<PAGE> 1
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO ________________
COMMISSION FILE NUMBER: O-13198
MORTON INDUSTRIAL GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
GEORGIA 38-0811650
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
</TABLE>
1021 WEST BIRCHWOOD, MORTON, ILLINOIS 61550
(Address of principal executive offices)
309-266-7176
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act:
(TITLE OF CLASS)
Class A Common Stock, par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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 (ss. 229.405 of this chapter) 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 March 2, 1998, the aggregate market value of the Class A Common Stock
held by non-affiliates was approximately $28,279,000, and there were 3,803,334
shares of Class A Common Stock and 200,000 shares of Class B Common Stock issued
and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement of the Registrant for the Annual
Meeting of Shareholders to be held in June 1998 are incorporated by reference
into Part III hereof.
================================================================================
<PAGE> 2
PART I
ITEM 1. BUSINESS
BACKGROUND
The Registrant is a Georgia corporation that was named MLX Corp. ("MLX")
prior to January 20, 1998. On that date, Morton Metalcraft Holding Co., a
Delaware corporation ("Morton"), was merged with and into MLX (the "Merger"),
which changed its name to Morton Industrial Group, Inc. (the "Company").
Financial information, Management's Discussion and Analysis of Financial
Condition and Results of Operations, and certain other information about MLX are
contained in this annual report on Form 10-K, as is information about the
business of the Company. Financial information, Management's Discussion and
Analysis of Financial Condition and Results of Operations, and other information
about Morton are set forth in Exhibit 99.1 to this annual report on Form 10-K.
Before June 30, 1995, MLX owned and managed businesses in a variety of
industries. With the sale of its S.K. Wellman industrial friction materials
business on June 30, 1995, MLX ceased to have recurring revenues or operating
subsidiaries and began searching for acquisition opportunities that met its
financial acquisition criteria. Those criteria generally focused on mid-sized
entities that were involved in manufacturing, distribution, or assembly of
non-consumer products and that offered continuing management. Between June 1995
and October 1997, MLX evaluated more than 150 potential acquisition
opportunities in a wide array of industries and made offers or engaged in
extensive valuation discussions in more than ten instances. Representatives of
Morton and MLX began discussions in June 1997 that led to the two companies'
execution of an Agreement and Plan of Merger on October 20, 1997, and the
closing of the Merger on January 20, 1998. Until the completion of the Merger,
MLX's offices were located in the Atlanta, Georgia, metropolitan area.
The predecessor of Morton was founded in 1963 in Morton, Illinois, to
produce fabricated sheet metal products for customers located in central
Illinois. During its first two decades Morton developed into a custom sheet
metal fabricator specializing in fast turnarounds. In 1989, Mr. William D.
Morton, now the Chairman, Chief Executive Officer, and President of the Company,
and several venture capital investors acquired control of Morton. In 1995,
Morton purchased the venture capital interests as a part of a recapitalization
of Morton.
GENERAL
The Company, now headquartered in Morton, Illinois, and operating through
its subsidiaries is a contract manufacturer and supplier of high-quality
fabricated sheet metal components and subassemblies for construction,
agricultural, and industrial equipment manufacturers located primarily in the
Midwestern and Southeastern United States. The Company provides large original
equipment manufacturers with a wide range of services including design,
prototype fabrication, precision tool making, and fabrication of component
parts. Additional services provided by the Company include welding, painting,
subassembly, packaging, warehousing, and just-in-time delivery to customers'
production lines. The Company combines this wide range of services with
high-quality, state-of-the-art fabrication capabilities, and has developed close
relationships with customers such as Caterpillar Inc. ("Caterpillar") and Deere
& Co. ("Deere"). (In its two most recent fiscal years, sales to Caterpillar and
Deere have constituted between 85% and 89% of Morton's total sales.) The Company
works closely with its major customers on product development, production
scheduling, and just-in-time delivery.
FABRICATION OPERATIONS
The Company's primary fabrication operations include cutting, punching,
bending, welding, painting, final assembly, packaging, warehousing and
just-in-time delivery of sheet metal components and subassemblies. The Company
also offers fully integrated ancillary services, including design engineering,
tool making and prototype fabrication.
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Within its fabrication operations, the Company's products fall into the
following seven categories of fabricated products and other miscellaneous
products:
- Sheet Metal Component Packages -- includes panels, doors, hoods,
brackets, grills, supports and covers produced primarily for construction
and agricultural equipment.
- Sheet Metal Enclosures and Boxes -- includes generator set enclosures,
compressor enclosures and electrical and battery boxes developed in
response to customers' need for environmentally sound enclosures that are
aesthetically attractive and cost competitive.
- Special Weldments -- includes lift arms, seat modules, guards, platforms
and step assemblies. This business developed primarily from concurrent
design projects with two major customers.
- Fabricated Steel Tanks -- includes fuel, hydraulic and water reservoirs.
The Company developed these products in response to customers' needs for
flexible designs that facilitate quick response to changes in tank
requirements.
- Prototype/Tooling -- includes prototype, tooling and preproduction steps
in the manufacturing process. The Company's dedicated prototype and
tooling departments work with customers throughout development efforts,
allowing for a smooth introduction of new products and subassemblies to
the focus factories.
- Store Fixtures -- includes backframes, lights, and brackets used in store
displays.
- Feeder Housings -- includes feeder housings and other harvester
components manufactured for agricultural equipment in the Company's
Peoria, Illinois, facility.
While these products and services currently represent the core of the
Company's business, the Company's management is evaluating opportunities for a
further broadening of the Company's offerings to customers.
The Company's facilities are located near its key customers in the Midwest
and the Southeast. The Birchwood Street complex in Morton, Illinois, houses
receiving, tool making, pre-production, first operations, general fabrication
and enclosure operations. Substantially all non-production personnel, including
senior management, purchasing, engineering, sales, production control and
accounting are also located at this facility. The Detroit Avenue plant, located
one mile from Birchwood Street, contains the production operations for commodity
products such as tanks, seat modules, and heavy fabrication operations. The
Company produces components for agricultural equipment at its Peoria, Illinois,
facility, which opened in 1995. The Company's Apex, North Carolina plant serves
the operations of nearby customers and entered production in July 1997. At these
locations, the Company employs computer assisted design and manufacturing
equipment, including laser cutting machines and robotic welders.
Morton combined its sales and engineering organizations in 1995. This sales
and engineering group has primary responsibility for managing relationships with
customers and working with them to design new products. An account team, led by
one of the Company's account managers and including representatives from all key
functional areas of the Company, works closely with each key customer to design
products, produce prototypes, schedule production, and monitor quality and
customer satisfaction.
COMPETITION
The component fabrication industry is fragmented and highly competitive,
with no single supplier having significant market share. Competition involves
product quality, price, the ability to provide just-in-time deliveries,
provision of support services, and product development capabilities.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
At December 31, 1997, MLX had no business operations. Following the Merger,
the Company's business is in the fabrication segment.
3
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AVAILABILITY OF RAW MATERIALS
The primary raw material used by the Company after the Merger is steel, and
the Company has five major steel suppliers. The Company also purchases
fabrications and machined parts from a large number of suppliers. All raw
materials are in adequate supply.
PATENTS, TRADEMARKS, LICENSES, FRANCHISES, AND CONCESSIONS
The Company holds no material patents, trademarks, franchises, or
concessions. The Company has been granted a number of software licenses that it
uses in its design, production, and other business operations. All of these
licenses have customary terms and conditions.
WORKING CAPITAL ITEMS
The Company's working capital requirements reflect several business
factors. Working capital requirements are typically greater during the second
half of the calendar year because both Deere and Caterpillar suspend operations
for two weeks of vacation time during July and/or August. Production operations
of both of these customers also slow during the last two weeks of December.
During these periods, the Company must rely more heavily on its credit
facilities for liquidity. The Company's rapid growth over the last two years has
also increased the Company's need for working capital to meet the capital
expenditures required to increase production capacity.
ENVIRONMENTAL REGULATION
The Company's operations are subject to numerous federal, state and local
laws and regulations concerning the containment and disposal of hazardous
materials. The Company maintains a policy of complying with all environmental
rules and regulations and believes that it is in substantial compliance with all
applicable environmental laws and regulations.
EMPLOYEES
As of February 1, 1998, the Company employed 941 employees, of which 799
were hourly, 139 were salaried, and three were part-time employees. The Company
believes that its relationship with its employees is good.
ADDITIONAL INFORMATION ABOUT MORTON
For additional information about Morton, including its audited financial
statements for the six months ended December 31, 1997, and its three fiscal
years ended June 30, 1997, 1996, and 1995, see Exhibit 99.1 to this annual
report on Form 10-K. Exhibit 99.1 also contains Morton's Management's Discussion
and Analysis of Financial Condition and Results of Operations, Selected
Financial Data, and unaudited financial statements for the six months ended
December 31, 1996. Exhibit 99.2 to this annual report on Form 10-K contains pro
forma condensed combined financial statements giving effect to the Merger.
ITEM 2. PROPERTIES.
The following table summarizes the Company's manufacturing, warehouse, and
office facilities:
<TABLE>
<CAPTION>
APPROX. MONTHLY EXPIRATION
LOCATION SQ. FT. ACRES LEASE TERMS DATE
- -------- ------- ----- ----------- ----------
<S> <C> <C> <C> <C>
1021 West Birchwood Street
Morton, IL............................................ 270,000 40 Owned N/A
400 Detroit Avenue
Morton, IL............................................ 75,000 N/A $21,164 08/31/04
Peoria, IL............................................ 137,000 N/A $20,035 05/31/03
Apex, NC.............................................. 100,000 N/A $37,580 11/06/06
</TABLE>
4
<PAGE> 5
ITEM 3. LEGAL PROCEEDINGS.
The Company is not currently a party to any material legal proceedings that
the Company's management believes would have a material adverse effect on the
Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Prior to the conclusion of the Merger, MLX's common stock traded on the
over-the-counter market under the symbol "MLXR" and was quoted on the OTC
Bulletin Board of the National Association of Security Dealers, Inc. Following
the Merger, the Company's Class A Common Stock continued to be traded on the
over-the-counter market under the symbol "MGRP" and quoted on the OTC Bulletin
Board. The Company has applied to have the Class A common Stock listed for
trading on the NASDAQ Small Cap Market under the symbol "MGRP."
The following table sets forth the quarterly high and low bids for the MLX
common stock during MLX's two most recent fiscal years as reported by Bloomberg
Financial Services:
<TABLE>
<CAPTION>
MLX COMMON STOCK
-------------------------
HIGH LOW
---- ---
<S> <C> <C>
1997
October 1 to December 31.................................. $19.0000 $15.8125
July 1 to September 30.................................... $16.2500 $14.6875
April 1 to June 30........................................ $14.8750 $14.2500
January 1 to March 31..................................... $16.7500 $13.2500
1996
October 1 to December 31.................................. $13.5000 $12.6250
July 1 to September 30.................................... $13.5625 $13.0000
April 1 to June 30........................................ $15.2500 $12.7500
January 1 to March 31..................................... $13.1250 $ 9.8750
</TABLE>
As of March 2, 1998, there were 5,899 holders of record and 2,343
beneficial holders of the Company's Class A Common Stock.
MLX did not declare or pay any dividends in its fiscal years ended December
31, 1997, and 1996. In connection with the Merger, the Company entered into a
credit agreement that precludes the payment of dividends.
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<PAGE> 6
ITEM 6. SELECTED MLX FINANCIAL DATA.
The following selected financial data relates to MLX before the Merger and
is derived from the audited financial statements of MLX.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales...................................... $ -- $ -- $ -- $ -- $ --
General and administrative expenses............ (1,553) (997) (1,015) (827) (1,342)
Stock appreciation rights compensation......... (2,225) -- -- -- --
Interest income................................ 1,886 1,876 1,074 17 12
Interest expense............................... -- -- (114) (202) (366)
Other (expense) income......................... -- -- (18) (94) 81
Provision for income taxes..................... -- (317) 18 376 549
------- ------- ------- ------- -------
Earnings (loss) from continuing
operations........................... (1,892) 562 (55) (730) (1,066)
Discontinued operations (net of income
taxes)...................................... -- -- 20,593 3,477 3,105
Extraordinary gain on early retirement of debt
(net of income taxes)....................... -- -- 272 -- 3,627
------- ------- ------- ------- -------
Net earnings (loss).................... $(1,892) $ 562 $20,810 $ 2,747 $ 5,666
------- ------- ------- ------- -------
Earnings (loss) applicable to common
stock................................ $(1,892) $ 562 $20,158 $ 1,689 $ 4,793
======= ======= ======= ======= =======
PER SHARE DATA:
Average outstanding common shares -- basic..... 2,618 2,613 2,576 2,537 2,539
Average outstanding common shares -- diluted... 2,618 2,755 2,576 2,537 2,539
Earnings (loss) per share--basic
Continuing operations (net of dividends and
accretion on preferred stock)............. $ (0.72) $ 0.22 $ (0.27) $ (0.70) $ (0.76)
Discontinued operations (net of income
taxes).................................... -- -- 7.99 1.37 1.22
Extraordinary gain on early retirement of
debt (net of income taxes)................ -- -- 0.11 -- 1.43
------- ------- ------- ------- -------
Total.................................. $ (0.72) $ 0.22 $ 7.83 $ 0.67 $ 1.89
======= ======= ======= ======= =======
Earnings (loss) per share -- diluted
Continuing operations (net of dividends and
accretion on preferred stock)............. $ (0.72) $ 0.20 $ (0.27) $ (0.70) $ (0.76)
Discontinued operations (net of income
taxes).................................... -- -- 7.99 1.37 1.22
Extraordinary gain on early retirement of
debt (net of income taxes)................ -- -- 0.11 -- 1.43
------- ------- ------- ------- -------
Total....................................... $ (0.72) $ 0.20 $ 7.83 $ 0.67 $ 1.89
======= ======= ======= ======= =======
FINANCIAL POSITION (AT END OF PERIOD):
Working capital (deficit)...................... $35,383 $37,304 $36,445 $ (42) $(1,181)
Total assets................................... 38,259 39,431 38,509 13,874 11,603
Long-term liabilities.......................... 2,042 1,998 1,957 2,463 2,403
Shareholders' equity........................... $34,872 $36,764 $35,878 $10,729 $ 7,324
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF MLX.
RESULTS OF OPERATIONS
BASIS OF PRESENTATION -- On January 20, 1998, MLX completed the Merger with
Morton following the approval of the Agreement and Plan of Merger at a special
meeting of MLX shareholders the previous day. Pursuant to the Merger, the name
of MLX was changed to Morton Industrial Group, Inc., and 1,232,323 shares of the
Company Class A Common Stock and 100,000 of its shares of Class B Common Stock
were
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issued to holders of the common stock of Morton. The accompanying financial
statements report the financial condition and results of operations of MLX for
all periods presented excluding the results of the Merger.
On June 30, 1995, MLX completed the sale of all the common stock of its
subsidiary, S.K. Wellman Limited, Inc. ("Wellman"), following the approval of
such divestiture by MLX's shareholders at the 1995 Annual Meeting. The
accompanying financial statements report the financial condition and results of
operations of the Wellman business as a discontinued operation and, accordingly,
the results of operations of Wellman for all the periods presented are excluded
from earnings/loss from continuing operations. The gain on the disposal of the
Wellman subsidiary is reported as a gain from the disposal of a discontinued
business.
The discussion below addresses the operations and financial condition of
MLX only and as they existed prior to the Merger with Morton.
OPERATIONS -- After the disposal of Wellman, MLX had no recurring revenues
or operating subsidiaries. The general and administrative expenses of MLX were
incurred for acquisition search, compensation, occupancy, shareholders costs
(such as printing, distribution, and stock transfer fees) and legal and
professional matters.
MLX invested its cash resources in short-term repurchase instruments
managed by selected commercial banks. As of December 31, 1997, MLX's average
rate of return on these investments was approximately 5.50%. As these
investments account for all of MLX's income subsequent to the sale of Wellman,
MLX financial results are affected by changes in the short-term interest rates
available to MLX.
Following the divestiture of Wellman, MLX was actively engaged in pursuing
the acquisition of new businesses and on October 20, 1997, entered into a
definitive agreement to merge with Morton Metalcraft Holding Co. The Merger
proposal (completed on January 20, 1998) reflected an enterprise valuation of
Morton of approximately $81.1 million to Morton stockholders, which includes the
issuance of 1,232,323 shares of MLX Class A Common Stock and 100,000 shares of
MLX Class B Common Stock, a cash payment of $20 million to Morton stockholders
for the purchase of Morton common stock, and the assumption of Morton's debt.
Prior to the Merger transaction, MLX considered its business to be that of
seeking to acquire an operating business that met its financial acquisition
criteria. Accordingly, MLX believed that it was not an investment company as
defined by the Investment Company Act of 1940 (the "Act") and submitted an
application to the Securities and Exchange Commission (the "Commission")
requesting an exemption from certain provisions of the Act until December 31,
1997. On May 19, 1997, the Commission issued an exemptive order pursuant to
Sections 6(c) and 6(e) of the Act, which exempted MLX from all provisions of the
Act except Sections 9, 17(a), 17(d) (modified as described in the application),
17(e), 17(f) (modified as described in the application), and 36 through 53,
through December 31, 1997. MLX and other persons, in their transactions and
relations with MLX, were subject to such excepted sections of the Act as if MLX
were a registered investment company under the Act. The implementation of the
exemptive order did not require MLX to change or modify any of its existing
practices or policies.
On October 27, 1997, MLX submitted a new application, identical to the
existing one, asking for an extension of the exemptive period through June 30,
1998, and the application was approved on December 30, 1997.
1997 VERSUS 1996 -- General and administrative expenses in 1997 amounted to
$1.6 million versus a 1996 level of approximately $997,000, an increase of
approximately 56%. The increase in expenses in 1997 reflected $670,000 accrued
for professional fees in the Merger, which was partially offset by generally
lower insurance charges.
On February 12, 1997, MLX's Board of Directors approved the conversion of
all the common stock options held by its former Chief Executive Officer to stock
appreciation rights ("SARs"), and all such SARs were exercised as of that date.
The resulting compensation liability under this agreement amounted to $2.2
million and was paid in February 1997. There was no such compensation in 1996.
Interest income in 1997 amounted to $1.9 million compared to $1.9 million
in 1996.
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<PAGE> 8
In 1997, MLX had a net loss of $1.9 million (or $0.72 per share -- diluted)
compared to net earnings of $562,000 (or $.20 per share -- diluted) in 1996.
1996 VERSUS 1995 -- General and administrative expenses in 1996 amounted to
$997,000 versus a 1995 level of approximately $1.0 million, a decrease of 2%.
Interest income in 1996 amounted to $1.9 million compared to $1.1 million
in 1995 because the 1995 period included two quarters that preceded the sale of
Wellman and the availability of cash proceeds from that sale. Correspondingly,
there was no interest expense in 1996 compared to $114,000 in 1995 since the
debt obligations of MLX were repaid following the divestiture of the Wellman
business.
There were no dividends and accretion on the Registrant's Series A
Preferred Stock in 1996 compared to $652,000 in 1995. This decrease resulted
from the redemption of such Preferred Stock at the time of the Wellman
transaction.
In 1996, MLX had net earnings of $562,000 (or $.20 per share -- diluted)
compared to $20.8 million in 1995 (or $7.83 per share net of obligations on the
Series A Preferred Stock). In 1995, earnings from discontinued operations
(including the gain on disposal of Wellman) amounted to $7.99 per
share -- diluted, and the extraordinary gain on early retirement amounted to
$0.11 per share -- diluted.
MLX has been able to offset substantially all of its federal taxable income
with its pre-reorganization tax loss carryforwards and therefore has a federal
tax liability only for Alternative Minimum Tax amounts. Accordingly, the charge
in lieu of federal income taxes included in the statements of income is not
accruable or payable. These pro forma charges in 1996 and 1995 were $299,000 and
$11.3 million, respectively. No such pro forma charge was recorded in 1997. The
following table illustrates the effect of this pro forma charge on the Company's
earnings and earnings per share.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Net Earnings (loss).................................. $(1,892) $562 $20,810
Less dividends and accretion on preferred stock...... -- -- (652)
Plus pro forma federal tax charge not due or
payable............................................ -- 299 11,325
------- ---- -------
Total earnings (loss)................................ $(1,892) $861 $31,483
======= ==== =======
Total earnings (loss) per common share -- diluted.... $ (0.72) $.31 $ 12.22
======= ==== =======
</TABLE>
FINANCIAL POSITION AND LIQUIDITY
Consolidated working capital at December 31, 1997, was $35.4 million
compared to $37.3 million at the end of 1996. Working capital at December 31,
1997, consisted principally of cash and short-term investments of $36.7 million
and estimated short-term obligations of $1.3 million for income taxes, legal and
professional expenses and compensation.
On February 12, 1997, MLX's Board of Directors approved the conversion of
all the common stock options held by its former Chief Executive Officer to stock
appreciation rights ("SARs") and those SARs were exercised as of that date. The
resulting liability of $2.2 million was disbursed to the former Chief Executive
Officer in February 1997.
MLX invested its available funds in short-term repurchase agreements
managed by five selected commercial banks and collateralized by U.S. Treasury
and federal agency obligations. MLX issued instructions to each such bank
providing guidelines on investments and restrictions on any disbursement of
MLX's funds.
In connection with the sale of Wellman, MLX funded an escrow fund with a
cash payment of $4 million to partially collateralize the indemnification
obligations of MLX in the purchase and sale agreement. MLX's maximum liability
under such indemnity provisions was $5 million. On October 1, 1996, the escrow
fund balance of $4.3 million was disbursed to MLX. An additional escrow fund
amounting to $1,250,000 was
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<PAGE> 9
established at June 30, 1995 (adjusted to $1,347,000 in August 1995) relating to
certain estimated income tax obligations arising from the sale.
MLX's Zero Coupon Bonds were originally issued in 1990 and amended in 1992.
The proceeds of the Wellman transaction were used to repay all outstanding
obligations under these Bonds.
The 1993 Variable Rate Subordinated Notes were issued in April 1993 in
exchange for certain of the Zero Coupon Bonds. All obligations under such Notes
were repaid with proceeds of the Wellman divestiture.
The Series A Preferred Stock was issued as of December 31, 1992, and April
22, 1993, with an escalating dividend rate feature and provision for redemption
solely at the option of MLX. In connection with the Wellman transaction, all
such Preferred Stock was redeemed.
OTHER DATA
CAPITAL EXPENDITURES -- MLX had no material commitments for capital
expenditures outstanding at December 31, 1997.
EMPLOYEES -- MLX's business was conducted by two full-time and three
part-time employees. The services of the part-time employees were obtained
through a facilities and service sharing arrangement with Pameco Corp. At
December 31, 1996, the number of MLX's employees was the same.
See Exhibit 99.1 to this annual report on Form 10-K for Item 6 and 7
information about Morton.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO MLX CORP. CONSOLIDATED FINANCIAL STATEMENTS
a. Report of Independent Auditors.
b. Consolidated Balance Sheets of MLX as of December 31, 1997, and 1996.
c. Consolidated Statements of Operations of MLX for each of the years ended
December 31, 1997, 1996, and 1995.
d. Consolidated Statements of Cash Flows of MLX for each of the years ended
December 31, 1997, 1996, and 1995.
e. Consolidated Statements of Stockholders' Equity of MLX for each of the
years ended December 31, 1997, 1996, and 1995.
f. Notes to Consolidated Financial Statements of MLX.
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<PAGE> 10
REPORT OF INDEPENDENT AUDITORS
Board of Directors
MLX Corp.
We have audited the accompanying balance sheets of MLX Corp. as of December
31, 1997 and 1996, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MLX Corp. at December 31,
1997 and 1996, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Atlanta, Georgia
February 20, 1998
10
<PAGE> 11
MLX CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 36,718 $ 37,927
Prepaid expenses.......................................... 10 46
-------- --------
Total current assets........................................ 36,728 37,973
Equipment and other assets.................................. 2 4
Tax escrow funds............................................ 1,529 1,454
-------- --------
Total assets................................................ $ 38,259 $ 39,431
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued compensation and benefits......................... $ 169 $ 103
Other accrued professional services and expenses.......... 914 280
Accrued taxes............................................. 262 286
-------- --------
Total current liabilities................................... 1,345 669
Other long-term liabilities................................. 2,042 1,998
Shareholders' equity:
Preferred stock, no par value - authorized 1,500,000
shares; none outstanding............................... -- --
Preferred stock, Series A, $30 par value - authorized
500,000 shares; none outstanding....................... --
Common stock, $.01 par value - authorized 38,500,000
shares; 2,618,000 shares outstanding in 1997 and
1996................................................... 26 26
Capital in excess of par value............................ 73,165 73,165
Retained earnings deficit................................. (38,319) (36,427)
-------- --------
Total shareholders' equity.................................. 34,872 36,764
-------- --------
Total liabilities and shareholders' equity.................. $ 38,259 $ 39,431
======== ========
</TABLE>
See accompanying notes.
11
<PAGE> 12
MLX CORP.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................................... $ -- $ -- $ --
General and administrative expenses......................... 1,553 997 1,015
Stock appreciation rights compensation 2,225 -- --
------- ------- -------
Operating loss from continuing operations................... (3,778) (997) (1,015)
Interest income 1,886 1,876 1,074
Interest expense -- -- (114)
Other expense -- -- (18)
------- ------- -------
Earnings (loss) before income taxes, discontinued operations
and extraordinary item.................................... (1,892) 879 (73)
Provision (benefit) for income taxes:
Federal taxes due and payable -- 18 --
Charge in lieu of federal income taxes (federal income tax
benefit)............................................... -- 299 (18)
------- ------- -------
Earnings (loss) from continuing operations before
extraordinary item........................................ (1,892) 562 (55)
Discontinued operations:
Earnings from operations (net of income tax of $1,928).... -- -- 2,507
Gain on disposal of business (net of income tax of
$13,311)............................................... -- -- 18,086
------- ------- -------
Earnings from discontinued operations....................... -- -- 20,593
------- ------- -------
Extraordinary gain on early retirement of debt (net of
income taxes of $140)..................................... -- -- 272
------- ------- -------
Net earnings (loss)......................................... (1,892) 562 20,810
Dividends and accretion of preferred stock.................. -- -- (652)
------- ------- -------
Earnings (loss) applicable to common stock.................. $(1,892) $ 562 $20,158
======= ======= =======
Earnings (loss) per common share -- basic:
Earnings (loss) from continuing operations (net of
dividends and accretion on preferred stock)............ $(0.72) $0.22 $(0.27)
Discontinued operations:
Earnings from operations.................................. -- -- 0.97
Gain of disposal of business.............................. -- -- 7.02
Extraordinary gain on early retirement of debt.............. -- -- 0.11
------- ------- -------
Net earnings (loss) per common share -- basic.......... $(0.72) $0.22 $7.83
======= ======= =======
Net earnings (loss) per common share -- diluted............. $(0.72) $0.20 $7.83
======= ======= =======
</TABLE>
See accompanying notes.
12
<PAGE> 13
MLX CORP.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL IN
SERIES A EXCESS OF RETAINED OTHER
PREFERRED COMMON PAR EARNINGS EQUITY
STOCK STOCK VALUE (DEFICIT) ADJUSTMENTS TOTAL
--------- ------ ---------- --------- ----------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1995............ $ 7,265 $25 $61,874 $(57,147) $(1,288) $10,729
Dividends and accretion on
preferred stock............... 117 -- -- (652) -- (535)
Foreign currency translation
adjustment.................... -- -- -- -- (77) (77)
Benefit of pre-reorganization tax
loss carryforward............. -- -- 11,325 -- -- 11,325
Stock options exercised.......... -- 1 180 -- -- 181
Equity adjustment upon sale of
S.K. Wellman.................. -- -- -- -- 1,365 1,365
Redemption of preferred stock.... (7,382) -- (538) -- -- (7,920)
Net earnings..................... -- -- -- 20,810 -- 20,810
------- --- ------- -------- ------- -------
Balance December 31, 1995.......... -- 26 72,841 (36,989) -- 35,878
Benefit of pre-reorganization tax
loss carryforwards............ -- -- 299 -- -- 299
Stock options exercised.......... -- -- 25 -- -- 25
Net earnings..................... -- -- -- 562 -- 562
------- --- ------- -------- ------- -------
Balance December 31, 1996.......... -- 26 73,165 (36,427) -- 36,764
Net loss......................... -- -- -- (1,892) -- (1,892)
------- --- ------- -------- ------- -------
Balance December 31, 1997.......... $ -- $26 $73,165 $(38,319) $ -- $34,872
======= === ======= ======== ======= =======
</TABLE>
See accompanying notes.
13
<PAGE> 14
MLX CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Earnings (loss) from continuing operations (including
extraordinary gain on early retirement of debt)........... $(1,892) $ 562 $ 217
Adjustments to reconcile earnings (loss) from continuing
operations to net cash provided by (used in) operating
activities from continuing operations:
Extraordinary gain on early retirement of debt............ -- -- (412)
Charge in lieu of federal income taxes.................... -- 299 122
Change in operating assets and liabilities of continuing
operations:
Prepaid expenses....................................... 36 57 (217)
Accounts payable and accrued expenses.................. 676 (5) (1,655)
Other.................................................. 46 42 (54)
------- ------- -------
Net cash provided by (used in) operating activities from
continuing operations..................................... (1,134) 955 (1,999)
Net cash provided by operating activities from discontinued
operations................................................ -- -- 3,875
------- ------- -------
Net cash provided by (used in) operating activities......... (1,134) 955 1,876
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of S.K. Wellman.......................... -- -- 49,177
Redemption of Series A Preferred Stock...................... -- -- (7,920)
Decrease (increase) in escrow funds for warranties and
taxes..................................................... (75) 4,044 (5,498)
Investing cash flows from discontinued operations........... -- -- (1,437)
------- ------- -------
Net cash provided by (used in) investing activities......... (75) 4,044 34,322
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of dividends on Series A Preferred Stock........... -- -- (747)
Repayment of debt........................................... -- -- (2,076)
Stock options exercised..................................... -- 25 181
Financing cash flows from discontinued operations........... -- -- (1,740)
------- ------- -------
Net cash provided by (used in) financing activities......... -- 25 (4,382)
------- ------- -------
Net increase (decrease) in cash and cash equivalents........ (1,209) 5,024 31,816
Cash and cash equivalents at January 1...................... 37,927 32,903 1,087
Cash and cash equivalents at December 31.................... $36,718 $37,927 $32,903
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid............................................... $ -- $ -- $ 127
======= ======= =======
</TABLE>
See accompanying notes.
14
<PAGE> 15
MLX CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
MLX Corp. (MLX or the Company) was merged with Morton Metalcraft Holding,
Co. on January 20, 1998 and its name was changed to Morton Industrial Group,
Inc. (see Note 6).
During 1995, the Company sold its sole remaining operating subsidiary, S.K.
Wellman Limited, Inc. (Wellman). Accordingly, the accompanying financial
statements and notes have been restated to report the operating results of
Wellman as a discontinued operation.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
CASH EQUIVALENTS
Cash equivalents consist of investments in short-term asset management
accounts with five banking institutions, none of which holds greater than $8.1
million of these assets. All investments are stated at cost plus accrued
interest which approximates market value. At December 31, 1997, the Company's
average rate of return on these investments was approximately 5.50%. As these
investments account for all of the Company's income subsequent to the sale of
Wellman, the Company's future financial results will be impacted by changes in
the short-term interest rates available to the Company. For purposes of the
accompanying Statements of Cash Flows, the Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.
FEDERAL INCOME TAXES
Any tax benefits resulting from the utilization of the Company's federal
net operating loss or other carryforwards existing at December 11, 1984, the
date of confirmation of the Plan of Reorganization (Confirmation Date), are
excluded from operations and credited to capital in excess of par value in the
year such tax benefits are realized.
EARNINGS PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share. Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
appropriate, restated to conform to the Statement 128 requirements.
RELATIONSHIP WITH PAMECO CORPORATION
MLX has an arrangement with Pameco Corporation (Pameco) pursuant to which
MLX shares certain management, operational and administrative functions. The
costs for such services are also shared. MLX paid $54,000 to Pameco under this
agreement in 1997, $52,000 in 1996 and $60,000 1995. Such amounts are included
as a component of general and administrative expenses in the accompanying
Statements of Operations.
15
<PAGE> 16
MLX CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SALE OF S.K. WELLMAN SUBSIDIARY
On April 10, 1995, the Company entered into a stock purchase agreement (the
Agreement) with a third party for the sale of all the common stock of Wellman
for $60 million, which includes certain amounts related to the repayment or
assumption of debt and capital leases by the purchaser. Such sale was approved
by the common shareholders of MLX Corp. at the 1995 annual meeting of
shareholders and was completed on June 30, 1995. The cash proceeds received by
the Company pursuant to the transaction, less purchase price adjustments and
estimated expenses, amounted to $48.9 million.
In connection with the sale of the Wellman subsidiary, the Company repaid
its principal and interest obligations under the Variable Rate Subordinated
Notes and Zero Coupon Bonds and redeemed its Series A Preferred Stock along with
unpaid dividends. The net proceeds to the Company from the transaction after
such repayments were $38.5 million.
A portion of these proceeds was used by the Company to fund an escrow
account of $4 million to partially collateralize its indemnification obligations
in the purchase and sale agreement. The Company's maximum liability under such
indemnity provisions was $5 million. On October 1, 1996, the escrow fund balance
of $4.3 million was disbursed to MLX. An additional escrow fund amounting to
$1,250,000 was established at June 30, 1995 (adjusted to $1,347,000 in August
1995) relating to certain estimated income tax obligations arising from the
sale. This escrow fund has been classified as long-term in the Balance Sheets.
Other Long-Term Liabilities include taxes related to this escrow fund which are
estimated to be payable after one year.
The transaction resulted in a gain of $31.4 million. Income taxes were
provided for this gain as follows (in thousands):
<TABLE>
<S> <C>
Federal and state income taxes payable...................... $ 3,291
Pro forma charge in lieu of federal income taxes............ 10,020
-------
$13,311
=======
</TABLE>
The accompanying consolidated financial statements reflect the operating
results and cash flows of the discontinued operations separately from continuing
operations for all years presented.
The operating results of the discontinued operations through the date of
the sale were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------
(IN THOUSANDS)
<S> <C>
Net sales................................................... $34,916
=======
Earnings from operations before income taxes................ $ 4,435
Income taxes................................................ (1,928)
-------
Earnings from discontinued operations....................... $ 2,507
=======
</TABLE>
16
<PAGE> 17
MLX CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table provides supplemental information pertaining to the
discontinued operations in the Statements of Cash Flows through the date of the
sale:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------
(IN THOUSANDS)
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Earnings from discontinued operations....................... $ 2,507
Adjustments to reconcile earnings to net cash provided by
discontinued operating activities:
Depreciation and amortization............................. 1,062
Charge in lieu of federal income taxes.................... 1,183
Changes in operating assets and liabilities:
Accounts receivable....................................... (1,158)
Inventories and prepaid expenses.......................... (791)
Accounts payable and accrued expenses..................... 310
Other..................................................... 762
-------
Net cash provided by operating activities................... $ 3,875
=======
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment................... $(1,437)
-------
Net cash used in investing activities....................... $(1,437)
=======
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on long-term debt................................ $ 522
Repayment of debt........................................... (2,262)
-------
Net cash used in financing activities....................... $(1,740)
=======
</TABLE>
3. GAIN ON EARLY RETIREMENT OF DEBT
In connection with the sale of Wellman (see Note 2), the Company retired
Zero Coupon Bonds and Variable Rate Subordinated Notes with a carrying value of
$2.5 million with cash payments totaling $2.1 million. The resulting net gain on
early retirement of debt (net of pro forma charge in lieu of federal income
taxes of $140,000) has been reported as an extraordinary item.
Also on June 30, 1995, the Company redeemed all its outstanding shares of
Series A Preferred Stock for cash payments totaling $7.9 million, the
contractual redemption value. The difference between this redemption amount and
the carrying value of $7.4 million was charged to Capital in Excess of Par
Value.
4. SHAREHOLDERS' EQUITY, STOCK OPTIONS AND EARNINGS PER SHARE
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation," requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
The Company has two stock option plans. Under the MLX Corp. Stock Option
Plan, adopted in 1985, the Company granted stock options to certain officers,
directors and key employees at prices not less than the
17
<PAGE> 18
MLX CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
market value on the date the option was granted. At December 31, 1997, 20,000
options were outstanding under this Plan with exercise periods extending through
December 1999. No new options may be granted under this Plan.
Under the MLX Corp. Stock Option and Incentive Award Plan (the "1995
Plan"), adopted in 1995, stock-based awards may be issued to key employees
(including directors who are also employees) and certain others in a variety of
forms. Such awards may include incentive stock options, non-qualified stock
options, restricted stock and outright stock awards. A total of 125,000 shares
of MLX common stock are reserved under the 1995 Plan. All options granted under
the 1995 plan have 5 year terms and vest and become fully exercisable at the end
of 3 years of continued employment. The 1995 Plan terminates in June 2005. At
December 31, 1997, 30,000 options were outstanding under the 1995 Plan.
Pro forma information regarding net income (loss) and earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1994 under the fair value method of that
Statement. There were no options granted in 1996 and in 1997. The fair value for
the options granted in 1995 was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rate of 6.21%; volatility factor of the expected
market price of the Company's common stock of .817; and a weighted average
expected life of the option of 5 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands except for earnings per share
information):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Pro forma net earnings (loss)........................ $(1,934) $ 520 $20,140
Pro forma earnings (loss) per share -- diluted....... $ (0.74) $0.19 $ 7.81
</TABLE>
Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until future
years.
18
<PAGE> 19
MLX CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the Company's stock option activity, and related information
for the years ended December 31 follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year....... 50,000 $7.19 60,200 $6.39 104,467 $3.04
Granted.............................. -- -- -- 30,000 9.25
Exercised............................ -- (10,200) 2.50 (67,834) 2.63
Cancelled............................ -- -- -- (6,433) 5.01
------ ----- ------- ----- ------- -----
Outstanding at end of year............. 50,000 $7.19 50,000 $7.19 60,200 $6.39
====== ===== ======= ===== ======= =====
At December 31
Exercisable.......................... 50,000 $7.19 40,000 $6.67 36,033 $5.08
====== ===== ======= ===== ======= =====
Reserved for future grant............ 95,000 95,000 95,000
====== ======= =======
Weighted average fair value of options
granted during the year.............. -- -- $ 6.40
====== ======= =======
</TABLE>
Exercise prices for options outstanding as of December 31, 1997 ranged from
$4.00 to $9.25. The weighted average remaining contractual life of those options
is 2.2 years.
At December 31, 1996, the Company's former Chief Executive Officer held
options to acquire 190,400 shares of the Company's common stock at $5.00 per
share (the market value at date of grant) which are not reflected in the table
above. In February 1997, the MLX Board of Directors approved the conversion of
the 190,400 options held by the former Chief Executive Officer to Stock
Appreciation Rights and all such SARs were exercised as of February 12, 1997.
The resulting liability under this agreement amounted to $2.2 million and was
disbursed in February 1997 and was reported as compensation expense in 1997.
The Company is authorized to issue up to 500,000 shares designated as
Series A Preferred Stock with a par value and liquidation preference of $30 per
share. The Series A Preferred Stock is nonvoting. Dividends on shares of Series
A Preferred Stock outstanding during 1995 were payable in cash on the basis of
an increasing rate formula (12.5% at June 30, 1995). All outstanding shares of
Series A Preferred Stock were redeemed by the Company with the proceeds from the
sale of Wellman.
An aggregate of 264,000 shares of Series A Preferred Stock was issued to
certain holders of Zero Coupon Bonds as of December 1992 and April 1993. The
Series A Preferred Stock was initially recorded at its estimated fair value and
was being increased to the redemption price of $30 per share during the period
from date of issuance until January 1, 1999 (commencement of maximum annual
dividend rate). This annual accretion, based on the interest method, was charged
to retained earnings and amounted to $117,000 in 1995.
The assets and liabilities of foreign operations of the discontinued
operations were translated into U.S. dollars at current exchange rates with the
resulting cumulative translation adjustment, $(1,018,000) at December 31, 1994,
recorded as a separate component of shareholders' equity. In connection with the
sale of Wellman, the cumulative translation adjustment at June 30, 1995 was
included in the calculation of the gain on the sale.
19
<PAGE> 20
MLX CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the computation of basic and diluted
earnings per share (in 000's except per share amounts):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income (loss) from continuing operations................ $(1,892) $ 562 $ (55)
Dividends and accretion on preferred stock.................. -- -- (652)
------- ------ ------
Net income (loss) from continuing operations applicable to
common stock.............................................. $(1,892) $ 562 $ (707)
======= ====== ======
Basic average common shares outstanding..................... 2,618 2,613 2,576
Effect of dilutive securities -- employee stock options..... -- 142 --
Diluted average common shares outstanding................... 2,618 2,755 2,576
======= ====== ======
Earnings (loss) from continuing operations per share --
basic..................................................... $ (0.72) $ 0.22 $(0.27)
======= ====== ======
Earnings from continuing operations per share -- diluted.... $ (0.72) $ 0.20 $(0.27)
======= ====== ======
</TABLE>
The effect of dilutive securities is anti-dilutive for 1997 and 1995,
therefore basic and dilutive earnings per share are the same for those years.
5. INCOME TAXES
The Company accounts for income taxes in accordance with the liability
method as required by FASB Statement No. 109, "Accounting for Income Taxes."
At December 31, 1997, MLX has net operating loss carryforwards, existing as
of the Confirmation Date, of approximately $75.0 million which are available to
offset future taxable income for federal income tax purposes. Such carryforwards
expire as of December 31 in each of the years as follows: $1.2 million in 1998
and $73.8 million in 1999. Any tax benefit derived from the utilization of these
net operating loss carryforwards is excluded from operations and credited to
capital in excess of par value in the year such tax benefits are utilized.
Subsequent to the Confirmation Date, the Company has available (for federal
income tax purposes), net operating loss carryforwards of approximately $60.3
million, which expire as of December 31 in each of the years as follows: $2.7
million in 2000, $2.2 million in 2002, $5.0 million in 2005, $2.0 million in
2006, $47.3 million in 2007, and $1.1 million in 2012.
The cumulative net operating loss for financial reporting purposes
approximates the tax amount as shown above. The components of the income tax
provision are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Charge in lieu of federal income taxes
(federal income tax benefits):
Continuing operations.................................. $ -- $299 $(18)
Extraordinary gain on early retirement of debt......... -- -- 140
Federal alternative minimum taxes...................... -- 18 --
------ ---- ----
Total............................................. $ -- $317 $122
====== ==== ====
</TABLE>
Income tax expense associated with discontinued operations is set forth in
Note 2.
The charge in lieu of federal income taxes (federal income tax benefit)
approximates the statutory rate applied to earnings before income taxes.
20
<PAGE> 21
MLX CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Federal net operating loss carryforward................... $46,000 $ 94,000
State net operating loss carryforward..................... 3,000 3,000
Reserves and other........................................ 900 1,000
------- --------
Total..................................................... 49,900 98,000
Valuation allowance for deferred tax assets............... 49,900 (98,000)
------- --------
Net deferred tax assets................................... $ -- $ --
======= ========
</TABLE>
The valuation allowance for deferred tax assets decreased $48.1 million
during 1997.
6. SUBSEQUENT EVENTS
On January 20, 1998 the Company merged (the "Merger") with Morton
Metalcraft Holding Co. ("Morton") and the Articles of Incorporation were amended
to change the name of the Company to Morton Industrial Group, Inc. In connection
with the merger, the Company paid $19,991,000 for the purchase of 612,121 shares
of Morton common stock and options and warrants to purchase Morton common stock
and issued 1,332,323 shares of common stock for the remaining shares of Morton
common stock.
The Merger for accounting and financial reporting purposes will be treated
as a purchase in accordance with generally accepted accounting principles. The
Merger will be accounted for as though Morton purchased MLX because (i) the
Chairman and Chief Executive Officer of Morton through his common stock
ownership in the merged companies, together with the right to vote certain
shares pursuant to a Shareholders Agreement will have over 50% of the votes of
all classes of stock of the Surviving Company, (ii) the Chairman of the Board of
Directors, Chief Executive Officer and directors of the Surviving Company will
consist of individuals appointed by the Chairman and Chief Executive Officer of
Morton, (iii) the revenues, net earnings and current market value of Morton
exceeds those of MLX and (iv) the market value of the consideration received by
the former shareholders of Morton common stock and former holders of options and
warrants for Morton common stock, including MLX Common Stock, MLX Options and
cash, exceeds the market value of the securities to be retained by the
shareholders of MLX common stock.
The historical financial statements of Morton Metalcraft Holding Co. will,
after the date of the Merger, become the historical financial statements of MLX,
Inc. as the result of the reverse purchase.
On January 19, 1998 the shareholders of MLX approved an amendment to the
Articles of Incorporation to (i) provide for the reclassification of the
existing common stock of MLX, par value $.01 per share as Class A Common stock
of MLX, par value $.01 per share , (ii) establish a class of 200,000 shares of
Class B Common Stock of MLX, par value $.01 per share and (iii) establish the
rights of the MLX Class B Common Stock. The shareholders also approved the MLX
Corp. 1997 Stock Option Plan. Under the 1997 Stock Plan, a maximum of 1,166,896
shares of MLX Class A Common Stock, subject to adjustment as described in the
1997 Stock Plan, would be authorized to be delivered to MLX's officers, other
key employees, directors and consultants by MLX, in the sole discretion of a
stock plan committee, pursuant to either nonqualified stock options or incentive
stock options.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
21
<PAGE> 22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item 10 about the executive officers and
Directors of the Company is incorporated herein by reference to the information
set forth under the caption "Election of Directors" in the Company's definitive
proxy statement for the 1998 annual meeting of stockholders, which will be filed
with the Securities and Exchange commission not later than one hundred twenty
days after December 31, 1997 pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item 11 is incorporated herein by
reference to the information set forth under the caption "Executive
Compensation" in the Company's definitive proxy statement for the 1998 annual
meeting of stockholders, which will be filed with the Securities and Exchange
commission not later than one hundred twenty days after December 31, 1997
pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item 12 is incorporated herein by
reference to the information set forth under the caption "Voting securities and
Principal Stockholders" in the Company's definitive proxy statement for the 1998
annual meeting of stockholders, which will be filed with the Securities and
Exchange commission not later than one hundred twenty days after December 31,
1997 pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item 13 is incorporated herein by
reference to the information set forth under the caption "Certain Transactions"
in the Company's definitive proxy statement for the 1998 annual meeting of
stockholders, which will be filed with the Securities and Exchange commission
not later than one hundred twenty days after December 31, 1997 pursuant to
Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS CONTAINED ON FORM
8-K.
(a) The following documents are filed as part of this report:
1. FINANCIAL STATEMENTS.
The following financial statements of MLX Corp. are included in Item 8:
a. Report of Independent Auditors.
b. Consolidated Balance Sheets of MLX as of December 31, 1997, and
1996.
c. Consolidated Statements of Operations of MLX for each of the years
ended December 31, 1997, 1996, and 1995.
d. Consolidated Statements of Cash Flows of MLX for each of the years
ended December 31, 1997, 1996, and 1995.
e. Consolidated Statements of Stockholders' Equity of MLX for each of
the years ended December 31, 1997, 1996, and 1995.
f. Notes to Consolidated Financial Statements of MLX.
22
<PAGE> 23
The following financial statements of Morton Metalcraft Holding Co. are
contained in Exhibit 99.1:
a. Report of Independent Auditors.
b. Consolidated Balance Sheets as of December 31, 1997, and June 30,
1997, and 1996.
c. Consolidated Statements of Operations for the Six Months Ended
December 31, 1997, and the Fiscal Years Ended June 30, 1997, 1996, and
1995.
d. Consolidated Statements of Stockholders' Equity (Deficit) for the
Six Months Ended December 31, 1997, and the Fiscal Years Ended June 30,
1997, 1996, and 1995.
e. Consolidated Statements of Cash Flows for the Six Months Ended
December 31, 1997, and the Fiscal Years Ended June 30, 1997, 1996, and
1995.
f. Notes to the Consolidated Financial Statements.
g. Consolidated Balance Sheet as of December 31, 1997 (audited) and
1996 (unaudited).
h. Consolidated Statements of Operations for the Six Months Ended
December 31, 1997 (audited) and 1996 (unaudited).
i. Consolidated Statements of Cash Flows for the Six Months Ended
December 31, 1997 (audited) and 1996 (unaudited).
2. FINANCIAL STATEMENT SCHEDULES.
MLX Corp.: All schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.
Morton: Schedule IX -- Valuation and Qualifying Accounts appears in Exhibit
99.1.
3. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND DOCUMENT TITLE INCORPORATED BY REFERENCE TO FILED HEREWITH
- --------------------------------- ---------------------------- --------------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger Between MLX Annex B to the Definitive Proxy
Corp. and Morton Metalcraft Holding Co., dated Statement on Schedule 14A filed by
as of October 20, 1997 MLX Corp. with the Securities and
Exchange Commission ("SEC") on
January 6, 1998.
2.2 -- Securities Purchase Agreement Among MLX X
Corp. and Security Holders of Morton Metalcraft
Holding Co., dated as of October 20, 1997
3.1 -- Articles of Incorporation of the MLX Corp. Form 10-Q for the quarter
registrant as Amended prior to January 20, 1998 ended June 30, 1993
3.2 -- Articles of Amendment to Articles of Exhibit 3 to Morton Industrial Group,
Incorporation of the Registrant Effective Inc. Report on Form 8-K filed with
January 20, 1998 the SEC on February 4, 1998
3.3 -- Bylaws of the Registrant, as Amended X
10.1 -- Credit Agreement Among the Registrant, X
Morton Metalcraft Co., Morton Metalcraft Co. of
North Carolina and Harris Trust & Savings Bank,
individually and as Agent, dated January 20,
1998
</TABLE>
23
<PAGE> 24
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND DOCUMENT TITLE INCORPORATED BY REFERENCE TO FILED HEREWITH
- --------------------------------- ---------------------------- --------------
<S> <C> <C>
10.2 -- Security Agreement executed by Morton X
Industrial Group, Inc., Morton Metalcraft Co.,
and Morton Metalcraft Co. of North Carolina in
favor of Harris Trust & Savings Bank,
individually and as Agent, dated January 20,
1998
10.3 -- Mortgage and Security Agreement with X
Assignment of Rents executed by Morton
Metalcraft Co. in favor of Harris Trust &
Savings Bank, individually and as Agent, dated
January 20, 1998
10.4 -- Pledge Agreement executed by Registrant X
in favor of Harris Trust & Savings Bank,
individually and as Agent, dated January 20,
1998
10.5 -- Limited Indemnification Agreement dated X
as of October 20, 1997, among MLX Corp., William
D. Morton, and Other Morton Metalcraft
Shareholders and Option Holders
10.6 -- Industrial Building Lease between Morton X
Welding Co., Inc., and Morton Metalcraft Co.
dated September 1, 1994
10.7 -- Lease between Caterpillar, Inc., and X
Morton Metalcraft Co., Inc. dated June 9, 1995
10.8 -- Lease between Agracel, Inc., and Morton X
Metalcraft Co. dated November 6, 1996
10.9 -- Employment Agreement dated as of January X
20, 1998, between the Registrant and William D.
Morton
10.10 -- Employment Agreement dated as of X
January 20, 1998, between the Registrant and
Daryl R. Lindemann
10.11 -- MLX Corp. 1997 Stock Option Plan Appendix C to the Definitive Proxy
Statement on Schedule 14A filed by
MLX Corp. with the SEC on January 6,
1998
10.12 -- MLX Corp. 1995 Stock Option Plan MLX Corp. Definitive Proxy Statement
on Schedule 14A for the 1995 Annual
Meeting of Stockholders
10.13 -- Master Lease Agreement between Morton X
Metalcraft Co. and General Electric Capital
Corporation dated August 7, 1996
10.14 -- Guaranty of Master Lease Agreement by X
Morton Metalcraft Holding Co., dated August 7,
1996
10.15 -- Split Dollar Insurance Agreement X
between Morton Metalcraft Co. and William D.
Morton dated February 3, 1995
10.16 -- Split Dollar Assignment between William X
D. Morton and Morton Metalcraft Co. dated
February 3, 1995
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND DOCUMENT TITLE INCORPORATED BY REFERENCE TO FILED HEREWITH
- --------------------------------- ---------------------------- --------------
<S> <C> <C>
10.17 -- Split Dollar Insurance Agreement X
between Morton Metalcraft Co. and William D.
Morton dated October 10, 1993
10.18 -- Split Dollar Assignment between William X
D. Morton and Morton Metalcraft Co., dated
October 10, 1993
10.19 -- Split Dollar Insurance Agreement X
between Morton Metalcraft Co. and Daryl R.
Lindemann dated October 10, 1993
10.20 -- Split Dollar Assignment between Daryl X
R. Lindemann and Morton Metalcraft Co., dated
October 10, 1993
10.21 -- Death Benefit Agreement between Morton X
Metalcraft Co. and William D. Morton
10.22 -- Salary Continuation Agreement between X
Morton Metalcraft Co. and William D. Morton
dated February 26, 1996
21.1 -- Subsidiaries of Registrant X
23.1 -- Consent of Ernst & Young LLP X
23.2 -- Consent of Clifton Gunderson L.L.C. X
27.1 -- Financial Data Schedule -- MLX Corp. X
27.2 -- Financial Data Schedule -- Morton X
Metalcraft Holding Co.
99.1 -- Additional Information About Morton X
Metalcraft Holding Co., Including Financial
Statements
99.2 Pro Forma Condensed Combined Financial X
Statements
</TABLE>
4. REPORTS ON FORM 8-K
None.
25
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant as duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MORTON INDUSTRIAL GROUP, INC.
By: /s/ WILLIAM D. MORTON
------------------------------------
William D. Morton
President, Chief Executive
Officer, and Chairman of the
Board of Directors
Dated: March 10, 1998
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 in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ WILLIAM D. MORTON President, Chief Executive March 10, 1998
- ----------------------------------------------------- Officer, and Chairman of the
William D. Morton Board of Directors
/s/ DARYL R. LINDEMANN Vice President -- Finance March 10, 1998
- ----------------------------------------------------- (Principal Accounting Officer)
Daryl R. Lindemann
/s/ FRED W. BROLING Director March 13, 1998
- -----------------------------------------------------
Fred W. Broling
Director March , 1998
- -----------------------------------------------------
Alfred R. Glancy III
/s/ MARK W. MEALY Director March 9, 1998
- -----------------------------------------------------
Mark W. Mealy
/s/ WILLEM F. P. DE VOGEL Director March 10, 1998
- -----------------------------------------------------
Willem F. P. De Vogel
</TABLE>
26
<PAGE> 27
EXHIBIT INDEX
Except where incorporated by reference, the following documents are
attached to this annual report on Form 10-K as Exhibits:
2.1 - Agreement and Plan of Merger Between MLX Corp. and Morton
Metalcraft Holding Co., dated as of October 20, 1997,
incorporated by reference to the definitive Proxy Statement on
Schedule 14A filed by MLX Corp. with the Securities and Exchange
Commission ("SEC") on January 6, 1998.
2.2 - Securities Purchase Agreement Among MLX Corp. and Security
Holders of Morton Metalcraft Holding Co., dated as of October
20, 1997
3.1 - Articles of Incorporation of the registrant as Amended prior to
January 20, 1998, incorporated by reference to MLX Corp.'s Form
10-Q for the quarter ended June 30, 1993.
3.2 - Articles of Amendment to Articles of Incorporation of the
Registrant Effective January 20, 1998, incorporated by reference
to Exhibit 3 to Morton Industrial Group, Inc.'s Report on Form
8-K filed with the SEC on February 4, 1998.
3.3 - Bylaws of the Registrant, as Amended
10.1 - Credit Agreement Among the Registrant, Morton Metalcraft Co.,
Morton Metalcraft Co. of North Carolina and Harris Trust &
Savings Bank, individually and as Agent, dated January 20, 1998
10.2 - Security Agreement executed by Morton Industrial Group, Inc.,
Morton Metalcraft Co., and Morton Metalcraft Co. of North
Carolina in favor of Harris Trust & Savings Bank, individually
and as Agent, dated January 20, 1998
10.3 - Mortgage and Security Agreement with Assignment of Rents
executed by Morton Metalcraft Co. in favor of Harris Trust &
Savings Bank, individually and as Agent, dated January 20, 1998
<PAGE> 28
10.4 - Pledge Agreement executed by Registrant in favor of Harris Trust
& Savings Bank, individually and as Agent, dated January 20, 1998
10.5 - Limited Indemnification Agreement dated as of October 20, 1997,
among MLX Corp., William D. Morton, and Other Morton
Metalcraft Shareholders and Option Holders
10.6 - Industrial Building Lease between Morton Welding Co., Inc., and
Morton Metalcraft Co. dated September 1, 1994
10.7 - Lease between Caterpillar, Inc., and Morton Metalcraft Co., Inc.
dated June 9, 1995
10.8 - Lease between Agracel, Inc., and Morton Metalcraft Co. dated
November 6, 1996.
10.9 - Employment Agreement dated as of January 20, 1998, between the
Registrant and William D. Morton
10.10 - Employment Agreement dated as of January 20, 1998, between the
Registrant and Daryl R. Lindemann
10.11 - MLX Corp. 1997 Stock Option Plan, incorporated by reference to
the Definitive Proxy Statement on Schedule 14A filed by MLX
Corp. with the SEC on January 6, 1998.
10.12 - MLX Corp. 1995 Stock Option Plan, incorporated by reference to
Definitive Proxy Statement on Schedule 14A filed by MLX Corp.
with the SEC for the 1995 annual meeting of stockholders.
10.13 - Master Lease Agreement between Morton Metalcraft Co. and General
Electric Capital Corporation dated August 7, 1996
10.14 - Guaranty of Master Lease Agreement by Morton Metalcraft Holding
Co., dated August 7, 1996
10.15 - Split Dollar Insurance Agreement between Morton Metalcraft Co.
and William D. Morton dated
-2-
<PAGE> 29
February 3, 1995.
10.16 - Split Dollar Assignment between William D. Morton and Morton Metalcraft
Co. dated February 3, 1995
10.17 - Split Dollar Insurance Agreement between Morton Metalcraft Co. and
William D. Morton dated October 10, 1993
10.18 - Split Dollar Assignment between William D. Morton and Morton Metalcraft
Co., dated October 10, 1993
10.19 - Split Dollar Insurance Agreement between Morton Metalcraft Co. and Daryl
R. Lindemann dated October 10, 1993
10.20 - Split Dollar Assignment between Daryl R. Lindemann and Morton Metalcraft
Co., dated October 10, 1993
10.21 - Death Benefit Agreement between Morton Metalcraft Co. and William D.
Morton
10.22 - Salary Continuation Agreement between Morton Metalcraft Co. and William
D. Morton dated February 26, 1996.
21.1 - Subsidiaries of Registrant
23.1 - Consent of Ernst & Young LLP
23.2 - Consent of Clifton Gunderson L.L.C.
27.1 - Financial Data Schedule - MLX Corp.
27.2 - Financial Data Schedule - Morton Metalcraft Holding Co.
99.1 - Additional Information About Morton Metalcraft Holding Co., Including
Financial Statements
99.2 - Pro-Forma Condensed Combined Financial Statements
-3-
<PAGE> 1
EXECUTION COPY
EXHIBIT 2.2
SECURITIES PURCHASE AGREEMENT
AGREEMENT, dated October 20, 1997, among MLX Corp., a Georgia corporation
("Buyer"), and the holders (the "Selling Securityholders") of shares of common
stock ("Common Stock"), par value $0.01 per share, of Morton Metalcraft Holding
Co., a Delaware Corporation (the "Company"), and options and warrants to
acquire shares of Common Stock (such shares of Common Stock, warrants and
options, the "Company Securities").
Pursuant to an Agreement and Plan of Merger dated as of October 20, 1997
(the "Merger Agreement"), among Buyer and the Company, the Company shall be
merged with and into Buyer (the "Merger"), with Buyer being the surviving
corporation (hereinafter referred to as the "Surviving Corporation").
Pursuant to Section 5.9 of the Merger Agreement, prior to the Effective
Time (as defined in the Merger Agreement), the Company will be recapitalized
(the "Recapitalization") as set forth in the Merger Agreement.
Each Selling Securityholder is the record and beneficial owner of the
Company Securities set forth opposite such Selling Securityholder's name on
Exhibit A hereto. As a result of the Recapitalization, each Selling
Securityholder will become the record and beneficial owner of the newly issued
securities of the Company (the "Recap Company Securities") set forth opposite
such Selling Securityholder's name on Exhibit B hereto. Each Selling
Securityholder wishes to sell the Recap Company Securities (all such Recap
Company Securities of all Selling Securityholders herein referred to as the
"Sale Securities") set forth opposite such Selling Stockholder's name on
Exhibit C
<PAGE> 2
2
hereto and Buyer wishes to purchase all such Sale Securities upon the terms and
subject to the conditions of this Agreement. Capitalized terms used herein but
not otherwise defined shall have the meanings given them in Section 11.1
hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Sale and Purchase of Sale Securities.
1.1 Sale and Purchase of Sale Securities. At the Closing (as
hereinafter defined), (i) each Selling Securityholder shall sell, and Buyer
shall purchase all of the Sale Securities of such Selling Securityholder, free
of any Liens, (ii) each Selling Securityholder shall deliver or cause to be
delivered to Buyer certificates representing all of such Sale Securities
accompanied by stock or warrant powers, as the case may be, duly executed in
blank, in proper form for transfer, and with all appropriate stock transfer
tax stamps affixed, and (iii) Buyer shall deliver the Purchase Price (as
hereinafter defined) to the Selling Securityholders in accordance with Section
1.2 below.
1.2 Purchase Price. The aggregate purchase price for the Sale
Securities (the "Purchase Price") shall be the aggregate of all the purchase
prices shown on Exhibit C. Buyer shall pay to each of the Selling
Securityholders in immediately available funds, pursuant to written
instructions provided by each Selling Securityholder at or prior to the
Closing, the amount of the payment set forth opposite such Selling
Securityholder's name on Exhibit C, against receipt of the Sale Securities of
such Selling Stockholder set forth on Exhibit C hereto.
<PAGE> 3
3
2. Closing; Closing Date. The closing of the purchase and sale of the
Sale Securities (the "Closing") shall take place immediately prior to the
Effective Time (as defined in the Merger Agreement) on satisfaction or waiver
of the conditions set forth in Article 4 hereof at such place and time as the
parties may agree in writing (such time and date being referred to herein as
the "Closing Date").
3. Representations and Warranties of Selling Securityholders. Each
Selling Securityholder severally, and not jointly, represents and warrants to
Buyer as follows:
3.1 Title to the Company Securities. Except as set forth on Schedule
3.1, as of the date hereof, such Selling Securityholder owns of record, free and
clear of any Lien, such Company Securities set forth opposite such Selling
Stockholder's name on Exhibit A hereto.
3.2 Title to the Recap Company Securities. As of the Closing Date and
assuming the consummation of the Recapitalization in accordance with the Merger
Agreement, such Selling Securityholder shall own of record, free and clear of
any Lien, such Recap Company Securities set forth opposite such Selling
Stockholder's name on Exhibit B hereto. Any Liens set forth on Schedule 3.1
regarding such Selling Stockholder's Company Securities shall no longer be in
effect as of the Closing Date.
3.3 Title to the Sale Securities. As of the Closing Date and assuming
the consummation of the Recapitalization in accordance with the Merger
Agreement, such Selling Securityholder shall own of record, free and clear of
any Lien, such Sale Securities set forth opposite such Selling Stockholder's
name on
<PAGE> 4
4
Exhibit C hereto, and, upon delivery of and payment for such Sale Securities by
Buyer as herein provided, such Selling Securityholder will convey to Buyer good
and valid title thereto, free and clear of any Lien. Any Liens set forth on
Schedule 3.1 regarding such Selling Stockholder's Sale Securities shall no
longer be in effect as of the Closing Date.
3.4 Authority to Execute and Perform Agreement. Such Selling
Securityholder has the full legal right, power and all authority required to
enter into, execute and deliver this Agreement and to perform fully such
Selling Securityholder's obligations hereunder. This Agreement has been duly
executed and delivered by such Selling Securityholder and (assuming the due
authorization, execution and delivery hereof by Buyer) is a legal, valid and
binding obligation of such Selling Securityholder enforceable against such
Selling Securityholder in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting creditors' rights and to general equity principles
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
3.5 Noncontravention. Except as set forth on Schedule 3.5, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby by such Selling Securityholder will not (i)
contravene such Selling Securityholder's charter, articles or certificate of
incorporation or by-laws, as applicable; (ii) violate, or cause such Selling
Securityholder to be in default under, any provision of law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award in effect
having
<PAGE> 5
5
applicability to such Selling Securityholder; (iii) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which such Selling Securityholder is a
party or by which it or its properties may be bound or affected; or (iv) result
in, or require, the creation or imposition of any Lien upon or with respect to
any of the properties now owned by such Selling Securityholder.
3.6 Representations and Warranties on Closing Date. The representations
and warranties of such Selling Stockholder contained in this Article 3 shall be
true and correct on and as of the Closing Date with the same force and effect
as though such representations and warranties had been made on and as of the
Closing Date.
4. Representations and Warranties of Buyer. Buyer represents and warrants
to each Selling Securityholder as follows:
4.1 Authority to Execute and Perform Agreement. Buyer has the full legal
right, power and all authority required to enter into, execute and deliver this
Agreement and to perform fully Buyer's obligations hereunder. This Agreement
has been duly executed and delivered by Buyer and (assuming the due
authorization, execution and delivery hereof by the Selling Securityholders) is
a legal, valid and binding obligation of Buyer enforceable against Buyer in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium, or other similar laws affecting
creditors' rights and to general equity principles (regardless of whether
enforcement is sought in a proceeding at law or in equity).
4.2 Noncontravention. Except as set forth on Schedule 4.2,
<PAGE> 6
6
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby by Buyer will not (i) contravene
Buyer's charter, articles or certificate of incorporation or by-laws; (ii)
violate, or cause Buyer to be in default under, any provision of law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
in effect having applicability to Buyer; (iii) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which Buyer is a party or by which it
or its properties may be bound or affected; or result in, or require, the
creation or imposition of any Lien upon or with respect to any of the
properties now owned by Buyer.
5. Conditions Precedent to the Obligation of Buyer to Close. The
obligation of Buyer to enter into and complete the Closing is subject, at the
option of Buyer, to the fulfillment on or prior to the Closing Date of the
following conditions, any one or more of which may be waived by it:
5.1 Consummation of the Merger. All conditions precedent to the
consummation of the Merger shall have been fulfilled by the parties to the
Merger Agreement.
5.2 Representations and Warranties. The representations and
warranties of the Selling Securityholders contained in this Agreement shall be
true and correct on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date.
6. Conditions Precedent to the Obligation of the Selling Securityholders
to Close. The obligation of each of the Selling Securityholders to enter into
and complete the Closing is subject, at the option of such Selling
Securityholder,
<PAGE> 7
7
to the fulfillment on or prior to the Closing Date of the following conditions,
any one or more of which may be waived by it:
6.1 Consummation of the Merger. All conditions precedent to the
consummation of the Merger shall have been fulfilled by the parties to the
Merger Agreement, the Buyer shall in good faith expect the Effective Time under
the Merger Agreement to occur immediately after the Closing hereunder and no
amendment or other modification to the Merger Agreement shall have been made
which would increase the merger consideration thereunder or otherwise adversely
affect the rights of any of the Selling Securityholders hereunder.
6.2 Shareholders' Agreement. The Shareholders' Agreement, dated as of
March 20, 1995, among the Company, Morton Metalcraft Co., William D. Morton and
the Purchasers (as defined therein) party thereto shall have been terminated
simultaneously with the Closing of this Agreement.
6.3 Shareholders' Agreement. The Shareholders' Agreement, dated as of
January 25, 1995, as amended as of July 11, 1997, among the Company, Morton
Metalcraft Co., William D. Morton and the Noteholders (as defined therein)
party thereto shall have been terminated simultaneously with the Closing of
this Agreement.
6.4 Representations and Warranties. The representations and warranties of
Buyer contained in this Agreement shall be true and correct on and as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date.
<PAGE> 8
8
6.5 Recapitalization. The Recapitalization shall have been consummated by
the Company and as a result thereof the Company's capital structure shall be as
set forth on Exhibit B hereto.
6.6 Prepayment of Certain Debt of the Company. On or immediately after
the Closing Date, the Company shall have prepaid the indebtedness owed to each
of Connecticut General Life Insurance Company ("CGLIC"), as beneficial owner
(CIG & CO. being the registered owner) and CIGNA Mezzanine Partners III, L.P.
("CMP"; CMP and CGLIC collectively being referred to as, "CIGNA"), as
beneficial owner (CIG & CO. being the registered owner) pursuant to the
Company's 11.50% Senior Notes due January 31, 2005 (the "CIGNA Notes"), in the
aggregate outstanding principal amount of $25,000,000 such prepayment being
accompanied with a prepayment premium of $250,000, all accrued and unpaid
interest due on the CIGNA Notes on the Closing Date and all other amounts due
and owing under those separate Note Purchase Agreements, dated as of January
25, 1997, between the Company and each of CGLIC and CMP, and the Company and
Buyer shall have taken or caused to be taken all actions required to be taken
by each of them on or immediately after the Closing Date pursuant to that
certain Note Redemption Agreement, dated as of October 20, 1997, between, the
Company, Morton Metalcraft Co., Buyer and CIGNA.
7. Covenants.
7.1 Reasonable Best Efforts. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its reasonable best efforts
(to the extent within the control of any party hereto) to take, or cause to be
<PAGE> 9
9
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by the Merger Agreement.
7.2 Survival of Representations and Warranties of the Selling
Securityholders After Closing. Notwithstanding any right of Buyer to
investigate and notwithstanding any knowledge of facts determined or
determinable by Buyer pursuant to such investigation or right of investigation,
Buyer has the right to rely fully upon the representations and warranties of
the Selling Securityholders contained in this Agreement. Notwithstanding any
waiver by Buyer of any condition precedent to its obligation to close, all
representations and warranties shall survive the execution and delivery of this
Agreement and the Closing hereunder.
7.3 Survival of Representations and Warranties of Buyer After Closing.
Notwithstanding any right of the Selling Securityholders to investigate and
notwithstanding any knowledge of facts determined or determinable by the
Selling Securityholders pursuant to such investigation or right of
investigation, the Selling Securityholders have the right to rely fully upon
the representations and warranties of Buyer contained in this Agreement.
Notwithstanding any waiver by the Selling Securityholders of any condition
precedent to its obligation to close, all representations and warranties shall
survive the execution and delivery of this Agreement and the Closing hereunder.
7.4 Selling Securityholder Restrictions. Each Selling Securityholder
hereby agrees to waive all restrictions (whether transfer or otherwise)
applicable to the shares of such Selling Securityholder to the extent necessary
to
<PAGE> 10
10
facilitate the consummation of the transactions contemplated by this Agreement.
Each Selling Securityholder hereby further agrees that any agreements
containing any such restrictions as they apply to the Sale Securities shall
terminate upon the consummation of the transaction contemplated by this
Agreement.
8. Indemnification.
8.1 Indemnification by Selling Securityholders. Each Selling
Securityholder hereby agrees that such Selling Securityholder shall be
severally, and not jointly, liable to and shall indemnify, defend and hold
harmless Buyer, its Affiliates (including the Surviving Corporation) and their
respective directors, officers, employees, Affiliates, successors and assigns
pursuant to this Agreement from and against any and all loss, cost, damage or
expense (including reasonable fees of counsel) whatsoever based upon, arising
out of or otherwise resulting from any breach of any representation or warranty
of such Selling Securityholder, or breach of any covenant or obligation of such
Selling Securityholder or enforcement by Buyer of its rights agasint such
Selling Securityholders hereunder, in either case, contained in this Agreement.
Nothing in the Limited Indemnification Agreement, dated October 17, 1997 (the
"Indemnification Agreement"), among Buyer and certain of the Selling
Securityholders shall limit the general liability of Selling Securityholders
under this Agreement.
8.2 Indemnification by Buyer. Buyer hereby agrees that Buyer shall be
liable to and shall indemnify, defend and hold harmless each Selling
Securityholder, its Affiliates and their respective directors, officers,
employees, Affiliates, successors and assigns pursuant to this Agreement from
and against any and all loss, cost, damage or expense (including reasonable
fees of counsel) whatsoever
<PAGE> 11
11
based upon, arising out of or otherwise resulting from any breach of any
representation or warranty of Buyer, or breach of any covenant or obligation of
Buyer or enforcement by any Selling Securityholder of its rights hereunder, in
either case, contained in this Agreement. Nothing in the Limited
Indemnification Agreement shall limit the general liability of Buyer under this
Agreement.
9. Additional Parties. The parties to this Agreement agree that
additional Selling Securityholders ("Additional Selling Securityholders") may
be added as parties to this Agreement prior to the Closing by such Additional
Selling Securityholders agreeing in writing to be bound by the provisions of
this Agreement, such addition to be made without the necessity of any action by
the parties hereto.
10.Termination of Agreement.
This Agreement shall terminate prior to the Closing as follows:
(a) upon the termination of the Merger Agreement; or
(b) at any time on or prior to the Closing Date, by mutual
written consent of the Selling Securityholders and Buyer.
If this Agreement is terminated as provided herein no party hereto shall
have any liability or further obligation to any other party under the terms of
this Agreement except for the intentional or willful violation of, or willful
misstatement contained in, the representations and warranties of such parties
contained in this Agreement.
11. Miscellaneous.
11.1 Certain Definitions. (a) As used in this Agreement, the
<PAGE> 12
12
following terms have the following meanings:
(i) "Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with, or the parents,
spouse, lineal descendants or beneficiaries of, such Person.
(ii) "Lien" means any lien, pledge, mortgage, security interest,
claim, lease, charge, option, right of first refusal, easement, servitude,
transfer restriction under any shareholder or similar agreement, encumbrance
or any other restriction or limitation whatsoever (other than restrictions
imposed by applicable securities laws).
(iii) "Person" means any individual, corporation, limited liability
company, partnership, firm, joint venture, association, joint-stock company,
trust, unincorporated organization, Governmental Body or other entity.
11.2 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission
or, if mailed, five days after the date of deposit in the United States mails,
as follows:
(a) if to Buyer, to:
MLX Corp.
1000 Center Place
Norcross, Georgia 30093
Attention: Thomas C. Waggoner
Telecopy: (770) 798-0633
<PAGE> 13
13
with a copy to:
Paul, Weiss, Rifkind, Wharton &
Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Robert M. Hirsh, Esq.
Facsimile: (212) 757-3990
(b) if to a Selling Securityholder, to the
address set forth on Exhibit D hereto.
Any party may by notice given in accordance with this Section to the other
parties designate another address or Person for receipt of notices hereunder.
11.3 Entire Agreement. This Agreement contains the entire agreement among
the parties with respect to the purchase of the Sale Securities and supersedes
all prior agreements, written or oral, with respect thereto.
11.4 Waivers and Amendments. This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any such right, power or
privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
11.5 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware.
11.6 Binding Effect; No Assignment. This Agreement shall
<PAGE> 14
14
be binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. This Agreement is not assignable, except
that Buyer may assign its rights hereunder to any of its Affiliates.
11.7 Variations in Pronouns. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
11.8 Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof
each signed by less than all, but together signed by all of the parties hereto.
11.9 Headings. The headings in this Agreement are for reference only, and
shall not affect the interpretation of this Agreement.
11.10 Severability of Provisions. If any provision or any portion of any
provision of this Agreement, or the application of any such provision or any
portion thereof to any Person or circumstance, shall be held invalid or
unenforceable, the remaining portion of such provision and the remaining
provisions of this Agreement, and the application of such provision or portion
of such provision as is held invalid or unenforceable to Persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby.
<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
MLX CORP.
By: /s/ Thomas C. Waggoner
-------------------------
Name:
Title:
/s/ William D. Morton
-------------------------
William D. Morton
/s/ Brian L. Geiger
-------------------------
Brian L. Geiger
/s/ Daryl R. Lindemann
-------------------------
Daryl R. Lindemann
/s/ Brian R. Doolittle
-------------------------
Brian R. Doolittle
/s/ David M. Stratton
-------------------------
David M. Stratton
<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
/s/ Mark W. Mealy
-------------------------
Mark W. Mealy
/s/ Reid G. Leggett
-------------------------
Reid G. Leggett
/s/ Frederic H. Garner
-------------------------
Frederic H. Garner
/s/ Katherine D. Garner
-------------------------
Katherine D. Garner
/s/ Edward P. Imbrogno
-------------------------
Edward P. Imbrogno
/s/ Thomas L. Temple
-------------------------
Thomas L. Temple
/s/ Stephen E. Cummings
-------------------------
Stephen E. Cummings
/s/ John T. Johnston III
-------------------------
John T. Johnston III
<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
/s/ Robert G. Calton III
-------------------------
Robert G. Calton III
/s/ Kelly L. Katterhagen
-------------------------
Kelly L. Katterhagen
/s/ William A. Morrisett
-------------------------
William A. Morrisett
/s/ Matthew S. Rankowitz
-------------------------
Matthew S. Rankowitz
/s/ John H. Grigg
-------------------------
John H. Grigg
/s/ Shannon G. Smith
-------------------------
Shannon G. Smith
<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
/s/ Nancy B. Conner
-------------------------
Nancy B. Conner
/s/ Charles H. Conner, Jr.
--------------------------
Charles H. Conner, Jr.
/s/ Charles H. Conner, Jr.
--------------------------
Charles H. Conner, Jr., as
custodian for Lindsay A. Conner
/s/ Charles H. Conner, Jr.
--------------------------
Charles H. Conner, Jr., as
custodian for Bryan B. Conner
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
MORTIN INDUSTRIAL GROUP, INC.
(Formerly MLX Corp. and Georgia MLX Corp.)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The corporation shall maintain at all
times a registered office in the State of Georgia and a registered agent at that
office.
SECTION 2. OTHER OFFICES. The corporation may also have offices at such
other places both within and without the State of Georgia as the business of the
corporation may require or make desirable.
ARTICLE II
SHAREHOLDERS MEETINGS
SECTION 1. REGULAR MEETINGS. The regular meeting of the shareholders of
the corporation shall be held at the principal office of the corporation or at
such other place in the United States as may be determined by the board of
directors, at 11:00 a.m. on such date in April or May of each year, or at such
other date and time as shall be determined by the board of directors, for the
purpose of electing directors and transacting such other business as may
properly be brought before the meeting.
SECTION 2. SPECIAL MEETINGS. (a) Special meetings of the shareholders
shall be called by the President or the Secretary (i) when so directed by a
majority of the entire board of directors or (ii) upon the written demand of
holders of at least thirty-three and one-third percent (33 1/3%) of the issued
and outstanding shares of any class of voting shares.
(b) Promptly after the receipt of written shareholder demands (the
"Demand Date") purporting to comply with the provisions of the Georgia Business
Corporation Code, as amended from time to time (the "Code"), and these bylaws,
the corporation shall engage independent inspectors for the purpose of
<PAGE> 2
determining the validity of the demand(s) and any revocations thereof. Within 15
days of the Demand Date, such independent inspectors shall deliver to the
corporation a written report stating whether the demand comports with the
requirements of the Code and these bylaws. If such written report states that
the demand is adequate, or if no report is delivered by the independent
inspectors within 15 days from the Demand Date, the President or the Secretary
of the corporation shall call a special shareholders meeting by mailing notice
within 15 days after receipt of the report by said independent inspectors or
after the expiration of the reporting period.
(c) The time, date and place of any special shareholders meeting shall
be determined by the board of directors and shall be set forth in the notice of
meeting.
SECTION 3. NOTICE OF MEETINGS. Unless otherwise required by law or
specified in the articles of incorporation or these bylaws, written notice of
every meeting of shareholders, stating the place, date and hour of the meeting,
shall be given, in a manner permitted by applicable law, to each shareholder of
record entitled to vote at such meeting not less than 10 nor more than 60 days
prior to the date of the meeting. Notice of a special meeting shall include a
description of the purpose for which such meeting is called. The form of notice
of a meeting shall be as presented by counsel for the corporation and approved
by the Chairman. Notice may be waived as provided by law.
SECTION 4. QUORUM. The holders of a majority of the shares outstanding
and entitled to vote thereat (not a majority of each class of voting shares),
present in person or represented by proxy, shall constitute a quorum for the
transaction of business at all meetings of the shareholders (except as otherwise
provided by law, the articles of incorporation or these bylaws). If a quorum is
not present at any meeting of the shareholders, the holders of a majority of the
shares present (in person or represented by proxy) and entitled to vote thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the original
meeting.
SECTION 5. VOTING. Unless otherwise provided by law, the articles of
incorporation, or board resolutions setting forth the preferences and other
rights, restrictions or limitations of any class or series of preferred stock,
each outstanding share, regardless of class, shall be entitled to one vote on
each matter voted on at a shareholders meeting. Unless the articles of
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<PAGE> 3
incorporation, these bylaws, a resolution of the board of directors or
applicable law require a different vote, action on a matter presented for
consideration at a meeting where a quorum is present, shall be approved as
follows: (a) directors shall be elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present; and (b) all other matters shall be approved if the votes cast within
the applicable voting group (as defined by applicable law) favoring the action
exceed the votes cast opposing the action.
A shareholder may vote his shares in person or by proxy. A shareholder
may appoint a proxy to vote or otherwise act for him by signing an appointment
form. An appointment of a proxy is valid for eleven months unless a shorter or
longer period is expressly provided in the appointment form.
SECTION 6. SHAREHOLDER PROPOSALS. (a) No shareholder proposal or
resolution (each a "Shareholder Proposal"), whether purporting to be binding or
non-binding on the corporation or its board of directors, shall be considered at
any annual or special meeting of the shareholders unless:
(i) If such Shareholder Proposal relates solely to the
nomination and election of directors, it satisfies the
requirements of Article III, Section 3 hereof; or
(ii) With respect to any Shareholder Proposal to be
considered at a special shareholders meeting called
pursuant to Article II, Section 2, subsection (a)(i),
the shareholder(s) proposing to make such Shareholder
Proposal provided the information set forth in
subsection (b) of this Section 6 to the board of
directors within 14 days after the date of the notice
calling such special shareholders meeting (or if less
than 21 days notice of the meeting is given to
shareholders, such information was delivered to the
President not later than the close of the seventh day
following the date on which the notice of the
shareholders' meeting was mailed); or
(iii) With respect to any Shareholder Proposal to be
considered at a special shareholders meeting called
pursuant to Article II, Section 2, subsection (a)(ii)
hereof, the shareholder(s) proposing to make such
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<PAGE> 4
Shareholder Proposal provided the information set forth
in subsection (b) of this Section 6 to the board of
directors concurrently with the filing of the initial
demand by shareholders relating to such special
shareholders meeting; or
(iv) With respect to any Shareholder Proposal to be
considered at any regular meeting of shareholders, other
than as described in clause (i) hereof, the
shareholder(s) proposing to make such Shareholder
Proposal provided the information set forth in
subsection (b) of this Section 6 to the board of
directors between 90 to 120 days prior to the regular
meeting at which they wish the Shareholder Proposal to
be considered.
For the purposes of determining whether information was provided at the times or
within the specified periods, the date of the applicable meeting shall be as set
forth in the notice of meeting given by the corporation, and such times and
periods will be determined without regard to any postponements, deferrals or
adjournments of such meeting to a later date.
(b) The following information must be provided to the board of
directors, within or at the times specified above, in order for the Shareholder
Proposal to be considered at the applicable shareholders meeting.
(i) The Shareholder Proposal, as it will be proposed, in
full text and in writing;
(ii) The purpose(s) for which the Shareholder Proposal is
desired and the specific meeting at which such proposal
is proposed to be considered;
(iii) The name(s), address(es), and number of shares held of
record by the shareholder(s) making such Shareholder
Proposal (or owned beneficially and represented by a
nominee certificate on file with the corporation;
(iv) The number of shares that have been solicited with
regard to the Shareholder Proposal and the number of
shares the holders of which have agreed (in writing or
otherwise) to vote in any specific fashion on said
Shareholder Proposal; and
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<PAGE> 5
(v) A written statement by said shareholder(s) that they
intend to continue ownership of such voting shares
through the date of the meeting at which said
Shareholder Proposal is proposed to be considered.
(c) Failure to fully comply with the provisions of this Section 6 shall
bar discussion of and voting on the Shareholder Proposal at the applicable
regular or special shareholders meeting. Any Shareholder Proposal that does not
comply with the requirements of this Section 6 shall be disregarded by the
chairman of the meeting, and any votes cast in support of the Shareholder
Proposal, unless the Shareholder Proposal has been validly submitted by another
shareholder, shall be disregarded by the chairman of such meeting.
(d) The provisions in this Section 6 shall be read in accordance with
and so as not to conflict with the rules and regulations promulgated by the
Securities and Exchange Commission and any stock exchange or quotation system
upon which the corporation's shares are traded. Nothing in these bylaws shall be
deemed to require the consideration at any meeting of shareholders of any
Shareholder Proposal that, pursuant to law, the corporation may refuse to permit
consideration thereof.
SECTION 7. LIST OF SHAREHOLDERS; INSPECTION OF RECORDS. (a) The
corporation shall keep at its registered office or principal place of business,
or at the office of its transfer agent or registrar, a record of its
shareholders, giving their names and addresses and the number, class and series,
if any, of the shares held by each.
(b) Shareholders are entitled to inspect the corporate records as and
to the extent provided by the Code.
ARTICLE III
DIRECTORS
SECTION 1. POWERS. Except as otherwise provided by any legal agreement
among shareholders, the property, affairs and business of the corporation shall
be managed and directed by its board of directors, which may exercise all powers
of the corporation and do all lawful acts and things which are not (by law, by
any legal agreement among shareholders, by the articles of incorporation or by
these bylaws) directed or required to be exercised or done by the shareholders.
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<PAGE> 6
SECTION 2. NUMBER, ELECTION AND TERM. The number of directors which
shall constitute the whole board shall be not less than five nor more than ten,
the number thereof to be determined from time to time by resolution of the board
of directors. Except as hereinafter provided with respect to filling vacancies
on the board, the directors shall be elected by the shareholders at an annual
meeting or at a special meeting called for that purpose (in the event of a
failure to elect them at an annual meeting) as provided in Article II hereof,
and each director elected shall hold office until his successor is elected and
qualified or until his earlier resignation, removal from office, or death.
Directors shall be natural persons who have attained the age of 21 years, but
need not be residents of the State of Georgia or shareholders of the
corporation.
SECTION 3. NOMINATIONS. (a) If any shareholder intends to nominate or
cause to be nominated any candidate for election to the board of directors
(other than any candidate to be sponsored by and proposed at the instance of the
management), such shareholder shall notify the President by first class
registered mail sent not less than 14 nor more than 50 days before the scheduled
meeting of the shareholders at which directors will be elected. However, if less
than 21 days notice of the meeting is given to shareholders, such nomination
shall be delivered or mailed to the President not later than the close of the
seventh day following the date on which the notice of the shareholders' meeting
was mailed. Such notification shall contain the following information with
respect to each nominee, to the extent known to the shareholder giving such
notification:
(1) Name, address and principal present occupation;
(2) To the knowledge of the shareholder who proposed to make such
nomination, the total number of shares that may be voted for
such proposed nominee;
(3) The names and address of the shareholders who propose to make
such nomination, and the number of shares of the corporation
owned by each of such shareholders; and
(4) The following additional information with respect to each
nominee: age, past employment, education, beneficial ownership
of shares in the corporation, past and present financial
standing, criminal history (including any convictions,
indictments or settlements thereof), involvement in any past or
pending litigation or administrative proceedings
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<PAGE> 7
(including threatened involvement), relationship to and
agreements (whether or not in writing) with the shareholder(s)
(and their relatives, subsidiaries and affiliates) intending to
make such nomination, past and present relationships or dealings
with the corporation or any of its subsidiaries, affiliates,
directors, officers or agents, plans or ideas for managing the
affairs of the corporation (including, without limitation, any
termination of employees, any sales of corporate assets, any
proposed merger, business combination or recapitalization
involving the corporation, and any proposed dissolution or
liquidation of the corporation), and all additional information
relating to such person that would be required to be disclosed,
or otherwise required, pursuant to Sections 13 or 14 of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the "Exchange Act"), in
connection with any acquisition of shares by such nominee or in
connection with the solicitation of proxies by such nominee for
his election as a director, regardless of the applicability of
such provisions of the Exchange Act.
(b) Any nominations not in accordance with the provisions of this
Section 3 may be disregarded by the chairman of the meeting, and upon
instructions by the chairman, votes cast for each such nominee shall be
disregarded. In the event, however, that a person should be nominated by more
than one shareholder, and if one such nomination complies with the provisions of
this Section 3, such nomination shall be honored, and all shares voted for such
nominee shall be counted.
SECTION 4. VACANCIES. Vacancies, including vacancies resulting from any
increase in the number of directors, but not including vacancies resulting from
removal from office by the shareholders (except as provided in Section 9 of this
Article), may be filled by the board of directors or by a majority of the
directors then in office (if the directors remaining in office constitute less
than a quorum), and a director so chosen shall hold office until the next annual
election and until his successor is duly elected and qualified, unless sooner
displaced. If there are no directors in office, then vacancies shall be filled
through election by the shareholders.
SECTION 5. MEETINGS AND NOTICE. The board of directors of the
corporation may hold meetings, both regular and special,
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<PAGE> 8
either within or without the State of Georgia. Regular meetings of the board of
directors may be held at such time and place as shall from time to time be
determined by the Chairman or any three directors upon two day's notice given in
a manner permitted by law. Special meetings of the board may be called by the
Chairman or by any three directors upon two day's notice given in a manner
permitted by law. Such notice shall state a reasonable time, date and place of
meeting, but the purpose need not be stated therein. Such notice may be waived
as provided by law. Unless otherwise provided by law, the articles of
incorporation of these bylaws, directors may participate in a meeting of the
board, or any committee thereof, by means of conference telephone or similar
communications equipment whereby all persons participating in the meeting can
hear each other. Participation in the meeting shall constitute presence in
person. The board of directors shall hold an annual meeting for the election of
officers of the corporation as soon as practicable after the annual meeting of
the shareholders shall have been held. Such meeting may be held at the
registered office of the corporation or at such other place as may be designated
in the notice.
SECTION 6. QUORUM. At all meetings of the board, a majority of
directors shall constitute a quorum for the transaction of business, and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the board, except as may be otherwise specifically provided
by law, by the articles of incorporation, by these bylaws or by contract. If a
quorum shall not be present at any meeting of the board, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
SECTION 7. CONSENT OF DIRECTORS. Unless otherwise restricted by the
articles of incorporation or these bylaws, any action required or permitted to
be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting if the action is evidenced by one or more written
consents describing the action taken and signed by each director or committee
member, and the writing or writings are delivered to the corporation for
inclusion in the minutes for filing with the corporate records. Such consent
shall have the same force and effect as a unanimous vote of the board or
committee, as the case may be.
SECTION 8. COMMITTEES. The board of directors may by resolution create
one or more committees and appoint one or more members of the board of directors
to serve on them. The board may designate one or more directors as alternate
members of any committee, who may replace any absent member at any meeting of
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<PAGE> 9
such committee. Any such committee, to the extent provided in the resolution,
shall have and may exercise all of the authority of the board of directors in
the management of the business and affairs of the corporation, subject to
limitations imposed by law or the articles of incorporation. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the board of directors. A majority of each committee
may determine its action and may fix the time and places of its meetings, unless
otherwise provided by the board of directors. Each committee shall keep regular
minutes of its meetings and report the same to the board of directors when
required.
SECTION 9. REMOVAL OF DIRECTORS. No member of the board of directors of
the corporation may be removed, except for cause, unless the removal is voted
upon at a duly held meeting of the shareholders called for such purpose at which
holders of at least seventy-five percent (75%) of the shares entitled to vote at
an election of directors vote for any such removal of a director or directors.
SECTION 10. COMPENSATION OF DIRECTORS. Directors shall be entitled to
such compensation for their services as directors or members of any committee of
the board as shall be fixed from time to time by resolution adopted by the
board, and shall also be entitled to reimbursement for any reasonable expenses
incurred in attending any meeting of the board or any such committee.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The officers of the corporation shall be chosen by
the board of directors and shall be a Chairman, a President (each of whom shall
be chosen from among the members of the board of directors), one or more Vice
Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer and one
or more Assistant Treasurers. Two or more offices may be held by the same
person, but an officer shall not execute, acknowledge or verify an instrument in
more than one capacity if the instrument is required by law, the articles of
incorporation or these bylaws to be executed, acknowledged or verified by two or
more officers. The board of directors shall, from time to time, designate one of
the officers of the corporation as the Chief Executive Officer of the
corporation. The board of directors may further, from time to time, but shall
not be obligated to, designate one of the officers of the corporation as the
Chief Operating Officer of the corporation and may, from time to time, but shall
not be obligated to, designate one of the officers of the corporation as
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<PAGE> 10
the Chief Financial Officer. The board of directors may appoint such other
officers and agents as it shall deem necessary.
SECTION 2. COMPENSATION. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors or a committee or officer
appointed by the board.
SECTION 3. TERM OF OFFICE. Unless otherwise provided by resolution of
the board of directors, the principal officers shall be chosen annually by the
board of directors at the first meeting of the board following the regular
meeting of shareholders of the corporation, or as soon thereafter as is
conveniently possible. Subordinate officers may be elected from time to time,
and the Chairman may appoint Assistant Secretaries and Assistant Treasurers for
terms of less than one year. Each officer shall serve until his successor shall
have been chosen and qualified, or until his death, resignation or removal.
SECTION 4. REMOVAL. Any officer may be removed from office at any time,
with or without cause, by the board of directors whenever in its judgment the
best interests of the corporation will be served thereby.
SECTION 5. VACANCIES. Any vacancy in an office, existing for any
reason, may be filled by the board of directors.
SECTION 6. POWERS AND DUTIES. Except as otherwise provided by law, the
articles of incorporation or these bylaws, or as hereinafter provided, the
officers of the corporation shall each have such powers and duties as from time
to time may be conferred by the board of directors.
(a) Chairman. The Chairman shall preside as chairman at all meetings of
the board of directors and of the shareholders, and shall have such other
authority and duties as the board of directors or these bylaws shall provide.
(b) President. The President shall perform such duties as may be
prescribed by the board of directors. In the event of the absence or inability
of the Chairman to act, the President shall have the powers and duties of the
Chairman.
(c) Vice President. It shall be the duty of each Vice President to do
and perform all of the duties required by him by the board of directors. In the
event of the absence or inability of the President to act or a vacancy in the
office, the duties of the President shall devolve upon the respective Vice
Presidents in the order designated by the board of directors.
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<PAGE> 11
(d) Secretary. It shall be the duty of the Secretary to keep a correct
record of all of the proceedings of the meetings of the stockholders and of the
board of directors; to give, or cause to be given, notice of all meetings of the
shareholders; to keep, or cause to be kept, books for the record and transfer of
stock, to issue certificates of stock when duly authorized to do so, and to
attest the same, together with all other instruments of the corporation
requiring attention; to have charge of the corporate seal of the corporation and
to affix the same to instruments as he may be directed and authorized; and in
general to perform such other duties as pertain to the office of secretary of a
corporation, and all duties imposed upon him by these bylaws, as well as those
required of him by the board of directors.
(e) Assistant Secretary. The Assistant Secretary shall have such powers
and perform such duties as shall from time to time be assigned to him by the
board of directors and/or the Chairman. In the absence of the Secretary or in
the case of his inability to act, the Assistant Secretary shall possess the
powers and perform the duties of the Secretary, subject to control by the board
of directors.
(f) Treasurer. It shall be the duty of the Treasurer to have the care
and custody of all the funds and securities of the corporation which may come
into his hands; to endorse checks, drafts and other instruments for the payment
of money for deposit or collection when necessary or proper; to deposit the same
to the credit of the corporation in such bank or banks or depository or
depositories as the board of directors may designate. The Treasurer may endorse
all commercial documents requiring endorsement for or on behalf of the
corporation; he may sign all receipts and vouchers for payments made to the
corporation; he shall render a statement of his cash account to the board of
directors as often as they shall require the same; he shall keep or cause to be
kept, in books regularly kept for that purpose, full and adequate account of all
monies received and paid by him on account of the corporation; and shall keep or
cause to be kept, accurate and true accounts of all the corporation's business
transactions; he shall at all reasonable times exhibit his books and accounts to
any director of the corporation, upon application, at the office of the
corporation during regular business hours; and he shall perform all acts
incident to the position of Treasurer, subject to the control of the board of
directors. In the event of the absence or inability of the Vice President(s) or
a vacancy in the office, the duties of the Vice President shall devolve upon the
Treasurer and, in the event of the absence or inability of the Treasurer or a
vacancy in that office, upon the Secretary.
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<PAGE> 12
(g) Assistant Treasurer. The Assistant Treasurer shall have such power
and shall perform such duties as shall be assigned to him from time to time by
the Treasurer or the board of directors or the Chairman. In the absence of the
Treasurer or in the case of his inability to act, the Assistant Treasurer shall
possess the powers and perform the duties of the Treasurer, subject to the
control of the board of directors.
(h) Bonds and Sureties. If required by the board of directors, any
officer or employee shall give the corporation a bond in such sum and with such
surety or sureties as shall be satisfactory to the board of directors for the
faithful performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
(i) Signatures. The signature of any officer, employee or agent upon
any document of the corporation may be made by facsimile or machine signature
under such limitations and circumstances as the board of directors or any
appropriate committee of the board of directors may provide from time to time.
SECTION 7. VOTING SECURITIES OF CORPORATION. Unless otherwise provided
by the board of directors, the Chairman, and in his absence, the President,
shall have full power and authority on behalf of the corporation to attend and
to act and vote at any meetings of security holders of corporations in which the
corporation may hold securities, and at such meetings shall possess and may
exercise any and all rights and powers incident to the ownership of such
securities which the corporation might have possessed and exercised if it had
been present. The board of directors by resolution from time to time may confer
like powers upon any other person or persons.
ARTICLE V
INDEMNIFICATION
SECTION 1. RIGHT OF INDEMNIFICATION. The corporation shall indemnify
each of its current and former officers, directors, employees and agents (and
the heirs and legal representatives of such officers and directors) to the
maximum extent permitted by applicable law.
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<PAGE> 13
SECTION 2. ADVANCE OF EXPENSES. The corporation shall advance expenses
incurred by a current or former officer or director with respect to any
proceeding for which indemnification is available if such officer or director
complies with the provisions of applicable law.
SECTION 3. RIGHTS OF INDEMNIFICATION CUMULATIVE. The rights of
indemnification provided in this Article V shall be in addition to any rights to
which any director or officer or other person may otherwise be entitled under
any bylaw, agreement, vote of shareholders, or otherwise, and shall be in
addition to the power of the corporation to purchase and maintain insurance with
respect to any director, officer or other person.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 1. FORM OF CERTIFICATE. Every holder of record of fully-paid
shares in the corporation shall be entitled to have a certificate in such form
as the board of directors may from time to time prescribe signed by the
Chairman, President or any Vice President and the Treasurer or any Assistant
Treasurer or the Secretary or an Assistant Secretary of the corporation, sealed
with the corporate seal of the corporation. Where any such certificate is signed
(i) by a transfer agent or an assistant transfer agent or (ii) by a transfer
clerk acting for the corporation and a registrar, the signature of the Chairman,
President, or any Vice President, Treasurer, Assistant Treasurer, Secretary or
Assistant Secretary and the seal of the corporation upon such certificate may be
a facsimile engraved or printed thereon. In case any such officer who has signed
or whose facsimile signature has been used on any such certificate shall have
ceased to be such officer before such certificate is delivered by the
corporation, such certificate may nevertheless be issued and delivered with the
same effect as if such officer had not ceased to be such officer. The name of
the person to whom any certificate is issued, with the number of shares
represented thereby, and the date of issue of the certificate shall be entered
into a book or books to be kept for that purpose.
SECTION 2. LOST CERTIFICATES. The corporation may issue a new
certificate in place of any certificate theretofore issued by the corporation
and alleged to have been lost, stolen or destroyed, upon the making of an
affidavit, in form and substance satisfactory to the corporation, of that fact
by the person claiming the certificate to be lost, stolen or destroyed. The
corporation may, in its discretion and as a condition precedent
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<PAGE> 14
to the issuance thereof, together with such other conditions precedent that it
may reasonably require, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
SECTION 3. TRANSFERS. (a) Transfers of capital shares of the
corporation shall be made only on the books of the corporation by the registered
holder thereof, or by his duly authorized attorney, or with a transfer clerk or
transfer agent appointed as provided in Section 5 of this Article, and on
surrender of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon.
(b) Except as otherwise provided by law or as provided elsewhere
herein, the corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends, and
to vote as such owner, and for all other purposes, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof.
(c) Capital shares may be transferred by delivery of the certificates
thereof, accompanied either by an assignment in writing on the back of the
certificates or by separate written power of attorney to sell, assign and
transfer the same, signed by the record holder thereof, or by his duly
authorized attorney-in-fact, and accompanied by such evidence that all such
signatures are genuine, as the corporation, at its option, may request, but no
transfer shall affect the right of the corporation to pay any dividend upon the
stock to the holder of record as the holder in fact thereof for all purposes,
and no transfer shall be valid, except between the parties thereto, until such
transfer shall have been made upon the books of the corporation as herein
provided.
(d) The board may, from time to time, make such additional rules and
regulations as it may deem expedient, not inconsistent with these bylaws or the
articles of incorporation concerning the issue, transfer and registration of
certificates for shares of the corporation, and nothing contained herein shall
limit or waive any rights of the corporation with respect to such matters under
applicable law or any subscriptions or other agreement by which the corporation
is bound.
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<PAGE> 15
SECTION 4. RECORD DATE. the stock transfer books shall not be closed at
any time for any purpose unless otherwise required by law, but in order that the
corporation may determine the shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or to express any
consent or demand with respect to any corporate action, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of shares or for the purpose of any rights, or entitled to exercise any rights
in respect of any change, conversion or exchange of shares or for the purpose of
any other lawful action, the board of directors may fix, in advance, a record
date, which shall not be more than 60 days and, in case of a meeting of
shareholders, not less than 10 days prior to the date on which the particular
action requiring such determination of shareholders is to be taken.
SECTION 5. TRANSFER AGENT AND REGISTRAR. The board of directors may
appoint one or more transfer agents or one or more transfer clerks and one or
more registrars, and may require all certificates of shares to bear the
signature or signatures of any of them.
ARTICLE VII
CONVEYANCE OF REAL ESTATE
All transfers and conveyances of real estate shall be made by the
corporation, under seal, in accordance with the orders of the board of
directors, and shall be signed by the Chairman, President, any Vice President or
Treasurer and attested by the Secretary.
ARTICLE VIII
MINUTE BOOK
The articles of incorporation and all amendments thereto, the
proceedings of all regular and special meetings of stockholders and directors,
the bylaws and all amendments thereto, and reports of any committees of
directors shall be recorded in the corporation's minute book. The minutes of
each meeting shall be signed by the Secretary and attested by the Chairman or
President depending upon who presides.
ARTICLE IX
CONTRACTS
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<PAGE> 16
All contracts for the purchase of supplies or property or the sale of
products or property of the corporation in the regular course of business, shall
be executed on behalf of the corporation by the Chairman, President, any Vice
President or Treasurer.
All other contracts, bills of sale, mortgages, guaranties, deeds,
assignments, leases and all evidences of debt other than checks, bills of
exchange, trade acceptances and drafts, shall be signed by the Chairman,
President, any Vice President or Treasurer and the Secretary or Assistant
Secretary, except as otherwise provided by resolution of the board of directors
of the corporation.
No check or other instrument for the payment of money to the
corporation shall be endorsed otherwise than for deposit to the credit of the
corporation. All checks of the corporation shall be drawn to order. Each bank
account of the corporation shall be established or continued by resolution of
the board of directors, a certified copy of which shall be filed with the bank,
and shall provide that the funds on deposit therein shall be withdrawn only upon
checks signed by any of the officers of the corporation specified in such
resolution.
ARTICLE X
GENERAL PROVISIONS
SECTION 1. DISTRIBUTION. Distributions upon shares of the corporation,
subject to the provisions, if any, of the articles of incorporation, or any
lawful agreement among shareholders, may be declared by the board of directors
at any regular or special meeting, pursuant to law. Distributions may be paid in
cash or in property, subject to applicable provisions of the articles of
incorporation. Before payment of any distribution, there may be set aside out of
any funds of the corporation available for distribution such sum or sums as the
board from time to time, in its sole and absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing distributions, or
for repairing or maintaining any property of the corporation, or for such other
purpose as the board shall deem conducive to the interest of the corporation,
and the board may modify or abolish any such reserve in its sole and absolute
discretion.
SECTION 2. FISCAL YEAR. The fiscal year of the corporation shall end on
December 31 of each year.
SECTION 3. SEAL. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization
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<PAGE> 17
and the words "Corporate Seal" and "Georgia." The seal may be used by causing it
or a facsimile thereof to be impressed, affixed or reproduced.
SECTION 4. SAVINGS CLAUSE. To the extent these bylaws conflict with any
provision of any state or federal law as such laws may be amended from time to
time, these bylaws shall be construed so as not to conflict with said law, and
any discretionary actions made hereunder shall be made in accordance with
applicable law.
ARTICLE XI
AMENDMENTS
The board of directors shall have power to alter, amend or repeal these
bylaws or adopt new bylaws, including the fixing of directors as permitted by
law, at any meeting of the directors by a vote of the majority of the members
thereof, provided that notice of the proposed amendment or repeal shall have
been given in the notice or waiver of notice of such meeting of the board and
provided further that the maximum and minimum number of directors specified in
Article III, Section 2 of these bylaws may be amended only upon the vote of not
less than eighty percent (80%) of the members thereof.
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<PAGE> 1
EXHIBIT 10.1
================================================================================
U.S. $50,000,000
CREDIT AGREEMENT
by and among
MORTON INDUSTRIAL GROUP, INC.
and
CERTAIN OF ITS SUBSIDIARIES
and
HARRIS TRUST AND SAVINGS BANK
individually and as Agent
and
the Lenders
which are or become parties hereto
<PAGE> 2
Dated as of January __, 1998
================================================================================
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<PAGE> 3
TABLE OF CONTENTS
SECTION HEADING PAGE
SECTION 1. THE CREDITS...............................................1
Section 1.1. Revolving Credit........................................1
(a) Generally...............................................1
(b) Revolving Loans.........................................1
(c) Mandatory Conversion of Revolving Loans.................2
(d) Voluntary Conversion of Revolving Loans.................3
(e) Conversions Generally...................................3
Section 1.2. Term Credit.............................................3
Section 1.3. Letters of Credit.......................................4
(a) General Terms...........................................4
(b) Applications............................................4
(c) The Reimbursement Obligation............................5
(d) The Participating Interests.............................5
(e) Indemnification.........................................6
(f) Change in Laws..........................................7
Section 1.4. Manner and Disbursement of Borrowings...................7
(a) Generally...............................................7
(b) Reimbursement Obligation................................8
(c) Agent Reliance on Bank Funding..........................8
Section 1.5. Manner of Obtaining Letters of Credit...................8
Section 1.6. Appointment of Morton as Agent for Borrowers; Reliance
by Agent................................................9
(a) Appointment.............................................9
(b) Reliance................................................9
SECTION 2. INTEREST AND CHANGE IN CIRCUMSTANCES......................9
Section 2.1. Interest Rate Options...................................9
Section 2.2. Minimum Amounts........................................10
Section 2.3. Computation of Interest................................10
Section 2.4. Manner of Rate Selection...............................11
Section 2.5. Change of Law..........................................11
Section 2.6. Unavailability of Deposits or Inability to Ascertain
Adjusted LIBOR.........................................11
Section 2.7. Taxes and Increased Costs..............................12
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<PAGE> 4
Section 2.8. Change in Capital Adequacy Requirements................13
Section 2.9. Funding Indemnity......................................13
Section 2.10. Lending Branch.........................................14
Section 2.11. Lender's Duty to Mitigate..............................14
Section 2.12. Discretion of Lenders as to Manner of Funding..........15
Section 2.13. Replacement of Lender..................................15
SECTION 3. FEES, PREPAYMENTS, TERMINATIONS, APPLICATIONS AND
NOTATIONS................................................16
Section 3.1. Fees...................................................16
Section 3.2. Voluntary Prepayments..................................17
Section 3.3. Mandatory Prepayments..................................17
Section 3.4. Terminations of Revolving Credit Commitments...........19
Section 3.5. Place and Application of Payments......................20
Section 3.6. Notations and Requests.................................21
SECTION 4. COLLATERAL.............................................21
Section 4.1. Collateral.............................................21
Section 4.2. Guaranties.............................................22
Section 4.3. Further Assurances.....................................22
SECTION 5. DEFINITIONS............................................22
Section 5.1. Definitions............................................22
Section 5.2. Interpretation.........................................35
Section 5.3. Change in Accounting Principles........................35
SECTION 6. REPRESENTATIONS AND WARRANTIES.........................35
Section 6.1. Organization and Qualification.........................35
Section 6.2. Non-Borrowing Subsidiaries.............................36
Section 6.3. Margin Stock...........................................37
Section 6.4. Financial Reports......................................37
Section 6.5. Full Disclosure........................................37
Section 6.6. Good Title.............................................37
Section 6.7. Litigation and Other Controversies.....................38
Section 6.8. Taxes..................................................38
Section 6.9. Approvals..............................................38
Section 6.10. Affiliate Transactions.................................38
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<PAGE> 5
Section 6.11. Investment Company.....................................38
Section 6.12. ERISA..................................................38
Section 6.13. Compliance with Laws...................................39
Section 6.14. Other Agreements.......................................39
Section 6.15. Merger Documents.......................................39
SECTION 7. CONDITIONS PRECEDENT.....................................39
Section 7.1. All Advances...........................................39
Section 7.2. Initial Advance........................................40
SECTION 8. COVENANTS................................................42
Section 8.1. Maintenance of Business................................42
Section 8.2. Maintenance of Property................................42
Section 8.3. Taxes and Assessments..................................42
Section 8.4. Insurance..............................................43
Section 8.5. Financial Reports......................................43
Section 8.6. Interest Coverage Ratio................................45
Section 8.7. Leverage Ratio.........................................45
Section 8.8. Net Worth..............................................45
Section 8.9. Fixed Charge Coverage Ratio............................45
Section 8.10. Capital Expenditures...................................45
Section 8.11. Indebtedness...........................................45
Section 8.12. Liens..................................................46
Section 8.13. Investments, Loans, Advances and Guaranties............47
Section 8.14. Leases. (a) Sales and Leasebacks......................48
Section 8.15. Dividends and Certain Other Restricted Payments........48
Section 8.16. Mergers, Consolidations and Sales......................48
Section 8.17. Acquisitions...........................................49
Section 8.18. Maintenance of Subsidiaries............................50
Section 8.19. Formation of Subsidiaries..............................51
Section 8.20. ERISA..................................................51
Section 8.21. Compliance with Laws...................................51
Section 8.22. Burdensome Contracts With Affiliates...................51
Section 8.23. Changes in Fiscal Year.................................51
Section 8.24. Change in the Nature of Business.......................52
Section 8.25. Use of Loan Proceeds...................................52
SECTION 9. EVENTS OF DEFAULT AND REMEDIES...........................52
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<PAGE> 6
SECTION 10. THE AGENT................................................55
Section 10.1. Appointment and Authorization..........................55
Section 10.2. Rights as a Lender.....................................55
Section 10.3. Standard of Care.......................................55
Section 10.4. Costs and Expenses.....................................56
Section 10.5. Indemnity..............................................56
SECTION 11. JOINT AND SEVERAL LIABILITY AND GUARANTIES...............57
Section 11.1. Joint and Several Liability and Guaranties.............57
Section 11.2. Guaranty Unconditional.................................57
Section 11.3. Discharge Only Upon Payment in Full; Reinstatement
in Certain Circumstances...............................58
Section 11.4. Waivers................................................58
Section 11.5. Limit on Recovery......................................59
Section 11.6. Stay of Acceleration...................................59
Section 11.7. Benefit to Guarantors..................................59
Section 11.8. Guarantor Covenants....................................59
SECTION 12. MISCELLANEOUS............................................59
Section 12.1. Holidays...............................................59
Section 12.2. No Waiver, Cumulative Remedies.........................59
Section 12.3. Waivers, Modifications and Amendments..................60
Section 12.4. Costs and Expenses.....................................60
Section 12.5. Documentary Taxes......................................61
Section 12.6. Survival of Representations............................61
Section 12.7. Survival of Indemnities................................61
Section 12.8. Notices................................................61
Section 12.9. Headings...............................................61
Section 12.10. Severability of Provisions.............................61
Section 12.11. Counterparts...........................................62
Section 12.12. Binding Nature, Governing Law, Etc.....................62
Section 12.13. Entire Understanding...................................62
Section 12.14. Participations.........................................62
Section 12.15. Assignment Agreements..................................62
Section 12.16. Confidentiality........................................63
Signature....................................................................65
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<PAGE> 7
Exhibit A -- Revolving Credit Note
Exhibit B -- Term Credit Note
Exhibit C -- Mandatory Conversion Term Note
Exhibit D -- Voluntary Conversion Term Note
Exhibit E -- Compliance Certificate
Attachment to Compliance Certificate
Exhibit F -- Notice of Payment Request
Exhibit G -- Guaranty
Exhibit H -- Opinion of Counsel
Schedule 6.2 -- Subsidiaries
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<PAGE> 8
MORTON INDUSTRIAL GROUP, INC.
CREDIT AGREEMENT
To Each of the Lenders Signatory Hereto
Ladies and Gentlemen:
The undersigned, Morton Metalcraft Co., an Illinois corporation
("Morton"), and Morton Metalcraft Co. of North Carolina, a North Carolina
corporation ("Morton North Carolina") (Morton and Morton North Carolina being
hereinafter referred to collectively as the "Borrowers" and individually as a
"Borrower") apply to you for your several commitments, subject to all of the
terms and conditions hereof and on the basis of the representations and
warranties hereinafter set forth, to make a revolving credit (the "Revolving
Credit") and a term credit (the "Term Credit") in each case available to the
Borrowers, all as more fully hereinafter set forth. The undersigned, Morton
Industrial Group, Inc., a Georgia corporation (the "Parent"), executes and
delivers this Agreement to confirm certain of its agreements made in connection
with the extension of such credit to the Borrowers.
SECTION 1. THE CREDITS.
Section 1.1. Revolving Credit.
(a) Generally. Subject to the terms and conditions hereof, each
Lender severally agrees to extend credit to the Borrowers on a revolving basis
under the Revolving Credit which may be availed of by each and any Borrower from
time to time, and borrowings thereunder may be repaid and used again, during the
period from the date hereof to and including the Termination Date, at which time
the commitments of the Lenders to extend credit under the Revolving Credit shall
expire. The maximum amount of the Revolving Credit which each Lender agrees to
extend to the Borrowers, taken together, shall not exceed its Revolving Credit
Commitment. The Revolving Credit may be utilized by each and any Borrower in the
form of Revolving Loans and Letters of Credit, all as more fully hereinafter set
forth; provided, however, that the aggregate amount of Revolving Loans and L/C
Obligations outstanding at any one time from all the Borrowers, taken together,
shall not exceed the Revolving Credit Commitments then in effect. For all
purposes of this Agreement, where a determination of the unused or available
amount of the Revolving Credit Commitments is necessary, the Revolving Loans and
L/C Obligations shall be deemed to utilize the Revolving Credit Commitments then
in effect. The obligations of the Lenders hereunder are several and not joint,
and no Lender shall under any circumstances be
<PAGE> 9
obligated to extend credit under the Revolving Credit in excess of its
Revolving Credit Commitment.
(b) Revolving Loans. Subject to the terms and conditions hereof, the
Revolving Credit may be availed of by each and any Borrower in the form of loans
(individually a "Revolving Loan" and collectively the "Revolving Loans"). Each
Revolving Loan by the Lenders shall be in a minimum amount of $100,000 or such
greater amount which is an integral multiple of $100,000, except to the extent
Section 2 provides otherwise in the case of LIBOR Portions. Each Revolving Loan
shall be made pro rata by the Lenders in accordance with the amounts of their
respective Percentages. Each advance made by a Lender of its pro rata share of
each Revolving Loan shall be evidenced by the same Revolving Credit Note of the
Borrowers (individually, for each Lender, its "Revolving Credit Note" and
collectively, for all the Lenders, their "Revolving Credit Notes"), jointly and
severally, payable to the order of such Lender in the amount of its Revolving
Credit Commitment, with each Revolving Credit Note to be in the form (with
appropriate insertions) attached hereto as Exhibit A. Each Revolving Credit Note
shall be dated the date of issuance thereof, be expressed to bear interest as
provided in Section 2 hereof and be expressed to mature on the Termination Date.
Without regard to the principal amount of each Revolving Credit Note stated on
its face, the actual principal amount at any time outstanding and owing by the
Borrowers on account thereof shall be the sum of all advances then or
theretofore made thereon less all payments of principal actually received.
(c) Mandatory Conversion of Revolving Loans. If the aggregate unpaid
principal balance of Revolving Loans shall exceed $15,000,000 for at least three
(3) consecutive days during any fiscal quarter prior to the Termination Date,
then $10,000,000 of the Revolving Loans outstanding (or such lesser amount of
the Revolving Loans as may then be outstanding) as of the close of the next
succeeding fiscal quarter shall as of such day be automatically converted (such
conversion to be made ratably among the Lenders in accordance with their
Percentages) into a term loan (a "Mandatory Conversion Term Loan") such that
each Lender shall be deemed to have made a pro rata share of such Mandatory
Conversion Term Loan in the amount of such Lender's Percentage of the Revolving
Loans so converted; provided, however, that (i) unless the Required Lenders
otherwise agree in their discretion, no such conversion shall occur if any
Default or Event of Default shall have occurred and be continuing and (ii) once
$20,000,000 of Revolving Loans have been converted (whether as a result of
voluntary or mandatory conversions), no further conversions of the Revolving
Loans shall be required by this Section. Each Lender's pro rata share of each
Mandatory Conversion Term Loan shall be made against and evidenced by a separate
Term Loan Note of the Borrowers (individually a "Mandatory Conversion Term Note"
and collectively the "Mandatory Conversion Term Notes"), jointly and severally,
one such Note per Lender for each Mandatory Conversion Term Loan, payable to the
order of such Lender in an amount equal to such Lender's Percentage of the
Revolving Loans so
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<PAGE> 10
converted, each Mandatory Conversion Term Note to be in the form (with
appropriate insertions) attached hereto as Exhibit C. Each Mandatory Conversion
Term Note shall be expressed to mature in consecutive quarterly installments
equal (except for the last such installment) to 1/28th of the principal amount
of the Mandatory Conversion Term Loan evidenced thereby, commencing on the first
close of a calendar quarter following the date on which the relevant Revolving
Loans were converted and continuing on the last day of each and every calendar
quarter thereafter, but with the final payment of both principal and interest,
if not sooner paid, due on the Termination Date.
(d) Voluntary Conversion of Revolving Loans. Any time during the
period from the date hereof to the Termination Date, upon five (5) Business
Days' prior written notice to the Agent (which shall promptly so inform the
Lenders), Morton (which is acting on behalf of the Borrowers pursuant to Section
1.6 hereof) may elect to convert all or any part (but if in part, then in an
minimum amount of $5,000,000 or such greater amount which is an integral
multiple of $1,000,000 and such conversion to be made ratably as among the
Lenders in accordance with their Percentages) of the then outstanding Revolving
Loans to a term loan (individually a "Voluntary Conversion Term Loan") (the
Mandatory Conversion Term Loans and Voluntary Conversion Term Loans being
hereinafter referred to collectively as "Conversion Term Loans" and individually
as a "Conversion Term Loan") such that each Lender shall be deemed to have made
a pro rata share of such Voluntary Conversion Term Loan in the amount of such
Lender's Percentage of the amount of Revolving Loans so converted; provided,
however, that (i) no such conversion shall be permitted if any Default or Event
of Default shall have occurred and be continuing and (ii) no such conversion
shall be permitted unless at least one Mandatory Conversion Term Loan shall have
been made. Each Lender's share of a Voluntary Conversion Term Loan shall be made
against and evidenced by a separate Term Loan Note of the Borrowers
(individually a "Voluntary Conversion Term Note" and collectively the "Voluntary
Conversion Term Notes") (the Mandatory Conversion Term Notes and the Voluntary
Conversion Term Notes being hereinafter referred to collectively as the
"Conversion Term Notes" and individually as a "Conversion Term Note"), jointly
and severally, one such Note per Lender for each Voluntary Conversion Term Loan,
payable to the order of such Lender in an amount equal to such Lender's
Percentage of the Revolving Loans so converted, each Voluntary Conversion Term
Note to be in the form (with appropriate insertions) attached hereto as Exhibit
D. Each Voluntary Conversion Term Note shall be expressed to mature in
consecutive quarterly installments equal (except for the last such installment)
to 1/28th of the principal amount of the Voluntary Conversion Term Loan
evidenced thereby, commencing on the first close of a calendar quarter to follow
the date on which the relevant Revolving Loans were converted and continuing on
the last day of each and every calendar quarter thereafter, but with the final
payment of both principal and interest, if not sooner paid, due on the
Termination Date.
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<PAGE> 11
(e) Conversions Generally. The principal amount of each Conversion
Term Loan shall concurrently and permanently reduce by like amount the Revolving
Credit Commitments and hence the credit available under such Commitments, and no
amount repaid or prepaid on any Conversion Term Loan may be borrowed again. The
Lenders' respective shares of each Conversion Term Loan, and share of the
related concurrent reduction by like amount of the Revolving Credit Commitments,
shall be ratable in accordance with their respective Percentages.
Section 1.2. Term Credit. Subject to all of the terms and
conditions hereof, the Lenders severally agreed to make a term loan (the "Term
Credit Loan") to the Borrowers under the Term Credit in an amount not to exceed
their Term Credit Commitments. The Term Loan shall be disbursed in a single
advance made, if at all, on or before January 31, 1998, at which time the
commitments of the Lenders to make the Term Loan shall expire. Each Lender shall
advance a pro rata share of the Term Loan in accordance with the amounts of
their respective Percentages. Each Lender's pro rata share of the Term Loan
shall be evidenced by a Term Loan Note of the Borrowers (individually a "Term
Credit Note" and collectively the "Term Credit Notes") (the Conversion Term
Notes and the Term Credit Notes being hereinafter referred to collectively as
the "Term Notes" and individually as a "Term Note") payable to the order of such
Lender in the amount of its pro rata share of the Term Loan, each Term Credit
Note to be in the form (with appropriate insertions) attached hereto as Exhibit
B. Each Term Credit Note shall be expressed to mature in twenty-four (24)
installments commencing on March 31, 1998 and continuing on the last day of each
calendar quarter occurring thereafter to and including September 30, 2003, with
the final installment due on December 31, 2003, with the principal installments
on the Term Credit Notes to aggregate $500,000 per installment through and
including December 31, 1999, $625,000 per installment thereafter and through and
including December 31, 2001, $750,000 per installment thereafter and through and
including September 30, 2003 and with the final principal installment on all the
Term Credit Notes to aggregate in an amount equal to all principal and interest
not sooner paid, and with the amount of each installment due on the Term Credit
Note held by each Lender to be equal to such Lender's Percentage of such
installment.
Section 1.3. Letters of Credit.
(a) General Terms. Subject to the terms and conditions hereof, as
part of the Revolving Credit, the Agent shall issue standby and commercial
letters of credit (each a "Letter of Credit") for the account of each and any
Borrower in U.S. Dollars in an aggregate undrawn face amount up to the amount of
the L/C Commitment as then in effect; provided, however, that the aggregate L/C
Obligations at any time outstanding shall not exceed the difference between the
Revolving Credit Commitments in effect at such time and the aggregate principal
amount of Revolving Loans then outstanding. Each Letter of Credit shall be
issued by the Agent, but each
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Lender shall be obligated to reimburse the Agent for its Percentage of the
amount of each drawing thereunder and, accordingly, the undrawn face amount of
each Letter of Credit shall constitute usage of the Revolving Credit Commitment
of each Lender pro rata in accordance with each Lender's Percentage.
(b) Applications. At any time before the Termination Date, the Agent
shall, at the request of Morton (which is acting on behalf of the Borrowers
pursuant to Section 1.6 hereof), issue one or more Letters of Credit for the
account of any one or more of the Borrowers, in a form satisfactory to the
Agent, in an aggregate face amount as set forth above, upon the receipt of an
application for the Letter of Credit in the form customarily prescribed by the
Agent duly executed by each Borrower for whose account such Letter of Credit was
issued (each an "Application"). Each Letter of Credit issued hereunder which is
a standby letter of credit shall expire not later than the earlier of (i) twelve
(12) months from the date of issuance and each renewal or (ii) the Termination
Date. Each Letter of Credit issued hereunder which is a commercial letter of
credit shall expire not later than the earlier of (i) one hundred eighty (180)
days from the date of issuance and each renewal or (ii) the Termination Date.
The current forms of the Agent's Applications for standby and commercial Letters
of Credit attached hereto as Schedule 1.3 (Standby) and Schedule 1.3
(Commercial), respectively. The Agent shall provide at least one of the
Borrowers and each Lender with copies of any new form of Application that may,
from time to time, be adopted by the Agent. Notwithstanding anything contained
in any Application to the contrary (i) the Borrowers shall be jointly and
severally liable for all obligations in respect of each Letter of Credit, (ii)
the Borrowers' obligation to pay fees in connection with each Letter of Credit
shall be as exclusively set forth in Section 3.1(b) hereof, (iii) except during
the continuance of an Event of Default, the Agent will not call for the funding
by the Borrowers of any amount under a Letter of Credit, or any other form of
collateral security for the Borrowers' obligations in connection with such
Letter of Credit, before being presented with a drawing thereunder, and (iv) if
the Agent is not timely reimbursed for the amount of any drawing under a Letter
of Credit on the date such drawing is paid, the Borrowers' obligation to
reimburse the Agent for the amount of such drawing shall bear interest (which
the Borrowers hereby promise, jointly and severally, to pay) from and after the
date such drawing is paid at a rate per annum equal to the sum of 2-1/4% plus
the Domestic Rate from time to time in effect. The Agent will promptly notify
the Lenders of each issuance by it of a Letter of Credit. If the Agent issues
any Letters of Credit with expiration dates that are automatically extended
unless the Agent gives notice that the expiration date will not so extend beyond
its then scheduled expiration date, the Agent will give such notice of
non-renewal before the time necessary to prevent such automatic extension if
before such required notice date (i) the expiration date of such Letter of
Credit if so extended would be after the Termination Date, (ii) the Revolving
Credit Commitments have been terminated or (iii) an Event of Default exists and
the Required Lenders have given the Agent instructions not to so permit the
extension of the expiration date of such Letter of Credit. The
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Agent agrees to issue amendments to the Letter(s) of Credit increasing the
amount, or extending the expiration date, thereof at the request of the
Borrowers subject to the conditions of Section 7 and the other terms of this
Section 1.3. Without limiting the generality of the foregoing, the Agent's
obligation to issue, amend or extend the expiration date of a Letter of Credit
is subject to the conditions of Section 7 and the other terms of this Section
1.3 and the Agent will not issue, amend or extend the expiration date of any
Letter of Credit if any Lender notifies the Agent of any failure to satisfy or
otherwise comply with such conditions and terms and directs the Agent not to
take such action.
(c) The Reimbursement Obligation. Subject to Section 1.3(b) hereof,
the obligation of a Borrower to reimburse the Agent for all drawings under a
Letter of Credit issued for such Borrower's account (a "Reimbursement
Obligation") shall be governed by the Application related to such Letter of
Credit, except that reimbursement of each drawing shall be made in immediately
available funds at the Agent's principal office in Chicago, Illinois by no later
than 12:30 p.m. (Chicago time) on the date when such drawing is paid or, if
drawing was paid after 11:30 a.m. (Chicago time), by the end of such day. If the
relevant Borrower does not make any such reimbursement payment on the date due
and the Participating Lenders fund their participations therein in the manner
set forth in Section 1.3(d) below, then all payments thereafter received by the
Agent in discharge of any of the relevant Reimbursement Obligations shall be
distributed in accordance with Section 1.3(d) below.
(d) The Participating Interests. Each Lender (other than the Lender
then acting as Agent in issuing Letters of Credit), by its acceptance hereof,
severally agrees to purchase from the Agent, and the Agent hereby agrees to sell
to each such Lender (a "Participating Lender"), an undivided percentage
participating interest (a "Participating Interest"), to the extent of its
Percentage, in each Letter of Credit issued by, and each Reimbursement
Obligation owed to, the Agent. Upon any failure by a Borrower to pay any
Reimbursement Obligation in respect of a Letter of Credit issued for such
Borrower's account at the time required on the date the related drawing is paid,
as set forth in Section 1.3(c) above, or if the Agent is required at any time to
return to a Borrower or to a trustee, receiver, liquidator, custodian or other
Person any portion of any payment of any Reimbursement Obligation, each
Participating Lender shall, not later than the Business Day it receives a
certificate in the form of Exhibit F hereto from the Agent to such effect, if
such certificate is received before 1:00 p.m. (Chicago time), or not later than
the following Business Day, if such certificate is received after such time, pay
to the Agent an amount equal to its Percentage of such unpaid or recaptured
Reimbursement Obligation together with interest on such amount accrued from the
date the related payment was made by the Agent to the date of such payment by
such Participating Lender at a rate per annum equal to (i) from the date the
related payment was made by the Agent to the date two (2) Business Days after
payment by such Participating Lender is due hereunder, the Federal Funds Rate
for each such day and
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(ii) from the date two (2) Business Days after the date such payment is due
from such Participating Lender to the date such payment is made by such
Participating Lender, the Domestic Rate in effect for each such day. Each such
Participating Lender shall thereafter be entitled to receive its Percentage of
each payment received in respect of the relevant Reimbursement Obligation and
of interest paid thereon, with the Agent retaining its Percentage as a Lender
hereunder.
The several obligations of the Participating Lenders to the Agent under
this Section 1.3 shall be absolute, irrevocable and unconditional under any and
all circumstances whatsoever (except, without limiting the Borrowers' joint and
several obligations under each Application for a Letter of Credit issued for any
Borrower's account, to the extent such Borrower is relieved from its obligation
to reimburse the Agent for a drawing under a Letter of Credit because of the
Agent's gross negligence or willful misconduct in determining that documents
received under the Letter of Credit comply with the terms thereof) and shall not
be subject to any set-off, counterclaim or defense to payment which any
Participating Lender may have or have had against any one or more of the
Borrowers, the Agent, any other Lender or any other Person whatsoever. Without
limiting the generality of the foregoing, such obligations shall not be affected
by any Default or Event of Default or by any reduction or termination of any
Revolving Credit Commitment of any Lender, and each payment by a Participating
Lender under this Section 1.3 shall be made without any offset, abatement,
withholding or reduction whatsoever. The Agent shall be entitled to offset
amounts received for the account of a Lender under this Agreement against unpaid
amounts due from such Lender to the Agent hereunder (whether as fundings of
participations, indemnities or otherwise), but shall not be entitled to offset
against amounts owed to the Agent by any Lender arising outside this Agreement.
(e) Indemnification. Each Participating Lender shall, to the extent
of its respective Percentage, indemnify the Agent (to the extent not reimbursed
by the Borrowers) against any cost, expense (including reasonable counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from the Agent's gross negligence or willful misconduct) that the Agent
may suffer or incur in connection with any Letter of Credit. The obligations of
the Participating Lenders under this Section 1.3(d) and all other parts of this
Section 1.3 shall survive termination of this Agreement and of all other L/C
Documents.
(f) Change in Laws. If the Agent or any Lender shall determine in
good faith that any change in any applicable law, regulation or guideline
(including, without limitation, Regulation D of the Board of Governors of the
Federal Reserve System) or any new law, regulation or guideline, or any
interpretation of any of the foregoing by any governmental authority charged
with the administration thereof or any central bank or other fiscal, monetary or
other authority having jurisdiction over the Agent or such Lender (whether or
not having the force of law), shall:
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(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against the Letters of Credit, or the
Agent's or such Lender's or the liability of any Borrower with respect
thereto; or
(ii) impose on the Agent or such Lender any penalty with
respect to the foregoing or any other condition regarding this
Agreement, the Applications or the Letters of Credit;
and the Agent or such Lender shall determine in good faith that the result of
any of the foregoing is to increase the cost (whether by incurring a cost or
adding to a cost) to the Agent or such Lender of issuing, maintaining or
participating in the Letters of Credit hereunder (without benefit of, or credit
for, any prorations, exemptions, credits or other offsets available under any
such laws, regulations, guidelines or interpretations thereof), then the
Borrowers shall pay on demand to the Agent or such Lender from time to time as
specified by the Agent or such Lender such additional amounts as the Agent or
such Lender shall determine are sufficient to compensate and indemnify it for
such increased cost in respect of each such Letter of Credit; provided, however,
that the Borrowers shall not be obligated to pay any such amount or amounts to
the extent such additional cost was incurred or paid by such Lender more than
sixty (60) days prior to the date of the delivery of the certificate referred to
in the immediately following sentence (nothing herein to impair or otherwise
affect the Borrowers' liability hereunder for costs subsequently incurred or
paid by such Lender).
Section 1.4. Manner and Disbursement of Borrowings. (a) Generally.
Morton (which is acting on behalf of the Borrowers pursuant to Section 1.6
hereof) shall give written or telephonic notice to the Agent (which notice shall
be irrevocable once given and, if given by telephone, shall be promptly
confirmed in writing) by no later than 11:00 a.m. (Chicago time) on any Business
Day of each request for a Loan, in each case specifying the type of Loan
(whether a Revolving Loan or a Term Credit Loan) which is to be made, the
Borrower to which the proceeds of such Loan are to be disbursed (in the case of
a Loan of a Revolving Loan), the amount of such Loan and the date such Loan is
to be made. The Agent shall promptly notify each Lender of the Agent's receipt
of each such notice. Each Loan shall initially constitute part of the applicable
Domestic Rate Portion except to the extent the Company has otherwise timely
elected as provided in Section 2 hereof. Not later than 12:00 noon (Chicago
time) on the date specified for any Loan to be made by a Lender hereunder, such
Lender shall make the proceeds of its pro rata share of such Loan available to
the Agent in Chicago in immediately available funds. Subject to the provisions
of Section 7 hereof, the proceeds of each Loan shall be made available to the
relevant Borrower at the principal office of the Agent in Chicago, Illinois, in
immediately available funds, upon receipt by the Agent from each Lender of its
pro rata share of such Loan.
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(b) Reimbursement Obligation. In the event the Company fails to give
notice pursuant to Section 1.4(a) above of a Revolving Loan equal to the amount
of a Reimbursement Obligation and has not notified the Agent by 11:00 a.m.
(Chicago time) on the day such Reimbursement Obligation becomes due that it
intends to repay such Reimbursement Obligation through funds not borrowed under
this Agreement, the Company shall be deemed to have requested a Revolving Loan
constituting part of the Domestic Rate Portion on such day in the amount of the
Reimbursement Obligation then due, subject to Section 7.1 hereof, which
Borrowing shall be applied to pay the Reimbursement Obligation then due.
(c) Agent Reliance on Bank Funding. Unless the Agent shall have been
notified by a Lender prior to 11:30 a.m. (Chicago time) on the date a Loan is to
be made hereunder that such Lender does not intend to make its pro rata share of
such Loan available to the Agent, the Agent may assume that such Lender has made
such share available to the Agent on such date and the Agent may in reliance
upon such assumption make available to the relevant Borrower a corresponding
amount. If such corresponding amount is not in fact made available to the Agent
by such Lender and the Agent has made such amount available to the relevant
Borrower, the Agent shall be entitled to receive such amount from such Lender
forthwith upon the Agent's demand, together with interest thereon in respect of
each day during the period commencing on the date such amount was made available
to such Borrower and ending on but excluding the date the Agent recovers such
amount at a rate per annum equal to the effective rate charged to the Agent for
overnight federal funds transactions with member banks of the federal reserve
system for each day as determined by the Agent (or in the case of a day which is
not a Business Day, then for the preceding day). If such amount is not received
from such Lender by the Agent immediately upon demand, such Borrower will, on
demand, repay to the Agent the proceeds of the Loan attributable to such Lender
with interest thereon at a rate per annum equal to the interest rate applicable
to the relevant Loan, but without such payment being considered a payment or
prepayment of a Loan, so that the such Borrower will have no liability under
Section 2.9 hereof with respect to such payment.
Section 1.5. Manner of Obtaining Letters of Credit. Morton (which
is acting on behalf of the Borrowers pursuant to Section 1.6 hereof) shall
provide at least four (4) Business Days' advance written notice to the Agent of
a Borrower's request for the issuance for such Borrower's account of a Letter of
Credit, such notice in each case to be accompanied by an Application for such
Letter of Credit properly completed and executed by such Borrower and in the
case of an extension or an increase in the amount of a Letter of Credit, a
written request therefor, in a form acceptable to the Agent, in each case,
together with the fees called for by this Agreement. The Agent shall promptly
notify each Lender of the Agent's receipt of each such notice.
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Section 1.6. Appointment of Morton as Agent for Borrowers; Reliance
by Agent.
(a) Appointment. Each Borrower irrevocably appoints Morton as its
agent hereunder to make requests on such Borrower's behalf under Section 1
hereof for borrowings to be made by such Borrower and for Letters of Credit to
be issued for such Borrower's sole or joint account, to select on such
Borrower's behalf the interest rate to be applicable under Section 2 hereof to
Loans made to such Borrower, effect conversions of Revolving Loans into
Voluntary Conversion Term Loans and to take any other action contemplated by the
Loan Documents with respect to credit extended hereunder to such Borrower. The
Agent and the Lenders shall be entitled to conclusively presume that any action
by Morton under the Loan Documents is taken on behalf of any one or more of the
relevant Borrowers whether or not Morton so indicates.
(b) Reliance. All requests for borrowings and selection of interest
rates to be applicable thereto may be written or oral, including by telephone or
facsimile. The Borrowers agree that the Agent may rely on any such notice given
by any person the Agent in good faith believes is an Authorized Representative
without the necessity of independent investigation (the Borrowers hereby
indemnifying the Agent and Lenders from any liability or loss ensuing from such
reliance), and in the event any such telephonic or other oral notice conflicts
with any written confirmation, such oral or telephonic notice shall govern if
the Agent has acted in reliance thereon.
SECTION 2. INTEREST AND CHANGE IN CIRCUMSTANCES.
Section 2.1. Interest Rate Options. (a) Subject to the terms and
conditions of this Section 2, portions of the principal indebtedness evidenced
by the Notes (all of the indebtedness evidenced by the Notes, whether or not
Notes of the same class, bearing interest at the same rate for the same period
of time being hereinafter referred to as a "Portion") may, at the option of
Morton, which is acting on behalf of the Borrowers pursuant to Section 1.6
hereof, bear interest with reference to the Domestic Rate (the "Domestic Rate
Portion") or with reference to the Adjusted LIBOR ("LIBOR Portions"), and
Portions of a particular class of Notes may be converted from time to time from
one basis for such Notes to the other. All of the indebtedness evidenced by the
Notes which is not part of a LIBOR Portion shall constitute a single Domestic
Rate Portion. All of the indebtedness evidenced by the Notes which bears
interest with reference to a particular Adjusted LIBOR for a particular Interest
Period shall constitute a single LIBOR Portion. Anything contained herein to the
contrary notwithstanding, the obligation of the Lenders to create, continue or
effect by conversion any LIBOR Portion shall be conditioned upon the fact that
at the time no Default or Event of Default shall have occurred and be
continuing. The Borrowers hereby promise to pay interest on each Portion at the
rates and times specified in this Section 2.
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(b) Domestic Rate Portion. Each Domestic Rate Portion shall bear
interest (which the Borrowers hereby promise to pay at the times herein
provided) at the rate per annum determined by adding the Applicable Margin to
the Domestic Rate as in effect from time to time, provided that if a Domestic
Rate Portion or any part thereof is not paid when due (whether by lapse of time,
acceleration or otherwise) such Portion shall bear interest (which the Borrowers
hereby promise to pay at the times herein provided), before as well as after
judgment, until payment in full thereof at the rate per annum determined by
adding 2% to the interest rate which would otherwise be applicable thereto from
time to time. Interest on the Domestic Rate Portion shall be payable monthly on
the last day of each month in each year (commencing January 31, 1998) and at
maturity of the applicable Notes, and interest after maturity shall be due and
payable upon demand. Any change in the interest rate on the Domestic Rate
Portions resulting from a change in the Domestic Rate shall be effective on the
date of the relevant change in the Domestic Rate.
(c) LIBOR Portions. Each LIBOR Portion shall bear interest (which the
relevant Borrower hereby promises to pay at the times herein provided) for each
Interest Period selected therefor at a rate per annum determined by adding the
Applicable Margin to the Adjusted LIBOR for such Interest Period, provided that
if any LIBOR Portion is not paid when due (whether by lapse of time,
acceleration or otherwise) such Portion shall bear interest (which the relevant
Borrower hereby promises to pay at the times herein provided), whether before or
after judgment, until payment in full thereof through the end of the Interest
Period then applicable thereto at the rate per annum determined by adding 2% to
the interest rate which would otherwise be applicable thereto, and effective at
the end of the Interest Period such LIBOR Portion shall automatically be
converted into and added to the Domestic Rate Portion and shall thereafter bear
interest at the interest rate applicable to the Domestic Rate Portion of the
applicable Notes after default. Interest on each LIBOR Portion shall be due and
payable on the last day of each Interest Period applicable thereto and, with
respect to any Interest Period applicable to a LIBOR Portion in excess of three
(3) months, on the date occurring every three (3) months after the date such
Interest Period began and at the end of such Interest Period, and interest after
maturity shall be due and payable upon demand. Morton (which is acting on behalf
of the Borrowers pursuant to Section 1.6 hereof) shall notify the Agent on or
before 11:00 a.m. (Chicago time) on the third Business Day preceding the end of
an Interest Period applicable to a LIBOR Portion whether such LIBOR Portion is
to continue as a LIBOR Portion, in which event Morton shall notify the Agent of
the new Interest Period selected therefor, and in the event Morton shall fail to
so notify the Agent, such LIBOR Portion shall automatically be converted into
and added to the Domestic Rate Portion of the applicable Notes as of and on the
last day of such Interest Period. The Agent shall promptly notify each Lender of
each notice received from Morton pursuant to the foregoing provision.
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Section 2.2. Minimum Amounts. Each LIBOR Portion shall be
in a minimum amount of $1,000,000 or such greater amount which is an integral
multiple of $100,000.
Section 2.3. Computation of Interest. All interest on each LIBOR
Portion shall be computed on the basis of a year of 360 days for the actual
number of days elapsed. All interest on the Domestic Rate Portion shall be
computed on the basis of a year of 365 days (or, in a leap year, 366 days) for
the actual number of days elapsed.
Section 2.4. Manner of Rate Selection. Morton (which is acting on
behalf of the Borrowers pursuant to Section 1.6 hereof) shall notify the Agent
by 11:00 a.m. (Chicago time) at least three (3) Business Days prior to the date
upon which it requests that any LIBOR Portion be created or that any part of the
Domestic Rate Portion be converted into a LIBOR Portion (each such notice to
specify in each instance the amount thereof and the Interest Period selected
therefor), and the Agent shall advise each Lender of each notice by 2:00 p.m.
(Chicago time) on the same Business Day the Agent receives such notice. If any
request is made to convert a LIBOR Portion into the Domestic Rate Portion, such
conversion shall only be made so as to become effective as of the last day of
the Interest Period applicable thereto. All requests for the creation,
continuance or conversion of Portions under this Agreement shall be irrevocable.
Section 2.5. Change of Law. Notwithstanding any other provisions of
this Agreement or of the Notes, if at any time any Lender shall determine in
good faith that any change in applicable laws, treaties or regulations or in the
interpretation thereof makes it unlawful for such Lender to create or continue
to maintain any LIBOR Portion, it shall promptly so notify the Agent (which
shall in turn promptly notify any of the Borrowers and the other Lenders) and
the obligation of such Lender to create, continue or maintain LIBOR Portions
under this Agreement shall terminate until it is no longer unlawful for such
Lender to create, continue or maintain LIBOR Portions. The Borrowers, on demand,
shall, if the continued maintenance of any such LIBOR Portion is unlawful,
thereupon prepay the outstanding principal amount of the affected LIBOR
Portions, together with all interest accrued thereon and all other amounts
payable to the affected Lender with respect thereto under this Agreement;
provided, however, that Morton (which is acting on behalf of the Borrowers
pursuant to Section 1.6 hereof) may instead elect to convert the principal
amount of the affected LIBOR Portion into the Domestic Rate Portion of the
applicable Notes, subject to the terms and conditions of this Agreement.
Section 2.6. Unavailability of Deposits or Inability to Ascertain
Adjusted LIBOR. Notwithstanding any other provision of this Agreement or of the
Notes, if prior to the commencement of any Interest Period:
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(a) the Agent or Required Lenders in good faith determine
that deposits in the amount of any LIBOR Portion scheduled to be
outstanding during such Interest Period are not readily available to
the Lenders in the relevant market;
(b) the Agent or Required Lenders in good faith determine
that by reason of circumstances affecting the relevant market, adequate
and reasonable means do not exist for ascertaining Adjusted LIBOR; or
(c) the Agent or Required Lenders in good faith determine
that (i) LIBOR as determined by the Agent will not adequately and
fairly reflect the cost to the Lenders of funding their LIBOR Portions
for such Interest Period and (ii) the Lenders' rights to payment under
Section 2.7 hereof will not reasonably compensate them for such
inadequate or unfair reflection of such cost;
then the Agent or Required Lenders, as the case may be, shall promptly give
notice thereof to the other Lenders and the Company and the obligations of the
Lenders to create, continue or effect by conversion any LIBOR Portion in such
amount and for such Interest Period shall terminate until deposits in such
amount and for the Interest Period selected by or on behalf of the relevant
Borrower shall again be readily available in the relevant market and adequate
and reasonable means exist for ascertaining Adjusted LIBOR.
Section 2.7. Taxes and Increased Costs. With respect to any LIBOR
Portion, if any Lender shall determine in good faith that any change in any
applicable law, treaty, regulation or guideline (including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) or any new
law, treaty, regulation or guideline, or any interpretation of any of the
foregoing by any governmental authority charged with the administration thereof
or any central bank or other fiscal, monetary or other authority having
jurisdiction over such Lender or its lending branch or the LIBOR Portions
contemplated by this Agreement (whether or not having the force of law) shall:
(i) impose, increase, or deem applicable any reserve, special
deposit or similar requirement against assets held by, or deposits in
or for the account of, or loans by, or any other acquisition of funds
or disbursements by, such Lender which is not in any instance already
accounted for in computing Adjusted LIBOR;
(ii) subject such Lender, any LIBOR Portion or a Note to the
extent it evidences such a Portion, to any tax (including, without
limitation, any United States interest equalization tax or similar tax
however named applicable to the acquisition or holding of debt
obligations and any interest or penalties with respect thereto),
duty,
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charge, stamp tax, fee, deduction or withholding in respect of
this Agreement, any LIBOR Portion or a Note to the extent it evidences
such a Portion, except such taxes as may be measured by the overall net
income or gross receipts of such Lender or its lending branches and
imposed by the jurisdiction, or any political subdivision or taxing
authority thereof, in which such Lender's principal executive office or
its lending branch is located;
(iii) change the basis of taxation of payments of principal and
interest due from any Borrower to such Lender hereunder or under a Note
to the extent it evidences any LIBOR Portion (other than by a change in
taxation of the overall net income or gross receipts of such Lender);
or
(iv) impose on such Lender any penalty with respect to the
foregoing or any other condition regarding this Agreement, the
disbursement of credit hereunder, any LIBOR Portion or a Note to the
extent it evidences any LIBOR Portion;
and such Lender shall determine that the result of any of the foregoing is to
increase the cost (whether by incurring a cost or adding to a cost) to such
Lender of creating or maintaining any LIBOR Portion hereunder or to reduce the
amount of principal or interest received or receivable by such Lender (without
benefit of, or credit for, any prorations, exemption, credits or other offsets
available under any such laws, treaties, regulations, guidelines or
interpretations thereof), then the Borrowers shall pay on demand to such Lender
from time to time as specified by such Lender such additional amounts as such
Lender shall reasonably determine are sufficient to compensate and indemnify it
for such increased cost or reduced amount; provided, however, that the Borrowers
shall not be obligated to pay any such amount or amounts to the extent such
additional cost or payment was incurred or paid by such Lender more than sixty
(60) days prior to the date of the delivery of the certificate referred to in
the immediately following sentence (nothing herein to impair or otherwise affect
the Borrowers' liability hereunder for costs or payments subsequently incurred
or paid by such Lender). If a Lender makes such a claim for compensation, it
shall provide to any of the Borrowers (with a copy to the Agent) a certificate
setting forth the computation of the increased cost or reduced amount as a
result of any event mentioned herein in reasonable detail and such certificate
shall be conclusive if reasonably determined.
Section 2.8. Change in Capital Adequacy Requirements. If any Lender
shall determine that the adoption after the date hereof of any applicable law,
rule or regulation regarding capital adequacy, or any change in any existing
law, rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by such Lender
(or any of its branches or any corporation controlling such Lender) with any
request
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<PAGE> 22
or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on such Lender's or such
corporation's capital, as the case may be, as a consequence of such Lender's
obligations hereunder or for the credit which is the subject matter hereof to a
level below that which such Lender or such corporation could have achieved but
for such adoption, change or compliance (taking into consideration such Lender's
or such corporation's policies with respect to liquidity and capital adequacy)
by an amount deemed by such Lender to be material, then from time to time,
within fifteen (15) days after demand by such Lender, the Borrowers shall pay to
the Lender such additional amount or amounts reasonably determined by such
Lender as will compensate such Lender for such reduction; provided, however,
that the Borrowers shall not be obligated to compensate such Lender to the
extent its rate of return was so reduced more than sixty (60) days prior to the
date of such demand (nothing herein to impair or otherwise affect the Borrowers'
liability hereunder to compensate for subsequent reductions in such Lender's
rate of return).
Section 2.9. Funding Indemnity. In the event any Lender shall incur
any loss, cost or expense (including, without limitation, any loss, cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired or contracted to be acquired by such Lender to fund or
maintain its part of any LIBOR Portion or the relending or reinvesting of such
deposits or other funds or amounts paid or prepaid to such Lender) as a result
of:
(i) any payment of a LIBOR Portion on a date other than the
last day of the then applicable Interest Period for any reason, whether
before or after default, and whether or not such payment is required by
any provisions of this Agreement; or
(ii) any failure by any Borrower to create, borrow, continue
or effect by conversion a LIBOR Portion on the date specified in a
notice given pursuant to this Agreement, unless such failure results
from the Lenders' inability or unwillingness pursuant to Sections 2.5
and 2.6 hereof to create, continue or effect by conversion such LIBOR
Portion;
then, upon the demand of such Lender, the Borrowers shall pay to such Lender
such amount as will reimburse such Lender for such loss, cost or expense. If a
Lender requests such a reimbursement, it shall provide to any of the Borrowers
(with a copy to the Agent) a certificate setting forth the computation of the
loss, cost or expense giving rise to the request for reimbursement in reasonable
detail and such certificate shall be conclusive if reasonably determined;
provided, however, that the Borrowers shall not be obligated to pay any such
amount or amounts to the extent such loss, cost or expense was incurred by such
Lender more than sixty (60) days prior to the date of the delivery of such
certificate (nothing herein to impair
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or otherwise affect the Borrowers' liability hereunder to compensate for any
subsequent loss, cost, or expense incurred by such Lender).
Section 2.10. Lending Branch. Each Lender may, at its option, elect
to make, fund or maintain its pro rata share of the Loans hereunder at the
branches or offices specified on the signature pages hereof or on any Assignment
Agreement executed and delivered pursuant to Section 12.15 hereof or at such of
its branches or offices as such Lender may from time to time elect.
Section 2.11. Lender's Duty to Mitigate. Each Lender agrees that, as
promptly as practicable after it becomes aware of the occurrence of an event or
the existence of a condition that would cause it to be affected under Section
2.5, 2.6 or 2.7 hereof, such Lender will, after notice to any Borrower, to the
extent not inconsistent with such Lender's internal policies and customary
business practices, use its best efforts to make, fund or maintain the affected
LIBOR Portion or issue or participate in the affected Letter of Credit, as the
case may be, through another lending office of such Lender if as a result
thereof the unlawfulness which would otherwise require payment of such Portion
pursuant to Section 2.5 hereof would cease to exist or the circumstances which
would otherwise terminate such Lender's obligation to make such Portion under
Section 2.6 hereof would cease to exist or the increased costs which would
otherwise be required to be paid in respect of such Portion or Letter of Credit
pursuant to Section 2.7 hereof would be materially reduced, and if, as
determined by such Lender, in its sole discretion, the making, funding or
maintaining of such Portion, or issuance or participation in such Letter of
Credit, as the case may be, through such other lending office would not
otherwise adversely affect such Portion or such Lender. The Borrowers hereby
agree to pay all reasonable expenses incurred by each such Lender in utilizing
another lending office pursuant to this Section 2.11.
Section 2.12. Discretion of Lenders as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, each Lender
shall be entitled to fund and maintain its funding of all or any part of its
Notes in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder (including, without
limitation, determinations under Sections 2.5, 2.6, 2.7 and 2.9 hereof) shall be
made as if each Lender had actually funded and maintained each LIBOR Portion
during each Interest Period applicable thereto through the purchase of deposits
in the relevant market in the amount of its share of such LIBOR Portion, having
a maturity corresponding to such Interest Period, and bearing an interest rate
equal to the LIBOR for such Interest Period.
Section 2.13. Replacement of Lender. (a) In the event that (x) any
Borrower receives from a Lender a certificate requesting an amount be paid to
such Lender under Section 1.3(f), 2.7
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or 2.8 hereof and the Required Lenders have not similarly made requests for
payment arising out of the same circumstances or (y) the obligation of any
Lender to make or maintain any LIBOR Portion has terminated under Section 2.5 or
2.6 hereof and the obligations of the Required Lenders to make or maintain LIBOR
Portions have not similarly terminated by reason of the same circumstances or
(z) any Lender becomes a Defaulting Lender, then the Company may request other
Lenders hereunder to assume in full the Commitments then in effect of the Lender
requesting such amount be paid or whose obligations with respect to LIBOR
Portions have so terminated or of such Defaulting Lender, as the case may be
(such Lender in each case being herein referred to as the "Replaceable Lender"),
and to purchase the Notes issued to the Replaceable Lender at a price equal to
the outstanding principal amount of such Notes and the Replaceable Lender's
share of any accrued and unpaid interest on such Notes plus accrued and unpaid
commitment fees owed to the Replaceable Lender, and if any Lender or Lenders in
their sole discretion agree so to assume in full the Commitments of the
Replaceable Lender (each an "Assuming Lender"), and after payment by the
Borrowers to the Replaceable Lender of all amounts due under this Agreement to
such Lender (including any amount specified as due in a certificate submitted
under Section 1.3(f), 2.7 or 2.8 hereof) not so paid by the Assuming Lender,
then such assumption shall take place in the manner set forth in subsection (b)
below. In the event no Lender or Lenders agrees to assume in full the
Commitments of the Replaceable Lender, then the Company may nominate one or more
Lenders not then party to this Agreement so to assume in full the Commitments of
the Replaceable Lender, and if such nominated Lender or Lenders are acceptable
to the Agent and Required Lenders (excluding the Replaceable Lender), such
assumption shall take place in the manner set forth in subsection (b) below and
each such Lender or Lenders shall become a Lender hereunder (each a "New
Lender") and the Replaceable Lender shall no longer be a party hereto or have
any rights hereunder.
(b) In the event a Replaceable Lender's Commitments are to be assumed
in full by an Assuming Lender or a New Lender, then such assumption shall take
place on a date acceptable to the Company, the Replaceable Lender and the
Assuming Lender or New Lender, as the case may be, and such assumption shall
take place through the payment of all amounts due under this Agreement to the
Replaceable Lender and the execution of such instruments and documents as shall,
in the reasonable opinion of the Agent, be reasonably necessary or appropriate
for the Assuming Lender or New Lender to assume in full the Commitments of the
Replaceable Lender (including, without limitation, the issuance of new Notes and
the execution of an amendment hereto making any New Lender a party hereto). In
the event no Assuming Lender or New Lender agrees to assume in full the
Commitments of the Replaceable Lender, then such Replaceable Lender shall remain
a party hereto and its Commitments shall remain in effect.
(c) The rights and remedies against a Defaulting Lender under this
Agreement, including without limitation this Section 2.13, are in addition to
other rights and remedies that the
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Borrowers may have against such Defaulting Lender with respect to any Loan which
such Defaulting Lender has not funded, and that the Agent, or any Lender may
have against such Defaulting Lender with respect to any such Loan.
SECTION 3. FEES, PREPAYMENTS, TERMINATIONS, APPLICATIONS AND NOTATIONS.
Section 3.1. Fees.
(a) Commitment Fee. For the period from and including the date
hereof to but not including the Termination Date, the Borrowers shall pay to the
Agent for the ratable benefit of the Lenders in accordance with their
Percentages, a commitment fee at the Applicable Margin (computed on the basis of
a year of 360 days for the actual number of days elapsed) on the average daily
unused portion of the Revolving Credit Commitments. Such commitment fee shall be
payable quarterly in arrears on the last day of each March, June, September and
December in each year (commencing March 31, 1998) and on the Termination Date.
(b) Letter of Credit Fees. On the date of issuance or extension, or
increase in the amount, of each Letter of Credit pursuant to Section 1.3 hereof,
the Borrowers shall pay to the Agent for its own account an issuance fee equal
to .125% of the face amount of (or the increase in the face amount of) such
Letter of Credit. On the last day of each calendar quarter (commencing on March
31, 1998) to, and on, the Termination Date, the Borrowers shall pay to the Agent
for the ratable benefit of the Lenders in accordance with their percentages a
fee equal to the Applicable Margin for LIBOR Portions of the Revolving Loans
(computed on the basis of a year of 360 days for the actual number of days
elapsed) on the average daily outstanding amounts during the immediately
preceding calendar quarter of the Letters of Credit. In addition to the letter
of credit fees called for above, the Borrowers further agree to pay to the Agent
for its own account such processing and transaction fees and charges as the
Agent from time to time customarily imposes in connection with any issuance,
amendment, cancellation, negotiation and/or payment of letters of credit and
drafts drawn thereunder.
(c) Audit Fees. The Borrowers shall pay to the Agent for its own
use and benefit charges for audits of the Collateral by the Agent or its agents
or representatives in such amounts as the Agent may from time to time request
(the Agent acknowledging and agreeing that such charges shall be computed in the
same manner as it at the time customarily uses for the assessment of charges for
similar collateral audits actually performed by it); provided, however, that in
the absence of any Default or Event of Default, (i) the Borrowers shall not be
required to reimburse the Agent for more than one (1) such audit per year (a
"Scheduled Field Audit") plus one (1) audit of each target of an Acquisition and
(ii) the Borrowers shall in no event be liable for more than $3,000 for any one
Scheduled Field Audit.
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(d) Agent's Fee. The Borrowers shall pay to the Agent the fees
agreed to in a letter exchanged between them.
Section 3.2. Voluntary Prepayments.
(a) Revolving Credit Notes. The Borrowers shall have the privilege
of prepaying the Revolving Credit Notes in whole or in part (but if in part,
then in a minimum amount of $100,000 or such greater amount which is an integral
multiple of $100,000) on any Business Day upon notice thereof to the Agent not
later than 11:00 a.m. (Chicago time) on such day, the Agent to promptly so
notify the Lenders, by the relevant Borrower or Borrowers paying to the Agent
for the account of the Lenders the principal amount to be prepaid and (i) if
such a prepayment prepays such Notes in full and is accompanied by the
termination in whole of the Revolving Credit Commitments pursuant to which such
Notes were issued, accrued interest thereon to the date of prepayment plus any
commitment fee which has accrued and is unpaid and (ii) any amount due the
Lenders under Section 2.9 hereof. Any amount so prepaid on the Revolving Credit
Notes may, subject to the terms and conditions of this Agreement, be reborrowed.
(b) Term Notes. The Borrowers shall have the privilege of prepaying
the Term Notes in whole or in part (but if in part, then in a minimum amount of
$100,000 or such greater amount which is an integral multiple of $100,000 as to
any particular class of Term Notes being prepaid) at any time upon one (1)
Business Day's prior notice to the Agent (such notice, if received subsequent to
11:00 a.m. (Chicago time) on a given day, to be treated as though received at
the opening of business on the next Business Day), which shall promptly so
notify the Lenders, by paying to the Agent for the account of the Lenders the
principal amount to be prepaid and (i) if such a prepayment prepays such Notes
in full, accrued interest thereon to the date of prepayment and (ii) any amounts
due to the Lenders under Section 2.9 hereof. Voluntary prepayments of the
principal of each class of the Term Notes shall be applied in several
installments thereof due on such class of Notes in the inverse order of their
respective maturities. No amount paid or prepaid on the Term Notes may be
reborrowed.
Section 3.3. Mandatory Prepayments.
(a) Excess Cash Flow. If the Leverage Ratio equals or exceeds 2.50
to 1.00 as of December 31 of any calendar year (commencing on December 31, 1998)
then, not later than April 15 of the immediately following year (commencing
April 15, 1999), the Borrowers shall pay over to the Agent for the ratable
benefit of the Lenders, as and for a mandatory prepayment on the Term Notes an
amount equal to 50% of Excess Cash Flow for the then most recently completed
fiscal year. Each such prepayment shall be applied to the remaining installments
of the Conversion Term Notes in the inverse order of maturity, ratably as among
installments on both
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classes of Conversion Term Notes due on the same date in accordance with the
aggregate principal amount of the installments due on each such class of the
Conversion Term Notes, until the Conversion Term Notes have been fully paid and
satisfied, with any remaining balance of such prepayment applied to the
remaining installments of the Term Credit Notes in the inverse order of
maturity.
(b) Equity Offering. Within five (5) Business Days of receipt by
the Parent or any Borrower of cash proceeds from any public offering or private
placement of any capital stock or other equity securities of the Parent or any
Borrower (other than proceeds from (i) any sale of capital stock of any Borrower
pursuant to an employee stock ownership plan or (ii) any sale of capital stock
of the Parent or any Borrower, or any options to acquire any such stock, to
officers or directors of the Parent or any Borrower as compensation for services
rendered or (iii) any exercise by such officers or directors of such options),
the Parent or relevant Borrower (as the case may be) shall make a mandatory
prepayment in an amount equal to 100% of the net cash proceeds of such issuance
(net only of underwriting discounts and commissions and any other reasonable
out-of-pocket costs and expenses directly incurred and payable in connection
therewith). Each such prepayment shall be applied to the remaining installments
of the Conversion Term Notes in the inverse order of maturity, ratably as among
installments on both classes of Conversion Term Notes due on the same date in
accordance with the aggregate principal amount of the installments due on each
such class of the Conversion Term Notes, until the Conversion Term Notes have
been fully paid and satisfied, with any remaining balance of such prepayment
applied to the remaining installments of the Term Credit Notes in the inverse
order of maturity.
(c) Asset Sales. Any and all proceeds derived from the sale or
disposition (whether voluntary or involuntary), or on account of damage or
destruction, of the real estate, furniture, fixtures, equipment or other fixed
assets of any Borrower shall be paid over to the Agent as and for a mandatory
prepayment on the Term Notes; provided, however, that if at the time of receipt
no amount is outstanding under the Term Notes or the amount received is in
excess of the amount necessary to prepay the Term Notes in full, then such
payment or excess (as appropriate) shall be held by the Agent as collateral
security for the Borrowers' L/C Obligations if the Term Loans have been prepaid
in full but Letters of Credit are outstanding and the Commitments shall be
ratably reduced by a like amount; provided, however, that (i) the foregoing
provisions shall be inapplicable to proceeds received by the Agent under the
Collateral Documents if and so long as, pursuant to the terms of the Collateral
Documents, the same are to be held by the Agent and disbursed for the
restoration, repair or replacement of the property in respect of which such
proceeds were received, (ii) no prepayment shall be required with respect to the
first $100,000 of net proceeds (i.e., gross proceeds net of out-of-pocket
expenses incurred in effecting the sale or other disposition) received during
any one calendar year from the sale or other disposition of
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equipment, furniture and fixtures of the Borrowers, taken together, which are
worn out, obsolete or, in the good faith judgment of such Borrower, no longer
desirable to the efficient conduct of its business as then conducted, (iii) no
prepayment shall be required with respect to proceeds received from the sale,
damage or destruction of any of the equipment or other assets subject to Liens
permitted by Section 8.12 hereof if and to the extent such proceeds are applied
to reduce the indebtedness secured by such Liens and (iv) so long as no Default
or Event of Default has occurred or is continuing the Borrowers may retain the
proceeds derived from the sale, damage or destruction of fixtures, furniture and
equipment if and to the extent that the relevant Borrower establishes to the
reasonable satisfaction of the Agent that the equipment sold, damaged, or
destroyed has been replaced (or repaired in the case of damaged property) with
fixtures, furniture or equipment of at least equal value and utility to that
replaced (before any such damage or destruction) which is subject to a first
lien in favor of the Agent for the benefit of the Lenders. Nothing herein
contained shall in any manner impair or otherwise affect the prohibitions
against the sale or other disposition of Collateral contained herein and in the
Collateral Documents. Each such prepayment shall be applied to the remaining
installments of the Conversion Term Notes in the inverse order of maturity,
ratably as among installments on both classes of Conversion Term Notes due on
the same date in accordance with the aggregate principal amount of the
installments due on each such class of the Conversion Term Notes, until the
Conversion Term Notes have been fully paid and satisfied, with any remaining
balance of such prepayment applied to the remaining installments of the Term
Credit Notes in the inverse order of maturity.
(d) Commitment Reductions. In the event the aggregate principal
amount of Revolving Loans and L/C Obligations exceeds the Revolving Credit
Commitments after giving effect to any reduction therein (whether such
reductions were voluntary or required), the Borrowers shall immediately and
without notice or demand pay over the amount of the excess to the Agent as and
for a mandatory prepayment on the principal of the Revolving Loans or, if the
Revolving Loans have been prepaid in full but Reimbursement Obligations are
outstanding, then, in such event, such excess shall be paid over to the Agent to
be applied against or held as collateral security for such Reimbursement
Obligations.
Section 3.4. Terminations of Revolving Credit Commitments.
(a) Voluntary. Morton (which is acting on behalf of the Borrower
pursuant to Section 1.6 hereof) shall have the right as of the close of any
calendar quarter, upon five (5) Business Days' prior notice to the Agent (which
shall promptly notify the Lenders), to ratably terminate the Revolving Credit
Commitments without premium or penalty and in whole or in part (but if in part,
then in an amount not less than $5,000,000 or such greater amount which is an
integral multiple of $100,000), provided that the Revolving Credit Commitments
may not be reduced to an amount less than the aggregate principal amount of the
Revolving Loans and L/C
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Obligations then outstanding. Any termination of the Revolving Credit
Commitments pursuant to this Section may not be reinstated. Any reduction of the
Revolving Credit Commitments to a level below the L/C Commitment shall effect a
concurrent reduction in the L/C Commitment so as to equal the total Revolving
Credit Commitments after giving effect to such reduction.
(b) Mandatory. Effective December 31, 2000, the Revolving Credit
Commitments shall automatically reduce to $15,000,000 if such Commitments have
not already been reduced to such amount or less (whether such reductions were
voluntary or required), such reduction to reduce the Revolving Credit
Commitments of the Lenders pro rata in accordance with their respective
Percentages.
Section 3.5. Place and Application of Payments. All payments of
principal, interest, fees and all other amounts payable hereunder shall be made
to the Agent at its office at 111 West Monroe Street, Chicago, Illinois (or at
such other place as the Agent may specify) on the date any such payment is due
and payable. All such payments shall be made in lawful money of the United
States of America, in immediately available funds at the place of payment,
without setoff or counterclaim and without reduction for, and free from, any and
all present or future taxes, levies, imposts, duties, fees, charges, deductions,
withholdings, restrictions or conditions of any nature imposed by any government
or any political subdivision or taxing authority thereof (but excluding any
taxes imposed on or measured by the net income of the Lender). Payments received
by the Agent after 11:00 a.m. (Chicago time) shall be deemed received as of the
opening of business on the next Business Day. Except as herein provided, all
payments shall be received by the Agent for the ratable account of the Lenders
and shall be promptly distributed by the Agent ratably to the Lenders. Unless
Morton (which is acting on behalf of the Borrowers pursuant to Section 1.6
hereof) otherwise directs or this Agreement otherwise requires, principal
payments on any particular class of Notes shall be first applied to the Domestic
Rate Portion of such Notes until payment in full thereof, with any balance
applied to the LIBOR Portions of such Notes in the order in which their Interest
Periods expire. Any amount paid or prepaid on the Revolving Credit Notes may,
subject to all of the terms and conditions hereof, be borrowed, repaid and
borrowed again. No amount paid or prepaid on the Term Notes may be reborrowed.
Anything contained herein to the contrary notwithstanding, all payments
and collections received in respect of the Loans and other Obligations by the
Agent or any of the Lenders after the occurrence of an Event of Default shall be
remitted to the Agent and distributed as follows:
(a) first, to the payment of any outstanding costs and
expenses incurred by the Agent in protecting, preserving or enforcing
rights under this Agreement and the other Loan Documents and in any
event including all costs and expenses of a character which the
Borrowers have agreed to pay under Section 11.4 hereof (such funds to
be retained by
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the Agent for its own account unless it has previously been reimbursed
for such costs and expenses by the Lenders, in which event such
amounts shall be remitted to the Lenders to reimburse them for
payments theretofore made to the Agent);
(b) second, to the payment of any outstanding interest or
other fees or indemnification amounts due under the Loan Documents
other than for principal of the Loans and L/C Obligations, ratably as
among the Agent and the Lenders in accord with the amount of such
interest and other fees or Obligations owing each;
(c) third, to the payment of the principal of the Loans and
any liabilities in respect of Reimbursement Obligations and to the
Agent to be held as collateral security for any undrawn Letters of
Credit (until the Agent is holding an amount of cash equal to the then
outstanding amount of all such Letters of Credit), the aggregate amount
paid to or held as collateral security for the Lenders to be allocated
pro rata as among the Lenders in accord with the then respective
aggregate unpaid principal balances of the Loans and the L/C
Obligations;
(d) fourth, to the Agent and the Lenders ratably in accord
with the amounts of other Obligations owing to each of them (other than
those described above) unless and until all such Obligations have been
fully paid and satisfied; and
(e) fifth, to Morton (each Borrower hereby agreeing that its
recourse for its share of such payment shall be to Morton and not the
Agent or any Lender) or to whoever the Agent reasonably determines to
be lawfully entitled thereto.
Section 3.6. Notations and Requests. All Loans made by a Lender
against a Note, the status of all amounts evidenced by a Note as constituting
part of the Domestic Rate Portion or a LIBOR Portion, and the rates of interest
and Interest Periods applicable to such Portions shall be recorded by such
Lender on its books and records or, at its option in any instance, endorsed on a
schedule to its Note and the unpaid principal balance and status, rates and
Interest Periods so recorded or endorsed by such Lender shall be prima facie
evidence in any court or other proceeding brought to enforce its Note of the
principal amount remaining unpaid thereon, the status of the Loans evidenced
thereby and the interest rates and Interest Periods applicable thereto; provided
that the failure of a Lender to record any of the foregoing shall not limit or
otherwise affect the obligation of the Borrowers to repay the principal amount
of each Note together with accrued interest thereon. Prior to any Lender's
negotiation of a Note, such Lender shall record on a schedule thereto the status
of all amounts evidenced thereby as constituting part of the Domestic Rate
Portion or LIBOR Portion and the rates of interest and the Interest Periods
applicable thereto.
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SECTION 4. COLLATERAL.
Section 4.1. Collateral. The payment and performance of the
Obligations shall at all times be secured by, among other things, (a) all of the
Borrowers' and other Subsidiaries' accounts, chattel paper, documents,
instruments, general intangibles, inventory, equipment and certain other assets
and property of the Borrowers and the other Subsidiaries, in each case whether
now owned or held or hereafter acquired or arising, pursuant to that certain
Security Agreement from the Borrowers and the other Subsidiaries dated as of
even date herewith, as the same may be amended, modified or supplemented from
time to time (the "Security Agreement"), (b) all of the capital stock of the
Subsidiaries and certain other assets and property of the Parent, the Borrowers
and the other Subsidiaries, in each case whether now owned or held or hereafter
acquired or arising, pursuant to that certain Pledge Agreement from the Parent
and Morton dated as of even date herewith, as the same may be amended, modified
or supplemented from time to time (the "Pledge Agreement"), (c) Morton's real
estate in Morton, Illinois, commonly known as 1021 West Birchwood and related
assets and properties of Morton, in each case whether now owned or held or
hereafter acquired or arising, pursuant to that certain Mortgage and Security
Agreement with Assignment of Rents from Morton dated as of January 19, 1998, as
the same may be amended, modified or supplemented from time to time (the
"Mortgage"), and (d) within 30 days from the date hereof, an assignment of the
Parent's life insurance policy maintained on the life of William D. Morton, in
an amount not less than $4,000,000, such assignment being made pursuant to a
separate Assignment of Life Insurance Policy as Collateral dated of even date
herewith, as the same may be amended, modified or supplemented from time to time
(the "Life Insurance Assignment").
Section 4.2. Guaranties. Payment of the Notes and the other
Obligations shall at all times be jointly and severally guaranteed by each
Subsidiary pursuant hereto or pursuant to a Guaranty issued by such Subsidiary.
In the event any Subsidiary is hereafter acquired or formed, each Borrower shall
also cause such Subsidiary to execute such Collateral Documents (having terms
and conditions substantially similar to those executed by each Borrower and its
Subsidiaries in connection with the initial Loans under this Agreement) as the
Agent may then require granting the Agent for the benefit of the Lenders a
security interest in and lien on the assets of such Subsidiary as collateral
security for the Notes and the other Obligations, together with such other
instruments, documents, certificates and opinions required by the Agent in
connection therewith.
Section 4.3. Further Assurances. Each Borrower covenants and agrees
that it shall, and shall cause each Subsidiary to, comply with all terms and
conditions of each of the Collateral Documents and that each Borrower shall, and
shall cause each Subsidiary to, at any time and from time to time as requested
by the Agent, execute and deliver such further instruments and do such
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other acts as the Agent or the Required Lenders may deem necessary or desirable
to provide for or protect or perfect the Lien of the Agent in the Collateral.
SECTION 5. DEFINITIONS; INTERPRETATION.
Section 5.1. Definitions. The following terms when used herein
shall have the following meanings:
"Acquisition" means (i) the acquisition of all or any substantial part
of the assets, property or business of any other person, firm or corporation,
(ii) any acquisition of a majority of the common stock or other equity
securities of any firm or corporation.
"Adjusted LIBOR" means a rate per annum determined by the Agent
pursuant to the following formula:
Adjusted LIBOR = LIBOR
-----------------------
100%-Reserve Percentage
"Reserve Percentage" means, for the purpose of computing Adjusted LIBOR, the
maximum rate of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental or other special reserves) imposed by the
Board of Governors of the Federal Reserve System (or any successor) under
Regulation D on Eurocurrency liabilities (as such term is defined in Regulation
D) for the applicable Interest Period as of the first day of such Interest
Period, but subject to any amendments to such reserve requirement by such Board
or its successor, and taking into account any transitional adjustments thereto
becoming effective during such Interest Period. For purposes of this definition,
LIBOR Portions shall be deemed to be Eurocurrency liabilities as defined in
Regulation D without benefit of or credit for prorations, exemptions or offsets
under Regulation D. "LIBOR" means, for an Interest Period, (a) the LIBOR Index
Rate for such Interest Period, if such rate is available, and (b) if the LIBOR
Index Rate cannot be determined, the arithmetic average of the rate of interest
per annum (rounded upwards, if necessary, to nearest 1/100 of 1%) at which
deposits in U.S. dollars in immediately available funds are offered to the Agent
at 11:00 a.m. (London, England time) two (2) Business Days before the beginning
of such Interest Period by major banks in the interbank eurodollar market for a
period equal to such Interest Period and in an amount equal or comparable to the
principal amount of such LIBOR Portion which is scheduled to be made by the
Agent. Each determination of LIBOR made by the Agent shall be conclusive and
binding absent manifest error.
"Affiliate" means any Person, directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another Person.
A Person shall be deemed to control
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another Person for the purposes of this definition if such Person possesses,
directly or indirectly, the power to direct, or cause the direction of, the
management and policies of the other Person, whether through the ownership of
voting securities, common directors, trustees or officers, by contract or
otherwise; provided that, in any event, any Person that owns, directly or
indirectly, 5% or more of the securities having the ordinary voting power for
the election of directors or governing body of a corporation or 5% or more of
the partnership or other ownership interests of any other Person (other than as
a limited partner of such other Person) will be deemed to control such
corporation or other Person.
"Agent" means Harris Trust and Savings Bank and any successor thereto
appointed pursuant to Section 10.1 hereof.
"Applicable Margin" means the rate specified below, subject to
quarterly adjustment as hereinafter provided:
<TABLE>
<CAPTION>
Applicable Applicable Applicable Applicable
When Following Status Margin Margin Margin Margin
Exists For Any Margin For Domestic Rate For LIBOR Portions For Domestic Rate For LIBOR Portions
Determination Date Portion of Revolving of Revolving and Portion of of Conversion Term
and Term Credit Loan Term Credit Loan Conversion Term Loans
Is: Is: Loans Is:
Commitment Fee Is Is:
<S> <C> <C> <C> <C> <C>
Level I Status 0% 1.00% .25% 0% 1.25%
Level II Status 0% 1.25% .25% 0% 1.50%
Level III Status 0% 1.625% .375% 0% 1.875%
Level IV Status .25% 2.00% .50% .50% 2.25%
</TABLE>
provided, however, that all of the foregoing is subject to the following:
(i) the initial Applicable Margin in effect through the first
Margin Determination Date shall be the Applicable Margin for Level III
Status;
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<PAGE> 34
(ii) on or before the date that is ten (10) Business Days
after the date on which the Company has delivered a Compliance
Certificate to the Agent for a given quarterly accounting period of the
Parent (commencing with the quarterly accounting period ending on or
about June 30, 1998) pursuant to Section 8.5 hereof (such date that is
ten (10) Business Days after the date on which the Company delivered a
Compliance Certificate to the Agent being herein referred to as the
"Margin Determination Date"), the Agent shall determine whether Level I
Status, Level II Status, Level III Status or Level IV Status exists as
of the close of the applicable accounting period, based upon the
Compliance Certificate and financial statements delivered to the Agent
under Section 8.5 hereof for such accounting period, and shall promptly
notify the Company and the Lenders of such determination and of any
change in the Applicable Margin resulting therefrom. Any such change in
the Applicable Margin shall be effective as of such Margin
Determination Date, with such new Applicable Margin to continue in
effect until the next Margin Determination Date. If the Company has not
delivered a Compliance Certificate by the date such Compliance
Certificate is required to be delivered under Section 8.5 hereof, until
a Compliance Certificate is delivered before the next Margin
Determination Date, the Applicable Margin shall be the Applicable
Margin for Level IV Status. If the Company subsequently delivers a
Compliance Certificate before the next Margin Determination Date, the
Applicable Margin established by such Compliance Certificate shall take
effect from the date of delivery until the next Margin Determination
Date; and
(iii) if and so long as any Event of Default has occurred and
is continuing hereunder, notwithstanding anything herein to the
contrary, the Applicable Margin shall be the Applicable Margin for
Level IV Status.
"Application" is defined in Section 1.3 hereof.
"Authorized Representative" means those persons shown on the list of
officers and employees of the Borrowers provided by Morton (which is acting on
behalf of the Borrowers pursuant to Section 1.6 hereof) pursuant to Section
7.2(a) hereof or on any update of any such list provided by Morton to the Agent,
or any further or different officers and employees so named by any Authorized
Representative in a written notice to the Agent.
"Borrowers" is defined in the introductory paragraph hereof, with (i)
the term "Borrowers" to mean the Borrowers, collectively, and, also, each
individually, and (ii) all promises and covenants (including promises to pay)
and representations and warranties of and by the Borrowers made in the Loan
Documents or any instruments or documents delivered pursuant thereto to be and
constitute the joint and several promises, covenants, representations and
warranties of and by each and all of such corporations. The term "Borrower"
appearing in such
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<PAGE> 35
singular form shall be deemed a reference to any of the Borrowers unless the
context in which such term is used shall otherwise require.
"Business Day" means any day (other than a Saturday or Sunday) on which
banks are not authorized or required to close in Chicago, Illinois and, when
used with respect to LIBOR Portions, a day on which banks are dealing in United
States Dollar deposits in the interbank market of London, England and Nassau,
Bahamas.
"Capital Expenditures" means for any period capital expenditures of the
Parent and its Subsidiaries during such period as defined and classified in
accordance with GAAP, but in any event excluding amounts expended to effect a
Permitted Acquisition.
"Capital Lease" means any lease of Property which in accordance with
GAAP is required to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligation" means the amount of the liability shown
on the balance sheet of any Person in respect of a Capital Lease determined in
accordance with GAAP.
"Change of Control" means the occurrence, at any time after the date
hereof, of (i) any Person or two or more Persons acting in concert acquiring
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended),
directly or indirectly, of securities of Parent (or other securities convertible
into such securities) representing more than 25% of the combined voting power of
all securities of the Parent entitled to vote in the election of directors; or
(ii) commencing after the date hereof, individuals who as of the date hereof
were directors of the Parent ceasing for any reason to constitute a majority of
the Board of Directors of the Parent unless the Persons replacing such
individuals were nominated by William D. Morton or the Board of Directors of the
Parent; or (iii) any Person or two or more Persons acting in concert acquiring
by contract or otherwise, or entering into a contract or arrangement which upon
consummation will result in its or their acquisition of, or control over,
securities of the Parent (or other securities convertible into such securities)
representing more than 25% of the combined voting power of all securities of the
Parent entitled to vote in the election of directors.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
"Collateral Documents" means the Security Agreement and all other
mortgages, deeds of trust, security agreements, assignments, financing
statements and other documents as shall from time to time secure the
Obligations.
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<PAGE> 36
"Commitments" means and includes the Revolving Credit Commitments and
the Term Credit Commitments.
"Compliance Certificate" means a certificate in the form Exhibit E
hereto.
"Consolidated Net Income" means, with reference to any period, the net
income (or net deficit) of the Parent and its Subsidiaries for such period as
computed on a consolidated basis in accordance with GAAP; provided, however,
that if any Permitted Acquisition occurs at any time during such period,
Consolidated Net Income shall be calculated on a proforma basis to include
earnings of the acquired entity or business for the entire period prior to such
Permitted Acquisition as if such Permitted Acquisition had taken place on the
first day of such period, all as reasonably calculated by the Borrowers based on
actual results of operations of the acquired entity or business (without giving
retroactive effect to any operating efficiencies realized after such
Acquisition).
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Parent or any Subsidiary, are treated as
a single employer under Section 414 of the Code.
"Conversion Term Loans" is defined in Section 1.1(d) hereof.
"Conversion Term Notes" is defined in Section 1.1(d) hereof.
"Current Maturities" means, as of any date, the aggregate amount of
payments scheduled to be made by the Parent and its Subsidiaries within the
twelve (12) calendar months following such date with respect to principal on all
Indebtedness (whether at maturity, as a result of mandatory sinking fund
redemption, scheduled mandatory prepayment or otherwise).
"Default" means any event or condition the occurrence of which would,
with the passage of time or the giving of notice, or both, constitute an Event
of Default.
"Defaulting Lender" shall mean a Lender which has failed to fund as and
when required by the terms and conditions of this Agreement such Lender's
ratable share of any Loan hereunder, if any so long as such failure continues
unremedied.
"Domestic Rate" means, for any day, the greater of (i) the rate of
interest announced by the Agent from time to time as its prime commercial rate,
as in effect on such day; and (ii) the sum of (x) the rate determined by the
Agent to be the average (rounded upwards, if necessary, to the next higher 1/100
of 1%) of the rates per annum quoted to the Agent at approximately 10:00 a.m.
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<PAGE> 37
(Chicago time) (or as soon thereafter as is practicable) on such day (or, if
such day is not a Business Day, on the immediately preceding Business Day) by
two or more Federal funds brokers selected by the Agent for the sale to the
Agent at face value of Federal funds in an amount equal or comparable to the
principal amount owed to the Agent for which such rate is being determined, plus
(y) 1/2 of 1% (0.5%).
"Domestic Rate Portion" is defined in Section 2.1(a) hereof.
"EBIT" means, with reference to any period, Consolidated Net Income for
such period plus all amounts deducted in arriving at such Consolidated Net
Income for such period in respect of (i) Interest Expense for such period plus
(ii) federal, state and local income taxes for such period; provided, however,
that (x) if EBIT includes any Consolidated Net Income for any period ending on
or prior to December 31, 1997, EBIT shall be increased by all amounts deducted
in arriving at such Consolidated Net Income for such period in respect of the
non-cash charges taken against earnings on or prior to December 31, 1997 and (y)
if EBIT includes any Consolidated Net Income for any period ending on or prior
to March 31, 1998, EBIT shall be increased by all amounts deducted in arriving
at such Consolidated Net Income for such period in respect of the one-time
non-recurring charge (not to exceed $4,000,000) taken against earnings on or
prior to March 31, 1998 for bonus payments to management of the Parent and
Borrowers.
"EBITDA" means, with reference to any period, Consolidated Net Income
for such period plus all amounts deducted in arriving at such Consolidated Net
Income for such period in respect of (i) Interest Expense for such period, plus
(ii) federal, state and local income taxes for such period, plus (iii) all
amounts properly charged for depreciation of fixed assets and amortization of
intangible assets during such period on the books of the Parent and its
Subsidiaries; provided, however, that (x) if EBITDA includes any Consolidated
Net Income for any period ending on or prior to December 31, 1997, EBITDA shall
be increased by all amounts deducted in arriving at such Consolidated Net Income
for such period in respect of the non-cash charges taken against earnings on or
prior to December 31, 1997 and (y) if EBITDA includes any Consolidated Net
Income for any period ending on or prior to March 31, 1998, EBITDA shall be
increased by all amounts deducted in arriving at such Consolidated Net Income
for such period in respect of the one-time non-recurring charge (not to exceed
$4,000,000) taken against earnings on or prior to March 31, 1998 for bonus
payments to Morton's management of the Parent and Borrowers.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute thereto.
"Event of Default" means any event or condition identified as such in
Section 9.1 hereof.
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<PAGE> 38
"Excess Cash Flow" means, as of any date the same is to be computed,
EBITDA for the period consisting of the four most recently completed fiscal
quarters of the Parent, less Interest Expense paid in cash by the Parent and its
Subsidiaries during such period, less payments in cash by the Parent and its
Subsidiaries in respect of taxes on or measured by net income during such
period, less the aggregate amount of all Capital Expenditures during such period
other than any Capital Expenditures financed through any Capitalized Lease, less
Current Maturities as at said date.
"Fixed Charge Coverage Ratio" means, as of any date the same is to be
determined, the ratio of (i) the amount (if any) by which (a) EBITDA for the
four consecutive fiscal quarters of the Parent ending on, or (if none so end)
most recently completed prior to such date exceeds (b) Pro Forma Capital
Expenditures during the same four fiscal quarters (excluding 50% of such Pro
Forma Capital Expenditures which consist of Greenfield Expenses) to (ii) the sum
of (a) Pro Forma Interest Expense for the same four fiscal quarters and (b)
Current Maturities as at said date.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied by the Parent and its Subsidiaries on a basis consistent
with the preparation of the Parent's most recent financial statements furnished
to the Lenders pursuant to Section 6.4 hereof.
"Greenfield Expenses" means Capital Expenditures made for construction
of an entirely new plant or other production facilities.
"Guarantor" means the Parent and each Subsidiary that is a signatory
hereto or that executes and delivers to the Agent a Guaranty along with the
accompanying closing documents required by Section 4.2 hereof; provided,
however, that the term "Guarantor", when used in Sections 6.2 and 7.2 hereof,
shall not include the Parent.
"Guaranty" means this Agreement as to Guarantors party hereto and
otherwise, a letter to the Agent in the form of Exhibit G hereto executed by a
Subsidiary whereby it acknowledges it is party hereto as a Guarantor under
Section 11 hereof and also in the case of any Subsidiary not organized under the
laws of the United States of any State thereof, such other form of guaranty as
shall be reasonably acceptable to the Agent and the Required Lenders.
"Indebtedness" means for any Person (without duplication) (i) all
indebtedness created, assumed or incurred in any manner by such Person
representing money borrowed (including by the issuance of debt securities), (ii)
all indebtedness for the deferred purchase price of property or services (other
than trade accounts payable arising in the ordinary course of business which are
not more than 180 days past due), (iii) all indebtedness secured by any Lien
upon Property of such
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<PAGE> 39
Person, whether or not such Person has assumed or become liable for the payment
of such indebtedness, (iv) all Capitalized Lease Obligations of such Person, (v)
all obligations of such Person on or with respect to letters of credit, bankers'
acceptances and other extensions of credit whether or not representing
obligations for borrowed money and (vi) each "non-compete" and like payment owed
by such Person in connection with an Acquisition, to the extent such payment
would be classified as a liability under GAAP.
"Interest Coverage Ratio" means, as of any date the same is to be
determined, the ratio of (i) EBIT for the four consecutive fiscal quarters of
the Parent ending on, or (if none so end) most recently completed prior to such
date to (ii) Pro Forma Interest Expense for the same four fiscal quarters.
"Interest Expense" means, with reference to any period, the sum of all
interest charges with respect to Indebtedness (including imputed interest
charges with respect to Capitalized Lease Obligations and all amortization of
debt discount and expense) of the Parent and its Subsidiaries for such period
determined in accordance with GAAP.
"Interest Period" means, with respect to any LIBOR Portion, the period
commencing on, as the case may be, the creation, continuation or conversion date
with respect to such LIBOR Portion and ending one (1), two (2), three (3) or six
(6) months thereafter as selected by Morton in its notice as provided herein;
provided that, all of the foregoing provisions relating to Interest Periods are
subject to the following:
(i) if any Interest Period would otherwise end on a day which
is not a Business Day, that Interest Period shall be extended to the
next succeeding Business Day, unless the result of such extension would
be to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
(ii) no Interest Period may extend beyond the final maturity
date of any Note evidencing such Portion;
(iii) the interest rate to be applicable to each Portion for
each Interest Period shall apply from and including the first day of
such Interest Period to but excluding the last day thereof; and
(iv) no Interest Period may be selected if after giving effect
thereto any Borrower will be unable to make a principal payment
scheduled to be made during such
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<PAGE> 40
Interest Period without paying part of a LIBOR Portion on a date other
than the last day of the Interest Period applicable thereto.
For purposes of determining an Interest Period, a month means a period
starting on one day in a calendar month and ending on a numerically
corresponding day in the next calendar month, provided, however, if an Interest
Period begins on the last day of a month or if there is no numerically
corresponding day in the month in which an Interest Period is to end, then such
Interest Period shall end on the last Business Day of such month.
"L/C Commitment" shall mean $5,000,000, in each case as the same
may be reduced pursuant to Section 3.4 hereof.
"L/C Document" shall mean the Letters of Credit, any draft or other
document presented in connection with a drawing thereunder, the Applications and
this Agreement.
"L/C Obligations" means as of any date the same is to be determined,
the sum of (i) the aggregate undrawn amount then available under the Letters of
Credit then outstanding (with the undrawn amount available under a Letter of
Credit to be the maximum amount which can then be drawn thereunder (after giving
effect to any prior reductions in such amount, whether scheduled on the face of
such Letter of Credit or due to prior partial drawings) under any circumstances
and over any period of time plus (ii) all unpaid Reimbursement Obligations then
outstanding (other than any such Reimbursement Obligations as are being repaid
the same day directly out of the proceeds of a Revolving Loan requested for such
purpose).
"Lender" means Harris Trust and Savings Bank, the other signatories
hereto (other than the Parent and the Borrowers) and all other lenders becoming
parties hereto pursuant to Section 11.16 hereof.
"Letters of Credit" is defined in Section 1.3 hereof.
"Level I Status" means, for any Margin Determination Date, that as of
the close of the most recently completed fiscal quarter with reference to which
such Margin Determination Date was set, the Leverage Ratio is less than 1.50 to
1.
"Level II Status" means, for any Margin Determination Date, that as of
the close of the most recently completed fiscal quarter with reference to which
such Margin Determination Date was set, the Leverage Ratio is greater than or
equal to 1.50 to 1 but less than 2.00 to 1.
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<PAGE> 41
"Level III Status" means, for any Margin Determination Date, that as of
the close of the most recently completed fiscal quarter with reference to which
such Margin Determination Date was set, the Leverage Ratio is greater than or
equal to 2.00 to 1 but less than 3.00 to 1.
"Level IV Status" means, for any Margin Determination Date, that as of
the close of the most recently completed fiscal quarter with reference to which
such Margin Determination Date was set, the Leverage Ratio is greater than or
equal to 3.00 to 1.
"Leverage Ratio" means, as of any date the same is to be determined,
the ratio of (x) Total Funded Debt as of such date to (y) EBITDA for the four
consecutive fiscal quarters of the Parent ending on, or (if none so end) most
recently completed prior to such date.
"LIBOR Index Rate" means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one hundred-thousandth of a
percentage point) for deposits in U.S. Dollars for a period equal to such
Interest Period, which appears on the Telerate Page 3750 as of 11:00 a.m.
(London, England time) on the day two (2) Business Days before the commencement
of such Interest Period.
"LIBOR Portions" is defined in Section 2.1(a) hereof.
"Lien" means any mortgage, lien, security interest, pledge, charge or
encumbrance of any kind in respect of any Property, including the interests of a
vendor or lessor under any conditional sale, capital lease or other title
retention arrangement.
"Loan Documents" means this Agreement, the Notes, the Applications, the
L/C Documents, the Guaranties and the Collateral Documents.
"Loans" means and includes Revolving Loans, the Term Loans and the
Conversion Term Loans.
"Material Plan" is defined in Section 9.1(h) hereof.
"Mandatory Conversion Term Loans" is defined in Section 1.1(c) hereof.
"Mandatory Conversion Term Notes" is defined in Section 1.1(c) hereof.
"Merger" means that certain merger pursuant to the Merger Documents
pursuant to which Morton Holding merges with and into the Parent (then known as
MLX Corp.), in which the Parent is the surviving corporation.
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<PAGE> 42
"Merger Documents" means that certain Agreement and Plan of Merger
dated as of October 20, 1997 by and between Morton Holding and the Parent.
"Mortgage" is defined in Section 4.1 hereof.
"Morton" is defined in the introductory paragraph hereof.
"Morton Holding" means Morton Metalcraft Holding Co., a former Delaware
corporation of which Morton was previously a subsidiary and which merges out of
existence in the Merger.
"Morton North Carolina" is defined in the introductory paragraph
hereof.
"Net Worth" means, at any time the same is to be determined, the total
shareholders' equity (including capital stock, additional paid-in capital and
retained earnings after deducting treasury stock, but excluding minority
interest in Subsidiaries) which would appear on the balance sheet of the Parent
and its Subsidiaries determined on a consolidated basis in accordance with GAAP.
"Notes" means and includes the Revolving Credit Notes and the Term
Notes. When used with reference to the Notes, the term "class" of Notes refers
to the status of such Notes as one of the following four types, Revolving Credit
Notes, Mandatory Conversion Term Notes, Voluntary Conversion Term Notes or Term
Credit Notes, such Notes to constitute four separate classes of Notes.
"Obligations" means all obligations of the Borrowers and either of them
to pay the principal and interest on the Loans, all Reimbursement Obligations,
all fees and charges payable hereunder, and all other payment obligations of the
Borrowers arising under or in relation to any Loan Document, in each case
whether now existing or hereafter arising, due or to become due, direct or
indirect, absolute or contingent, and howsoever evidenced, held or acquired.
"Parent" is defined in the introductory paragraph hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any or all of its functions under ERISA.
"Percentage" means, for each Lender, the percentage of the Revolving
Credit Commitments represented by such Lender's Revolving Credit Commitment or,
if the Revolving Credit Commitments have been terminated, the percentage held by
such Lender (including
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<PAGE> 43
through participation interests in L/C Obligations) of the aggregate principal
amount of all outstanding Obligations.
"Permitted Acquisitions" means the Acquisitions permitted pursuant to
Section 8.17 hereof.
"Person" means an individual, partnership, corporation, association,
trust, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof.
"Plan" means any employee pension benefit plan covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code
that either (i) is maintained by a member of the Controlled Group for employees
of a member of the Controlled Group, (ii) is maintained pursuant to a collective
bargaining agreement or any other arrangement under which more than one employer
makes contributions and to which a member of the Controlled Group is then making
or accruing an obligation to make contributions or has within the preceding five
plan years made contributions, or (iii) under which a member of the Controlled
Group has any liability, including any liability by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any time
during the preceding five years or by reason of being deemed a contributing
sponsor under Section 4064 of ERISA.
"Portion" is defined in Section 2.1(a) hereof.
"Pro Forma Capital Expenditures" means, with reference to any period
(the "measurement period"), Capital Expenditures for such measurement period;
provided, however, that if the measurement period ends at any time prior to the
fourth fiscal quarter of the Parent to commence and end after the date of this
Agreement, Pro Forma Capital Expenditures shall mean the product of (x) Capital
Expenditures for each fully completed fiscal quarter of the Parent which
commenced and ended after the date of this Agreement (each, a "post-closing
quarter") and (y) a fraction, the numerator of which is 4 and the denominator of
which is the whole number of post-closing quarters included in such measurement
period.
"Pro Forma Interest Expense" means, with reference to any period (the
"measurement period"), Interest Expense for such measurement period; provided,
however, that if the measurement period ends at any time prior to the fourth
fiscal quarter of the Parent to commence and end after the date of this
Agreement, Pro Forma Interest Expense shall mean the product of (x) Interest
Expense for each fully completed fiscal quarter of the Parent which commenced
and ended after the date of this Agreement (each, a "post-closing quarter") and
(y) a fraction, the numerator of which is 4 and the denominator of which is the
whole number of post-closing
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<PAGE> 44
quarters included in such measurement period; further provided, however, that if
any Permitted Acquisition occurs at any time during such measurement period,
Interest Expense shall be equal to the product of (x) interest charges with
respect to Indebtedness, as reasonably determined on a consolidated basis, from
and including the date of (and after giving effect to) the most recent such
Permitted Acquisition occurring during such period through the close of such
measurement period, multiplied by (y) a fraction, the numerator of which is the
number of days in such measurement period and the denominator of which is the
number of those days in such measurement period including and following the date
of such Permitted Acquisition.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Reimbursement Obligation" is defined in Section 1.3(c) hereof.
"Required Lenders" means, as of the date of determination thereof,
those Lenders holding at least 66-2/3% of the Revolving Credit Commitments or,
in the event that no Revolving Credit Commitments are outstanding hereunder,
those Lenders holding at least 66-2/3% in aggregate principal amount of the
Loans outstanding hereunder.
"Restricted Payments" is defined in Section 8.16 hereof.
"Revolving Credit" is defined in the introductory paragraph hereof.
"Revolving Credit Commitments" means the aggregate amount of the
commitments of the Lenders to extend credit under the Revolving Credit, as
such amount may be reduced pursuant hereto. The Revolving Credit
Commitments are $35,000,000 as of the date hereof.
"Revolving Loans" is defined in Section 1.2 hereof.
"Revolving Credit Notes" is defined in Section 1.2 hereof.
"Subordinated Debt" means indebtedness for borrowed money subordinated
in right of payment to the prior payment of the Obligations by written
provisions acceptable to the Agent and Required Lenders in form and substance
and otherwise pursuant to documentation, in an amount, and containing interest
rates, payment terms, maturities, amortization schedules, covenants, defaults,
remedies and other material terms in form and substance satisfactory to the
Agent and Required Lenders.
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<PAGE> 45
"Subsidiary" means (x) when used with reference to the Parent, any
corporation or other Person more than 50% of the outstanding ordinary voting
shares or other equity interests of which is at the time directly or indirectly
owned by the Parent, by one or more of such Subsidiaries, or by the Parent and
one or more of such Subsidiaries and (y) when used with reference to any
Borrower, any corporation or other Person more than 50% of the outstanding
ordinary voting shares or other equity interests of which is at the time
directly or indirectly owned by such Borrower, by one or more of such
Subsidiaries, or by the Borrower and one or more of such Subsidiaries.
"Telerate Page 3750" means the display designated as "Page 3750" on the
Telerate Service (or such other page as may replace Page 3750 on that service or
such other service as may be nominated by the British Bankers' Association as
the information vendor for the purpose of displaying British Bankers'
Association Interest Settlement Rates for U.S. Dollar deposits).
"Term Credit" is defined in the introductory paragraph hereof.
"Term Credit Commitments" means the commitments of the Lenders to make
the Term Credit Loan in the amounts set forth opposite their signatures hereto
under the heading "Term Credit Commitment" and opposite their signatures on
Assignment Agreements delivered pursuant to Section 12.15 hereof under the
heading "Term Credit Commitment", as such amounts may be reduced pursuant
hereto. The Term Credit Commitments are $15,000,000 as of the date hereof.
"Term Credit Loan" is defined in Section 1.2 hereof.
"Term Credit Notes" is defined in Section 1.4 hereof.
"Termination Date" means (x) December 31, 2003, or (y) if earlier, such
earlier date on which the Revolving Credit Commitments are terminated in whole
pursuant to Sections 3.4, 9.2 or 9.3 hereof, or (z) if later, such later date to
which the Revolving Credit Commitments are extended pursuant to Section 11.14
hereof.
"Term Notes" is defined in Section 1.2 hereof.
"Total Funded Debt" means, at any time the same is to be determined,
the aggregate of all Indebtedness of the Parent and its Subsidiaries at such
time, plus all Indebtedness of any other Person which is directly or indirectly
guaranteed by the Parent or any of its Subsidiaries or which the Company of any
of its Subsidiaries has agreed (contingently or otherwise) to purchase or
otherwise acquire or in respect of which the Parent or any of its Subsidiaries
has otherwise assured a creditor against loss.
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<PAGE> 46
"Unfunded Vested Liabilities" means, for any Plan at any time, the
amount (if any) by which the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"Voluntary Conversion Term Loans" is defined in Section 1.1(d) hereof.
"Voluntary Conversion Term Notes" is defined in Section 1.1(d) hereof.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1) of
ERISA.
"Wholly Owned Subsidiary" means (x) when used with reference to the
Parent, a Subsidiary of which all of the issued and outstanding shares of
capital stock (other than directors' qualifying shares as required by law) or
other equity interests are owned by the Parent and/or one or more Wholly Owned
Subsidiaries within the meaning of this definition and (y) when used with
reference to any Borrower, a Subsidiary of which all of the issued and
outstanding shares of capital stock (other than directors' qualifying shares as
required by law) or other equity interests are owned by such Borrower and/or one
or more Wholly Owned Subsidiaries within the meaning of this definition.
Section 5.2. Interpretation. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined. All
references to time of day herein are references to Chicago, Illinois time unless
otherwise specifically provided. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, it shall be done in accordance with GAAP except
where such principles are inconsistent with the specific provisions of this
Agreement.
Section 5.3. Change in Accounting Principles. If, after the date of
this Agreement, there shall occur any change in generally accepted accounting
principles from those used in the preparation of the financial statements
referred to in Section 6.4 hereof and such change shall result in a change in
the method of calculation of any financial covenant, standard or term found in
this Agreement, either the Parent or the Required Lenders may by notice to the
Lenders and the Parent, respectively, require that the Lenders and the Parent
negotiate in good faith to amend such covenant, standard and term so as
equitably to reflect such change in accounting principles, with the desired
result being that the criteria for evaluating the financial condition of the
Parent and its Subsidiaries shall be the same as if such change had not been
made. No delay by the Parent or the Required Lenders in requiring such
negotiation shall limit their right to so require such a
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negotiation at any time after such a change in accounting principles. Without
limiting the generality of the foregoing, the Parent shall neither be deemed to
be in compliance with any financial covenant hereunder nor out of compliance
with any financial covenant hereunder if such state of compliance or
noncompliance, as the case may be, would not exist but for the occurrence of a
change in accounting principles after the date hereof.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
The Parent and each Borrower represents and warrants to the Lenders as
follows (provided that each Borrower is making such representations and
warranties only as to itself and its Subsidiaries):
Section 6.1. Organization and Qualification. (i) The Parent is duly
organized, validly existing and in good standing as a corporation under the laws
of the State of Georgia, (ii) Morton is duly organized, validly existing and in
good standing as a corporation under the laws of the State of Illinois and (iii)
Morton North Carolina is duly organized, validly existing and in good standing
as a corporation under the laws of the State of North Carolina, and each has
full and adequate corporate power to own its Property and carry on its business
as now conducted. Each of the Parent and the Borrowers is duly licensed or
qualified and in good standing in each jurisdiction in which the nature of the
business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying unless and to the extent that the failure
to be so licensed or qualified or to be in such good standing would not have any
material adverse effect on the financial condition, Properties, business, or
operations of the Parent, Morton or Morton North Carolina or in the ability of
any of them to perform or the Agent's ability to enforce performance of the
obligations of any of them under the Loan Documents. The Parent and each
Borrower has full right and authority to enter into this Agreement, to obtain
(in the case of each Borrower) the credit herein provided for, to issue (in the
case of each Borrower) its Notes in evidence of the borrowings herein provided
for, to execute and deliver each Loan Document delivered by it, and to perform
each and all of the matters and things therein provided for; and the Loan
Documents do not, nor does the performance or observance by the Parent or any
Borrower of any of the matters and things therein provided for, contravene or
constitute a default under any provision of law or any judgment, injunction,
order or decree binding upon the Parent or any Borrower or any charter or by-law
provision of the Parent or any Borrower or any covenant, indenture or agreement
of or affecting the Parent or any Borrower or any of their respective
Properties, or result in the creation or imposition of any Lien on any Property
of the Parent or any Borrower.
Section 6.2. Non-Borrowing Subsidiaries. Each Guarantor is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated or
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organized, as the case may be, has full and adequate power to own its Property
and carry on its business as now conducted, and is duly licensed or qualified
and in good standing in each jurisdiction in which the nature of the business
conducted by it or the nature of the Property owned or leased by it requires
such licensing or qualifying unless and to the extent that the failure to be so
licensed or qualified or to be in such good standing would not have any material
adverse effect on the financial condition, Properties, business or operations of
the Parent and its Subsidiaries taken as a whole or, in the case of a Borrower,
in its ability to perform or the Agent's ability to enforce performance of such
Borrower's obligations under the Loan Documents. Each Guarantor has full right,
power and authority to execute and deliver each Loan Document delivered by it
and to observe and perform each and all of the matters and things therein
provided for, and the Loan Documents do not, nor will the performance or
observance by any Guarantor of any of the matters and things therein provided
for, contravene any provision of law or any charter or by-law provision of any
Guarantor or any covenant, indenture or agreement of or affecting the Parent or
any Subsidiary or any of their respective Properties or require any governmental
approval or consent. Schedule 6.2 hereto identifies each Subsidiary, the
jurisdiction of its incorporation or organization, as the case may be, the
percentage of issued and outstanding shares of each class of its capital stock
or other equity interests owned by the Parent and the Subsidiaries and, if such
percentage is not 100% (excluding directors' qualifying shares as required by
law), a description of each class of its authorized capital stock and other
equity interests and the number of shares of each class issued and outstanding.
All of the outstanding shares of capital stock and other equity interests of
each Subsidiary are validly issued and outstanding and fully paid and
nonassessable and all such shares and other equity interests indicated on
Schedule 6.2 as owned by the Parent or a Subsidiary are owned, beneficially and
of record, by the Parent or such Subsidiary free and clear of all Liens. There
are no outstanding commitments or other obligations of any Subsidiary to issue,
and no options, warrants or other rights of any Person to acquire, any shares of
any class of capital stock or other equity interests of any Subsidiary.
Section 6.3. Margin Stock. Neither the Parent nor any Borrower nor
any of their respective Subsidiaries is engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Loan or Letter of Credit issued
hereunder will be used to purchase or carry any such margin stock or to extend
credit to others for the purpose of purchasing or carrying any such margin
stock.
Section 6.4. Financial Reports. The consolidated balance sheet of
Morton and its Subsidiaries as at June 30, 1997 and the related consolidated
statements of income, retained earnings and cash flows of the Parent and its
Subsidiaries for the fiscal year then ended, and accompanying notes thereto,
which financial statements are accompanied by the audit report of Clifton
Gunderson L.L.C., independent public accountants, and the unaudited interim
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consolidated balance sheet of Morton and its Subsidiaries as at September 30,
1997, and the related consolidated statements of income, retained earnings and
cash flows of the Parent and its Subsidiaries for the three (3) months then
ended, heretofore furnished to the Lenders, fairly present the consolidated
financial condition of the Parent and its Subsidiaries as at said dates and the
consolidated results of their operations and cash flows for the periods then
ended in conformity with GAAP applied on a consistent basis. Neither the Parent
nor any Borrower nor any of their respective Subsidiaries has contingent
liabilities which are material to it other than as indicated on such financial
statements or, with respect to future periods, on the financial statements
furnished pursuant to Section 8.5 hereof. Since June 30, 1997, or if later, the
date as of which were prepared the most recent financial statements for Morton
or the Parent, as the case may be, furnished pursuant to Section 8.5(a) or (b)
hereof, there has been no material adverse change in the condition (financial or
otherwise) or business prospects of the Parent and its Subsidiaries taken as a
whole.
Section 6.5. Full Disclosure. The statements and information
furnished to the Agent and the Lenders in connection with the negotiation of
this Agreement and the commitments by the Lenders to provide all or part of the
financing contemplated hereby do not contain any untrue statements of a material
fact or omit a material fact necessary to make the material statements contained
therein or herein not misleading, the Lenders acknowledging that as to any
projections furnished to any Lender, the Parent and the Borrowers only represent
that the same were prepared on the basis of information and estimates the Parent
and the Borrowers believed to be reasonable.
Section 6.6. Good Title. The Parent, each Borrower and their
respective Subsidiaries have good and defensible title to their respective
material assets as reflected on the most recent consolidated balance sheet of
the Parent and its Subsidiaries furnished to the Lenders (except for sales of
assets by the Parent, such Borrower and such Subsidiaries in the ordinary course
of their respective businesses), subject to no Liens other than such thereof as
are permitted by Section 8.12 hereof.
Section 6.7. Litigation and Other Controversies. There is no
litigation or governmental proceeding or labor controversy pending, nor to the
knowledge of the Parent or any Borrower threatened, against the Parent, such
Borrower or any of their respective Subsidiaries which if adversely determined
would result in any material adverse change in the financial condition,
Properties, business or operations of the Parent and its Subsidiaries taken as a
whole.
Section 6.8. Taxes. All tax returns with respect to any income tax
or other material tax required to be filed by the Parent or any Subsidiary in
any jurisdiction have, in fact, been filed, and all taxes, assessments, fees and
other governmental charges upon the Parent or any Subsidiary
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or upon any of their respective Properties, income or franchises, which are
shown to be due and payable in such returns, have been paid. The Parent does not
know of any proposed additional tax assessment against any subsidiary for which
adequate provision in accordance with GAAP has not been made on its accounts.
Adequate provisions in accordance with GAAP for taxes on the books of the Parent
and each Subsidiary have been made for all open years, and for its current
fiscal period.
Section 6.9. Approvals. No authorization, consent, license,
exemption, filing or registration with any court or governmental department,
agency or instrumentality, nor any approval or consent of the stockholders of
the Parent or any other Person, is or will be necessary to the valid execution,
delivery or performance by the Parent and the Borrowers of this Agreement, the
Applications or the Notes.
Section 6.10. Affiliate Transactions. Neither the Parent nor any
Borrower nor any of their respective Subsidiaries is a party to any contracts or
agreements with any of its Affiliates (other than with Wholly Owned
Subsidiaries) on terms and conditions which are less favorable to the Parent,
such Borrower or such Subsidiary than would be usual and customary in similar
contracts or agreements between Persons not affiliated with each other.
Section 6.11. Investment Company; Public Utility Holding Company.
Neither the Parent nor any Borrower nor any of their respective Subsidiaries is
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or a
"public utility holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
Section 6.12. ERISA. The Parent and each other member of its
Controlled Group has fulfilled its obligations under the minimum funding
standards of and is in compliance in all material respects with ERISA and the
Code to the extent applicable to it and has not incurred any liability to the
PBGC or a Plan under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA. Neither the Parent nor any Subsidiary has
any contingent liabilities with respect to any post-retirement benefits under a
Welfare Plan, other than liability for continuation coverage described in
article 6 of Title I of ERISA.
Section 6.13. Compliance with Laws. The Parent, each Borrower and
their respective Subsidiaries are in compliance with the requirements of all
federal, state and local laws, rules and regulations applicable to or pertaining
to the Properties or business operations of the Parent, such Borrower or any
such Subsidiary (including, without limitation, the Occupational Safety and
Health Act of 1970, the Americans with Disabilities Act of 1990, and laws and
regulations establishing quality criteria and standards for air, water, land and
toxic or hazardous wastes or
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substances), non-compliance with which would reasonably be expected to have a
material adverse effect on the financial condition, Properties, business or
operations of the Parent and its Subsidiaries taken as a whole. Neither the
Parent nor any Borrower nor any of their respective Subsidiaries has received
notice to the effect that its operations are not in compliance with any of the
requirements of applicable federal, state or local environmental, health and
safety statutes and regulations or are the subject of any governmental
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action would reasonably be expected to have a
material adverse effect on the financial condition, Properties, business or
operations of the Parent and its Subsidiaries taken as a whole.
Section 6.14. Other Agreements. Neither the Parent nor any Borrower
nor any of their respective Subsidiaries is in default under the terms of any
covenant, indenture or agreement of or affecting the Parent, such Borrower or
any such Subsidiary or any of their Properties, which default would have a
material adverse effect on the financial condition, Properties, business or
operations of the Parent and its Subsidiaries taken as a whole.
Section 6.15. Merger Documents. The Borrowers heretofore caused
Morton Holding to deliver to each Lender true and correct copies of the Merger
Documents and all exhibits thereto and the same have not been amended or
modified in any respect. Morton Holding has all necessary corporate right, power
and authority to consummate the Merger and other transactions contemplated by
the Merger Documents and to perform and observe all of its obligations
thereunder. Morton Holding is not in default in any material respect of any of
its obligations under the Merger Documents.
SECTION 7. CONDITIONS PRECEDENT.
The obligation of the Lenders to make any Loan or of the Agent to issue
any Letter of Credit under this Agreement is subject to the following conditions
precedent:
Section 7.1. All Advances. As of the time of the making of
each Loan and the issuance of each Letter of Credit (including the initial
Loan and the initial Letter of Credit) hereunder:
(a) each of the representations and warranties set forth in
Section 6 hereof and the Applications shall be true and correct in all
material respects as of such time, except to the extent the same relate
expressly to an earlier date;
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(b) the Parent and each Borrower shall be in compliance with
all of the terms and conditions hereof, and no Default or Event of
Default shall have occurred and be continuing hereunder;
(c) after giving effect to such extension of credit to the
relevant Borrower, (i) the aggregate principal amount of all Revolving
Loans and L/C Obligations outstanding under the Revolving Credit shall
not exceed the Revolving Credit Commitments then in effect;
(d) such extension of credit shall not violate any order,
judgment or decree of any court or other authority or any provision of
law or regulation applicable to the Agent or any Lender (including,
without limitation, Regulation U of the Board of Governors of the
Federal Reserve System) as then in effect; and
(e) in the case of the issuance of any Letter of Credit, the
Agent shall have received a properly completed Application therefor
and, in the case of an extension or increase in the amount of the
Letter of Credit, the Agent shall have received a written request
therefor, in a form acceptable to the Agent, with such Application or
written request, in each case to be accompanied by the fees required by
this Agreement.
Each Borrower's request for any Loan or for any Letter of Credit, shall
constitute its warranty to the Agent and the Lenders on the date such credit is
to be extended as to the facts specified in paragraphs (a) and (b) of this
Section.
Section 7.2. Initial Advance. Prior to the making of the
initial Loan or the issuance of the initial Letter of Credit hereunder, the
following conditions precedent shall also have been satisfied:
(a) the Agent shall have received the following for the
account of the Lenders (each to be properly executed and completed) and
the same shall have been approved as to form and substance by the
Lenders:
(i) the Notes;
(ii) the Guaranties;
(iii) the Collateral Documents and the UCC
financing statements requested by the Agent in connection
therewith;
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(iv) a mortgagee's policy of title insurance (or a
binding commitment therefor) for the Mortgage insuring the
Lien thereof in the amount of $7,500,000 to be a valid first
lien subject to no defects or objections which are
unacceptable to the Agent, together with endorsements
(including, without limitation, a revolving credit endorsement
and a comprehensive endorsement) as the Agent may require;
(v) an ALTA survey prepared by a licensed surveyor
on each parcel of real property subject to the lien of the
Mortgage, which survey shall also state whether or not any
portion of the real property is in a designated flood hazard
area;
(vi) a report of an independent firm of environmental
engineers acceptable to the Agent concerning the environmental
hazards and matters with respect to the parcels of real
property subject to the lien of the Mortgage;
(vii) certified copies of resolutions of the Board of
Directors of the Parent, each Borrower and each Guarantor
authorizing the execution and delivery of the Loan Documents
delivered by them and indicating the authorized signers of
such Loan Documents;
(viii) copies of the articles of incorporation and
by-laws of the Parent, each Borrower and each Guarantor
certified as true and correct by the Secretary or other
appropriate officer of the Parent, such Borrower or such
Guarantor, as the case may be;
(ix) a good standing certificate for the Parent, each
Borrower and Guarantor, dated as of a date no earlier than
thirty days prior to the date hereof, from the appropriate
governmental office in the jurisdiction of its incorporation;
(x) an incumbency certificate containing the name,
title and genuine signatures of the Borrowers' Authorized
Representatives;
(xi) certified copies of the Merger Documents,
together with all exhibits and attachments thereto; and
(xii) payoff letters from Connecticut General Life
Insurance Company and CIGNA Mezzanine Partners III, L.P.
(collectively, "Cigna") and Fleet Capital Corporation
("Fleet") which contain Cigna's and Fleet's promise to release
their
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respective Liens on all assets of any of the Borrowers
upon its receipt of the payoff amount specified therein; and
(b) the Agent shall have received for the account of and
addressed to the Lenders the favorable written opinion of counsel for
the Parent and the Borrowers and certain Guarantors in the form
attached hereto as Exhibit H;
(c) the Merger shall have occurred subject to no conditions
subsequent which have not yet been satisfied except for the Lenders'
funding out of the initial Loans of not more than $25,000,000 of the
merger price therefor and the Agent shall have received evidence
satisfactory to it of the foregoing;
(d) the Agent shall have received for itself and for the
Lenders the initial fees called for hereby;
(e) each Lender shall have received a pro forma balance sheet
of the Parent and its Subsidiaries as of and immediately after giving
effect to the Merger and such other valuations and certifications, as
it may require in order to satisfy itself as to the value of the
Collateral, the financial condition of the Parent and of each Borrower
and their respective Subsidiaries, and the lack of material contingent
liabilities of the Parent, each Borrower and their respective
Subsidiaries;
(f) the Agent shall have received a Compliance Certificate
showing a pro forma computation (after giving effect to the Merger) of
the calculations contained therein (other than the Fixed Charge
Coverage Ratio) as of the close of the most recently completed fiscal
quarter of the Parent, such pro forma computation to be in form and
substance reasonably satisfactory to the Agent and otherwise in
reasonable detail;
(g) the Liens granted to the Agent under the Collateral
Documents shall have been perfected in a manner satisfactory to each
Lender and its counsel; and
(h) the Agent shall have received for the account of the
Lenders such other agreements, instruments, documents, certificates and
opinions as the Agent or the Lenders may reasonably request.
SECTION 8. COVENANTS.
The Parent and each Borrower agrees that, so long as any Loans, Letters
of Credit or Commitments are available to or in use by any Borrower hereunder,
except to the extent
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compliance in any case or cases is waived in writing by the Required Lenders and
except that each Borrower is making such agreements only as to itself and its
Subsidiaries:
Section 8.1. Maintenance of Business. The Parent and each Borrower
shall, and shall cause each of their respective Subsidiaries to, preserve and
keep in force and effect its corporate existence (except to the extent such
existence terminates in mergers and consolidations permitted by Section 8.16
hereof) and all licenses, permits and franchises necessary to the proper conduct
of its business.
Section 8.2. Maintenance of Property. The Parent and each Borrower
will maintain, preserve and keep those of its Properties material to its
business in good repair, working order and condition (ordinary wear and tear
excepted) and will from time to time make all needful and proper repairs,
renewals, replacements, additions and betterments thereto so that at all times
the efficiency thereof shall be fully preserved and maintained, and will cause
each of their respective Subsidiaries to do so in respect of Property owned or
used by it.
Section 8.3. Taxes and Assessments. The Parent and each Borrower
will duly pay and discharge, and will cause each of their respective
Subsidiaries to duly pay and discharge, all federal and other material taxes,
rates, assessments, fees and governmental charges upon or against it or its
Properties, in each case before the same become delinquent and before penalties
accrue thereon, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings which prevent enforcement of the
matter under contest and adequate reserves are provided therefor.
Section 8.4. Insurance. The Parent and each Borrower will insure
and keep insured, and will cause each of their respective Subsidiaries to insure
and keep insured, with good and responsible insurance companies, all insurable
Property owned by it which is of a character usually insured by Persons
similarly situated and operating like Properties against loss or damage from
such hazards and risks, and in such amounts, as are insured by Persons similarly
situated and operating like Properties; and the Parent and each Borrower will
insure, and cause each of their respective Subsidiaries to insure, such other
hazards and risks (including employers' and public liability risks) with other
good and responsible insurance companies as and to the extent usually insured by
Persons similarly situated and conducting similar businesses. The Parent and
each Borrower will upon request of the Agent furnish a certificate setting forth
in summary form the nature and extent of the insurance maintained pursuant to
this Section.
Section 8.5. Financial Reports. The Parent and each Borrower will,
and will cause each of their respective Subsidiaries to, maintain a standard
system of accounting in accordance with GAAP, will permit the Agent, each Lender
and their representatives to visit and inspect the
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properties and assets (including books and records) of the Parent, such Borrower
and their respective Subsidiaries at all reasonable times and will furnish to
the Agent, each Lender and their duly authorized representatives such
information respecting the business and financial condition of the Parent, such
Borrower and their respective Subsidiaries as the Agent or such Lender may
reasonably request; and without any request, the Parent will furnish to the
Lenders:
(a) as soon as available, and in any event within 45 days
after the close of each quarterly fiscal period of the Parent, a copy
of the balance sheet and statements of income, retained earnings and
cash flows of the Parent and its Subsidiaries for such period, all
prepared on a consolidated basis and in reasonable detail showing in
comparative form the figures for the corresponding date and period in
the previous fiscal year, prepared by the Parent in accordance with
GAAP (subject to normal year-end audit adjustments and the absence of
notes) and certified to by the chief financial officer of the Parent;
(b) as soon as available, and in any event within 90 days
after the close of each fiscal year of the Parent, a copy of the
consolidated balance sheet of the Parent and its Subsidiaries as of the
close of such fiscal year and the consolidated statements of income,
retained earnings and cash flows of the Parent and its Subsidiaries for
such period, and accompanying notes thereto, all in reasonable detail
showing in comparative form the figures for the previous fiscal year,
accompanied by an unqualified opinion thereon of Clifton Gunderson
L.L.C. or another firm of independent public accountants of recognized
national standing, selected by the Parent and satisfactory to the
Required Lenders, to the effect that the financial statements have been
prepared in accordance with GAAP and present fairly in accordance with
GAAP the consolidated financial condition of the Parent and its
Subsidiaries as of the close of such fiscal year and the results of
their operations and cash flows for the fiscal year then ended and that
an examination of such accounts in connection with such financial
statements has been made in accordance with generally accepted auditing
standards and, accordingly, such examination included such tests of the
accounting records and such other auditing procedures as were
considered necessary in the circumstances;
(c) if any Lender so requests, the Parent or any Borrower,
not later than 10 days after receipt thereof, a copy of any management
letters on internal accounting controls of the Parent or any Subsidiary
prepared by its independent public accountants;
(d) promptly after the sending or filing thereof, copies of
all proxy statements, financial statements and reports the Parent sends
to its shareholders, and copies of all other regular, periodic and
special reports (other than SEC Form 3, Form 4, Form 5, Form S-8 or
similar administrative reports) and all registration
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statements the Parent files with the Securities and Exchange
Commission or any successor thereto, or with any national securities
exchanges; and
(e) promptly after knowledge thereof shall have come to the
attention of any responsible officer of the Parent or any Borrower,
written notice of any threatened or pending litigation or governmental
proceeding or labor controversy against the Parent or any Subsidiary
which, if adversely determined, would have a material adverse effect on
the financial condition, Properties, business or operations of the
Parent and its Subsidiaries taken as a whole or of the occurrence of
any Default or Event of Default hereunder.
Each of the financial statements furnished to the Lenders pursuant to
clauses (a) and (b) of this Section shall be accompanied by a written
certificate in the form attached hereto as Exhibit E signed by the chief
financial officer of the Parent to the effect that to the best of the chief
financial officer's knowledge and belief no Default or Event of Default is
continuing as of the close of the period covered by such statements or, if any
such Default or Event of Default is continuing as of the close of such period,
setting forth a description of such Default or Event of Default and specifying
the action, if any, taken by the Parent or any Borrower to remedy the same. Such
certificate shall also set forth the calculations supporting such statements in
respect of Sections 8.6, 8.7, 8.8, 8.9 and 8.10 of this Agreement.
The Parent and Borrowers will, and will cause each Subsidiary to,
permit the Agent, the Lenders and their duly authorized representatives to visit
and inspect any of the Properties of the Parent, the Borrowers and their
respective Subsidiaries, to examine all of their books of account, records,
reports and other papers, to make copies and extracts therefrom, and to discuss
their respective affairs, finances and accounts with their respective officers,
employees and independent public accountants (and by this provision the Parent
and Borrowers authorize such accountants to discuss with the Lenders (and such
Persons as any Lender may designate) the finances and affairs of the Parent, the
Borrowers and its Subsidiaries) all at such reasonable times and as often as may
be reasonably requested.
Section 8.6. Interest Coverage Ratio. The Parent will, as of
the last day of each fiscal quarter of the Parent, maintain an Interest
Coverage Ratio of not less than 2.50 to 1.0.
Section 8.7. Leverage Ratio. The Parent will at all times maintain
its Leverage Ratio at not more than (i) 3.5 to 1.0 from the date hereof through
and including the third fiscal quarter of the Parent's fiscal year 2000 and (ii)
3.0 to 1.0 at all times thereafter.
Section 8.8. Net Worth. The Parent will, as of the last day of each
fiscal quarter of the Parent, maintain its Net Worth at not less than the
Minimum Required Amount. For purposes
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of this Section 8.8, the term "Minimum Required Amount" shall mean $1,250,000
through March 30, 1998 and shall increase (but never decrease) as of March 31,
1998 and as of the close of each fiscal quarter of the Parent by sixty percent
(60%) of Consolidated Net Income (if positive) for the fiscal quarter of the
Parent then ended.
Section 8.9. Fixed Charge Coverage Ratio. The Parent will, as of
the last day of each fiscal quarter of the Parent, maintain the Fixed Charge
Coverage Ratio at not less than 1.25 to 1.0.
Section 8.10. Capital Expenditures. The Parent will not, nor will it
permit any Subsidiary to, expend during any fiscal year, or (without
duplication) become obligated to expend during such fiscal year, in each case
for Capital Expenditures (including any Greenfield Expenses) an aggregate amount
in excess of $8,000,000 for the Parent and its Subsidiaries taken together.
Section 8.11. Indebtedness. The Parent and each Borrower will not,
nor will it permit any of their respective Subsidiaries to, issue, incur,
assume, create or have outstanding any Indebtedness; provided, however, that the
foregoing provisions shall not restrict nor operate to prevent:
(a) the Obligations;
(b) purchase money indebtedness and Capitalized Lease
Obligations secured by Liens permitted by Section 8.12(d) hereof in an
aggregate amount which does not exceed $5,000,000 at any one time
outstanding;
(c) intercompany borrowings by and from the Parent and
its Subsidiaries;
(d) indebtedness secured by Liens permitted by Section
8.12(e) hereof in an aggregate amount which does not exceed $1,000,000
at any one time outstanding;
(e) non-compete payments owing by Morton to Roland Lender and
Lee Hinnen aggregating not more than $500,000;
(f) non-compete payments owing to sellers as part of the
consideration due them for Permitted Acquisitions;
(g) unsecured Subordinated Debt; and
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(h) unsecured indebtedness not otherwise permitted by this
Section 8.11 provided the aggregate amount at any one time outstanding
does not exceed $100,000.
Section 8.12. Liens. The Parent and each Borrower will not, and will
not permit any of their respective Subsidiaries to, create, incur or permit to
exist any Lien of any kind on any Property owned by the Parent, such Borrower or
any such Subsidiary; provided, however, that this Section shall not apply to nor
operate to prevent:
(a) Liens arising by statute in connection with worker's
compensation, unemployment insurance, old age benefits, social security
obligations, taxes, assessments, statutory obligations or other similar
charges, good faith cash deposits in connection with tenders, contracts
or leases to which the Parent, any Borrower or any of their respective
Subsidiaries is a party or other cash deposits required to be made in
the ordinary course of business, provided in each case that the
obligation is not for borrowed money and that the obligation secured is
not overdue or, if overdue, is being contested in good faith by
appropriate proceedings which prevent enforcement of the matter under
contest and adequate reserves have been established therefor;
(b) mechanics', workmen's, materialmen's, landlords',
carriers', or other similar Liens arising in the ordinary course of
business with respect to obligations which are not overdue or which are
being contested in good faith by appropriate proceedings which prevent
enforcement of the matter under contest;
(c) the pledge of assets for the purpose of securing an
appeal, stay or discharge in the course of any legal proceeding,
provided that the aggregate amount of liabilities of the Parent and its
Subsidiaries secured by a pledge of assets permitted under this clause,
including interest and penalties thereon, if any, shall not be in
excess of $250,000 at any one time outstanding;
(d) Liens securing indebtedness permitted by Section 8.11(b)
hereof in respect of Property now owned or hereafter acquired by the
Parent, any Borrower or any of their respective Subsidiaries (not
extending to any other Property), or Liens on Property so acquired (not
extending to any other Property) existing at the time of acquisition
thereof, or renewals, extensions and refundings of any such Liens (not
extending to any other Property);
(e) any Lien existing on any Property (other than (i) shares
of stock in any Subsidiary, (ii) receivables, inventory and similar
working capital assets and (iii) patents, trademarks and similar
intangibles) prior to the acquisition thereof by the Parent or any
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Subsidiary, provided that such Lien is not created in contemplation of
or in connection with such acquisition;
(f) the Liens described on Schedule 8.12 hereof; and
(g) with respect to real property, easements, rights of way,
reservations and other minor defects or irregularities in title which
do not materially impair the use thereof for the purposes for which it
is held by the Parent, any Borrower or any of their respective
Subsidiaries.
Section 8.13. Investments, Loans, Advances and Guaranties. The
Parent and each Borrower will not, and will not permit any of their respective
Subsidiaries to, directly or indirectly, make, retain or have outstanding any
investments (whether through purchase of stock or obligations or otherwise) in,
or loans or advances (other than for travel advances and other similar cash
advances made to employees in the ordinary course of business) to, any other
Person, or be or become liable as endorser, guarantor, surety or otherwise for
any debt, obligation or undertaking of any other Person, or otherwise agree to
provide funds for payment of the obligations of another, or supply funds thereto
or invest therein or otherwise assure a creditor of another against loss or
apply for or become liable to the issuer of a letter of credit which supports an
obligation of another, or subordinate any claim or demand it may have to the
claim or demand of any other Person; provided, however, that the foregoing
provisions shall not apply to nor operate to prevent:
(a) investments in direct obligations of the United States of
America or of any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of
America, provided that any such obligations shall mature within one
year of the date of issuance thereof;
(b) investments in commercial paper rated at least P-1 by
Moody's Investors Services, Inc. and at least A-1 by Standard & Poor's
Corporation maturing within 270 days of the date of issuance thereof;
(c) investments in certificates of deposit issued by any
United States commercial bank having capital and surplus of not less
than $100,000,000 which have a maturity of one year or less;
(d) endorsement of items for deposit or collection of
commercial paper received in the ordinary course of business;
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(e) intercompany loans and advances by and from the
Parent and its Subsidiaries;
(f) Permitted Acquisitions; and
(g) the Guaranties.
In determining the amount of investments, loans, advances and
guarantees permitted under this Section, investments shall always be taken at
the original cost thereof (regardless of any subsequent appreciation or
depreciation therein); loans and advances shall be taken at the principal amount
thereof then remaining unpaid; and guarantees shall be taken at the amount of
obligations guaranteed thereby.
Section 8.14. Leases. (a) Sales and Leasebacks. The Parent and each
Borrower will not, and will not permit any of their respective Subsidiaries to,
enter into any arrangement with any bank, insurance company or any other lender
or investor providing for the leasing by the Parent, such Borrower or any such
Subsidiary of any Property theretofore owned by it and which has been or is to
be sold or transferred by such owner to such lender or investor.
(b) Operating Leases. The Parent and Borrowers shall not, nor
shall they permit any of their Subsidiaries to, acquire the use or possession of
any Property under a lease or similar arrangement, whether or not the Parent or
any of its Subsidiaries have the express or implied right to acquire title to or
purchase such Property, at any time if, after giving effect thereto, the
aggregate amount of fixed rentals and other consideration payable by the Parent
and its Subsidiaries under all such leases and similar arrangements would exceed
$5,000,000 during any fiscal year of the Parent. Capital Leases shall not be
included in computing compliance with this Section to the extent the Parent's
and its Subsidiaries' liability in respect of the same is permitted by Section
8.11(b) hereof.
Section 8.15. Dividends and Certain Other Restricted Payments. The
Parent will not (a) declare or pay any dividends on or make any other
distributions in respect of any class or series of its capital stock or (b)
directly or indirectly purchase, redeem or otherwise acquire or retire any of
its capital stock; provided, however, that the foregoing shall neither apply to
nor operate to prevent the Parent's expenditure of up to $63,000 in the
aggregate to redeem fractional shares of its common stock resulting from a
previous reverse stock split at the Parent.
Section 8.16. Mergers, Consolidations and Sales. The Parent and each
Borrower will not, and will not permit any of their respective Subsidiaries to,
be a party to any merger or consolidation, or sell, transfer, lease or otherwise
dispose of any operating unit or division or any
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rights to any trade name or similar intangible or all or any substantial part of
its Property (except for sales of inventory in the ordinary course of business),
or in any event sell or discount (with or without recourse) any of its notes or
accounts receivable; provided, however, that:
(a) any Subsidiary of the Parent (including any corporation
which immediately after giving effect to an Acquisition permitted by
Section 8.17 hereof becomes such a Subsidiary, but in any event
excluding the Borrowers) may merge or consolidate with or into the
Parent, Morton or any Wholly Owned Subsidiary of Morton; provided that
in any such merger or consolidation involving the Parent or a Borrower,
the Parent or such Borrower (as the case may be) shall be the surviving
or continuing corporation, or, in the case of any other merger or
consolidation of a Subsidiary (whether of the Parent or a Borrower) and
a Wholly Owned Subsidiary of the Parent or any Borrower, such Wholly
Owned Subsidiary shall be the continuing or surviving corporation; and
provided, further, that, in the case of such a merger or consolidation
involving a Guarantor, the net worth of the continuing or surviving
corporation shall not be less than the net worth of such Guarantor
immediately prior to such merger or consolidation;
(b) any Subsidiary may in the ordinary course of its business
sell, lease or otherwise dispose of all or any substantial part of its
equipment to the Parent, Morton or any Wholly Owned Subsidiary of the
Company; and
(c) the Parent may merge with a Wholly Owned Subsidiary
incorporated in Delaware solely for the purpose of changing the
Parent's state of incorporation to Delaware, with such Wholly Owned
Subsidiary surviving such merger, provided that:
(i) at the time of such merger, no Default or
Event of Default shall occur or be continuing;
(ii) such Wholly Owned Subsidiary shall have
acknowledged in writing (in form and substance reasonably
satisfactory to the Agent and Required Lenders) its assumption
of all the Parent's obligations under the Loan Documents to
the same extent, with the same force and effect, as if such
Wholly Owned Subsidiary were originally the Parent identified
and defined therein;
(iii) the Agent shall have received an opinion of
counsel of the Parent, and such other assurances that the
Agent or Required Lenders shall reasonably require, to confirm
that such merger has been effected in accordance with all
applicable laws and that the foregoing conditions set forth in
this subsection (c) have been satisfied; and
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(iv) such merger shall have no adverse effect on the
financial condition Properties, business or operations the
Parent, Morton or Morton North Carolina or in the ability of
any of them to perform or the Agent's ability to enforce
performance of the obligations of any of them under the Loan
Documents.
The term "substantial" as used herein shall mean the sale, transfer, lease or
other disposition in any fiscal year of five percent (5%) or more of the
Properties of the Parent and its Subsidiaries taken as a whole.
Section 8.17. Acquisitions. The Parent and each Borrower will not,
and will not permit any of their respective Subsidiaries to, make or commit to
make any Acquisitions; provided, however, that the Parent, any Borrower and
their respective Wholly Owned Subsidiaries may make Acquisitions of assets
located primarily in the United States used or useful in a business similar or
related to the business of the Parent, such Borrower or such Subsidiary (or
Acquisitions of the capital stock of a corporation engaged primarily in such a
business if (a) the corporation's primary operations are in the United States
and (b) immediately after giving effect to such Acquisition, the corporation so
acquired becomes a Subsidiary) if and only if: (i) the Parent or any Borrower
has, prior to committing to the acquisition, notified the Lenders thereof and
demonstrated to the satisfaction of the Lenders that no Default or Event of
Default shall occur or be continuing at the time of or after giving effect to
the Acquisition in question, (ii) the board of directors or other governing body
of such Person whose Property, or voting stock or other interests in which, are
being so acquired has approved the terms of such Acquisition, (iii) the Parent
shall have delivered to the Lenders an updated Schedule 6.2 to reflect any new
Subsidiary resulting from such Acquisition, (iv) the aggregate amount expended
by the Parent and its Subsidiaries as consideration for such Acquisition (and in
any event (1) including as such consideration, any Indebtedness assumed or
incurred as a result of such Acquisition, and (2) excluding as such
consideration, any equity securities issued by the Parent as consideration for
such Acquisition), when taken together with the aggregate amount expended as
consideration (including Indebtedness and excluding equity securities as
aforesaid) for all other Acquisitions permitted under this Section 8.18 during
the then twelve most recently completed calendar months does not exceed
$15,000,000, (v) the Parent or any Borrower has informed the Lenders of such
Acquisition at least ten (10) Business Days in advance of its closing and
promptly informed the Lenders of any terms and conditions applicable to the
Acquisition which the Parent or any Borrower in good faith believe are material,
(vi) the Parent can demonstrate on a pro forma basis after giving effect to such
Acquisition that (x) the Leverage Ratio (such pro forma calculation of the
Leverage Ratio to be made on the basis of the information contained in the then
most recent Compliance Certificate required to be submitted to each Lender with
the following adjustments: (i) Total Funded Debt shall include all indebtedness
incurred directly or indirectly to finance such Acquisition and (ii) EBITDA
shall be computed as if such Acquisition had occurred
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at the commencement of the four-quarter period with reference to which the
Leverage Ratio is being calculated) is less than 3.0 to 1.0 and (y) the Parent
will continue to comply through the term of this Agreement with Sections 8.6,
8.7, 8.9 and 8.10 of this Agreement (the Borrowers to be liable to reimburse the
Agent and Lenders for their reasonable out-of-pocket costs of conducting due
diligence to verify such demonstration), (vii) at least ten (10) Business Days
in advance of the closing of such Acquisition, the Parent or any Borrower have
provided to the Lenders such financial and other information regarding the
Person whose Property or capital stock is being so acquired, including financial
statements, and a description of such Person, as the Agent or any Lender may
reasonably request and (viii) after giving effect to such Acquisition, the
Revolving Loans and L/C Obligations are at least $5,000,000 below the Revolving
Credit Commitments then in effect. Capital Expenditures for Property in
compliance with Section 8.10 hereof shall not be considered Acquisitions subject
to this Section.
Section 8.18. Maintenance of Subsidiaries. The Parent and each
Borrower will not assign, sell or transfer, or permit any of their respective
Subsidiaries to issue, assign, sell or transfer, any shares of capital stock of
a Subsidiary, provided that the foregoing shall not operate to prevent the
issuance, sale and transfer to any person of any shares of capital stock of a
Subsidiary solely for the purpose of qualifying, and to the extent legally
necessary to qualify, such person as a director of such Subsidiary.
Section 8.19. Formation of Subsidiaries. In the event any Subsidiary
is formed or acquired after the date hereof, the Borrowers shall within thirty
(30) Business Days thereof (x) furnish an update to Schedule 6.2 hereof to
reflect such new Subsidiary and (y) cause such newly-formed or acquired
Subsidiary to execute a Guaranty and execute such Collateral Documents to the
extent required by Section 4 hereof (on terms substantially similar to those
executed in connection with this Agreement) as the Agent may then require
granting the Agent for the benefit of the Lenders a security interest in and
lien on the personal property of such Subsidiary as collateral security for the
Notes and the other Obligations, together with documentation (including a legal
opinion) similar to that described in Section 7.2 hereof relating to the
authorization for, execution and delivery of, and validity of such Subsidiary's
obligations as a Guarantor hereunder and otherwise under its Loan Documents in
form and substance satisfactory to the Agent and such other instruments,
documents, certificates and opinions as are required by the Agent in connection
therewith.
Section 8.20. ERISA. The Parent and each Borrower will, and will
cause each of their respective Subsidiaries to, promptly pay and discharge all
obligations and liabilities arising under ERISA of a character which if unpaid
or unperformed might result in the imposition of a Lien against any material
portion of its Properties. The Parent and each Borrower will, and will cause
each of their respective Subsidiaries to, promptly notify the Lenders of (i) the
occurrence of any
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reportable event (as defined in ERISA) with respect to a Plan, (ii) receipt of
any notice from the PBGC of its intention to seek termination of any Plan or
appointment of a trustee therefor, (iii) its intention to terminate or withdraw
from any Plan, and (iv) the occurrence of any event with respect to any Plan
which would result in the incurrence by the Parent, any Borrower or any of their
respective Subsidiaries of any material liability, fine or penalty, or any
material increase in the contingent liability of the Parent, such Borrower or
any such Subsidiary with respect to any post-retirement Welfare Plan benefit.
Section 8.21. Compliance with Laws. The Parent and each Borrower
will, and will cause each of their respective Subsidiaries to, comply in all
respects with the requirements of all federal, state and local laws, rules,
regulations, ordinances and orders applicable to or pertaining to the Properties
or business operations of the Parent, such Borrower or any such Subsidiary,
non-compliance with which could have a material adverse effect on the financial
condition, Properties, business or operations of the Parent and its Subsidiaries
taken as a whole or would reasonably be expected to result in a Lien upon any of
their Property.
Section 8.22. Burdensome Contracts With Affiliates. The Parent and
each Borrower will not, and will not permit any of their respective Subsidiaries
to, enter into any contract, agreement or business arrangement with any of its
Affiliates (other than with Wholly Owned Subsidiaries) on terms and conditions
which are less favorable to the Parent, such Borrower or such Subsidiary than
would be usual and customary in similar contracts, agreements or business
arrangements between Persons not affiliated with each other.
Section 8.23. Changes in Fiscal Year. Except to change (with notice
to the Lenders) its fiscal year to correspond with the calendar year, neither
the Parent nor any Borrower nor any of their respective Subsidiaries will change
its fiscal year from its present basis without the prior written consent of the
Required Lenders.
Section 8.24. Change in the Nature of Business. The Parent and each
Borrower will not, and will not permit any of their respective Subsidiaries to,
engage in any business or activity if as a result the general nature of the
business of the Parent, such Borrower or any such Subsidiary would be changed in
any material respect from the general nature of the business engaged in by the
Parent, such Borrower or such Subsidiary on the date of this Agreement.
Section 8.25. Use of Loan Proceeds. The Borrowers will use the
Revolving Credit solely to refinance currently outstanding Indebtedness, to
finance general corporate needs and to finance the Permitted Acquisitions. The
Borrower will use the Term Loans solely to refinance currently outstanding
Indebtedness.
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SECTION 9. EVENTS OF DEFAULT AND REMEDIES.
Section 9.1. Any one or more of the following shall constitute an
Event of Default hereunder:
(a) default in the payment when due of all or any part of the
principal of any Note (whether at the stated maturity thereof or at any
other time provided for in this Agreement) or default in the
reimbursement when due of amounts drawn under a Letter of Credit; or
(b) default for five (5) days or more in the payment when due
of all or any part of interest on any Note (whether at the stated
maturity thereof or at any other time provided for in this Agreement)
or of any fee or other amount payable by the Parent or any Borrower
hereunder or under any Application; or
(c) default in the observance or performance of any covenant
set forth in Sections 8.6, 8.7, 8.8, 8.9, 8.10, 8.11, 8.12, 8.13, 8.15,
8.16, 8.17, 8.18 or 8.25 hereof; or
(d) default in the observance or performance of any covenant
set forth in Section 8.5 hereof which is not remedied within ten (10)
days after written notice thereof to any Borrower by the Agent or any
Lender; or
(e) default in the observance or performance of any other
provision hereof or of any Application which is not remedied within
thirty (30) days after written notice thereof to any Borrower by the
Agent or any Lender; or
(f) any representation or warranty made by the Parent or any
Borrower herein or in any Application, or in any statement or
certificate furnished by it pursuant hereto or thereto, or in
connection with any Loan made or Letter of Credit issued hereunder,
proves untrue in any material respect as of the date of the issuance or
making thereof; or
(g) any Guaranty shall for any reason not be or shall cease
to be in full force and effect, or any Guarantor shall purport to
disavow, revoke, repudiate or terminate its Guaranty; or
(h) default shall occur under any evidence of Indebtedness
aggregating $1,000,000 or more issued, assumed or guaranteed by the
Parent or any Subsidiary or under any indenture, agreement or other
instrument under which the same may be issued, and such default shall
continue for a period of time sufficient to permit the acceleration of
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the maturity of any such Indebtedness (whether or not such maturity is
in fact accelerated) or any such Indebtedness shall not be paid when
due (whether by lapse of time, acceleration or otherwise); or
(i) any judgment or judgments, writ or writs, or warrant or
warrants of attachment, or any similar process or processes in an
aggregate amount in excess of $250,000 shall be entered or filed
against the Parent or any of its Subsidiaries or against any of their
Property and which remains unvacated, unbonded, unstayed or unsatisfied
for a period of thirty (30) days; or
(j) the Parent or any member of its Controlled Group shall
fail to pay when due an amount or amounts aggregating in excess
$250,000 which it shall have become liable to pay to the PBGC or to a
Plan under Title IV of ERISA; or notice of intent to terminate a Plan
or Plans having aggregate Unfunded Vested Liabilities in excess of
$250,000 (collectively, a "Material Plan") shall be filed under Title
IV of ERISA by the Parent or any other member of its Controlled Group,
any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any Material Plan or a
proceeding shall be instituted by a fiduciary of any Material Plan
against the Parent or any member of its Controlled Group to enforce
Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have
been dismissed within thirty (30) days thereafter; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or
(k) the Parent or any Subsidiary makes any payment or other
distribution on account of the principal of or interest on any
indebtedness which payment or other distribution is prohibited under
the terms of any instrument subordinating such indebtedness to the
Notes or the Borrowers' other obligations hereunder;
(l) either Borrower shall cease at any time and for any
reason to be a Wholly Owned Subsidiary of the Parent;
(m) a Change of Control shall occur; or
(n) the Parent or any Subsidiary shall (i) have entered
involuntarily against it an order for relief under the United States
Bankruptcy Code, as amended, (ii) not pay, or admit in writing its
inability to pay, its debts generally as they become due, (iii) make an
assignment for the benefit of creditors, (iv) apply for, seek, consent
to, or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it
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or any substantial part of its Property, (v) institute any proceeding
seeking to have entered against it an order for relief under the
United States Bankruptcy Code, as amended, to adjudicate it
insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or
other pleading denying the material allegations of any such
proceeding filed against it, or (vi) fail to contest in good faith
any appointment or proceeding described in Section 9.1(p) hereof; or
(o) a custodian, receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Parent or any of its
Subsidiaries or any substantial part of any of their Property, or a
proceeding described in Section 9.1(n)(v) shall be instituted against
the Parent or any of its Subsidiaries, and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a
period of sixty (60) days.
Section 9.2. When any Event of Default described in clauses (a)
through (m), both inclusive, of Section 9.1 has occurred and is continuing, the
Agent shall, upon request of the Required Lenders, by notice to any Borrower,
take either or both of the following actions:
(a) terminate the obligations of the Lenders to extend any
further credit hereunder on the date (which may be the date thereof)
stated in such notice;
(b) declare the principal of and the accrued interest on the
Notes to be forthwith due and payable and thereupon the Notes,
including both principal and interest and all fees, charges and other
amounts payable hereunder, shall be and become immediately due and
payable without further demand, presentment, protest or notice of any
kind.
Section 9.3. When any Event of Default described in clauses (n) or
(o) of Section 9.1 has occurred and is continuing, then the Notes, including
both principal and interest, and all fees, charges and other amounts payable
hereunder, shall immediately become due and payable without presentment, demand,
protest or notice of any kind, and the obligations of the Lenders to extend
further credit pursuant to any of the terms hereof shall immediately terminate.
Section 9.4. When any Event of Default, other than an Event of
Default described in subsections (n) or (o) of Section 9.1, has occurred and is
continuing, the relevant Borrower shall, upon demand of the Agent (which demand
shall be made upon the request of the Required Lenders), and when any Event of
Default described in subsections (n) or (o) of Section 9.1 has occurred the
relevant Borrower shall, without notice or demand from the Agent, immediately
pay
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to the Agent the full outstanding amount of each Letter of Credit (such
amount to be held as cash collateral for the applicable Borrower's obligations
in respect of the Letters of Credit), the relevant Borrower agreeing to
immediately make each such payment and acknowledging and agreeing the Agent and
the Lenders would not have an adequate remedy at law for failure of the relevant
Borrower to honor any such demand and that the Agent shall have the right to
require the relevant Borrower to specifically perform such undertaking whether
or not any draws had been made under any such Letter of Credit.
SECTION 10. THE AGENT.
Section 10.1. Appointment and Authorization. Each Lender hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers hereunder and under the Guaranties and the Applications
as are designated to the Agent by the terms hereof and thereof together with
such powers as are reasonably incidental thereto. The Lenders expressly agree
that the Agent is not acting as a fiduciary of the Lenders in respect of the
Loan Documents, the Borrowers or otherwise, and nothing herein or in any of the
other Loan Documents shall result in any duties or obligations on the Agent or
any of the Lenders except as expressly set forth herein. The Agent may resign at
any time by sending twenty (20) days prior written notice to any Borrower and
the Lenders and may be removed by the Required Lenders upon twenty (20) days
prior written notice to any Borrower and the Lenders. In the event of any such
resignation or removal the Required Lenders may appoint a new agent after
consultation with any Borrower, which shall succeed to all the rights, powers
and duties of the Agent hereunder and under the Guaranties and Applications. Any
resigning or removed Agent shall be entitled to the benefit of all the
protective provisions hereof with respect to its acts as an agent hereunder, but
no successor Agent shall in any event be liable or responsible for any actions
of its predecessor. If the Agent resigns or is removed and no successor is
appointed, the rights and obligations of such Agent shall be automatically
assumed by the Required Lenders and (i) each Borrower shall be directed to make
all payments due each Lender hereunder directly to such Lender and (ii) the
Agent's rights in the Guaranties and Applications shall be assigned without
representation, recourse or warranty to the Lenders as their interests may
appear.
Section 10.2. Rights as a Lender. The Agent has and reserves all of
the rights, powers and duties hereunder and under its Notes and the Guaranties
and Applications as any Lender may have and may exercise the same as though it
were not the Agent and the terms "Lender" or "Lenders" as used herein and in all
of such documents shall, unless the context otherwise expressly indicates,
include the Agent in its individual capacity as a Lender.
Section 10.3. Standard of Care. The Lenders acknowledge that they
have received and approved copies of the Guaranties and such other information
and documents concerning the
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transactions contemplated and financed hereby as they have requested to receive
and/or review. The Agent makes no representations or warranties of any kind or
character to the Lenders with respect to the validity, enforceability,
genuineness, perfection, value, worth or collectibility hereof or of the Notes
or the Guaranties or of any other documents called for hereby or thereby.
Neither the Agent nor any director, officer, employee, agent or representative
thereof shall in any event be liable for any clerical errors or errors in
judgment, inadvertence or oversight, or for action taken or omitted to be taken
by it or them hereunder or under the Guaranties or Applications or in connection
herewith or therewith except for its or their own gross negligence or willful
misconduct. The Agent shall incur no liability under or in respect of this
Agreement or the Guaranties or Applications by acting upon any notice,
certificate, warranty, instruction or statement (oral or written) of anyone
(including anyone in good faith believed by it to be authorized to act on behalf
of the Borrowers or the Parent), unless it has actual knowledge of the
untruthfulness of same. The Agent may execute any of its duties hereunder by or
through employees, agents, and attorneys-in-fact and shall not be answerable to
the Lenders for the default or misconduct of any such agents or
attorneys-in-fact selected with reasonable care except for the gross negligence
or willful misconduct of its employees. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agencies hereby created and its
duties hereunder, and shall incur no liability to anyone and be fully protected
in acting upon the advice of such counsel. The Agent shall be entitled to assume
that no Default or Event of Default exists unless notified to the contrary by a
Lender. The Agent shall in all events be fully protected in acting or failing to
act in accord with the instructions of the Required Lenders. The Agent shall in
all cases be fully justified in failing or refusing to act hereunder unless it
shall be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by the Agent by reason of taking or
continuing to take any such action. The Agent may treat the owner of any Note as
the holder thereof until written notice of transfer shall have been filed with
the Agent signed by such owner in form satisfactory to the Agent. Each Lender
acknowledges that it has independently and without reliance on the Agent or any
other Lender and based upon such information, investigations and inquiries as it
deems appropriate made its own credit analysis and decision to extend credit to
the Borrowers. It shall be the responsibility of each Lender to keep itself
informed as to the creditworthiness of the Borrowers and the Agent shall have no
liability to any Lender with respect thereto.
Section 10.4. Costs and Expenses. Each Lender agrees to reimburse
the Agent for all costs and expenses suffered or incurred by the Agent in
performing its duties hereunder and under the Guaranties and Applications, or in
the exercise of any right or power imposed or conferred upon the Agent hereby or
thereby, to the extent that the Agent is not promptly reimbursed for same by the
Parent or any Borrower, all such costs and expenses to be borne by the Lenders
ratably in accordance with the amounts of their respective Commitments. If any
Lender fails to reimburse the Agent for such Lender's share of any such costs
and expenses, such costs and
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expenses shall be paid pro rata by the remaining Lenders, but without in any
manner releasing the defaulting Lender from its liability hereunder.
Section 10.5. Indemnity. The Lenders, to the extent not prohibited
by applicable law, shall ratably indemnify and hold the Agent, and its
directors, officers, employees, agents or representatives harmless from and
against any liabilities, losses, costs and expenses suffered or incurred by them
hereunder or under the Guaranties or Applications or in connection with the
transactions contemplated hereby or thereby, regardless of when asserted or
arising, except to the extent they are promptly reimbursed for the same by the
relevant Borrower and except to the extent that any event giving rise to a claim
was caused by the gross negligence or willful misconduct of the party seeking to
be indemnified. If any Lender defaults in its obligations hereunder, its share
of the obligations shall be paid pro rata by the remaining Lenders, but without
in any manner releasing the defaulting Lender from its liability hereunder.
SECTION 11. JOINT AND SEVERAL LIABILITY AND GUARANTIES.
Section 11.1. Joint and Several Liability and Guaranties. To induce
the Lenders to provide the credit described herein and in consideration of
benefits expected to accrue to each Guarantor by reason of the Commitments and
for other good and valuable consideration, receipt of which is hereby
acknowledged, the Parent, each Subsidiary party hereto and each Subsidiary which
executes and delivers a Guaranty (the Parent and each such Subsidiary being
hereinafter referred to individually as a "Guarantor" and collectively as the
"Guarantors") hereby unconditionally and irrevocably guarantee jointly and
severally to the Agent, the Lenders and each other holder of any of the
Obligations, and each Borrower hereby unconditionally and irrevocably agrees to
be jointly and severally liable to the Agent, the Lenders and such holders for,
the due and punctual payment of all present and future indebtedness of the
Borrowers evidenced by or arising out of the Loan Documents, including, but not
limited to, the due and punctual payment of principal of and interest on the
Notes and the due and punctual payment of all other Obligations now or hereafter
owed by the Borrowers under the Loan Documents as and when the same shall become
due and payable, whether at stated maturity, by acceleration or otherwise,
according to the terms hereof and thereof. In case of failure by the Borrowers
punctually to pay any indebtedness or other Obligations guarantied hereby or for
which the Borrowers agree hereby to be jointly and severally liable, each
Guarantor hereby unconditionally agrees jointly and severally to make such
payment or to cause such payment to be made punctually as and when the same
shall become due and payable, whether at stated maturity, by acceleration or
otherwise, and as if such payment were made by the Borrowers.
Section 11.2. Guaranty Unconditional. The obligations of each
Guarantor as a guarantor or joint and several obligor under the Loan Documents,
including this Section 11, shall
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be unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of any Borrower or of any other
Guarantor under this Agreement or any other Loan Document or by
operation of law or otherwise;
(b) any modification or amendment of or supplement to
this Agreement or any other Loan Document;
(c) any change in the corporate existence, structure or
ownership of, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting, the Borrowers, any other Guarantor, or
any of their respective assets, or any resulting release or discharge
of any obligation of any Borrower or of any other Guarantor contained
in any Loan Document;
(d) the existence of any claim, set-off or other rights which
the Guarantor may have at any time against the Agent, any Lender or any
other Person, whether or not arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim or
demand or any exercise of, or failure to exercise, any rights or
remedies against any Borrower, any other Guarantor or any other Person
or Property;
(f) any application of any sums by whomsoever paid or
howsoever realized to any obligation of any Borrower, regardless of
what obligations of the Borrowers remain unpaid;
(g) any invalidity or unenforceability relating to or against
any Borrower or any other Guarantor for any reason of this Agreement or
of any other Loan Document or any provision of applicable law or
regulation purporting to prohibit the payment by the Borrowers or any
other Guarantor of the principal of or interest on any Note or any
other amount payable by them under the Loan Documents; or
(h) any other act or omission to act or delay of any kind by
the Agent, any Lender or any other Person or any other circumstance
whatsoever that might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of the obligations of the
Guarantors under the Loan Documents.
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Section 11.3. Discharge Only Upon Payment in Full; Reinstatement in
Certain Circumstances. Each Guarantor's obligations under this Section 11 shall
remain in full force and effect until the Commitments are terminated and the
principal of and interest on the Notes and all other amounts payable by the
Borrowers under this Agreement and all other Loan Documents shall have been paid
in full. If at any time any payment of the principal of or interest on any Note
or any other amount payable by the Borrowers under the Loan Documents is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of any Borrower or of any Guarantor, or otherwise,
each Guarantor's obligations under this Section 11 with respect to such payment
shall be reinstated at such time as though such payment had become due but had
not been made at such time.
Section 11.4. Waivers.
(a) General. Each Guarantor irrevocably waives acceptance hereof,
presentment, demand, protest and any notice not provided for herein, as well as
any requirement that at any time any action be taken by the Agent, any Lender or
any other Person against the Borrowers, another Guarantor or any other Person.
(b) Subrogation and Contribution. Each Guarantor hereby agrees not to
exercise or enforce any right of exoneration, contribution, reimbursement,
recourse or subrogation available to such Guarantor against any Person liable
for payment of the Obligations, or as to any security therefor, unless and until
the full amount owing on the Obligations has been paid and the Commitments have
terminated; and the payment by such Guarantor of any amount pursuant to any of
the Loan Documents on account of credit extended to any other Borrower shall not
in any way entitle such Guarantor to any right, title or interest (whether by
way of subrogation or otherwise) in and to any of the Obligations or any
proceeds thereof or any security therefor unless and until the full amount owing
on the Obligations has been paid and the Commitments have terminated.
Section 11.5. Limit on Recovery. Notwithstanding any other provision
hereof or of the Revolving Credit Notes, the right of recovery against each
Guarantor under this Section 11 or against a Borrower on the Notes issued by it
shall not (to the extent required by or as may be necessary or desirable to
ensure the enforceability against such Guarantor of its obligations hereunder or
thereunder in accordance with the laws of the jurisdiction of its incorporation
or where it carries on business) exceed (x) the amount which would render such
Guarantor's obligations under this Section 11 and the Notes void or voidable
under applicable law, including without limitation fraudulent conveyance law
minus (y) $1.00.
Section 11.6. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Borrowers under this Agreement or any other
Loan Document is stayed
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upon the insolvency, bankruptcy or reorganization of any of the Borrowers, all
such amounts otherwise subject to acceleration under the terms of this Agreement
or the other Loan Documents shall nonetheless be payable jointly and severally
by the Guarantors hereunder forthwith on demand by the Agent made at the request
of the Required Lenders.
Section 11.7. Benefit to Guarantors. All of the Guarantors are
engaged in related businesses and integrated to such an extent that the
financial strength and flexibility of each Guarantor has a direct impact on the
success of each other Guarantor. Each Guarantor will derive substantial direct
and indirect benefit from the extension of credit hereunder.
Section 11.8. Guarantor Covenants. Each Guarantor shall take such
action as the Parent and the Borrowers are required by this Agreement to cause
such Guarantor to take, and shall refrain from taking such action as the Parent
and the Borrowers are required by this Agreement to prohibit such Guarantor from
taking.
SECTION 12. MISCELLANEOUS.
Section 12.1. Holidays. If any payment of principal or interest on
any Note or any fee hereunder shall fall due on a day which is not a Business
Day, principal together with interest at the rate the Note bears for the period
prior to maturity or any fee at the rate such fee accrues shall continue to
accrue from the stated due date thereof to and including the next succeeding
Business Day, on which the same is payable.
Section 12.2. No Waiver, Cumulative Remedies. No delay or failure on
the part of the Agent or any Lender or on the part of any other holder of any
Note in the exercise of any power or right shall operate as a waiver thereof,
nor as an acquiescence in any default, nor shall any single or partial exercise
of any power or right preclude any other or further exercise thereof, or the
exercise of any other power or right, and the rights and remedies hereunder of
the Agent, each Lender and each other holder of any Note are cumulative to, and
not exclusive of, any rights or remedies which any of them would otherwise have.
Section 12.3. Waivers, Modifications and Amendments. Any provision
hereof or of the Notes or the Guaranties may be amended, modified, waived or
released and any Default or Event of Default and its consequences may be
rescinded and annulled upon the written consent of the Required Lenders;
provided, however, that without the consent of all Lenders no such amendment,
modification or waiver shall increase the amount or extend the terms of any
Lender's Commitment or increase the L/C Commitment or reduce the interest rate
applicable to or extend the maturity (including any scheduled installment) of
its Notes or reduce the amount of the principal or interest or fees to which
such Lender is entitled hereunder or release any substantial
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(in value) part of the collateral security afforded by the Collateral Documents
(except in connection with a sale or other disposition required to be effected
by the provisions hereof or of the Collateral Documents) or release any
Guarantor or change this Section or change the definition of "Required Lenders"
or change the number of Lenders required to take any action hereunder or under
the Guaranties. No amendment, modification or waiver of the Agent's protective
provisions shall be effective without the prior written consent of the Agent.
Section 12.4. Costs and Expenses. The Borrowers agree to pay on
demand the costs and expenses of the Agent in connection with the negotiation,
preparation, execution and delivery of the Loan Documents and the other
instruments and documents to be delivered hereunder or thereunder or in
connection with the transactions contemplated hereby or thereby or in connection
with any consents hereunder or waivers or amendments hereto or thereto,
including the fees and expenses of Messrs. Chapman and Cutler, counsel for the
Agent, with respect to all of the foregoing (whether or not the transactions
contemplated hereby are consummated), and all costs and expenses (including
attorneys' fees), if any, incurred by the Agent, the Lenders or any other
holders of a Note in connection with a default under or the enforcement of the
Loan Documents or any other instrument or document to be delivered hereunder or
thereunder. Each Borrower agrees to pay on demand all costs and expenses for
which such Borrower is liable in accordance with the preceding sentence in
connection with Letters of Credit issued for such Borrower's account. The
Borrowers agree to indemnify and save the Lenders and the Agent harmless from
any and all liabilities, losses, costs and expenses (collectively, "indemnified
liabilities") incurred by the Lenders or the Agent in connection with any
action, suit or proceeding brought against the Agent or any Lender by any Person
(but excluding attorneys' fees for litigation solely between the Lenders to
which neither the Parent nor any Borrower are a party) which arises out of the
transactions contemplated or financed hereby or out of any action or inaction by
the Agent or any Lender hereunder or thereunder, except for such thereof as is
caused by the gross negligence or willful misconduct of the party seeking to be
indemnified. Each Borrower agrees to similarly indemnify and save the Lenders
and the Agent harmless from any and all indemnified liabilities as relate to
Letters of Credit issued for its account. The provisions of this Section and the
protective provisions of Section 2 hereof shall survive payment of the Notes.
Section 12.5. Documentary Taxes. The Borrowers agree to pay on
demand any documentary, stamp or similar taxes payable in respect of this
Agreement, the Notes, the Applications, or any Guaranty including interest and
penalties, in the event any such taxes are assessed, irrespective of when such
assessment is made and whether or not any credit is then in use or available
hereunder.
Section 12.6. Survival of Representations. All representations and
warranties made herein or in any other Loan Documents or in certificates given
pursuant hereto or thereto shall
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survive the execution and delivery of this Agreement and shall continue in full
force and effect with respect to the date as of which they were made as long as
any credit is in use or available hereunder.
Section 12.7. Survival of Indemnities. All indemnities and other
provisions relative to reimbursement to the Lenders of amounts sufficient to
protect the yield of the Lenders with respect to the Loans and Letters of
Credit, including, but not limited to, Sections 1.3, 2.7, 2.8 and 2.9 hereof,
shall survive the termination of this Agreement and the payment of the Notes.
Section 12.8. Notices. Except as otherwise specified herein, all
notices hereunder shall be in writing (including cable or telecopy) and shall be
given to the relevant party at its address or telecopier number set forth below,
in the case of the Parent or the Borrowers, or on the appropriate signature page
hereof, in the case of the Lenders and the Agent, or such other address or
telecopier number as such party may hereafter specify by notice to the Agent and
any Borrower given by United States certified or registered mail or by telecopy.
Notices hereunder to the Parent or any Borrower shall be addressed to the name
of such Person in care of Morton at:
1021 West Birchwood
Morton, Illinois 61550-0429
Attention: Chief Financial Officer
Telephone: (309)266-7176
Telecopy: (309)263-1841
Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section and a confirmation of such telecopy has been received
by the sender, (ii) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the addresses specified in this Section; provided that any notice given pursuant
to Section 1 or Section 2 hereof shall be effective only upon receipt.
Section 12.9. Headings. Section headings used in this
Agreement are for convenience of reference only and are not a part of this
Agreement for any other purpose.
Section 12.10. Severability of Provisions. Any provision of this
Agreement which is unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. All rights, remedies
and powers provided in this Agreement and the Notes may be exercised only to the
extent that the exercise
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thereof does not violate any applicable mandatory provisions of law, and all the
provisions of this Agreement and the Notes are intended to be subject to all
applicable mandatory provisions of law which may be controlling and to be
limited to the extent necessary so that they will not render this Agreement or
the Notes invalid or unenforceable.
Section 12.11. Counterparts. This Agreement may be executed in any
number of counterparts, and by different parties hereto on separate counterpart
signature pages, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.
Section 12.12. Binding Nature, Governing Law, Etc. This Agreement
shall be binding upon the Parent, the Borrowers and their respective successors
and assigns, and shall inure to the benefit of the Agent and the Lenders and the
benefit of their successors and assigns, including any subsequent holder of an
interest in the Notes. This Agreement and the rights and duties of the parties
hereto shall be governed by, and construed in accordance with, the internal laws
of the State of Illinois without regard to principles of conflicts of laws.
The Borrowers may not assign their rights hereunder without the written consent
of the Lenders.
Section 12.13. Entire Understanding. This Agreement, together with
the Notes, constitute the entire understanding of the parties with respect to
the subject matter hereof and any prior agreements, whether written or oral,
with respect thereto are superseded hereby except for prior understandings
related to fees payable to the Agent upon the initial closing of the
transactions contemplated hereby.
Section 12.14. Participations. Any Lender may, upon the prior written
consent of any Borrower (which consent shall not be unreasonably withheld),
grant participations in its extensions of credit hereunder to any other bank or
other lending institution (a "Participant") provided that (i) no Participant
shall thereby acquire any direct rights under this Agreement, (ii) no Lender
shall agree with a Participant not to exercise any of such Lender's rights
hereunder without the consent of such Participant except for rights which under
the terms hereof may only be exercised by all Lenders and (iii) no sale of a
participation in extensions of credit shall in any manner relieve the selling
Lender of its obligations hereunder.
Section 12.15. Assignment Agreements. Each Lender may, from time to
time upon at least five (5) Business Days' prior written notice to the Agent,
assign to other commercial lenders part of its rights and obligations under this
Agreement (including without limitation the indebtedness evidenced by the Notes
then owned by such assigning Lender, together with an equivalent proportion of
its Commitments to make Loans hereunder) pursuant to written agreements executed
by such assigning Lender, such assignee lender or lenders, the Parent and the
Agent, which agreements shall specify in each instance the portion of the
indebtedness
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evidenced by the Notes which is to be assigned to each such assignee lender and
the portion of the Commitments of the assigning Lender to be assumed by it (the
"Assignment Agreements"); provided, however, that (i) each such assignment shall
be of a constant, and not a varying, percentage of the assigning Lender's rights
and obligations under this Agreement and the assignment shall cover the same
percentage of such Lender's Commitments, Loans and Notes; (ii) unless the Agent
otherwise consents, the aggregate amount of the Commitments, Loans and Notes of
the assigning Lender being assigned pursuant to each such assignment (determined
as of the effective date of the relevant Assignment Agreement) shall in no event
be less than $5,000,000 and shall be an integral multiple of $1,000,000; (iii)
the Agent, each Lender originally party hereto and Morton must each consent
(such consent to not be unreasonably withheld by any such party), to each such
assignment to a party which was not an original signatory of this Agreement
(provided no such consent is required from Morton (i) for any assignment to any
Lender party hereto, whether an original signatory of this Agreement or a party
hereto by reason of an Assignment Agreement, (ii) for any assignment to any
Affiliate of any such Lender and (iii) for any such assignment made during the
continuance of any Event of Default); and (iv) the assigning Lender must pay to
the Agent a processing and recordation fee of $2,500 and any out-of-pocket
attorneys' fees and expenses incurred by the Agent in connection with such
Assignment Agreement. Upon the execution of each Assignment Agreement by the
assigning Lender thereunder, the assignee lender thereunder, the Parent and the
Borrowers and the Agent and payment to such assigning Lender by such assignee
lender of the purchase price for the portion of the indebtedness of the
Borrowers being acquired by it, (i) such assignee lender shall thereupon become
a "Lender" for all purposes of this Agreement with Commitments in the amounts
set forth in such Assignment Agreement and with all the rights, powers and
obligations afforded a Lender hereunder, (ii) such assigning Lender shall have
no further liability for funding the portion of its Commitments assumed by such
other Lender and (iii) the address for notices to such assignee Lender shall be
as specified in the Assignment Agreement executed by it. Concurrently with the
execution and delivery of such Assignment Agreement, the Borrowers shall execute
and deliver Notes to the assignee Lender in the respective amounts of its
Commitments under the Revolving Credit and Term Credit and new Notes to the
assigning Lender in the respective amounts of its Commitments under the
Revolving Credit and Term Credit after giving effect to the reduction occasioned
by such assignment, all such Notes to constitute "Notes" for all purposes of
this Agreement.
Section 12.16. Confidentiality. The Agent and each Lender shall hold
in confidence any material nonpublic information delivered or made available to
them by the Parent or any Subsidiary. The foregoing to the contrary
notwithstanding, nothing herein shall prevent any Lender from disclosing any
information delivered or made available to it by the Parent or any Subsidiary
(i) to any other Lender, (ii) to any other Person if reasonably incidental to
the administration of the credit contemplated hereby, (iii) upon the order of
any court or
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administrative agency, (iv) upon the request or demand of any regulatory agency
or authority, (v) which has been publicly disclosed other than as a result of a
disclosure by the Agent or any Lender which is not permitted by this Agreement,
(vi) in connection with any litigation to which the Agent, any Lender, or any of
their respective Affiliates may be a party, along with the Parent, any
Subsidiary or any of their respective Affiliates, (vii) to the extent reasonably
required in connection with the exercise of any right or remedy under this
Agreement, the other L/C Documents or otherwise, (viii) to such Lender's legal
counsel and financial consultants and independent auditors, and (ix) to any
actual or proposed participant or assignee of all or part of its rights under
the credit contemplated hereby provided such participant or assignee agrees in
writing to be bound by the duty of confidentiality under this Section to the
same extent as if it were a Lender hereunder.
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Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall constitute a contract between us for the uses and purposes
hereinabove set forth.
Dated as of this 20th day of January, 1998.
MORTON INDUSTRIAL GROUP, INC.
By
Its:__________________________________
MORTON METALCRAFT CO.
By
Its:__________________________________
MORTON METALCRAFT CO. OF NORTH CAROLINA
By
Its:__________________________________
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Accepted and Agreed to at Chicago, Illinois as of the day and year last
above written.
Each of the Lenders hereby agrees with each other Lender that if it
should receive or obtain any payment (whether by voluntary payment, by
realization upon collateral, by the exercise of rights of setoff or banker's
lien, by counterclaim or cross action, or by the enforcement of any rights under
this Agreement, the Notes, the Guaranties or otherwise) in respect of the
obligations of the any Borrower under this Agreement, the Notes and the
Guaranties in a greater amount than such Lender would have received had such
payment been made to the Agent and been distributed among the Lenders as
contemplated by Section 2.4 hereof then in that event the Lender receiving such
disproportionate payment shall purchase for cash without recourse from the other
Lenders an interest in the obligations of such Borrower to such Lenders arising
under this Agreement the Notes, and the Guaranties in such amount as shall
result in a distribution of such payment as contemplated by Section 2.4 hereof.
In the event any payment made to a Lender and shared with the other Lenders
pursuant to the provisions hereof is ever recovered from such Lender, the
Lenders receiving a portion of such payment hereunder shall restore the same to
the payor Lender, but without interest.
Amount and Percentage of Commitments:
Revolving Credit Commitment: HARRIS TRUST AND SAVINGS BANK
$14,000,000 (40%)
Term Credit Commitment: By_____________________________
$6,000,000 (40%) Its Vice President
111 West Monroe Street
Chicago, Illinois 60603
Attention: Agency Services
Telephone: (312) 461-2359
Telecopy: (312) 765-1655
LIBOR Funding Office:
Nassau Branch
c/o 111 West Monroe Street
Chicago, Illinois 60690
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Amount and Percentage of Commitments:
Revolving Credit Commitment: FIRSTAR BANK MILWAUKEE, N.A.
$7,000,000 (20%)
Term Credit Commitment: By______________________________
$3,000,000 (20%) Its________________________
_____________________________
_____________________________
_____________________________
_____________________________
Telephone: _________________
Telecopy: __________________
LIBOR Funding Office
_____________________________
_____________________________
_____________________________
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Amount and Percentage of Commitments:
Revolving Credit Commitment: NATIONAL CITY BANK
$7,000,000 (20%)
Term Credit Commitment: By______________________________
$3,000,000 (20%) Its________________________
1900 East Ninth Street
Locator #2094
Cleveland, Ohio 44114-3484
Attention: Margaret Moek
Telephone: (216) 575-2577
Telecopy: (216) 575-2162
LIBOR Funding Office
1900 East Ninth Street
Locator #2094
Cleveland, Ohio 44114-3484
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Amount and Percentage of Commitments:
Revolving Credit Commitment: THE NORTHERN TRUST COMPANY
$7,000,000 (20%)
Term Credit Commitment: By______________________________
$3,000,000 (20%) Its________________________
________________________________
________________________________
________________________________
________________________________
Telephone: ___________________
Telecopy: ____________________
LIBOR Funding Office
_____________________________
_____________________________
_____________________________
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EXHIBIT 10.2
SECURITY AGREEMENT
This Security Agreement (the "Agreement") is dated as of January____, 1998,
by and among the parties executing this Agreement under the heading "Debtors"
(such parties, along with any parties who execute and deliver to the Agent an
agreement in the form attached hereto as Exhibit D, being hereinafter referred
to collectively as the "Debtors" and individually as a "Debtor"), and HARRIS
TRUST AND SAVINGS BANK, an Illinois banking corporation ("Harris"), with its
mailing address at 111 West Monroe Street, Chicago, Illinois 60603, acting as
agent hereunder for the Lenders hereinafter identified and defined (Harris
acting as such agent and any successor or successors to Harris acting in such
capacity being hereinafter referred to as the "Agent");
PRELIMINARY STATEMENTS
A. Morton Industrial Group, Inc., a Georgia corporation (the
"Company"), and certain Subsidiaries of the Company, Harris, individually and as
agent, and certain Lenders have entered into a Credit Agreement dated as of even
date herewith (such Credit Agreement, as the same may be amended or modified
from time to time, including amendments and restatements thereof in its
entirety, being hereinafter referred to as the "Credit Agreement"), pursuant to
which Harris and other Lenders from time to time party to the Credit Agreement
(Harris and the other Lenders which are now or from time to time hereafter
become party to the Credit Agreement, being hereinafter referred to collectively
as the "Lenders" and individually as a "Lender") have agreed, subject to certain
terms and conditions, to extend credit and make certain other financial
accommodations available to the Borrowers identified therein.
B. As a condition precedent to extending credit or otherwise making
financial accommodations available to the Borrowers under the Credit Agreement,
the Lenders have required, among other things, that each Debtor grant to the
Agent for the benefit of the Lenders a lien on and security interest in certain
personal property of such Debtor pursuant to this Agreement.
C. The Company owns, directly or indirectly, all or substantially all
of the equity interests in each Debtor (other than the Company) and the Company
provides each Debtor with financial, management, administrative, and technical
support which enables such Debtor to conduct its business in an orderly and
efficient manner in the ordinary course.
D. Each Debtor will benefit, directly or indirectly, from credit and
other financial accommodations extended by the Lenders to the Borrowers.
<PAGE> 2
NOW, THEREFORE, for and in consideration of the execution and delivery
by the Lenders of the Credit Agreement, and other good and valuable
consideration, receipt whereof is hereby acknowledged, the parties hereto hereby
agree as follows:
Section 1. Terms Defined in Credit Agreement. All capitalized terms
used herein without definition shall have the same meanings herein as such terms
have in the Credit Agreement. The term "Debtor" and "Debtors" as used herein
shall mean and include the Debtors collectively and also each individually, with
all grants, representations, warranties and covenants of and by the Debtors, or
any of them, herein contained to constitute joint and several grants,
representations, warranties and covenants of and by the Debtors; provided,
however, that unless the context in which the same is used shall otherwise
require, any grant, representation, warranty or covenant contained herein
related to the Collateral shall be made by each Debtor only with respect to the
Collateral owned by it or represented by such Debtor as owned by it.
Section 2. Grant of Security Interest in the Collateral; Obligations
Secured. (a) Each Debtor hereby grants to the Agent for the benefit of the
Lenders a lien on and security interest in, and right of set-off against, and
acknowledges and agrees that the Agent has and shall continue to have for the
benefit of the Lenders a continuing lien on and security interest in, and right
of set-off against, any and all right, title and interest of each Debtor,
whether now owned or existing or hereafter created, acquired or arising, in and
to the following:
(i) Receivables. Receivables, whether now owned or existing or
hereafter created, acquired or arising, and however evidenced or
acquired, or in which such Debtor now has or hereafter acquires any
rights (the term "Receivables" means and includes all accounts,
accounts receivable, contract rights, instruments, notes, drafts,
acceptances, documents, chattel paper, any right of such Debtor to
payment for goods sold or leased or for services rendered, whether
arising out of the sale of Inventory (as hereinafter defined) or
otherwise and whether or not earned by performance, and all other forms
of obligations owing to such Debtor, and all of such Debtor's rights to
any merchandise and other goods (including without limitation any
returned or repossessed goods and the right of stoppage in transit)
which is represented by, arises from or is related to any of the
foregoing);
(ii) General Intangibles. All general intangibles, whether now owned
or existing or hereafter created, acquired or arising, or in which such
Debtor now has or hereafter acquires any rights, including, without
limitation all patents, patent applications, patent licenses,
trademarks, trademark registrations, trademark licenses, trade styles,
trade names, copyrights, copyright registrations, copyright licenses
and other licenses and similar intangibles and all customer, client and
supplier lists (in whatever form maintained) and all rights in leases
and other agreements relating to real or personal property, all
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causes of action and tax refunds of every kind and nature, all
privileges, franchises, immunities, licenses, permits and similar
intangibles, all rights to receive payments in connection with the
termination of any pension plan or employee stock ownership plan or
trust established for the benefit of employees of such Debtor and all
other personal property (including things in action) not otherwise
covered by this Agreement;
(iii) Inventory. Inventory, whether now owned or existing or
hereafter created, acquired or arising, or in which such Debtor now has
or hereafter acquires any rights and all documents of title at any time
evidencing or representing any part thereof (the term "Inventory" means
and includes all goods which are held for sale or lease or are to be
furnished under contracts of service or consumed in such Debtor's
business, and all goods which are raw materials, work-in-process,
finished goods, materials and supplies of every kind and nature, in
each case used or usable in connection with the acquisition,
manufacture, processing, supply, servicing, storing, packing, shipping,
advertising, selling, leasing or furnishing of such goods, and any
constituents or ingredients thereof, and all goods which are returned
or repossessed goods);
(iv) Equipment. Equipment, whether now owned or existing or
hereafter created, acquired or arising, or in which such Debtor now has
or hereafter acquires any rights (the term "Equipment" means and
includes all equipment, machinery, tools, trade fixtures, furniture,
furnishings, office equipment and vehicles (including vehicles subject
to a certificate of title law) and all other goods, in each case now or
hereafter used or usable in connection with such Debtor's business,
together with all parts, accessories and attachments relating to any of
the foregoing);
(v) Investment Property. All Investment Property, whether now owned
or existing or hereafter created, acquired or arising, or in which such
Debtor now has or hereafter acquires any rights (the term "Investment
Property" means and includes all investment property and any other
securities (whether certificated or uncertificated), security
entitlements, securities accounts, commodity contracts and commodity
accounts, including all substitutions and additions thereto, all
dividends, distributions and sums distributable or payable from, upon,
or in respect of such property, and all rights and privileges incident
to such property);
(vi) Records and Cabinets. Supporting evidence and documents
relating to any of the above-described property, including without
limitation, computer programs, disks, tapes and related electronic data
processing media, rights of such Debtor to retrieve the same from third
parties, written applications, credit information, account cards,
payment records, correspondence, delivery and installation
certificates, invoice copies, delivery
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receipts, notes and other evidences of indebtedness, insurance
certificates and the like, together with all books of account,
ledgers and cabinets in which the same are reflected or maintained,
all whether now existing or hereafter arising;
(vii) Deposits and Property in Possession. All deposit accounts
(whether general, special or otherwise) maintained with the Agent or
any of the Lenders and all sums now or hereafter on deposit therein or
payable thereon, and any and all other property or interests in
property which now is or may from time to time hereafter come into the
possession, custody or control of the Agent or any of the Lenders, or
any agent or affiliate of the Agent or any of the Lenders, in any way
and for any purpose (whether for safekeeping, custody, pledge,
transmission, collection or otherwise);
(viii) Accessions and Additions. All accessions and additions to and
substitutions and replacements of any of the foregoing, whether now
existing or hereafter arising; and
(ix) Proceeds and Products. All proceeds and products of the
foregoing and all insurance of the foregoing and proceeds thereof,
whether now existing or hereafter arising;
all of the foregoing being herein sometimes referred to as the "Collateral."
(b) This Agreement is made and given to secure, and shall secure, the
payment and performance of (i) (x) any and all indebtedness, obligations and
liabilities of any of the Borrowers to the Agent, the Lenders, or any of them
individually, evidenced by or otherwise arising out of or relating to the
Credit Agreement or any promissory note of any of the Borrowers issued at any
time under the Credit Agreement (including all notes issued in extension or
renewal thereof or in substitution or replacement therefor), and (y) any
liability of any of the Debtors, or any of them individually, arising out of
the Credit Agreement, as well as for any and all other indebtedness,
obligations and liabilities of the Debtors, or any of them individually, to the
Agent, the Lenders, or any of them individually, evidenced by or otherwise
arising out of or relating to this Agreement or any other Loan Document, in
each case, whether now existing or hereafter arising (and whether arising
before or after the filing of a petition in bankruptcy), due or to become due,
direct or indirect, absolute or contingent, and howsoever evidenced, held or
acquired, and (ii) any and all expenses and charges, legal or otherwise,
suffered or incurred by the Agent, the Lenders, or any of them individually, in
collecting or enforcing any of such indebtedness, obligations or liabilities or
in realizing on or protecting or preserving any security therefor, including,
without limitation, the lien and security interest granted hereby (all of the
foregoing being hereinafter referred to as the "Obligations"). Notwithstanding
anything in this Agreement to the contrary, the right of
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recovery against any Debtor (other than the Borrowers to which this limitation
shall not apply) under this Agreement shall not exceed $1 less than the amount
which would render such Debtor's obligations under this Agreement void or
voidable under applicable law, including fraudulent conveyance law.
Section 3. Covenants, Agreements, Representations and Warranties. Each
Debtor hereby covenants and agrees with, and represents and warrants to the
Agent and the Lenders that:
(a) Such Debtor is duly organized and existing under the laws of the
state of its organization, is the sole and lawful owner of its
Collateral and has full right, power and authority to enter into this
Agreement and to perform each and all of the matters and things herein
provided for; and the execution and delivery of this Agreement, and the
observance and performance of any of the matters and things herein set
forth, will not violate or contravene any provision of law or of the
articles of incorporation, by-laws or operating agreement of such
Debtor, as applicable, or of any indenture, loan agreement or other
agreement of or affecting such Debtor or any of its properties, or
result in the creation or imposition of any liens or encumbrance on any
property of such Debtor.
(b) The Collateral is in each Debtor's possession at the locations
listed under Column_1 on Schedule_A attached hereto. Each Debtor's
respective chief executive office and chief place of business is listed
opposite its name on Schedule_A attached hereto and the Debtors have no
other places of business other than those listed under Column_4 on
Schedule_A attached hereto. No Debtor will remove its Collateral from
the locations specified in the first sentence of this Section_3(b)
without prior written notice to the Agent, unless such Collateral will
be moved to a location outside the United States, in which event, the
Agent's prior written consent shall be required, which consent shall
not be unreasonably withheld (provided that if for any reason
Collateral is at any time kept or located at locations other than its
present location or locations hereafter consented to by the Agent shall
nevertheless have and retain a security interest therein).
(c) The Collateral and every part thereof is and will be free and
clear of all security interests, liens (including, without limitation,
mechanic's, laborer's and statutory liens), attachments, levies and
encumbrances of every kind, nature and description and whether
voluntary or involuntary except for the security interest of the Agent
therein and as otherwise provided in the Credit Agreement, and each
Debtor will warrant and defend its Collateral against any claims and
demands of all persons at any time claiming the same or any interest
therein adverse to the Agent or any Lender.
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(d) Each Debtor will pay promptly when due all taxes, assessments,
and governmental charges and levies upon or against its Collateral in
each case before the same become delinquent and before penalties accrue
thereon, unless and to the extent that the same are being contested in
good faith by appropriate proceedings.
(e) Each Debtor at its own cost and expense will maintain, keep and
preserve its Collateral in good repair and condition and will not waste
or destroy such Collateral or any part thereof and will not be
negligent in the care and use of any Collateral and will not use or
permit to be used any Collateral in violation of any statute, ordinance
or other governmental requirement. Each Debtor will perform its
obligations under any contract or other agreement constituting part of
the Collateral, it being understood and agreed that the Agent and the
Lenders have no responsibility to perform such obligations.
(f) Except for liens expressly permitted by the Credit Agreement,
and subject to Sections_5(a), 7(b) and 7(c) hereof, no Debtor will,
without the Agent's prior written consent, sell, assign, mortgage,
lease or otherwise dispose of its Collateral or any interest therein.
(g) Each Debtor will insure its Collateral which is insurable
against such risks and hazards as other companies similarly situated
insure against, and including in any event loss or damage by fire,
theft, burglary, pilferage, loss in transit and such other hazards as
the Agent may specify, in amounts and under policies containing loss
payable clauses to the Agent as its interest may appear (and, if the
Agent requests, naming the Agent and the Lenders as additional insureds
therein) by insurers acceptable to the Agent. In case of any material
loss, damage to or destruction of its Collateral or any part thereof,
the appropriate Debtor shall promptly give written notice thereof to
the Agent generally describing the nature and extent of such damage or
destruction. In the event any Debtor shall receive any proceeds of such
insurance, such Debtor will immediately pay over such proceeds to the
Agent. Net insurance proceeds received by the Agent under the
provisions hereof or under any policy or policies of insurance covering
the Collateral or any part thereof shall be applied to the reduction of
the Obligations (whether or not then due); provided, however, that the
Agent may in its sole discretion release any or all such insurance
proceeds to the appropriate Debtor. All insurance proceeds shall be
subject to the lien and security interest of the Agent hereunder.
UNLESS THE DEBTORS PROVIDE THE AGENT WITH EVIDENCE OF THE INSURANCE
COVERAGE REQUIRED BY THIS AGREEMENT, THE AGENT MAY PURCHASE INSURANCE
AT THE DEBTORS' EXPENSE TO PROTECT THE AGENT'S INTERESTS IN THE
COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT ANY DEBTOR'S
INTERESTS IN THE COLLATERAL.
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THE COVERAGE PURCHASED BY THE AGENT MAY NOT PAY ANY CLAIMS THAT ANY
DEBTOR MAKES OR ANY CLAIM THAT IS MADE AGAINST SUCH DEBTOR IN
CONNECTION WITH THE COLLATERAL. THE DEBTORS MAY LATER CANCEL ANY SUCH
INSURANCE PURCHASED BY THE AGENT, BUT ONLY AFTER PROVIDING THE AGENT
WITH EVIDENCE THAT THE DEBTORS HAVE OBTAINED INSURANCE AS REQUIRED BY
THIS AGREEMENT. IF THE AGENT PURCHASES INSURANCE FOR THE COLLATERAL,
THE DEBTORS WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE,
INCLUDING INTEREST AND ANY OTHER CHARGES THAT THE AGENT MAY IMPOSE IN
CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE
DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF
THE INSURANCE MAY BE ADDED TO THE OBLIGATIONS SECURED HEREBY. THE COSTS
OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE THE DEBTORS MAY
BE ABLE TO OBTAIN ON THEIR OWN.
(h) Each Debtor will at all times allow the Agent, any Lender or
their respective representatives free access to and right of inspection
of the Collateral. Each Debtor will, to the extent it is within its
power so to do, authorize and instruct all bailees and other parties at
any time holding, storing, shipping or transferring all or any part of
such Debtor's Collateral to permit the Agent, any Lender or their
respective or its designees to examine and inspect any of such
Collateral then in such party's possession and to verify from such
party's own books and records any information concerning such
Collateral or any part thereof which the Agent or such Lender may seek
to verify. As to any premises not owned by any of the Debtors wherein
any of the Collateral is located, if any, the appropriate Debtor shall,
unless the Agent requests otherwise, cause each Person having any
right, title or interest in, or lien on, any of such premises to enter
into an agreement (any such agreement to contain a legal description of
such premises) whereby such party disclaims any right, title and
interest in, and lien on, the Collateral, allowing the removal of such
Collateral by the Agent or its designee and otherwise in form and
substance acceptable to the Agent.
(i) Each Debtor agrees from time to time to deliver to the Agent and
any Lender such evidence of the existence and identity of such Debtor's
Collateral and of its availability as collateral security pursuant
hereto (including, without limitation, schedules describing all
Receivables created or acquired by such Debtor, copies of customer
invoices or the equivalent and original shipping or delivery receipts
for all merchandise and other goods sold or leased or services
rendered, together with such Debtor's warranty of the genuineness
thereof, and reports stating the book value of Inventory and Equipment
by major category and location), as the Agent or such Lender may
request. Each Debtor will promptly notify the Agent and each Lender of
any Collateral which such Debtor has
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determined to have been rendered obsolete, stating the prior book
value of such Collateral, its type and location.
(j) Each Debtor will comply with the terms and conditions of any
leases, easements, right-of-way agreements or other agreements covering
the premises wherein its Collateral is located and any orders,
ordinances, laws or statutes of any city, state or other governmental
entity, department or agency having jurisdiction with respect to such
premises or the conduct of business thereon.
(k) On failure of any Debtor to perform any of the covenants and
agreements herein contained, the Agent may, at its option, perform the
same and in so doing may expend such sums as the Agent may deem
advisable in the performance thereof, including without limitation the
payment of any insurance premiums, the payment of any taxes, liens and
encumbrances, expenditures made in defending against any adverse claim
and all other expenditures which the Agent may be compelled to make by
operation of law or which the Agent may make by agreement or otherwise
for the protection of the security hereof. All such sums and amounts so
expended shall be repayable by the Debtors immediately without notice
or demand, shall constitute so much additional Obligations hereby
secured and shall bear interest from the date said amounts are expended
at the rate per annum (computed on the basis of a 365-day or 366 day
year, as the case may be, for the actual number of days elapsed)
determined by adding 2% to the Base Rate (such rate per annum as so
determined being hereinafter referred to as the "Default Rate"). No
such performance of any covenant or agreement by the Agent on behalf of
any Debtor and no such advancement or expenditure therefor, shall
relieve any Debtor of any default under the terms of this Agreement or
in any way obligate the Agent or any Lender to take any further or
future action with respect thereto. The Agent, in making any payment
hereby authorized, may do so according to any bill, statement or
estimate procured from the appropriate public office or holder of the
claim to be discharged without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien or title or claim. The Agent, in performing any
act hereunder, shall be the sole judge of whether the relevant Debtor
is required to perform same under the terms of this Agreement. The
Agent is authorized to charge any depository account of any Debtor
maintained with the Agent for the amount of such sums and amounts so
expended.
(l) Each Debtor warrants that such Debtor has not transacted
business, and does not transact business, under any trade names except
as set forth on Schedule_B. Each Debtor agrees that it will not change
its name or transact business under any trade names without first
giving the Agent 30 days' prior written notice of its intent to do so.
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<PAGE> 9
(m) Each Debtor agrees to execute and deliver to the Agent such
further agreements and assignments or other instruments and to do all
such other things as the Agent may deem necessary or appropriate to
assure the Agent its security interest hereunder, including such
financing statement or statements or amendments thereof or supplements
thereto or other instruments as the Agent or the Required Lenders may
from time to time require in order to comply with the Uniform
Commercial Code as enacted in the State of Illinois and any successor
statute(s) thereto (the "Code"). Each Debtor hereby agrees that a
carbon, photographic or other reproduction of this Agreement or any
such financing statement is sufficient for filing as a financing
statement by the Agent without notice thereof to any Debtor wherever
the Agent in its sole discretion desires to file the same. In the event
for any reason the law of any other jurisdiction than Illinois becomes
or is applicable to the Collateral or any part thereof, or to any of
the Obligations, each Debtor agrees to execute and deliver all such
instruments and to do all such other things as the Agent in its sole
discretion deems necessary or appropriate to preserve, protect and
enforce the security interests of the Agent under the law of such other
jurisdiction to at least the same extent as such security interests
would be protected under the Code. If any Collateral is in the
possession or control of any Debtor's agents or processors and unless
the Agent requests otherwise, such Debtor agrees to notify such agents
or processors in writing of the Agent's security interests therein, and
upon the Agent's request instruct them to hold all such Collateral for
the Agent's account and subject to the Agent's instructions. The
Debtors agree to mark their books and records to reflect the security
interests of the Agent in the Collateral.
Section 4. Special Provisions Re: Receivables. (a)_As of the time any
Receivable becomes subject to the security interest provided for hereby and at
all times thereafter, each Debtor shall be deemed to have warranted as to each
and all of such Receivables that all warranties of such Debtor set forth in this
Agreement are true and correct with respect to such Receivables; that each
Receivable and all papers and documents relating thereto are genuine and in all
respects what they purport to be; that each Receivable is valid and subsisting
and, if such Receivable is an account, arises out of a bona fide sale of goods
sold and delivered by such Debtor to, or in the process of being delivered to,
or out of and for services theretofore actually rendered by such Debtor to, the
account debtor named therein; that no such Receivable is evidenced by any
instrument or chattel paper unless such instrument or chattel paper has
theretofore been endorsed by such Debtor and delivered to the Agent (except to
the extent the Agent specifically requests such Debtor not to do so with respect
to any such instrument or chattel paper); that no surety bond was required or
given in connection with said Receivable or the contracts or purchase orders out
of which the same arose; that the amount of the Receivable represented as owing
is the correct amount actually and unconditionally owing, except for normal cash
discounts on normal trade terms in the ordinary course of business if such
Receivable is an
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account and that the amount of such Receivable represented as owing is not
disputed and is not subject to any set-offs, credits, deductions or
countercharges other than those arising in the ordinary course of such Debtor's
business which are disclosed to the Agent in writing promptly upon such Debtor
becoming aware thereof; provided, however, that the untruth of the foregoing
warranties of this sentence as to Receivables aggregating not more than $100,000
shall not constitute a breach of this sentence. Without limiting the foregoing,
if any Receivable arises out of a contract with the United States of America or
any of its departments, agencies or instrumentalities, if and to the extent the
Agent so requests, each Debtor agrees to notify the Agent and execute whatever
instruments and documents are required by the Agent in order that such
Receivable shall be assigned to the Agent and that proper notice of such
assignment shall be given under the federal Assignment of Claims Act (or any
successor statute)
(b) Each Debtor shall keep all of its books and records relating to the
Receivables only at its chief executive office described in Section_3(b) hereof.
(c) Unless and until an Event of Default occurs, any merchandise which
is returned by a customer or account debtor or otherwise recovered may be resold
by the Debtors in the ordinary course of their respective businesses in
accordance with Section_5(b) hereof; after an Event of Default occurs, such
merchandise shall be set aside and held by each of the Debtors as trustee for
the Agent and the Lenders and shall remain part of the Agent's Collateral.
Unless and until an Event of Default occurs, each Debtor may settle and adjust
disputes and claims with its customers and account debtors, handle returns and
recoveries and grant discounts, credits and allowances in the ordinary course of
its business and otherwise for amounts and on terms which such Debtor considers
advisable. However, after an Event of Default has occurred and unless the Agent
requests otherwise, each Debtor shall notify the Agent promptly of all returns
and recoveries and on request deliver the merchandise to the Agent. After an
Event of Default has occurred and unless the Agent requests otherwise, each
Debtor shall also notify the Agent promptly of all disputes and claims and
settle or adjust them at no expense to the Agent or the Lenders, but no
discount, credit or allowance other than on normal trade terms in the ordinary
course of business shall be granted to any customer or account debtor and no
returns of merchandise shall be accepted by such Debtor without the Agent's
consent. The Agent may, at all times after such an Event of Default has
occurred, settle or adjust disputes and claims directly with customers or
account debtors for amounts and upon terms which the Agent considers advisable.
(d) From time to time, as the Agent may request of any Debtor, such
Debtor shall provide the Agent with schedules describing all Receivables created
or acquired by such Debtor, provided, however, that the failure of such Debtor
to execute and deliver such schedules shall not affect or limit the Agent's
security interest or other rights in and to any such Receivables.
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Together with each schedule, each Debtor shall if requested by the Agent,
furnish copies of customers' invoices or the equivalent, and original shipping
or delivery receipts, for all merchandise sold, and each Debtor warrants the
genuineness thereof.
Section 5. Collection of Receivables. (a) Except as otherwise provided
in this Agreement each Debtor shall make collection of all of its Receivables
and may use the same to carry on its business in accordance with sound business
practice and otherwise subject to the terms hereof.
(b) Whether or not the Agent has exercised any or all of its rights
under other provisions of this Section_5 and whether or not any Event of Default
has occurred, at the request of the Agent, each Debtor agrees that: (i)_all
instruments and chattel paper at any time constituting part of the Collateral
(including any post-dated checks) shall, upon receipt by the relevant Debtor, be
immediately endorsed to and deposited with Agent; and (ii)_such Debtor shall
instruct all account debtors to remit all payments in respect of its Receivables
to a lockbox or lockboxes from which deposits will be made into one or more
accounts maintained with the Agent or under the control by agreement of the
Agent (whether or not maintained with the Agent), the Debtors acknowledging that
each such account and all funds contained therein constitute Collateral
hereunder.
(c) Whether or not any Event of Default has occurred and whether or not
the Agent has exercised any or all of its rights under other provisions of this
Section_5, in the event the Agent requests any Debtor to do so, all instruments
and chattel paper at any time constituting part of the Receivables (including
any postdated checks) shall, upon receipt by such Debtor, be immediately
endorsed to and deposited with the Agent.
(d) Upon the occurrence and during the continuation of any Event of
Default and whether or not the Agent has exercised any or all of its rights
under other provisions of this Section_5, the Agent or its designee may notify
any Debtor's customers or account debtors at any time that Receivables have been
assigned to the Agent or of the Agent's security interest therein and either in
its own name, or such Debtor's or both, demand, collect (including without
limitation through a lockbox analogous to that described in Section_5(b)
hereof), receive, receipt for, sue for, compound and give acquittance for any or
all amounts due or to become due on Receivables, and in the Agent's discretion
file any claim or take any other action or proceeding which the Agent may deem
necessary or appropriate to protect and realize upon the security interest of
the Agent in the Receivables.
(e) Any proceeds of Receivables or other Collateral transmitted to or
otherwise received by the Agent pursuant to any of the provisions of
Sections 5(b), 5(c) or 5(d) hereof shall
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be handled and administered by the Agent in and through a remittance
account maintained at the Agent and each Debtor acknowledges that the
maintenance of such remittance account by the Agent is solely for the Agent's
own convenience and that such Debtor does not have any right, title or interest
in such remittance account or any amounts at any time standing to the credit
thereof. The Agent may apply all or any part of any proceeds of Receivables or
other Collateral received by it from any source to the payment of the
Obligations (whether or not then due and payable), such applications to be made
in such amounts, in such manner and order and at such intervals as the Agent may
from time to time in its discretion determine, but not less often than once each
week. The Agent need not apply or give credit for any item included in proceeds
of Receivables or other Collateral until the Agent has received final payment
therefor at its office in cash or final solvent credits current in Chicago,
Illinois, acceptable to the Agent as such. However, if the Agent does give
credit for any item prior to receiving final payment therefor and the Agent
fails to receive such final payment or an item is charged back to the Agent for
any reason, the Agent may at its election in either instance charge the amount
of such item back against the remittance account, together with interest thereon
at the Default Rate. Each Debtor shall accompany each transmission of any
proceeds of Receivables or other Collateral to the Agent with a report in such
form as the Agent shall require identifying the particular Receivable or other
Collateral from which the same arises or relates. The Debtors hereby jointly and
severally indemnify the Agent and the Lenders from and against all liabilities,
damages, losses, actions, claims, judgments, costs, expenses, charges and
attorney's fees suffered or incurred by the Agent or the Lenders because of the
maintenance of the foregoing arrangements. The Agent and the Lenders shall have
no liability or responsibility to any Debtor for accepting any check, draft or
other order for payment of money bearing the legend "payment in full" or words
of similar import or any other restrictive legend or endorsement whatsoever or
be responsible for determining the correctness of any remittance.
Section 6. Special Provisions Re: Investment Property. (a)__Unless and
until an Event of Default has occurred and is continuing and thereafter until
notified to the contrary by the Agent pursuant to Section_9(e) hereof:
(i) Each Debtor shall be entitled to exercise all voting and/or
consensual powers pertaining to the Investment Property or any part
thereof owned or held by it, for all purposes not inconsistent with the
terms of this Agreement, the Credit Agreement or any other document
evidencing or otherwise relating to any Obligations; and
(ii) Each Debtor shall be entitled to receive and retain all cash
dividends paid upon or in respect of the Investment Property owned or
held by it.
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(b) Certificates for all securities now or at any time constituting
Investment Property hereunder shall be promptly delivered by the relevant Debtor
to the Agent duly endorsed in blank for transfer or accompanied by an
appropriate assignment or assignments or an appropriate undated stock power or
powers, in every case sufficient to transfer title thereto, and, with respect to
any Investment Property held by a securities intermediary, commodity
intermediary, or other financial intermediary of any kind, the relevant Debtor
shall execute and deliver, and shall cause any such intermediary to execute and
deliver, an agreement among such Debtor, the Agent, and such intermediary in
form and substance satisfactory to the Agent which provides, among other things,
for the intermediary's agreement that it will comply with entitlement orders,
and apply any value distributed on account of any Investment Property maintained
in an account with such intermediary, as directed by the Agent without further
consent by such Debtor at any time after the occurrence of any Event of Default;
provided, however, that, prior to the existence of an Event of Default and
thereafter until otherwise required by the Agent or the Required Lenders, a
Debtor shall not be required to deliver any such certificates or cause any such
agreement to be entered into with the relevant financial intermediary if and so
long as (i) the fair market value of any such Investment Property held by such
Debtor is less than $100,000 and (ii)_the aggregate fair market value of all
such Investment Property held by the Debtors and not subject to the control (as
such term is defined in the Code) of the Agent under the Collateral Documents is
less than $250,000 at any one time outstanding. The Agent may at any time after
the occurrence of an Event of Default cause to be transferred into its name or
the name of its nominee or nominees any and all of the Investment Property
hereunder.
(c) Unless and until an Event of Default has occurred and is
continuing, each Debtor may sell or otherwise dispose of any Investment Property
to the extent permitted by the Credit Agreement, provided that no Debtor shall
sell or otherwise dispose of any capital stock or other equity interests in any
other Debtor or any direct or indirect Subsidiary of any Debtor without the
Agent's prior written consent. During the existence of any Event of Default, no
Debtor shall sell or otherwise dispose of all or any part of the Investment
Property without the prior written consent of the Agent.
(d) Each Debtor represents that on the date of this Agreement, none of
the Investment Property consists of margin stock (as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System) except to
the extent such Debtor has delivered to the Agent a duly executed and completed
Form U-1 with respect to such stock. If at any time the Investment Property or
any part thereof consists of margin stock, the relevant Debtor shall promptly so
notify the Agent and deliver to the Agent duly executed and completed Form U-1
and such other instruments and documents reasonably requested by the Agent in
form and substance satisfactory to the Agent.
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<PAGE> 14
(e) Notwithstanding anything to the contrary contained herein, in the
event any Investment Property is subject to the terms of a separate security
agreement (including, without limitation, the Pledge Agreement bearing even date
herewith relating to the equity interests issued by certain of the Debtors
hereunder) in favor of the Agent, the terms of such separate security agreement
shall govern and control unless otherwise agreed to in writing by the Agent and
the Lenders.
Section 7. Special Provisions Re: Inventory and Equipment. (a)__Each
Debtor will at its own cost and expense maintain, keep and preserve its
Inventory in good and merchantable condition and keep and preserve its Equipment
in good repair, working order and condition, ordinary wear and tear excepted,
and without limiting the foregoing make all necessary and proper repairs,
replacements and additions to the Equipment so that the efficiency thereof shall
be fully preserved and maintained.
(b) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, use, consume
and sell its Inventory in the ordinary course of its business as presently
conducted, but a sale in the ordinary course of business shall not under any
circumstance include any transfer or sale in satisfaction, partial or complete,
of a debt owing by any Debtor.
(c) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, sell
(i) obsolete, worn out or unusable Equipment which is concurrently replaced with
similar Equipment at least equal in quality and condition to that sold and owned
by such Debtor free of any lien, charge or encumbrance other than the lien
hereof and (y)_Equipment which is not necessary for, or of importance to, the
proper conduct of any Debtor's business in the ordinary course and failure to
repair or replace such Equipment would not be disadvantageous to the rights
hereunder of the Agent and the Lenders.
(d) As of the time any Inventory or Equipment becomes subject to the
security interest provided for hereby and at all times thereafter, each Debtor
shall be deemed to have warranted as to any and all of its Inventory and
Equipment that all warranties of such Debtor set forth in this Agreement are
true and correct with respect to such Inventory and Equipment and that all of
such Inventory and Equipment is located at a location set forth pursuant to
Section 3(b) hereof. Each Debtor warrants and agrees that no Inventory is or
will be consigned to any other person without the Agent's prior written consent.
(e) Each Debtor shall at its own cost and expense cause the lien of the
Agent in and to any portion of its Collateral subject to a certificate of title
law to be duly noted on such certificate of title or to be otherwise filed in
such manner as is prescribed by law in order to perfect such lien
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<PAGE> 15
and shall cause all such certificates of title and evidences of lien to be
deposited with the Agent unless otherwise permitted by the Required Lenders in
their sole discretion; provided that no Debtor shall be obligated to cause the
Agent's lien to be so noted or to deliver any such certificate of title to the
Agent to the extent such certificate is held by another creditor with a purchase
money security interest permitted by the Credit Agreement on the Collateral
represented by such certificate.
(f) Each Debtor shall at its own cost and expense cause any certificate
of title evidencing any of the Collateral to be amended to reflect the current
and correct name of such Debtor as and when required by applicable law, but in
any event no later than such date on which such Debtor must renew its
registration of such Collateral under applicable law. Each Debtor shall cause
the lien of the Agent in such Collateral to continue to be duly noted on such
amended or reissued certificate of title.
(g) Except for Equipment from time to time located on the real estate
described on Schedule C attached hereto and as otherwise disclosed to the Agent
in writing, none of the Equipment is or will be attached to real estate in such
a manner that the same may become a fixture.
(h) If any of its Inventory is at any time evidenced by a document of
title, such document shall be promptly delivered by the appropriate Debtor to
the Agent.
Section 8. Power of Attorney. In addition to any other powers of
attorney contained herein, each Debtor appoints the Agent, its nominee, or any
other person whom the Agent may designate as such Debtor's attorney in fact,
with full power to endorse such Debtor's names on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security that may
come into the Agent's possession, to sign such Debtor's names on any invoice or
bill of lading relating to any Receivables, on drafts against customers, on
schedules and assignments of Receivables, on notices of assignment, on public
records, on verifications of accounts and on notices to customers, to send
requests for verification of Receivables to customers or account debtors, to
notify the post office authorities to change the address for delivery of such
Debtor's mail to an address designated by the Agent and to receive, open and
dispose of all mail addressed to such Debtor and to do all other things
necessary to carry out this Agreement. Each Debtor hereby ratifies and approves
all acts of any such attorney and agree that neither the Agent nor any such
attorney nor any Lender will be liable for any acts or omissions nor for any
error of judgment or mistake of fact or law other than their own gross
negligence or willful misconduct. The foregoing power of attorney, being coupled
with an interest, is irrevocable until the Obligations have been fully satisfied
and any commitment of the Lenders to extend credit constituting Obligations has
terminated. The Agent may file one or more financing
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<PAGE> 16
statements disclosing its security interest in any or all of the Collateral
without any Debtor's signature appearing thereon. Each Debtor also hereby grants
the Agent a power of attorney to execute any such financing statement, or
amendments and supplements to financing statements, on behalf of such Debtor
without notice thereof to any Debtor, which power of attorney is coupled with an
interest and is irrevocable until the Obligations have been fully satisfied and
any commitment of the Lenders to extend credit constituting Obligations to any
of the Borrowers has terminated.
Section 9. Defaults and Remedies. (a) The occurrence of any event or
the existence of any condition which is specified as an Event of Default under
the Credit Agreement shall constitute an "Event of Default" hereunder.
(b) Upon the occurrence of any Event of Default, the Agent shall have,
in addition to all other rights provided herein or by law, the rights and
remedies of a secured party under the Code (regardless of whether the Code is
the law of the jurisdiction where the rights or remedies are asserted and
regardless of whether the Code applies to the affected Collateral), and further
the Agent may, without demand and without advertisement, notice, hearing or
process of law, all of which each Debtor hereby waives to the extent permitted
by law, at any time or times, sell and deliver any or all Collateral held by or
for it at public or private sale, for cash, upon credit or otherwise, at such
prices and upon such terms as the Agent deems advisable, in its sole
discretion. In addition to all other sums due the Agent and the Lenders
hereunder, the Debtors jointly and severally agree to pay to the Agent and the
Lenders all costs and expenses incurred by the Agent and the Lenders, including
reasonable attorneys' fees and court costs, in obtaining, liquidating or
enforcing payment of Collateral or Obligations or in the prosecution or defense
of any action or proceeding by or against the Agent or such Lender or the
Debtors or any of them concerning any matter arising out of or connected with
this Agreement or the Collateral or Obligations, including without limitation
any of the foregoing arising in, arising under or related to a case under the
Bankruptcy Code. Any requirement of reasonable notice shall be met if such
notice is personally served on or mailed, postage prepaid, to the Debtors in
accordance with Section 14(b) hereof at least ten days before the time of sale
or other event giving rise to the requirement of such notice; however, no
notification need be given to a Debtor if that Debtor has signed, after an
Event of Default has occurred, a statement renouncing any right to notification
of sale or other intended disposition. The Agent shall not be obligated to make
any sale or other disposition of the Collateral regardless of notice having
been given. The Agent or any Lender may be the purchaser at any such sale. To
the extent permitted by applicable law, each Debtor hereby waives all of its
rights of redemption from any such sale. Subject to the provisions of
applicable law, the Agent may postpone or cause the postponement of the sale of
all or any portion of the Collateral by announcement at the time and place of
such sale, and such sale may, without further notice, be
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<PAGE> 17
made at the time and place to which the sale was postponed or the Agent may
further postpone such sale by announcement made at such time and place.
(c) Without in any way limiting the foregoing, during the existence of
any Event of Default, the Agent shall have the right, in addition to all other
rights provided herein or by law, to take physical possession of any and all of
the Collateral and anything found therein, the right for that purpose to enter
without legal process any premises where the Collateral may be found (provided
such entry be done lawfully), and the right to maintain such possession on each
Debtor's premises (each Debtor hereby agreeing to lease warehouses without cost
or expense to the Agent or its designee if the Agent so requests) or to remove
its Collateral or any part thereof to such other places as the Agent may desire.
During the existence of any Event of Default, the Agent shall have the right to
exercise any and all rights with respect to deposit accounts of any Debtor
maintained with the Agent or any Lender, including, without limitation, the
right to collect, withdraw and receive all amounts due or to become due or
payable under each such deposit account. During the existence of any Event of
Default, each Debtor shall, upon the Agent's demand, assemble its Collateral and
make it available to the Agent at a place designated by the Agent. If the Agent
exercises its right to take possession of the Collateral, each Debtor shall also
at its expense perform any and all other steps requested by the Agent to
preserve and protect the security interest hereby granted in the Collateral,
such as placing and maintaining signs indicating the security interest of the
Agent, appointing overseers for the Collateral and maintaining stock records.
(d) Without in any way limiting the foregoing, each Debtor hereby
grants to the Agent and the Lenders a royalty-free irrevocable license and right
to use all of such Debtor's patents, patent applications, patent licenses,
trademarks, trademark registrations, trademark licenses, trade names, trade
styles, and similar intangibles in connection with any foreclosure or other
realization by the Agent or the Lenders on all or any part of the Collateral,
provided that the license granted hereunder shall not include any rights in any
license agreement under which the relevant Debtor is licensee which, by its
terms, prohibits the license contemplated by this Section. The license and right
granted the Agent and the Lenders hereby shall be without any royalty or fee or
charge whatsoever. Such license and right shall only be exercisable upon the
occurrence and continuation of an Event of Default.
(e) Without in any way limiting the foregoing, during the existence of
any Event of Default, all rights of a Debtor to exercise the voting and/or
consensual powers which it is entitled to exercise pursuant to Section_6(a)(i)
hereof and/or to receive and retain the distributions which it is entitled to
receive and retain pursuant to Section 6(a)(ii) hereof, shall, at the option of
the Agent, cease and thereupon become vested in the Agent, which, in addition to
all other rights provided herein or by law, shall then be entitled solely and
exclusively to exercise all voting and
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<PAGE> 18
other consensual powers pertaining to the Investment Property and/or to receive
and retain the distributions which such Debtor would otherwise have been
authorized to retain pursuant to Section 6(a)(ii) hereof and shall then be
entitled solely and exclusively to exercise any and all rights of conversion,
exchange or subscription or any other rights, privileges or options pertaining
to any Investment Property as if the Agent were the absolute owner thereof
including, without limitation, the rights to exchange, at its discretion, any
and all of the Investment Property upon the merger, consolidation,
reorganization, recapitalization or other readjustment of the respective issuer
thereof or upon the exercise by or on behalf of any such issuer or the Agent of
any right, privilege or option pertaining to any Investment Property and, in
connection therewith, to deposit and deliver any and all of the Investment
Property with any committee, depositary, transfer Agent, registrar or other
designated agency upon such terms and conditions as the Agent may determine.
Without limiting the foregoing, during the existence of any Event of Default,
the Agent may, by written demand, direct any securities intermediary,
commodities intermediary, or other financial intermediary at any time holding
any Investment Property, or any issuer thereof, to deliver such Collateral, or
any part thereof, and/or liquidate such Collateral, or any party thereof, and
deliver the proceeds therefrom to the Agent. In the event the Agent in good
faith believes any of the Collateral constitutes restricted securities within
the meaning of any applicable securities laws, any disposition thereof in
compliance with such laws shall not render the disposition commercially
unreasonable.
(f) The powers conferred upon the Agent hereunder are solely to protect
its interest in the Collateral and shall not impose on it any duty to exercise
such powers. The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of Investment Property in its possession if such
Collateral is accorded treatment substantially equivalent to that which the
Agent accords its own property consisting of similar type assets, it being
understood, however, that the Agent shall have no responsibility for
ascertaining or taking any action with respect to calls, conversions, exchanges,
maturities, tenders, or other matters relating to any such Collateral, whether
or not the Agent has or is deemed to have knowledge of such matters. This
Agreement constitutes an assignment of rights only and not an assignment of any
duties or obligations of any Debtor in any way related to the Collateral, and
the Agent shall have no duty or obligation to discharge any such duty or
obligation. The Agent shall have no responsibility for taking any necessary
steps to preserve rights against any parties with respect to any Collateral or
initiating any action to protect the Collateral against the possibility of a
decline in market value. Neither the Agent or any Lender, nor any party acting
as attorney for the Agent or any Lender, shall be liable for any acts or
omissions or for any error of judgment or mistake of fact or law other than such
person's gross negligence or willful misconduct.
(g) Failure by the Agent or any Lender to exercise any right, remedy or
option under this Agreement or any other agreement between the Debtors or any of
them and the Agent or any
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<PAGE> 19
Lender or Lenders or provided by law, or delay by the Agent or any Lender in
exercising the same, shall not operate as a waiver; no waiver shall be effective
unless it is in writing, signed by the party against whom enforcement of the
waiver is sought and then only to the extent specifically stated. Neither the
Agent, any Lender nor any party acting as attorney for the Agent or such Lender,
shall be liable for any acts or omissions or for any error of judgment or
mistake of fact or law other than their gross negligence or willful misconduct.
The rights and remedies of the Agent and the Lenders under this Agreement shall
be cumulative and not exclusive of any other right or remedy which the Agent or
any Lender may have. For purposes of this Agreement, an Event of Default shall
be construed as continuing after its occurrence until the same is waived in
writing by the Lenders or the Required Lenders, as the case may be, in
accordance with the Credit Agreement.
Section 10. Application of Proceeds. The proceeds and avails of the
Collateral at any time received by the Agent upon the occurrence and during the
continuation of any Event of Default shall, when received by the Agent in cash
or its equivalent, be applied by the Agent in reduction of the Obligations in
accordance with the terms of the Credit Agreement. The Debtors shall remain
liable to the Agent and the Lenders for any deficiency. Any surplus remaining
after the full payment and satisfaction of the Obligations shall be returned to
the Debtors or to whomsoever the Agent reasonably determines is lawfully
entitled thereto.
Section 11. Continuing Agreement. This Agreement shall be a continuing
agreement in every respect and shall remain in full force and effect until all
of the Obligations, both for principal and interest, have been fully paid and
satisfied and any commitment to extend any credit constituting Obligations to
any of the Borrowers shall have terminated.
Section 12. Primary Security; Obligations Absolute. The lien and
security herein created and provided for stand as direct and primary security
for the Obligations. No application of any sums received by the Agent in respect
of the Collateral or any disposition thereof to the reduction of the Obligations
or any portion thereof shall in any manner entitle any Debtor to any right,
title or interest in or to the Obligations or any collateral security therefor,
whether by subrogation or otherwise, unless and until all Obligations have been
fully paid and satisfied and any commitment to extend credit constituting
Obligations to any of the Borrowers shall have terminated. Each Debtor
acknowledges and agrees that the lien and security hereby created and provided
for are absolute and unconditional and shall not in any manner be affected or
impaired by any acts or omissions whatsoever of the Agent, any Lender or any
other holder of any of the Obligations, and without limiting the generality of
the foregoing, the lien and security hereof shall not be impaired by any
acceptance by the Agent, any Lender or any holder of any of the Obligations of
any other security for or guarantors upon any of the Obligations or by any
failure, neglect or omission on the part of the Agent, any Lender or any other
holder of any of the
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<PAGE> 20
Obligations to realize upon or protect any of the Obligations or any collateral
security therefor. The lien and security hereof shall not in any manner be
impaired or affected by (and the Agent and the Lenders, without notice to
anyone, are hereby authorized to make from time to time) any sale, pledge,
surrender, compromise, settlement, release, renewal, extension, indulgence,
alteration, substitution, exchange, change in, modification or disposition of
any of the Obligations, or of any collateral security therefor, or of any
guaranty thereof or of any obligor thereon. The Lenders may at their discretion
at any time grant credit to any of the Borrowers without notice to any Debtor in
such amounts and on such terms as the Lenders may elect (all of such to
constitute additional Obligations) without in any manner impairing the lien and
security hereby created and provided for. No release, compromise or discharge of
any Debtor hereunder or with respect to any of the Obligations or any Collateral
provided by such Debtor shall release or discharge, or impair the agreements of,
any other Debtor hereunder or in any manner impair the liens and security
interests granted by any other Debtor hereunder; and the Agent may proceed
against the Collateral provided hereunder by any one or more of the Debtors
without proceeding against any or all of the other Debtors, their respective
properties or any other security or guaranty whatsoever. Without limiting the
generality of the foregoing, the Agent (acting at the direction of the Lenders)
may at any time or from time to time release any Debtor from its obligations
hereunder or release any Collateral or effect any compromise with any Debtor,
and no such release or compromise shall in any manner impair or otherwise effect
the liens granted by, or the obligations of, the other Debtors hereunder. In
order to foreclose or otherwise realize hereon and to exercise the rights
granted the Agent hereunder and under applicable law as against any Debtor or
any Collateral in which such Debtor has rights, there shall be no obligation on
the part of the Agent, any Lender or any other holder of any of the Obligations
at any time to first resort for payment to any of the Borrowers or any other
Debtor or any other Person, its property or estate or to any guaranty of the
Obligations or any portion thereof or to resort to any other collateral
security, property, liens or any other rights or remedies whatsoever, and the
Agent shall have the right to enforce this instrument as against any Debtor or
any Collateral in which such Debtor has rights, irrespective of whether or not
other proceedings or steps are pending seeking resort to or realization upon or
from any of the foregoing.
Section 13. The Agent. In acting under or by virtue of this Agreement,
the Agent shall be entitled to all the rights, authority, privileges and
immunities provided in Section_10 of the Credit Agreement, all of which
provisions of said Section 10 are incorporated by reference herein with the
same force and effect as if set forth herein in their entirety. The Agent
hereby disclaims any representation or warranty to the Lenders concerning the
perfection of the security interest granted hereunder or in the value of any
of the Collateral.
Section 14. Miscellaneous. (a) This Agreement cannot be changed or
terminated orally. All of the rights, privileges, remedies and options given
to the Agent and the Lenders
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<PAGE> 21
hereunder shall inure to the benefit of their respective successors and assigns,
and all the terms, conditions, promises, covenants, representations and
warranties of and in this Agreement shall bind each Debtor and its legal
representatives, successors and assigns, provided that no Debtor may assign its
rights or delegate its duties hereunder without the Agent's prior written
consent. Without limiting the generality of the foregoing, and subject to the
provisions of Sections 12.14 and 12.15 of the Credit Agreement, any Lender may
assign or otherwise transfer any indebtedness held by it secured by this
Agreement to any other person or entity, and such other person or entity shall
thereupon become vested with all the benefits in respect thereof granted to such
Lender herein or otherwise, subject, however, to the provisions of the Credit
Agreement. Each Debtor hereby releases the Agent and each Lender from any
liability for any act or omission relating to its Collateral or this Agreement,
except the Agent's or such Lender's gross negligence or willful misconduct.
(b) All communications provided for herein shall be in writing, except
as otherwise specifically provided for hereinabove, and shall be deemed to have
been given or made, if to any Debtor when given to any of the Borrowers in
accordance with Section 12.8 of the Credit Agreement, or if to the Agent or any
Lender, when given to such party in accordance with Section 12.8 of the Credit
Agreement.
(c) No Lender shall have the right to institute any suit, action or
proceeding in equity or at law for the foreclosure against any Collateral
subject to this Agreement or for the execution of any trust or power hereof or
for the appointment of a receiver, or for the enforcement of any other remedy
under or upon this Agreement; it being understood and intended that no one or
more of the Lenders shall have any right in any manner whatsoever to affect,
disturb or prejudice the lien and security interest of this Agreement by its or
their action or to enforce any right hereunder, and that all proceedings at law
or in equity shall be instituted, had and maintained by the Agent in the manner
herein provided for the ratable benefit of the Lenders.
(d) In the event that any provision hereof shall be deemed to be
invalid by reason of the operation of any law or by reason of the interpretation
placed thereon by any court, this Agreement shall be construed as not containing
such provision, but only as to such locations where such law or interpretation
is operative, and the invalidity of such provision shall not affect the validity
of any remaining provision hereof, and any and all other provisions hereof which
are otherwise lawful and valid shall remain in full force and effect. Without
limiting the generality of the foregoing, in the event that this Agreement shall
be deemed to be invalid or otherwise unenforceable with respect to any Debtor,
such invalidity or unenforceability shall not affect the validity of this
Agreement with respect to the other Debtors.
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<PAGE> 22
(e) This Agreement shall be deemed to have been made in the State of
Illinois and shall be governed by the internal laws of the State of Illinois
(without regard to the principles of conflicts of law). All terms which are used
in this Agreement which are defined in the Code shall have the same meanings
herein as said terms do in the Code unless this Agreement shall otherwise
specifically provide. The headings in this instrument are for convenience of
reference only and shall not limit or otherwise affect the meaning of any
provision hereof.
(f) This Agreement may be executed in any number of counterparts, each
constituting an original, but all together one and the same instrument. Each
Debtor acknowledges that this Agreement is and shall be effective upon its
execution and delivery by such Debtor to the Agent, and it shall not be
necessary for the Agent to execute this Agreement or any other acceptance hereof
or otherwise to signify or express its acceptance hereof.
(g) THE AGENT AND THE DEBTORS AGREE THAT ALL DISPUTES AMONG THEM
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR FEDERAL
COURTS LOCATED IN COOK COUNTY, ILLINOIS, BUT EACH OF THE AGENT AND THE DEBTORS
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF COOK COUNTY, ILLINOIS. EACH OF THE DEBTORS WAIVES IN ALL
DISPUTES ANY OBJECTION THAT SUCH DEBTOR MAY HAVE TO THE LOCATION OF THE COURT
CONSIDERING THE DISPUTE OR ANY OBJECTION THAT SUCH DEBTOR MAY HAVE THAT ANY
OTHER PARTY HAS NOT BEEN JOINED IN SUCH PROCEEDING. EACH OF THE DEBTORS AGREES
THAT THE AGENT SHALL HAVE THE RIGHT TO PROCEED AGAINST EACH AND ANY OF THE
DEBTORS OR THEIR COLLATERAL IN A COURT IN ANY LOCATION TO ENABLE THE AGENT TO
REALIZE ON THE COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED
IN FAVOR OF THE AGENT, WHETHER OR NOT PROCEEDING SEPARATELY AGAINST ANY DEBTOR
AND ITS PROPERTY OR JOINTLY AGAINST THE BORROWER AND ANY ONE OR MORE OF THE
DEBTORS AND THEIR PROPERTY. EACH OF THE DEBTORS WAIVES ANY OBJECTION THAT IT MAY
HAVE TO THE LOCATION OF THE COURT IN WHICH THE AGENT HAS COMMENCED A PROCEEDING
DESCRIBED IN THIS PARAGRAPH.
[SIGNATURE PAGES TO FOLLOW]
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<PAGE> 23
IN WITNESS WHEREOF, the Debtors have caused this Agreement to be duly
executed as of the date first above written.
DEBTORS:
MORTON INDUSTRIAL GROUP, INC.
By
Its__________________________________
MORTON METALCRAFT CO.
By
Its__________________________________
MORTON METALCRAFT CO. OF NORTH
CAROLINA
By
Its__________________________________
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<PAGE> 24
Accepted and agreed to as of the date first above written.
HARRIS TRUST AND SAVINGS BANK, as
Agent as aforesaid for the Lenders
By
Its____________________________________
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<PAGE> 1
EXHIBIT 10.3
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This Document Prepared By |
and After Recording Return To: |
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Thomas M. Quirk |
Chapman and Cutler |
111 West Monroe Street |
Chicago, Illinois 60603 |
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================================================================================
SPACE ABOVE THIS LINE RESERVED FOR RECORDER'S
USE ONLY
MORTGAGE AND SECURITY AGREEMENT WITH
ASSIGNMENT OF RENTS
This Mortgage dated as of January __, 1998 from Morton Metalcraft Co.,
an Illinois corporation with its principal place of business and mailing address
at 1021 West Birchwood, Morton, Illinois 61550-0429 (hereinafter referred to as
the "Mortgagor") to Harris Trust and Savings Bank, an Illinois banking
corporation with its principal place of business and mailing address at 111 West
Monroe Street, Chicago, Illinois 60690 ("Harris"), as agent hereunder for the
Lenders hereinafter identified and defined (Harris acting as such agent and any
successor or successors to Harris in such capacity being hereinafter referred to
as the "Mortgagee");
WITNESSETH THAT:
WHEREAS, the Mortgagor and Morton Metalcraft Co. of North Carolina
("Morton North Carolina; the Mortgagor and Morton North Carolina being herein
referred to collectively as the "Borrowers" and individually as a "Borrower")
have entered into with Harris (individually and as agent for the Lenders
identified and defined below) that certain Credit Agreement dated as of January
20, 1998 (such Credit Agreement as the same may from time to time be modified,
amended or restated being hereinafter referred to as the "Credit Agreement")
pursuant to which Harris and the other lenders named therein and which may
thereafter become parties thereto (Harris and such other lenders being herein
referred to collectively as the "Lenders" and individually as a "Lender")
commit, subject to certain terms and conditions, (i) to make a
<PAGE> 2
revolving credit facility available to the Borrowers in the form of loans and
letters of credit (the "Revolving Credit") in the aggregate principal amount not
to exceed $35,000,000 at any one time outstanding during the period ending on
December 31, 2003 (the "Termination Date") with all loans made under the
Revolving Credit being repayable on the Termination Date and (ii) to make term
loans in the aggregate principal amount of $15,000,000 to Mortgagor payable in
installments with a final maturity of all principal and interest not required to
be sooner paid of December 31, 2003 (the "Term Loans"), a true and correct copy
of which Credit Agreement is on file at the offices of the Mortgagee; and
WHEREAS, advances from time to time made under the Revolving Credit are
evidenced and to be evidenced by Revolving Credit Notes (such Revolving Credit
Notes and any extensions thereof or modifications thereto and any and all notes
issued in renewal thereof or in substitution or replacement therefor being
hereinafter referred to as the "Revolving Credit Notes") aggregating $35,000,000
in face principal amount and payable to the order of the respective Lenders
named thereon, whereby the Borrowers promise to pay the advances evidenced
thereby on or before the Termination Date with interest and premium as set forth
in the Credit Agreement; and
WHEREAS, the Term Loans are evidenced and to be evidenced by Term
Credit Notes (the "Term Credit Notes") aggregating $15,000,000 in principal
amount and payable to the order of the respective Lenders named thereon, whereby
the Borrowers promises to pay the term loans evidenced thereby, with interest
and premium as set forth in the Credit Agreement, in installments with a final
maturity of all principal and interest and premium not required to be sooner
paid of December 31, 2003; and
WHEREAS, pursuant to the terms of the Credit Agreement, any Lender or
Lenders may, from time to time, assign to other Lenders portions of the
indebtedness evidenced by the Notes then owned by such assigning Lender together
with an equivalent proportion of such assigning Lender's obligation to make
advances under the Credit Agreement (each such assignment being hereinafter
referred to as an "Assignment"); and
WHEREAS, in the event of each Assignment under the Credit Agreement,
the Borrowers have agreed pursuant to the terms of the Credit Agreement to
execute and deliver to each new assignee Lender by reason of such Assignment,
new Notes evidencing that portion of the indebtedness so assigned to such new
assignee Lender and advances to be thereafter made by such new assignee Lender
pursuant to the Credit Agreement and to execute new Notes to such assigning
Lender evidencing the portion of such indebtedness not so assigned and advances
to be thereafter made by such assigning Lender pursuant to the Credit Agreement;
and
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<PAGE> 3
WHEREAS, it is the intention of the Mortgagor that all such Notes
constitute "Notes" for the purposes hereof and to be secured hereby; and
WHEREAS, pursuant to the terms of the Credit Agreement, the Mortgagee
may from time to time issue letters of credit (the "Letters of Credit") for the
account of the Borrowers in an aggregate face amount not to exceed $5,000,000
and with expiry dates on or before the Termination Date, and which Letters of
Credit, when combined with the principal amount of loans outstanding under the
Revolving Credit from time to time, shall not exceed $35,000,000; and
NOW, THEREFORE, in order to secure (i) payment of all principal of and
interest and premium on the Notes (ratably among the Notes without preference or
priority to one over the others) as and when the same become due and payable
(whether by lapse of time, acceleration or otherwise) and all advances now or
hereafter evidenced thereby, (ii) the payment and performance of all obligations
arising under any applications executed by the Borrowers, or either of them, in
connection with any of the Letters of Credit, including the obligation of the
Borrowers, or either of them, to reimburse the Mortgagee for any draws under the
Letters of Credit, (iii) payment of all fees and charges payable by the
Borrowers, or either of them, under the terms of the Credit Agreement, (iv)
payment of all other sums at any time due or owing from or required to be paid
by the Borrowers, or either of them, under the terms of the Mortgage and the
performance and observance of all the covenants and agreements in the Mortgage
provided to be performed or observed by the Mortgagor, and (v) the performance
and observance of all covenants and agreements contained in the Mortgage or in
the Notes or in the Credit Agreement or in any other instrument or document at
any time evidencing or securing any of the foregoing indebtedness, obligations
or liabilities or setting forth terms and conditions applicable thereto (all of
such indebtedness, obligations and liabilities referred to in clauses (i), (ii),
(iii), (iv) and (v) above being hereinafter collectively referred to as the
"indebtedness hereby secured"), Mortgagor does hereby grant, bargain, sell,
convey, mortgage, warrant, assign, and pledge unto the Mortgagee, its successors
and assigns, and grant to the Mortgagee, its successors and assigns a security
interest in all and singular the properties, rights, interests and privileges
described in Granting Clauses I, II, III, IV, V and VI below, all of the same
being collectively referred to herein as the "Mortgaged Premises":
GRANTING CLAUSE I
That certain real estate lying and being in the County of Tazewell in
the State of Illinois, more particularly described in Schedule I attached hereto
and made a part hereof.
GRANTING CLAUSE II
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<PAGE> 4
All buildings and improvements of every kind and description heretofore
or hereafter erected or placed on the property described in Granting Clause I
and all materials intended for construction, reconstruction, alteration and
repairs of the buildings and improvements now or hereafter erected thereon, all
of which materials shall be deemed to be included within the premises
immediately upon the delivery thereof to the said real estate, and all fixtures,
machinery, apparatus, equipment, fittings and articles of personal property of
every kind and nature whatsoever now or hereafter attached to or contained in or
used or useful in connection with said real estate and the buildings and
improvements now or hereafter located thereon and the operation, maintenance and
protection thereof, including but not limited to all machinery, motors,
fittings, radiators, awnings, shades, screens, all gas, coal, steam, electric,
oil and other heating, cooking, power and lighting apparatus and fixtures, all
fire prevention and extinguishing equipment and apparatus, all cooling and
ventilating apparatus and systems, all plumbing, incinerating, and sprinkler
equipment and fixtures, all elevators and escalators, all communication and
electronic monitoring equipment, all window and structural cleaning rigs and all
other machinery and equipment of every nature and fixtures and appurtenances
thereto and all items of furniture, appliances, draperies, carpets, other
furnishings, equipment and personal property used or useful in the operation,
maintenance and protection of the said real estate and the buildings and
improvements now or hereafter located thereon and all renewals or replacements
thereof or articles in substitution therefor or insurance proceeds relating
thereto, whether or not the same are or shall be attached to said real estate,
buildings or improvements in any manner, and all proceeds thereof; it being
mutually agreed, intended and declared that all the aforesaid property shall, so
far as permitted by law, be deemed to form a part and parcel of the real estate
and for the purpose of this Mortgage to be real estate and covered by this
Mortgage; and as to the balance of the property aforesaid, this Mortgage is
hereby deemed to be as well a Security Agreement under the provisions of the
Uniform Commercial Code for the purpose of creating hereby a security interest
in said property, which is hereby granted by Mortgagor as debtor to Mortgagee as
secured party, securing the indebtedness hereby secured. The addresses of
Mortgagor (debtor) and Mortgagee (secured party) appear at the beginning hereof.
GRANTING CLAUSE III
All right, title and interest of Mortgagor now owned or hereafter
acquired in and to all and singular the estates (including without limitation
leasehold estates), leases, tenements, hereditaments, privileges, easements,
licenses, franchises, appurtenances and royalties, mineral, oil, and water
rights belonging or in any wise appertaining to the property described in the
preceding Granting Clause I and the buildings and improvements now or hereafter
located thereon and the reversions, rents, issues, revenues and profits thereof
and insurance proceeds therefrom, including all interest of Mortgagor in all
rents, issues and profits of and insurance proceeds from the aforementioned
property and all rents, issues, profits, revenues, royalties, bonuses, rights
and benefits due, payable or accruing (including all deposits of money as
advanced rent or for
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<PAGE> 5
security) under any and all leases or subleases and renewals thereof of, or
under any contracts or options for the sale of all or any part of, said property
(including during any period allowed by law for the redemption of said property
after any foreclosure or other sale), together with the right, but not the
obligation, to collect, receive and receipt for all such rents and other sums
and apply them to the indebtedness hereby secured and to demand, sue for and
recover the same when due or payable; provided that the assignments made hereby
shall not impair or diminish the obligations of Mortgagor under the provisions
of such leases or other agreements nor shall such obligations be imposed upon
Mortgagee. By acceptance of this Mortgage, Mortgagee agrees, not as a limitation
or condition hereof, but as a personal covenant available only to Mortgagor that
until an event of default (as hereinafter defined) shall occur giving Mortgagee
the right to foreclose this Mortgage, Mortgagor may collect, receive (but not
more than 30 days in advance) and enjoy such rents.
GRANTING CLAUSE IV
All judgments, awards of damages, settlements and other compensation
heretofore or hereafter made resulting from condemnation proceedings or the
taking of the property described in Granting Clause I or any part thereof or any
building or other improvement now or at any time hereafter located thereon or
any easement or other appurtenance thereto under the power of eminent domain, or
any similar power or right (including any award from the United States
Government at any time after the allowance of the claim therefor, the
ascertainment of the amount thereof and the issuance of the warrant for the
payment thereof), whether permanent or temporary, or for any damage (whether
caused by such taking or otherwise) to said property or any part thereof or the
improvements thereon or any part thereof, or to any rights appurtenant thereto,
including severance and consequential damage, and any award for change of grade
of streets (collectively "Condemnation Awards").
GRANTING CLAUSE V
All property and rights, if any, which are by the express provisions of
this instrument required to be subjected to the lien hereof and any additional
property and rights that may from time to time hereafter, by installation or
writing of any kind, be subjected to the lien hereof by Mortgagor or by anyone
in Mortgagor's behalf.
GRANTING CLAUSE VI
All rights in and to common areas and access roads on adjacent
properties heretofore or hereafter granted to Mortgagor and any after-acquired
title or reversion in and to the beds of any
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<PAGE> 6
ways, roads, streets, avenues and alleys adjoining the property described in
Granting Clause I or any part thereof.
TO HAVE AND TO HOLD the Mortgaged Premises and the properties, rights
and privileges hereby granted, bargained, sold, conveyed, mortgaged, warranted,
pledged and assigned, and in which a security interest is granted, or intended
so to be, unto Mortgagee, its successors and assigns, forever; provided,
however, that this instrument is upon the express condition that if the
principal of and interest on the Notes shall be paid in full and all other
indebtedness hereby secured shall be fully paid and performed and no Letters of
Credit shall remain outstanding, then this instrument and the estate and rights
hereby granted shall cease, determine and be void and this instrument shall be
released by Mortgagee upon the written request and at the expense of Mortgagor,
otherwise to remain in full force and effect.
It is expressly understood and agreed that the indebtedness hereby
secured will in no event exceed two hundred percent (200%) of (i) the total face
amount of the Notes and the Letters of Credit plus (ii) the total interest which
may hereafter accrue under the Notes and the Reimbursement Obligations (as
defined in the Credit Agreement) on such face amount plus (iii) any fees, costs
or expenses which may be payable hereunder or under the Credit Agreement.
Mortgagor hereby covenants and agrees with Mortgagee as follows:
1. Payment of the Indebtedness. The indebtedness hereby
secured will be promptly paid as and when the same becomes due without
any relief whatever from valuation or appraisement laws of the State of
Illinois.
2. Binding Obligation and Further Assurances. This Mortgage
and all other documents, instruments and agreements executed in
connection herewith are valid and binding obligations of Mortgagor,
enforceable in accordance with their respective terms. Mortgagor will
execute and deliver such further instruments and do such further acts
as may be necessary or proper to carry out more effectively the purpose
of this instrument and, without limiting the foregoing, to make subject
to the lien hereof any property agreed to be subjected hereto or
covered by the Granting Clauses hereof or intended so to be.
3. Ownership of the Mortgaged Premises. Mortgagor covenants
and warrants that it is lawfully seized of and has good and marketable
fee title to the Mortgaged Premises free and clear of all liens,
charges and encumbrances whatsoever except those exceptions to title
listed on Schedule II attached hereto (the "Permitted Exceptions") and
Mortgagor has good right, full power and authority to convey, transfer
and mortgage the same to Mortgagee for the uses and purposes set forth
in this Mortgage;
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<PAGE> 7
and Mortgagor will warrant and forever defend the title to the
Mortgaged Premises subject to the Permitted Exceptions against all
claims and demands whatsoever.
4. Possession. Provided no event of default has occurred and
is continuing hereunder, Mortgagor shall be suffered and permitted to
remain in full possession, enjoyment and control of the Mortgaged
Premises, subject always to the observance and performance of the terms
of this instrument.
5. Payment of Taxes. Mortgagor shall pay before any penalty
attaches, all general taxes and all special taxes, special assessments,
water, drainage and sewer charges and all other charges of any kind
whatsoever, ordinary or extraordinary, which may be levied, assessed,
imposed or charged on or against the Mortgaged Premises or any part
thereof and which, if unpaid, might by law become a lien or charge upon
the Mortgaged Premises or any part thereof, and shall, upon written
request, exhibit to Mortgagee official receipts evidencing such
payments, except that, unless and until foreclosure, distraint, sale or
other similar proceedings shall have been commenced, no such charge or
claim need be paid if being contested (except to the extent any full or
partial payment shall be required by law), after notice to Mortgagee,
by appropriate proceedings which shall operate to prevent the
collection thereof or the sale or forfeiture of the Mortgaged Premises
or any part thereof to satisfy the same, conducted in good faith and
with due diligence and if Mortgagor shall have furnished such security,
if any, as may be required in the proceedings or requested by
Mortgagee.
6. Payment of Taxes on Notes, Letters of Credit, Mortgage or
Interest of Mortgagee or Lenders. Mortgagor agrees that if any tax,
assessment or imposition upon this Mortgage or the indebtedness hereby
secured or the Notes or any of the Letters of Credits or the interest
of Mortgagee or any Lender in the Mortgaged Premises or upon Mortgagee
or any Lender by reason of or as a holder of any of the foregoing
(including, without limitation, excise taxes, but excepting therefrom
any income tax on interest payments on the principal portion of the
indebtedness hereby secured imposed by the United States or any state)
is levied, assessed or charged, then, unless all such taxes are paid by
Mortgagor to, for or on behalf of Mortgagee or any Lender as they
become due and payable (which Mortgagor agrees to do upon demand of
Mortgagee, to the extent permitted by law), or Mortgagee or any Lender
is reimbursed for any such sum advanced by Mortgagee, all sums hereby
secured shall become immediately due and payable, at the option of
Mortgagee upon 30 days' notice to Mortgagor, notwithstanding anything
contained herein or in any law heretofore or hereafter enacted,
including any provision thereof forbidding Mortgagor from making any
such payment. Mortgagor agrees to exhibit to Mortgagee, upon request,
official receipts showing payment of all taxes and charges which
Mortgagor is required to pay hereunder.
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<PAGE> 8
7. Recordation and Payment of Taxes and Expenses Incident
Thereto. Mortgagor will maintain and preserve the lien of this Mortgage
until all indebtedness hereby secured has been paid and satisfied in
full. Without limiting the foregoing, Mortgagor will cause this
Mortgage, all mortgages supplemental hereto and any financing statement
or other notice of a security interest required by Mortgagee at all
times to be kept, recorded and filed at its own expense in such manner
and in such places as may be required by law for the recording and
filing or for the rerecording and refiling of a mortgage, security
interest, assignment or other lien or charge upon the Mortgaged
Premises, or any part thereof, in order fully to preserve and protect
the rights of Mortgagee hereunder and, without limiting the foregoing,
Mortgagor will pay or reimburse Mortgagee and any Lender for the
payment of any and all taxes, fees or other charges incurred in
connection with any such recordation or rerecordation, including any
documentary stamp tax or tax imposed upon the privilege of having this
instrument or any instrument issued pursuant hereto recorded.
8. Insurance. Mortgagor will, at its expense, keep all
buildings, improvements, equipment and other property now or hereafter
constituting part of the Mortgaged Premises insured against loss or
damage by fire, lightning, windstorm, explosion and such other risks as
are usually included under extended coverage policies, or which are
usually insured against by companies similarly situated conducting
similar businesses and owning like properties, in amount sufficient to
prevent Mortgagor, Mortgagee or the Lenders from becoming a co-insurer
of any partial loss under applicable policies and in any event not less
than the then full insurable value (actual replacement value without
deduction for physical depreciation) thereof, as determined at the
request of Mortgagee and at Mortgagor's expense by the insurer or
insurers or by an expert approved by Mortgagee, all under insurance
policies payable, in case of loss or damage, to Mortgagee (and if
Mortgagee so requests, naming Mortgagee and the Lenders as additional
insureds therein), such rights to be evidenced by the usual standard
non-contributory form of mortgage clause to be attached to each policy.
Mortgagor shall not carry separate insurance concurrent in kind or form
and contributing in the event of loss, with any insurance required
hereby. Mortgagor shall also obtain and maintain public liability,
property damage and workmen's compensation insurance in each case in
form and content satisfactory to Mortgagee and in amounts as are
customarily carried by owners of like property and approved by
Mortgagee. Mortgagor shall also obtain and maintain such other
insurance with respect to the Mortgaged Premises in such amounts and
against such insurable hazards as Mortgagee from time to time may
require, including, without limitation, boiler and machinery insurance,
insurance against flood risks for any improvements located in a flood
plain when and to the extent obtainable from the United States
Government or any agency thereof, and insurance against loss of rent
due to fire and risks now or hereafter embraced by so-called "extended
coverage". All insurance
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<PAGE> 9
required hereby shall be maintained with good and responsible insurance
companies satisfactory to Mortgagee and shall not provide for any
deductible amount in excess of $250,000 not approved in writing by
Mortgagee, shall provide that any losses shall be payable
notwithstanding any act or negligence of Mortgagor, shall provide that
no cancellation thereof shall be effective until at least thirty days
after receipt by Mortgagor and Mortgagee of written notice thereof, and
shall be satisfactory to Mortgagee in all other respects. Upon the
execution of this Mortgage and thereafter not less than 15 days prior
to the expiration date of any policy delivered pursuant to this
instrument, Mortgagor will deliver to Mortgagee certificates evidencing
the policy or renewal policy, as the case may be, required by this
instrument, bearing notations evidencing the payment of all premiums.
In the event of foreclosure, Mortgagor authorizes and empowers
Mortgagee to effect insurance upon the Mortgaged Premises in amounts
aforesaid for a period covering the time of redemption from foreclosure
sale provided by law, and if necessary therefor to cancel any or all
existing insurance policies.
9. Damage to or Destruction of Mortgaged Premises.
(a) Notice. In case of any material damage to or
destruction of the Mortgaged Premises or any part thereof,
Mortgagor shall promptly give written notice thereof to
Mortgagee, generally describing the nature and extent of such
damage or destruction.
(b) Restoration. In case of any damage to or
destruction of the Mortgaged Premises or any part thereof,
Mortgagor, whether or not the insurance proceeds, if any,
received on account of such damage or destruction shall be
sufficient for the purpose, at Mortgagor's expense, will
promptly commence and complete (subject to unavoidable delays
occasioned by strikes, lockouts, acts of God, inability to
obtain labor or materials, governmental restrictions and
similar causes beyond the reasonable control of Mortgagor) the
restoration, replacement or rebuilding of the Mortgaged
Premises as nearly as possible to its value, condition and
character immediately prior to such damage or destruction,
provided that any part of the Mortgaged Premises so damaged or
destroyed need not be restored, replaced or rebuilt if (i)
prior to its damage or destruction, it had become
uneconomical, obsolete or worn out or (ii) it is not necessary
for or of importance to the proper conduct of the Mortgagor's
business in the ordinary course.
(c) Adjustment of Loss. Mortgagor hereby authorizes
Mortgagee, at Mortgagee's option, to adjust and compromise any
losses under any insurance afforded at any time after the
occurrence and during the continuation of any event of default
hereunder or any event which with the lapse of time, the
giving of
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notice, or both, would constitute an event of default
hereunder (herein, a "default"), but unless Mortgagee elects
to adjust the losses as aforesaid, said adjustment and/or
compromise shall be made by Mortgagor, subject to final
approval of Mortgagee (regardless of whether or not a default
or event of default hereunder shall have occurred) in the case
of losses exceeding $250,000.
(d) Application of Insurance Proceeds. Net insurance
proceeds (except in cases where (i) the amount payable in
respect of any one loss, when combined with amounts paid in
respect of all losses incurred during any calendar year, is
less than $250,000 and (ii) an event of default hereunder
shall not have occurred and be continuing, in which case the
amount payable in respect of such loss may be received by
Mortgagor and need not be applied toward the payment of the
amount owing on the indebtedness hereby secured or for the
restoration of the Mortgaged Premises damaged or destroyed)
received by Mortgagee under the provisions of this Mortgage or
any instruments supplemental hereto or thereto or under any
policy or policies of insurance covering the Mortgaged
Premises or any part thereof shall first be applied toward the
payment of the amount owing on the indebtedness hereby secured
in such order of application as Mortgagee may elect whether or
not the same may then be due or be otherwise adequately
secured; provided, however, that such proceeds shall be made
available for the restoration of the portion of the Mortgaged
Premises damaged or destroyed if written application for such
use is made within thirty (30) days of receipt of such
proceeds and the following conditions are satisfied: (i)
Mortgagor has in effect business interruption insurance
covering the income to be lost during the restoration period
as a result of the damage or destruction to the Mortgaged
Premises or provides Mortgagee with other evidence
satisfactory to it that Mortgagor has cash resources
sufficient to pay its obligations during the restoration
period; (ii) no event of default, or event which, with the
lapse of time, the giving of notice, or both, would constitute
an event of default hereunder, shall have occurred or be
continuing (and if such an event shall occur during
restoration Mortgagee may, at its election, apply any
insurance proceeds then remaining in its hands to the
reduction of the indebtedness evidenced by the NOTES and the
other indebtedness hereby secured); (iii) Mortgagor shall have
submitted to Mortgagee plans and specifications for the
restoration which shall be satisfactory to it; (iv) Mortgagor
shall submit to Mortgagee fixed price contracts with good and
responsible contractors and materialmen covering all work and
materials necessary to complete restoration and providing for
a total completion price not in excess of the amount of
insurance proceeds available for restoration, or, if a
deficiency shall exist, Mortgagor shall have deposited the
amount of such deficiency with Mortgagee and (v) Mortgagor
shall have obtained a waiver of the right of
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<PAGE> 11
subrogation from any insurer under such policies of insurance
who at that time claims that no liability exists as to
Mortgagor or the insured under such policies. Any insurance
proceeds to be released pursuant to the foregoing provisions
may at the option of Mortgagee be disbursed from time to time
as restoration progresses to pay for restoration work
completed and in place and such disbursements may at
Mortgagee's option be made directly to Mortgagor or to or
through any contractor or materialman to whom payment is due
or to or through a construction escrow to be maintained by a
title insurer acceptable to Mortgagee. Mortgagee may impose
such further conditions upon the release of insurance proceeds
(including the receipt of title insurance) as are customarily
imposed by prudent construction lenders to insure the
completion of the restoration work free and clear of all liens
or claims for lien. All title insurance charges and other
costs and expenses paid to or for the account of Mortgagor in
connection with the release of such insurance proceeds shall
constitute so much additional indebtedness hereby secured to
be payable upon demand with interest at the Default Rate.
Mortgagee may deduct any such costs and expenses from
insurance proceeds at any time standing in its hands. If
Mortgagor fails to request that insurance proceeds be applied
to the restoration of the improvements or if Mortgagor makes
such a request but fails to complete restoration within a
reasonable time, Mortgagee shall have the right, but not the
duty, to restore or rebuild said Mortgaged Premises or any
part thereof for or on behalf of Mortgagor in lieu of applying
said proceeds to the indebtedness hereby secured and for such
purpose may do all necessary acts, including using funds
deposited by Mortgagor as aforesaid and advancing additional
funds for the purpose of restoration, all such additional
funds to constitute part of the indebtedness hereby secured
payable upon demand with interest at the Default Rate.
10. Eminent Domain. Mortgagor acknowledges that Condemnation
Awards have been assigned to Mortgagee, which awards Mortgagee is
hereby irrevocably authorized to collect and receive, and to give
appropriate receipts and acquittances therefor, and at Mortgagee's
option, to apply the same toward the payment of the amount owing on
account of the indebtedness hereby secured in such order of application
as Mortgagee may elect and whether or not the same may then be due and
payable or otherwise adequately secured; provided, however, that a
Condemnation Award in respect of any taking of a portion (but not all
or any material portion) of the Mortgaged Premises shall be made
available for the restoration of such Mortgaged Premises in the same
manner and subject to the same conditions as are imposed on the release
of insurance proceeds set forth in Section 9(d) hereof as if the
Mortgaged Premises so taken were destroyed and the Condemnation Award
for such taking was actually insurance proceeds in respect of the
Mortgaged Premises so deemed as having been destroyed. In the event
that any proceeds
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<PAGE> 12
of a Condemnation Award shall be made available to Mortgagor for
restoring the Mortgaged Premises so taken, Mortgagor hereby covenants
to promptly commence and complete such restoration of the Mortgaged
Premises as nearly as possible to its value, condition and character
immediately prior to such taking. Mortgagor covenants and agrees that
Mortgagor will give Mortgagee immediate notice of the actual or
threatened commencement of any proceedings under condemnation or
eminent domain affecting all or any material part of the Mortgaged
Premises including any easement therein or appurtenance thereof or
severance and consequential damage and change in grade of streets, and
will deliver to Mortgagee copies of any and all papers served in
connection with any such proceedings. Mortgagor further covenants and
agrees to make, execute and deliver to Mortgagee, at any time or times
upon request, free, clear and discharged of any encumbrances of any
kind whatsoever, any and all further assignments and/or instruments
deemed necessary by Mortgagee for the purpose of validly and
sufficiently assigning all awards and other compensation heretofore and
hereafter to be made to Mortgagor for any taking, either permanent or
temporary, under any such proceeding.
11. Construction, Repair, Waste, Etc. Mortgagor agrees that
no building or other improvement on the Mortgaged Premises and
constituting a part thereof shall be materially altered, removed or
demolished nor shall any material fixtures or appliances on, in or
about said buildings or improvements be severed, removed, sold or
mortgaged, without the consent of Mortgagee, and in the event of the
demolition or destruction in whole or in part of any of the fixtures or
articles of personal property covered hereby, Mortgagor covenants that
the same will be replaced promptly by similar fixtures and articles of
personal property at least equal in quality and condition to those
replaced, free from any security interest in or encumbrance thereon or
reservation of title thereto other than liens permitted by the Credit
Agreement and the Permitted Exceptions; provided, however, that
Mortgagor may alter, remove or demolish any such building, improvement,
fixture or appliance, and need not replace any such fixtures or
personal property, in each case to the extent such action (i) is
desirable to the proper conduct of the business of Mortgagor in the
ordinary course as presently conducted and otherwise in the best
interest of Mortgagor, (ii) does not impair the overall value or
utility of the Mortgaged Premises and Mortgagor's other related
properties as an integrated facility, (iii) does not decrease the
efficiency or capacity of the Mortgaged Premises and (iv) does not
impair the rights and benefits under this Mortgage of the Lenders.
Mortgagor further agrees to permit, commit or suffer no material waste,
impairment or deterioration of the Mortgaged Premises or any part
thereof; to keep and maintain said Mortgaged Premises and every part
thereof in good working condition (ordinary wear and tear excepted);
to effect such repairs as Mortgagee may reasonably require and from
time to time to make all needful and proper replacements and additions
so that said buildings, fixtures, machinery and appurtenances will,
at all times, be in good working condition (ordinary wear and tear
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<PAGE> 13
excepted), fit and proper for the respective purposes for which
they were originally erected or installed; to comply with all statutes,
orders, requirements or decrees relating to the Mortgaged Premises by
any federal, state or municipal authority if the failure to comply with
such statutes, orders, requirements or decrees could have a material
adverse effect on the Mortgaged Premises or the business or financial
condition of the Mortgagor; to observe and comply with all conditions
and requirements necessary to preserve and extend any and all rights,
licenses, permits (including, but not limited to, zoning variances,
special exceptions and non-conforming uses), privileges, franchises and
concessions which are applicable to the Mortgaged Premises or which
have been granted to or contracted for by Mortgagor in connection with
any existing or presently contemplated use of the Mortgaged Premises or
any part thereof and not to initiate or acquiesce in any changes to or
terminations of any of the foregoing or of zoning classifications
affecting the use to which the Mortgaged Premises or any part thereof
may be put without the prior written consent of Mortgagee; and to make
no material alterations in or improvements or additions to the
Mortgaged Premises except as required by governmental authority or as
permitted by Mortgagee. Mortgagor will not lease the Mortgaged Premises
or any material part thereof without the prior written consent of
Mortgagee, which consent shall not be unreasonably withheld.
12. Liens and Encumbrances. Mortgagor will not, without the
prior written consent of Mortgagee, directly or indirectly, create or
suffer to be created or to remain and will discharge or promptly cause
to be discharged any mortgage, lien, encumbrance or charge on, pledge
of, or conditional sale or other title retention agreement with respect
to, the Mortgaged Premises or any part thereof, whether superior or
subordinate to the lien hereof, except for this instrument, liens
permitted by the Credit Agreement and the Permitted Exceptions.
13. Right of Mortgagee to Perform Mortgagor's Covenants, Etc.
If Mortgagor shall fail to make any payment or perform any act required
to be made or performed hereunder, Mortgagee, without waiving or
releasing any obligation or default, may (but shall be under no
obligation to) at any time after notice to the Mortgagor make such
payment or perform such act for the account and at the expense of
Mortgagor, and may enter upon the Mortgaged Premises or any part
thereof for such purpose and take all such action thereon as, in the
opinion of Mortgagee, may be reasonably necessary or appropriate
therefor. All sums so paid by Mortgagee and all reasonable costs and
expenses (including without limitation attorney's fees and expenses) so
incurred, together with interest thereon from the date of payment or
incurrence at the Default Rate, shall constitute so much additional
indebtedness hereby secured and shall be paid by Mortgagor to Mortgagee
on demand. Mortgagee in making any payment authorized under this
Section relating to taxes or assessments may do so according to any
bill, statement or
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<PAGE> 14
estimate procured from the appropriate public office without inquiry
into the accuracy of such bill, statement or estimate or into the
validity of any tax assessment, sale, forfeiture, tax lien or title or
claim thereof.
14. After-Acquired Property. Any and all property hereafter
acquired which is of the kind or nature herein provided, or intended to
be and become subject to the lien hereof, shall ipso facto, and without
any further conveyance, assignment or act on the part of Mortgagor,
become and be subject to the lien of this Mortgage as fully and
completely as though specifically described herein; but nevertheless
Mortgagor shall from time to time, if requested by Mortgagee, execute
and deliver any and all such further assurances, conveyances and
assignments as Mortgagee may reasonably require for the purpose of
expressly and specifically subjecting to the lien of this Mortgage all
such property.
15. Inspection by Mortgagee. Mortgagee, any Lender and their
respective representatives shall have the right to inspect the
Mortgaged Premises at all reasonable times, and access thereto shall be
permitted for that purpose; provided, however, that prior to the
occurrence of any Default or Event of Default hereunder, any such
access or inspection shall only be required during the Mortgagor's
normal business hours and shall only be permitted with at least 24
hours advance notice.
16. Reports on Mortgaged Premises. Mortgagor will furnish to
Mortgagee or any Lender such information and data with respect to the
Mortgaged Premises as Mortgagee or such Lender may reasonably request.
17. Subrogation. Mortgagor acknowledges and agrees that
Mortgagee shall be subrogated to any lien discharged out of the
proceeds of the loan evidenced by any Note or out of any advance by
Mortgagee hereunder, irrespective of whether or not any such lien may
have been released of record.
18. Events of Default. Any one or more of the following shall
constitute an event of default hereunder:
(a) Failure to pay when due any indebtedness hereby
secured; or
(b) Any event occurs or condition exists which is
specified as an Event of Default under the Credit Agreement;
or
(c) The Mortgaged Premises or any material part
thereof shall be sold, transferred, or conveyed, whether
voluntarily or involuntarily, by operation of law or
otherwise, except for sales of obsolete, worn out or unusable
fixtures or
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<PAGE> 15
personal property which are concurrently replaced (unless the
Mortgagor, in the exercise of its commercially reasonable
judgment deems such replacement not necessary or impractical
and such failure to replace would cause no material adverse
change in the Mortgaged Premises) with similar fixtures or
personal property at least equal in quality and condition to
those sold and owned by Mortgagor free of any lien, charge or
encumbrance other than the lien hereof; or
(d) Any indebtedness secured by a lien or charge on
the Mortgaged Premises or any part thereof is not paid when
due after the expiration of applicable grace periods and the
giving of applicable notices, if any (unless such indebtedness
is being contested in good faith by appropriate proceedings
which prevent the enforcement of the matter under contest and
adequate reserves have been established therefor), or
proceedings are commenced to foreclose or otherwise realize
upon any such lien or charge or to have a receiver appointed
for the property subject thereto or to place the holder of
such indebtedness or its representative in possession thereof;
or
(e) The Mortgaged Premises is abandoned.
19. Remedies. When any event of default has happened and is
continuing (regardless of the pendency of any proceeding which has or
might have the effect of preventing Mortgagor from complying with the
terms of this instrument and of the adequacy of the security for the
Notes, Letters of Credit and the other indebtedness hereby secured) and
in addition to such other rights as may be available under applicable
law, but subject at all times to any mandatory legal requirements:
(a) Acceleration. As and to the extent expressly
permitted by the Credit Agreement, Mortgagee may, by written
notice to Mortgagor, declare the Notes and all unpaid
indebtedness hereby secured, including the reimbursement
obligations of the Mortgagor in connection with any Letters of
Credit, including any interest then accrued thereon, to be
forthwith due and payable, whereupon the same shall become and
be forthwith due and payable, without other notice or demand
of any kind.
(b) Uniform Commercial Code. Mortgagee shall, with
respect to any part of the Mortgaged Premises constituting
property of the type in respect of which realization on a lien
or security interest granted therein is governed by the
Uniform Commercial Code, have all the rights, options and
remedies of a secured party under the Uniform Commercial Code
of Illinois, including without limitation, the right to the
possession of any such property, or any part thereof, and the
right
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<PAGE> 16
to enter without legal process any premises where any such
property may be found. Any requirement of said Code for
reasonable notification shall be met by mailing written notice
to Mortgagor at its address above set forth at least 10
Business Days prior to the sale or other event for which such
notice is required. The expenses of retaking, selling, and
otherwise disposing of said property, including reasonable
attorney's fees and legal expenses incurred in connection
therewith, shall constitute so much additional indebtedness
hereby secured and shall be payable upon demand with interest
at the Default Rate.
(c) Foreclosure. Mortgagee may proceed to protect
and enforce the rights of Mortgagee or Lenders hereunder (i)
by any action at law, suit in equity or other appropriate
proceedings, whether for the specific performance of any
agreement contained herein, or for an injunction against the
violation of any of the terms hereof, or in aid of the
exercise of any power granted hereby or by law, or (ii) by the
foreclosure of this Mortgage.
(d) Appointment of Receiver. Mortgagee shall, as a
matter of right, without notice and without giving bond to
Mortgagor or anyone claiming by, under or through it, and
without regard to the solvency or insolvency of Mortgagor or
the then value of the Mortgaged Premises, be entitled to have
a receiver appointed of all or any part of the Mortgaged
Premises and the rents, issues and profits thereof, with such
power as the court making such appointment shall confer, and
Mortgagor hereby consents to the appointment of such receiver
and shall not oppose any such appointment. Any such receiver
may, to the extent permitted under applicable law, without
notice, enter upon and take possession of the Mortgaged
Premises or any part thereof by force, summary proceedings,
ejectment or otherwise, and may remove Mortgagor or other
persons and any and all property therefrom, and may hold,
operate and manage the same and receive all earnings, income,
rents, issues and proceeds accruing with respect thereto or
any part thereof, whether during the pendency of any
foreclosure or until any right of redemption shall expire or
otherwise.
(e) Taking Possession, Collecting Rents, Etc.
Mortgagee may enter and take possession of the Mortgaged
Premises or any part thereof and manage, operate, insure,
repair and improve the same and take any action which, in
Mortgagee's reasonable judgment, is necessary or proper to
conserve the value of the Mortgaged Premises. Mortgagee may
also take possession of, and for these purposes use, any and
all personal property contained in the Mortgaged Premises and
used in the operation, rental or leasing thereof or any part
thereof. Mortgagee shall be entitled to collect and receive
all earnings, revenues, rents, issues and
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<PAGE> 17
profits of the Mortgaged Premises or any part thereof (and for
such purpose Mortgagor does hereby irrevocably constitute and
appoint Mortgagee its true and lawful attorney-in-fact for it
and in its name, place and stead to receive, collect and
receipt for all of the foregoing, Mortgagor irrevocably
acknowledging that any payment made to Mortgagee hereunder
shall be a good receipt and acquittance against Mortgagor to
the extent so made) and to apply same to the reduction of the
indebtedness hereby secured. The right to enter and take
possession of the Mortgaged Premises and use any personal
property therein, to manage, operate and conserve the same,
and to collect the rents, issues and profits thereof, shall be
in addition to all other rights or remedies of Mortgagee
hereunder or afforded by law, and may be exercised
concurrently therewith or independently thereof. The
reasonable expenses (including any receiver's fees, counsel
fees, costs and agent's compensation) incurred pursuant to the
powers herein contained shall be so much additional
indebtedness hereby secured which Mortgagor promises to pay
upon demand together with interest at the Default Rate.
Mortgagee shall not be liable to account to Mortgagor for any
action taken pursuant hereto other than to account for any
rents actually received by Mortgagee. Without taking
possession of the Mortgaged Premises, Mortgagee may, in the
event the Mortgaged Premises becomes vacant or is abandoned,
take such steps as it deems appropriate to protect and secure
the Mortgaged Premises (including hiring watchmen therefor)
and all reasonable costs incurred in so doing shall constitute
so much additional indebtedness hereby secured payable upon
demand with interest thereon at the Default Rate.
20. Waiver of Right to Redeem From Sale - Waiver of
Appraisement, Valuation, Etc. Mortgagor shall not and will not apply
for or avail itself of any appraisement, valuation, stay, extension or
exemption laws, or any so-called "Moratorium Laws", now existing or
hereafter enacted in order to prevent or hinder the enforcement or
foreclosure of this Mortgage, but hereby waives the benefit of such
laws. Mortgagor for itself and all who may claim through or under it
waives any and all right to have the property and estates comprising
the Mortgaged Premises marshalled upon any foreclosure of the lien
hereof and agrees that any court having jurisdiction to foreclose such
lien may order the Mortgaged Premises sold as an entirety. In the event
of any sale made under or by virtue of this instrument, the whole of
the Mortgaged Premises may be sold in one parcel as an entirety or in
separate lots or parcels at the same or different times, all as the
Mortgagee may determine. Mortgagee or any Lender shall have the right
to become the purchaser at any sale made under or by virtue of this
instrument; and Mortgagee or any Lender so purchasing at any such sale
shall have the right to be credited upon the amount of the bid made
therefor by Mortgagee or such Lender with the amount payable to
Mortgagee or such Lender out of the net proceeds of such sale, and upon
compliance with
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<PAGE> 18
the terms of sale, may hold, retain and possess and dispose of such
property in its own absolute right without further accountability. In
the event of any such sale, the Notes, the Reimbursement Obligations
and the other indebtedness hereby secured, if not previously due, shall
be and become immediately due and payable without demand or notice of
any kind. Mortgagor hereby waives any and all rights of redemption
prior to or from sale under any order or decree of foreclosure pursuant
to rights herein granted, on behalf of Mortgagor, and each and every
person acquiring any interest in, or title to the Mortgaged Premises
described herein subsequent to the date of this Mortgage, and on behalf
of all other persons to the extent permitted by applicable law.
21. Costs and Expenses of Foreclosure. In any suit to
foreclose the lien hereof there shall be allowed and included as
additional indebtedness in the decree for sale all reasonable
expenditures and expenses which may be paid or incurred by or on behalf
of Mortgagee or any Lender for attorney's fees, appraiser's fees,
outlays for documentary and expert evidence, stenographic charges,
publication costs and costs (which may be estimated as to items to be
expended after the entry of the decree) of procuring all such abstracts
of title, title searches and examination, guarantee policies, Torrens
certificates and similar data and assurances with respect to title as
Mortgagee or any Lender may deem to be reasonably necessary either to
prosecute any foreclosure action or to evidence to the bidder at any
sale pursuant thereto the true condition of the title to or the value
of the Mortgaged Premises, all of which expenditures shall become so
much additional indebtedness hereby secured which Mortgagor agrees to
pay and all of such shall be immediately due and payable with interest
thereon from the date of expenditure until paid at the Default Rate.
22. Application of Proceeds. The proceeds and avails of the
Mortgaged Premises, including without limitation the proceeds of any
foreclosure sale of the Mortgaged Premises or of any sale of property
pursuant to Section l9(b) hereof, shall, when received by Mortgagee in
cash or its equivalent, be applied by the Mortgagee as set forth in
Section 3.5 of the Credit Agreement. Mortgagor shall remain liable to
Mortgagee and the Lenders for any deficiency. Any surplus remaining
after the full payment and satisfaction of the foregoing shall be
returned to Mortgagor or to whomsoever a court of competent
jurisdiction shall determine to be entitled thereto.
23. Deficiency Decree. If at any foreclosure proceeding the
Mortgaged Premises shall be sold for a sum less than the total amount
of indebtedness for which judgment is therein given, the judgment
creditor shall be entitled to the entry of a deficiency decree against
Mortgagor and against the property of Mortgagor for the amount of such
deficiency; and Mortgagor does hereby irrevocably consent to the
appointment of a receiver for the Mortgaged Premises and the property
of Mortgagor and
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<PAGE> 19
of the rents, issues and profits thereof after such sale and until such
deficiency decree is satisfied in full.
24. Mortgagee's Remedies Cumulative - No Waiver. No remedy or
right of Mortgagee shall be exclusive of but shall be cumulative and in
addition to every other remedy or right now or hereafter existing at
law or in equity or by statute or otherwise. No delay in the exercise
or omission to exercise any remedy or right accruing on any default
shall impair any such remedy or right or be construed to be a waiver of
any such default or acquiescence therein, nor shall it affect any
subsequent default of the same or a different nature. Every such remedy
or right may be exercised concurrently or independently, and when and
as often as may be deemed expedient by Mortgagee.
25. Mortgagee Party to Suits. Mortgagee shall have the power
and authority (but not the duty) to institute and maintain any suits
and proceedings as Mortgagee may deem advisable (a) to prevent any
impairment of the Mortgaged Premises by any acts which may be unlawful
or which violate the terms of this Mortgage, (b) to preserve or protect
its interest in the Mortgaged Premises or (c) to restrain the
enforcement of or compliance with any legislation or other governmental
enactment, rule or order that may be unconstitutional or otherwise
invalid, if the enforcement of or compliance with such enactment, rule
or order might impair the security hereunder or be prejudicial to
Mortgagee's or Lender's interest. If Mortgagee or any Lender shall be
made a party to or shall intervene in any action or proceeding
affecting the Mortgaged Premises or the title thereto or the interest
of Mortgagee or any Lender under this Mortgage (including probate and
bankruptcy proceedings), or if Mortgagee or any Lender employs an
attorney to collect any or all of the indebtedness hereby secured or to
enforce any of the terms hereof or realize hereupon or to protect the
lien hereof, or if Mortgagee or any Lender shall incur any costs or
expenses in preparation for the commencement of any foreclosure
proceedings or for the defense of any threatened suit or proceeding
which might affect the Mortgaged Premises or the security hereof,
whether or not any such foreclosure or other suit or proceeding shall
be actually commenced, then in any such case, Mortgagor agrees to pay
to Mortgagee or such Lender, as the case may be, immediately and
without demand, all reasonable costs, charges, expenses and attorney's
fees incurred by Mortgagee or such Lender in any such case, and the
same shall constitute so much additional indebtedness hereby secured
payable upon demand with interest at the Default Rate.
26. Modifications Not to Affect Lien. Mortgagee, without
notice to anyone (except the Lenders), and without regard to the
consideration, if any, paid therefor, or the presence of other liens on
the Mortgaged Premises, may at the direction of the Lenders release any
part of the Mortgaged Premises or any person liable for any of the
indebtedness hereby secured, may extend the time of payment of any of
the indebtedness hereby secured and may grant waivers or other
indulgences with respect hereto and thereto, and may agree with
Mortgagor to modifications to the terms and conditions contained herein
or otherwise applicable to any of the indebtedness hereby secured
(including modifications in the rates of interest applicable thereto),
without in any way affecting or impairing the liability of any party
liable upon any of the indebtedness
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<PAGE> 20
hereby secured or the priority of the lien of this Mortgage upon all of
the Mortgaged Premises not expressly released, and any party acquiring
any direct or indirect interest in the Mortgaged Premises shall take
same subject to all of the provisions hereof.
27. Revolving Credit Loan. This Mortgage is given to secure,
among other things, a revolving credit loan and shall secure not only
presently existing indebtedness under the Credit Agreement but also
future advances, or otherwise, as are made within twenty (20) years
from the date hereof, to the same extent as if such future advances
were made on the date of the execution of this Mortgage, although there
may be no advance made at the time of execution of this Mortgage and
although there may be no indebtedness hereby secured outstanding at the
time any advance is made. The lien of this Mortgage shall be valid as
to all indebtedness hereby secured, including future advances, from the
time of its filing for record in the recorder's or registrar's office
of the county in which the Mortgaged Premises are located. The total
amount of indebtedness hereby secured may increase or decrease from
time to time, but the total unpaid balance of indebtedness hereby
secured (including disbursements which Mortgagee may make under this
Mortgage, the Credit Agreement or any other documents related thereto)
at any one time outstanding shall not exceed a maximum principal amount
of One Hundred Million Dollars ($100,000,000) plus interest thereon and
any disbursements made for payment of taxes, special assessments or
insurance on the Mortgaged Premises and interest on such disbursements
(all such indebtedness being hereinafter referred to as the "maximum
amount secured hereby"). This Mortgage shall be valid and have priority
over all subsequent liens and encumbrances, including statutory liens,
excepting solely taxes and assessments levied on the Mortgaged
Premises, to the extent of the maximum amount secured hereby.
28. Notices. All communications provided for herein shall be
in writing (including cable, telecopy or telex) and shall be given to
the relevant party at its address, telecopier number or telex number
set forth below, in the case of the Mortgagor or the Mortgagee, or on
the signature pages of the Credit Agreement, in the case of the
Lenders, or such other address, telecopier number or telex number as
such party may hereafter specify by notice to the Mortgagor and the
Mortgagee given by United States certified or registered mail, by
telecopy or by other telecommunication device capable of creating a
written record of such notice and its receipt:
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<PAGE> 21
Morton Metalcraft Co.
1021 West Birchwood
Morton, Illinois 61550-0429
Attention: Chief Financial Officer
Telephone: (309) 266-7176
Telecopy: (309) 263-1841
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Attention: Richard Michalek
Telephone: (312) 461-2272
Telecopy: (312) 461-2591
Each such notice, request or other communication shall be effective (i)
if given by telecopier, when such telecopy is transmitted to the
telecopier number specified herein and a confirmation of such telecopy
has been received by the sender, (ii) if given by telex, when such
telex is transmitted to the telex number specified herein and the
answer back is received by sender, (iii) if given by mail, five (5)
days after such communication is deposited in the mail, certified or
registered with return receipt requested, addressed as aforesaid or
(iv) if given by any other means, when delivered at the addresses
specified herein.
29. Compliance with Environmental Laws. Mortgagor represents
and warrants that, to the best of Mortgagor's knowledge, except as
heretofore disclosed in writing to the Mortgagee, the Mortgaged
Premises complies in all material respects with all applicable federal,
state, regional, county or local laws, statutes, rules, regulations or
ordinances (collectively, "Environmental Laws"), including, but not
limited to, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. SS.9601 et seq., the Resource
Conservation and Recovery Act of 1976, as amended by the Solid and
Hazardous Waste Amendments of 1984, 42 U.S.C. SS.6901 et seq., the
Federal Water Pollution Control Act, as amended by the Clean Water Act
of 1977, 33 U.S.C. SS.1251 et seq., the Toxic Substances Control Act of
1976, 15 U.S.C. SS.2601 et seq., the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. SS.11001 et seq., the Clean Air
Act of 1966, as amended, 42 U.S.C. SS.7401 et seq., the National
Environmental Policy Act of 1975, 42 U.S.C. SS.4321, the Rivers and
Harbours Act of 1899, 33 U.S.C. SS.401 et seq., the Occupational Safety
and Health Act of 1970, 29 U.S.C. SS.651 et seq., and the Safe Drinking
Water Act of 1974, as amended, 42 U.S.C. SS.300(F) et seq., and all
rules, regulations and guidance documents promulgated or published
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<PAGE> 22
thereunder, and any state, regional, county or local statute, law,
rule, regulation or ordinance relating to public health, safety or the
environment, including, without limitation, relating to releases,
discharges, emissions or disposals to air, water, land or groundwater,
to the withdrawal or use of groundwater, to the use, handling or
disposal of polychlorinated biphenyls (PCBs), asbestos or urea
formaldehyde, to the treatment, storage, disposal or management of
hazardous substances (including, without limitation, petroleum, its
derivatives or by-products, or other hydrocarbons), to exposure to
toxic, hazardous, or other controlled, prohibited or regulated
substances, to the transportation, storage, disposal, management or
release of gaseous or liquid substances, and any regulation, order,
injunction, judgment, declaration, notice or demand issued thereunder.
30. Condition of Property. Mortgagor warrants and represents
that, to the best of its knowledge, except as heretofore disclosed in
writing to the Mortgagee, the Mortgaged Premises, including all
personal property, is free from contamination, that there has not been
thereon a release, discharge or emission, or threat of release,
discharge or emission, of any hazardous substance, gas or liquid
(including, without limitation, petroleum, its derivatives or
by-products, or other hydrocarbons), or any other substance, gas or
liquid, which is prohibited, controlled or regulated under applicable
law, or which poses a threat or nuisance to safety, health or the
environment, and that the Mortgaged Premises does not contain, or is
not affected by, except to the extent not in violation of Environmental
Laws: (i) asbestos, (ii) urea formaldehyde foam insulation, (iii)
polychlorinated biphenyls (PCBs), (iv) underground storage tanks, (v)
landfills, land disposals or dumps.
31. Notice of Environmental Problem. Except as heretofore
disclosed in writing to the Mortgagee, Mortgagor represents and
warrants that to the best of its knowledge it has not given, nor should
it give, nor has it received, any notice, letter, citation, order,
warning, complaint, inquiry, claim or demand that: (i) Mortgagor has
violated, or is about to violate, any federal, state, regional, county
or local environmental, health or safety statute, law, rule,
regulation, ordinance, judgment or order on the Mortgaged Premises;
(ii) there has been a release, or there is threat of release, of
hazardous substances (including, without limitation, petroleum, its
by-products or derivatives, or other hydrocarbons) from the Mortgaged
Premises; (iii) Mortgagor may be or is liable, in whole or in part, for
the costs or cleaning up, remediating or responding to a release of
hazardous substances (including, without limitation, petroleum, its
by-products or derivatives, or other hydrocarbons) on the Mortgaged
Premises; (iv) any of the Mortgagor's property or assets are subject to
a lien in favor of any governmental body for any liability, costs or
damages, under federal, state or local environmental law, rule or
regulation arising from or costs incurred by such governmental entity
in response to a release of a hazardous substance (including, without
limitation, petroleum, its by-products
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<PAGE> 23
or derivatives, or other hydrocarbons). In the event that Mortgagor
receives any notice of the type described in this Section, Mortgagor
shall promptly provide a copy to Mortgagee, and in no event, later than
fifteen (15) days from Mortgagor's receipt or submission thereof.
32. Use of Property and Facilities. Mortgagor represents and
warrants that to the best of its knowledge, except as heretofore
disclosed in writing to the Mortgagee, it has never in the past engaged
in, and agrees that in the future it shall not conduct, any business,
operations or activity on the Mortgaged Premises, or employ or use the
personal property or facilities, to manufacture, use, generate, treat,
store, transport or dispose of any hazardous substance (including,
without limitation, petroleum, its derivatives or by-products, or other
hydrocarbons), or any other substance which is prohibited, controlled
or regulated under applicable law, or which poses a threat or nuisance
to safety, health or the environment, including, without limitation,
any business, operation or activity which would cause Mortgagor, its
property or facilities, to be in violation of the Resource Conservation
and Recovery Act of 1976, as amended by the Solid and Hazardous Waste
Amendments of 1984, 42 U.S.C. SS.6901 et seq., the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. SS.9601 et seq., the Clean Air Act of 1966, as amended, 42
U.S.C. SS.7401 et seq., or any similar state, county, regional or local
statute, law, regulation, rule or ordinance, including, without
limitation, any state statute providing for financial responsibility
for cleanup for the release or threatened release of substances
provided for thereunder. The provisions of this Section shall apply to
all real and personal property, without limitation, owned or controlled
by Mortgagor or its subsidiaries.
33. Partial Invalidity. All rights, powers and remedies
provided herein are intended to be limited to the extent necessary so
that they will not render this Mortgage invalid, unenforceable or not
entitled to be recorded, registered or filed under any applicable law.
If any term of this Mortgage shall be held to be invalid, illegal or
unenforceable, the validity and enforceability of the other terms of
this Mortgage shall in no way be affected thereby.
34. Agent. Mortgagee has been appointed as agent pursuant to
the Credit Agreement. In acting under or by virtue of this Mortgage,
Mortgagee shall be entitled to all the rights, authority, privileges
and immunities provided in Section 10 of the Credit Agreement, all of
which provisions of said Section 10 are incorporated by reference
herein with the same force and effect as if set forth herein. Mortgagee
hereby disclaims any representation or warranty to Lenders concerning
the perfection of the security interest granted hereunder or the value
of the Mortgaged Premises.
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<PAGE> 24
35. Restrictions on Lenders' Right to Enforce. No Lender
shall have the right to institute any suit, action or proceeding in
equity or at law for the foreclosure of this Mortgage or for the
execution of any trust or power hereof or for the appointment of a
receiver, or for the enforcement of any other remedy under or upon this
Mortgage; it being understood and intended that no one or more of the
Lenders shall have any right in any manner whatsoever to affect,
disturb or prejudice the lien of this Mortgage by its or their action
or to enforce any right hereunder, and that all proceedings at law or
in equity shall be instituted, had and maintained by the Mortgagee in
the manner herein provided and for the ratable benefit of the Lenders.
36. Successors and Assigns. Whenever any of the parties
hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all the covenants, promises
and agreements in this Mortgage contained by or on behalf of Mortgagor,
or by or on behalf of Mortgagee or Lenders, shall bind and inure to the
benefit of the respective successors and assigns of such parties,
whether so expressed or not. Without limiting the generality of the
foregoing, and subject to the provisions of Sections 12.14 and 12.15 of
the Credit Agreement, any Lender may assign or otherwise transfer any
indebtedness held by it secured by this Mortgage to any other person or
entity, and such other person or entity shall thereupon become vested
with all the benefits in respect thereof granted to such Lender herein
or otherwise, subject, however, to the provisions of the Credit
Agreement.
37. Default Rate. For purposes of this Mortgage, "Default
Rate" shall mean the rate per annum (computed on the basis of a year of
365 or 366 days, as the case may be, for the actual number of days
elapsed) determined by adding 2% to the rate per annum from time to
time announced by Harris as its prime commercial rate (with any change
in the Default Rate resulting from a change in such prime commercial
rate to be and become effective as of and on the date of the relevant
change in such prime commercial rate).
38. Liens Absolute, Etc. Mortgagor acknowledges and agrees
that the lien and security interest hereby created and provided for are
absolute and unconditional and shall not in any manner be affected or
impaired by any acts or omissions whatsoever of Mortgagee or any other
holder of any of the indebtedness hereby secured, and without limiting
the generality of the foregoing, the lien and security hereof shall not
be impaired by any acceptance by Mortgagee or any other holder of any
of the indebtedness hereby secured of any other security for or
guarantors upon any of the indebtedness hereby secured or by any
failure, neglect or omission on the part of Mortgagee or any other
holder of any of the indebtedness hereby secured to realize upon or
protect any of the indebtedness hereby secured or any collateral or
security therefor. The lien and security interest hereof shall not in
any manner be impaired or affected by (and Mortgagee, without
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<PAGE> 25
notice to anyone, is hereby authorized to make from time to time) any
sale, pledge, surrender, compromise, settlement, release, renewal,
extension, indulgence, alteration, substitution, exchange, change in,
modification or disposition of any of the indebtedness hereby secured,
or of any collateral or security therefor, or of any guaranty thereof,
or of any instrument or agreement setting forth the terms and
conditions pertaining to any of the foregoing. The Lenders may at their
discretion at any time grant credit to any Borrower without notice to
Mortgagor in such amounts and on such terms as such Lenders may elect
(all of such to constitute additional indebtedness hereby secured)
without in any manner impairing the lien and security interest created
and provided for herein. In order to realize hereon and to exercise the
rights granted Mortgagee hereby and under applicable law, there shall
be no obligation on the part of Mortgagee or any other holder of any of
the indebtedness hereby secured at any time to first resort for payment
to any Borrower or to any guaranty of any of the indebtedness hereby
secured or any portion thereof or to resort to any other collateral,
security, property, liens or any other rights or remedies whatsoever,
and Mortgagee shall have the right to enforce this Mortgage
irrespective of whether or not other proceedings or steps seeking
resort to or realization upon or from any of the foregoing are pending.
39. Direct and Primary Security - No Subrogation. The lien
and security interest herein created and provided for stand as direct
and primary security for the Notes as well as for any of the other
indebtedness hereby secured. No application of any sums received by
Mortgagee in respect of the Mortgaged Premises or any disposition
thereof to the reduction of the indebtedness hereby secured or any part
thereof shall in any manner entitle Mortgagor to any right, title or
interest in or to the indebtedness hereby secured or any collateral or
security therefor, whether by subrogation or otherwise, unless and
until all indebtedness hereby secured has been fully paid and satisfied
and any commitment of the Lenders to extend credit to Mortgagor or to
any Borrower shall have expired.
40. Headings. The headings in this instrument are for
convenience of reference only and shall not limit or otherwise affect
the meaning of any provision hereof.
41. Changes, Etc. This instrument and the provisions hereof
may be changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of the change,
waiver, discharge or termination is sought.
42. Governing Law. The creation of this Mortgage, the
perfection of the lien or security interest in the Mortgaged Premises,
and the rights and remedies of the Mortgagee with respect to the
Mortgaged Premises, as provided herein and by the laws of the state in
which the Mortgaged Premises is
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located, shall be governed by and construed in accordance with the
internal laws of the state in which the Mortgaged Premises is located
without regard to principles of conflicts of law. OTHERWISE, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, THE MORTGAGE, THE CREDIT AGREEMENT,
THE NOTES, THE LETTERS OF CREDIT AND ALL OTHER OBLIGATIONS OF MORTGAGOR
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
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IN WITNESS WHEREOF, Mortgagor has caused these presents to be signed
the day and year first above written.
MORTON METALCRAFT CO.
By
Its______________________
__________________
(Type or Print Name)
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<PAGE> 28
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
I, _______________________________, a Notary Public in and for said
County, in the State aforesaid, do hereby certify that _______________,
___________ of Morton Metalcraft Co., an Illinois corporation, who is personally
known to me to be the same person whose name is subscribed to the foregoing
instrument as such _____________, appeared before me this day in person and
acknowledged that he signed and delivered the said instrument as his own free
and voluntary act and as the free and voluntary act and deed of said corporation
for the uses and purposes therein set forth.
Given under my hand and notarial seal, this _____ day of January, 1998.
___________________________
_______
Notary Public
_____________________________
_______
(Type or Print Name)
(Notary Seal)
Commission Expires:
________________________________
<PAGE> 1
EXHIBIT 10.4
PLEDGE AGREEMENT
This Pledge Agreement (the "Agreement") is dated as of January 20,
1998, by and among the parties executing this Agreement under the heading
"Pledgors" (such parties, along with any parties who execute and deliver to the
Agent an agreement in the form attached hereto as Schedule E, being hereinafter
referred to collectively as the "Pledgors" and individually as a "Pledgor"),
each with its mailing address as set forth on the signature page hereto and
HARRIS TRUST AND SAVINGS BANK, an Illinois banking corporation ("Harris"), with
its mailing address at 111 West Monroe Street, Chicago, Illinois 60603, acting
as agent hereunder for the Secured Creditors hereinafter identified and defined
(Harris acting as such agent and any successor or successors to Harris acting in
such capacity being hereinafter referred to as the "Agent");
PRELIMINARY STATEMENTS
A. Morton Industrial Group, Inc., a Georgia corporation (the
"Company"), certain Subsidiaries of the Company, Harris, individually and as
agent, and certain lenders have entered into a Credit Agreement dated as of even
date herewith (such Credit Agreement, as the same may be amended or modified
from time to time, including amendments and restatements thereof in its
entirety, being hereinafter referred to as the "Credit Agreement"), pursuant to
which Harris and other lenders from time to time party to the Credit Agreement
(Harris and the other lenders which are now or from time to time hereafter
become party to the Credit Agreement, being hereinafter referred to collectively
as the "Lenders" and individually as a "Lender") have agreed, subject to certain
terms and conditions, to extend credit and make certain other financial
accommodations available to the Borrowers identified therein.
B. As a condition precedent to extending credit or otherwise making
financial accommodations available to the Borrowers under the Credit Agreement,
the Lenders have required, among other things, that each Pledgor grant to the
Agent for the benefit of the Lenders a lien on and security interest in certain
personal property of such Pledgor pursuant to this Agreement.
C. The Company owns, directly or indirectly, all or substantially all
of the equity interests in each Borrower and provides each Borrower with
financial, management, administrative, and technical support which enables such
Borrower to conduct its business in an orderly and efficient manner in the
ordinary course.
D. Each Borrower will benefit, directly or indirectly, from credit and
other financial accommodations extended by the Lenders to the Company.
<PAGE> 2
NOW, THEREFORE, for and in consideration of the execution and delivery
by the Lenders of the Credit Agreement, and other good and valuable
consideration, receipt whereof is hereby acknowledged, the parties hereto hereby
agree as follows:
Section 1. Terms Defined in Credit Agreement. All capitalized terms
used herein without definition shall have the same meanings herein as such terms
have in the Credit Agreement. The term "Pledgor" and "Pledgors" as used herein
shall mean and include the Pledgors collectively and also each individually,
with all grants, representations, warranties and covenants of and by the
Pledgors, or any of them, herein contained to constitute joint and several
grants, representations, warranties and covenants of and by the Pledgors;
provided, however, that unless the context in which the same is used shall
otherwise require, any grant, representation, warranty or covenant contained
herein related to the Collateral shall be made by each Pledgor only with respect
to the Collateral owned by it or represented by such Pledgor as owned by it.
Section 2. Grant of Security Interest in the Collateral. Each Pledgor
hereby grants to the Agent a security interest in, in each case for the ratable
benefit of the Lenders, and acknowledges and agrees that the Agent has and shall
continue to have for the ratable benefit of the Lenders a continuing security
interest in, any and all right, title and interest of each Pledgor, whether now
owned or existing or hereafter created, acquired or arising, in and to the
following (collectively, the "Collateral"):
(a) Stock Collateral. (i) All shares of the capital stock of each
of the issuers listed and described on Schedule A attached hereto owned
or held by such Pledgor, whether now owned or hereafter acquired (those
shares delivered to and deposited with the Agent on the date hereof
being listed and described on Schedule A attached hereto), and all
substitutions and additions to such shares (herein, the "Pledged
Securities"), (ii) all dividends, distributions and sums distributable
or payable from, upon or in respect of the Pledged Securities and
(iii) all other rights and privileges incident to the Pledged
Securities (all of the foregoing being hereinafter referred to
collectively as the "Stock Collateral");
(b) Partnership Interest Collateral. (i) Each partnership
identified on Schedule B attached hereto and made a part hereof (such
partnerships being hereinafter referred to collectively as the
"Partnerships" and individually as a "Partnership") and (ii) any and
all payments and distributions of whatever kind or character, whether
in cash or other property, at any time made, owing or payable to such
Pledgor in respect of or on account of its present or hereafter
acquired interests in the Partnerships, whether due or to become due
and whether representing profits, distributions pursuant to complete or
partial liquidation or dissolution of any such Partnership,
distributions representing the complete
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<PAGE> 3
or partial redemption of such Pledgor's interest in any such
Partnership or the complete or partial withdrawal of such Pledgor
from any such Partnership, repayment of capital contributions,
payment of management fees or commissions, or otherwise, and the
right to receive, receipt for, use and enjoy all such payments and
distributions (all of the foregoing being hereinafter collectively
called the "Partnership Interest Collateral"); and
(c) Proceeds. All proceeds of the foregoing.
All terms which are used in this Agreement which are defined in the Uniform
Commercial Code of the State of Illinois ("UCC") shall have the same meanings
herein as such terms are defined in the UCC, unless this Agreement shall
otherwise specifically provide.
Section 3. Obligations Hereby Secured. This Agreement is made and given
to secure, and shall secure, the payment and performance of (i)(x) any and all
indebtedness, obligations and liabilities of the Borrowers to the Agent, the
Lenders, or any of them individually, evidenced by or otherwise arising out of
or relating to the Credit Agreement or any promissory note of any of the
Borrowers issued at any time under the Credit Agreement (including all notes
issued in extension or renewal thereof or in substitution or replacement
therefor) and (y) any liability of the Pledgors, or any of them individually,
arising out of the Credit Agreement, as well as for any and all other
indebtedness, obligations and liabilities of the Pledgors, or any of them
individually, to the Agent, the Lenders, or any of them individually, evidenced
by or otherwise arising out of or relating to this Agreement or any other Loan
Document, in each case, whether now existing or hereafter arising (and whether
arising before or after the filing of a petition in bankruptcy), due or to
become due, direct or indirect, absolute or contingent, and howsoever evidenced,
held or acquired, and (ii) any and all expenses and charges, legal or otherwise,
suffered or incurred by the Agent, the Lenders, or any of them individually, in
collecting or enforcing any of such indebtedness, obligations or liabilities or
in realizing on or protecting or preserving any security therefor, including,
without limitation, the lien and security interest granted hereby (all of the
foregoing being hereinafter referred to as the "Obligations"). Notwithstanding
anything in this Agreement to the contrary, the right of recovery against any
Pledgor (other than the Borrowers to which this limitation shall not apply)
under this Agreement shall not exceed $1 less than the amount which would render
such Pledgor's obligations under this Agreement void or voidable under
applicable law, including fraudulent conveyance law.
Section 4. Covenants, Agreements, Representations and Warranties. Each
Pledgor hereby covenants and agrees with, and represents and warrants to, the
Agent and the Lenders that:
(a) Each Pledgor is and shall be the sole and lawful legal, record
and beneficial owner of its Collateral. Each Pledgor's chief executive
office or place of business at the
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<PAGE> 4
address listed under such Pledgor's name on Schedule A and Schedule B
hereto, as applicable. Each Pledgor agrees that it will not change any
location set forth on the applicable Schedule hereto without prior
written notice to the Agent, unless such location shall be outside the
United States, in which event, the Agent's prior written consent shall
be required, which consent shall not be unreasonably withheld. No
Pledgor shall, without the Agent's prior written consent, sell, assign,
or otherwise dispose of the Collateral or any interest therein. The
Collateral, and every part thereof, is and shall be free and clear of
all security interests, liens, rights, claims, attachments, levies and
encumbrances of every kind, nature and description and whether
voluntary or involuntary, except for the security interest of the Agent
hereunder and for other Liens which are expressly permitted by the
Credit Agreement. Each Pledgor shall warrant and defend the Collateral
against any claims and demands of all persons at any time claiming the
same or any interest in the Collateral adverse to the Agent and the
Lenders.
(b) Each Pledgor agrees to execute and deliver to the Agent such
further agreements, assignments, instruments and documents and to do
all such other things as the Agent may deem necessary or appropriate to
assure the Agent its lien and security interest hereunder, including
such assignments, acknowledgments (including acknowledgments of
assignment in the form attached hereto as Schedule C) stock powers,
financing statements, instruments and documents as the Agent may from
time to time require in order to comply with the Uniform Commercial
Code as enacted in the State of Illinois and any successor statute(s)
thereto (the "UCC"). Each Pledgor hereby agrees that a carbon,
photographic or other reproduction of this Agreement or any such
financing statement is sufficient for filing as a financing statement
by the Agent without notice thereof to such Pledgor wherever the Agent
in its discretion desires to file the same. In the event for any reason
the law of any jurisdiction other than Illinois becomes or is
applicable to the Collateral or any part thereof, or to any of the
Obligations, each Pledgor agrees to execute and deliver all such
agreements, assignments, instruments and documents and to do all such
other things as the Agent in its sole discretion deems necessary or
appropriate to preserve, protect and enforce the lien and security
interest of the Agent under the law of such other jurisdiction to at
least the same extent as such security interests would be protected
under the UCC.
(c) If, as and when any Pledgor (x) delivers any securities for
pledge hereunder in addition to those listed on Schedule A hereto or
(y) pledges interests in any Partnership in addition to those listed on
Schedule B hereto, the Pledgors shall furnish to the Agent a duly
completed and executed amendment to such Schedule in substantially the
form (with appropriate insertions) of Schedule D hereto reflecting the
securities pledged hereunder after giving effect to such addition.
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<PAGE> 5
(d) None of the Collateral constitutes margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal
Reserve System).
(e) On failure of any Pledgor to perform any of the agreements and
covenants herein contained, the Agent may, at its option, perform the
same and in so doing may expend such sums as the Agent may deem
advisable in the performance thereof, including, without limitation,
the payment of any taxes, liens and encumbrances, expenditures made in
defending against any adverse claim, and all other expenditures which
the Agent may be compelled to make by operation of law or which Agent
may make by agreement or otherwise for the protection of the security
hereof. All such sums and amounts so expended shall be repayable by the
Pledgors immediately without notice or demand, shall constitute
additional Obligations secured hereunder and shall bear interest from
the date said amounts are expended at the rate per annum (computed on
the basis of a 365-day or 366-day year, as the case may be, for the
actual number of days elapsed) determined by adding 2% to the Base Rate
(such rate per annum as so determined being hereinafter referred to as
the "Default Rate"). No such performance of any covenant or agreement
by the Agent on behalf of such Pledgor, and no such advancement or
expenditure therefor, shall relieve such Pledgor of any default under
the terms of this Agreement or in any way obligate the Agent or any
Lender to take any further or future action with respect thereto. The
Agent, in making any payment hereby authorized, may do so according to
any bill, statement or estimate procured from the appropriate public
office or holder of the claim to be discharged without inquiry into the
accuracy of such bill, statement or estimate, or into the validity of
any tax assessment, sale, forfeiture, tax lien or title or claim. The
Agent, in performing any act hereunder, shall be the sole judge of
whether the relevant Pledgor is required to perform the same under the
terms of this Agreement. The Agent is hereby authorized to charge any
depository or other account of any Pledgor maintained with the Agent
for the amount of such sums and amounts so expended.
Section 5. Special Provisions Re: Stock Collateral.
(a) Each Pledgor has the right to vote the Pledged Securities and
there are no restrictions upon the voting rights associated with, or
the transfer of, any of the Pledged Securities, except as provided by
federal and state laws applicable to the sale of securities generally.
(b) The certificates for all shares of the Pledged Securities shall
be delivered by the relevant Pledgor to the Agent or any bailee of the
Agent duly endorsed in blank for transfer or accompanied by an
appropriate assignment or assignments or an appropriate undated stock
power or powers, in every case sufficient to transfer title thereto.
Each Pledgor acknowledges and agrees that National City Bank,
Cleveland, Ohio ("NatCity")
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<PAGE> 6
currently acts and shall continue to act as the Agent's bailee
until such time as NatCity delivers the Pledged Securities and such
stock powers to the Agent or any other bailee of the Agent. The Agent
may at any time after the occurrence of an Event of Default cause to be
transferred into its name or into the name of its nominee or nominees
any and all of the Pledged Securities. The Agent shall at all times
have the right to exchange the certificates representing the Pledged
Securities for certificates of smaller or larger denominations.
(c) The Pledged Securities have been validly issued and are fully
paid and non-assessable. There are no outstanding commitments or other
obligations of the issuers of any of the Pledged Securities to issue,
and no options, warrants or other rights of any individual or entity to
acquire, any share of any class or series of capital stock of such
issuers. The Pledged Securities listed and described on Schedule A
attached hereto and delivered concurrently herewith to NatCity as the
Agent's bailee constitute the percentage of the issued and outstanding
capital stock of each series and class of the issuers thereof as set
forth thereon owned by the relevant Pledgor. Each Pledgor further
agrees that in the event any such issuer shall issue any additional
capital stock of any series or class (whether or not entitled to vote)
to such Pledgor or otherwise on account of its ownership interest
therein, each Pledgor will forthwith pledge and deposit hereunder, or
cause to be pledged and deposited hereunder, all such additional shares
of such capital stock.
Section 6. Special Provisions Re: Partnership Interest Collateral.
(a) Each Pledgor further warrants to and agrees with the Agent
and the Lenders as follows:
(i) that said Partnerships are valid and existing entities of
the type listed on Schedule B and are duly organized and existing
under applicable law;
(ii) that the Partnership Interest Collateral listed and
described on Schedule B attached hereto constitutes the percentage of
the equity interest in each Partnership set forth thereon owned by the
relevant Pledgor;
(iii) that the copies of the partnership agreements (each such
agreement being hereinafter referred to as "Organizational Agreement")
for the Partnerships heretofore delivered to the Agent are true and
correct copies thereof and have not been amended or modified in any
respect, except for such amendments or modifications as are attached
to the copies thereof delivered to the Agent; and
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<PAGE> 7
(iv) that the Partnerships have no loans outstanding to the
Pledgors, and no Pledgor will borrow money from the Partnerships.
(b) The Pledgors shall not, without the prior written consent of
the Agent, consent to any amendment or modification to any of the
Organizational Agreements which would in any manner adversely affect or
impair the Partnership Interest Collateral or reduce or dilute the rights
of the Pledgor with respect to any of the Partnerships, any of such done
without such prior written consent to be null and void. The Pledgors shall
promptly send to the Agent copies of all notices and communications with
respect to each Partnership alleging the existence of a default by an
Pledgor in the performance of any of its obligations under any
Organizational Agreement. Each Pledgor agrees that it will promptly notify
the Agent of any litigation which might adversely affect such Pledgor or a
Partnership or any of their respective properties and of any material
adverse change in the operations, business properties, assets or
conditions, financial or otherwise, of any Pledgor or any Partnership.
Each Pledgor shall promptly perform all of its obligations under each
Organizational Agreement. In the event any Pledgor fails to pay or perform
any obligation arising under any Organizational Agreement or otherwise
related to any Partnership, the Agent may, but need not, pay or perform
such obligation at the expense and for the account of the Pledgors and all
funds expended for such purposes shall constitute Obligations secured
hereby which the Pledgors promise to pay to the Agent together with
interest thereon at the Default Rate.
Section 7. Voting Rights and Dividends. Unless and until an Event of
Default hereunder has occurred and thereafter until notified by the Agent
pursuant to Section 9(b) hereof:
(a) Each Pledgor shall be entitled to exercise all voting and/or
consensual powers pertaining to the Collateral of such Pledgor, or any
part thereof, for all purposes not inconsistent with the terms of this
Agreement or any other document evidencing or otherwise relating to any of
the Obligations.
(b) Each Pledgor shall be entitled to receive and retain all
dividends and distributions in respect of the Collateral which are paid in
cash of whatsoever nature; provided, however, that such dividends and
distributions representing:
(i) stock or liquidating dividends or a distribution or return
of capital upon or in respect of the Pledged Securities or any part
thereof or resulting from a split-up, revision or reclassification of
the Pledged Securities or any part thereof or received in addition to,
in substitution of or in exchange for the Pledged Securities or any part
thereof as a result of a merger, consolidation or otherwise, or
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<PAGE> 8
(ii) distributions in complete or partial liquidation of any
Partnership or the interest of such Pledgor therein,
in each case, shall be paid, delivered or transferred, as appropriate,
directly to the Agent immediately upon the receipt thereof by such
Pledgor and shall, in the case of cash, be applied by the Agent to the
satisfaction of Obligations in accordance with the provisions of Section
10 hereof, whether or not the same may then be due or otherwise
adequately secured and shall, in the case of all other property,
together with any cash received by the Agent and not applied as
aforesaid, be held by the Agent pursuant hereto as part of the Pledged
Securities as additional Pledged Securities pledged under and subject to
the terms of this Agreement; or
(c) In order to permit each Pledgor to exercise such voting
and/or consensual powers which it is entitled to exercise under
subsection (a) above and to receive such distributions which such
Pledgor is entitled to receive and retain under subsection (b) above,
the Agent will, if necessary, upon the written request of such Pledgor,
from time to time execute and deliver to such Pledgor appropriate
proxies and dividend orders.
Section 8. Power of Attorney. Each Pledgor hereby appoints the Agent,
and each of its nominees, officers, agents, attorneys, and any other person whom
the Agent may designate, as such Pledgor's attorney-in-fact, with full power and
authority to ask, demand, collect, receive, receipt for, sue for, compound and
give acquittance for any and all sums or properties which may be or become due,
payable or distributable in respect of the Collateral or any part thereof, with
full power to settle, adjust or compromise any claim thereunder or therefor as
fully as such Pledgor could itself do, to endorse or sign the Pledgor's name on
any assignments, stock powers, or other instruments of transfer and on any
checks, notes, acceptances, money orders, drafts, and any other forms of payment
or security that may come into the Agent's possession and on all documents of
satisfaction, discharge or receipt required or requested in connection
therewith, and, in its discretion, to file any claim or take any other action or
proceeding, either in its own name or in the name of such Pledgor, or otherwise,
which the Agent may deem necessary or appropriate to collect or otherwise
realize upon all or any part of the Collateral, or effect a transfer thereof, or
which may be necessary or appropriate to protect and preserve the right, title
and interest of the Agent in and to such Collateral and the security intended to
be afforded hereby. Each Pledgor hereby ratifies and approves all acts of any
such attorney and agrees that neither the Agent nor any such attorney will be
liable for any such acts or omissions nor for any error of judgment or mistake
of fact or law other than such person's gross negligence or willful misconduct.
The Agent may file one or more financing statements disclosing its security
interest in all or any part of the Collateral without any Pledgor's signature
appearing thereon, and each Pledgor also hereby grants the Agent a power of
attorney to execute any such financing
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<PAGE> 9
statements, and any amendments or supplements thereto, on behalf of
such Pledgor without notice thereof to such Pledgor. The foregoing powers of
attorney, being coupled with an interest, are irrevocable until the Obligations
have been fully satisfied and any commitment of the Lenders to extend credit
constituting Obligations to any of the Borrowers has terminated; provided,
however, that the Agent agrees, as a personal covenant to the relevant Pledgor,
not to exercise the powers of attorney set forth in this Section unless an Event
of Default exists.
Section 9. Defaults and Remedies. (a) The occurrence of any event or
the existence of any condition which is specified as an "Event of Default" under
the Credit Agreement shall constitute an "Event of Default" hereunder.
(b) Upon the occurrence of any Event of Default, all rights of the
Pledgors to receive and retain the distributions which they are entitled to
receive and retain pursuant to Section 7(b) hereof shall, at the option of the
Agent cease and thereupon become vested in the Agent which, in addition to all
other rights provided herein or by law, shall then be entitled solely and
exclusively to receive and retain the distributions which the Pledgors would
otherwise have been authorized to retain pursuant to Section 7(b) hereof and all
rights of the Pledgors to exercise the voting and/or consensual powers which
they are entitled to exercise pursuant to Section 7(a) hereof shall, at the
option of the Agent, cease and thereupon become vested in the Agent which, in
addition to all other rights provided herein or by law, shall then be entitled
solely and exclusively to exercise all voting and other consensual powers
pertaining to the Collateral and to exercise any and all rights of conversion,
exchange or subscription and any other rights, privileges or options pertaining
thereto as if the Agent were the absolute owner thereof including, without
limitation, the right to exchange, at its discretion, the Collateral or any part
thereof upon the merger, consolidation, reorganization, recapitalization or
other readjustment of the respective issuer thereof or upon the exercise by or
on behalf of any such issuer or the Agent of any right, privilege or option
pertaining to the Collateral or any part thereof and, in connection therewith,
to deposit and deliver the Collateral or any part thereof with any committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as the Agent may determine. In the event the Agent in good faith
believes any of the Collateral constitutes restricted securities within the
meaning of any applicable securities law, any disposition thereof in compliance
with such laws shall not render the disposition commercially unreasonable.
(c) Upon the occurrence of any Event of Default, the Agent shall have,
in addition to all other rights provided herein or by law, the rights and
remedies of a secured party under the UCC (regardless of whether the UCC is the
law of the jurisdiction where the rights or remedies are asserted and regardless
of whether the UCC applies to the affected Collateral), and further the Agent
may, without demand and without advertisement, notice, hearing or process of
law, all of which each Pledgor hereby waives to the extent permitted by law, at
any time or times, sell and deliver any or all of the Collateral held by or for
it at public or private sale, at any securities
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<PAGE> 10
exchange or broker's board or at any of the Agent's offices or elsewhere, for
cash, upon credit or otherwise, at such prices and upon such terms as the Agent
deems advisable, in its sole discretion. In the exercise of any such remedies,
the Agent may sell the Collateral as a unit even though the sales price thereof
may be in excess of the amount remaining unpaid on the Obligations. Also, if
less than all the Collateral is sold, the Agent shall have no duty to marshal or
apportion the part of the Collateral so sold as between the Pledgors, or any of
them, but may sell and deliver any or all of the Collateral without regard to
which of the Pledgors are the owners thereof. In addition to all other sums due
the Agent or any Lender hereunder, each Pledgor shall pay the Agent and the
Lenders all costs and expenses incurred by the Agent and such Lenders, including
reasonable attorneys' fees and court costs, in obtaining, liquidating or
enforcing payment of Collateral or the Obligations or in the prosecution or
defense of any action or proceeding by or against the Agent, such Lenders or any
Pledgor concerning any matter arising out of or connected with this Agreement or
the Collateral or the Obligations including, without limitation, any of the
foregoing arising in, arising under or related to a case under the United States
Bankruptcy Code (or any successor statute). Any requirement of reasonable notice
shall be met if such notice is personally served on or mailed, postage prepaid,
to the Pledgors in accordance with Section 14(b) hereof at least ten days before
the time of sale or other event giving rise to the requirement of such notice;
provided, however, no notification need be given to a Pledgor if such Pledgor
has signed, after an Event of Default has occurred, a statement renouncing any
right to notification of sale or other intended disposition. The Agent shall not
be obligated to make any sale or other disposition of the Collateral regardless
of notice having been given. The Agent or any Lender may be the purchaser at any
sale or other disposition of the Collateral or any part thereof. Each Pledgor
hereby waives all of its rights of redemption from any sale or other disposition
of the Collateral or any part thereof. The Agent may postpone or cause the
postponement of the sale of all or any portion of the Collateral by announcement
at the time and place of such sale, and such sale may, without further notice,
be made at the time and place to which the sale was postponed or the Agent may
further postpone such sale by announcement made at such time and place.
EACH PLEDGOR AGREES THAT IF ANY PART OF THE COLLATERAL IS SOLD AT ANY
PUBLIC OR PRIVATE SALE, THE AGENT MAY ELECT TO SELL ONLY TO A BUYER WHO WILL
GIVE FURTHER ASSURANCES, SATISFACTORY IN FORM AND SUBSTANCE TO THE AGENT,
RESPECTING COMPLIANCE WITH THE REQUIREMENTS OF THE FEDERAL SECURITIES ACT OF
1933, AS AMENDED, AND A SALE SUBJECT TO SUCH CONDITION SHALL BE DEEMED
COMMERCIALLY REASONABLE.
EACH PLEDGOR FURTHER AGREES THAT IN ANY SALE OF ANY PART OF THE COLLATERAL,
THE AGENT IS HEREBY AUTHORIZED TO COMPLY WITH ANY LIMITATION OR RESTRICTION IN
CONNECTION WITH SUCH SALE AS IT MAY BE ADVISED BY COUNSEL IS NECESSARY IN ORDER
TO AVOID ANY VIOLATION OF APPLICABLE LAW (INCLUDING, WITHOUT LIMITATION,
COMPLIANCE WITH SUCH PROCEDURES AS MAY RESTRICT THE NUMBER OF PROSPECTIVE
BIDDERS AND
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<PAGE> 11
PURCHASERS AND/OR FURTHER RESTRICT SUCH PROSPECTIVE BIDDERS OR PURCHASERS TO
PERSONS WHO WILL REPRESENT AND AGREE THAT THEY ARE PURCHASING FOR THEIR OWN
ACCOUNT FOR INVESTMENT AND NOT WITH A VIEW TO THE DISTRIBUTION OR RESALE OF SUCH
COLLATERAL ), OR IN ORDER TO OBTAIN ANY REQUIRED APPROVAL OF THE SALE OR OF THE
PURCHASER BY ANY GOVERNMENTAL REGULATORY AUTHORITY OR OFFICIAL, AND EACH PLEDGOR
FURTHER AGREES THAT SUCH COMPLIANCE SHALL NOT RESULT IN SUCH SALE BEING
CONSIDERED OR DEEMED NOT TO HAVE BEEN MADE IN A COMMERCIALLY REASONABLE MANNER,
NOR SHALL THE AGENT BE LIABLE OR ACCOUNTABLE TO ANY PLEDGOR FOR ANY DISCOUNT
ALLOWED BY REASON OF THE FACT THAT SUCH COLLATERAL IS SOLD IN COMPLIANCE WITH
ANY SUCH LIMITATION OR RESTRICTION.
(d) In the event the Agent shall sell any part of the Partnership
Interest Collateral at a foreclosure sale, each Pledgor hereby grants the
purchaser of such portion of the Partnership Interest Collateral to the fullest
extent of its capacity, the ability (but not the obligation) to become a partner
in the relevant Partnership (subject to the approval of the general partner of
the relevant Partnership, in the exercise of its sole discretion), in the place
and stead of such Pledgor. To exercise such right, the purchaser shall give
written notice to the relevant Partnership of its election to become a partner
in such Partnership. Following such election and giving of consent by all
necessary partners of the relevant Partnership as to the purchaser becoming a
partner, the purchaser shall have the right and powers and be subject to the
liabilities of a partner under the relevant Organizational Agreement and the
partnership act governing the Partnership.
(e) Upon the occurrence and during the continuation of any Event of
Default, in addition to all other rights provided herein or by law, the Agent
shall have the right to cause all or any part of the Partnership Interest
Collateral of any of the Pledgors in any one or more of the Partnerships to be
redeemed and to cause a withdrawal, in whole or in part, of any Pledgor from any
Partnership or any of its Partnership Interest Collateral therein.
(f) The powers conferred upon the Agent hereunder are solely to protect
its interest in the Collateral and shall not impose on it any duties to exercise
such powers. The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equivalent to that which the Agent accords
its own property, consisting of similar types securities, it being understood,
however, that the Agent shall have no responsibility for (i) ascertaining or
taking any action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relating to any Collateral, whether or not the Agent
has or is deemed to have knowledge of such matters, (ii) taking any necessary
steps to preserve rights against any parties with respect to any Collateral, or
(iii) initiating any action to protect the Collateral or any part thereof
against the possibility of a decline in market value. This Agreement constitutes
an assignment of rights only and not an assignment of any duties or obligations
of the Pledgors in any way related to the Collateral, and the Agent shall have
no duty
-11-
<PAGE> 12
or obligation to discharge any such duty or obligation. By its
acceptance hereof, the Agent does not undertake to perform or discharge and
shall not be responsible or liable for the performance or discharge of any such
duties or responsibilities and shall not in any event become a "Substituted
Limited Partner" or words of like import (as defined in the relevant
Organizational Agreement) in the relevant Partnership. Neither the Agent or any
Lender, nor any party acting as attorney for the Agent or any Lender, shall be
liable hereunder for any acts or omissions or for any error of judgment or
mistake of fact or law other than such person's gross negligence or willful
misconduct.
(g) Failure by the Agent to exercise any right, remedy or option under
this Agreement or any other agreement between any Pledgor and the Agent or
provided by law, or delay by the Agent in exercising the same, shall not operate
as a waiver; and no waiver shall be effective unless it is in writing, signed by
the party against whom such waiver is sought to be enforced and then only to the
extent specifically stated. The rights and remedies of the Agent and the Lenders
under this Agreement shall be cumulative and not exclusive of any other right or
remedy which the Agent or the Lenders may have. For purposes of this Agreement,
an Event of Default shall be construed as continuing after its occurrence until
the same is waived in writing by the Lenders or the Required Lenders, as the
case may be, in accordance with the Credit Agreement.
Section 10. Application of Proceeds. The proceeds and avails of the
Collateral at any time received by the Agent during the existence of any Event
of Default shall, when received by the Agent in cash or its equivalent, be
applied by the Agent in reduction of, or as collateral security for, the
Obligations in accordance with the terms of the Credit Agreement. The Pledgors
shall remain liable to the Agent and the Lenders for any deficiency. Any surplus
remaining after the full payment and satisfaction of the Obligations shall be
returned to the Pledgors, or to whomsoever the Agent reasonably determines is
lawfully entitled thereto.
Section 11. Continuing Agreement. This Agreement shall be a continuing
agreement in every respect and shall remain in full force and effect until all
of the Obligations, both for principal and interest, have been fully paid and
satisfied and any commitment to extend constituting Obligations to and of the
Borrowers shall have terminated. Upon such termination of this Agreement, the
Agent shall, upon the request and at the expense of the Pledgors, forthwith
release all its liens and security interests hereunder.
Section 12. Primary Security; Obligations Absolute. The lien and
security herein created and provided for stand as direct and primary security
for the Obligations. No application of any sums received by the Agent in respect
of the Collateral or any disposition thereof to the reduction of the Obligations
or any portion thereof shall in any manner entitle any Pledgor to any right,
title or interest in or to the Obligations or any collateral security therefor,
whether by
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<PAGE> 13
subrogation or otherwise, unless and until all Obligations have been fully paid
and satisfied and any commitments to extend credit constituting Obligations to
any of the Borrowers shall have terminated. Each Pledgor acknowledges and agrees
that the lien and security hereby created and provided for are absolute and
unconditional and shall not in any manner be affected or impaired by any acts or
omissions whatsoever of the Agent, any Lender or any other holder of any of the
Obligations, and without limiting the generality of the foregoing, the lien and
security hereof shall not be impaired by any acceptance by the Agent, any Lender
or any other holder of any of the Obligations of any other security for or
guarantors upon any Obligations or by any failure, neglect or omission on the
part of the Agent, any Lender or any other holder of any of the Obligations to
realize upon or protect any of the Obligations or any collateral security
therefor. The lien and security hereof shall not in any manner be impaired or
affected by (and the Agent and the Lenders, without notice to anyone, are hereby
authorized to make from time to time) any sale, pledge, surrender, compromise,
settlement, release, renewal, extension, indulgence, alteration, substitution,
exchange, change in, modification or disposition of any of the Obligations, or
of any collateral security therefor, or of any guaranty thereof, or of any
instrument or agreement setting forth the terms and conditions pertaining to any
of the foregoing. The Lenders may at their discretion at any time grant credit
to any of the Borrowers without notice to any Pledgor in such amounts and on
such terms as the Lenders may elect without in any manner impairing the lien and
security hereby created and provided for. In order to realize hereon and to
exercise the rights granted the Agent hereunder and under applicable law as
against any Pledgor or any portion of the Collateral in which any such Pledgor
has rights, there shall be no obligation on the part of the Agent, any Lender or
any other holder of any of the Obligations at any time to first resort for
payment to any of the Borrowers or any other Pledgor or any other Person, its
property or estate or to any guaranty of the Obligations or any portion thereof
or to resort to any other collateral security, property, liens or any other
rights or remedies whatsoever, and the Agent shall have the right to enforce
this Agreement as against any Pledgor or any portion of the Collateral in which
any such Pledgor has rights, irrespective of whether or not other proceedings or
steps are pending seeking resort to or realization upon or from any of the
foregoing.
Section 13. The Agent. In acting under or by virtue of this Agreement,
Agent shall be entitled to all the rights, authority, privileges and immunities
provided in Section 10 of the Credit Agreement, all of which provisions of said
Section 10 are incorporated by reference herein with the same force and effect
as if set forth herein in their entirety. The Agent hereby disclaims any
representation or warranty to the Lenders or any other holders of the
Obligations concerning the perfection of the liens and security interests
granted hereunder or in the value of the Collateral.
Section 14. Miscellaneous. (a) This Agreement cannot be changed or
terminated orally. This Agreement shall create a continuing lien on and security
interest in the Collateral and shall be binding upon each Pledgor, its
successors and assigns, and shall inure, together with the
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<PAGE> 14
rights and remedies of the Agent and the Lenders hereunder, to the benefit of
the Agent and the Lenders, and their successors and assigns; provided, however,
that no Pledgor may assign its rights or delegate its duties hereunder without
the Agent's prior written consent. Without limiting the generality of the
foregoing, and subject to the provisions of the Credit Agreement, any Lender may
assign or otherwise transfer any indebtedness held by it secured by this
Agreement to any other person, and such other person shall thereupon become
vested with all the benefits in respect thereof granted to such Lender herein or
otherwise.
(b) All communications provided for herein shall be in writing, except
as otherwise specifically provided for hereinabove, and shall be deemed to have
been given or made, if to any Pledgor when given to any of the Borrowers in
accordance with Section 12.8 of the Credit Agreement, or if to the Agent or any
Lender, when given to such party in accordance with Section 12.8 of the Credit
Agreement.
(c) No Lender shall have the right to institute any suit, action or
proceeding in equity or at law for the foreclosure or other realization upon any
Collateral subject to this Agreement or for the execution of any trust or power
hereof or for the appointment of a receiver, or for the enforcement of any other
remedy under or upon this Agreement; it being understood and intended that no
one or more of the Lenders shall have any right in any manner whatsoever to
affect, disturb or prejudice the lien and security interest of this Agreement by
its or their action or to enforce any right hereunder, and that all proceedings
at law or in equity shall be instituted, had and maintained by the Agent in the
manner herein provided for the benefit of the Lenders.
(d) In the event that any provision hereof shall be deemed to be
invalid by reason of the operation of any law or by reason of the interpretation
placed thereon by any court, this Agreement shall be construed as not containing
such provision, but only as to such locations where such law or interpretation
is operative, and the invalidity of such provision shall not affect the validity
of any remaining provision hereof, and any and all other provisions hereof which
are otherwise lawful and valid shall remain in full force and effect. Without
limiting the generality of the foregoing, in the event that this Agreement shall
be deemed to be invalid or otherwise unenforceable with respect to any Pledgor,
such invalidity or unenforceability shall not affect the validity of this
Agreement with respect to the other Pledgors.
(e) This Agreement shall be deemed to have been made in the State of
Illinois and shall be governed by, and construed in accordance with, the laws of
the State of Illinois. All terms which are used in this Agreement which are
defined in the UCC shall have the same meanings herein as said terms do in the
UCC unless this Agreement shall otherwise specifically provide. The headings in
this Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning of any provision hereof.
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<PAGE> 15
(f) This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterpart signature pages, each
constituting an original, but all together one and the same instrument. Each
Pledgor acknowledges that this Agreement is and shall be effective upon its
execution and delivery by such Pledgor to the Agent, and it shall not be
necessary for the Agent to execute this Agreement or any other acceptance hereof
or otherwise to signify or express its acceptance hereof.
(g) In the event the Agent and the Lenders shall at any time in their
discretion permit a substitution of Pledgors hereunder or a party shall wish to
become a Pledgor hereunder, such substituted or additional Pledgor shall, upon
executing an agreement in the form attached hereto as Schedule E, become a party
hereto and be bound by all the terms and conditions hereof to the same extent as
though such Pledgor had originally executed this Agreement and, in the case of a
substitution, in lieu of the Pledgor being replaced. No such substitution shall
be effective absent the written consent of Agent and the Lenders nor shall it in
any manner affect the obligations of the other Pledgors hereunder.
(h) THE AGENT AND THE PLEDGORS AGREE THAT ALL DISPUTES AMONG THEM
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR FEDERAL
COURTS LOCATED IN COOK COUNTY, ILLINOIS, BUT EACH OF THE AGENT AND THE PLEDGORS
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF COOK COUNTY, ILLINOIS. EACH OF THE PLEDGORS WAIVES IN ALL
DISPUTES ANY OBJECTION THAT SUCH PLEDGOR MAY HAVE TO THE LOCATION OF THE COURT
CONSIDERING THE DISPUTE OR ANY OBJECTION THAT SUCH PLEDGOR MAY HAVE THAT ANY
OTHER PARTY HAS NOT BEEN JOINED IN SUCH PROCEEDING. EACH OF THE PLEDGORS AGREES
THAT THE AGENT SHALL HAVE THE RIGHT TO PROCEED AGAINST EACH AND ANY OF THE
PLEDGORS OR THEIR COLLATERAL IN A COURT IN ANY LOCATION TO ENABLE THE AGENT TO
REALIZE ON THE COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED
IN FAVOR OF THE AGENT, WHETHER OR NOT PROCEEDING SEPARATELY AGAINST ANY PLEDGOR
AND ITS PROPERTY OR JOINTLY AGAINST THE BORROWERS AND ANY ONE OR MORE OF THE
PLEDGORS AND THEIR PROPERTY. EACH OF THE PLEDGORS WAIVES ANY OBJECTION THAT IT
MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE AGENT HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS PARAGRAPH.
[SIGNATURE PAGES TO FOLLOW]
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<PAGE> 16
IN WITNESS WHEREOF, each Pledgor has caused this Agreement to be duly
executed and delivered as of the date first above written.
PLEDGORS:
MORTON INDUSTRIAL GROUP, INC.
By
Its____________________________________
MORTON METALCRAFT CO.
By
Its___________________________________
MORTON METALCRAFT CO. OF NORTH
CAROLINA
By
Its____________________________________
Acknowledged and agreed to as of the date first above written.
HARRIS TRUST AND SAVINGS BANK, as
Agent as aforesaid for the Lenders
By
Its:___________________________________
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<PAGE> 1
EXECUTION COPY
EXHIBIT 10.5
LIMITED INDEMNIFICATION AGREEMENT
LIMITED INDEMNIFICATION AGREEMENT, dated October 20, 1997 (the
"Agreement"), by and among MLX Corp., a Georgia corporation ("Buyer") and
certain holders (the "Securityholders") of shares of common stock ("Common
Stock"), par value $0.01 per share, of Morton Metalcraft Holding Co., a
Delaware corporation (the "Company") and options and warrants to acquire shares
of Common Stock (such shares of Common Stock, warrants and options, the
"Company Securities").
Pursuant to an Agreement and Plan of Merger dated as of October 20, 1997
(the "Merger Agreement"), among Buyer and the Company, the Company shall be
merged with and into Buyer (the "Merger"), with Buyer being the surviving
corporation (hereinafter referred to as the "Surviving Corporation").
Pursuant to that certain Securities Purchase Agreement, dated as of
October 20, 1997 (the "Securities Purchase Agreement"), by and among Buyer and
certain holders (the "Selling Securityholders") of Company Securities,
immediately prior to the Merger, the Selling Securityholders will sell and
Buyer will purchase, at the prices and on the terms and conditions set forth
therein, the Company Securities of the Selling Securityholders set forth in the
Securities Purchase Agreement.
Buyer has requested as an inducement for it to enter into the Merger
Agreement and the Securities Purchase Agreement that the Securityholders
execute and deliver this Agreement and the Securityholders are willing to
execute and deliver this
<PAGE> 2
2
Agreement as an inducement to Buyer to enter into the Merger Agreement and
Securities Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Indemnification.
1.1 Obligations to Indemnify. Each Securityholder hereby agrees
that subject to Section 1.2 below, such Securityholder shall be severally, and
not jointly, liable to and shall indemnify, defend and hold harmless Buyer, its
affiliates (including the Surviving Corporation) and their respective
directors, officers, employees, affiliates, successors and assigns (each, an
"Indemnified Party") pursuant to this Agreement from and against any and all
loss, cost, damage or expense (including reasonable fees of counsel) whatsoever
("Losses") based upon, arising out of or otherwise resulting from any breach of
any representation or warranty of the Company, or breach of any covenant or
obligation of the Company, in either case, contained in the Merger Agreement,
or the enforcement by the Company of its rights hereunder; provided that for
purposes of this Agreement, each representation and warranty of the Company
contained in the Merger Agreement will, for purposes of this Agreement, be
deemed amended and supplemented by the disclosures contained in the certificate
delivered to Buyer as required by Section 6.2.3 of the Merger Agreement. Each
Security holder shall not be liable for any breaches of representations and
warranties of the Company of which none of the persons identified on Schedule
1.1 had actual knowledge on or before the Closing Date.
<PAGE> 3
3
1.2 Limitation on Liability. The indemnification provided for in
this Agreement shall be subject to the limitation that:
(a) no Securityholder shall be obligated to make any payment
for indemnification pursuant to this Agreement in respect of any Losses until
the aggregate amount of such Losses exceeds $500,000 (the "Basket Amount"),
whereupon the Securityholders shall, severally and not jointly, be obligated to
pay, subject to clauses (b), (c) and (d) below, all such amounts for
indemnification in excess of the Basket Amount;
(b) the Securityholders shall have no obligation to make
indemnification payments under this Agreement in excess of $1,600,000 in the
aggregate;
(c) with respect to any Losses, each Securityholder shall be
obligated to pay, subject to the other limitations set forth in this Section
1.2, an amount equal to the product of (A) the amount of such Losses, times (B)
a fraction, the numerator of which is the number of shares of Common Stock
owned by such Securityholder and/or the number of shares of Common Stock for
which such Securityholder's Company Securities are exercisable immediately
prior to the acquisition of Company Securities pursuant to the Securities
Purchase Agreement, as the case may be, and the denominator of which is the
total number of shares of Common Stock owned by all Securityholders plus the
number of shares of Common Stock reserved for issuance upon the exercise of
options or warrants owned by all Securityholders, in each case, immediately
prior to the acquisition of Company
<PAGE> 4
4
Securities pursuant to the Securities Purchase Agreement.
(d) except with respect to Losses for which an Indemnification
Notice (as defined below) has been given prior to 18 months after the Effective
Time, the obligation to make indemnification payments under this Agreement
shall terminate 18 months after the Effective Time.
1.3 Other Liability. Nothing in this Agreement shall limit the
several liability of each Securityholder under the Securities Purchase
Agreement.
1.4 Notice to Securityholders.
(a) Notice of Asserted Liability. Promptly after an
Indemnified Party under this Agreement receives notice of any demand, claim or
circumstances which, with the lapse of time, would or might give rise to a
claim or the commencement (or threatened commencement) of any action, audit,
proceeding or investigation (an "Asserted Liability") that may result in a
Loss, or otherwise determines that any Securityholder is or may be obligated to
provide indemnification to it under this Agreement such Indemnified Party shall
give notice thereof (the "Indemnification Notice") to the Securityholders. The
Indemnification Notice shall describe the Asserted Liability or Loss, as the
case may be, in reasonable detail, and shall indicate the amount (estimated, if
necessary and to the extent it is feasible) of the Loss that has been or may be
suffered by Buyer. The failure to give the Indemnification Notice promptly
shall not bar indemnification hereunder except to the extent provided in
Section 1.2(d) or to the extent such failure prejudiced the party against whom
indemnification is sought.
<PAGE> 5
5
(b) Opportunity to Defend. In the event the
Securityholders may be obligated to make indemnification payments with respect
to an Asserted Liability the Securityholders may elect to control and
compromise or defend, at the Securityholders' expense and by their own counsel,
any such Asserted Liability (other than any Asserted Liability in respect of
Taxes). Any such decisions and actions with respect to any such Asserted
Liability shall be made by Securityholders obligated to pay a majority of
losses under Section 1.2(c). If the Securityholders elect to compromise or
defend such Asserted Liability, they shall within 30 days (or sooner, if the
nature of the Asserted Liability so requires) notify Buyer of their intent to
do so, and, if requested, Buyer shall cooperate at the expense of the
Securityholders (with respect to out-of-pocket expenses), in the compromise of,
or defense against such Asserted Liability. If the Securityholders elect not to
compromise or defend the Asserted Liability, or fail, in a timely manner, to
notify Buyer of their election as herein provided, Buyer shall have the right,
without prejudice to its right to indemnification from the Securityholders, to
pay, compromise or defend such Asserted Liability. Notwithstanding any other
provision of this Agreement, neither the Securityholders nor Buyer may settle
or compromise any claim over the objection of the other. In any event, both
Buyer and the Securityholders may participate in the defense of such Asserted
Liability. If the Securityholders choose to defend any claim, Buyer shall make
available to the Securityholders any books, records or other documents within
its control that are reasonably requested for such defense and shall afford
reasonable access to its personnel and the personnel of the Surviving
<PAGE> 6
6
Corporation. Notwithstanding any other provision of this Agreement, if Buyer
shall determine in good faith that the indemnification payment as set forth in
Section 1.2(a) and (b) will not be sufficient to satisfy the Asserted
Liability, Buyer may elect to control, compromise or defend such Asserted
Liability, and in such event shall permit the reasonable participation of the
Securityholders.
2. Consent to Jurisdiction and Service of Process. Any legal action,
suit or proceeding arising out of or relating to this Agreement may be
instituted in the United States District Court for the District of Delaware,
and each party agrees not to assert, by way of motion, as a defense, or
otherwise, in any such action, suit or proceeding, any claim that it is not
subject personally to the jurisdiction of such Court, that the action, suit or
proceeding is brought in an inconvenient forum, that the venue of the action,
suit or proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced in or by such Court. Each party irrevocably submits
to the jurisdiction of such Court in any such action, suit or proceeding. Any
and all service of process and any other notice in any such action, suit or
proceeding shall be effective against any party if given personally or by
registered or certified mail, return receipt requested, or by any other means
of mail that requires a signed receipt, postage prepaid, mailed to such party
as herein provided. Nothing herein contained shall be deemed to affect the
rights of any party to serve process in any manner permitted by law or to
commence legal proceedings or otherwise proceed against any other party in any
other jurisdiction if permitted by law.
3. Miscellaneous.
<PAGE> 7
7
3.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed or sent by certified, registered or express mail, postage prepaid. Any
such notice shall be deemed given when so delivered personally, telegraphed,
telexed, or sent by facsimile transmission or, if mailed, five days after the
date of deposit in the United States mails, as follows:
(a) if to Buyer or to the Surviving Corporation, to:
MLX Corp.
1000 Center Place
Norcross, Georgia 30093
Attention: Thomas C. Waggoner
Telecopy: (770) 798-0633
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Robert M. Hirsh, Esq.
Telecopy: (212) 373-2159
(b) if to a Securityholder, to the address set forth on Exhibit
A hereto:
3.2 Entire Agreement. This Agreement is entered into and delivered
pursuant to the Merger Agreement and the Securities Purchase Agreement and
together with such agreements contains the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior agreements,
written or oral, with respect thereto.
<PAGE> 8
8
3.3 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the Buyer and by the
Securityholders who are, pursuant to Section 1.2(a), obligated to pay a
majority of Losses as determined under Section 1.2(c). No delay on the part of
any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party of any such
right, power or privilege, nor any single or partial exercise of any such
right, power or privilege preclude any further exercise thereof or the exercise
of any other such right, power or privilege. The rights and remedies of any
party based upon a breach of any representation, warranty, covenant or
agreement contained in the Merger Agreement shall in no way be limited by the
fact that such inaccuracy or breach may also be the subject matter of any other
representation, warranty, covenant or agreement contained in the Merger
Agreement (or in any other agreement between the parties) as to which there is
no inaccuracy or breach.
3.4 Effectiveness. This Agreement shall become effective only upon
the consummation of the Merger.
3.5 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State.
3.6 Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
<PAGE> 9
9
3.7 Further Assurances. Each of the parties shall execute such
documents and other papers and take such further actions as may be reasonably
required or desirable to carry out the provisions hereof and the transactions
contemplated hereby.
3.8 Variations in Pronouns. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
context may require.
3.9 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument.
3.10 Headings. The headings in this Agreement are for
reference only and shall not affect the interpretation of this Agreement.
<PAGE> 10
10
Schedule 1.1 to
Limited Indemnification Agreement
William D. Morton
Daryl R. Lindemann
Brian L. Geiger
Brian R. Doolittle
David Stratton
Robert J. Janeczko
<PAGE> 1
EXHIBIT 10.6
INDUSTRIAL BUILDING LEASE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
DATE OF LEASE TERM OF LEASE MONTHLY RENT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
September 1, 1994 BEGINNING ENDING $11,460 subject to adjust-
-------------------------------------------------- ment for a building addition
(see Section 25) and annual
9/01/94 8/31/04 escalator (see Section 26)
- --------------------------------------------------------------------------------------------------------
Location of Premises: 400 Detroit Street
Morton, Illinois 61550
- --------------------------------------------------------------------------------------------------------
Purpose: Manufacturing, Painting, Warehousing and Office Administration.
This agreement supersedes the lease dated June 30, 1992.
- --------------------------------------------------------------------------------------------------------
LESSEE LESSOR
NAME Morton Metalcraft Co. NAME Morton Welding Co., Inc.
ADDRESS 1021 W. Birchwood Street ADDRESS 724 W. Jackson Street
Morton, Illinois 61550 Morton, Illinois 61550
</TABLE>
In consideration of the mutual covenants and agreements herein stated, Lessor
hereby leases to Lessee and Lessee hereby leases from Lessor solely for the
above purpose the Premises designated above (the "Premises"), together with the
appurtenances thereto, for the above Term.
RENT 1. Lessee shall pay Lessor or Lessor's agent as rent for
the Premises, the sum stated above, monthly paid on the
15th of each month, until termination of this lease, at
Lessor's address stated above or such other address as
Lessor may designate in writing.
CONDITION 2. Lessee has examined and knows the condition of the
AND UPKEEP Premises and has received the same in good order and
OF repair, and acknowledges that no representations as to
PREMISES the condition and repair thereof have been made by
Lessor, or his agent, prior to or at the execution of
this lease that are not herein expressed; Lessee will
keep the Premises including all appurtenances, in good
repair, replacing all broken glass with glass of the same
size and quality as that broken, and will replace all
damaged plumbing fixtures with others of equal quality,
and will keep the Premises, including adjoining alleys,
in a clean and healthful condition according to the
applicable municipal ordinances and the direction of the
proper public officers during the term of this lease at
Lessee's expense, and will without injury to the roof
remove all snow and ice from the same when necessary, and
will remove the snow and ice from the sidewalk abutting
the Premises; and upon the termination of this lease, in
any way, will yield up the Premises to Lessor, in good
condition and repair, loss by fire and ordinary wear
excepted, and will deliver the keys therefor at the place
of payment of said rent.
<PAGE> 2
LESSEE NOT 3. Lessee will not allow the Premises to be used for any
TO MISUSE; purpose that will increase the rate of insurance
SUBLET; thereon, nor for any purpose other than that
ASSIGNMENT hereinbefore specified, and will not load floors with
machinery or goods beyond the floor load rating
prescribed by applicable municipal ordinances, and will
not allow the Premises to be occupied in whole, by any
other person, and will not assign this lease without in
each case the written consent of the Lessor first had,
and Lessee will not permit any transfer by operation of
law of the interest in the Premises acquired through
this lease, and will not permit the Premises to be used
for any unlawful purpose, or for any purpose that will
injure the reputation of the building or increase the
fire hazard of the building, or disturb the tenants or
the neighborhood, and will not permit the same to remain
vacant or unoccupied for more than twenty consecutive
days; and will not allow any signs, cards or placards to
be posted, or placed thereon, nor permit any alteration
of or addition to any part of the Premises, except by
written consent of Lessor; all alterations and additions
to the Premises shall remain for the benefit of Lessor
unless otherwise provided in the consent aforesaid.
Lessor agrees that the Lessee can sublet any or all of
the offices to a company or companies of solid
reputation of its sole choice.
MECHANIC'S 4. Lessee will not permit any mechanic's lien or
LIEN liens to be placed upon the Premises or any building
or improvement thereon during the term hereof, and in
case of the filing of such lien Lessee will promptly pay
same. If default in payment thereof shall continue for
thirty (30) days after written notice thereof from Lessor
to the Lessee, the Lessor shall have the right and
privilege at Lessor's option of paying the same or any
portion thereof without inquiry as to the validity
thereof, and any amounts so paid, including expenses and
interest, shall be so much additional indebtedness
hereunder due from Lessee to Lessor and shall be repaid
to Lessor immediately on rendition of bill therefor.
INDEMNITY 5. Lessee covenants and agrees that he will protect
FOR and save and keep the Lessor forever harmless and
ACCIDENTS indemnified against and from any penalty or damages or
charges imposed for any violation of any laws or
ordinances, whether occasioned by the neglect of Lessee
or those holding under Lessee, and that Lessee will at
all times protect, indemnify and save and keep harmless
the Lessor against and from any and all loss, cost,
damage or expense, arising out of or from any accident or
other occurrence on or about the Premises, causing injury
to any person or property whomsoever or whatsoever and
will protect, indemnify and save and keep harmless the
Lessor against and from any and all claims and against
and from any and all loss, cost, damage or expense
arising out of any failure of Lessee in any respect to
comply with and perform all the requirements and
provisions hereof.
The Lessee agrees at all times during the term of this
lease and any extension thereof, at Lessee's expense, to
maintain, keep in effect, furnish and deliver to Lessor
liability insurance policies in a form and with an
insurer satisfactory to Lessor providing statutory
worker's compensation insurance for Lessee's employees
and insuring both the Lessor and Lessee against all
liability for damages to person
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<PAGE> 3
or property in or about the leased premises in an amount
equivalent to One Million Dollars for injury to one
person, One Million Dollars for injuries arising out of
any one accident and not less than One Million Dollars
for damage to property, or a single combined limit of Two
Million Dollars bodily injury and property damage. All
such insurance shall insure performance by Lessee of the
indemnity provisions hereof.
NON- 6. Except as provided by Illinois statute, Lessor
LIABILITY shall not be liable for any damage occasioned by
OF LESSOR failure to keep the Premises in repair, nor for
any damage done or occasioned by or from plumbing, gas,
water, sprinkler, steam or other pipes or sewerage or the
bursting leaking or running of any pipes, tank or
plumbing fixtures, in, above, upon or about Premises or
any building or improvement thereon nor for any damage
occasioned by water, snow or ice being upon or coming
through the roof, skylights, trap door or otherwise, nor
for any damages arising from acts or neglect of any
owners or occupants of adjacent or contiguous property.
WATER, GAS 7. Lessee will pay, in addition to the rent above
AND ELEC- specified, all water rents, gas and electric light
TRIC and power bills taxed, levied or charged on the
CHARGES Premises, for and during the time for which this
lease is granted, and in case said water rents and bills
for gas, electric light and power shall not be paid when
due, Lessor shall have the right to pay the same, which
amounts so paid, together with any sums paid by Lessor to
keep the Premises in a clean and healthy condition, as
above specified, are declared to be so much additional
rent and payable with the installment of rent next due
thereafter.
REAL ES- 8. Lessee shall be responsible for and pay all real
TATE TAXES estate taxes which are assessed and payable on the
Premises which relate to Tenant's period of occupancy
under this lease.
BUILDING 9. Lessee shall maintain on the buildings and
INSURANCE other improvements that are part of the Premises a policy
of standard fire and extended coverage insurance for the
full insurable value of the Premises with a loss payable
clause in favor of Lessor as its interest may appear.
Lessee shall deposit such policies of insurance with
Lessor.
KEEP PRE- 10. Lessor shall not be obliged to incur any expense
MISES IN for repairing any improvements upon said demised
REPAIR premises or connected therewith, and the Lessee at his
own expense will keep all improvements in good repair
(injury by fire, or other causes beyond Lessee's control
excepted) as well as in a good tenantable and wholesome
condition, and will comply with all local or general
regulations, laws and ordinances applicable thereto, as
well as lawful requirements of all competent authorities
in that behalf. Lessee will, as far as possible, keep
said improvements from deterioration due to ordinary wear
and from falling temporarily out of repair. If Lessee
does not make repairs as required hereunder promptly and
adequately, Lessor may but need not make such repairs and
pay the costs thereof, and such costs shall be so much
additional rent immediately due from and payable by
Lessee to Lessor.
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<PAGE> 4
ACCESS 11. Lessee will allow Lessor free access to the Premises
TO PREMISES for the purpose of examining or exhibiting the same, or
to make any needful repairs, or alterations thereof which
Lessor may see fit to make.
ABANDON- 12. If Lessee shall abandon or vacate the Premises, or
MENT AND if Lessee's right to occupy the Premises be terminated
RELETTING by Lessor by reason of Lessee's breach of any of the
covenants herein, the same may be re-let by Lessor for
such rent and upon such terms as Lessor may deem fit; and
if a sufficient sum shall not thus be realized monthly,
after paying the expenses of such re-letting and
collecting to satisfy the rent hereby reserved, Lessee
agrees to satisfy and pay all deficiency monthly during
the remaining period of this lease.
HOLDING 13. Lessee will, at the termination of this lease by
OVER lapse of time or otherwise yield up immediate possession
to Lessor, and failing so to do, will pay as liquidated
damages, for the whole time such possession is withheld,
the sum of Four Hundred Dollars ($400.00) per day; but
the provisions of this clause shall not be held as a
waiver by Lessor of any right of re-entry as hereinafter
set forth; nor shall the receipt of said rent or any part
thereof, or any other act in apparent affirmance of
tenancy, operate as a waiver of the right to forfeit this
lease and the term hereby granted for the period still
unexpired, for a breach of any of the covenants herein.
EXTRA FIRE 14. There shall not be allowed, kept, or used on the
HAZARD Premises any inflammable or explosive liquids or
materials save such as may be necessary for use in the
business of the Lessee, and in such case, any such
substances shall be delivered and stored in amount, and
used, in accordance with the rules of the applicable
Board of Underwriters and statutes and ordinances now or
hereafter in force. Both parties understand that the
building has had and will continue to be used for
painting services and all such paint, solvents,
chemicals, and materials required for such services will
be present on the site.
DEFAULT BY 15. If default be made in the payment of the above
LESSEE rent, or any part thereof, or in any of the covenants
herein contained to be kept by the Lessee, Lessor may at
any time thereafter at his election declare said term
ended and reenter the Premises or any part thereof, with
or (to the extent permitted by law) without notice or
process of law, and remove Lessee or any persons
occupying the same, without prejudice to any remedies
which might otherwise be used for arrears of rent, and
Lessor shall have at all times the right to distrain for
rent due, and shall have a valid and first lien upon all
personal property which Lessee now owns, or may hereafter
acquire or have an interest in, which is by law subject
to such distraint, as security for payment of the rent
herein reserved.
NO RENT 16. Lessee's covenant to pay rent is and shall be
REDUCTION independent of each and every other covenant of this
OR SET OFF lease. Lessee agrees that any claim by Lessee against
Lessor shall not be deducted from rent nor set off
against any claim for rent in any action.
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<PAGE> 5
RENT AFTER 17. It is further agreed, by the parties hereto, that
NOTICE OR after the service of notice, or the commencement of a
SUIT suit or after final judgement for possession of the
Premises, Lessor may receive and collect any rent
due, and the payment of said rent shall not waive or
affect said notice, said suit, or said judgement.
PAYMENT OF 18. Lessee will pay and discharge all reasonable
COSTS costs, attorney's fees and expenses that shall be made
and incurred by Lessor in enforcing the covenants and
agreements of this lease.
RIGHTS 19. The rights and remedies of Lessor under this lease
CUMULATIVE are cumulative. The exercise or use of any one or more
thereof shall not bar Lessor from exercise or use of any
other right or remedy provided herein or otherwise
provided by law, nor shall exercise nor use of any right
or remedy by Lessor waive any other right or remedy.
FIRE AND 20. In case the Premises shall be rendered untenantable
CASUALTY during the term of this lease by fire or other casualty,
Lessor at his option may terminate the lease or repair
the Premises within sixty (60) days thereafter. If Lessor
elects to repair, this lease shall remain in effect
provided such repairs are completed within said time. If
Lessor shall not have repaired the Premises within said
time, then at the end of such time the term hereby
created shall terminate. If this lease is terminated by
reason of fire or casualty as herein specified, rent
shall be apportioned and paid to the day of such fire or
other casualty.
SUBORDINA- 21. This lease is subordinate to all mortgages which may
TION now or hereafter affect the Premises.
PLURALS; 22. The words "Lessor" and "Lessee" wherever herein
SUCCESSORS occurring and used shall be construed to mean "Lessors"
and "Lessees" in case more than one person constitutes
either party to this lease; and all the covenants and
agreements contained shall be binding upon, and inure to,
their respective successors, heirs, executors,
administrators and assigns and may be exercised by his or
their attorney or agent.
SEVER- 23. Wherever possible each provision of this lease shall
ABILITY be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this
lease 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 lease.
PURCHASE 24. Lessor agrees to provide Lessee an option to purchase
OPTION the premises under lease at any time of the Lessee's
choice for an amount equal to the higher of two
Appraisals from Appraisers of mutual choice of both
parties provided that the higher Appraisal is not more
than 110% of the lower Appraisal and provided further
that in no event shall the option price be less than
$1,250,000 plus the cost of the building addition and
building improvements contemplated by Section 25 hereof
(estimated at $500,000 for a total estimated floor option
price of $1,750,000). In the event that the higher
Appraisal is more
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<PAGE> 6
than 110% of the lower Appraisal, the Appraisers shall
select a third Appraiser and the option price shall be
the average of the two Appraisals which are closest to
each other (but not less than the floor option price
mentioned above).
BUILDING 25. Lessor agrees to pay for improvements to the existing
ADDITION building located on the Premises in accordance with plans
and specifications to be submitted by Lessee and approved
by Lessor (at an estimated cost of $75,000) and a
building addition in accordance with plans and
specifications to be submitted by Lessee and approved by
Lessor (at an estimated cost of $425,000) with such
improvements to be constructed by a contractor selected
by the Lessee and approved by the Lessor. Where the
Lessor's approval is required herein, such approval shall
not be unreasonably withheld. At such time as the
building addition is sufficiently completed that the
Lessee begins occupancy of the Premises, the monthly
rental amount shall be increased by an amount determined
by multiplying the total cost of the improvements to the
existing building and the building addition including
construction period interest by 11% and dividing the
amount so determined by 12 to arrive at the monthly
rental adjustment. Lessor and Lessee also agree to
complete the Addendum attached hereto as Exhibit A to
document the rental adjustment.
RENT ESCA- 26. Lessor and Lessee agree that as of September 1, 1995
LATOR and on September 1 of each year thereafter during the
lease term, the monthly rental shall be increased. The
new monthly rental for each year shall be determined by
multiplying the monthly rental in effect at the end of
the immediately preceding lease year by 103% to arrive at
the monthly rental to be effective as of September 1 and
continuing for the next lease year.
EPA COM- 27. Lessor shall retain responsibility for the clean up
PLIANCE of any environmental contamination which existed prior to
Lessee's occupancy of the Premises including any clean up
required in connection with the underground storage tanks
which were located on the Premises when leased to the
Lessee. Lessee shall assume responsibility to comply with
all EPA regulations going forward and shall be
responsible for any contamination or clean up required as
a result of the Lessee's business operations.
CATER- 28. Both parties understand that should the Lessee's
PILLAR largest customer, Caterpillar, have a work stoppage,
STRIKE other than normal vacation, of any duration, that the
CLAUSE Lessee shall have the right to reduce its monthly lease
payment by 50% for 3 months. The amount of any rental
payment reductions pursuant hereto shall be due and
payable to Lessor 12 months following the end of the
reduction period.
WAIVER OF 29. Neither the Lessor nor the Lessee shall be liable to
SUBROGA- the other for loss arising out of damage to or
TION destruction of the leased premises or the building or
improvement of which the leased premises are a part or
with which they are connected or the contents thereof,
when such loss is caused by any of the perils which are
or could be included within or insured against by a
standard form of fire insurance policy with extended
coverage, including all risk type form and sprinkler
leakage insurance, if applicable. All such claims for any
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<PAGE> 7
and all loss, however caused, are waived. Said absence of
liability shall exist whether or not the damage or
destruction is caused by the negligence or acts of either
Lessee or Lessor or by any of their respective agents,
servants, or employees. It is the intention and agreement
of the Lessor and the Lessee that the rentals reserved by
this lease have been fixed in contemplation that each
party shall fully provide his own insurance protection,
except as heretofore set forth, and that each party shall
look to his respective insurance carriers for
reimbursement of any such loss and that as a further
condition thereof no insurance carrier shall be entitled
to subrogation under any circumstances against any party
to this lease. Neither the Lessor nor the Lessee shall
have any interest or claim in the other's insurance
policy or policies, except as heretofore provided. The
foregoing release and waiver shall be in force only if
both releasers' insurance policies contain a clause that
such a release or waiver shall not invalidate the
insurance thereunder. Lessee agrees that all personal
property upon the premises shall be at the risk of the
Lessee only and Lessor shall not be liable for its damage
or theft regardless of the cause of such damage or theft.
This lease consists of 7 pages numbered 1 to 7, and a one page Addendum,
identified by Lessor and Lessee.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as of
the Date of lease stated above.
LESSEE: MORTON METALCRAFT CO. LESSOR: MORTON WELDING CO., INC.
By____________________________ By________________________________
William D. Morton, President James A. Rinkenberger, President
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<PAGE> 8
Exhibit A
ADDENDUM
Lessor and Lessee agree that the building addition contemplated by Section 25 of
the Lease Agreement between the parties dated September 1, 1994 was available
for occupancy by the Lessee on _____, 199___ and that the total cost of the
improvements to the existing building and the new addition was $____.
Accordingly, as of ____, 199___, the monthly rental under the Lease Agreement
shall increase by $________________ per month from the previous monthly
rental of $_______ per month to the new monthly rental of $per month. Further,
the parties agree that the floor option price under Section 24 of the Lease
Agreement shall be $______.
Dated this _____ day of ________________, 19___.
LESSEE: MORTON METALCRAFT CO. LESSOR: MORTON WELDING CO., INC.
By____________________________ By________________________________
William D. Morton, President James A. Rinkenberger, President
<PAGE> 9
AMENDMENT TO INDUSTRIAL BUILDING LEASE
MORTON WELDING CO., INC., as Lessor, and MORTON METALCRAFT CO., as
Lessee, entered into an Industrial Building Lease dated September 1, 1994 (the
"Lease") for the premises commonly known as 400 Detroit Street, Morton,
Illinois 61550.
Pursuant to Section 25 of the Lease, the Lessor paid for improvements
to the existing building and the Lessor and the Lessee have now agreed on the
completion of the Addendum attached to the Lease as Exhibit A. In connection
with the completion of Exhibit A, however, the Lessor and the Lessee agree to
use a capitalization rate of 11-3/4% rather than the 11% provided in the Lease.
Exhibit A attached hereto is hereby approved, authorized and ratified.
Except as herein modified, the parties hereto do hereby ratify and
confirm the Lease.
Dated as of this ____ day of May, 1995.
LESSEE: LESSOR:
MORTON METALCRAFT CO. MORTON WELDING CO., INC.
By William D. Morton By James A. Rinkenberger
-------------------------- -------------------------
William D. Morton, President James A. Rinkenberger
President
President
<PAGE> 10
EXHIBIT A
ADDENDUM
Lessor and Lessee agree that the building addition contemplated by Section 25
of the Lease Agreement between the parties dated September 1, 1994 was
available for occupancy by the Lessee on November 15, 1994 and that the total
cost of the improvements to the existing building and the new addition was
$746,779.00. Accordingly, as of November 15, 1994, the monthly rental under the
Lease Agreement shall increase by $7,312.22 per month from the previous monthly
rental of $12,055.86 per month to the new monthly rental of $19,368.07 per
month. Further, the parties agree that the floor option price under Section 24
of the Lease Agreement shall be $1,996,779.00.
Dated this ______ day of May, 1995.
LESSEE: MORTON METALCRAFT CO. LESSOR: MORTON WELDING CO., INC.
By William D. Morton By James A. Rinkenberger
-------------------------------- --------------------------------
William D. Morton, President James A. Rinkenberger, President
<PAGE> 1
EXHIBIT 10.7
LEASE
This Lease is made and entered into this 9th day of June, 1995, by and between
Caterpillar Inc., a Delaware corporation, (hereinafter referred to as "Lessor"),
and Morton Metalcraft Co., an Illinois corporation, (hereinafter referred to as
"Lessee").
Witnesseth:
1. PREMISES - Lessor, for and in consideration of the rent and covenants,
conditions and agreements hereinafter described to be kept and performed by
Lessee, does hereby rent, demise and lease to Lessee, and Lessee does
hereby rent and lease from Lessor, one hundred thirty-seven thousand three
hundred fifty-one (137,351) square feet in a building located at 8201 N.
University Street, Peoria, IL 61615, being more particularly shown on
Exhibit "A" attached hereto and incorporated herein by reference (the
"Premises"). Lessee shall have access rights to the Premises as shown on
Exhibit A and exclusive use of the fenced-in area shown on Exhibit A.
Lessee may use existing hard-surfaced areas within the fenced-in area for
employee parking and truck access. Any additional employee parking on or
off site shall be provided by Lessee.
2. TERM - The term of this Lease shall be for eight years, commencing on June
1, 1995 and terminating on May 31, 2003.
3. RENT - Rent shall be payable in monthly installments, commencing January 1,
1996, in accordance with the following schedule:
<PAGE> 2
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Years 1996 - 1997 $20,030.35/MO ($1.75/SF/YR)
Years 1998 - 1999 $25,753.30/MO ($2.25/SF/YR)
Years 2000 - 2001 $27,470.20/MO ($2.40/SF/YR)
Year 2002 $28,294.30/MO (3% escalation)
Year 2003 $29,143.13/MO (3% escalation)
Monthly installments of rent as provided above shall be paid in
advance on the first day of each month at the offices of the Lessor
shown in Section 23. If commencement and termination dates are other
than the first of a month, rent shall be prorated based on the number
of days used in the month.
4. USE OF PREMISES - Premises are to be used by Lessee for manufacturing
and assembly purposes, or for any other purposes permitted by
applicable law, zoning and covenants and by this Lease.
Lessee shall comply, at the cost and expense of Lessee, with any and
all ordinances, statutes or other laws relating to the use of the
Premises, and will observe and comply with requests of fire insurance
companies respecting the use of the Premises.
Lessee's employees, agents and invitees shall remain within the
Premises and not enter adjoining building space.
5. REGULATORY COMPLIANCE
A. Lessee shall not, and shall not permit others to, introduce, use,
dispose of, dump or store any materials on the Premises in a
<PAGE> 3
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manner in which, or whose presence would, violate any laws,
ordinances or regulations relating to environment, health or
safety conditions; and Lessee's operations at the Premises shall
remain in compliance with all such applicable laws.
B. Lessee agrees to defend and hold Lessor harmless from and to
indemnify Lessor against any and all claims, liabilities and
damages, penalties, costs or expenses (including, but not limited
to, attorney's fees) arising from or caused in whole or in part,
directly or indirectly, from any failure to comply with Lessee's
obligations in this Section. This indemnification shall survive
the termination of this Agreement.
C. Lessor agrees to defend and hold Lessee harmless from and to
indemnify Lessee against any and all claims, liabilities and
damages, penalties, costs or expense (including, but not limited
to attorney's fees) arising from any violation of any
environmental, health or safety regulation or law or condition
existing prior to Lessee's occupancy of the Premises or solely
caused by Lessor. In the event any environmental condition
existing prior to Lessee's occupancy of the Premises adversely
impacts Lessee's occupancy of or the conduct of Lessee's business
upon the Premises, Lessee may, as its sole remedy, either
terminate this Lease or ask Lessor to abate the rent to the
extent the Premises becomes untenantable. This indemnification
shall survive the termination of this Agreement.
<PAGE> 4
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6. ALTERATIONS, IMPROVEMENTS AND SIGNS
A. Improvements by Lessee
During the term of the Lease, Lessee at its sole expense may, with the
prior consent of Lessor, make alterations and improvements to the
Premises for use by Lessee as provided herein, including but not
limited to, installation of signs, equipment, fixtures, partitions and
shelving. Lessor hereby preliminarily consents to Lessee's planned
improvements detailed on Exhibit B hereto, pending Lessor's approval
of the final designs.
Upon termination of this Lease, alterations and improvements to the
Premises made by Lessee and other property of Lessee left in place
with the consent of Lessor shall become the property of Lessor, unless
the consent given by Lessor to Lessee was conditioned upon Lessee's
removal of such improvements and restoration of the Premises to the
same condition as existed prior to the alterations and improvements.
If Lessee has not removed its alterations and improvements (except as
Lessor has otherwise agreed) at the termination of this Lease, Lessor
may remove them and all charges therefor will be due immediately from
Lessee.
B. Improvements by Lessor - Lessor agrees to make the alterations and
improvements to the Premises specified in Exhibit C hereto. Such
alterations and improvements shall be at Lessor's cost. Lessor
<PAGE> 5
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agrees to contribute fifty thousand dollars ($50,000) towards Lessee's
construction of a new dock as specified in Exhibit B hereto, with such
contribution due upon receipt by Lessor of invoices identified by
Lessee as pertaining to completion of construction of the new dock.
7. UTILITIES AND REIMBURSEMENT COSTS - Lessee shall pay for all utilities
(e.g. gas, electricity, water and sanitary sewer) serving the Premises. In
addition, Lessee shall pay for its prorata share (which prorata share
equals 33.3% based upon property containing 412,404 sq. ft. of building
space) of all building insurance costs and real estate taxes. Such prorata
share shall be paid by Lessee within thirty (30) days after receiving an
invoice from Lessor.
8. TAXES AND INSURANCE
a. Taxes - Subject to Lessee's reimbursement of Lessee's prorata share of
real estate taxes as specified in Section 7 above, Lessor shall pay
when due all real estate taxes levied against the property which
includes the Premises. Lessee will be responsible to Lessor for any
increase in taxes resulting solely from improvements made by Lessee.
Lessee shall pay when due all personal property taxes assessed against
property owned by or placed in, upon or about the Premises by Lessee.
b. Insurance - Lessee at its expense shall procure and maintain during
the Lease term:
<PAGE> 6
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i) casualty insurance on improvements and personal property of Lessee on the
Premises including, without limitation, fire, extended coverage and
all-risk hazard insurance;
ii) Commercial General Liability Insurance for Bodily Injury and Property
Damage covering Premises, completed operations and personal injury in a
combined amount of not less than $2,000,000; and
iii) Workman's Compensation and employer's liability insurance coverage for all
employees of Lessee employed on or about the Premises, or shall be a
qualified self-insurer, as required by the laws of the State of Illinois.
Lessee shall provide to Lessor not less than five (5) days prior to Lessee's
occupancy of the Premises certificates evidencing the existence of said
coverages, designating Lessor as an additional insured under the coverages set
forth in item ii above, and providing that the Lessor shall receive not less
than ten (10) days prior notice of any change in or cancellation of the
policies or coverage thereunder.
Each party hereby releases and relieves the other and waives, respectively,
their entire claim against the other for property loss or property damage
arising out of or incident to fire explosion, sprinkler or water damage, or
other perils included in the extended coverage endorsement of the insurance
policies of either party, on or about the Premises, whether due to the
<PAGE> 7
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negligence of any of said parties, their agents or employees or otherwise.
The foregoing language shall not be construed as waiving or releasing any
claim or claims which the parties or either of them have against any
insurance company or companies.
9. REPAIRS AND MAINTENANCE - Lessor shall maintain the roof, foundations,
exterior walls (excluding windows) and fire protection system of the
Premises. The term "roof" as used herein shall include skylights, smoke
hatches and roof vents.
Lessee, at its expense, shall maintain and repair all building equipment
located on the Premises including, but not limited to, fire sprinkler
systems, sanitary and storm sewer lines, utility services, exterior
lighting, floor covering, heating, ventilation and air conditioning system,
truck doors, dock levelers, dock bumpers, dock plates, plumbing work and
fixtures. Lessee shall also maintain (including snow removal) and repair
all outside areas of the Premises, including, but not limited to, the lawn,
driveways, storage areas, dock ramps and parking areas. Lessee shall
maintain and repair all improvements installed by Lessee. Lessee, at its
expense, shall clean the Premises and arrange for regular removal from the
Premises Lessee's trash and debris. Notwithstanding the foregoing, in no
event shall Lessee have any responsibility to maintain or repair any
building equipment located outside of the Premises, even if such equipment
is a part of or connected to equipment located on the Premises. If any
building equipment located on the Premises services both areas on the
Premises and areas outside of the Premises, Lessee shall only be
responsible for a percentage of the cost to maintain and
<PAGE> 8
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repair the same, this percentage being equivalent to the percentage of the
equipment's capacity designed to service only the Premises. At the
termination of this Lease term or extension thereof, the Lessee shall
return the Premises to a condition similar to that existing at the
commencement of the Lease, excepting ordinary wear and tear.
10. ACCESS BY LESSOR - Upon reasonable notice, except in emergencies where no
such notice shall be required, Lessor's representatives shall have the
right to enter the Premises to inspect the same, and to perform such work
as may be permitted or required hereunder (including testing and
maintenance of the exterior underground fire protection sprinkler lines),
to make repairs or alterations, to deal with emergencies, to post such
notices as may be permitted or required by law to prevent the perfection of
liens against Lessor's interest in the Premises or to exhibit the Premises
to prospective tenants, purchasers, or others, or for any other purposes
Lessor may deem necessary or desirable; provided, however, that Lessor
shall not unreasonably interfere with Lessee's operations. Lessee shall not
be entitled to any abatement of rent by reason of the exercise of any such
right of entry. Lessee shall give notice to Lessor at least thirty (30)
days prior to vacating the Premises and shall meet with Lessor for a joint
inspection of the Premises at the time of vacating.
11. INDEMNIFICATION - Lessee hereby agrees to defend, indemnify and hold
harmless Lessor, its officers, employees and agents, from and against all
claims and demands of any nature whatsoever arising out of the injury to or
death of any person or damage to property, to the extent caused by the acts
or omissions of Lessee, its employees, agents, guests, licensees or
invitees during the term of this Lease, or resulting from possession or use
of the Premises by Lessee.
<PAGE> 9
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Lessor herby agrees to defend, indemnify and hold harmless Lessee, its
officers, employees and agents, from and against all claims and demands of
any nature whatsoever arising out of the injury to or death of any person
or damage to property, to the extent caused by the acts or omissions of
Lessor, its employees, agents, guests, licensees or invitees during the
term of this Lease.
12. LOSS OR DESTRUCTION OF PREMISES - In the event that the Premises are
damaged by fire or other casualty or taken by condemnation of public
authority in such a way that the Premises are rendered partially or
substantially unsuitable to Lessee for the carrying out of its business,
and if Lessor does not restore the Premises within ninety (90) days
following any such casualty or taking, then either party shall have the
option of terminating this Lease. To the extent that the Premises become
untenantable, rent shall be abated.
13. LESSEE SHALL DISCHARGE ALL LIENS - Lessee shall promptly pay all its
contractors and materialmen. Should any lien be filed against the Premises
or Lessor as a result of Lessee's act or forbearance, Lessee shall promptly
furnish Lessor security in an amount sufficient to protect Lessor from loss
or make provisions for discharge of the lien within five (5) days after
written request by Lessor.
14. DEFAULT BY LESSEE, RIGHTS AND REMEDIES - If default is made in the payment
of rent at the times herein stated, or if Lessee shall fail to perform any
of the covenants, conditions and agreements contained in this Lease and
such default continues for fifteen (15) days after written notice thereof
by Lessor to Lessee, then Lessor, or its legal
<PAGE> 10
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representative, shall have all rights and remedies at law or in equity to
evict Lessee and retake possession with or without court order and without
in any way prejudicing Lessor from exercising any and all rights, remedies
or causes of action which it may have, including the right to receive and
collect the balance of rent or any other sums which may be due under this
Lease. All remedies of Lessor are cumulative and the selection of one
remedy shall not be deemed a waiver of any other.
If Lessee shall make an assignment for the benefit of creditors, file a
petition in any court for insolvency proceedings of any kind, or have a
petition filed against it for insolvency proceedings in any court, this
Lease shall automatically terminate and Lessor shall have the rights
provided for herein in the event of default.
15. WAIVER - The waiver by Lessor of breach of any term, covenant, condition or
agreement herein contained shall not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant, condition or
agreement.
16. ASSIGNMENT OR SUBLETTING - Lessee shall not assign this Lease or sublease
all or any portion of the Premises without the written consent of Lessor,
which consent shall not be unreasonably withheld.
17. SUBORDINATION - This Lease and all the rights of Lessee hereunder are and
shall be subject and subordinate at all times to the lien or liens of any
mortgages placed on the Premises, either prior or subsequent to the date
hereof. Lessee shall execute and deliver upon demand such
<PAGE> 11
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further instrument or instruments evidencing such subordination
of this Lease as may be requested by any mortgagee or proposed
mortgagee.
18. WASTE OR NUISANCE - Lessee shall not commit or suffer to be
committed any waste upon the Premises or any nuisance or other
act or thing which may disturb the quiet enjoyment of another
tenant in the building in which the Premises is located.
19. QUIET ENJOYMENT - As long as Lessee is not in default under the
terms of this Lease, Lessee shall at all times during the term
hereof have the peaceable and quiet enjoyment, possession,
occupancy and use of the Premises.
20. BROKERS - Lessor and Lessee each represent that it has not dealt
with any broker in connection with the negotiation, execution, or
delivery of this Lease, except for Maloof Real Estate Company
("Broker"), for whose commission Lessor is solely responsible.
Each party shall defend, indemnify and hold harmless the other
party from and against any claims or demands for brokerage
commissions or finder's fees alleged to arise from the acts of
the first mentioned party.
21. OPTION TO RENEW - If Lessee is not then in default under this
Lease, Lessee shall have an option to renew this Lease for three
(3) further terms of five (5) years each ("Renewal Period" or
"Renewal Periods") by giving Lessor written notice of its
election to do so not less than one hundred eighty (180) days
prior to the end of the then current term. Such renewals shall be
on the same terms and conditions other than as to rent. Rent for
each Renewal Period shall equal the greater
<PAGE> 12
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of: a) the final rental rate under the then-current term, with an annual
escalation factor thereafter equaling the increase in the Consumer Price
Index; or b) the fair market rate (based upon a five year lease of similar
property) at the beginning of the Renewal Period, with an annual escalation
factor thereafter equaling the increase in the Consumer Price Index. (If
the U.S. Department of Labor discontinues publishing the Consumer Price
Index at regular intervals, then any similar reports issued at regular
intervals by another agency of the U.S. Government for substantially
similar purposes shall be used.) If the parties cannot agree upon the fair
market rate, such dispute shall be submitted to arbitration. Lessor shall
select one arbitrator, Lessee shall select one arbitrator, and if the two
arbitrators are unable to agree upon the fair market rent within thirty
(30) days of their appointment, the two arbitrators shall select a third
arbitrator, whose determination thereof shall be binding on Lessor and
Lessee. All three arbitrators shall be licensed Real Estate Brokers with at
least five (5) years' experience in the Peoria, IL area.
22. NOTICES - Any notice or other communication provided for in this Lease
shall be given by certified mail or telefax to the other party at the
address specified below unless a party has changed its address by notice
given pursuant to this section:
Lessor:
Caterpillar Inc.
100 N.E. Adams Street
Peoria, Illinois 61629-3315
Attn.: Real Estate Manager
<PAGE> 13
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Lessee:
Morton Metalcraft Co.
1021 W. Birchwood
Morton, IL 61550-0429
Attn: Vice President of Finance
23. SUCCESSORS - All rights, liabilities, and covenants herein contained, given
to or imposed upon the parties hereto shall extend to and bind their heirs,
executors, administrators, successors and assigns.
24. PARTIAL INVALIDITY - The provisions of this Lease shall be severable and
the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the remaining provisions.
25. GOVERNING LAW - This Lease or any term hereof shall be construed according
to the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have caused this Lease to be executed on the
day and year first above written.
CATERPILLAR INC., Lessor MORTON METALCRAFT CO., Lessee
By: /s/ Glen Barton By: /s/ William D. Morton
-------------------------- --------------------------
Name: Glen Barton Name: William D. Morton
------------------------ ------------------------
Title: Group President Title: President
----------------------- -----------------------
<PAGE> 1
EXHIBIT 10.8
LEASE
THIS LEASE (the "Lease") is made and entered into as of the 6th day of
November, 1996, by and between AGRACEL, INC., an Illinois corporation,
hereinafter referred to as "Lessor", and MORTON METALCRAFT CO., an Illinois
corporation, of 1021 West Birchwood Street, P.O. Box 429, Morton, Illinois
61550-0429, hereinafter referred to as "Lessee".
1. PROPERTY LEASED:
(a) Lessor shall lease to the Lessee and Lessee shall lease from Lessor
that certain parcel of real property legally described at Article 1 (b) below
(the "Land"), together with the buildings and improvements to be erected
thereon by Lessor according to plans and specifications described on Exhibit A
attached hereto (the "Building"). The Land and the Building are hereafter
referred to as the "Premises".
(b) The Building is to be constructed on the Land described as: See
attached Exhibit B.
(c) (i) Lessor agrees to construct the Building on the Land in
accordance with the plans and specifications attached as Exhibit A hereto, as
the same may be amended from time to time by agreement of the parties, as set
forth in written change orders signed by both parties or their designated
representatives. Lessor further agrees to provide such on-site improvements as
are delineated in Exhibit A hereto.
(ii) Lessor agrees that such construction will be under roof and
sufficiently complete to take delivery of Lessee's equipment not later than
February 3, 1997, and that all such
<PAGE> 2
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construction except for punch-list items will be completed, and a certificate
of occupancy sufficient to permit Lessee to begin manufacturing operations will
be issued, not later than March 14, 1997. Punchlist items will be completed not
later than May 15, 1997.
(iii) Lessor agrees to secure all necessary permits for such
construction; that such construction will be completed in a good and
workmanlike manner; that materials and workmanship will be of such quality as
is usual and customary in the Wake County, North Carolina area; and that all
such construction shall comply with all applicable building and safety codes,
and shall comport in all material respects with the plans and specifications.
(iv) Lessor shall provide usual ventilation, heating, air
conditioning, electrical, plumbing, and mechanical systems, equipment, and
fixtures for the Building, to the extent set forth in Exhibit A hereto.
(v) Upon the commencement date, or as soon thereafter as they shall
become available, Lessor shall deliver and transfer to Lessee all
manufacturers' warranties, owners' manuals and related materials. Lessor
warrants the workmanship and materials of the Building and its components
installed by Lessor, its subcontractors, agents, and anyone working under
Lessor's control, for a period of one (1) year after the commencement date
hereof.
(vi) Lessor warrants that upon completion of the improvements, public
utilities providing water, electrical power,
<PAGE> 3
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natural gas, telephone and sewage disposal, will be available to the building.
Lessee will pay any "turn-on" costs.
(vii) Lessor warrants that all improvements to be constructed
will comply with all building codes, zoning laws, minimum size requirements,
setbacks and required parking.
(viii) Lessor warrants that the improvements will, to the extent
required by the American with Disabilities Act, comply with the Act.
(d) So long as Lessee is not in default of this Lease and so long as
there has been no adverse material changes in Lessee's financial condition and
business prospects, Lessor agrees to construct at Lessor's expense expansions
to the Building at any time and from time to time upon written notice from
Lessee on the following terms and conditions:
(i) Initial annual rental for each expansion shall be determined
according to the following formula: (A) Actual Cost (hereinafter defined) of
the expansion multiplied by (B) a percentage equal to the sum of the Lessor's
actual cost of funds for the expansion plus four and one-half percent (4 1/2%)
per annum. Initial Annual Rental for each expansion shall be paid for the first
year following the substantial completion of that expansion. Rental for that
expansion thereafter shall be based upon the initial rental for that expansion
plus 3% per year for the remainder of the term and any extensions. Rental shall
be payable in equal monthly installments in advance on the first day of each
month commencing on the date of substantial completion of the expansion of the
Building.
<PAGE> 4
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(ii) The "Actual Cost" of each expansion to the Building is herein
defined as the cost of financing, cost of materials and labor, the fees of
architects, engineers, surveyors, and other professionals; actual out-of-pocket
costs for obtaining permits and other governmental approvals; and any other
out-of-pocket costs actually and reasonably incurred by Lessor for construction
of the expansion of the Building, as such costs may be adjusted (by increase or
decrease) by change orders mutually agreed upon by Lessor and Lessee, all as
determined by an internal audit performed by Lessor and Lessee upon the
substantial completion of the expansion.
(iii) Lessee shall provide to Lessor a preliminary design for each
expansion which shall conform to all laws, rules and regulations then in effect
and applicable to the Building and which shall incorporate materials and
workmanship of a quality at least equal to that of the Building;
(iv) Lessor shall promptly estimate the Actual Cost (hereinafter
defined) of the construction of the expansion to the Building based upon the
preliminary design and provide to Lessee a written estimate in reasonable
line-item detail of the Actual Cost of the expansion. Upon Lessee's receipt of
Lessor's Actual Cost estimate, Lessee shall promptly notify Lessor of its
acceptance or challenge of Lessor's estimate of Actual Cost. If
<PAGE> 5
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Lessee challenges Lessor's estimate of the Actual Cost or any line-item
thereof, Lessor shall promptly provide Lessee with three competitive bids for
each line-item to which Lessee's challenge relates, and Lessor shall award
contracts to the competitive bidders of Lessee's choice. Lessor's estimate of
Actual Cost, as adjusted by challenge as provided above, shall further be
adjusted (either by increase or decrease) to reflect any change orders mutually
agreed upon by Lessor and Lessee during the construction of the expansion.
(v) If the Initial Term (hereinafter defined) of the Lease at the
time(s) Lessee exercises its continuing expansion option is less than ten
years, then as a condition precedent to Lessor's obligation to construct an
expansion to the Building, Lessee and Lessor shall execute an amendment to the
Lease providing for an additional extension term (the "Amended Extension Term")
which, when added to the unexpired portion of the Initial Term, will equal not
less than ten years, calculated as of the date of substantial completion of the
expansion to the Building. The rental for the premises during the Amended
Extension Term, exclusive of the expansion(s), shall be the same as during the
initial term adjusted as set forth at paragraph 2. The rental for the
expansion(s) during the remainder of the Initial Term and the Amended Extension
Term shall be as set forth in Paragraph 1(d)(i) above. As used herein, "Initial
Term" shall mean the initial ten (10) year term of the Lease, inclusive of any
extension term as to which Lessee has then exercised its option pursuant to
Paragraph 3(d) below.
<PAGE> 6
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(vi) Promptly upon establishment of the estimate of the Actual Cost
of the expansion as set forth in subsection (iv) above, Lessor shall promptly
commence and diligently pursue to completion the construction of the
expansion. If Lessor fails to provide Lessee with an estimate of the Actual
Cost of the expansion pursuant to the provisions of subsection (iv) above or if
Lessor fails to promptly commence and diligently pursue to completion the
construction of the expansion, then in addition to any other remedies Lessee
may have under this Lease or at law for Lessor's breach, and upon written
notice to Lessor, Lessee may at its own cost and expense undertake to complete
the construction of the expansion, calculate the Actual Cost of the expansion,
determine the rental due on the expansion in accordance with the terms set
forth in subsection (i) above, and offset from the rental due for the expansion
all costs incurred by Lessee in completing the construction of the expansion
until Lessee has been reimbursed in full.
(vii) All other terms of this Lease applicable to the
construction of the Building and the lease of the premises shall apply to the
construction and lease of the expansion to the Building.
2. RENTAL:
Tenant shall pay to Landlord initial rent in the amount of $3.46 per
square foot for 98,250 square feet for the first year of the term of this
lease. Rent payable thereafter shall be based upon the initial rent plus three
percent (3%) per year for the remainder of the Term and any extensions, payable
as follows:
<PAGE> 7
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Year 1.................................................$28,328.75 per month
Year 2.................................................$29,178.61 per month
Year 3.................................................$30,053.96 per month
Year 4.................................................$30,955.57 per month
Year 5.................................................$31,884.23 per month
Year 6.................................................$32,840.75 per month
Year 7.................................................$33,825.97 per month
Year 8.................................................$34,840.74 per month
Year 9.................................................$35,885.96 per month
Year 10................................................$36,962.54 per month
beginning with the commencement date defined below, and continuing on the same
date of each month thereafter.
Lessee shall also pay to Lessor a sum equivalent to one month's rent,
which sum shall be held by Lessor in an interest bearing escrow account as
security for the faithful performance by Lessee of all of the terms of this
Lease by Lessee to be observed and performed. Interest on the escrow account
will be retained by and taxable to the lessor. At the end of the lease term,
provided the lessee has fulfilled its obligation under the lease, the escrow
balance will be returned to the lessee within thirty days of the end of the
lease. If the cost of construction of the building and improvements changes as
a result of changes requested by Lessee, then the rent shall adjust according
to the following formula:
<PAGE> 8
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Agreed to increase Increase (decrease)
(decrease) in = in initial annual rent
cost x 12.75%
3. TERM:
(a) The initial term of this Lease shall be ten (10) years, beginning on
the commencement date (defined in paragraph (b) of this article) and ending at
12 o'clock midnight on a date ten (10) years thereafter, unless sooner
terminated as provided herein.
(b) The commencement date shall be March 15, 1997, or as soon thereafter
as the Building to be constructed by Lessor is substantially complete. The
commencement date shall be delayed for one day by each day of delay caused
solely by any material change orders required by Lessee. Each change order at
the time agreed to shall specify the number of days required to implement it.
If delays caused solely by Lessee in supplying plans and specifications or
because of change orders shall cause a delay in the completion date of more
than thirty (30) days, then the Lessee shall pay to Lessor a per diem rent for
each day in excess of thirty (30) days of delay calculated by taking the
monthly rent installment specified above at Article 2 and dividing it by 30.
"Substantially complete" means that a Certificate of Occupancy sufficient to
permit Lessee to begin manufacturing operations has been issued and the
Building is capable of being occupied by Lessee for its purpose of operating
therein a light manufacturing plant suitable for manufacturing sheet metal
fabrications upon installation of equipment for such purposes by
<PAGE> 9
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Lessee as planned, even though some construction items may still be
incomplete and in the process of being completed. After the commencement
date has been determined, and upon the demand of either party, the parties
shall execute a declaration in recordable form expressing the specific
commencement and termination dates of the initial term.
(c) Lessor agrees that construction will be under roof to the extent
necessary to take delivery and provide suitable cover for Lessee's equipment
not later than February 3, 1997, subject to delay caused solely by Lessee.
Commencing on February 4, 1997, the Lessee may enter upon the leased property
at reasonable times for the purpose of installing equipment, furniture, and
fixtures. Lessee's activities may not unreasonably interfere with Lessor's
contractor's activities.
(d) The Lessee shall have one option to extend this Lease for a period
of five (5) years on the same terms as the initial term. Lessee shall
exercise this option by sending written notice thereof to Lessor not later
than March 15, 2006. During the extended term of this Lease, Lessee shall
pay rent at the Fair Market Rental (hereinafter defined). All other terms
of this Lease shall continue in full force and effect during the extended
term. "Fair Market Rental" is herein defined as the rental which a willing
tenant would pay Lessor for the rental of space of the size, location, and
configuration of the premises for the extension term, estimated as of the
commencement of the extension term. Within sixty (60) days after Lessor
has received notice from Lessee that Lessee is exercising its extension
<PAGE> 10
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option, Lessor shall send to Lessee a written notice specifying the Fair Market
Rental as estimated by Lessor in accordance with this subparagraph and, within
fifteen (15) days after receipt of such notice, Lessee shall give Lessor
written notice of its acceptance or challenge of Lessor's estimation of the
Fair Market Rental; provided, however, that if Lessee challenges Lessor's
estimation of the Fair Market Rental, Lessor and Lessee shall endeavor to reach
an agreement as to the Fair Market Rental within fifteen (15) days after the
expiration of such fifteen (15) day period for challenge. If Lessor and Lessee
are unable to reach an agreement as to the Fair Market Rental within said time
period, they each shall immediately thereafter select an appraiser, each of
whom shall be a legally qualified commercial real estate appraiser with a
minimum of three (3) years' experience in the Raleigh, North Carolina
commercial real estate market, who shall determine the Fair Market Rental. The
appraisers shall be instructed to complete the appraisal procedure and to
submit their written determinations to Lessor and Lessee within thirty (30)
days after their selection. In the event that the determination of the Fair
Market Rental submitted by Lessor's appraiser is less than or equal to one
hundred five percent (105%) of the determination of the Fair Market Rental
submitted by Lessee's appraiser, the Fair Market Rental shall be the average of
such determinations. If the determination of the Fair Market Rental submitted
by Lessor's appraiser is greater than one hundred five percent (105%) of the
determination of the Fair Market Rental submitted by Lessee's appraiser, the
<PAGE> 11
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appraisers shall, within ten (10) days, appoint a third appraiser with similar
qualifications to make such determination of the Fair Market Rental in
accordance with the foregoing limitations. The third appraiser shall be
instructed to complete the appraisal procedure and to submit a written
determination of the Fair Market Rental to Lessor and Lessee within thirty (30)
days after such appraiser's appointment. The determination which is neither the
highest nor the lowest of the three (3) determinations of the Fair Market
Rental shall be binding upon Lessor and Lessee. Lessor and Lessee shall each
bear the costs of their respective appraisers. The expenses of the third
appraiser shall be borne one-half (1/2) by Lessor and one-half (1/2) by Lessee.
Notwithstanding the foregoing, rental during the extension term for any and all
expansions to the Building constructed pursuant to the terms of Paragraph 1(d)
above shall be calculated in accordance with the terms set forth in Paragraph
1(d) above.
(e) If Lessor is delayed by more than thirty (30) days in (i)
substantially completing the construction of the building by March 14, 1997,
for any reason other than a delay caused solely by Lessee, Lessor shall pay to
Lessee $500.00 per day for each day that substantial completion is delayed.
Lessor shall not under any circumstances be liable for contingent or
consequential damages. The completion date shall be extended day for day by any
delays caused by Lessee.
4. USE OF PREMISES:
a) The premises are leased for the purpose of general light
manufacturing, including the manufacture of sheet metal
<PAGE> 12
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components manufactured by Lessee and are not to be used for any other purpose
without first having secured the written consent of the Lessor, which consent
shall not be unreasonably withheld. No use of the building shall be made which
would increase the insurable risk of the building for fire and extended
coverage insurance.
b) The premises shall at all times after the commencement date be
accessible to semi-trucks.
5. PUBLIC REQUIREMENTS:
(a) Lessee shall comply with, and on date of commencement, the
improvements shall conform with all laws, ordinances, governmental orders and
regulations and other public requirements now and hereafter affecting the
premises or the use thereof, including but not limited to all recorded
covenants and restrictions, if any. Lessee shall save and hold Lessor harmless
from expense or damage resulting from failure to do so, except for such lack of
such compliance which exists and affects the premises or the use thereof at the
commencement date of this Lease. Lessor guarantees that the real estate is
properly zoned for those uses of the premises provided by paragraph 4.
(b) In the furtherance of, and not in limitation of, Lessee's obligations
under the foregoing paragraph, throughout the terms of this Lease, Lessee shall
do or cause to be done all things necessary to preserve and keep in full force
and effect permits required for the conduct of its business and operations from
the time of commencement of this Lease until its expiration or termination.
<PAGE> 13
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6. ASSIGNING AND SUBLEASING:
Lessee shall not sublet the premises or any part thereof and Lessee shall
not assign, transfer, pledge, mortgage or otherwise encumber this Lease, or any
portion of the term thereof, without the previous written consent in each
instance of Lessor, and Lessee shall furnish to Lessor with each request a copy
of such proposed instrument; Lessor agreeing, however, not to arbitrarily
withhold consent to subletting for any legitimate business not detrimental to
the premises or adjacent property, or occupants thereof, and not more hazardous
on account of fire or otherwise, and not creating wear and tear to the premises
more than the business for which the premises are herein leased. Permission is,
however, granted Lessee to assign or transfer this Lease and also to sublet the
premises to any subsidiary corporation of Lessee, affiliate corporation of
Lessee, or parent corporation of Lessee, upon giving Lessor written notice of
intent so to do. Lessee shall have the right to transfer and assign this Lease
without Lessor's consent to any parent, subsidiary, or affiliated company of
Lessee or to any person or corporation acquiring all or substantially all of
the assets of Lessee by purchase, merger, consolidation or otherwise. An
affiliate company is a company which has at least a 50% common ownership with
Lessee. Transfers of Lessee's shares of stock as may occur from time to time
shall not be deemed a prohibited assignment of this Lease. In the event of any
assignment or subletting, Lessee shall remain the principal obligor to the
Lessor under all covenants of this Lease, and by accepting any assignment or
subletting, an assignee
<PAGE> 14
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or sublessee shall become bound by and shall perform and shall become entitled
to the benefits of all the terms, conditions and covenants by which the Lessee
hereunder is bound.
7. INSURANCE--LESSEE:
(a) Lessee shall, throughout the term of this Lease, maintain fire and
extended coverage insurance on the premises leased in an amount equal to the
full insurable value thereof, in a company or companies rated Best A or better.
(b) Lessee shall, at its expense, during the term hereof, maintain and
deliver to Lessor public liability insurance policies with respect to the
premises. Such policies shall name both the Lessor and the Lessee as insureds
as their interests may appear, and have limits of at least $2,000,000 for
injury or death to any one person and $2,000,000 for any one accident, and
$1,000,000 with respect to damage to property. Such policies shall be in
whatever form and with such insurance companies as are reasonably satisfactory
to Lessor, and shall provide for at least ten days' prior notice to Lessor of
cancellation. At least ten days before any such policy expires, Lessee shall
supply Lessor with a substitute therefor, together with evidence that the
premiums therefor were paid. If Lessee fails to do so, Lessor may procure such
policies or pay such premiums. In such case, all amounts so paid by Lessor,
with interest thereon at the rate of 4% over Wall Street Journal's published
prime rate as published from time to time per annum, shall be added to the next
monthly rent installment coming due, and shall be collected as additional rent.
<PAGE> 15
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(c) Lessee shall be responsible for its equipment, furniture, fixtures,
inventory and other personal property located on the premises and shall be
solely responsible for carrying whatever insurance it desires with respect to
such property.
(d) Lessor and Lessor's mortgagee, if any, shall at all times be named as
a co-insured on all policies of insurance required by this Lease and Lessee
shall provide to Lessor and Lessor's mortgagee, if any, a current certificate
showing compliance with this requirement, provided that Lessor shall have
notified Lessee in writing of the name and address of such mortgagee. Each
policy of insurance shall require notice to Lessor and Lessor's mortgagee prior
to cancellation.
8. TAXES:
Lessee shall pay all real property taxes, personal property taxes and
special assessments lawfully levied against the premises during the term of this
Lease. Taxes for the first and last year of the Lease shall be prorated between
Lessor and Lessee, based on number of days leased.
Lessee shall have the right to contest the amount or validity, in whole or
in part, of any tax by appropriate proceedings diligently conducted in good
faith. If the provisions of any law or regulation then in effect so require,
Lessor shall join in such proceedings.
9. MAINTENANCE BY LESSEE:
Lessee agrees to take good care of the premises and appurtenances thereto,
and to keep them in good repair, free from
<PAGE> 16
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filth, overloading, danger of fire or any pest or nuisance, and to keep all
mechanical systems in good working order. Lessee agrees to maintain and replace
any plate glass or other glass in the building. To the extent not provided by
construction warranties and manufacturers' warranties, Lessee shall conduct a
continuing program of preventive maintenance covering such mechanical
equipment, including regular service and maintenance to heating and air
conditioning equipment by competent tradesmen. Lessee shall not permit any
waste of the premises. At the expiration or other termination of this Lease,
Lessee shall return the premises to Lessor broom clean in as good condition as
when received by Lessee, except only for normal wear and use, damage by fire,
explosion or other insured casualty and acts of third parties not under control
of Lessee. If Lessee fails to do anything required of Lessee in this paragraph
within a reasonable time, Lessor may, at Lessor's option, perform the same at
Lessee's expense.
10. ALTERATIONS AND ADDITIONS:
Lessee shall have the right, at its sole expense, to make non-structural
additions, improvements, or modifications to the interior of the building on the
premises for the convenient conduct of its business. All such changes shall be
made in a good and workmanlike manner and in accordance with applicable codes
and regulations. Lessee shall give Lessor prior written notice of any
alterations, additions, improvements or modifications so made.
<PAGE> 17
-17-
Lessee shall have the right to install such machinery, equipment, and
business and trade fixtures as it deems necessary, and such items shall remain
the property of Lessee and shall be removed at the termination of this Lease,
the Lessee repairing any damage occasioned by removal. If Lessee shall obtain
written consent of Lessor to leave any machinery or like equipment in the
premises, then the full title to such machinery and equipment shall thereupon
pass to Lessor.
11. LESSOR'S RIGHT OF ENTRY:
Lessor, or Lessor's Agent, may enter upon the premises at reasonable hours
upon reasonable notice to examine the same and to do anything required of
Lessor hereunder or which Lessor may deem necessary for the good of the
premises; and during the last 90 days of this Lease may display a sign offering
the premises for sale or for lease, which sign may be affixed in a conspicuous
place on the front of the premises.
Neither Lessor nor any of Lessor's agents who enters upon the premises
shall disclose to any person or entity any information, observations, data, or
visual impressions regarding the trade secrets or other confidential business
information of Lessee. Lessor and any of its agents agree that they will not
take any photographs, videotapes or other images of the interior of the
premises without the prior consent of Lessee.
12. SIGNS AND ADVERTISEMENTS:
Lessee is hereby granted the privilege of erecting signs on the front of
the premises, including in the front and side yards of the building, subject to
applicable laws and regulations,
<PAGE> 18
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including but not limited to ordinances of the municipality in which the
premises are located and restrictive covenants relating to signs in the
industrial park in which the premises are located, if applicable. No signs
shall be erected which are attached to the roof of the building and no signs
shall be attached to the building at right angles suspended by guy wires, but
shall be attached flush to the building in a safe and secure manner. All such
signs shall advertise the Lessee's business, and no revenue producing signs
shall be permitted on the premises. Lessee shall not paint any signs directly on
the building, or otherwise deface, damage or overload the building. Lessee
shall remove all signs at the termination of this Lease, and shall repair any
damage to the building caused by signs at its sole cost and expense.
13. LIABILITY:
Lessee hereby relinquishes all claims, releases, assumes all risks and
agrees to hold Lessor harmless from any liability for any damage done or
occasioned by or from any plumbing, wiring, gas, water, steam, sprinkler
system, equipment or other pipes, or the bursting, leaking or running of any
tank, washstand, water closet, waste pipe or other articles in, above, upon or
about the building or premises, or for damage occasioned from or by water,
snow, or ice being upon or about the premises (except on the roof of the
building) unless caused by the negligence or intentional act of Lessor, its
agents or employees.
Lessor and Lessee hereby expressly waive any cause of action or right of
recovery which either may have hereafter against the
<PAGE> 19
-19-
other for any loss or damage to the premises, or to the contents thereof, from
all claims and liabilities arising from or caused by any hazard that could be
covered by a standard fire insurance policy with extended coverage and "all
risk" endorsement on the premises or on the contents thereof, to the extent of
any amounts actually received or which could have been received had the proper
insurance been in place, and each party hereto shall obtain a waiver from any
insurance carrier with which it carries insurance covering the premises, or the
contents thereof, releasing its subrogation rights as against the other party,
and upon request by either party evidence of said waiver shall be furnished by
each party hereto to the other party.
Lessee agrees to save and hold Lessor harmless from any claim, damage,
liability, or expense arising from any injury (including death) to persons or
damage to property occurring in, on or about the premises, except to the extent
caused by the negligence of the Lessor, its agents and employees. In the event
of the negligence of more than one party, the parties shall be liable to one
another for their proportionate share.
14. DAMAGE BY CASUALTY:
If, during the term hereof, or previous thereto, the premises or any
Building of which the premises are a part shall suffer damage by fire,
explosion, providential means or any other casualty to the extent that the
premises or Building cannot reasonably be repaired within 90 days after date of
such damage, in the judgment of Lessor and Lessee, of if they cannot agree, a
mutually agreeable third party qualified in the construction
<PAGE> 20
-20-
industry in or about Wake County, North Carolina, or to such an extent that
under the then existing laws, orders, ordinances or other public requirements
the same cannot be repaired to substantially the same form and with
substantially the same materials as before such damage, then the term hereby
created shall, at the option of either party exercised by written notice not
later than sixty (60) days after the occurrence of such casualty, terminate as
of the date of such damage and rent shall cease as of the date of such damage
(with proportionate refund of any prepayment) on condition Lessee forthwith
surrenders the premises to Lessor. If this Lease is not so terminated, then
Lessor shall repair the premises as soon as practicable with due diligence. A
maximum of 120 days shall be considered a reasonable time in which to complete
repairs barring any extraordinary circumstances or matters beyond the control
of Lessor, placing the same in as good condition as they were just before such
damage, and rent shall abate pro rata and in proportion to untenantability of
the premises (or if the undamaged portion is not reasonably usable for Lessee's
purposes pending the restoration of the Building, all rent shall abate) from
the time of such damage until restoration of the premises by Lessor. It is
further agreed that the period for reconstruction shall be extended for such
time during which strikes, riots, civil commotion, governmental intervention,
acts of God, or any other contingency beyond Lessor's control shall delay the
construction. In case of such damage, whether this Lease is thereby terminated
or not, Lessee shall remove all of the rubbish
<PAGE> 21
-21-
and debris of Lessee's property within sixty (60) days after written request
by Lessor, and if this Lease is not thereby terminated, Lessee shall not do
anything to hinder or delay Lessor's work of repair, and will cooperate with
Lessor in such work. Lessor shall not be liable for inconvenience to Lessee by
making repairs to any part of the premises or Building, nor for the
restoration of any improvements made by Lessee, nor for the restoration of any
property of Lessee. Notwithstanding anything herein to the contrary, in the
event the holder of any indebtedness secured by a mortgage or deed of trust
covering the premises requires that the insurance proceeds be applied to such
indebtedness, then Lessor shall have the right to terminate this Lease by
delivering written notice of termination to Lessee, whereupon all rights and
obligations hereunder shall cease and terminate with proportionate refund of
any prepayment.
15 DEFAULT:
If there be default in payment of any rent or in any other of Lessee's
obligations hereunder, or if the premises be vacated by Lessee without adequate
provision for building security and maintenance, and if such default or
condition shall continue after ten (10) days' notice, in writing, from Lessor
to Lessee to make good such default or correct such condition, Lessor may, at
Lessor's option, at any time thereafter while such default or condition
continues, without further notice or demand, declare this Lease terminated and
enter upon and repossess the premises free of this Lease; or Lessor may, at
Lessor's option, enter upon and repossess the premises as aforesaid or receive
the keys
<PAGE> 22
-22-
thereto, Lessee hereby acknowledging that the Lessor has received same as Agent
of the Lessee and is authorized to re-let the premises for the balance of the
term of this Lease, for a shorter or longer term, at such rental as Lessor
deems fit, and may receive the rents therefor, applying the same first to the
payment of the reasonable expense of such re-letting and second to the payment
of rent due and to become due under this Lease, Lessee remaining liable for and
agreeing hereby to pay Lessor any deficiency. Lessor shall make reasonable
efforts to re-lease the premises. Listing the premises for re-lease with a
reputable broker shall be considered a reasonable effort, but all reasonable
broker's commissions shall be at Lessee's expense. Provided, however, if any
such default be other than for non-payment of money and it would take more than
thirty (30) days to cure the same, Lessor shall not be entitled to terminate
this Lease or enter upon the premises for such default if Lessee begins the cure
of such default within said thirty (30) days and prosecutes the cure thereof
with due diligence to completion. If any proceedings under the present or any
other Bankruptcy Code, including but not being limited to voluntary or
involuntary straight bankruptcy proceedings, arrangements or reorganizations,
be instituted by or against Lessee, or if a receiver or trustee be appointed for
or ordered to dispose of Lessee's business or property, or if Lessee makes any
assignment or conveyance for benefit of creditors, the same shall constitute a
breach of this Lease and Lessor shall forthwith on such breach have the right of
<PAGE> 23
-23-
termination, entry and repossession as above, in this paragraph set forth.
16. EMINENT DOMAIN:
If the premises or any substantial part thereof shall be taken by any
competent authority under the power of eminent domain, or a conveyance thereof
be made in lieu of or in anticipation of the exercise of such power, or if the
premises or any substantial part thereof be acquired for any public or
quasi-public use or purpose, the term of this Lease shall cease and terminate
upon the date when the possession of said premises or the part thereof so taken
shall be required for such use or purpose and without apportionment of the
award, and Lessee shall have no claim against Lessor for the value of any
unexpired term of this Lease. If any condemnation proceeding shall be
instituted in which it is sought to take or damage any part of Lessor's
building or the land under it, Lessor or Lessee shall have the right to cancel
this Lease after having given written notice of cancellation to the other not
less than ninety (90) days prior to the date of cancellation designated in the
notice. Rent at the then current rate shall be apportioned as of the date of
the termination. No money or other consideration shall be payable by the Lessor
to the Lessee or by Lessee to the Lessor for the right of cancellation and the
Lessee shall have no right to share in the condemnation award or in any
judgment for damages caused by the taking. Nothing in this paragraph shall
preclude an award being made to Lessee for loss of business or depreciation to
and cost of removal of equipment or fixtures.
<PAGE> 24
-24-
17. UTILITIES:
Lessee shall contract in its own name and pay for all charges for water,
sewer charges, gas heat, oil, electricity, fuel, telephone and other utilities
used in or serving the premises during the term of this Lease.
18. MECHANIC'S LIENS:
Lessee will not permit any mechanic's liens, or other liens, to be placed
upon the premises or any building or improvement thereon during the term hereof
as a result of Lessee's actions, and in case of the filing of any such lien,
Lessee will promptly pay same; provided, however, that Lessee shall have the
right to contest the validity or amount of any such lien upon posting security
with Lessor which in Lessor's sole reasonable judgment is adequate to pay and
discharge any such lien in full if held valid. Lessee shall have sixty (60)
days after filing to pay the lien or post security as provided. If default in
payment thereof shall continue for thirty (30) days after notice thereof from
Lessor to Lessee, Lessor shall have the right and privilege at Lessor's option
of paying the same or any portion thereof without inquiry as to the validity
thereof, and any amounts so paid, including expenses and interest, shall be
immediately due by Lessee to Lessor and shall be paid promptly upon
presentation of bill therefor.
Lessor covenants that it will not permit any mechanic's liens to be placed
on the premises, and that, should such lien be recorded against the premises,
Lessor will ensure its removal not
<PAGE> 25
-25-
later than thirty (30) days after written demand therefor is made upon Lessor by
Lessee.
19. MORTGAGES AND ESTOPPEL CERTIFICATES:
This Lease shall be subject and subordinate to any mortgage or deed or
trust now or at any time hereafter constituting a lien or charge upon the
Premises or the improvements situated thereon; provided that Lessee and the
holder of such mortgage or deed of trust shall have entered into a
non-disturbance and attornment agreement in form and content reasonably
acceptable to such parties. Subject to the foregoing, Lessee shall at any time
hereafter on demand execute any instruments, releases or other documents which
may be required by any such mortgagee for the purpose of subjecting and
subordinating this Lease to the lien of any such mortgage.
Lessee shall at any time and from time to time, upon not less than thirty
(30) days' prior request by Lessor, execute, acknowledge and deliver to Lessor,
a statement in writing certifying that (i) this Lease is unmodified and in full
force and effect (or if there have been modifications that the same is in full
force and effect as modified and identifying the modifications), (ii) the dates
to which the base rent and other charges have been paid, and (iii) so far as
the person making the certificate knows, Lessor is not in default under any
provisions of this Lease (or if there are defaults, specifying the defaults).
It is intended that any such statement may be relied upon by any person
proposing to acquire Lessor's interest in this Lease or the premises, or any
prospective mortgagee of, or
<PAGE> 26
-26-
assignee of any mortgage upon such interest or the premises.
20. ENVIRONMENTAL COVENANTS AND WARRANTIES:
Compliance with Law: (a) Lessee, at Lessee's expense, shall comply with
all applicable federal, state and local laws, regulations, or ordinances
pertaining to air and water quality, hazardous materials (as hereinafter
defined), waste disposal, air emissions, and other environmental matters, and
with any direction of any public officer or officers, pursuant to law, which
shall impose any duty upon Lessor or Lessee with respect to any of the
foregoing.
(b) Lessor shall deliver a Phase 1 Environmental Audit prepared by a
professional registered engineer with environmental expertise, dated not
earlier than August 1, 1996, to Lessee within eight (8) weeks of execution by
Lessee of this lease. As used in this paragraph, the Phase I Environmental
Audit shall be in accordance with the provisions set forth in 42 U.S.C.
9601(35)(B) and shall also consist of a visual inspection of the premises,
including any equipment and machinery thereon and all building components or
materials used therein, an inquiry into past occupants and uses of the
premises, a search of all records pertaining to environmental conditions on
the premises, including any reports generated for or from any governmental
authority, notices of warnings, complaints and violations of applicable
environmental statutes, rules or regulations, and applicable environmental
statutes, rules or regulations, and a visual inspection of all properties
adjoining the premises, and any
<PAGE> 27
-27-
other investigation deemed consistent with good commercial practices.
Lessee shall, upon written notice to Lessor, have the right thereafter to
terminate this Lease if the Phase I Environmental Audit shows conditions on the
Land violative of environmental laws, rules, regulations or ordinances and
which cannot with due diligence by Lessor be corrected prior to Lessee's
initial occupation of the premises. Upon delivery of the Phase I Environmental
Audit, Lessor will represent that to the best of Lessor's information and
belief said Phase I Environmental Audit is complete, true and accurate; that to
the best of Lessor's information and belief there has been no change in the
condition of the premises since the date of said Phase I Environmental Audit;
that except as may be reflected in said Phase I Environmental Audit, Lessor has
no knowledge of any environment hazard or pollution on the premises, now or in
the past; and that to the best of Lessor's information and belief, the premises
are in full compliance with all legal requirements of every sort whatsoever.
Lessor warrants that neither it nor any person or entity under its control will
take any action which will cause the premises or any part thereof to be
materially in violation of any applicable statute, ordinance or regulation for
more than thirty (30) days after Lessor receives notice of such violation.
21. INDEMNIFICATION:
(a) Lessee shall indemnify, defend, and hold Lessor harmless from any and
all claims, judgments, damages, penalties, fines, costs, liabilities, or losses
(including, without
<PAGE> 28
-28-
limitation, diminution in value of the premises, damages for the loss or
restriction on use of rentable or usable space or of any amenity of the
premises and reasonable sums paid in settlement of claims, reasonable
attorney's fees, reasonable consultant fees, and reasonable expert
fees) which arise during or after the Lease term as a result of contamination
by hazardous material as a result of Lessee's use or activities, or of Lessee's
agents or contractors. This indemnification of Lessor by Lessee includes,
without limitation, costs incurred in connection with any investigation of site
conditions or any cleanup, remedial, removal, or restoration work required by
any federal, state, or local government agency or political subdivision because
of hazardous material present in the soil or groundwater on or under the
premises as a result of Lessee's use or activities, or Lessee's agents or
contractors, or which would have with reasonable care exerted by Lessee not have
occurred. Without limiting the foregoing, if the presence of any hazardous
material on the premises caused or permitted by Lessee or its agents or
contractors results in any contamination of the premises, Lessee shall promptly
take all actions at its sole expenses as are necessary to return the premises
to the condition existing prior to the release of any such hazardous material
to the premises, provided that Lessor's approval of such actions shall first be
obtained, which approval shall not be unreasonably withheld so long as such
actions would not potentially have any material adverse long-term or short-term
effect on the premises. The
<PAGE> 29
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foregoing indemnity shall survive the expiration or earlier termination of this
Lease.
(b) At the expiration of this Lease or any extension hereof, Lessee shall
select, said selection to be mutually agreeable to Lessor, a professional
registered engineer with environmental expertise to conduct, at Lessee's sole
expense, a Phase I Environmental Audit of the premises. As used in this
Paragraph, a Phase I Environmental Audit shall be in accordance with the
provisions set forth in 42 U.S.C. 9601(35)(B) and shall also consist of a
visual inspection of the premises, including any equipment and machinery thereon
and all building components or materials used therein, an inquiry into past
occupants and uses of the premises, a search of all records pertaining to
environmental conditions on the premises, including any reports generated for
or from any governmental authority, notices of warnings, complaints and
violations of applicable environmental statutes, rules or regulations, and
applicable environmental statutes, rules or regulations, and a visual inspection
of all properties adjoining the premises, and any other investigation deemed
consistent with good commercial practices.
(c) As used herein, the term "hazardous material" means any hazardous or
toxic substance, material, or waste, including, but not limited to, those
substances, materials, and wastes listed in the United States Department of
Transportation Hazardous Materials Table (49 CFR 172.101) or by the United
States Environmental Protection Agency as hazardous substances (40 CFR Part
302) or hazardous wastes (40 CFR Part 261), petroleum
<PAGE> 30
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products, asbestos, or such other substances, materials, and wastes that are or
become regulated under any applicable state or local law.
(d) Anything in this Lease to the contrary notwithstanding Lessee shall not
be responsible for any costs or expenses caused by any condition of the
premises existing before the date of this Lease or created after the
termination of this Lease, or created by any person or entity other than
Lessee, its agents or contractors, except where by reasonable care, Lessee
could have prevented such occurrence.
22. OPTION TO PURCHASE:
Lessor grants to Lessee an irrevocable option to purchase the premises on
the terms and conditions set forth hereafter.
(a) Lessee shall have the right to exercise this option at any time during
the term of this lease or extension thereof by mailing six months written
notice of its exercise to Lessor.
(b) Exercise of its option rights shall entitle and require Lessee to
purchase the premises and to close within thirty (30) days following the later
to occur of (i) the date six months after exercise of the option; or (ii) the
establishment of the purchase price pursuant to the terms of subsection (c)
below. If the closing date occurs after the expiration of the term of the
Lease, inclusive of any and all extensions thereof, then Lessee shall be
permitted to hold over the premises from the date of the expiration of the term
of the Lease until the closing date upon the same terms and conditions set
forth in this Lease and at the same monthly rental as that paid in the last
month of the term of
<PAGE> 31
-31-
the Lease. Lessor will convey title by general warranty deed with English
covenants of title, but subject to no exceptions to title other than as set
forth in the policy of title insurance reviewed and approved by Lessee pursuant
to the terms set forth in Paragraph 23 below.
(c) The purchase price for the premises shall be determined as follows:
Lessor and Lessee shall each select an appraiser, each of whom shall be a duly
licensed or legally authorized commercial real estate appraiser with a minimum
of three (3) years' experience in the Raleigh, North Carolina commercial real
estate market. The appraisers shall be instructed to complete the appraisal
procedure and to submit their written determinations to Lessor and Lessee
within thirty (30) days after their selection. The purchase price shall be the
higher of: (1) the two appraisals, but not more than 110% of the lowest
appraisal; or (2) $3.2 million plus the cost of all changes, additions,
improvements and expansions that are financed by the Lessor pursuant hereto,
except as listed on the Exhibit A Contract Specifications.
(d) Should any part of the premises be condemned prior to Lessee's
exercise of its option rights hereunder, all proceeds from said condemnation
shall belong to Lessor, and Lessee's option right shall remain in full force
and effect as to the remainder of the premises. Should any part of the premises
be condemned after Lessee's exercise of its option rights hereunder, Lessor
shall tender to Lessee any offer for the premises, and the defense of any
condemnation suit; Lessee shall be entitled to all
<PAGE> 32
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proceeds from said condemnation; and Lessee shall be obligated to proceed to
closing as to the remainder of the premises.
(e) Lessor agrees that it will not take any action regarding the premises
which would impair the value of Lessee's option rights. Lessor agrees that
Lessee shall be entitled to have specific performance of its option rights
herein granted; that those rights shall be binding on Lessor and Lessor's
successors and assigns; and that those rights shall be covenants running with
the Land. Upon request, Lessor agrees to execute and deliver to Lessee a
memorandum of option in such form as to be recordable among the land records of
Wake County North Carolina.
(f) Upon Lessee's exercise of the option rights herein granted, and
ascertainment of the purchase price and date of closing, the parties agree to
execute and deliver to each other duplicate originals of an appropriate
contract of purchase and sale, embodying the terms set forth herein and such
other terms as are usual, necessary and appropriate to the transaction.
23 TITLE:
Within thirty (30) days following the date of this Lease, Lessor shall
deliver to Lessee a copy of a current owner's policy of title insurance,
together with a copy of all exceptions to title noted therein, issued by a
title company satisfactory to Lessor and Lessee insuring Lessor's fee simple
title to the Land. Upon receipt of such copy, Lessee shall have five (5)
business days to review and approve the title to the Land. Lessee shall have
the right to terminate this Lease, immediately upon written
<PAGE> 33
-33-
notice to Lessor if such title insurance policy discloses any matter or
exception which would materially and adversely affect Lessee's use and quiet
enjoyment of the premises for the purposes set forth in this Lease.
24. The submission of this Lease to Lessee shall not be construed as an
offer and Lessee shall not have any rights with respect thereto unless Lessor
executes a copy of this Lease and delivers the same to Lessee; provided,
however, that if Lessor shall not have executed and delivered a copy of this
Lease to Lessee by October 30, 1996, then this Lease shall be null and void and
of no further force and effect and neither party shall have any rights
thereunder.
25. This Lease shall be amended to conform to any reasonable requests of
Lessor's lender or lenders so long as such amendment or amendments to not
adversely affect Lessee's rights pursuant hereto or increase Lessee's duties
with respect hereto.
26. Lessor may be required by contractual obligation to purchase an
additional 1.43 acres adjoining the present site for $20,000.00. In the event
that occurs, the purchase price of $20,000.00 shall be considered a Lessee
requested expansion, pursuant to paragraph 1(d) and the rent shall be
re-calculated accordingly, and the additional 1.43 acres shall be considered
part of the leased Premises.
27. Lessor's return on its investment is based upon the initial
improvements being financed through Industrial Revenue Bonds which are Federal
and State income tax exempt. Maintenance of the tax exempt status of the
financing requires certain
<PAGE> 34
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actions and forebearances on Lessee's part. Lessee agrees to do whatever is
required of it to maintain the tax exempt status of Lessor's financing. Should
the tax exempt status of Lessor's financing be lost except due solely to the
act or actions of Lessor, and Lessor's cost of financing increases as a result,
then Lessee shall pay to Lessor, as additional rent, such sums as are necessary
to reimburse Lessor for any diminishment in its return on its investment
resulting from the increase in Lessor's cost of financing. In the event that
tax exempt financing is used for any Lessee required improvements, pursuant to
paragraph 10, then the foregoing shall apply to that financing as well.
28. WAIVER:
A waiver by Lessor or Lessee of any default or breach hereunder shall not
be construed to be a continuing waiver of such default or breach, not as a
waiver or permission, expressed or implied, of any other or subsequent default
or breach. All waivers must be in writing and no course of conduct shall
establish a custom or confer any rights upon Lessee or Lessor.
29. NOTICES:
Unless otherwise designated by like notice in writing by either party to
the other, notices required herein shall be sent by registered or certified
mail or by express overnight delivery as follows:
To Lessor: Agracel, Inc.
P.O. Box 1107
Effingham, Illinois 62401
<PAGE> 35
-35-
Copy to: Q. Anthony Siemer
P.O. Box 607
Effingham, Illinois 62401
To Lessee: Morton Metalcraft Co.
1021 West Birchwood Street
P.O. Box 429
Morton, Illinois 61550-0429
Notices so mailed or delivered shall be deemed duly given upon deposit with the
U.S. Postal service or overnight courier, as applicable, postage or delivery
fee prepaid, addressed as above indicated.
30. SUCCESSORS:
All of the terms, covenants and conditions of this Lease shall apply and
inure to the benefit of, and be binding upon the parties hereto, and upon their
respective successors in interest and legal representatives, except as
otherwise provided herein.
31. QUIET POSSESSION:
Lessor covenants with Lessee that said Lessee, on paying the rent herein
required to be paid and performing the covenants herein contained, shall and
may peaceably and quietly have, hold and enjoy the premises during the term of
this Lease.
32. PROCUREMENT OF THIS LEASE:
Each of the parties hereto certifies that no broker or leasing agent
independent of the parties has been involved in the negotiation of this Lease.
33. ATTORNEY'S FEES:
If any action at law or in equity shall be brought to enforce any of the
covenants, terms or conditions of this Lease, the prevailing party shall be
entitled to recover from the other
<PAGE> 36
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party, as part of the prevailing party's costs, reasonable attorney's fees, the
amount of which shall be fixed by the court, and shall be made a part of any
judgment or decree rendered.
34. LEASE CONSTITUTES ENTIRE CONTRACT:
Each party to this Lease acknowledges that this Lease constitutes all of
the agreements between the parties hereto, and that no representations,
warranties, or other covenants are included except as set forth herein, and
this Lease shall not be recordable, but a "Memorandum of Lease" in usual and
customary form will be executed and acknowledged by the parties, upon request
of either party, which may be recorded.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease or have
caused it to be executed by this respective authorized representatives the day
and year first above written. Each of the persons executing this Lease
represent that they are authorized to execute the same on behalf of the party
for whom they have executed hereafter.
LESSEE
MORTON METALCRAFT CO.
By: /s/ Daryl R. Lindemann
-----------------------------
Its Vice President of Finance
ATTEST:
By:
------------------
Its Vice President
<PAGE> 37
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LESSOR
AGRACEL INC.,
By: /s/ [SIG]
-------------------------
Its President
ATTEST:
By: /s/ [SIG]
-------------------------
Its Vice President
STATE OF ILLINOIS )
) ss.
COUNTY OF TAZEWELL )
I, the undersigned, a Notary Public, in and for said county, in the state
aforesaid, DO HEREBY CERTIFY that Daryl R. Lindemann, personally known to me to
be the Vice President of Morton Metalcraft Co., and David M. Strotton,
personally known to me to be the President of said corporation, and personally
known to me to be the same persons whose names are subscribed to the foregoing
instrument, appeared before me this day in person and acknowledged that as such
Vice Presidents they signed and delivered the said instrument as Vice Presidents
of said corporation, and caused the corporate seal of said corporation to be
affixed thereto, pursuant to authority given by the Board of Directors of said
corporation, as their free and voluntary act and as the free and voluntary act
and deed of said corporation, for the uses and purposes therein set forth.
Given under my hand and notarial seal this 6th day of November, 1996.
/s/ Judith A. Heisel
------------------------
Notary Public
My commission expires:
July, 1997
"OFFICIAL SEAL"
Judith A. Heisel
Notary Public, State of Illinois
My Commission Expires 07/08/97
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
AGREEMENT made this 20th day of January, 1998, by and between MORTON
INDUSTRIAL GROUP, INC., a Georgia corporation (the "Company"), and WILLIAM D.
MORTON (the "Executive").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Agreement and Plan of Merger dated
October 20, 1997 (the "Merger Agreement"), MLX CORP., a Georgia corporation
("MLX"), through a merger (the "Merger") of MORTON METALCRAFT HOLDING CO., a
Delaware corporation ("Morton"), with and into MLX whose name is being changed
to MORTON INDUSTRIAL GROUP, INC., will acquire Morton; and
WHEREAS, the Executive was employed by Morton and, accordingly, the
Company (as successor to the business of Morton) wishes to ensure the employment
of the Executive with the Company and the Executive wishes to accept such
employment upon the terms and conditions hereinafter set forth; and
WHEREAS, it is intended that the Company and its subsidiaries will be
operationally combined under the management of the Executive who shall serve as
the Company's Chairman and Chief Executive Officer ("Company CEO") with other
companies which may be acquired by the Company (the Company and its
subsidiaries, together with such other companies are collectively called the
"Group");
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. Employment
The Company agrees to employ the Executive during the Term specified in
paragraph 2, and the Executive agrees to accept such employment, upon the terms
and conditions hereinafter set forth.
2. Term
(a) Subject to Sections 6 and 7 below and the other terms and
conditions of this Agreement, the Executive's employment by the Company shall be
for a term commencing on the date hereof and expiring on the close of business
on December 31, 2007 (the "Initial Term"); provided, however, the term of the
Executive's employment by the Company shall continue thereafter unless and until
either party shall give to the other six months advance written notice of
expiration of the term (a "Notice of Termination") (the Initial Term and the
period, if any, thereafter, during which the Executive's employment shall
continue are collectively referred to as the "Term"). Any Notice of Termination
given under
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this paragraph 2(a) shall specify the date of expiration (which may not be
earlier than December 31, 2007) and may be given at any time on or after June
30, 2007. The Company shall have the right at any time during any such six month
notice period to relieve the Executive of his offices, duties and
responsibilities and to place him on a paid leave-of-absence status, provided
that during such notice period the Executive shall remain a full-time employee
of the Company and shall continue to receive his base salary compensation and
other benefits as provided in this Agreement. The effective date of the
termination of the Executive's employment with the Company, regardless of the
reason therefor, is referred to in this Agreement as the "Date of Termination".
(b) Upon termination of the employment of the Executive with
the Company pursuant to a Notice of Termination under paragraph 2(a) above, the
Company shall pay the Executive, subject to appropriate offsets, as permitted by
the applicable law, only for debts due from the Executive to the Company or
another company with the Group (collectively, "Offsets"), for so long as the
Executive is not in breach of his obligations to the Company under Section 8
hereof, his base salary compensation and any unused accrued vacation only
through, and any unpaid reimbursement expenses outstanding as of, the Date of
Termination. Any benefits to which the Executive or his beneficiaries may be
entitled under the plans and programs described in Section 5 below, or any other
applicable plans and programs in which he participated as an employee of the
Company, shall be determined as of the Date of Termination in accordance with
the terms of such plans and programs. In connection with the Executive's
termination of employment pursuant to paragraph 2(a), except as provided in this
paragraph 2(b), the Company shall have no further liability to the Executive or
the Executive's heirs, beneficiaries or estate for damages, compensation,
benefits, severance, indemnities or other amounts of whatever nature.
3. Duties and Responsibilities
(a) During the Term, the Executive shall have the position of
Chairman and Chief Executive Officer of the Company and any member of the Group
(unless Executive declines to serve in such capacity). The Executive shall
report to the Board of Directors (the "Board") of the Company.
(b) The Executive shall perform such duties and
responsibilities customary to his office and as are reasonably necessary to the
operations of the Company and the Group and as may be assigned to him from time
to time by or under authority of the Board consistent with his positions as
designated in paragraph 3(a) above.
(c) The Executive's employment by the Company shall be
full-time and during the Term, the Executive agrees that he will (i) devote all
of his business time and attention, his best
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efforts, and his skill and ability to promote the interests of the Group; (ii)
carry out his duties in a competent and professional manner; and (iii) work with
other employees of the Group in a competent and professional manner.
Notwithstanding the foregoing, the Executive shall be permitted to engage in
other business activities (as an active participant or a passive investor),
including without limitation, serving on civic or charitable boards and
committees and performing speaking engagements, provided that such activities
are not rendered for a company which transacts business with any member of the
Group or engages in business competitive with that conducted by any member of
the Group (or, if such company does transact business with a member of the Group
or does engage in a competitive business, it is a publicly held corporation and
the Executive owns less than 1/4 of 1% of its outstanding shares) and further
provided that such activities (individually or collectively) do not materially
interfere with the performance of his duties or responsibilities under this
Agreement.
(d) The Executive's services hereunder shall be performed at
the offices of the Company in Morton, Illinois, subject to necessary travel
requirements of his position and duties hereunder. The Executive shall not be
required to relocate without his prior written consent.
4. Compensation
As compensation for his services hereunder, the Company shall pay the
Executive during the Term, in accordance with its normal payroll practices,
direct salary compensation at an annual rate of $280,000, provided that such
annual rate of salary compensation shall be increased by not less than 5%
annually (but may not be decreased) under the authority of the Board and the
Board's Compensation Committee.
5. Expenses; Fringe Benefits
(a) The Company agrees to pay or to reimburse the Executive
during the Term for all reasonable, ordinary and necessary vouchered business or
entertainment expenses incurred in the performance of his services hereunder in
accordance with the policy of the Company and the Group as from time to time in
effect. The Executive, as a condition precedent to obtaining such payment or
reimbursement, shall provide to the Company any and all statements, bills or
receipts evidencing the travel or out-of-pocket expenses for which the Executive
seeks payment or reimbursement, and any other information or materials, as the
Company or the Group may from time to time reasonably require.
(b) During the Term, subject to the approval of the Board, the
Executive shall be eligible to participate in the incentive compensation plans
of the Company as in effect from time to time.
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<PAGE> 4
(c) During the Term, the Executive and, to the extent
eligible, his dependents, shall be entitled to participate in and receive all
benefits under any welfare benefit plans and programs (including without
limitation, medical, dental, disability, group life (including accidental death
and dismemberment) and business travel insurance plans and programs) now or
hereafter provided by the Company which are applicable generally to the
employees of the Company, subject, however, to the generally applicable
eligibility and other provisions of the various plans and programs in effect
from time to time.
(d) During the Term, the Executive shall be entitled to
participate in all retirement plans and programs (including without limitation
any profit sharing/401(k) plan) which are applicable generally to the employees
of the Company, subject, however, to generally applicable eligibility and other
provisions of the various plans and programs in effect from time to time. In
addition, during the Term, the Executive shall be entitled to receive fringe
benefits and perquisites in accordance with the plans, practices, programs and
policies of the Company from time to time in effect which are available
generally to the officers of the Company and such other fringe benefits as may
from time to time be approved in writing by the Board.
(e) During the Term, the Company will provide the Executive
with the exclusive use of a Company leased automobile and pay for all costs of
leasing, insuring, and maintaining such automobile for use in the business of
the Company on a basis consistent with the pre-Merger policy of Morton, and such
costs shall be added to Executive's compensation as required by applicable tax
regulations.
(f) The Executive shall be entitled to vacation during each
calendar year of the Term on a basis consistent with the pre-Merger vacation
policy of Morton, to be taken at such time(s) as shall not, in the reasonable
judgment of the Company CEO, materially interfere with the Executive's
fulfillment of his duties hereunder, and shall be entitled to as many holidays,
sick days and personal days as are in accordance with the Company's policy then
in effect for its executive officers generally, upon such terms as may be
provided its executive officers generally.
(g) The Executive and Morton are currently parties to an
Executive Stock Option Agreement dated February 15, 1995, as amended (the
"Executive Stock Option Agreement"), pursuant to which the Executive holds
options to purchase 64,815 shares of Morton's stock (the "Pre-Merger Options").
Pursuant to a separate agreement to be entered into by and between the Executive
and the Company, the Pre-Merger Options will be converted to options for Company
shares (but will be adjusted to reflect the effects of the Merger). This
Agreement is not otherwise intended to in any way modify or amend the Executive
Stock Option Agreement which shall remain in full force and effect.
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<PAGE> 5
(h) Notwithstanding anything to the contrary contained above,
the Company shall be entitled to terminate or reduce any employee benefit or
perquisite enjoyed by the Executive pursuant to the provisions of paragraph
5(b), 5(c) 5(d) and 5(f) above, if such reduction is part of an across-the-board
reduction applicable to all executive officers of the Company.
6. Termination
(a) The Company, by direction of the Board, shall be entitled
to terminate the Term and to discharge the Executive for "cause" effective upon
the giving of written notice. The term "cause" shall be limited to the following
grounds:
(i) Conviction in a court of law of, or entering a plea of
guilty or no contest to, any felony or any crime involving dishonesty or theft.
Upon the termination of the employment of the Executive with the Company (x)
pursuant to this paragraph 6(a) or (y) by virtue of the Executive's resignation
other than as described in paragraph 2(a) above or paragraph 6(b) below, or (z)
any other termination by the Executive other than pursuant to a termination
under paragraph 2(a) above or paragraph 6(b) below (each event of termination
set forth in clauses (x), (y) and (z) is sometimes referred to as a "For Cause
Termination"), the Company shall pay the Executive, subject to any Offsets, his
base salary compensation and any unused accrued vacation only through, and any
unpaid reimbursable expenses outstanding as of, the Date of Termination. Any
benefits to which the Executive or his beneficiaries may be entitled under the
plans and programs described in Section 5 above, or any other applicable plans
and programs in which he participated as an employee of the Company, shall be
determined as of his Date of Termination in accordance with the terms of such
plans and programs. In connection with a For Cause Termination, except as
provided in this paragraph 6(a) and paragraph 20(c) below, the Company shall
have no further liability to the Executive or the Executive's heirs,
beneficiaries or estate for damages, compensation, benefits, severance,
indemnities or other amounts of whatever nature.
(b) The Executive shall be entitled to terminate the Term
hereunder in the event that the Company is in default of a material term of this
Agreement, which default remains uncured for a period of 30 days after written
notice of such default from the Executive to the Company (such notice to specify
the specific nature of the claimed default and the manner in which the Executive
requires such default to be cured) (a "Constructive Termination").
Notwithstanding a Constructive Termination, or in the event the Company
terminates the employment of the Executive in breach of its obligations under
this Agreement, the restrictions set forth in paragraph 8 shall remain in full
force and effect.
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<PAGE> 6
(c) In the event of a Constructive Termination, or a
termination of the employment of the Executive by the Company in breach of its
obligations under this Agreement (each such event being called a "Company
Termination"), as liquidated damages, the Executive shall be entitled to
continue to receive from the Company, subject to any Offsets, (i) for so long as
the Executive is not in breach of his obligations to the Company under Section 8
hereof, his then applicable base salary compensation when otherwise payable
through the minimum remaining Term hereof absent the Company Termination, and
(ii) any unpaid reimbursable expenses outstanding, and any unused accrued
vacation, as of the Date of Termination. For this purpose, the "minimum
remaining Term" shall mean (x) December 31, 2007 if the Company Termination
occurs on or prior to June 30, 2007, or (y) six months from the Company
Termination, if such termination occurs after June 30, 2007. Any benefits to
which Executive or his beneficiaries may be entitled under the plans and
programs described in Section 5 above, or any other applicable plans and
programs in which he participated as an employee of the Company, shall be
determined as of the Date of Termination in accordance with the terms of such
plans and programs; provided, however, that the Executive shall be entitled to
continued participation on the same basis (including without limitation, cost
contributions) as the other senior executives of the Company in all medical,
dental, hospitalization, disability and life insurance coverage (the "Continued
Plans") in which he was participating on the Date of Termination (as such
Continued Plans are from time to time in effect at the Company) until the
earlier of (A) the end of the period that he receives base salary compensation
payments under clause (i) above or (B) the date, or dates, he is entitled to
receive coverage and benefits under the same type of plan of a subsequent
employer, and provided further: (1) that if the Executive is precluded from
continuing his participation in any Continued Plan, he shall be provided with
the after-tax economic equivalent of the benefits provided under the Continued
Plan in which he is unable to participate, for the period specified above; (2)
that the economic equivalent of a benefit foregone shall be deemed the lowest
cost that would be incurred by the Executive in obtaining such benefit himself
on an individual basis; and (3) that payment of such after-tax economic
equivalent shall be made quarterly in advance. Except as provided in this
paragraph 6(c) and paragraph 20(c) below in connection with a Company
Termination, (x) the Company shall have no further liability to the Executive or
the Executive's heirs, beneficiaries or estate for damages, compensation,
benefits, severance, indemnities or other amounts of whatever nature and (y) the
Executive shall be under no obligation to mitigate his damages or to seek other
employment and any income the Executive earns from subsequent employment or
consulting shall not reduce payments by the Company under clause (i) of this
paragraph 6(c) or otherwise.
(d) It is agreed that a termination of the
Executive's employment pursuant to a Notice of Termination given in accordance
with paragraph 2(a) above shall not be deemed a Company
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<PAGE> 7
Termination or a For Cause Termination. It is also agreed that any termination
of the Executive's employment by the Company for any breach or alleged breach of
this Agreement by the Executive (other than as provided in paragraph 6(a) above)
shall be deemed to be a Company Termination and not a For Cause Termination.
7. DISABILITY; DEATH
(a) In the event the Executive shall be unable to perform his
duties hereunder by virtue of illness or physical or mental incapacity or
disability (from any cause of causes whatsoever) in substantially the manner and
to the extent required hereunder prior to the commencement of such disability
(all such causes being herein referred to as "disability") and the Executive
shall fail to perform such duties for periods aggregating 270 days, whether or
not continuous, in any continuous period of 360 days, the Company shall have the
right to terminate the Executive's employment hereunder as at the end of any
calendar month during the continuance of such disability upon at least 30 days'
prior written notice to him. In the event of the Executive's death, the Date of
Termination shall be the date of such death.
(b) In the event the Executive's employment terminates
pursuant to paragraph 7(a), the Executive, or in the case of his death, the
Executive's estate, shall be entitled to receive when otherwise payable, subject
to any Offsets, (i) all base salary compensation earned but unpaid as of the
Date of Termination and (ii) any unpaid reimbursable expenses outstanding, and
any unused accrued vacation, as of such date. Any benefits to which the
Executive or his beneficiaries may be entitled under the plans and programs
described in Section 5 above or any other applicable plans and programs in which
he participated as an employee of the Company, shall be determined as of the
Date of Termination in accordance with the terms of such plans and programs. In
the event of the Executive's termination due to disability or death, except as
provided in this paragraph 7(b) and paragraph 20(c) below, the Company shall
have no further liability to the Executive or the Executive's heirs,
beneficiaries or estate for damages, compensation, benefits, severance,
indemnities or other amounts of whatever nature.
8. NON-SOLICITATION/NON-SUPPLY AND PROTECTION OF CONFIDEN-
TIAL INFORMATION
(a) The Executive agrees that his services hereunder are of a
special, unique and extraordinary character and his position with the Group and
the Company (as successor to the business of Morton) places him in a position of
confidence and trust with the customers and employees of the Company and other
members of the Group. The Executive acknowledges (x) that from time to time
members of the Group cooperate with each other in supplying current customers
and/or the solicitation of prospective customers and (y) that the rendering of
services and the supply of products to the
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<PAGE> 8
customers of the Group necessarily requires the disclosure to the Executive of
confidential information and trade secrets of the Company and the Group (such as
without limitation, marketing plans, budgets, designs, client preferences and
policies, and identity of appropriate personnel of customers with sufficient
authority to influence a shift in suppliers). The parties hereto agree that in
the course of the Executive's employment with the Company and its predecessors,
the Executive has and will continue to develop a personal relationship with the
Group's customers and a knowledge of those customers' affairs and requirements,
and that the relationship of the Group with its established customers has been
and will continue to be placed in the Executive's hands in confidence and trust.
The Executive consequently agrees that it is reasonable and necessary for the
protection of the trade secrets, goodwill and business of the Company and the
Group that the Executive make the covenants contained herein. Accordingly, the
Executive agrees that for the period commencing on the date hereof and
terminating the later of (1) December 31, 2009 and (2) two years after the Date
of Termination, he shall not, as an individual, partner, shareholder, employee,
consultant or in association with any other person, business or enterprise,
except on behalf of the Company or another member of the Group, directly or
indirectly, and regardless of the reason for his ceasing to be employed by the
Company:
(i) attempt in any manner to solicit or accept from
any customer business of the type performed by members of the Group or to
persuade any customer to cease to do business or to reduce the amount of
business which any such customer has customarily done or is reasonably expected
to do with any member of the Group, whether or not the relationship between such
member of the Group and such customer was originally established in whole or in
part through his efforts.
(ii) employ as an employee or retain as an
exclusive consultant any person who is then or at any time during the preceding
twelve months was an employee of or consultant to any member of the Group, or
persuade or attempt to persuade any employee of or consultant to any member of
the Group to leave the employ of such member of the Group or to become employed
as an employee or retained as an exclusive consultant by anyone other than by a
member of the Group; or
(iii) supply to or for any customers any products
or services of the type supplied by members of the Group, as an independent
contractor or employee of the customer or in any other capacity whatsoever.
As used in paragraph 8(a) through paragraph 8(e), the term "Group" shall include
the Company and each other member of the Group and the term "customer" shall
mean (1) anyone who is a customer of any member of the Group on the Date of
Termination or, if the Executive's employment shall not have terminated, at
the time of the alleged prohibited conduct (any such applicable date being
called
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<PAGE> 9
the "Determination Date"); (2) anyone who was a customer of any member of the
Group at any time during the one year period immediately preceding the
Determination Date; (3) any prospective customer to whom any member of the Group
had made a new business presentation (or similar offering of products or
services) at any time during the one year period immediately preceding the
Determination Date; and (4) any prospective customer to whom any member of the
Group made a new business presentation (or similar offering of products or
services) at any time within six months after the Determination Date (but only
if the initial contract between such member of the Group and such prospective
customer occurred prior to the Determination Date, regardless if such contact
was made by the Executive). In addition, if the customer is part of a group of
companies which conducts business through more than one entity, division or
operating unit, whether or not separately incorporated (a "Customer Group"), the
term "customer" as used herein shall include each entity, division and operating
unit of the Customer Group.
(b) At any time while this paragraph 8 remains applicable
after the Executive is no longer employed by the Company, it shall be the
responsibility of the Executive to ascertain whether a prospect is a "customer"
as defined in this paragraph 8, of any member of the Group, if necessary by
making written inquiry of the Company, prior to soliciting or accepting from any
such prospect business of the type performed by members of the Group or supply
to or for any such prospect any products or services of the type supplied by
members of the Group. Within ten business days after receipt of such inquiry,
the Company shall notify the Executive in writing as to whether such prospect is
a customer within the meaning of this paragraph 8, and if the Company determines
that such prospect is a customer, such notification shall include the reasons
for the Company's determination set forth with reasonably specificity.
(c) The Executive also agrees that he will not at any time
(whether during the Term or after termination of this Agreement), disclose to
anyone any confidential information or trade secret of any member of the Group,
or any customer of any member of the Group, or utilize such confidential
information or trade secret for his own benefit, or for the benefit of third
parties and all memoranda, notes, records or other documents compiled by him or
made available to him during the Term pertaining to the business of members of
the Group and/or their respective customers shall be the property of the Company
and shall be delivered immediately to the Company on the termination of his
employment or, upon request, at any other time. The term "confidential
information or trade secret" does not include information which (i) becomes
generally available to the public other than by breach of this provision or (ii)
the Executive learns from a third party who is not under an obligation of
confidence to the Company, or another member of the Group.
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(d) If the Executive commits a breach or is about to commit a
breach, of any of the provisions of paragraphs 8(a) or 8(c) above, the Company
shall have the right to have the provisions of this Agreement specifically
enforced by any court having equity jurisdiction without being required to post
bond or other security and without having to prove the inadequacy of the
available remedies at law, it being acknowledged and agreed that any such breach
or threatened breach will cause irreparable injury to the Company and the Group
and that money damages will not provide an adequate remedy to the Company or the
Group. In addition, the Company may take all such other actions and remedies
available to it under law or in equity and shall be entitled to such damages as
it can show it has sustained by reason of such breach.
(e) The parties acknowledge that the type and periods of
restriction imposed in the provisions of paragraphs 8(a) and 8(c) above are fair
and reasonable and are reasonably required for the protection of the Company and
the Group and the goodwill associated with the business of the Company and the
Group; and that the time, scope, geographic area and other provisions of this
paragraph 8 have been specifically negotiated by sophisticated commercial
parties and are given as an integral part of the transactions contemplated by
the Merger Agreement, it being understood that the customers of the Group may be
supplied from any location and accordingly it is reasonable that the restrictive
covenants set forth herein are not limited by narrow geographic area but
generally by the location of such customers and potential customers. The
Executive specifically acknowledges that his being restricted from soliciting
and supplying customers as contemplated by this Agreement will not prevent him
from being employed or earning a livelihood in the type of business conducted by
the members of the Group. If any of the covenants in paragraphs 8(a) or 8(c)
above, or any part thereof, is hereafter construed to be invalid or
unenforceable, the same shall not affect the remainder of the covenant or
covenants, which shall be given full effect, without regard to the invalid
portions. If any of the covenants contained in paragraphs 8(a) and 8(c), or any
part thereof, is held to be unenforceable by reason of its extending for too
great a period of time or over too great a geographic area or by reason of its
being too extensive in any other respect, the parties agree (i) such covenant
shall be interpreted to extend only over the maximum period of time for which it
may be enforceable and/or over the maximum geographic areas as to which it may
be enforceable and/or over the maximum extent in all other respects as to which
it may be enforceable, all as determined by the court making such determination
and (ii) in its reduced form, such covenant shall then be enforceable. The
parties hereto intend to and hereby confer jurisdiction to enforce the covenants
contained in paragraphs 8(a) and 8(c) above upon the courts of any state or
other jurisdiction within the geographical scope of such covenants. In the event
that the courts of any one or more of such states or other jurisdictions shall
hold such covenants unenforceable (in whole or in part) by reason of the breadth
of such scope or otherwise, it is the
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intention of the parties hereto that such determination not bar or in any way
affect the right of the Company to the relief provided above in the courts of
any other states or other jurisdictions within the geographical scope of such
covenants, as to breaches of such covenants in such other respective states or
other jurisdictions, the above covenants as they relate to each state or other
jurisdiction being, for this purpose, severable into diverse and independent
covenants.
9. INTELLECTUAL PROPERTY
During the Term, the Executive will disclose to the Company all ideas,
inventions and business plans developed by him during such period which relate
directly or indirectly to the business of the Group, including without
limitation, any design, logo, slogan or campaign or any process, operation,
product or improvement which may be patentable or copyrightable. The Executive
agrees that all patents, licenses, copyrights, tradenames, trademarks, service
marks, advertising campaigns, promotional campaigns, designs, logos, slogans and
business plans developed or created by the Executive in the course of his
employment hereunder, either individually or in collaboration with others, will
be deemed works for hire and as between the Executive and the Company the sole
and absolute property of the Company, subject to the rights of customers and
others contracting with the Company. The Executive agrees, that at the Company's
request and expense, he will take all steps necessary to secure the rights
thereto to the Company by patent, copyrights or otherwise.
10. ENFORCEABILITY
The failure of any party at any time to require performance by another
party of any provision hereunder shall in no way affect the right of that party
thereafter to enforce the same, nor shall it affect any other party's right to
enforce the same, or to enforce any of the other provisions in this Agreement;
nor shall the waiver by any party of the breach of any provision hereof be taken
or held to be a waiver of any subsequent breach of such provision or as a waiver
of the provision itself.
11. ASSIGNMENT
This Agreement is a personal contract and the Executive's rights and
obligations hereunder may not be sold, transferred, assigned, pledged or
hypothecated by the Executive. The rights and obligations of the Company
hereunder shall be binding upon and run in favor of the successors and assigns
of the Company.
12. MODIFICATION
This Agreement may not be orally canceled, changed, modified
or amended, and no cancellation, change, modification or amendment
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<PAGE> 12
shall be effective or binding, unless in writing and signed by the
parties to this Agreement.
13. SEVERABILITY; SURVIVAL
In the event any provision or portion of this Agreement is determined
to be invalid or unenforceable for any reason, in whole or in part, the
remaining provisions of this Agreement shall nevertheless be binding upon the
parties with the same effect as thought the invalid or unenforceable part had
been severed and deleted. The respective rights and obligations of the parties
hereunder shall survive the termination of the Executive's employment to the
extent necessary to the intended preservation of such rights and obligations.
14. LIFE INSURANCE
The Executive agrees that the Company shall have the right to obtain
life insurance on the Executive's life, at the sole expense of the Company, as
the case may be, and with the Company as the sole beneficiary thereof. The
executive shall (a) cooperate fully in obtaining such life insurance, (b) sign
any necessary consents, applications and other related forms or documents and
(c) take any reasonably required medical examinations.
15. NOTICE
Any notice, request, instruction or other document to be given
hereunder by any party hereto to another party shall be in writing and shall be
deemed effective (a) upon personal delivery, if delivered by hand, or (b) three
days after the date of deposit in the mails, postage prepaid if mailed by
certified or registered mail, or (c) on the next business day, if sent by
facsimile transmission (if receipt is electronically confirmed) or prepaid
overnight courier service, and in each case addressed as follows:
If to the Executive:
William D. Morton
2660 N. Morton Avenue
Morton, Illinois 61550
If to the Company:
Morton Industrial Group, Inc.
P. O. Box 429
1021 W. Birchwood
Morton, Illinois 61550
Attention: Chief Executive Officer
Fax: (309) 263-1841
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<PAGE> 13
with copy to:
Husch & Eppenberger
800 Central Building
101 S.W. Adams Street
Peoria, Illinois 61602
Attention: Gene A. Petersen
Fax: (309) 637-4928
Any party may change the address to which notices are to be sent by giving
notice of such change of address to the other party in the manner provided for
giving notice.
16. APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois without application of conflict of law
provisions applicable herein. The parties hereby irrevocably submit to the
personal jurisdiction of the United States District Court for the Central
District of Illinois located in Peoria, Illinois or the courts of the State of
Illinois located in Peoria County, Illinois in any action or proceeding arising
out of or relating to this Agreement in any way, and hereby irrevocably agree
that all claims in respect of any such action or proceeding may be heard and
determined in any such court. In furtherance thereof, the parties hereby
irrevocably consent to the service of any summons and complaint and any other
process which may be served in any action or proceeding arising out of or
related to this Agreement in any way brought in the United States District Court
for the Central District of Illinois located in Peoria, Illinois or the courts
of the State of Illinois located in Peoria County, Illinois by the mailing by
certified or registered mail of copies of such process to their respective
addresses as set in paragraph 15 of this Agreement, and the parties hereby
irrevocably waive any objection which any of them now or hereafter may have to
the laying of venue of any action or proceeding arising out of or relating to
this Agreement in any way brought in the United States District Court for the
Central District of Illinois located in Peoria, Illinois or the courts of the
State of Illinois located in Peoria County, Illinois and any objection on the
ground that any such action or proceeding in any of such courts has been brought
in an inconvenient forum. EACH PARTY HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING UNDER THIS AGREEMENT.
17. NO CONFLICT
The Executive represents and warrants that he is not subject to any
agreement, instrument, order, judgment or decree of any kind, or any other
restrictive agreement of any character, which would prevent him from entering
into this agreement or which would be breached by the Executive upon his
performance of his duties pursuant to this Agreement.
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<PAGE> 14
18. ENTIRE AGREEMENT
This Agreement represents the entire agreement between the Company and
the Executive with respect to the subject matter hereof, and all prior
agreements, plans and arrangements relating to the employment of the Executive
by the Company are nullified and superseded hereby.
19. HEADINGS
The headings contained in this Agreement are for reference purposes
only, and shall not affect the meaning or interpretation of this Agreement.
20. MISCELLANEOUS
(a) The Company may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(b) Following the date hereof and regardless of any dispute
that may arise in the future, the Executive will not, and will use his best
efforts to cause his business associates to not, disparage, criticize or make
statements to the detriment of the Company, the Group or any of their
affiliates; and the Company will not, and will use its best efforts to cause
their affiliated companies to not, disparage, criticize or make statements to
the detriment of the Executive.
(c) Notwithstanding anything to the contrary contained in this
Agreement, the rights of the Executive under the provisions of the Company
by-laws relating to indemnification of directors and officers shall survive any
termination of this Agreement.
(d) The Executive acknowledges that Executive has consulted or
has had the opportunity to consult his own attorney in connection with this
Agreement.
(e) This Agreement shall become effective only if this
Agreement has been approved by the holders of record of stock of Morton
representing more than 75% of the voting power of all outstanding stock of
Morton, determined without regard to any stock owned or constructively owned by
any "disqualified individual" (as defined in Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code")) who will be receiving
compensation that, absent satisfaction of certain shareholder approval
requirements would constitute "parachute payments" under Section 280G of the
Code, prior to the effective date of the Merger.
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<PAGE> 15
21. SHAREHOLDERS AGREEMENT
Concurrently with the effective date of the Merger, the Executive, as a
shareholder in the Company, will enter into a Shareholders Agreement dated
October 20, 1997 (the "Shareholders Agreement") with certain other shareholders
of the Company pursuant to which the Executive will be given the right to vote
certain Company shares held by such other shareholders. For purposes of the
Shareholders Agreement, the Executive's employment with the Company shall be
deemed to continue (and his voting rights under the Shareholders Agreement shall
continue) unless a For Cause Termination of the Executive's employment with the
Company occurs pursuant to paragraph 6(a) above or the Executive's employment
with the Company is terminated by death or disability pursuant to paragraph 7(a)
above. In the event of any conflict between the provisions of this Agreement and
the provisions of the Shareholders Agreement with respect to the matters covered
in this Section 21 of this Agreement, provisions of the Shareholders Agreement
shall control.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
MORTON INDUSTRIAL GROUP, INC.
By David R. Lindemann
--------------------------------
Name: David R. Lindemann
Title:Vice President
William D. Morton
------------------------------------
William D. Morton, Executive
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<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
AGREEMENT made this 20th day of January, 1998, by and between MORTON
INDUSTRIAL GROUP, INC., a Georgia corporation (the "Company"), and DARYL R.
LINDEMANN (the "Executive").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Agreement and Plan of Merger dated
October 20, 1997 (the "Merger Agreement"), MLX CORP., a Georgia corporation
("MLX"), through a merger (the "Merger") of MORTON METALCRAFT HOLDING CO., a
Delaware corporation ("Morton"), with and into MLX, whose name is being changed
to MORTON INDUSTRIAL GROUP, INC., will acquire Morton; and
WHEREAS, the Executive was employed by Morton and, accordingly, the
Company (as successor to the business of Morton) wishes to ensure the employment
of the Executive with the Company and the Executive wishes to accept such
employment upon the terms and conditions hereinafter set forth; and
WHEREAS, it is intended that the Company and its subsidiaries will be
operationally combined under the management of WILLIAM D. MORTON, as the
Company's Chairman and Chief Executive Officer ("Company CEO") with other
companies which may be acquired by the Company (the Company and its
subsidiaries, together with such other companies are collectively called the
"Group");
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. EMPLOYMENT
The Company agrees to employ the Executive during the Term specified in
paragraph 2, and the Executive agrees to accept such employment, upon the terms
and conditions hereinafter set forth.
2. TERM
(a) Subject to Sections 6 and 7 below and the other terms and
conditions of this Agreement, the Executive's employment by the Company shall be
for a term commencing on the date hereof and expiring on the close of business
on December 31, 2000 (the "Initial Term"); provided, however, the term of the
Executive's employment by the Company shall continue thereafter unless and until
either party shall give to the other six months advance written notice of
expiration of the term (a "Six Month Notice of Termination") (the Initial Term
and the period, if any, thereafter,
<PAGE> 2
during which the Executive's employment shall continue are collectively referred
to as the "Term"). Any Six Month Notice of Termination given under this
paragraph 2(a) shall specify the date of expiration (which may not be earlier
than December 31, 2000) and may be given at any time on or after June 30, 2000.
Notwithstanding the foregoing provisions, the Company shall have the right at
any time during the Initial Term to terminate the term of the Executive's
employment by giving the Executive twelve months advance written notice of the
termination of the Term (a "Twelve Month Notice of Termination"). The Company
shall have the right at any time during any such six month or twelve month
notice period to relieve the Executive of his offices, duties and
responsibilities and to place him on a paid leave-of-absence status, provided
that during such notice period the Executive shall remain a full-time employee
of the Company and shall continue to receive his base salary compensation and
other benefits as provided in this Agreement. The effective date of the
termination of the Execu- tive's employment with the Company, regardless of the
reason therefor, is referred to in this Agreement as the "Date of Termination".
(b) Upon termination of the employment of the Executive with
the Company pursuant to a Six Month Notice of Termination or a Twelve Month
Notice of Termination under paragraph 2(a) above, the Company shall pay the
Executive, subject to appropriate offsets, as permitted by the applicable law,
only for debts due from the Executive to the Company or another company with the
Group (collectively, "Offsets"), for so long as the Executive is not in breach
of his obligations to the Company under Section 8 hereof, his base salary
compensation and any unused accrued vacation only through, and any unpaid
reimbursement expenses outstanding as of, the Date of Termination. Any benefits
to which the Executive or his beneficiaries may be entitled under the plans and
programs described in Section 5 below, or any other applicable plans and
programs in which he participated as an employee of the Company, shall be
determined as of the Date of Termination in accordance with the terms of such
plans and programs. In connection with the Executive's termination of employment
pursuant to paragraph 2(a), except as provided in this paragraph 2(b), the
Company shall have no further liability to the Executive or the Executive's
heirs, beneficiaries or estate for damages, compensation, benefits, severance,
indemnities or other amounts of whatever nature.
3. DUTIES AND RESPONSIBILITIES
(a) During the Term, the Executive shall have the position of
Vice President of Finance, Secretary and Treasurer. The Executive shall assume
similar positions at one or more members of the Group if requested to do so by
the Company CEO. The Executive shall report to the Company CEO or such other
officer of the Company as designated from time to time by the Company CEO at
such times and in such detail as such officer shall reasonably require.
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<PAGE> 3
(b) The Executive shall perform such duties and
responsibilities customary to his office and as are reasonably necessary to the
operations of the Company and the Group and as may be assigned to him from time
to time by or under authority of the Board of Directors of the Company (the
"Board") and the Company CEO, consistent with his positions as designated in
paragraph 3(a) above.
(c) The Executive's employment by the Company shall be
full-time and during the Term, the Executive agrees that he will (i) devote all
of his business time and attention, his best efforts, and his skill and ability
to promote the interests of the Group; (ii) carry out his duties in a competent
and professional manner; and (iii) work with other employees of the Group in a
competent and professional manner. Notwithstanding the foregoing, the Executive
shall be permitted to engage in other business activities (as an active
participant or a passive investor), including without limitation, serving on
civic or charitable boards and committees and performing speaking engagements,
provided that such activities are not rendered for a company which transacts
business with any member of the Group or engages in business competitive with
that conducted by any member of the Group (or, if such company does transact
business with a member of the Group or does engage in a competitive business, it
is a publicly held corporation and the Executive owns less than 1/4 of 1% of its
outstanding shares) and further provided that such activities (individually or
collectively) do not materially interfere with the performance of his duties or
responsibilities under this Agreement.
(d) The Executive's services hereunder shall be performed at
the offices of the Company in Morton, Illinois, subject to necessary travel
requirements of his position and duties hereunder. The Executive shall not be
required to relocate without his prior written consent.
4. COMPENSATION
As compensation for his services hereunder, the Company shall pay the
Executive during the Term, in accordance with its normal payroll practices,
direct salary compensation at an annual rate of $95,000, provided that such
annual rate of salary compensation shall be increased by not less than $5,000
annually (but may not be decreased) under the authority of the Company CEO in
accordance with the Company's general compensation policies.
5. EXPENSES; FRINGE BENEFITS
(a) The Company agrees to pay or to reimburse the Executive
during the Term for all reasonable, ordinary and necessary vouchered business or
entertainment expenses incurred in the performance of his services hereunder in
accordance with the policy of the Company and the Group as from time to time in
effect. The Executive, as a condition precedent to obtaining such payment
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<PAGE> 4
or reimbursement, shall provide to the Company any and all statements, bills or
receipts evidencing the travel or out-of-pocket expenses for which the Executive
seeks payment or reimbursement, and any other information or materials, as the
Company or the Group may from time to time reasonably require.
(b) During the Term, subject to the approval of the Company
CEO, the Executive shall be eligible to participate in the incentive
compensation plans of the Company as in effect from time to time.
(c) During the Term, the Executive and, to the extent
eligible, his dependents, shall be entitled to participate in and receive all
benefits under any welfare benefit plans and programs (including without
limitation, medical, dental, disability, group life (including accidental death
and dismemberment) and business travel insurance plans and programs) now or
hereafter provided by the Company which are applicable generally to the
employees of the Company, subject, however, to the generally applicable
eligibility and other provisions of the various plans and programs in effect
from time to time.
(d) During the Term, the Executive shall be entitled to
participate in all retirement plans and programs (including without limitation
any profit sharing/401(k) plan) which are applicable generally to the employees
of the Company, subject, however, to generally applicable eligibility and other
provisions of the various plans and programs in effect from time to time. In
addition, during the Term, the Executive shall be entitled to receive fringe
benefits and perquisites in accordance with the plans, practices, programs and
policies of the Company from time to time in effect which are available
generally to the officers of the Company and such other fringe benefits as may
from time to time be approved in writing by the Company CEO.
(e) The Executive shall be entitled to vacation during each
calendar year of the Term on a basis consistent with the pre-Merger vacation
policy of Morton, to be taken at such time(s) as shall not, in the reasonable
judgment of the Company CEO, materially interfere with the Executive's
fulfillment of his duties hereunder, and shall be entitled to as many holidays,
sick days and personal days as are in accordance with the Company's policy then
in effect for its executive officers generally, upon such terms as may be
provided its executive officers generally.
(f) The Executive and Morton are currently parties to an
Executive Stock Option Agreement dated September 7, 1990, as amended (the
"Executive Stock Option Agreement"), pursuant to which the Executive holds
options to purchase 83,333 shares of Morton's stock (the "Pre-Merger Options").
Pursuant to a separate agreement to be entered into by and between the Executive
and the Company, concurrently with the effective date of the Merger, the Company
will purchase from the Executive certain of the Pre-Merger Options
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<PAGE> 5
and the remaining Pre-Merger Options will be converted to options for Company
shares (but will be adjusted to reflect the effects of the Merger). This
Agreement is not otherwise intended to in any way modify or amend the Executive
Stock Option Agreement which shall remain in full force and effect.
(g) Notwithstanding anything to the contrary contained above,
the Company shall be entitled to terminate or reduce any employee benefit or
perquisite enjoyed by the Executive pursuant to the provisions of paragraph
5(b), 5(c) 5(d) and 5(e) above, if such reduction is part of an across-the-board
reduction applicable to all employees holding similar positions.
6. TERMINATION
(a) The Company, by direction of the Board or the Company CEO,
shall be entitled to terminate the Term and to discharge the Executive for
"cause" effective upon the giving of written notice. The term "cause" shall be
limited to the following grounds:
(i) The Executive's failure or refusal to material-
ly perform his duties and responsibilities as set forth in paragraph 3 hereof,
or the willful failure of the Executive to devote all of his business time and
attention exclusively to the business and affairs of the Company and the Group
in accordance with the terms hereof, in each case if such failure or refusal is
not cured within 30 days after written notice thereof to the Executive by the
Company;
(ii) Use of alcohol or illegal drugs, interfering
with the performance of the Executive's obligations under this
Agreement, continuing after written warning;
(iii) Conviction in a court of law of, or entering
a plea of guilty or no contest to, any felony or any crime
involving dishonesty or theft;
(iv) The commission in bad faith by the Executive
of any act which injures or could reasonably be expected to injure the
reputation, business or business relationships of the Company or any other
member of the Group, including without limitation, a willful or intentional
breach of the provisions of Section 8 of this Agreement; and
(v) Any material breach (not covered by any of the
clauses (i) through (v)) of any term, provision or condition of this Agreement,
if such breach is not cured within 30 days after written notice thereof to the
Executive by the Company (such notice to specify the specific nature of the
claimed breach and the manner in which the Company requires such breach to be
cured).
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<PAGE> 6
In any case where warning or notice to the Executive is required under this
Section 6(a), such warning or notice shall identify with reasonably specificity
the conduct relied upon as a basis for such warning or notice.
Upon the termination of the employment of the Executive with the Company (x)
pursuant to this paragraph 6(a) or (y) by virtue of the Executive's resignation
other than as described in paragraph 2(a) above or paragraph 6(b) below, or (z)
any other termination by the Executive other than pursuant to a termination
under paragraph 2(a) above or paragraph 6(b) below (each event of termination
set forth in clauses (x), (y) and (z) is sometimes referred to as a "For Cause
Termination"), the Company shall pay the Executive, subject to any Offsets, his
base salary compensation and any unused accrued vacation only through, and any
unpaid reimbursable expenses outstanding as of, the Date of Termination. Any
benefits to which the Executive or his beneficiaries may be entitled under the
plans and programs described in Section 5 above, or any other applicable plans
and programs in which he participated as an employee of the Company, shall be
determined as of his Date of Termination in accordance with the terms of such
plans and programs. In connection with a For Cause Termination, except as
provided in this paragraph 6(a) and paragraph 20(c) below, the Company shall
have no further liability to the Executive or the Executive's heirs,
beneficiaries or estate for damages, compensation, benefits, severance,
indemnities or other amounts of whatever nature.
(b) The Executive shall be entitled to terminate the Term
hereunder in the event that the Company is in default of a material term of this
Agreement, which default remains uncured for a period of 30 days after written
notice of such default from the Executive to the Company (such notice to specify
the specific nature of the claimed default and the manner in which the Executive
requires such default to be cured) (a "Constructive Termination").
Notwithstanding a Constructive Termination, or in the event the Company
terminates the employment of the Executive in breach of its obligations under
this Agreement, the restrictions set forth in paragraph 8 shall remain in full
force and effect.
(c) In the event of a Constructive Termination, or a
termination of the employment of the Executive by the Company in breach of its
obligations under this Agreement (each such event being called a "Company
Termination"), as liquidated damages, the Executive shall be entitled to
continue to receive from the Company, subject to any Offsets, (i) for so long as
the Executive is not in breach of his obligations to the Company under Section 8
hereof, his then applicable base salary compensation when otherwise payable
through the minimum remaining Term hereof absent the Company Termination, and
(ii) any unpaid reimbursable expenses outstanding, and any unused accrued
vacation, as of the Date of Termination. For this purpose, the "minimum
remaining Term" shall mean (x) one year from the Company Termination if the
Company Termination occurs on or prior to June 30, 2000, or (y) six months
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<PAGE> 7
from the Company Termination, if such termination occurs after June 30, 2000.
Any benefits to which Executive or his beneficiaries may be entitled under the
plans and programs described in Section 5 above, or any other applicable plans
and programs in which he participated as an employee of the Company, shall be
determined as of the Date of Termination in accordance with the terms of such
plans and programs; provided, however, that the Executive shall be entitled to
continued participation on the same basis (including without limitation, cost
contributions) as the other senior executives of the Company in all medical,
dental, hospitalization, disability and life insurance coverage (the "Continued
Plans") in which he was participating on the Date of Termination (as such
Continued Plans are from time to time in effect at the Company) until the
earlier of (A) the end of the period that he receives base salary compensation
payments under clause (i) above or (B) the date, or dates, he is entitled to
receive coverage and benefits under the same type of plan of a subsequent
employer, and provided further: (1) that if the Executive is precluded from
continuing his participation in any Continued Plan, he shall be provided with
the after-tax economic equivalent of the benefits provided under the Continued
Plan in which he is unable to participate, for the period specified above; (2)
that the economic equivalent of a benefit foregone shall be deemed the lowest
cost that would be incurred by the Executive in obtaining such benefit himself
on an individual basis; and (3) that payment of such after-tax economic
equivalent shall be made quarterly in advance. Except as provided in this
paragraph 6(c) and paragraph 20(c) below in connection with a Company
Termination, (x) the Company shall have no further liability to the Executive or
the Executive's heirs, beneficiaries or estate for damages, compensation,
benefits, severance, indemnities or other amounts of whatever nature and (y) the
Executive shall be under no obligation to mitigate his damages or to seek other
employment and any income the Executive earns from subsequent employment or
consulting shall not reduce payments by the Company under clause (i) of this
paragraph 6(c) or otherwise.
(d) It is agreed that a termination of the
Executive's employment pursuant to a Notice of Termination given in accordance
with paragraph 2(a) above shall not be deemed a Company Termination or a For
Cause Termination.
7. DISABILITY; DEATH
(a) In the event the Executive shall be unable to perform his
duties hereunder by virtue of illness or physical or mental incapacity or
disability (from any cause of causes whatsoever) in substantially the manner and
to the extent required hereunder prior to the commencement of such disability
(all such causes being herein referred to as "disability") and the Executive
shall fail to perform such duties for periods aggregating 270 days, whether or
not continuous, in any continuous period of 360 days, the Company shall have the
right to terminate the Executive's employment hereunder as at the end of any
calendar month during the
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<PAGE> 8
continuance of such disability upon at least 30 days' prior written notice to
him. In the event of the Executive's death, the Date of Termination shall be the
date of such death.
(b) In the event the Executive's employment terminates
pursuant to paragraph 7(a), the Executive, or in the case of his death, the
Executive's estate, shall be entitled to receive when otherwise payable, subject
to any Offsets, (i) all base salary compensation earned but unpaid as of the
Date of Termination and (ii) any unpaid reimbursable expenses outstanding, and
any unused accrued vacation, as of such date. Any benefits to which the
Executive or his beneficiaries may be entitled under the plans and programs
described in Section 5 above, or any other applicable plans and programs in
which he participated as an employee of the Company, shall be determined as of
the Date of Termination in accordance with the terms of such plans and programs.
In the event of the Executive's termination due to disability or death, except
as provided in this paragraph 7(b) and paragraph 20(c) below, the Company shall
have no further liability to the Executive or the Executive's heirs,
beneficiaries or estate for damages, compensation, benefits, severance,
indemnities or other amounts of whatever nature.
8. NON-SOLICITATION/NON-SUPPLY AND PROTECTION OF CONFIDEN-
TIAL INFORMATION
(a) The Executive agrees that his services hereunder are of a
special, unique and extraordinary character and his position with the Group and
the Company (as successor to the business of Morton) places him in a position of
confidence and trust with the customers and employees of the Company and other
members of the Group. The Executive acknowledges (x) that from time to time
members of the Group cooperate with each other in supplying current customers
and/or the solicitation of prospective customers and (y) that the rendering of
services and the supply of products to the customers of the Group necessarily
requires the disclosure to the Executive of confidential information and trade
secrets of the Company and the Group (such as without limitation, marketing
plans, budgets, designs, client preferences and policies, and identity of
appropriate personnel of customers with sufficient authority to influence a
shift in suppliers). The parties hereto agree that in the course of the
Executive's employment with the Company and its predecessors, the Executive has
and will continue to develop a personal relationship with the Group's customers
and a knowledge of those customers' affairs and requirements, and that the
relationship of the Group with its established customers has been and will
continue to be placed in the Executive's hands in confidence and trust. The
Executive consequently agrees that it is reasonable and necessary for the
protection of the trade secrets, goodwill and business of the Company and the
Group that the Executive make the covenants contained herein. Accordingly, the
Executive agrees that for the period commencing on the date hereof and
terminating the later of (1) December 31, 2002 and (2) two years after the Date
of
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<PAGE> 9
Termination, he shall not, as an individual, partner, shareholder, employee,
consultant or in association with any other person, business or enterprise,
except on behalf of the Company or another member of the Group, directly or
indirectly, and regardless of the reason for his ceasing to be employed by the
Company:
(i) attempt in any manner to solicit or accept from
any customer business of the type performed by members of the Group or to
persuade any customer to cease to do business or to reduce the amount of
business which any such customer has customarily done or is reasonably expected
to do with any member of the Group, whether or not the relationship between such
member of the Group and such customer was originally established in whole or in
part through his efforts.
(ii) employ as an employee or retain as an
exclusive consultant any person who is then or at any time during the preceding
twelve months was an employee of or consultant to any member of the Group, or
persuade or attempt to persuade any employee of or consultant to any member of
the Group to leave the employ of such member of the Group or to become employed
as an employee or retained as an exclusive consultant by anyone other than by a
member of the Group; or
(iii) supply to or for any customers any products
or services of the type supplied by members of the Group, as an independent
contractor or employee of the customer or in any other capacity whatsoever.
As used in paragraph 8(a) through paragraph 8(e), the term "Group" shall include
the Company and each other member of the Group and the term "customer" shall
mean (1) anyone who is a customer of any member of the Group on the Date of
Termination or, if the Executive's employment shall not have terminated, at
the time of the alleged prohibited conduct (any such applicable date being
called the "Determination Date"); (2) anyone who was a customer of any member of
the Group at any time during the one year period immediately preceding the
Determination Date; (3) any prospective customer to whom any member of the Group
had made a new business presentation (or similar offering of products or
services) at any time during the one year period immediately preceding the
Determination Date; and (4) any prospective customer to whom any member of the
Group made a new business presentation (or similar offering of products or
services) at any time within six months after the Determination Date (but only
if the initial contract between such member of the Group and such prospective
customer occurred prior to the Determination Date, regardless if such contact
was made by the Executive). In addition, if the customer is part of a group of
companies which conducts business through more than one entity, division or
operating unit, whether or not separately incorporated (a "Customer Group"), the
term "customer" as used herein shall include each entity, division and operating
unit of the Customer Group.
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<PAGE> 10
(b) At any time while this paragraph 8 remains applicable
after the Executive is no longer employed by the Company, it shall be the
responsibility of the Executive to ascertain whether a prospect is a "customer"
as defined in this paragraph 8, of any member of the Group, if necessary by
making written inquiry of the Company, prior to soliciting or accepting from any
such prospect business of the type performed by members of the Group or supply
to or for any such prospect any products or services of the type supplied by
members of the Group. Within ten business days after receipt of such inquiry,
the Company shall notify the Executive in writing as to whether such prospect is
a customer within the meaning of this paragraph 8, and if the Company determines
that such prospect is a customer, such notification shall include the reasons
for the Company's determination set forth with reasonably specificity.
(c) The Executive also agrees that he will not at any time
(whether during the Term or after termination of this Agreement), disclose to
anyone any confidential information or trade secret of any member of the Group,
or any customer of any member of the Group, or utilize such confidential
information or trade secret for his own benefit, or for the benefit of third
parties and all memoranda, notes, records or other documents compiled by him or
made available to him during the Term pertaining to the business of members of
the Group and/or their respective customers shall be the property of the Company
and shall be delivered immediately to the Company on the termination of his
employment or, upon request, at any other time. The term "confidential
information or trade secret" does not include information which (i) becomes
generally available to the public other than by breach of this provision or (ii)
the Executive learns from a third party who is not under an obligation of
confidence to the Company, or another member of the Group.
(d) If the Executive commits a breach or is about to commit a
breach, of any of the provisions of paragraphs 8(a) or 8(c) above, the Company
shall have the right to have the provisions of this Agreement specifically
enforced by any court having equity jurisdiction without being required to post
bond or other security and without having to prove the inadequacy of the
available remedies at law, it being acknowledged and agreed that any such breach
or threatened breach will cause irreparable injury to the Company and the Group
and that money damages will not provide an adequate remedy to the Company or the
Group. In addition, the Company may take all such other actions and remedies
available to it under law or in equity and shall be entitled to such damages as
it can show it has sustained by reason of such breach.
(e) The parties acknowledge that the type and periods of
restriction imposed in the provisions of paragraphs 8(a) and 8(c) above are fair
and reasonable and are reasonably required for the protection of the Company and
the Group and the goodwill associated with the business of the Company and the
Group; and that the time,
- 10 -
<PAGE> 11
scope, geographic area and other provisions of this paragraph 8 have been
specifically negotiated by sophisticated commercial parties and are given as an
integral part of the transactions contemplated by the Merger Agreement, it being
understood that the customers of the Group may be supplied from any location and
accordingly it is reasonable that the restrictive covenants set forth herein are
not limited by narrow geographic area but generally by the location of such
customers and potential customers. The Executive specifically acknowledges that
his being restricted from soliciting and supplying customers as contemplated by
this Agreement will not prevent him from being employed or earning a livelihood
in the type of business conducted by the members of the Group. If any of the
covenants in paragraphs 8(a) or 8(c) above, or any part thereof, is hereafter
construed to be invalid or unenforceable, the same shall not affect the
remainder of the covenant or covenants, which shall be given full effect,
without regard to the invalid portions. If any of the covenants contained in
paragraphs 8(a) and 8(c), or any part thereof, is held to be unenforceable by
reason of its extending for too great a period of time or over too great a
geographic area or by reason of its being too extensive in any other respect,
the parties agree (i) such covenant shall be interpreted to extend only over the
maximum period of time for which it may be enforceable and/or over the maximum
geographic areas as to which it may be enforceable and/or over the maximum
extent in all other respects as to which it may be enforceable, all as
determined by the court making such determination and (ii) in its reduced form,
such covenant shall then be enforceable. The parties hereto intend to and hereby
confer jurisdiction to enforce the covenants contained in paragraphs 8(a) and
8(c) above upon the courts of any state or other jurisdiction within the
geographical scope of such covenants. In the event that the courts of any one or
more of such states or other jurisdictions shall hold such covenants
unenforceable (in whole or in part) by reason of the breadth of such scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the right of the Company to the relief provided above
in the courts of any other states or other jurisdictions within the geographical
scope of such covenants, as to breaches of such covenants in such other
respective states or other jurisdictions, the above covenants as they relate to
each state or other jurisdiction being, for this purpose, severable into diverse
and independent covenants.
9. INTELLECTUAL PROPERTY
During the Term, the Executive will disclose to the Company all ideas,
inventions and business plans developed by him during such period which relate
directly or indirectly to the business of the Group, including without
limitation, any design, logo, slogan or campaign or any process, operation,
product or improvement which may be patentable or copyrightable. The Executive
agrees that all patents, licenses, copyrights, tradenames, trademarks, service
marks, advertising campaigns, promotional campaigns, designs,
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<PAGE> 12
logos, slogans and business plans developed or created by the Executive in the
course of his employment hereunder, either individually or in collaboration with
others, will be deemed works for hire and as between the Executive and the
Company the sole and absolute property of the Company, subject to the rights of
customers and others contracting with the Company. The Executive agrees, that at
the Company's request and expense, he will take all steps necessary to secure
the rights thereto to the Company by patent, copyrights or otherwise.
10. ENFORCEABILITY
The failure of any party at any time to require performance by another
party of any provision hereunder shall in no way affect the right of that party
thereafter to enforce the same, nor shall it affect any other party's right to
enforce the same, or to enforce any of the other provisions in this Agreement;
nor shall the waiver by any party of the breach of any provision hereof be taken
or held to be a waiver of any subsequent breach of such provision or as a waiver
of the provision itself.
11. ASSIGNMENT
This Agreement is a personal contract and the Executive's rights and
obligations hereunder may not be sold, transferred, assigned, pledged or
hypothecated by the Executive. The rights and obligations of the Company
hereunder shall be binding upon and run in favor of the successors and assigns
of the Company.
12. MODIFICATION
This Agreement may not be orally canceled, changed, modified or
amended, and no cancellation, change, modification or amendment shall be
effective or binding, unless in writing and signed by the parties to this
Agreement.
13. SEVERABILITY; SURVIVAL
In the event any provision or portion of this Agreement is determined
to be invalid or unenforceable for any reason, in whole or in part, the
remaining provisions of this Agreement shall nevertheless be binding upon the
parties with the same effect as thought the invalid or unenforceable part had
been severed and deleted. The respective rights and obligations of the parties
hereunder shall survive the termination of the Executive's employment to the
extent necessary to the intended preservation of such rights and obligations.
14. LIFE INSURANCE
The Executive agrees that the Company shall have the right to obtain
life insurance on the Executive's life, at the sole expense of the Company, as
the case may be, and with the Company as the
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<PAGE> 13
sole beneficiary thereof. The executive shall (a) cooperate fully in obtaining
such life insurance, (b) sign any necessary consents, applications and other
related forms or documents and (c) take any reasonably required medical
examinations.
15. NOTICE
Any notice, request, instruction or other document to be given
hereunder by any party hereto to another party shall be in writing and shall be
deemed effective (a) upon personal delivery, if delivered by hand, or (b) three
days after the date of deposit in the mails, postage prepaid if mailed by
certified or registered mail, or (c) on the next business day, if sent by
facsimile transmission (if receipt is electronically confirmed) or prepaid
overnight courier service, and in each case addressed as follows:
If to the Executive:
Daryl R. Lindemann
52 Maple Ridge Drive
Morton, IL 61550
If to the Company:
Morton Industrial Group, Inc.
P. O. Box 429
1021 W. Birchwood
Morton, Illinois 61550
Attention: Chief Executive Officer
Fax: (309) 263-1841
with copy to:
Husch & Eppenberger
800 Central Building
101 S.W. Adams Street
Peoria, Illinois 61602
Attention: Gene A. Petersen
Fax: (309) 637-4928
Any party may change the address to which notices are to be sent by giving
notice of such change of address to the other party in the manner provided for
giving notice.
16. APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois without application of conflict of law
provisions applicable herein. The parties hereby irrevocably submit to the
personal jurisdiction of the United States District Court for the Central
District of Illinois located in Peoria, Illinois or the courts of the State of
Illinois located in Peoria County, Illinois in any action or proceeding arising
out of or relating to this Agreement in any way, and hereby irrevocably
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<PAGE> 14
agree that all claims in respect of any such action or proceeding may be heard
and determined in any such court. In furtherance thereof, the parties hereby
irrevocably consent to the service of any summons and complaint and any other
process which may be served in any action or proceeding arising out of or
related to this Agreement in any way brought in the United States District Court
for the Central District of Illinois located in Peoria, Illinois or the courts
of the State of Illinois located in Peoria County, Illinois by the mailing by
certified or registered mail of copies of such process to their respective
addresses as set in paragraph 15 of this Agreement, and the parties hereby
irrevocably waive any objection which any of them now or hereafter may have to
the laying of venue of any action or proceeding arising out of or relating to
this Agreement in any way brought in the United States District Court for the
Central District of Illinois located in Peoria, Illinois or the courts of the
State of Illinois located in Peoria County, Illinois and any objection on the
ground that any such action or proceeding in any of such courts has been brought
in an inconvenient forum. EACH PARTY HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING UNDER THIS AGREEMENT.
17. NO CONFLICT
The Executive represents and warrants that he is not subject to any
agreement, instrument, order, judgment or decree of any kind, or any other
restrictive agreement of any character, which would prevent him from entering
into this agreement or which would be breached by the Executive upon his
performance of his duties pursuant to this Agreement.
18. ENTIRE AGREEMENT
This Agreement represents the entire agreement between the Company and
the Executive with respect to the subject matter hereof, and all prior
agreements, plans and arrangements relating to the employment of the Executive
by the Company are nullified and superseded hereby.
19. HEADINGS
The headings contained in this Agreement are for reference purposes
only, and shall not affect the meaning or interpretation of this Agreement.
20. MISCELLANEOUS
(a) The Company may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(b) Following the date hereof and regardless of any dispute
that may arise in the future, the Executive will not, and
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<PAGE> 15
will use his best efforts to cause his business associates to not, disparage,
criticize or make statements to the detriment of the Company, the Group or any
of their affiliates; and the Company will not, and will use its best efforts to
cause their affiliated companies to not, disparage, criticize or make statements
to the detriment of the Executive.
(c) Notwithstanding anything to the contrary contained in this
Agreement, the rights of the Executive under the provisions of the Company
by-laws relating to indemnification of directors and officers shall survive any
termination of this Agreement.
(d) The Executive acknowledges that Executive has consulted or
has had the opportunity to consult his own attorney in connection with this
Agreement.
(e) This Agreement shall become effective only if this
Agreement has been approved by the holders of record of stock of Morton
representing more than 75% of the voting power of all outstanding stock of
Morton, determined without regard to any stock owned or constructively owned by
any "disqualified individual" (as defined in Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code")) who will be receiving
compensation that, absent satisfaction of certain shareholder approval
requirements would constitute "parachute payments" under Section 280G of the
Code, prior to the effective date of the Merger.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
MORTON INDUSTRIAL GROUP, INC.
By William D. Morton
--------------------------------
Name:
Title:
Daryl R. Lindemann
-----------------------------------
Daryl R. Lindemann, Executive
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<PAGE> 1
EXHIBIT 10.13
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT, dated as of August 7, 1996, ("AGREEMENT"),
between GENERAL ELECTRIC CAPITAL CORPORATION, with an office at 303
INTERNATIONAL CIRCLE SUITE 300, HUNT VALLEY, MARYLAND 21031, (hereinafter
called, together with its successors and assigns, if any, "LESSOR"), and MORTON
METALCRAFT CO., A CORPORATION, organized and existing under the laws of the
State of ILLINOIS, with its mailing address and chief place of business at 1021
W. BIRCHWOOD STREET, MORTON, IL 61550 (hereinafter called "LESSEE").
WITNESSETH:
I. LEASING:
(a) Subject to the terms and conditions set forth below, Lessor
agrees to lease to Lessee, and Lessee agrees to lease from Lessor, the
equipment ("EQUIPMENT") described in Annex A to any schedule hereto
("SCHEDULE") and this Agreement shall be effective from and after the date of
execution hereof. Terms defined in a Schedule and not otherwise defined herein
shall have the meanings ascribed to them in such Schedule.
(b) The obligation of Lessor to purchase Equipment from the
manufacturer or supplier thereof ("SUPPLIER",) and to lease the same to Lessee
under any Schedule shall be subject to receipt by Lessor, prior to the Lease
Commencement Date (with respect to such Equipment), of each of the following
documents in form and substance satisfactory to Lessor: (i) a Schedule
relating to the Equipment then to be leased hereunder, (ii) a Purchase Order
Assignment and Consent in the form of Annex B to the applicable Schedule,
unless Lessor shall have delivered its purchase order for such Equipment, (iii)
evidence of insurance which complies with the requirements of Section X, and
(iv) such other documents as Lessor may reasonably request. As a further
condition to such obligations of Lessor, Lessee shall, upon delivery of such
Equipment (but not later than the Base Lease Commencement Date specified in the
applicable Schedule) execute and deliver to Lessor a Certificate of Acceptance
(in the form of Annex C to the applicable Schedule) covering such Equipment.
Lessor hereby appoints Lessee its agent for inspection and acceptance of the
Equipment from the Supplier. Upon execution by Lessee of any Certificate of
Acceptance, the Equipment described thereon shall be deemed to have been
delivered to, and irrevocably accepted by, Lessee for lease hereunder.
II. TERM, RENT AND PAYMENT:
(a) The rent payable hereunder and Lessee's right to use the
Equipment shall commence on the date of execution by Lessee of the Certificate
of Acceptance for such Equipment ("LEASE COMMENCEMENT DATE"). The term of this
Agreement shall be the period specified in the applicable Schedule. If any
term is extended, the word "TERM" shall be deemed to refer to all extended
terms, and all provisions of this Agreement shall apply during any extended
terms, except as may be otherwise specifically provided in writing.
(b) Rent shall be paid to lessor at its address stated above, except
as otherwise directed by Lessor. Payments of rent shall be in the amount set
forth in, and due in accordance with, the provisions of the applicable
Schedule. If one or more Advance Rentals are payable, such Advance Rental
shall be (i) set forth on the applicable Schedule, (ii) due upon acceptance by
Lessor of such Schedule, and (iii) when received by Lessor, applied to the
first rent payment and the balance, if any, to the final rental payment(s)
under such Schedule. In no event shall any Advance Rental or any other rent
payments be refunded to Lessee. If rent is not paid within ten days of its due
date, Lessee agrees to pay a late charge of five cents ($.05) per dollar on,
and in addition to, the amount of such rent but not exceeding the lawful
maximum, if any.
(c) So long as no default shall have occurred and be continuing
under the terms of this agreement, neither Lessor nor its agents, employees,
creditors, or assigns will disturb Lessee's quiet, peaceful and uninterrupted
possession of the Equipment during the term of this Lease and Lessee's
uninterrupted use thereof for its intended purpose.
III. TAXES: Except as provided in Section XIV(c), Lessee shall have no
liability for taxes imposed by the United States of America or any State or
political subdivision thereof which are on or measured by the net income of
Lessor. Lessee shall report (to the extent that it is legally permissible) and
pay promptly all other taxes, fees and assessments due, imposed, assessed or
levied against any Equipment (or the purchase, ownership, delivery, leasing,
possession, use or operation thereof), this Agreement (or any rentals or
receipts hereunder), any Schedule, Lessor or Lessee by any foreign, federal,
state or local government or taxing authority during or related to the term of
this Agreement, including, without limitation, all license and registration
fees, and all sales, use, personal property, excise, gross receipts, franchise,
stamp or other taxes, imposts, duties and charges, together with any penalties,
fines or interest thereon (all hereinafter called "TAXES"). Lessee shall (i)
reimburse Lessor upon receipt of written request for reimbursement for any
Taxes charged to or assessed against Lessor, (ii) on request of Lessor, submit
to Lessor written evidence of Lessee's payment of Taxes, (iii) on all reports
or returns show the ownership of the Equipment by Lessor, and (iv) send a copy
thereof to Lessor. The obligations of Lessee under this Section IV shall
survive any expiration or termination of this Agreement.
IV. REPORTS:
(a) Lessee will notify Lessor in writing, within ten (10) days
after any tax or other lien shall attach to any Equipment, of the full
particulars thereof and of the location of such Equipment on the date of such
notification.
<PAGE> 2
(b) Lessee will within ninety (90) days of the close of each fiscal
year of Lessee, deliver to Lessor, Lessee's complete financial statements,
certified by a recognized firm of certified public accountants. If Lessee
becomes a publicly traded entity, Lessee will, within thirty (30) days after
the date on which they are filed, deliver to Lessor all Forms 10-K and 10-Q
filed with the Securities and Exchange Commission. Upon request Lessee will
deliver to Lessor quarterly, within ninety (90) days of the close of each
fiscal quarter of Lessee, in reasonable detail, copies of Lessee's quarterly
financial report certified by the chief financial officer of Lessee. Upon
request, Lessee will deliver to Lessor one copy of each financial statement,
report, notice or proxy statement sent by Lessee to shareholders generally and
one copy of each regular or periodic report, registration statement or
prospectus filed by Lessee with any securities exchange or the Securities and
Exchange Commission or any successor agency, such copies to be delivered to
Lessor within thirty (30) days after they become available or are otherwise
filed.
(c) Lessee will permit Lessor to inspect any Equipment during
normal business hours.
(d) Lessee will keep the Equipment at the Equipment Location
(specified in the applicable Schedule) and will give Lessor prior written
notice of any relocation of Equipment. Upon the written request of Lessor,
Lessee will notify Lessor forthwith in writing of the location of any Equipment
as of the date of such notification.
(e) Lessee will promptly and fully report to Lessor in writing if
any Equipment is lost or damaged (where the estimated repair costs would exceed
twenty-five percent (25%) of its then fair market value), or is otherwise
involved in an accident causing personal injury or property damage.
(f) Within thirty (30) days after any request by Lessor, Lessee
will furnish a certificate of an authorized officer of Lessee stating that he
has reviewed the activities of Lessee and that, to the best of his knowledge,
there exists no default (as described in Section XI) or event which with notice
or lapse of time (or both) would become such a default.
V. DELIVERY, USE AND OPERATION:
(a) All Equipment shall be shipped directly from the Supplier to
Lessee.
(b) Lessee agrees that the Equipment will be used by Lessee solely
in the conduct of its business and in a manner complying with all applicable
federal, state, and local laws and regulations and any applicable insurance
policies and Lessee shall not discontinue use of the Equipment.
(c) LESSEE SHALL NOT ASSIGN, OTHER THAN TO A WHOLLY-OWNED
SUBSIDIARY OF MORTON METAL CRAFT HOLDINGS, MORTGAGE, SUBLET OR HYPOTHECATE ANY
EQUIPMENT, OR THE INTEREST OF LESSEE HEREUNDER, NOR SHALL LESSEE REMOVE ANY
EQUIPMENT FROM THE CONTINENTAL UNITED STATES, WITHOUT THE PRIOR WRITTEN CONSENT
OF THE LESSOR.
(d) Lessee will keep the Equipment free and clear of all liens and
encumbrances other than those which result from acts of Lessor.
VI. SERVICE:
(a) Lessee will, at its sole expense, maintain each unit of
Equipment in good operating order, repair, condition and appearance in
accordance with manufacturer's recommendations, normal wear and tear excepted.
Lessee shall, if at any time requested by Lessor, affix in a prominent position
on each unit of Equipment plates, tags or other identifying labels showing
ownership thereof by Lessor.
(b) Lessee will not, without the prior consent of Lessor, affix or
install any accessory, equipment or device on any Equipment if such addition
will impair the originally intended function or use of such Equipment. All
additions, repairs, parts, supplies, accessories, equipment, and devices
furnished, attached or affixed to any Equipment which are not readily removable
shall be made only in compliance with applicable law, including Internal
Revenue Service guidelines, shall be free and clear of all liens, encumbrances
or rights of others, and shall become the property of Lessor. Lessee will not,
without the prior written consent of Lessor and subject to such conditions as
Lessor may impose for its protection, affix or install any Equipment to or in
any other personal or real property.
(c) Any alterations or modifications to the Equipment that may, at
any time during the term of this Agreement, be required to comply with any
applicable law, rule or regulation shall be made at the expense of Lessee.
VII. STIPULATED LOSS VALUE: Lessee shall promptly and fully notify Lessor in
writing if any unit of Equipment shall be or become worn out, lost, stolen,
destroyed, irreparably damaged in the reasonable determination of Lessee, or
permanently rendered unfit for use from any cause whatsoever (such occurrences
being hereinafter called "CASUALTY OCCURRENCES"). On the rental payment date
next succeeding a Casualty Occurrence (the "PAYMENT DATE"), Lessee shall pay
Lessor the sum of (x) the Stipulated Loss Value of such unit calculated as of
the rental next preceding such Casualty Occurrence ("CALCULATION DATE") and (y)
all rentals and other amounts which are due hereunder as of the Payment Date.
Upon payment of all sums due hereunder, the term of this lease as to such unit
shall terminate and ownership of such unit shall pass to Lessee or Lessee's
insurance company.
VIII. LOSS OR DAMAGE: Lessee hereby assumes and shall bear the entire risk of
any loss, theft, damage to, or destruction of, any unit of Equipment from any
cause whatsoever from the time the Equipment is shipped to Lessee.
IX. INSURANCE: Lessee agrees, at its own expense, to keep all Equipment
insured for such amounts and against such hazards as Lessor may require,
including, but not limited to, insurance for damage to or loss of such
Equipment and liability coverage for personal injuries, death or property
damage, with Lessor named as additional insured and with a loss payable clause
in favor of Lessor, as its interest may appear, irrespective of any breach of
warranty or other act or omission of Lessee. All such policies shall be with
companies, and on terms, reasonably satisfactory to Lessor.
<PAGE> 3
Lessee agrees to deliver to Lessor evidence of insurance reasonably
satisfactory to Lessor. No insurance shall be subject to any co-insurance
clause. If the Lessee has not paid the Lessor for such Equipment pursuant to
Section VIII, Lessee hereby appoints Lessor as Lessee's attorney-in-fact to
make proof of loss and claim for insurance, and to make adjustments with
insurers and to receive payment of and execute or endorse all documents, checks
or drafts in connection with payments made as a result of such insurance
policies. Any such adjustments with insurers must be approved in writing by
Lessee. Any expense of Lessor in adjusting or collecting insurance shall be
borne by Lessee. Lessee will not make adjustments with insurers except (i)
with respect to claims for damage to any unit of Equipment where the repair
costs do not exceed ten percent (10%) of such unit's fair market value, or (ii)
with Lessor's written consent. Said policies shall provide that the insurance
may not be altered or cancelled by the insurer until after thirty (30) days'
written notice to Lessor. Lessor shall apply proceeds of insurance, in whole
or in part, to (i) repair or replace Equipment or any portion thereof, or (ii)
satisfy any obligation of Lessee to Lessor hereunder.
X. RETURN OF EQUIPMENT:
(a) Upon any expiration or termination of this Agreement or any
Schedule, Lessee shall promptly, at its own cost and expense: (i) perform any
testing and repairs required to place the affected units of Equipment in the
same condition and appearance as when received by Lessee (reasonable wear and
tear excepted) and in good working order for their originally intended purpose;
(ii) if deinstallation, disassembly or crating is required, cause such units to
be deinstalled, disassembled and crated by an authorized manufacturer's
representative or such other service person as is satisfactory to Lessor; and,
(iii) return such units to a location within the continental United States as
Lessor shall direct.
(b) Until Lessee has fully complied with the requirements of
Section X(a) above, Lessee's rent payment obligation and all other obligations
under this Agreement shall continue from month to month notwithstanding any
expiration or termination of the lease term. Lessor may terminate such
continued leasehold interest upon ten (10) days' notice to Lessee.
XI. DEFAULT:
(a) Lessor may in writing declare this Agreement in default if:
Lessee breaches its obligation to pay rent or any other sum when due and fails
to cure the breach within ten (10) days; Lessee breaches any of its insurance
obligations herewith under Section IX; Lessee breaches any of its other
obligations hereunder and fails to cure that breach within thirty (30) days
after written notice thereof; any representation or warranty made by or on
behalf of Lessee in connection with this Agreement shall be false or misleading
in any material respect; Lessee or any guarantor becomes insolvent or ceases to
do business as a going concern; any Equipment is illegally used; a petition is
filed by or against Lessee or any guarantor under any bankruptcy or insolvency
laws; there is a revocation or anticipatory repudiation of any guarantor's
obligations under any guaranty issued in connection with this Agreement; Lessee
or any guarantor shall be in default under any material obligation and the
applicable grace period with respect thereto shall have expired; Lessee or any
guarantor shall have terminated its existence, consolidated with, merged into or
conveyed or leased substantially all of its assets as an entirety to any person
(such actions being referred to as an "Event"). Any provision of this
Agreement to the contrary notwithstanding. Lessor may exercise all rights and
remedies hereunder independently with respect to each Schedule.
(b) After default at the request of Lessor, Lessee shall comply
with the provisions of Section X(a). Lessee hereby authorizes Lessor to enter,
with or without legal process, any premises where any Equipment is believed to
be and take possession thereof. Lessee shall, without further demand,
forthwith pay to Lessor as liquidated damages for loss of a bargain and not as
a penalty, the Stipulated Loss Value of the Equipment (calculated as of the
rental date next preceding the declaration of default), and all rentals and
other sums then due hereunder. Lessor may terminate this Agreement as to any
or all of the Equipment, provided that a termination shall occur only upon
written notice by Lessor to Lessee and only as to the items of Equipment
specified in any such notice. Lessor may, but shall not be required to, sell
Equipment at private or public sale, in bulk or in parcels, with or without
notice, and without having the Equipment present at the place of sale; or
Lessor may, but shall not be required to, lease, otherwise dispose of or keep
idle all or part of the Equipment; and Lessor may use Lessee's premises for any
or all of the foregoing without liability for rent, costs, damages or
otherwise. The proceeds of sale, lease or other disposition, if any, shall be
applied in the following order of priorities: (1) to pay all of Lessor's
costs, charges and expenses incurred in taking, removing, holding, repairing
and selling, leasing or otherwise disposing of Equipment; then, (2) to the
extent not previously paid by Lessee, to pay Lessor all sums due from Lessee
hereunder, then (3) to reimburse to Lessee any sums previously paid by Lessee
as liquidated damages; and (4) any surplus shall be retained by Lessor. Lessee
shall pay any deficiency in (1) and (2) forthwith.
(c) The foregoing remedies are cumulative, and any or all thereof
may be exercised in lieu of or in addition to each other or any remedies at
law, in equity, or under statute. Lessee waives notice of sale or other
disposition (and the time and place thereof), and the manner and place of any
advertising. Lessee shall pay Lessor's actual attorney's fees incurred in
connection with the enforcement, assertion, defense or preservation of Lessor's
rights and remedies hereunder, or if prohibited by law, such lesser sum as may
be permitted. Waiver of any default shall not be a waiver of any other or
subsequent default.
(d) Any default under the terms of this or any other agreement
between Lessor and Lessee may be declared by Lessor a default under this and any
such other agreement.
(e) Lessee is in default, and a default has been declared, under
it's revolving credit agreement with Fleet Capital Corporation (or any
replacement said revolving credit agreement), which is evidenced by a Loan and
Security Agreement dated February 1, 1995.
XII. ASSIGNMENT:
Lessor may, without the consent of Lessee, assign this
Agreement or any Schedule or any interests therein. Lessee agrees that if
Lessee receives written notice of an assignment from Lessor, Lessee will pay
all rent and all other amounts payable under any assigned Equipment Schedule to
such assignee or as instructed by Lessor. Lessee further agrees to confirm in
writing receipt of the notice of assignment as may be reasonably requested by
assignee. Lessee hereby waives and agrees not to assert against any such
assignee any defense, set-off, recoupment claim or counterclaim which Lessee
has or may at any time have against Lessor for any reason whatsoever.
<PAGE> 4
XIII. NET LEASE; NO SET-OFF, ETC: This Agreement is a net lease. Lessee's
obligation to pay rent and other amounts due hereunder shall be absolute and
unconditional. Lesee shall not be entitled to any abatement or reductions of,
or set-offs against, said rent or other amounts, including, without limitation,
those arising or allegedly arising out of claims (present or future,
alleged or actual, and including claims arising out of strict tort or
negligence of Lessor) of Lessee against Lessor under this Agreement or
otherwise. Nor shall this Agreement terminate or the obligations of Lessee be
affected by reason of any defect in or damage to, or loss of possession, use or
destruction of, any Equipment from whatsoever cause, except as otherwise
provided in Section VIII herein. It is the intention of the parties that rents
and other amounts due hereunder shall continue to be payable in all events in
the manner and at the times set forth herein unless the obligation to do so
shall have been terminated pursuant to the express terms hereof.
XIV. INDEMNIFICATION:
(a) Lessee hereby agrees to indemnify, save and keep harmless Lessor,
its agents, employees, successors and assigns from and against any and all
losses, damages, penalties, injuries, claims, actions and suits, including
legal expenses, of whatsoever kind and nature, in contract or tort or
otherwise, unless caused by the gross negligence or willful misconduct of
Lessor, and including, but not limited to, Lessor's strict liability in tort,
arising out of (i) the selection, manufacture, purchase, acceptance or
rejection of Equipment, the ownership of Equipment during the term of this
Agreement, and the delivery, lease, possession, maintenance, uses, condition,
return or operation of Equipment (including, without limitation, latent and
other defects, whether or not discoverable by Lessor or Lessee and any claim
for patent, trademark or copyright infringement or environmental damage) or
(ii) the condition of Equipment sold or disposed of after use by Lessee, any
sublessee or employee of Lessee, so long as any such condition arises out of
Lessee's lease, possession, maintenance, use or operation of the Equipment
during the term of the Agreement. The Equipment will be sold as is, where is
without warranty and representations of any kind. Lessee shall, upon request,
defend any actions based on, or arising out of, any of the foregoing.
(b) The Lease has been entered into on the assumption that (i) the
Lease will be treated for federal income tax purposes as a true lease and the
Lessor will be treated as the owner and lessor of the Equipment and the Lessee
will be treated as the lessee of the Equipment, and (ii) on the Lease
Commencement Date for any unit of Equipment, such unit will qualify for all of
the items of deduction and credit specified in Section C of applicable Schedule
("TAX BENEFITS") in the hands of Lessor (all references to Lessor in this
Section XV include Lessor and the consolidated tax payer group which Lessor is
a member).
(c) If as a result of a breach of any representation, warranty or
covenant of the Lessee contained in this Agreement or any Schedule (i) tax
counsel of Lessor shall determine that Lessor is not entitled to claim on its
federal income tax return all or any portion of the Tax Benefits with respect
to any Equipment or (ii) any such Tax Benefit claimed on the federal income tax
return of Lessor is disallowed or adjusted by the Internal Revenue Service or
(iii) any such Tax Benefit is recomputed or recaptured (any such determination,
disallowance, adjustment, recomputation or recapture being hereinafter called a
"LOSS"), then Lessee shall pay to Lessor, as an indemnity and as additional
rent, such amount as shall, in the reasonable opinion of Lessor, cause Lessor's
after-tax economic yields and cash flows, computed on the same assumptions,
including tax rates, and were utilized by Lessor in originally evaluating the
transaction (such yields and flows being hereinafter called the "NET ECONOMIC
RETURN") to equal the Net Economic Return that would have been realized by
Lessor if such Loss had not occurred. Such amount shall be payable upon demand
accompanied by a statement describing in reasonable detail such Loss and the
computation of such amount. Anything in this paragraph to the contrary
notwithstanding, Lessee shall have no obligation to indemnify Lessor from or
against any such Loss to the extent that such Loss is caused by: (i) any
failure by Lessor to properly or timely claim on its federal income tax return
any Tax Benefits on any Equipment (unless such failure is based upon a
determination by tax counsel of Lessor that Lessor is not entitled to claim
such Tax Benefits with respect to such Equipment); (ii) any failure of Lessor
to have sufficient taxable income to benefit from the Tax Benefits; (iii) any
liability of the Lessor for any alternative minimum taxes; (iv) the status of
Lessor for purposes of federal income taxes; (v) any sale or other disposition
of any Equipment by Lessor other than after an event of default by Lessee; (vi)
any tax election made or not made by Lessor relating to the Tax Benefits; or
(vii) any event which results in a payment by Lessee in an amount equal to, or
measured by, the Stipulated Loss Value to the extent that such Loss was
included in Lessor's calculation of such Stipulated Loss Value.
(d) All of Lessor's rights, privileges and indemnities contained in
this Section XIV shall survive the expiration or other termination of this
Agreement and the rights, privileges and indemnities contained herein are
expressly made for the benefit of, and shall be enforceable by Lessor, its
successors and assigns.
XV. DISCLAIMER: LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT
WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR DOES NOT
MAKE, HAS NOT MADE, NOR SHALL LESSOR BE DEEMED TO MAKE OR HAVE MADE, ANY
WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH
RESPECT TO THE EQUIPMENT LEASED HEREUNDER OR ANY COMPONENT THEREOF, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS,
QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE,
USE OR OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR
TITLE. All such risks, as between Lessor and Lessee, are to be borne by
Lessee. Without limiting the foregoing, Lessor shall have no responsibility or
liability to Lessee or any other person with respect to any of the following,
regardless of any negligence of Lessor (i) any liability, loss or damage caused
or alleged to be caused directly or indirectly by any Equipment, any inadequacy
thereof, any deficiency or defect (latent or otherwise) therein, or any other
circumstance in connection therewith; (ii) the use, operation or performance of
any Equipment or any risks relating thereto; (iii) any interruption of service,
loss of business or anticipated profits or consequential damages; or (iv) the
delivery, operation, servicing, maintenance, repair, improvement or replacement
of any Equipment. If, and so long as, no default exists under this Lease,
Lessee shall be, and hereby is, authorized during the terms of this Lease to
assert and enforce, at Lessee's sole cost and expense, from time to time, in
the name of and for the account of Lessor and/or Lessee, as their interests may
appear, whatever claims and rights Lessor may have against any Supplier of the
Equipment.
XVI. REPRESENTATIONS AND WARRANTIES OF LESSEE: Lessee hereby represents and
warrants to Lessor that on the date hereof and on the date of execution of each
Schedule:
<PAGE> 5
(a) Lessee has adequate power and capacity to enter into, and
perform under, this Agreement and all related documents (together, the
"DOCUMENTS") and is duly qualified to do business where ever necessary to carry
on its present business and operations, including the jurisdiction(s) where
the Equipment is or is to located.
(b) The Documents have been duly authorized, executed and delivered
by Lessee and constitute valid, legal and binding agreements, enforceable in
accordance with their terms, except to the extent that the enforcement of
remedies therein provided may be limited under applicable bankruptcy and
insolvency laws.
(c) No approval, consent or withholding of objections is required
from any governmental authority or instrumentality with respect to the entry
into or performance by Lessee of the Documents except such as have already been
obtained.
(d) The entry into and performance by Lessee of the Documents will
not; (i) violate any judgment, order, law or regulation applicable to Lessee or
any provision of Lessee's Certificate of Incorporation or By-Laws; or (ii)
result in any breach of, constitute a default under or result in the creation of
any lien, charge, security interest or other encumbrance upon any Equipment
pursuant to any indenture, mortgage, deed of trust, bank loan or credit
agreement or other instrument (other than this Agreement) to which Lessee is a
party.
(e) There are no suits or proceedings pending or threatened in
court or before any commission, board or other administrative agency against or
affecting Lessee, which if decided adversely will have a material adverse effect
on the ability of Lessee to fulfill its obligations under this Agreement.
(f) The Equipment accepted under any Certificate of Acceptance is
and will remain tangible personal property.
(g) Each financial statement delivered to Lessor has been prepared
in accordance with GAAP consistently applied, and since the date of the most
recent such financing statement, there has been no material adverse change.
(h) Lessee is and will be at all times validly existing and in good
standing under the laws of the State of its incorporation (specified in the
first sentence of this Agreement).
(i) The Equipment will at all times be used for commercial or
business purposes.
XVII. PURCHASE OPTION:
(a) So long as no default exists hereunder and the lease has not
been earlier terminated, Lessee may at lease expiration, upon at least one
hundred eighty (180) days' prior written notice to Lessor, purchase all (but
not less than all) of the Equipment in any Schedule on an AS IS, WHERE IS
BASIS without recourse to or warranty from Lessor, express or implied ("AS IS
BASIS") for cash equal to its then Fair Market Value (plus all applicable sales
taxes).
(b) "FAIR MARKET VALUE", shall mean the price which a willing buyer
(who is neither a lessee in possession nor a used equipment dealer) would pay
for the Equipment in an arm's-length transaction to a willing seller under no
compulsion to sell; provided, however, that in such determination: (i) the
Equipment shall be assumed to be in the condition in which it is required to be
maintained and returned under this Agreement; (ii) in the case of any installed
Equipment, that Equipment shall be valued on an installed basis; and (iii) costs
of removal from current location shall not be a deduction from such valuation.
If Lessor and Lessee are unable to agree on the Fair Market Value at least one
hundred thirty-five (135) days before lease expiration, Lessor shall appoint an
independent appraiser (reasonably acceptable to Lessee) to determine Fair
Market Value, and that determination shall be final, binding and conclusive.
Lessee shall bear all costs associated with any such appraisal.
(c) Lessee shall be deemed to have waived this option unless it
provides Lessor with written notice of its irrevocable election to exercise
the same within fifteen (15) days after Fair Market Value is determined (by
agreement or appraisal).
<PAGE> 6
XVIII. MISCELLANEOUS:
(A) LESSEE HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR
INDIRECTLY, THIS LEASE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN
LESSEE AND LESSOR RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY
RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN
LESSEE AND LESSOR. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING
OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
LEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION,
THIS LEASE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(b) Unless and until Lessee exercises its rights under Section XVII
above, nothing herein contained shall give or convey to Lessee any right, title
or interest in and to any Equipment except as a lessee. Any cancellation or
termination by Lessor, pursuant to the provision of this Agreement, any
Schedule, supplement or amendment hereto, or the lease of any Equipment
hereunder, shall not release Lessee from any then outstanding obligations to
Lessor hereunder. All Equipment shall at all times remain personal property of
Lessor regardless of the degree of its annexation to any real property and
shall not by reason of any installation in, or affixation to, real or personal
property become a part thereof.
(c) Time is of the essence of this Agreement. Lessor's failure at any
time to require strict performance by Lessee of any of the provisions hereof
shall not waive or diminish Lessor's right thereafter to demand strict
compliance therewith. Lessee agrees, upon Lessor's request, to execute any
instrument necessary or expedient for filing, recording or perfecting the
interest of Lessor. All notices required to be given hereunder shall be deemed
adequately given if sent by registered or certified mail to the addressee at
its address stated herein, or at such other place as such addressee may have
designated in writing and shall be deemed effective when sent. This Agreement
and any Schedule and Annexes thereto constitute the entire agreement of the
parties with respect to the subject matter hereof. NO VARIATION OR
MODIFICATION OF THIS AGREEMENT OR ANY WAIVER OF ANY OF ITS PROVISIONS OR
CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED
REPRESENTATIVE OF THE PARTIES HERETO.
LESSOR [SIG]
--------------
LESSEE [SIG]
--------------
(d) In case of a failure of Lessee to comply with any provision of
this Agreement, Lessor shall have the right, but shall not be obligated, to
effect such compliance, in whole or in part; and all moneys spent and expenses
and obligations incurred or assumed by Lessor in effecting such compliance
shall constitute additional rent due to Lessor within five days after the date
Lessor sends notice to Lessee requesting payment. Lessor's effecting such
compliance shall not be a waiver of Lessee's default.
(e) In the event that Lessee is declared in a default under this
Agreement, any rent or other amount not paid to Lessor when due hereunder shall
bear interest, both before and after any judgment or termination hereof, at the
lesser of eighteen percent (18%) per annum or the maximum rate allowed by law.
Any provisions in this Agreement and any Schedule which are in conflict with
any statute, law or applicable rule shall be deemed omitted, modified or
altered to conform thereto.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL CORPORATION MORTON METALCRAFT CO.
By: /s/ James R. Newman By: /s/ Daryl R. Lindemann
--------------------------------- -----------------------------
Name: James R. Newman Name: Daryl R. Lindemann
------------------------------- ---------------------------
Title: Sr. Credit Analyst Title: Vice President
------------------------------ --------------------------
<PAGE> 7
CORPORATE LESSEE'S
BOARD OF DIRECTORS RESOLUTION
The undersigned hereby certifies: (i) that she/he is the Secretary of
MORTON METALCRAFT CO.; (ii) that the following is a true and correct copy of
resolutions duly adopted at a meeting of the Board of Directors of said
Corporation duly held on the 7th day of August, 1996; and (iii) that said
resolutions have not been amended, rescinded, modified or revoked, and are in
full force and effect:
"RESOLVED, that each of the officers of this Corporation, whose name
appears below:
William D. Morton
- -------------------------- -----------------------------------
President Treasurer
Daryl R. Lindemann
- -------------------------- -----------------------------------
Vice President Secretary
or the duly elected or appointed successor in office of any or all of them, be,
and herby is, authorized and empowered in the name and on behalf of this
Corporation to enter into, execute and deliver a master lease agreement with
GENERAL ELECTRIC CAPITAL CORPORATION ("LESSOR") as Lessor, providing for the
leasing to (or sale and leaseback by) this Corporation, from time to time, of
certain equipment, and further providing for this Corporation to indemnify said
Lessor against certain occurrences and against the loss of contemplated tax
treatment; and
FURTHER RESOLVED, that each officer of this Corporation be, and hereby is,
authorized and empowered in the name and on behalf of this Corporation to enter
into, execute and deliver any documents and to do and perform all other acts
and deeds which may be necessary or appropriate to effectuate the lease (or
sale and leaseback) of equipment from Lessor; and
FURTHER RESOLVED, that the Lessor may rely upon the aforesaid resolutions
until receipt by it of written notice of any change.
IN WITNESS WHEREOF, I have set my hand and affixed the seal of said
Corporation this 7th day of August, 1996.
(CORPORATE SEAL)
Daryl R. Lindemann
- --------------------------
Secretary
<PAGE> 1
EXHIBIT 10.14
CORPORATE GUARANTY
Date: August 7, 1996
General Electric Capital Corporation
303 International Circle Suite 300
Hunt Valley, MARYLAND 21031
To induce you to enter into, purchase or otherwise acquire, now or at
any time hereafter, any promissory notes, security agreements, chattel
mortgages, pledge agreements, conditional sale contracts, lease agreements,
and/or any other documents or instruments evidencing or relating to, any lease,
loan, extension of credit or other financial accommodation (collectively
"Account Documents" and each an "Account Document") to MORTON METALCRAFT CO., a
corporation organized and existing under the laws of the State of Illinois
("Customer"), but without in any way binding you to do so, the undersigned, for
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, does hereby guarantee to you, your successors and assigns, the due
regular and punctual payment of any sum or sums of money which the Customer may
owe to you now or at any time hereafter, whether evidenced by an Account
Document, on open account or otherwise, and whether it represents principal,
interest, rent, late charges, indemnities, an original balance, an accelerated
balance, liquidated damages, a balance reduced by partial payment, a deficiency
after sale or other disposition of any leased equipment, collateral or security,
or any other type of sum of any kind whatsoever that the Customer may owe to
you now or at any time hereafter, and does hereby further guarantee to you,
your successors and assigns, the due, regular and punctual performance of any
other duty or obligation of any kind or character whatsoever that the Customer
may owe to you now or at any time hereafter (all such payment and performance
obligations being collectively referred to as "Obligations"). Undersigned does
hereby further guarantee to pay upon demand all losses, costs, attorneys' fees
and expenses which may be suffered by you by reason of Customer's default or
default of the undersigned.
This Guaranty is a guaranty of prompt payment and performance (and not
merely a guaranty of collection). Nothing herein shall require you to first
seek or exhaust any remedy against the Customer, its successors and assigns, or
any other person obligated with respect to the Obligations, or to first
foreclose, exhaust or otherwise proceed against any leased equipment,
collateral or security which may be given in connection with the Obligations.
It is agreed that you may, upon any breach or default of the Customer, or at
any time thereafter, make demand upon the undersigned and receive payment and
performance of the Obligations, with or without notice or demand for payment or
performance by the Customer, its successors or assigns, or any other person.
Suit may be brought and maintained against the undersigned, at your election,
without joinder of the Customer or any other person as parties thereto. The
obligations of each signatory to this Guaranty shall be joint and several.
The undersigned agrees that its obligations under this Guaranty shall
be primary, absolute, continuing and unconditional, irrespective of and
unaffected by any of the following actions or circumstances (regardless of any
notice to or consent of the undersigned): (a) the genuineness, validity,
regularity and enforceability of the Account Documents or any other document;
(b) any extension, renewal, amendment, change, waiver or other modification of
the Account Documents or any other document; (c) the absence of, or delay in
any action to enforce the Account Documents, this Guaranty or any other
document;(d) your failure or delay in obtaining any other guaranty of the
Obligations (including, without limitation, your failure to obtain the
signature of any other guarantor hereunder); (e) the release of, extension of
time for payment or performance by, or any other indulgence granted to the
Customer or any other person with respect to the Obligations by operation of
law or otherwise; (f) the existence, value, (with or without substitution) of,
time, place and manner of any sale or other disposition of any leased
equipment, collateral or security given in connection with the Obligations, or
any other impairment (whether intentional or negligent, by operation of law or
otherwise) of the rights of the undersigned; (g) the Customer's voluntary or
involuntary bankruptcy assignment for the benefit of creditors, reorganization,
or similar proceedings affecting the Customer or any of its assets; or (h) any
other action or circumstances which might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor.
This Guaranty may be terminated upon delivery to you (at your address
shown above) of a written termination notice from the undersigned. However, as
to all Obligations (whether matured, unmatured, absolute, contingent or
otherwise) incurred by the Customer prior to your receipt of such written
termination notice (and regardless of any subsequent amendment, extension
or other modification which may be made with respect to such Obligations), this
Guaranty shall nevertheless continue and remain undischarged until all such
Obligations are indefeasibly paid and performed in full.
The undersigned agrees that this Guaranty shall remain in full force
and effect or be reinstated (as the case may be) if at any time payment or
performance of any of the Obligations (or any party thereof) is rescinded,
reduced or must otherwise be restored or returned by you, all as though such
payment or performance had not been made. If, by reason of any bankruptcy,
insolvency orsimilar laws effecting the rights of creditors, you shall be
prohibited from exercising any of your rights or remedies against the Customer
or any other person or against any property, then, as between you and the
undersigned, such prohibition shall be of no force and effect, and you shall
have the right to make demand upon, and receive payment from, the undersigned
of all amounts and other sums that would be due to you upon a default with
respect to the Obligations.
Notice of acceptance of this Guaranty and of any default by the
Customer or any other person is hereby waived. Presentment, protest, demand, and
notice of protest, demand and dishonor of any of the Obligations, and the
exercise of possessory, collection or other remedies for the Obligations, are
hereby waived. The undersigned warrants that it has adequate means to obtain
from the Customer on a continuing basis financial data and other information
regarding the Customer and is not relying upon you to provide any such data or
other information. Without limiting the foregoing, notice of adverse change in
the Customer's financial condition or of any other fact which might materially
increase the risk of the undersigned is also waived.
<PAGE> 2
All settlements, compromises, accounts stated and agreed balances made in good
faith between the Customer, its successors or assigns, and you shall be binding
upon and shall not affect the liability of the undersigned.
Until such time as all obligations have been paid in full, the
undersigned hereby irrevocably and unconditionally waives and relinquishes all
statutory, contractual, common law, equitable and all other claims against the
Customer, any other obligor for any of the Obligations, any collateral
therefor, or any other assets of the Customer or any such other obligor, for
subrogation, reimbursement, exoneration, contribution, indemnification, setoff
or other recourse in respect of sums paid or payable to you by the undersigned
hereunder, and the undersigned hereby further irrevocably and unconditionally
waives and relinquishes any and all other benefits which it might otherwise
directly or indirectly receive or be entitled to receive by reason of any
amounts paid by, or collected or due from, it, the Customer or any other
obligor for any of the Obligations, or realized from any of their respective
assets.
THE UNDERSIGNED HEREBY UNCONDITIONALLY WAIVES ITS RIGHT TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR
INDIRECTLY, THIS GUARANTY, THE OBLIGATIONS GUARANTEED HEREBY, ANY OF THE
RELATED DOCUMENTS, ANY DEALINGS BETWEEN US RELATING TO THE SUBJECT MATTER
HEREOF OR THEREOF, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN
US. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL
DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY, THE
OBLIGATIONS GUARANTEED HEREBY, OR ANY RELATED DOCUMENTS. IN THE EVENT OF
LITIGATION, THIS GUARANTY MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
As used in this Guaranty, the word "person" shall include any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, or any government or any political
subdivision thereof.
This Guaranty is intended by the parties as a final expression of the
guaranty of the undersigned and is also intended as a complete and exclusive
statement of the terms thereof. No course of dealing, course of performance or
trade usage, nor any paid evidence of any kind, shall be used to supplement or
modify any of the terms hereof. Nor are there any conditions to the full
effectiveness of this Guaranty. This Guaranty and each of its provisions may
only be waived, modified, varied, released, terminated or surrendered, in whole
or in part, by a duly authorized written instrument signed by you. No failure
by you to exercise your rights hereunder shall give rise to any estoppel
against you, or excuse the undersigned from performing hereunder. Your waiver
of any right to demand performance hereunder shall not be a waiver of any
subsequent or other right to demand performance hereunder.
This Guaranty shall bind the undersigned's successors and assigns and
the benefits thereof shall extend to and include your successors and assigns.
In the event of default hereunder, you may at any time inspect undersigned's
records, or at your option, undersigned shall furnish you with a current
independent audit report.
If any provisions of this Guaranty are in conflict with any applicable
statute, rule or law, then such provisions shall be deemed null and void to the
extent that they may conflict therewith, but without invalidating any other
provisions hereof.
Each signatory on behalf of a corporate guarantor warrants that he had
authority to sign on behalf of such corporation and by so signing, to bind said
guarantor corporation hereunder.
IN WITNESS WHEREOF, this Guaranty is executed the day and year above
written.
MORTON METALCRAFT HOLDING CO.
By: Daryl R. Lindemann
--------------------------------
(Signature)
Title: Vice President
--------------------------------
(Officer's Title)
ATTEST: William D. Morton
------------------------------
Secretary/Assistant Secretary
<PAGE> 3
(3/91)
STOCKHOLDERS CERTIFICATION
We, the undersigned, being all of the stockholders of MORTON METALCRAFT
HOLDING CO. ("GUARANTOR"), the corporation which is about to execute a guaranty
of the obligations of MORTON METALCRAFT CO. ("CUSTOMER") in favor of GENERAL
ELECTRIC CAPITAL CORPORATION (the "GECC CORPORATION"), do hereby certify to
such GECC Corporation that it is to the benefit of the Guarantor to execute
such guaranty, that the benefit to be received by the Guarantor from such
guaranty is reasonably worth the obligations thereby guaranteed, that the
Guarantor is authorized to execute said guaranty, and that the persons
executing the same on behalf of the Guarantor are duly authorized to do so in
their named capacity and to thereby bind the Guarantor to the terms of said
instrument as therein set forth.
Dated: , 19 (L.S.)
-------------------------- -- -----------------------------
(L.S.)
-----------------------------
(L.S.)
-----------------------------
CERTIFIED RESOLUTION
The undersigned hereby certifies that he is Secretary of MORTON
METALCRAFT HOLDING CO., that the following resolution was passed at a meeting
of the Board of Directors of said corporation held on August 7, 1996 duly
called, a quorum being present, that said resolution has not since been revoked
or amended, and that the form of guaranty referred to therein is the form shown
attached hereto:
"RESOLVED that it is to the benefit of this corporation that it execute
a guaranty of the obligations of MORTON METALCRAFT CO. ("CUSTOMER") to GENERAL
ELECTRIC CAPITAL CORPORATION (the "GECC CORPORATION") and that the benefit to
be received by this corporation from such guaranty is reasonably worth the
obligations thereby guaranteed, and further that such guaranty shall be
substantially in the form annexed to these minutes, and further that the
President and Vice President (Title of Officers) of this corporation are
authorized to execute such guaranty on the behalf of this corporation."
WITNESS my hand and the seal of this corporation on this 7th day of
August, 1996.
Daryl R. Lindemann
-------------------------------
[Seal] Secretary
CERTIFICATION AND REPRESENTATION BY SIGNING OFFICERS
We, the undersigned, William D. Morton and Daryl R. Lindemann, being
the President and Vice President of MORTON METALCRAFT HOLDING CO., the
corporation which executed the guaranty attached hereto, hereby jointly and
severally certify and represent to GENERAL ELECTRIC CAPITAL CORPORATION that
each of the undersigned executed the guaranty for and on behalf of said
corporation and that in so executing said instrument the undersigned were duly
authorized to do so in their named capacity as officers and by so executing to
hereby bind said guarantor corporation to the terms of said instrument as
therein set forth.
William D. Morton (L.S.) Daryl R. Lindemann (L.S.)
- -------------------------------- -----------------------------
Date: August 7, 1996 Date: August 7, 1996
------------------------------- --------------------------------
<PAGE> 1
EXHIBIT 10.15
SPLIT DOLLAR INSURANCE AGREEMENT
THIS AGREEMENT made and entered into as of the 3rd day of February,
1995, by and between MORTON METALCRAFT CO., an Illinois corporation, with
principal offices and place of business in the State of Illinois in Morton,
Illinois (hereinafter referred to as the "Corporation"), and WILLIAM D. MORTON
II, an individual residing at 105 Forrest View Road, Morton, Illinois 61550
(hereinafter referred to as the "Employee");
WITNESSETH:
WHEREAS, the Employee is employed by the Corporation as President/CEO
of the Corporation; and
WHEREAS, the Employee, on November 28, 1994, applied to John Hancock
Mutual Life Insurance Company (hereinafter referred to as the "Insurer") for
life insurance in the specified amount of $2,000,000; and
WHEREAS, pursuant to the aforesaid application, the Insurer issued its
modified premium whole life insurance policy with additional insurance
protection rider in the initial face amount of $2,000,000 dated February 3, 1995
as Policy No. 67090421 (hereinafter the "Policy"); and
WHEREAS, the Corporation, in recognition of the Employee's management
skills, knowledge of the Corporation's business and contributions to its
earnings and profits, desires to obtain key executive death protection for its
estimated losses in the event of the Employee's premature death; and
WHEREAS, the Corporation is to receive, by way of an assignment, a
limited Policy ownership interest in the Policy on the life of the Employee and
has agreed to pay premiums under the method described herein; and
WHEREAS, the Employee agrees to make the Policy subject to the limited
Policy ownership interest of the Corporation in exchange for the Corporation's
willingness to pay a portion of the Policy premiums due on the Policy; and
WHEREAS, this Agreement is intended to qualify as a split dollar life
insurance plan as described in Revenue Ruling 64-328;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises contained herein, the parties hereto agree as follows:
1. Policy Subject to this Agreement; Term. The Policy shall be subject
to the terms and conditions of this Agreement during the
<PAGE> 2
term hereof. The term of this Agreement shall commence on February 3, 1995 and
shall expire February 2, 2015, unless earlier terminated as hereafter provided.
2. Beneficiary Provisions. The beneficiary provisions of the Policy
shall provide that upon the death of the Employee the proceeds shall be paid as
follows:
A. Amount to Corporation. To the Corporation there shall be
paid $1,100,000, or the total proceeds of less than that amount. The
Employee shall not have the right to change the beneficiary as to this
portion of the proceeds except with the consent of the Corporation, and
this designation may be accomplished pursuant to an assignment of an
interest in the Policy as described below.
B. Amount to Employee's Beneficiaries. Any balance of the
proceeds shall be paid to the beneficiary or beneficiaries noted by the
Employee in the Policy, and if no such beneficiary is noted, to the
Employee's spouse, if living, otherwise to the Executor or
Administrator of the estate of the Employee.
3. Ownership. Although the consent of the Corporation is required for
any change of beneficiary as to the portion of the proceeds payable to
Corporation as provided in Section 2, and although the exercise of ownership
rights is subject to the further restrictions provided in Sections 5 and 7, all
rights of ownership of the Policy continue in the Employee.
4. Premium Payments. The premiums on the Policy shall be paid by the
Corporation. Such premium payments shall be allocated between the Corporation
and the Employee as follows:
A. Corporation's Share. The Corporation's share of the premium
shall be equal to the lesser of (i) the economic benefit of $1,100,000
of one-year term insurance or (ii) the amount of planned premium due on
the Policy. Such economic benefit shall be computed in accordance with
the procedures specified in Internal Revenue Service Revenue Rulings
64-328 and 66-110, using the government "P.S. 58" rates set forth in
Revenue Rulings 55-747 and 66-110.
B. Employee's Share. The Employee's share of the premium shall
equal the planned premium pursuant to the Policy less the share of the
planned premium allocated to the Corporation in accordance with
subsection 4(A) above. The Employee shall reimburse the Corporation for
the amount of the premium allocated to the Employee at the time of each
premium payment by the Corporation. Solely as an administrative
convenience, the Employee may request that the Corporation make direct
payment to the Insurer of the entire premium due and charge the
Employee with earned income in an amount equal
-2-
<PAGE> 3
to that portion of the premium allocated to the Employee in this
subsection.
5. Assignment of Limited Policy Ownership Interest. The Employee does
hereby assign, transfer and set over to the Corporation, its successors and
assigns, a specific and limited policy ownership interest in the Policy in
consideration of the premium payment paid by the Corporation as required
hereunder.
6. Corporation's Policy Interest Defined. The limited policy ownership
interest hereby assigned by the Employee to the Corporation is that in the event
of the Employee's death during the term, the Corporation's policy interest shall
be an amount equal to $1,100,000 of death protection under the limited policy
ownership created hereunder as set forth in Section 2 hereof.
7. Restriction on Policy Loans and Surrenders. It is understood and
agreed that all cash values accruing to the Policy are the sole property of the
Employee and that the Corporation has no interest in or claim to such values.
The Corporation's interest in the Policy is limited to its beneficial interest
specified in Sections 2 and 6 hereof. It is further provided, however, that
while this Agreement is in force neither party to the Agreement shall have the
right to borrow, directly or indirectly against the Policy's values, to assign
the Policy as collateral (except the assignment from the Employee to the
Corporation to secure the death benefit payable to the Corporation hereunder) or
to surrender the Policy in full or in part.
8. Possession of Policy. If the above-described Policy is in the
possession of the Corporation, the Corporation will, upon notice and request,
forward the Policy without unreasonable delay to the Insurer if required by the
Insurer for any Policy transaction or change.
9. Insurer Action. The Insurer shall be bound only by the provisions of
and endorsements on the Policy, and any payments made or actions taken by it in
accordance therewith shall fully discharge it from all claims, suits and demands
of all persons whatsoever. It shall in no way be bound by or be deemed to have
notice of the provisions of this Agreement.
10. Termination of the Agreement. This Agreement shall terminate on the
first to occur of the following: (a) expiration of the term of this Agreement as
set forth in Section 1 hereof; (b) while the Employee is living by written
notice by either the Corporation or the Employee to the other; (c) upon
termination of the Employee's employment with the Corporation. Upon termination
of this Agreement, the Corporation shall receive an amount equal to any unearned
premium attributable to the premiums allocated to the Corporation at the time of
such termination and the Corporation's interest in the Policy shall thereafter
cease.
-3-
<PAGE> 4
11. Special Provisions. The following provisions are part of this
Agreement and are intended to meet the requirements of the Employee Retirement
Income Security Act of 1974:
A. The named fiduciary: The Corporation.
B. The funding policy under this Agreement is that all
premiums on the Policy be remitted to the Insurer when due.
C. Direct payment by the Insurer is the basis of payment of
benefits under this Agreement, with those benefits in turn being based
on the payment of premiums as provided in this Agreement.
D. The claims procedure under this Agreement shall be as
follows:
(1) If for any reason a claim for benefits under this
Agreement is denied by the Corporation, it shall deliver to
the claimant a written explanation setting forth the specific
reason for the denial, pertinent references to the Agreement
section on which the denial is based, such other data as may
be pertinent and information on the procedures to be followed
by the claimant in obtaining a review of his claim, all
written in a manner calculated to be understood by the
claimant. For this purpose:
(A) The claimant's claim shall be deemed
filed when presented in writing to the Corporation.
(B) The Corporation's explanation shall be
in writing delivered to the claimant within ninety
(90) days of the date the claim is filed.
(2) The claimant shall have sixty (60) days following
his receipt of the denial of the claim to file with the
Corporation a written request for review of the denial. For
such review, the claim or his representative may submit
pertinent documents and written issues and comments.
(3) The Corporation shall decide the issue on review
and furnish the claimant with a copy within sixty (60) days of
receipt of the claimant's request for review of his claim. The
decision on review shall be in writing and shall include
specific reasons for the decision written in a manner
calculated to be understood by the claimant, as
-4-
<PAGE> 5
well as specific reference to the pertinent Agreement
provisions on which the decision is based. If a copy of the
decision is not so furnished to the claimant within such sixty
(60) days, the claim shall be deemed denied on review.
12. Binding Effect. This Agreement shall be binding upon the
parties hereto, their respective heirs, assigns, successors, executors and
administrators.
13. Entire Agreement. This Agreement constitutes the entire
agreement between the parties in connection with the subject matter hereof.
14. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Illinois.
15. Amendments. Amendments may be made to this Agreement by a
written agreement signed by each of the parties and attached hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
ATTEST: MORTON METALCRAFT CO.
By: Daryl R. Lindemann By: William D. Morton II
----------------------- -----------------------------
Daryl R. Lindemann, William D. Morton II,
Secretary President
William D. Morton
---------------------------------
William D. Morton II
-5-
<PAGE> 1
EXHIBIT 10.16
SPLIT DOLLAR ASSIGNMENT
-----------------------
INSURER: John Hancock Mutual Life Insurance Company
INSURED: William D. Morton II
POLICY NO.: 67090421
THIS ASSIGNMENT is made by the undersigned Owner effective on the 3rd day of
February, 1995.
DEFINITIONS:
A. "Assignee": Morton Metalcraft Co., an Illinois corporation, with principal
offices at 1021 West Birchwood, Morton, Illinois 61550-0429.
B. "Owner": William D. Morton II
C. "Policy": The following policy of insurance issued by the Insurer on the
life the Insured, together with any supplementary contracts issued in
conjunction therewith: Policy No.: 67090421 Face Amount: $2,000,000
D. "Policy Interest": The Assignee's Policy Interest shall be as set forth in
the Split Dollar Insurance Agreement. The Insurer shall be entitled to rely
on the Assignee's certification of the amount of its Policy Interest.
E. "Split Dollar Agreement": That certain Agreement of even date herewith,
between the Owner and the Assignee. The Insurer is not bound by nor deemed
to have notice of the provisions of the Split Dollar Insurance Agreement.
RECITALS:
A. Under the Split Dollar Insurance Agreement, the Assignee has agreed to join
with the Owner in payment of premiums on the Policy.
B. In consideration of such premium payments by the Assignee, the Owner here
intends to grant the Assignee certain limited interests in the Policy.
THEREFORE, for value received, it is agreed:
<PAGE> 2
1. Assignment. The Owner hereby assigns, transfers and sets over to the
Assignee, its successors and assigns, the following specific rights in the
Policy and subject to the following terms and conditions:
A. The right to realize against the cash value of the Policy an
amount equal to the unearned portion of the premiums paid by it and the
amount in the unearned premium account in the event of the Policy's
surrender by the Owner.
B. The right to realize against proceeds of the Policy, to the
extent of its Policy Interest, in the event of the Insured's death.
2. Retained Rights. Except as expressly provided in Section 1, the Owner
retains all rights under the Policy including, but not limited to, the
exclusive right to surrender and to borrow against the Policy without the
consent of the Assignee.
3. Insurer. The Insurer is hereby authorized to recognize, and is fully
protected in recognizing:
A. The claims of the Assignee to rights hereunder, without
investigating the reasons for such action by the Assignee, or the
validity of the amount of such claims.
B. The Owner's request for surrender of the Policy without the
consent of the Assignee. Upon the surrender, the Policy shall be
terminated and of no further force or effect.
4. Release of Assignment. Upon payment to the Assignee of its Policy
Interest, the Assignee shall execute a written release of this Assignment.
IN WITNESS WHEREOF, the Owner and Assignee have executed this Assignment on
the date first above written.
William D. Morton II, Owner
----------------------------------
William D. Morton II, Owner
ATTEST: MORTON METALCRAFT CO.,
Assignee
By: Daryl R. Lindemann By: William D. Morton II
---------------------- --------------------------------
Daryl R. Lindemann, William D. Morton II,
Secretary President
-2-
<PAGE> 3
STATE OF ILLINOIS )
) SS.
COUNTY OF ________ )
I, the undersigned authority, in and for said County, in said State, hereby
certify that William D. Morton II whose name is signed to the foregoing
assignment and who is known to me, acknowledged before me on this day that,
being informed of the contents of the assignment, William D. Morton II executed
the same voluntarily on the day the same bears date.
Given under my hand and official seal this 3rd day of
February, 1995.
[SIG]
---------------------------------
Notary Public
ACCEPTANCE
- -------------------------------
"OFFICAL SEAL"
Judith A. Hasel
Notary Public State of Illinois
My commission Expires 07/08/97
- -------------------------------
This Assignment was received and recorded by John Hancock Mutual Life
Insurance Company on the 10 day of April, 1995.
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: [SIG]
-------------------------------
Its Security
-------------------------------
- 3 -
<PAGE> 1
EXHIBIT 10.17
SPLIT DOLLAR INSURANCE AGREEMENT
--------------------------------
THIS AGREEMENT made and entered into as of the 10th day of October, 1993,
by and between MORTON METALCRAFT CO., an Illinois corporation, with principal
offices and place of business in the State of Illinois in Morton, Illinois
(hereinafter referred to as the "Corporation"), and WILLIAM D. MORTON, II, an
individual residing at 105 Forrest View Rd., Morton, Illinois 61550
(hereinafter referred to as the "Employee");
WITNESSETH:
WHEREAS, the Employee is employed by the Corporation as President of the
Corporation; and
WHEREAS, the Employee, on September 14, 1993, applied to Protective Life
Insurance Company (hereinafter referred to as the "Insurer") for life insurance
in the specified amount of $300,000; and
WHEREAS, pursuant to the aforesaid application, the Insurer issued its
flexible premium adjustable life insurance policy under the Insurer's program
known as Patriot 100 Plus in the initial face amount of $300,000 dated October
10, 1993 as Policy No. B00212921 (hereinafter the "Policy"); and
WHEREAS, the Corporation in recognition of the Employee's invaluable
management skills, knowledge of the Corporation's business and contributions to
earnings and profits, desires to obtain key executive death protection for its
estimated losses in the event of the Employee's premature death; and
WHEREAS, the Corporation agrees to receive, by way of an assignment, a
limited Policy ownership interest in the Policy on the life of the Employee and
to pay premiums under the method described herein; and
WHEREAS, the Employee agrees to make the Policy subject to this Agreement in
exchange for the Employer's willingness to pay a portion of the Policy premiums
due on the Policy; and
WHEREAS, this Agreement is intended to qualify as a split dollar life
insurance plan as described in Revenue Ruling 64-328;
NOW, THEREFORE, in consideration of the premises and of the mutual promises
contained herein, the parties hereto agree as follows:
1. Policy Subject to This Agreement; Term. The Policy shall be subject to
the terms and conditions of this Agreement during the term hereof. The term of
this Agreement shall commence
<PAGE> 2
on October 10, 1993 and shall expire October 10, 2012, unless earlier
terminated as hereafter provided.
2. Premium Payments. The Corporation has paid to the Insurer an initial
premium on the Policy of $3,500.00. The Corporation agrees to continue to pay
eighteen (18) additional annual premiums of $3,500.00 each, which represents
the cumulative increasing P.S. 58 costs for the assigned death benefit to the
Corporation of $229,548 during the term of this Agreement, averaged and
levelized over a period of nineteen (19) years commencing on the date of
issuance of the Policy, for a term of nineteen (19) years of protection. The
annualized amount of premiums is reflected in Column 1 on Exhibit A attached
hereto and made a part hereof by this reference. Employee agrees to pay any
remaining portion of the planned periodic premiums due with respect to the
Policy. The Policy may, at the Employee's discretion, provide for the waiver
of premium on the Employee's disability. If it does so provide, the cost
thereof shall be borne by the Employee, the prior provisions of this Section 2
to the contrary notwithstanding.
3. Assignment of Limited Policy Ownership Interest. The Employee does hereby
assign, transfer and set over to the Corporation, its successors and assigns, a
specific and limited policy ownership interest in the Policy in consideration
of the premium payment paid by the Corporation as required hereunder.
4. Corporation's Policy Interest Defined. The limited policy ownership
interest hereby assigned by the Employee to the Corporation is as follows:
A. Upon death of Employee. In the event of the Employee's death during the
term, the Corporation's policy interest shall be an amount equal to $229,548
of death protection under the limited policy ownership created hereunder,
increased by the amount, if any, of unearned premiums resulting from the
pre-payment of premiums by the Corporation plus any amount in the "unearned
premium account" as hereinafter defined. Any remaining death proceeds shall
be payable to Employee's designated beneficiary pursuant to the Policy. For
purposes of this Agreement, the "unearned premium account" means the amount
by which the Corporation's levelized premium payments required pursuant to
this Agreement exceeds the amount of the P.S. 58 costs for the assigned death
benefits accrued during the term of the Policy until the date of termination
of the Policy, as reflected in Column 2 of Exhibit A attached.
B. Upon Cancellation or Termination of the Policy. In the event the
Employee elects to surrender or cancel the Policy during the term, the
Corporation shall receive such share of the Policy cash values as
-2-
<PAGE> 3
are attributable to the Corporation's prepaid premiums and any
unearned premium account. In the event such cash values are
insufficient to repay any amount due the Corporation, the
Employee agrees to pay any difference to THE Corporation. No
further benefits shall be payable to the Corporation hereunder.
Any remaining cash value shall inure to the benefit of the
Employee.
5. Employee's Retained Incidents of Ownership. Except as to the limited
policy ownership rights specifically granted the Corporation herein, Employee
retains all incidents of ownership (including the right to surrender or cancel
the Policy and the right to borrow or withdraw against the Policy). Employee's
right to borrow shall be limited to an amount equal to the maximum loan value
reduced by any prepaid premiums and unearned premium account of the
Corporation. Employee's right to withdraw from the Policy cash values under
the Policy's partial surrender provisions shall be limited to the allowable
partial surrender value under the Policy reduced by any prepaid premiums and
any unearned premium account in favor of the Corporation. In the event
Employee's Policy loans and accrued interest or, alternatively, the sum of
Employee's cash withdrawals, reduce the Corporation's earlier-stated death
benefit, the Employee agrees to contribute to the Policy such sums as are
required to maintain the integrity of such death benefits.
6. Possession of Policy. If the above-described Policy is in the possession
of the Corporation, the Corporation will, upon notice and request, forward the
Policy without unreasonable delay to the Insurer if required by the Insurer for
any Policy transaction or change.
7. Insurer Action. The Insurer shall be bound only by the provisions of and
endorsements on the Policy, and any payments made or actions taken by it in
accordance therewith shall fully discharge it from all claims, suits and
demands of all persons whatsoever. It shall in no way be bound by or be deemed
to have notice of the provisions of this Agreement.
8. Release of Corporation's Limited Ownership Interest. Upon Employee's
request and upon full payment to the Corporation of its Policy interest, as
earlier defined, the Corporation agrees to release and reassign its ownership
rights to the Policy to the Employee.
9. Premium Waiver. If the Policy contains a disability waiver of premium
provision or waiver of monthly deduction, any waived amounts shall be
considered for all purposes of this Agreement as having been paid by the
Employee and all provisions herein relating to Policy cash values and death
proceeds shall be construed accordingly should such premium waiver become
effective.
- 3 -
<PAGE> 4
10. Termination of the Agreement. This Agreement shall terminate during
Employee's lifetime on the first to occur of the following: (a) expiration of
the term of this Agreement as set forth in Section 1 hereof; (b) surrender of
the Policy by the Employee, who has the sole and exclusive right of surrender;
(c) by written notice by either the Corporation or the Employee to the other;
(d) upon termination of Employee's employment. Upon termination of this
Agreement, the Corporation shall receive an amount equal to the Corporation's
prepaid premiums and any unearned premium account at the time of such
termination and the Corporation's interest in the Policy shall thereafter
cease.
11. Special Provisions. The following provisions are part of this
Agreement and are intended to meet the requirements of the Employee Retirement
Income Security Act of 1974:
A. The named fiduciary: The Corporation.
B. The funding policy under this Agreement is that all premiums on the
Policy be remitted to the Insurer when due.
C. Direct payment by the Insurer is the basis of payment of benefits
under this Agreement, with those benefits in turn being based on the
payment of premiums as provided in this Agreement.
D. The claims procedure under this Agreement shall be as follows:
(1) If for any reason a claim for benefits under this Agreement
is denied by the Corporation, it shall deliver to the claimant a
written explanation setting forth the specific reason for the denial,
pertinent references to the Agreement section on which the denial is
based, such other data as may be pertinent and information on the
procedures to be followed by the claimant in obtaining a review of his
claim, all written in a manner calculated to be understood by the
claimant. For this purpose:
(A) The claimant's claim shall be deemed filed when
presented in writing to the Corporation.
(B) The Corporation's explanation shall be in writing
delivered to the claimant within ninety (90) days of the date
the claim is filed.
(2) The claimant shall have sixty (60) days
- 4 -
<PAGE> 5
following his receipt of the denial of the claim
to file with the Corporation a written request for
review of the denial. For such review, the claim
or his representative may submit pertinent documents
and written issues and comments.
(3) The Corporation shall decide the issue on
review and furnish the claimant with a copy within
sixty (60) days of receipt of the claimant's request
for review of his claim. The decision on review
shall be in writing and shall include specific reasons
for the decision written in a manner calculated to
be understood by the claimant, as well as specific
reference to the pertinent Agreement provisions on
which the decision is based. If a copy of the decision
is not so furnished to the claimant within such sixty
(60) days, the claim shall be deemed denied on review.
12. No Contract of Employment. Neither this Agreement, nor any
provisions hereof, nor any action taken by the Corporation pursuant hereto,
shall be construed as giving to the Employee the right to be retained in the
employ of the Corporation, nor shall it limit or restrict the right of the
Corporation to terminate the employmennt of the Employee with or without cause.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ATTEST: MORTON METALCRAFT CO.
By: By:
---------------------- --------------------------------
Daryl R. Lindemann, William D. Morton II,
Secretary President
-----------------------------------
William D. Morton II
- 5 -
<PAGE> 1
EXHIBIT 10.18
SPLIT DOLLAR ASSIGNMENT
INSURER: Protective Life Insurance Company
INSURED: William D. Morton, II
POLICY NO.: B00212921
THIS ASSIGNMENT is made by the undersigned Owner effective this 10th
day of October, 1993.
DEFINITIONS:
A. "Assignee": Morton Metalcraft Co., an Illinois corporation,
with principal offices at 1021 West Birchwood, Morton,
Illinois 61550-0429.
B. "Owner": William D. Morton, II.
C. "Policy": The following policy of insurance issued by the Insurer on
the life the Insured, together with any supplementary contracts issued
in conjunction therewith:
Policy No.: B00212921
Face Amount: $300,000.00
D. "Policy Interest": The Assignee's Policy Interest shall be as set forth
in the Split Dollar Insurance Agreement. The Insurer shall be entitled
to rely on the Assignee's certification of the amount of its Policy
Interest.
E. "Split Dollar Agreement": That certain Agreement of even date
herewith, between the Owner and the Assignee. The Insurer is
not bound by nor deemed to have notice of the provisions of
the Split Dollar Insurance Agreement.
RECITALS:
A. Under the Split Dollar Insurance Agreement, the Assignee has agreed to
join with the Owner in payment of premiums on the Policy.
B. In consideration of such premium payments by the Assignee, the Owner
here intends to grant the Assignee certain limited interests in the
Policy.
THEREFORE, for value received, it is agreed:
<PAGE> 2
1. Assignment. The Owner hereby assigns, transfers and sets over to the
Assignee, its successors and assigns, the following specific rights in the
Policy and subject to the following terms and conditions:
A. The right to realize against the cash value of the Policy
an amount equal to the unearned portion of the premiums paid by it and
the amount in the unearned premium account in the event of the Policy's
surrender by the Owner.
B. The right to realize against proceeds of the Policy, to the
extent of its Policy Interest, in the event of the Insured's death.
2. Retained Rights. Except as expressly provided in Section 1, the
Owner retains all rights under the Policy including, but not limited to, the
exclusive right to surrender and to borrow against the Policy without the
consent of the Assignee.
3. Insurer. The Insurer is hereby authorized to recognize, and is fully
protected in recognizing:
A. The claims of the Assignee to rights hereunder, without
investigating the reasons for such action by the Assignee, or the
validity of the amount of such claims.
B. The Owner's request for surrender of the Policy without the
consent of the Assignee. Upon the surrender, the Policy shall be
terminated and of no further force or effect.
4. Release of Assignment. Upon payment to the Assignee of
its Policy Interest, the Assignee shall execute a written release
of this Assignment.
IN WITNESS WHEREOF, the Owner and Assignee have executed this
Assignment on the date first above written.
William D. Morton
-----------------------------------
William D. Morton, II, Owner
ATTEST: MORTON METALCRAFT CO.,
Assignee
By: Daryl R. Lindemann By: William D. Morton
-------------------------- --------------------------------
Daryl R. Lindemann, William D. Morton, II,
Secretary President
- 2 -
<PAGE> 3
STATE OF ILLINOIS )
) SS.
COUNTY OF TAZEWELL )
I, the undersigned authority, in and for said County, in said State,
hereby certify that William D. Morton, II whose name is signed to the foregoing
assignment and who is known to me, acknowledged before me on this day that,
being informed of the contents of the assignment, William D. Morton, II executed
the same voluntarily on the day the same bears date.
Given under my hand and official seal this 11th day of
October, 1993.
Judith A. Heisel
- ------------------------------------ -----------------------------------
"OFFICIAL SEAL" Notary Public
JUDITH A. HEISEL
NOTARY PUBLIC, STATE OF ILLINOIS
MY COMMISSION EXPIRES 07/08/97
- -------------------------------------
ACCEPTANCE
This Assignment was received and recorded by Protective Life Insurance
Company on the 23rd day of February, 1995.
PROTECTIVE LIFE INSURANCE COMPANY
By: Denise M. Johnson
--------------------------------
Its Policy Service Analyst
--------------------------------
- 3 -
<PAGE> 1
EXHIBIT 10.19
SPLIT DOLLAR INSURANCE AGREEMENT
THIS AGREEMENT made and entered into as of the 10th day of October,
1993, by and between MORTON METALCRAFT CO., an Illinois corporation, with
principal offices and place of business in the State of Illinois in Morton,
Illinois (hereinafter referred to as the "Corporation"), and DARYL R.
LINDEMANN, an individual residing at 52 Maple Ridge, Morton, Illinois 61550
(hereinafter referred to as the "Employee");
WITNESSETH:
WHEREAS, the Employee is employed by the Corporation as _____________
______________________ of the Corporation; and
WHEREAS, the Employee, on September 14, 1993, applied to Protective
Life Insurance Company (hereinafter referred to as the "Insurer") for life
insurance in the specified amount of $300,000; and
WHEREAS, pursuant to the aforesaid application, the Insurer issued its
flexible premium adjustable life insurance policy under the Insurer's program
known as Patriot 100 Plus in the initial face amount of $300,000 dated October
10, 1993 as Policy No. B00212920 hereinafter the "Policy"); and
WHEREAS, the Corporation in recognition of the Employee's invaluable
management skills, knowledge of the Corporation's business and contributions to
earnings and profits, desires to obtain key executive death protection for its
estimated losses in the event of the Employee's premature death; and
WHEREAS, the Corporation agrees to receive, by way of an assignment, a
limited Policy ownership interest in the Policy on the life of the Employee and
to pay premiums under the method described herein; and
WHEREAS, the Employee agrees to make the Policy subject to this
Agreement in exchange for the Employer's willingness to pay a portion of the
Policy premiums due on the Policy; and
WHEREAS, this Agreement is intended to qualify as a split dollar life
insurance plan as described in Revenue Ruling 64-328;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises contained herein, the parties hereto agree as follows:
1. Policy Subject to This Agreement; Term. The Policy shall be
subject to the terms and conditions of this Agreement during the term hereof.
The term of this Agreement shall commence
<PAGE> 2
on October 10, 1993 and shall expire October 10, 2019, unless earlier
terminated as hereafter provided.
2. Premium Payments. The Corporation has paid to the Insurer an
initial premium on the Policy of $2,300.00. The Corporation agrees to continue
to pay twenty-five (25) additional annual premiums of $2,300.00 each, which
represents the cumulative increasing P.S. 58 costs for the assigned death
benefit to the Corporation of $183,633 during the term of this Agreement,
averaged and levelized over a period of twenty-six (26) years commencing on the
date of issuance of the Policy, for a term of twenty-six (26) years of
protection. The annualized amount of premiums is reflected in Column 1 on
Exhibit A attached hereto and made a part hereof by this reference. Employee
agrees to pay any remaining portion of the planned periodic premiums due with
respect to the Policy. The Policy may, at the Employee's discretion, provide
for the waiver of premium on the Employee's disability. If it does so provide,
the cost thereof shall be borne by the Employee, the prior provisions of this
Section 2 to the contrary notwithstanding.
3. Assignment of Limited Policy Ownership Interest. The Employee
does hereby assign, transfer and set over to the Corporation, its successors
and assigns, a specific and limited policy ownership interest in the Policy in
consideration of the premium payment paid by the Corporation as required
hereunder.
4. Corporation's Policy Interest Defined. The limited policy
ownership interest hereby assigned by the Employee to the Corporation is as
follows:
A. Upon death of Employee. In the event of the
Employee's death during the term, the Corporation's policy interest
shall be an amount equal to $183,633 of death protection under the
limited policy ownership created hereunder, increased by the amount,
if any, of unearned premiums resulting from the pre-payment of
premiums by the Corporation plus any amount in the "unearned premium
account" as hereinafter defined. Any remaining death proceeds shall
be payable to Employee's designated beneficiary pursuant to the
Policy. For purposes of this Agreement, the "unearned premium
account" means the amount by which the Corporation's levelized premium
payments required pursuant to this Agreement exceeds the amount of the
P.S. 58 costs for the assigned death benefits accrued during the term
of the Policy until the date of termination of the Policy, as
reflected in Column 2 of Exhibit A attached.
B. Upon Cancellation or Termination of the Policy. In
the event the Employee elects to surrender or cancel the Policy during
the term, the Corporation shall receive such share of the Policy cash
values as
- 2 -
<PAGE> 3
are attributable to the Corporation's prepaid premiums and any
unearned premium account. In the event such cash values are
insufficient to repay any amount due the Corporation, the Employee
agrees to pay any difference to the Corporation. No further benefits
shall be payable to the Corporation hereunder. Any remaining cash
value shall inure to the benefit of the Employee.
5. Employee's Retained Incidents of Ownership. Except as to the
limited policy ownership rights specifically granted the Corporation herein,
Employee retains all incidents of ownership (including the right to surrender
or cancel the Policy and the right to borrow or withdraw against the Policy).
Employee's right to borrow shall be limited to an amount equal to the maximum
loan value reduced by any prepaid premiums and unearned premium account of the
Corporation. Employee's right to withdraw from the Policy cash values under
the Policy's partial surrender provisions shall be limited to the allowable
partial surrender value under the Policy reduced by any prepaid premiums and
any unearned premium account in favor of the Corporation. In the event
Employee's Policy loans and accrued interest or, alternatively, the sum of
Employee's cash withdrawals, reduce the Corporation's earlier-stated death
benefit, the Employee agrees to contribute to the Policy such sums as are
required to maintain the integrity of such death benefits.
6. Possession of Policy. If the above-described Policy is in the
possession of the Corporation, the Corporation will, upon notice and request,
forward the Policy without unreasonable delay to the Insurer if required by the
Insurer for any Policy transaction or change.
7. Insurer Action. The Insurer shall be bound only by the
provisions of and endorsements on the Policy, and any payments made or actions
taken by it in accordance therewith shall fully discharge it from all claims,
suits and demands of all persons whatsoever. It shall in no way be bound by or
be deemed to have notice of the provisions of this Agreement.
8. Release of Corporation's Limited Ownership Interest. Upon
Employee's request and upon full payment to the Corporation of its Policy
interest, as earlier defined, the Corporation agrees to release and reassign
its ownership rights to the Policy to the Employee.
9. Premium Waiver. If the Policy contains a disability waiver of
premium provision or waiver of monthly deduction, any waived amounts shall be
considered for all purposes of this Agreement as having been paid by the
Employee and all provisions herein relating to Policy cash values and death
proceeds shall be construed accordingly should such premium waiver become
effective.
- 3 -
<PAGE> 4
10. Termination of the Agreement. This Agreement shall terminate
during Employee's lifetime on the first to occur of the following: (a)
expiration of the term of this Agreement as set forth in Section 1 hereof; (b)
surrender of the Policy by the Employee, who has the sole and exclusive right
of surrender; (c) by written notice by either the Corporation or the Employee
to the other; (d) upon termination of Employee's employment. Upon termination
of this Agreement, the Corporation shall receive an amount equal to the
Corporation's prepaid premiums and any unearned premium account at the time of
such termination and the Corporation's interest in the Policy shall thereafter
cease.
11. Special Provisions. The following provisions are part of this
Agreement and are intended to meet the requirements of the Employee Retirement
Income Security Act of 1974:
A. The named fiduciary: The Corporation.
B. The funding policy under this Agreement is that all
premiums on the Policy be remitted to the Insurer when due.
C. Direct payment by the Insurer is the basis of payment
of benefits under this Agreement, with those benefits in turn being
based on the payment of premiums as provided in this Agreement.
D. The claims procedure under this Agreement shall be as
follows:
(1) If for any reason a claim for benefits under
this Agreement is denied by the Corporation, it shall deliver
to the claimant a written explanation setting forth the
specific reason for the denial, pertinent references to the
Agreement section on which the denial is based, such other
data as may be pertinent and information on the procedures to
be followed by the claimant in obtaining a review of his
claim, all written in a manner calculated to be understood by
the claimant. For this purpose:
(A) The claimant's claim shall be deemed
filed when presented in writing to the Corporation.
(B) The Corporation's explanation shall
be in writing delivered to the claimant within ninety
(90) days of the date the claim is filed.
(2) The claimant shall have sixty (60) days
- 4 -
<PAGE> 5
following his receipt of the denial of the claim to file with
the Corporation a written request for review of the denial.
For such review, the claim or his representative may submit
pertinent documents and written issues and comments.
(3) The Corporation shall decide the issue on
review and furnish the claimant with a copy within sixty (60)
days of receipt of the claimant's request for review of his
claim. The decision on review shall be in writing and shall
include specific reasons for the decision written in a manner
calculated to be understood by the claimant, as well as
specific reference to the pertinent Agreement provisions on
which the decision is based. If a copy of the decision is not
so furnished to the claimant within such sixty (60) days, the
claim shall be deemed denied on review.
12. No Contract of Employment. Neither this Agreement, nor any
provisions hereof, nor any action taken by the Corporation pursuant hereto,
shall be construed as giving to the Employee the right to be retained in the
employ of the Corporation, nor shall it limit or restrict the right of the
Corporation to terminate the employmennt of the Employee with or without cause.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ATTEST: MORTON METALCRAFT CO.
By:______________________ By:________________________________
Daryl R. Lindemann, William D. Morton II,
Secretary President
___________________________________
Daryl R. Lindemann
- 5 -
<PAGE> 1
EXHIBIT 10.20
SPLIT DOLLAR ASSIGNMENT
INSURER: Protective Life Insurance Company
INSURED: Daryl R. Lindemann
POLICY NO.: B00212920
THIS ASSIGNMENT is made by the undersigned Owner effective this 10th
day of October, 1993.
DEFINITIONS:
A. "Assignee": Morton Metalcraft Co., an Illinois corporation,
with principal offices at 1021 West Birchwood, Morton,
Illinois 61550-0429.
B. "Owner": Daryl R. Lindemann.
C. "Policy": The following policy of insurance issued by the Insurer on
the life the Insured, together with any supplementary contracts issued
in conjunction therewith:
Policy No.: B00212920
Face Amount: $300,000.00
D. "Policy Interest": The Assignee's Policy Interest shall be as set forth
in the Split Dollar Insurance Agreement. The Insurer shall be entitled
to rely on the Assignee's certification of the amount of its Policy
Interest.
E. "Split Dollar Agreement": That certain Agreement of even date
herewith, between the Owner and the Assignee. The Insurer is
not bound by nor deemed to have notice of the provisions of
the Split Dollar Insurance Agreement.
RECITALS:
A. Under the Split Dollar Insurance Agreement, the Assignee has agreed to
join with the Owner in payment of premiums on the Policy.
B. In consideration of such premium payments by the Assignee, the Owner
here intends to grant the Assignee certain limited interests in the
Policy.
THEREFORE, for value received, it is agreed:
<PAGE> 2
1. Assignment. The Owner hereby assigns, transfers and sets over to the
Assignee, its successors and assigns, the following specific rights in the
Policy and subject to the following terms and conditions:
A. The right to realize against the cash value of the Policy
an amount equal to the unearned portion of the premiums paid by it and
the amount in the unearned premium account in the event of the Policy's
surrender by the Owner.
B. The right to realize against proceeds of the Policy, to the
extent of its Policy Interest, in the event of the Insured's death.
2. Retained Rights. Except as expressly provided in Section 1, the
Owner retains all rights under the Policy including, but not limited to, the
exclusive right to surrender and to borrow against the Policy without the
consent of the Assignee.
3. Insurer. The Insurer is hereby authorized to recognize, and is fully
protected in recognizing:
A. The claims of the Assignee to rights hereunder, without
investigating the reasons for such action by the Assignee, or the
validity of the amount of such claims.
B. The Owner's request for surrender of the Policy without the
consent of the Assignee. Upon the surrender, the Policy shall be
terminated and of no further force or effect.
4. Release of Assignment. Upon payment to the Assignee of
its Policy Interest, the Assignee shall execute a written release
of this Assignment.
IN WITNESS WHEREOF, the Owner and Assignee have executed this
Assignment on the date first above written.
Daryl R. Lindemann
-----------------------------------
Daryl R. Lindemann, Owner
ATTEST: MORTON METALCRAFT CO.,
Assignee
By:Daryl R. Lindemann By: William D. Morton, II
-------------------------- ---------------------------------
Daryl R. Lindemann, William D. Morton, II,
Secretary President
- 2 -
<PAGE> 3
STATE OF ILLINOIS )
) SS.
COUNTY OF TAZEWELL )
I, the undersigned authority, in and for said County, in said State,
hereby certify that Daryl R. Lindemann whose name is signed to the foregoing
assignment and who is known to me, acknowledged before me on this day that,
being informed of the contents of the assignment, Daryl R. Lindemann executed
the same voluntarily on the day the same bears date.
Given under my hand and official seal this 10th day of
October, 1993.
Judith A. Heisel
- --------------------------------------- ------------------------------
"OFFICIAL SEAL" Notary Public
Judith A. Heisel
Notary Public, State of Illinois
My Commission Expires 07/08/97
- ---------------------------------------
ACCEPTANCE
This Assignment was received and recorded by Protective Life Insurance
Company on the 23rd day of February, 1995.
PROTECTIVE LIFE INSURANCE COMPANY
By: Denise M. Johnson
--------------------------------
Its Policy Service Analyst
-----------------------------
- 3 -
<PAGE> 1
EXHIBIT 10.21
DEATH BENEFIT AGREEMENT
This Agreement, made as of the ______ day of __________________, 1993,
between MORTON METALCRAFT CO. (the "Company") and William D. Morton, II, (the
"Employee").
WITNESSETH:
WHEREAS, the Employee is employed as an officer of the Company; and
WHEREAS, the Employee's services to the Company have contributed
substantially to the general welfare of the Company; and
WHEREAS, the Employee is willing to continue in the employ of the
Company provided the Company agrees to pay to the beneficiaries designated
herein certain benefits in accordance with the terms and conditions set forth
below;
NOW, THEREFORE, it is agreed:
1. Death Benefits. If the Employee dies while in the employ of the
Company prior to October 10, 2012, the Company shall pay to the Employee's
widow, or if no widow survives him, to his surviving descendants per stripes, as
a death benefit, $230,000. Such amount will be payable within ninety (90) after
the date of death, without interest. In the event that all of the persons
designated herein as beneficiaries die prior to payment of the amount provided
for herein, the obligation of the Company to make the payment hereunder shall
terminate. The Employee shall have no right to modify or alter the beneficiaries
designated herein.
2. Suicide Exclusion. If the Employee commits suicide while sane or
insane, on or before October 17, 1995, no benefits shall be payable hereunder
and this Agreement shall be considered terminated, null and void.
3. Termination of Employment; Termination of Split Dollar Agreement. If
the Employee terminates employment prior to his death, or if the Company
discharges the Employee for any reason, no benefits shall become due and payable
to the named beneficiaries hereunder and this Agreement shall be considered
terminated, null and void. Likewise, if either party terminates the Split Dollar
Life Insurance Agreement between the parties hereto prior to Employee's death,
no benefits shall become due and payable to the named beneficiaries hereunder
and this Agreement shall be considered terminated, null and void.
4. Benefits Not Assignable. Neither the Employee, his widow, his
descendants, nor any other beneficiaries which may be
<PAGE> 2
designated herein, shall have any right to commute or assign the right to
receive payments hereunder and to the extent permitted by law, such payments
shall be exempt from the claims of creditors.
5. Not a Contract of Employment. This Agreement shall not be deemed to
constitute a contract of employment between the parties, nor shall any provision
restrict the right of the Company to discharge the Employee, or restrict the
right of the Employee to voluntarily terminate employment.
6. Waiver. The waiver by either party hereto of any breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by either the Company or Employee.
7. Severability. The invalidity or unenforceability of any particular
provision or provisions of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions had been omitted.
8. Governing Law. The validity and construction of this Agreement shall
be governed by the laws of the state of Illinois.
9. Headings. The headings of the several paragraphs hereof
are for convenience in reference only and shall not be construed to
be a part of this Agreement.
10. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of both the Company and the Employee and their respective
successors, heirs and legal representatives.
ATTEST: MORTON METALCRAFT CO.
By: By:
----------------------- -------------------------
Daryl R. Lindemann, William D. Morton, II,
Secretary President
--------------------------
William D. Morton, II
- 2 -
<PAGE> 1
EXHIBIT 10.22
SALARY CONTINUATION AGREEMENT
AGREEMENT made this 26 day of February, 1996, between MORTON METALCRAFT
CO., an Illinois corporation (the "Corporation"), and WILLIAM D. MORTON (the
"Employee").
1. Duties. The Corporation has for many years employed the Employee as
its President and Chief Executive Officer. Employee hereby agrees to continue
serving the Corporation in that capacity.
2. Benefit in the Event of Death. In consideration of the Employee's
agreement to continue service with the Corporation, if the Employee dies during
the term of his employment, the Corporation shall pay to his widow, if she
survives him, the sum of his then annual base salary payable in twelve (12)
substantially equal monthly installments commencing one month after the
Employee's death. In the event the Employee's widow survives Employee but dies
prior to receipt of the total number of installments due hereunder, any
remaining installments shall be payable to her estate. If Employee's spouse
does not survive him, the payments shall be made to Employee's estate.
3. Benefit in the Event of Disability. The following provisions shall
be applicable in the event Employee shall become Disabled, as hereinafter
defined, during the term of his employment:
A. Employee shall be considered to be "Disabled" for
purposes of this Agreement when, in the judgment of the board of
directors of the Corporation, Employee has been unable, by reason
of mental or physical incapacity, for a continuous period of
thirty (30) days, to properly perform his duties as President and
Chief Executive Officer. As to any period of time during which
Employee is covered under the terms of an individual or group
disability income insurance policy issued to the Corporation, the
definition of Disabled herein above set forth shall be
disregarded, and Employee shall be considered Disabled only in
the event he has suffered a disability as that term is defined in
such disability income insurance policy. In the event the
Corporation shall be the owner of more than one disability income
insurance policy covering Employee, then the definition of
Disability set forth in the policy most recently acquired by the
Corporation shall be controlling.
B. From and after the date upon which Employee shall
become Disabled, to and including three hundred sixty-five (365)
days thereafter as he shall continue to be Disabled, the Employee
shall be entitled to receive his base compensation which would
otherwise have become due and payable to him during such period.
<PAGE> 2
C. Any payment required by this section being made to the Employee
while he is Disabled shall be reduced by the amount of any payments made
directly to Employee under the terms of any disability income insurance
policy issued to the Corporation or provided by the Corporation for the
Employee's benefit.
4. Maximum Benefits. The maximum amount of benefits payable pursuant
to this Agreement by the Corporation shall in no event exceed an amount equal
to the Employee's annual base salary in effect at the time the benefit becomes
payable.
5. Continued Employment. Nothing contained herein shall be construed to
be a contract of employment for any term of years, nor as conferring upon the
Employee the right to continue to be employed by the Corporation in any
capacity.
6. Entire Agreement. This Agreement supersedes all other agreements
previously made between the parties relating to its subject matter. There are
no other understandings or agreements.
7. Nonwaiver. No delay or failure by either party to exercise any right
under this Agreement, and no partial or single exercise of that right, shall
constitute a waiver of that right or any other right, unless otherwise provided
herein.
8. Headings. The headings of this Agreement are for convenience only
and shall not be used to interpret or construe its provisions.
9. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Illinois.
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
11. Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefit of each of the parties and their respective
successors and assigns.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the day
and date first above written.
MORTON METALCRAFT CO.
By: William D. Morton William D. Morton
------------------------- ------------------------------
Its President William D. Morton
-2-
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Registrant
At December 31, 1997, the MLX Corp. had no subsidiaries. Following the
Merger on January 20, 1997, Morton Industrial Group, Inc., had two directly
wholly owned subsidiaries:
Morton Metalcraft Co., an Illinois corporation
Morton Metalcraft Co. of North Carolina, a North Carolina corporation
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement
(Form S-8 No. 333-22555) pertaining to the MLX Corp. Stock Option and Incentive
Award Plan and in the related Prospectuses of our report dated February 20,
1998, with respect to the financial statements of MLX Corp. included in the form
10-K of Morton Industrial Group, Inc. (formerly MLX Corp.) for the year ended
December 31, 1997.
ERNST & YOUNG LLP
March 5, 1998
Atlanta, Georgia
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
Morton Metalcraft Holding Co.
Morton, Illinois
We consent to the inclusion of our report dated February 4, 1998, with respect
to the consolidated balance sheets of Morton Metalcraft Holding Co. and
Subsidiaries as of December 31, 1997 and June 30, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for the six months ended December 31, 1997 and each of the years in the
three-year period ended June 30, 1997, and the financial statement schedule,
which report appears as an exhibit in the Form 10-K of MLX Corp. dated December
31, 1997.
CLIFTON GUNDERSON L.L.C.
Peoria, Illinois
February 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 36,718
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 36,728
<PP&E> 2
<DEPRECIATION> 0
<TOTAL-ASSETS> 36,259
<CURRENT-LIABILITIES> 1,345
<BONDS> 0
26
0
<COMMON> 0
<OTHER-SE> 34,846
<TOTAL-LIABILITY-AND-EQUITY> 38,259
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,778
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,892)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,892)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,892)
<EPS-PRIMARY> (.72)
<EPS-DILUTED> (.72)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 138
<SECURITIES> 0
<RECEIVABLES> 7,768
<ALLOWANCES> (100)
<INVENTORY> 7,510
<CURRENT-ASSETS> 18,261
<PP&E> 28,078
<DEPRECIATION> (9,265)
<TOTAL-ASSETS> 39,388
<CURRENT-LIABILITIES> 29,576
<BONDS> 23,000
52
0
<COMMON> 0
<OTHER-SE> (13,604)
<TOTAL-LIABILITY-AND-EQUITY> 39,388
<SALES> 46,598
<TOTAL-REVENUES> 46,598
<CGS> 41,932
<TOTAL-COSTS> 41,932
<OTHER-EXPENSES> 11,492
<LOSS-PROVISION> 60
<INTEREST-EXPENSE> 1,737
<INCOME-PRETAX> (8,568)
<INCOME-TAX> (3,370)
<INCOME-CONTINUING> (5,198)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,198)
<EPS-PRIMARY> (2.67)
<EPS-DILUTED> (1.56)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
ADDITIONAL INFORMATION ABOUT MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
This Exhibit contains additional information about Morton Metalcraft
Holding Co. and its subsidiaries (collectively, "Morton") for periods ending
before January 20, 1998, the date upon which Morton Metalcraft Holding Co. was
merged with and into the Registrant. The information includes Selected
Historical Financial Data about Morton for the six months ended December 31,
1997, and the three fiscal years ended June 30, 1997, 1996, and 1995, a
Management's Discussion and Analysis of Financial Condition and Results of
Operations for such six month and fiscal year periods, audited financial
statements for such six month and fiscal year periods, and other information.
BACKGROUND.
The Registrant is a Georgia corporation that was named MLX Corp. ("MLX")
prior to January 20, 1998. On that date, Morton Metalcraft Holding Co., a
Delaware corporation ("Morton") was merged with and into MLX (the "Merger"),
which changed its name to Morton Industrial Group, Inc. (the "Company").
The predecessor of Morton was founded in 1963 in Morton, Illinois, to
produce fabricated sheet metal products for customers located in central
Illinois. During its first two decades Morton developed into a custom sheet
metal fabricator specializing in fast turnarounds. In 1989, Mr. William D.
Morton, now the Chairman, Chief Executive Officer, and President of the
Registrant, and several venture capital investors acquired control of Morton.
In 1995, Morton purchased the venture capital interests as a part of a
recapitalization of the company.
GENERAL.
The Company, headquartered in Morton, Illinois, and operating through its
subsidiaries is a contract manufacturer and supplier of high-quality fabricated
sheet metal components and subassemblies for construction, agricultural, and
industrial equipment manufacturers located primarily in the Midwestern and
Southeastern United States. The Company provides large original equipment
manufacturers with a wide range of services including design, prototype
fabrication, precision tool making, and fabrication of component parts.
Additional services provided by the Company include welding, painting,
subassembly, packaging, warehousing, and just-in-time delivery to customers'
production lines. The Company combines this wide range of services with
high-quality, state-of-the-art fabrication capabilities, and has developed
close relationships with customers such as Caterpillar Inc. ("Caterpillar") and
Deere & Co. ("Deere"). (In its two most recently ended fiscal years and the
six month period ended December 31, 1997, the Company's sales to Caterpillar
and Deere have constituted between 85% and 89% of its total sales.) The
Company works closely with its major customers on product development,
production scheduling, and just-in-time delivery.
FABRICATION OPERATIONS.
The Company's primary fabrication operations include cutting, punching,
bending, welding, painting, final assembly, packaging, warehousing and
just-in-time delivery of sheet metal components and subassemblies. The Company
- 1 -
<PAGE> 2
also offers fully integrated ancillary services, including design engineering,
tool making and prototype fabrication.
Within its fabrication operations, the Company's products fall into the
following seven categories of fabricated steel products and other miscellaneous
products:
- Sheet Metal Component Packages - includes panels, doors,
hoods, brackets, grills, supports and covers produced primarily for
construction and agricultural equipment.
- Sheet Metal Enclosures and Boxes - includes generator set
enclosures, compressor enclosures and electrical and battery boxes
developed in response to customers' need for environmentally sound
enclosures that are aesthetically attractive and cost competitive.
- Special Weldments - includes lift arms, seat modules, guards,
platforms and step assemblies. This business developed primarily
from concurrent design projects with two major customers.
- Fabricated Steel Tanks - includes fuel, hydraulic and water
reservoirs. The Company developed these products in response to
customers' needs for flexible designs that facilitate quick response
to changes in tank requirements.
- Prototype/Tooling - includes prototype, tooling and
preproduction steps in the manufacturing process. The Company's
dedicated prototype and tooling departments work with customers
throughout development efforts, allowing for a smooth introduction
of new products and subassemblies to the focus factories.
- Store Fixtures - includes backframes, lights, and brackets
used in store displays.
- Feeder Housings - includes feeder housings and other
harvester components manufactured for agricultural equipment in the
Company's Peoria, Illinois, facility.
While these products and services currently represent the core of the
Company's business, the Company's management is evaluating opportunities for a
further broadening of the Company's offerings to customers.
The Company's facilities are located near its key customers in the Midwest
and the Southeast. The Birchwood Street complex in Morton, Illinois, houses
receiving, tool making, pre-production, first operations, general fabrication
and enclosure operations. Substantially all non-production personnel,
including senior management, purchasing, engineering, sales, production control
and accounting are also located at this facility. The Detroit Avenue plant,
located one mile from Birchwood Street, contains the production operations for
commodity products such as tanks, seat modules, and heavy fabrication
operations. The Company produces components for agricultural equipment at its
Peoria, Illinois, facility, which opened in 1995. The Company's Apex, North
Carolina, plant serves the operations of nearby customers and entered
production in July 1997. At these locations, the Company employs computer
assisted design and manufacturing equipment, including laser cutting machines
and robotic welders.
Morton combined its sales and engineering organizations in 1995. This
sales and engineering group has primary responsibility for managing
- 2 -
<PAGE> 3
relationships with customers and working with them to design new products. An
account team, led by one of the Company's account managers and including
representatives from all key functional areas of the Company, works closely
with each key customer to design products, produce prototypes, schedule
production, and monitor quality and customer satisfaction.
COMPETITION.
The component fabrication industry is fragmented and highly competitive,
with no single supplier having significant market share. Competition involves
product quality, price, the ability to provide just-in-time deliveries,
provision of support services, and product development capabilities.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
The Company's business is in the fabrication segment.
AVAILABILITY OF RAW MATERIALS.
The primary raw material used by the Company after the Merger is steel,
and the Company has five major steel suppliers. The Company also purchases
fabrications and machined parts from a large number of suppliers. All raw
materials are in adequate supply.
PATENTS, TRADEMARKS, LICENSES, FRANCHISES, AND CONCESSIONS.
The Company holds no material patents, trademarks, franchises, or
concessions. The Company has been granted a number of software licenses that
it uses in its design, production, and other business operations. All of these
licenses have customary terms and conditions.
WORKING CAPITAL ITEMS.
The Company's working capital requirements reflect several business
factors. Working capital requirements are typically greater during the second
half of the calendar year because both Deere and Caterpillar suspend
operations for two weeks of vacation time during July and/or August.
Production operations of both of these customers also slow during the last two
weeks of December. During these periods, the Company must rely more heavily on
its credit facilities for liquidity. The Company's rapid growth over the last
two years has also increased the Company's need for working capital to meet the
capital expenditures required to increase production capacity.
ENVIRONMENTAL REGULATION.
The Company's operations are subject to numerous federal, state and local
laws and regulations concerning the containment and disposal of hazardous
materials. The Company maintains a policy of complying with all environmental
rules and regulations and believes that it is in substantial compliance with
all applicable environmental laws and regulations.
EMPLOYEES
As of February 1, 1998, the Company employed 941 employees, of which 799
were hourly, 139 were salaried, and 3 were employed part-time and paid on an
hourly basis. The Company believes that its relationship with its employees is
good.
- 3 -
<PAGE> 4
PROPERTIES
The following table summarizes the Company's manufacturing, warehouse, and
office facilities:
<TABLE>
<CAPTION>
Approx. Monthly Expiration
LOCATION Sq. Ft. Acres Lease Terms Date
- ---------------------------- ------- ----- ----------- ----------
<S> <C> <C> <C> <C>
1021 West Birchwood Street
Morton, IL ................. 270,000 40 Owned N/A
400 Detroit Avenue
Morton, IL ................. 75,000 N/A $21,164 08/31/04
Peoria, IL ................. 137,000 N/A $20,035 05/31/03
Apex, NC ................... 100,000 N/A $37,580 11/06/06
</TABLE>
LEGAL PROCEEDINGS
The Company is not currently a party to any material legal proceedings
that the Company's management believes would have a material adverse effect on
the Company's financial condition or results of operations.
SALES BACKLOG
The Company's backlog of sales orders at December 31, 1997, totaled $74.5
million. The Company expects that virtually all of those orders would be
shipped in the twelve months ending December 31, 1998. This backlog level
compares to a sales order backlog of $56.5 million at December 31, 1996,
virtually all of which was shipped in calendar 1997.
EXECUTIVE OFFICERS OF THE COMPANY
Information about the Company's two executive officers following the
Merger is set out below.
<TABLE>
<CAPTION>
Name Age Position
- --------------------------------- --- ----------------------------------------
<S> <C> <C>
William D. Morton ............... 50 Chairman of the Board, President, and
Chief Executive Officer
Daryl R. Lindemann .............. 43 Vice President (Finance), Treasurer and
Secretary
</TABLE>
WILLIAM D. MORTON joined Morton in 1988 as an Executive Vice President.
Together with other investors, he purchased Morton from Morton's founding
owners in 1989 and has served as President and Chief Executive Officer since
that date. Mr. Morton received a Bachelors Degree in Mechanical Engineering
from the University of Illinois in 1970. He is a member of the Society of
Manufacturing Engineers.
DARYL R. LINDEMANN has been Vice President of Finance, Secretary and
Treasurer since he joined Morton in 1990. Mr. Lindemann is a Certified Public
Accountant and received a B.S. in Accounting in 1976 from the University of
Illinois. He is a member of the American Institute of Certified Public
Accountants and the Illinois CPA Society.
- 4 -
<PAGE> 5
SELECTED HISTORICAL FINANCIAL DATA
OF MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
Set forth below are certain selected historical financial data of Morton
Metalcraft Holding Co. and subsidiaries ("Morton"). This information should be
read in conjunction with the financial statements of Morton and the related
notes thereto appearing elsewhere herein and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Morton." The
selected consolidated financial data for, and as of the end of, each of the
five fiscal years ended June 30 and the six months ended December 31, 1997,are
derived from the audited financial statements of Morton. Information for the
six months ended December 31, 1996, is derived from the unaudited financial
statements of Morton.
<TABLE>
<CAPTION>
Six Months
Ended
December 31, For the Fiscal Year Ended June 30,
-----------------------------------------------------------------------
1997 1996 1997 1996 1995
------------ ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(In thousands except for share and per share data)
Operating data:
Net Sales ................................ $ 46,598 $ 32,958 $ 80,762 $ 59,006 $ 48,568
Cost of sales ............................ (41,932) (29,206) (70,541) (50,049) (40,730)
General and administrative expenses ...... (11,552) (2,578) (7,003) (4,900) (3,951)
Interest income .......................... 9 - 15 7 9
Interest expense ......................... (1,737) (1,628) (3,266) (3,297) (2,434)
Other income (expense) ................... 46 31 45 194 (378)
(Provision) benefit for income taxes ..... 3,370 282 (5) (424) (522)
---------- --------- ---------- ---------- ----------
Net earnings (loss) ...................... $ (5,198) $ (141) $ 7 $ 537 $ 562
========== ========= ========== ========== ==========
Supplemental disclosure:
Cash flows from operations ............... $ 1,277 $ 1,096 $ 5,144 $ 3,783 $ 2,510
Cash flows used in investing activities .. $ (6,229) $ (1,599) $ (5,592) $ (2,853) $ (4,282)
Cash flows from financing activities $ 4,886 $ 257 $ 323 $ (726) $ 1,865
Per share data:
Weighted average outstanding common
shares - Basic 1,944,444 1,944,444 1,944,444 1,944,444 3,535,006
- Diluted 3,325,974 3,323,925 3,327,241 3,309,827 3,551,006
Earnings (loss) per share - Basic ($ 2.67) ($ .07) - $ .28 $ .16
- Diluted ($ 1.56) ($ .04) - .16 $ .16
Financial position (at end of period):
Working capital .......................... ($ 11,315) $ 3,869 $ 2,147 $ 4,078 $ 4,548
Total assets ............................. $ 39,388 $ 29,142 34,362 29,576 27,550
Long-term liabilities .................... $ 23,364 $ 27,564 27,861 27,673 27,456
Stockholders' equity (deficit) ........... ($ 13,552) ($ 9,388) $ (9,099) $ (9,106) $ (9,644)
<CAPTION>
For the Fiscal Year Ended June 30,
----------------------------------
1994 1993
------------ -------------
<S> <C> <C>
(In thousands except for share and per share data)
Operating data:
Net Sales ................................ $ 39,602 $ 32,774
Cost of sales ............................ (32,673) (27,544)
General and administrative expenses ...... (3,806) (2,949)
Interest income .......................... 15 15
Interest expense ......................... (1,172) (1,434)
Other income (expense) ................... 50 26
(Provision) benefit for income taxes ..... (878) (368)
----------- ------------
Net earnings (loss) ...................... $ 1,138 $ 520
=========== ============
Supplemental disclosure:
Cash flows from operations ............... $ 1,771 $ 2,647
Cash flows used in investing activities .. $ (1,323) $ (998)
Cash flows from financing activities $ (530) $ (1,830)
Per share data:
Weighted average outstanding common
shares - Basic 4,722,221 4,722,221
- Diluted 4,722,221 4,722,221
Earnings (loss) per share - Basic $ .24 $ .11
- Diluted $ .24 .11
Financial position (at end of period):
Working capital .......................... $ 528 $ 177
Total assets ............................. 23,576 21,209
Long-term liabilities .................... 9,168 10,390
Stockholders' equity (deficit) ........... $ 2,564 $ 1,426
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF MORTON
The following discussion should be read in conjunction with the
consolidated financial statements of Morton and the notes thereto included
elsewhere in this Exhibit 99.1.
GENERAL
Before the Merger, Morton Metalcraft Holding Co., through its
subsidiaries, was a contract manufacturer and supplier of fabricated sheet
metal components and subassemblies for U.S. construction, agricultural, and
industrial equipment manufacturers. Morton operated four manufacturing
facilities in Illinois and North Carolina and had long standing relationships
- 5 -
<PAGE> 6
with its two major customers, Caterpillar Inc. ("Caterpillar") and Deere & Co.
("Deere").
OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1997, VERSUS SIX MONTHS ENDED DECEMBER 31, 1996
Revenues for Morton for the six months ended December 31, 1997, were $46.6
compared to $33.0 for the six months ended December 31, 1996, an increase of
$13.6 million or 41.2%. The increase resulted primarily from additional
fabrication for Deere. Sales to Deere and Caterpillar were approximately 87.0%
and 85.1% of Morton's total sales for the six months ended December 31, 1997,
and 1996, respectively.
Morton's gross profits for the six months ended December 31, 1997,
increased by approximately $.9 million, or 25.0%, over the same six months in
the prior year. The gross margin achieved in the six months ended December 31,
1997, was 10.0%, compared to 11.4% for the six months ended December 31, 1996.
The decline resulted from expenses associated with the start-up of Morton's
North Carolina facility and an approximately $2.0 million downward adjustment
of inventory values. The effect of these adjustments was partially offset by
increased productivity at the Peoria and Morton, Illinois, plants, improved
labor efficiency and better material use stemming from investments in
production technology, including laser cutting technology. New products
manufactured for Deere required higher material content and contributed to
lower labor and overhead costs. (The gross margins for the six months ended
December 31, 1996, were lower than those realized in earlier periods as a
result of the write-off of certain intangible assets, the downward revaluation
of inventories, and expenses associated with the development of the North
Carolina plant.)
Selling and administrative expenses for the six months ended December 31,
1997, amounted to $11.5 million, compared with $2.6 million for the six months
ended December 31, 1996, or an increase of $8.9 million. Of this increase,
$4.0 million was accrued bonuses to be paid to members of management and other
employees of Morton and its subsidiaries to compensate them for their prior
contributions to Morton's growth and success for which they had not been
adequately compensated. (Until eliminated in July 1997, restrictions in the
Company's credit facilities limited the compensation Morton and its
subsidiaries could pay management.) Morton also accrued professional fees,
investment banking costs, credit agreement fees, and other costs of the Merger
and the related bank financing that totaled approximately $2.5 million for the
six month period ended December 31, 1997, that were not incurred in the
comparable year earlier period. Other selling and general and administrative
costs increased as a result of the increase in sales volume over the prior
year's period, approximately $.5 million of expenses related to the start-up of
operations at the North Carolina facility, and approximately $.7 million of
compensation expense associated with a stock option grant.
Interest expense for the six months ended December 31, 1997, was $1.7
million, an increase of approximately $.1 million over the comparable six month
period in 1996.
Income tax benefits of $3.4 million and $.3 million resulted from
operating losses of $8.6 million and $.4 million for the six months ended
December 31, 1997, and 1996, respectively.
- 6 -
<PAGE> 7
FISCAL YEAR ENDED JUNE 30, 1997 VERSUS FISCAL YEAR ENDED JUNE 30, 1996
Revenues for Morton for the fiscal year ended June 30, 1997 were $80.8
million versus $59.0 million for the fiscal year ended June 30, 1996, an
increase of $21.8 million or 36.9%. This increase resulted from higher sales
to Deere for component packages, enclosures and boxes and feeder housings, as
well as higher sales of in-store display fixtures. Year over year, combined
sales to Deere and Caterpillar locations decreased slightly as a percent of
total revenues from 88.8% to 88.1%.
The gross margin achieved in the year ended June 30, 1997 was 12.7%
compared to 15.2% in the prior year. This decline resulted from expenses
associated with the start-up of the North Carolina facility, a write-off of
$1.8 million of intangible assets, and a $.9 million downward adjustment of the
value of excess inventory. The write-off of intangible assets resulted from a
reassessment of their future benefit to Morton in consideration of the
company's growth, its continuous design changes to existing products, its
continuous factory rearrangements and the opening of the North Carolina
facility. The effect of these expenses and adjustments was partly offset by
increased productivity at the Peoria and Morton, Illinois facilities, improved
labor efficiency and better material use stemming from investments in
production technology, including laser cutting equipment. New products
manufactured for Deere required higher material content and contributed to
lower labor and overhead costs.
Selling and administration expenses for the year ended June 30, 1997
amounted to $7.0 million (or 8.7% of revenues), an increase of $2.1 million or
43% over the year earlier period. The primary component of this increase was a
charge of $1.8 million (versus $142,000 in the earlier period) due to increased
payments under Morton's employee incentive programs. During the year Morton
began making payments under a new incentive compensation program for all of its
employees and increased bonuses to management. Morton expects that
approximately $1,500,000 of these incentive program expenses will be recurring
annually, and if Morton's performance improves these expenses will increase,
although at a substantially lower rate than that experienced in the year ended
June 30, 1997.
Interest expense in the year ended June 30, 1997 amounted to $3.3 million
representing a nominal decrease from the earlier amount.
Income taxes for the year ended June 30, 1997 decreased 98.8% from the
prior fiscal year reflecting the reduction of Morton's earnings before taxes,
primarily as a result of the write-off and adjustments described above. Net
earnings decreased by 98.7% from those realized in the prior fiscal year.
FISCAL YEAR ENDED JUNE 30, 1996 VERSUS FISCAL YEAR ENDED JUNE 30, 1995
Morton's revenues for the year ended June 30, 1996 amounted to $59.0
million compared to $48.6 million in the year ended June 30, 1995, an increase
of $10.4 million or 21.4%. This increase resulted from higher sales of sheet
metal component packages, the introduction of the feeder housing product line
for Deere and slightly lower sales of display fixtures. Year over year,
combined sales to Caterpillar and Deere rose from 84.8% to 88.8%.
The gross margin achieved in the year ended June 30, 1996 was 15.2%
compared to 16.1% in the year earlier period. This decrease resulted from
changes in product mix as a result of the commencement of feeder housing
production and added indirect labor and other start-up costs associated with
the opening of the Peoria facility.
- 7 -
<PAGE> 8
Selling and administration expenses for the year ended June 30, 1996
amounted to $4.9 million versus $3.9 million in the earlier year, an increase
of $949,000 or 24%. This increase resulted primarily from higher compensation
charges and insurance expenses. Year over year, selling and administration
expenses as a percent of revenues rose from 8.1% to 8.3%.
Interest expense in the year ended June 30, 1996 amounted to $3.3 million
compared to $2.4 million in the earlier year. This increase resulted from
higher borrowing stemming from the January 1, 1995 recapitalization of Morton.
Income taxes for the year ended June 30, 1996, decreased by approximately
$0.1 million or 18.9% as a result of reduced earnings before taxes and a
decrease in Morton's effective tax rate from 48.2% to 44.1%. Net earnings
declined a nominal amount to slightly more than $0.5 million.
FINANCIAL POSITION AND LIQUIDITY
Morton's consolidated working capital at December 31, 1997 was ($11.3)
million compared to $2.1 million at June 30, 1997, the Company's prior fiscal
year end. The decrease was primarily the result of a number of factors,
including (i) $5.6 million of capital expenditures, principally leasehold
improvements and equipment costs for the new North Carolina facility and costs
of the addition to the Morton, Illinois, facility, (ii) $4.0 `million of
accrued bonuses for management and employees of the Company and its
subsidiaries, (iii) $2.5 million of expenses associated with the Merger, (iv)
$.7 million of compensation expense related to the grant of a stock option, and
(v) $.5 million of expenses related to the start-up of the North Carolina
facility.
At December 31, 1997, Morton financed its operations with cash from
operations and the use of a revolving credit facility with a bank. The
revolving credit agreement provided for borrowings based on agreed-upon
percentages of eligible assets and an interest rate equal to 0.5% above the
bank's base rate. At December 31, 1997, Morton's outstanding indebtedness
under the revolving credit facility was approximately $6.7 million.
The $25 million senior notes payable that were outstanding on December 31,
1997, were issued in January 1995 in connection with a recapitalization of
Morton. The notes bore interest at 11.5% and were due in varying annual
installments from 1998 through 2005. The notes contained standard restrictive
covenants limiting certain actions pertaining to lease commitments and added
indebtedness.
Subsequent Events.
Concurrently with the closing of the Merger of Morton with MLX Corp., the
surviving company, Morton Industrial Group, Inc. (the "Company") entered into a
credit agreement with a bank group. The credit agreement contains a $15
million term loan facility and $35 million revolving credit facility. Twenty
million dollars of the revolving credit facility can be converted to term loans
before December 31, 2000. In addition, if during any quarter the Company's
borrowings under the revolving credit facility exceed $15,000,000, $10,000,000
of that facility will be converted into an additional term loan facility, and
the revolving credit facility will be reduced by $10,000,000. The initial
interest rate on both facilities is, at the Company's option, (i) the reserve
adjusted LIBOR plus the applicable LIBOR margin, fixed for 30, 60, 90, or 180
day periods, or (ii) the agent bank's base rate (which is the
- 8 -
<PAGE> 9
greater of the prime rate of the Federal Funds Rate plus 0.5%) plus an
"applicable base rate margin that increases from .25% to 2.0% as the Company's
funded debt to EBITDA ratio increases. The term loan facility, all of which
was borrowed at the Merger closing, matures on December 31, 2003. The
Company's indebtedness under the credit agreement is secured by a security
interest in all of the assets of the Company and its subsidiaries, a mortgage
on real property owned by the Company and its subsidiaries, and a pledge of the
stock of the Company's subsidiaries. At the closing, the Company borrowed $5.7
million under the revolving credit facility. A portion of the proceeds of the
Company's borrowings under both facilities at closing was used to pay off
Morton's pre-closing bank and institutional debt.
The credit agreement contains standard financial covenants and other
covenants that restrict certain activities by the Company and its subsidiaries,
including a prohibition on the payment of dividends.
The Company believes that cash generated by its operations and
availability under its credit agreement will provide the necessary liquidity
for its current operations.
The Company is actively pursuing acquisition possibilities in its industry
and related industries. The Company plans to use the availability under its
revolving credit facility to finance any such acquisitions, which would result
in the Company's incurring increased interest expense. Higher debt levels may
also be incurred as a result of the Company's internal growth and related
working capital requirements.
On March 2, 1998, the Company entered into a Stock Purchase Agreement with
the two principal owners of Carroll George, Inc., a Northwood, Iowa, supplier
of composite structures and plastic-based assemblies and components to
construction, agricultural, and industrial equipment manufacturers. Subject to
its completion of due diligence and other conditions to closing, the Company
plans to close the acquisition of substantially all of the capital stock of
Carroll George, Inc. on or before May 1, 1998. Additional information about
the transaction, including the financial statements of Carroll George, Inc.,
and pro-forma financial statements giving effect to the transactions will be
filed by the Company on Form 8-K.
OTHER CONSIDERATIONS
Capital Expenditures.
Capital expenditures for the six months ended December 31, 1997, were $5.6
million, and were principally for leasehold improvements and equipment costs
for the new North Carolina facility and costs of the addition to the Morton,
Illinois, facility. Capital expenditures for the year ended June 30, 1997
amounted to $5.7 million. Such expenditures were made primarily to construct
leasehold improvements and acquire equipment for the North Carolina facility,
and improve the production flow at the Morton facility. During the year ended
June 30, 1996, capital expenditures totaled $2.1 million and included
completion of the Peoria fabrication facility and the acquisition of equipment.
The Company has budgeted $5.0 million of capital expenditures for the
fiscal year ending December 31, 1998. These expenditures will be, among other
things, for presses, pressbrakes, additional equipment for the North Carolina
facility, information systems additions, cranes, and other new equipment.
Acquisitions of businesses during 1998 may result in increases in the Company's
capital expenditure budget for the year.
- 9 -
<PAGE> 10
Year 2000.
The Company has completed an internal assessment of its information
systems to determine year 2000 compliance. While the Company's product design,
business, and application software and hardware will be able to perform in the
year 2000 and beyond, certain personal computers used for workplace data
collection and certain Company-developed software require revision to perform
in 2000. The Company estimates that the revisions will cost a maximum of
$300,000. The Company has acquired software to help it identify the changes
required to Company-developed software. The Company expects to be fully year
2000 compliant by September 30, 1999.
Other Matters.
Most of the Company's production for Deere and Caterpillar is used in
products that those companies sell in the United States. As a result, the
Company currently believes that the continuing economic instability in Asia
will not have a material impact on its business.
The Company expects that it will continue to incur costs associated with
the start-up and rapid growth of its North Carolina operation that will reduce
the Company's gross margins for the current fiscal year ending December 31,
1998. The rapid growth has resulted in labor inefficiencies and increased the
management and training time required to improve productivity. The Company's
management has introduced a program to address these issues and is vigorously
implementing it. In addition, the Company is in the process of establishing
additional relationships with material suppliers located in the Southeast who
can meet the Company's just-in-time delivery requirements. Until it establishes
these additional relationships, the Company will continue to incur
transportation costs to receive supplies, including steel, at a higher cost
than the Company experiences in its Illinois plants.
Fiscal Year.
The Company's fiscal year will end on December 31, commencing with the
year ending December 31, 1998.
Recently Released Accounting and Reporting Pronouncements.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130 - Reporting
Comprehensive Income establishes standards for reporting comprehensive income
and components. The Statement addresses certain items that affect a company's
net assets without affecting its income statement. SFAS 130 is applicable to
the Company beginning in 1998 and should have no significant impact on the
Company's financial statement.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 131 - Disclosures about
Statements of an Enterprise and Related Information redefines the way public
companies report information about their business segments. The statement
intends to align reportable segments and certain disclosures with how the
operations are managed internally. It also modifies certain geographic
disclosures to be identified by country instead of geographic region. SFAS 131
is applicable to the Company beginning with its year-end reporting beginning in
1998. The impact of this statement on the Company's disclosures is not
expected to be significant.
- 10 -
<PAGE> 11
Forward Looking Statements.
Certain statements contained in this Exhibit 99.1, including this
Management's Discussion and Analysis, that are not related to historical
results are "forward looking statements" within the meaning of Section 27A of
the Securities Act of 1934 and Section 21E of the Securities Exchange Act of
1934 and involve risks and uncertainties. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimate," or
variations of such words and similar expressions are intended to identify such
forward looking statements. Although the Company believes that the assumptions
upon which these forward looking statements are based are reasonable, there can
be no assurance that such assumptions will prove to be accurate and actual
results could differ materially from those discussed in the forward looking
statements. Factors that could contribute to such differences include, but are
not limited to the concentration of the Company's sales and the possibility
that one or both of its two major customers, or a single plant of either of the
two, could reduce or cease placing orders with the Company; competition with
other fabricators; customer substitution of plastic components for metal
components; the risks associated with the Company's acquisition strategy,
including unanticipated problems, difficulties in integrating acquired
businesses; diversion of management's attention from daily operations;
potential increased interest costs; and possible adverse effects on earnings
resulting from increased goodwill amortization; reduction of key customers'
sales in developing countries; the loss of key employees, introduction of new
technologies that require significant capital expenditures; and general and
business conditions.
INDEX TO MORTON METALCRAFT HOLDING CO. CONSOLIDATED FINANCIAL STATEMENTS
a. Report of Independent Auditors.
b. Consolidated Balance Sheets as of December 31, 1997, and June
30, 1997, and 1996.
c. Consolidated Statements of Operations for the Six Months Ended
December 31, 1997, and the Fiscal Years Ended June 30, 1997, 1996,
and 1995.
d. Consolidated Statements of Stockholders' Equity (Deficit) for
the Six Months Ended December 31, 1997, and the Fiscal Years Ended
June 30, 1997, 1996, and 1995.
e. Consolidated Statements of Cash Flows for the Six Months Ended
December 31, 1997, and the Fiscal Years Ended June 30, 1997, 1996,
and 1995.
f. Notes to the Consolidated Financial Statements.
g. Consolidated Balance Sheet as of December 31, 1997 (audited) and
1996 (unaudited).
h. Consolidated Statements of Operations for the Six Months Ended
December 31, 1997 (audited) and 1996 (unaudited).
i. Consolidated Statements of Cash Flows for the Six Months Ended
December 31, 1997 (audited) and 1996 (unaudited).
- 11 -
<PAGE> 12
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Morton Metalcraft Holding Co.
Morton, Illinois
We have audited the accompanying consolidated balance sheets of Morton
Metalcraft Holding Co. and Subsidiaries as of December 31, 1997 and June 30,
1997 and 1996, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the six months ended
December 31, 1997 and each of the years in the three-year period ended June 30,
1997. In connection with our audits of the consolidated financial statements,
we also have audited the financial statement schedule as listed in the
accompanying table of contents. These consolidated financial statements and
the financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Morton Metalcraft
Holding Co. and Subsidiaries as of December 31, 1997 and June 30, 1997 and
1996, and the results of their operations and their cash flows for the six
months ended December 31, 1997 and each of the years in the three-year period
ended June 30, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the information
set forth therein.
CLIFTON GUNDERSON L.L.C.
Peoria, Illinois
February 4, 1998
<PAGE> 13
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND JUNE 30, 1997 AND 1996
(Dollars in Thousands, Except Share Data)
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, ----------------------------
1997 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 138 $ 204 $ 304
------------ ----------- -----------
Accounts and notes receivable:
Trade (Notes 6 and 12) 7,678 7,818 4,933
Employees and other 90 27 5
------------ ----------- -----------
7,768 7,845 4,938
Less allowance for doubtful accounts 100 40 10
------------ ----------- -----------
Net receivables 7,668 7,805 4,928
------------ ----------- -----------
Inventories (Notes 2 and 6) 7,510 8,005 8,879
Prepaid expenses and other current assets 815 821 975
Refundable income taxes 2,060 912 -
Deferred income taxes (Note 10) 70 - -
------------ ----------- -----------
Total current assets 18,261 17,747 15,086
------------ ----------- -----------
NOTE RECEIVABLE - STOCKHOLDER (Note 3) 250 268 253
------------ ----------- -----------
DEFERRED INCOME TAXES (Note 10) 114 - -
------------ ----------- -----------
PROPERTY, PLANT, AND EQUIPMENT (Notes 4 and 8)
Cost 28,078 22,507 16,644
Less accumulated depreciation 9,265 8,171 6,642
------------ ----------- -----------
Net property, plant, and equipment 18,813 14,336 10,002
------------ ----------- -----------
INTANGIBLE ASSETS, at cost, less
accumulated amortization (Note 5) 1,950 2,011 4,235
------------ ----------- -----------
$ 39,388 $ 34,362 $ 29,576
============ =========== ===========
</TABLE>
F-1
<PAGE> 14
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, -------------------------
1997 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
CURRENT LIABILITIES
Note payable to bank (Note 6) $ 6,740 $ 1,666 $ 1,005
Current installments of long-term debt (Note 7) 2,000 - -
Current installments of obligations under capital
leases (Note 8) 195 196 124
Current installments of covenants payable (Note 9) 195 184 163
Accounts payable 11,892 10,434 7,267
Accrued salaries and wages 4,615 1,311 604
Accrued payroll taxes and withholding 316 264 324
Accrued acquisition costs 1,826 - -
Accrued interest payable 1,198 1,198 1,216
Income taxes payable - - 82
Deferred income taxes (Note 10) - 47 63
Other 599 300 161
------------ ----------- -----------
Total current liabilities 29,576 15,600 11,009
LONG-TERM DEBT, excluding current
installments (Note 7) 23,000 25,000 25,000
OBLIGATIONS UNDER CAPITAL LEASES,
excluding current installment (Note 8) 221 318 275
COVENANTS PAYABLE, excluding current
installments (Note 9) 143 244 427
DEFERRED INCOME TAXES (Note 10) - 2,299 1,971
------------ ----------- -----------
Total liabilities 52,940 43,461 38,682
------------ ----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT) (Note 11)
Class A common stock, $.01 par value. Authorized
9,159,257 shares; issued 5,066,665 shares;
1,388,889 shares reserved 51 51 51
Class B common stock, convertible, $.01 par value.
Authorized 100,000 shares; issued 100,000 shares 1 1 1
Additional paid-in capital 1,203 458 458
Retained earnings (deficit) (2,037) 3,161 3,154
Treasury stock, 3,222,221 shares, at cost (12,770) (12,770) (12,770)
------------ ----------- -----------
Total stockholders' equity (deficit) (13,552) (9,099) (9,106)
------------ ----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 16)
$ 39,388 $ 34,362 $ 29,576
============ ========== ===========
</TABLE>
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
F-2
<PAGE> 15
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1997 AND THE
YEARS ENDED JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, -------------------------------------------
1997 1997 1996 1995
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES (Note 12) $ 46,598 $ 80,762 $ 59,006 $ 48,568
COST OF SALES 41,932 70,541 50,049 40,730
------------ ----------- ----------- -----------
Gross profit 4,666 10,221 8,957 7,838
------------ ----------- ----------- -----------
OPERATING EXPENSES
Selling expenses 1,202 1,832 1,529 1,278
Administrative expenses 10,350 5,171 3,371 2,672
------------ ----------- ----------- -----------
Total operating expenses 11,552 7,003 4,900 3,950
------------ ----------- ----------- -----------
Operating income (loss) (6,886) 3,218 4,057 3,888
------------ ----------- ----------- -----------
OTHER INCOME (EXPENSES)
Interest income 9 15 7 9
Interest expense (1,737) (3,266) (3,297) (2,434)
Gain on sale of equipment - 18 145 -
Miscellaneous 46 27 49 (54)
Forgiveness of note receivable
from stockholder - - - (324)
------------ ----------- ----------- -----------
Total other income (expenses) (1,682) (3,206) (3,096) (2,803)
------------ ----------- ----------- -----------
Earnings (loss) before
income taxes (8,568) 12 961 1,085
INCOME TAXES (Note 10) (3,370) 5 424 523
------------ ----------- ----------- -----------
NET EARNINGS (LOSS) $ (5,198) $ 7 $ 537 $ 562
============ =========== =========== ===========
EARNINGS (LOSS) PER SHARE
(Note 15)
Basic $ (2.67) $ - $ .28 $ .16
============ =========== =========== ===========
Diluted $ (1.56) $ - $ .16 $ .16
============ =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING
Basic 1,944,444 1,944,444 1,944,444 3,535,006
============ =========== =========== ===========
Diluted 3,325,974 3,327,241 3,309,827 3,551,006
============ =========== =========== ===========
</TABLE>
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
F-3
<PAGE> 16
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
SIX MONTHS ENDED DECEMBER 31, 1997 AND THE
YEARS ENDED JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK COMMON STOCK
------------------------ ------------------------
SHARES SHARES
ISSUED AMOUNT ISSUED AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE - JUNE 30, 1994, AS
PREVIOUSLY REPORTED 510,000 $ 510 - $ -
Recapitalization (510,000) (510) 4,622,221 46
----------- ----------- ----------- -----------
BALANCE - JUNE 30, 1994, AS
RESTATED - - 4,622,221 46
Acquisition of 3,222,221 Class A
common shares - - - -
Issuance of common shares
to certain stockholders - - 444,444 5
Net earnings - - - -
----------- ----------- ----------- -----------
BALANCE - JUNE 30, 1995 - - 5,066,665 51
Net earnings - - - -
----------- ----------- ----------- -----------
BALANCE - JUNE 30, 1996 - - 5,066,665 51
Net earnings - - - -
----------- ----------- ----------- -----------
BALANCE - JUNE 30, 1997 - - 5,066,665 51
Net loss - - - -
Issuance of stock options - - - -
----------- ----------- ----------- -----------
BALANCE - DECEMBER 31, 1997 - $ - 5,066,665 $ 51
=========== =========== =========== ===========
</TABLE>
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
F-4
<PAGE> 17
<TABLE>
<CAPTION>
CLASS B
COMMON STOCK
------------------------ ADDITIONAL
SHARES PAID-IN RETAINED TREASURY
ISSUED AMOUNT CAPITAL EARNINGS STOCK TOTAL
---------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
- $ - $ - $ 2,055 $ - $ 2,565
100,000 1 463 - - -
---------- ---------- ---------- --------- ---------- ----------
100,000 1 463 2,055 - 2,565
- - - - (12,770) (12,770)
- - (5) - - -
- - - 562 - 562
---------- ---------- ---------- --------- ---------- ----------
100,000 1 458 2,617 (12,770) (9,643)
- - - 537 - 537
---------- ---------- ---------- --------- ---------- ----------
100,000 1 458 3,154 (12,770) (9,106)
- - - 7 - 7
---------- ---------- ---------- --------- ---------- ----------
100,000 1 458 3,161 (12,770) (9,099)
- - - (5,198) - (5,198)
- - 745 - - 745
---------- ---------- ---------- --------- ---------- ----------
100,000 $ 1 $ 1,203 $ (2,037) $ (12,770) $ (13,552)
========== ========== ========== ========= ========== ==========
</TABLE>
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
F-5
<PAGE> 18
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1997 AND THE
YEARS ENDED JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, ----------------------------------------------
1997 1997 1996 1995
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (5,198) $ 7 $ 537 $ 562
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization of plant
and equipment 1,094 1,541 1,339 1,131
Other amortization 185 370 917 766
Write-off of intangible assets 552 1,854 - -
Forgiveness of note receivable from stockholder - - - 324
Compensation expense from issuance of
stock options 745 - - -
Increase (decrease) in allowance for doubtful
accounts 60 30 - (5)
(Decrease) increase in deferred income taxes (2,530) 312 180 (43)
(Gain) loss on sale of equipment - (18) (144) 38
Interest income capitalized as note receivable -
stockholder - (15) (3) (7)
Decrease (increase) in accounts and notes
receivable 77 (2,907) (236) 143
Decrease (increase) in inventories 495 874 (348) (1,827)
Decrease (increase) in prepaid expenses and
other current assets 6 154 (26) (206)
Increase in refundable income taxes (1,148) (912) - -
Increase in accounts payable 1,458 3,167 1,684 890
Increase (decrease) in accrued expenses and
other current liabilities 5,481 686 (117) 744
------------ ------------- ------------ ------------
Net cash provided by operating
activities 1,277 5,143 3,783 2,510
------------ ------------- ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures (5,571) (5,707) (2,142) (2,568)
Proceeds from sale of equipment - 135 215 358
Increase in intangible assets (676) - (676) (2,047)
Increase in note receivable - stockholder - - (250) (25)
Repayment of note receivable - stockholder 18 - - -
------------ ------------- ------------ ------------
Net cash used in investing activities (6,229) (5,572) (2,853) (4,282)
------------ ------------- ------------ ------------
</TABLE>
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
F-6
<PAGE> 19
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1997 AND THE
YEARS ENDED JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands)
<TABLE>
<CAPTION> JUNE 30,
DECEMBER 31, ----------------------------------------
1997 1997 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from issuance of note payable to bank $ 51,726 $ 79,418 $ 58,182 $ 51,562
Principal payments on note payable to bank (46,652) (78,757) (58,682) (54,042)
Proceeds from issuance of long-term debt - - - 25,000
Principal payments on long-term debt - - - (7,706)
Principal payments under capital lease obligations (98) (170) (81) (50)
Principal payments on covenants payable (90) (162) (145) (128)
Purchase of treasury stock - - - (12,770)
------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities 4,886 329 (726) 1,866
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (66) (100) 204 94
CASH AT BEGINNING OF PERIOD 204 304 100 6
------------ ------------ ------------ ------------
CASH AT END OF PERIOD $ 138 $ 204 $ 304 $ 100
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 1,737 $ 3,284 $ 3,279 $ 1,199
============ ============ ============ ============
Income taxes $ 307 $ 687 $ 493 $ 868
============ ============ ============ ============
NONCASH FINANCING AND
INVESTING ACTIVITIES
Capital lease obligations incurred for
machinery and equipment $ - $ 285 $ 480 $ 94
============ ============ ============ ============
</TABLE>
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
F-7
<PAGE> 20
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands, Except Per Share Data)
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(A) DESCRIPTION OF BUSINESS
The Morton Metalcraft Holding Co. holds the stock of its subsidiaries, Morton
Metalcraft Co. and Morton Metalcraft Co. of North Carolina. The primary
business of the subsidiaries is to fabricate and bend sheet metal in its plants
located in Morton and Peoria, Illinois and Apex, North Carolina. Morton
Metalcraft Co. of North Carolina began operations in July 1997.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements as of December 31, 1997 and June 30, 1997
and 1996 and for the six months ended December 31, 1997 and each of the years
in the three-year period ended June 30, 1997 include the financial statements
of Morton Metalcraft Holding Co. (Company) and its wholly owned subsidiaries,
Morton Metalcraft Co. and Morton Metalcraft Co. of North Carolina. All
significant intercompany transactions and balances have been eliminated in
consolidation. The Company changed its fiscal year end to December 31
subsequent to June 30, 1997.
(C) USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(D) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method on all inventories.
During 1996, the Company changed its method of determining the cost of
inventory from the last-in, first-out (LIFO) method to the FIFO method. This
change was not retroactively applied due to the amounts being immaterial. The
Company believes the FIFO method results in a closer matching of costs and
revenue during periods of fluctuating prices.
(E) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost less accumulated
depreciation. Equipment under capital leases is stated at the lower of the net
present value of the minimum lease payments at the beginning of the lease term
or fair value at the inception of the lease.
Depreciation of plant and equipment is calculated over the estimated useful
lives of the respective assets on the straight-line method. The equipment held
under capital leases is amortized using the straight-line method over the
shorter of the lease term or the estimated useful life of the asset.
F-8
<PAGE> 21
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands, Except Per Share Data)
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
(F) INTANGIBLE ASSETS
Intangible assets are recorded at cost and include acquisition costs, amortized
over 20 years, covenants not to compete, amortized over 10 years, and goodwill,
amortized over 20 years. Other intangible assets are amortized over their
estimated useful lives, typically no more than 5 years. The Company's policy
is to continually evaluate whether later events and circumstances have occurred
that indicate the remaining useful life of intangibles may warrant revision or
that the remaining balance of intangibles may not be recoverable. Such
evaluation is based on various analyses including cash flow and profitability
projections. If the sum of the expected future undiscounted cash flows is less
than the carrying amount, a loss is recognized for the difference between the
fair value and carrying amount of the asset.
(G) INCOME TAXES
Deferred income taxes are provided on temporary differences between financial
statement and income tax reporting. Temporary differences are differences
between the amounts of assets and liabilities reported for financial statement
purposes and their tax bases. Deferred tax liabilities are recognized for
temporary differences that will be taxable in future years' tax returns.
Deferred tax assets are recognized for temporary differences that will be
deductible in future years' tax returns and for operating loss and tax credit
carryforwards. Deferred tax assets are reduced by a valuation allowance if it
is deemed more likely than not that some or all of the deferred tax assets will
not be realized.
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company considers the recorded value of its financial assets and
liabilities, which consist primarily of cash, accounts and notes receivable,
accounts payable, notes payable, and long-term debt, to approximate the fair
value of the respective assets and liabilities.
(I) EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is computed under the provisions of Statement of
Financial Accounting Standards No. 128, Earnings Per Share, which was adopted
retroactively by the Company at December 31, 1997. Amounts reported as
earnings (loss) per share for the six months ended December 31, 1997 and for
each of the three years in the period ended June 30, 1997, reflect the earnings
available to stockholders for the year divided by the weighted average number
of common shares outstanding during the year.
F-9
<PAGE> 22
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands, Except Per Share Data)
NOTE 2 - INVENTORIES
A summary of inventories follows:
<TABLE>
<CAPTION> JUNE 30,
DECEMBER 31, --------------------------
1997 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Finished goods $ 2,588 $ 2,339 $ 2,220
Work in process 1,573 2,851 4,111
Raw materials, purchased parts,
and manufactured components 3,349 2,815 2,548
------------ ------------ ------------
TOTAL INVENTORIES $ 7,510 $ 8,005 $ 8,879
============ ============ ============
</TABLE>
NOTE 3 - NOTE RECEIVABLE - STOCKHOLDER
At December 31, 1997 and June 30, 1997 and 1996, the Company had a note
receivable from a stockholder in the amount of $250, $268, and $253,
respectively. The note, which is unsecured, is due April 12, 2001 and accrues
interest at 5.88 percent.
NOTE 4 - PROPERTY, PLANT, AND EQUIPMENT
A summary of property, plant, and equipment (at cost), including assets held
under capital leases as described in Note 8 to the consolidated financial
statements, is as follows:
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, --------------------------
1997 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Land, plant sites $ 545 $ 545 $ 545
Land held for expansion 121 121 121
Land improvements 203 203 131
Buildings and improvements 3,865 3,083 2,508
Leasehold improvements 1,050 592 327
Machinery 14,694 11,397 8,026
Tooling 5,028 4,540 3,727
Office equipment 2,507 1,961 1,212
Automobiles and trucks 65 65 47
------------ ------------ ------------
$ 28,078 $ 22,507 $ 16,644
============ ============ ============
</TABLE>
F-10
<PAGE> 23
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands, Except Per Share Data)
NOTE 5 - INTANGIBLE ASSETS
A summary of intangible assets, at cost, is as follows:
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, --------------------------
1997 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Goodwill $ 1,200 $ 1,200 $ 1,200
Organization costs 374 374 374
Covenants not to compete 2,136 2,136 2,136
Engineering costs - - 1,748
Specific project start-up costs - - 854
Refinancing costs 676 779 779
Factory rearrangement - - 700
------------ ------------ ------------
4,386 4,489 7,791
Less accumulated amortization 2,436 2,478 3,556
------------ ------------ ------------
NET INTANGIBLES $ 1,950 $ 2,011 $ 4,235
============ ============ ============
</TABLE>
During the six months ended December 31, 1997 and the year ended June 30, 1997,
intangible assets with a net value of approximately $552 and $1,854,
respectively, were written off due to the determination that these intangible
assets no longer had value.
NOTE 6 - NOTE PAYABLE TO BANK
The Company has a revolving credit agreement which provides up to $9,000 in
revolving credit, limited to 85 percent of qualified accounts receivable and
40-60 percent of eligible inventory (up to a maximum borrowing of $5,000 for
inventory) and expires January 30, 1999. The interest on the outstanding
borrowings is due on the first day of each month at 0.5 percent over the bank's
base rate (9.00 percent at December 31, 1997). At December 31, 1997 and June
30, 1997 and 1996, the Company had $6,740, $1,666, and $1,005, respectively, of
its credit line in use. The revolving credit agreement contains certain
restrictive covenants on the Company, including financial restrictions relating
to working capital, net worth, and earnings. The restrictions also limit
capital expenditures, executive compensation, ownership changes, and prohibit
dividend payments and the creation of additional indebtedness.
Subsequent to December 31, 1997, the Company refinanced its revolving credit
agreement and entered into a new revolving credit facility with another
institution. The new revolving credit facility provides up to $35,000 in
revolving credit and is a portion of a $50,000 total credit facility as
discussed at Note 7.
F-11
<PAGE> 24
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands, Except Per Share Data)
NOTE 7 - LONG-TERM DEBT
A summary of long-term debt follows:
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, --------------------------
1997 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
$25,000 senior notes payable
with interest at 11.5 percent;
due in annual installments of
various amounts beginning
January 31, 1999 with the
balance due January 31, 2005. $ 25,000 $ 25,000 $ 25,000
============ ============ ============
</TABLE>
On January 25, 1995, the Company entered into a note and warrant purchase
agreement, pursuant to which the Company agreed to sell $25,000 of the
Company's 11.50 percent senior notes in consideration for a promise to repay
the principal, including interest, and the issuance of warrants to purchase
72,000 shares of the Company's common stock as discussed at Note 11.
The above-mentioned financing arrangement imposes certain restrictions on the
Company, including financial restrictions relating to working capital, lease
commitments, and indebtedness. The restrictions also require the Company to
maintain key man life insurance on the Company's president.
The interest on the senior notes is payable semi-annually in arrears each
January and July.
The aggregate amounts of long-term debt maturities and principal payments for
each of the five years subsequent to December 31, 1997 and thereafter are as
follows:
<TABLE>
<S> <C>
Fiscal year ending:
1998 $ -
1999 2,500
2000 3,125
2001 3,750
2002 3,750
Thereafter 11,875
--------
$ 25,000
========
</TABLE>
As discussed at Note 6, subsequent to December 31, 1997, the Company entered
into a financing arrangement with another institution which provides total
financing of $50,000. The arrangement contains a $35,000 revolving credit
portion and a $15,000 term loan portion. If during any quarter, borrowings
under the revolving credit facility exceed $15,000, $10,000 of the revolving
credit facility will be converted into an additional term loan, and the
revolving credit facility will be reduced by $10,000. The financing
arrangement bears interest at an adjustable rate based on LIBOR plus an
applicable margin which will vary depending on certain financial ratios
achieved by the Company. The financing arrangement has a term of six years and
includes some mandatory prepayment terms and customary financial and other
covenants. This financing arrangement requires quarterly principal payments of
various amounts of which $2,000 will be due in 1998. This amount has been
reclassified as a current liability as of December 31, 1997.
F-12
<PAGE> 25
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands, Except Per Share Data)
NOTE 7 - LONG-TERM DEBT (CONTINUED)
In connection with the above arrangement, the Company recorded debt issue costs
of $676 and wrote-off approximately $552 of previous debt issue costs, net of
accumulated amortization, that related to the previous financing facility. In
addition, the Company expensed $340 in termination fees to the previous
institution.
NOTE 8 - LEASES
The Company is obligated under various capital leases for certain machinery.
At December 31, 1997, the gross amount of equipment and related amortization
recorded under capital leases was as follows:
<TABLE>
<CAPTION>
1997
------
<S> <C>
Machinery $ 837
Less accumulated amortization (143)
------
$ 694
======
</TABLE>
Amortization of assets held under capital leases is included with depreciation
expense.
The present value of future minimum capital lease payments at December 31, 1997
was as follows:
<TABLE>
<S> <C>
Year ending December 31:
1998 $ 231
1999 128
2000 83
2001 30
------
Total minimum lease payments 472
Less amount representing interest (from 9.2 to 10.4 percent) 56
------
Present value of net minimum capital lease payments 416
Less current installments of obligations under capital leases 195
------
OBLIGATIONS UNDER CAPITAL LEASES, EXCLUDING CURRENT INSTALLMENTS $ 221
======
</TABLE>
The Company also has operating leases for two of its plants, certain warehouse
space, and manufacturing and computer equipment. Rental expense for operating
leases was $1,452, $2,061, $1,328, and $891 for the six months ended December
31, 1997 and years ended June 30, 1997, 1996, and 1995, respectively.
F-13
<PAGE> 26
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands, Except Per Share Data)
NOTE 8 - LEASES (CONTINUED)
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1997
are:
<TABLE>
<S> <C>
Year ending December 31:
1998 $ 3,298
1999 3,207
2000 2,955
2001 2,610
2002 2,434
Thereafter 4,989
--------
TOTAL MINIMUM LEASE PAYMENTS $ 19,493
========
</TABLE>
NOTE 9 - COVENANTS PAYABLE
With the acquisition of the outstanding common stock of Morton Metalcraft Co.
in 1989, the Company entered into non-competition agreements which expire
August 31, 1999 with two of Morton Metalcraft Co.'s former shareholders and
officers in exchange for $3,050. Monthly installments of $19 through August
15, 1999 will be paid to retire these obligations. The remaining payments have
been recorded in the consolidated financial statements at their net present
value.
NOTE 10 - INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- --------
<S> <C> <C> <C>
December 31, 1997:
Federal $ (812) $ (2,021) $ (2,833)
State (28) (509) (537)
------- -------- --------
$ (840) $ (2,530) $ (3,370)
======= ======== ========
June 30, 1997:
Federal $ (250) $ 254 $ 4
State (57) 58 1
------- -------- --------
$ (307) $ 312 $ 5
======= ======== ========
</TABLE>
F-14
<PAGE> 27
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands, Except Per Share Data)
NOTE 10 - INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- -------- --------
<S> <C> <C> <C>
June 30, 1996:
Federal $ 224 $ 147 $ 371
State 20 33 53
-------- -------- --------
$ 244 $ 180 $ 424
======== ======== ========
June 30, 1995:
Federal $ 520 $ (35) $ 485
State 46 (8) 38
-------- -------- --------
$ 566 $ (43) $ 523
======== ======== ========
</TABLE>
Total income tax expense (benefit) differed from the amounts computed by
applying the U.S. federal corporate income tax rate of 34 percent for all
periods to earnings (loss) before income taxes as a result of the following:
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, -----------------------------------------------
1997 1997 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Computed "expected" tax expense
(benefit) $ (2,913) $ 4 $ 327 $ 369
State income taxes (benefit), net of
federal income tax benefit
(expense) (354) 1 35 25
Surtax exemption - (2) - -
Amortization of goodwill 10 20 20 20
Officer's life insurance 8 16 15 10
Forgiveness of note receivable -
stockholder - - - 110
Other, net (121) (34) 27 (11)
------------ ------------ ------------ ------------
TOTAL INCOME TAX EXPENSE $ (3,370) $ 5 $ 424 $ 523
============ ============ ============ ============
EFFECTIVE TAX RATE (39.3)% 39.2% 44.1% 48.2%
============ ============ ============ ============
</TABLE>
F-15
<PAGE> 28
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands, Except Per Share Data)
NOTE 10 - INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1997
and June 30, 1997 and 1996 are presented below:
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, ------------------------
1997 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Deferred tax assets:
Inventories, principally due to additional
costs inventoried for tax purposes
pursuant to the Tax Reform Act of 1986 $ - $ 6 $ 80
Accrued vacation pay 136 125 112
Net operating loss carryforwards 2,298 - -
State tax credit carryforwards 50 - -
Compensation expense from issuance
of stock options 289 - -
Other 39 16 -
------------ ----------- -----------
Total deferred tax assets 2,812 147 192
------------ ----------- -----------
Deferred tax liabilities:
Plant and equipment, principally due
to differences in depreciation (2,389) (2,211) (1,876)
Recapture of inventory LIFO valuation
for tax purposes (155) (194) (255)
Excess of tax over book amortization of
organization costs (84) (88) (95)
------------ ----------- -----------
Total deferred tax liabilities (2,628) (2,493) (2,226)
------------ ----------- -----------
NET DEFERRED TAX ASSET (LIABILITY) $ 184 $ (2,346) $ (2,034)
============ =========== ===========
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment. In order to
fully realize the deferred tax asset, the Company will need to generate future
taxable income of approximately $474 prior to the expiration of the net
operating loss carryforward in 2012.
The Company has a tax net operating loss carryforward of approximately $5,920
available at December 31, 1997 which expires in 2012.
F-16
<PAGE> 29
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands, Except Per Share Data)
NOTE 11 - EMPLOYEE STOCK OPTIONS AND WARRANTS
The Company has granted stock options to purchase the Company's Class A common
stock to certain officers and directors. The options may be exercised at any
time prior to their expiration dates. The 722,222 shares under option have
been reserved. A summary of the stock options follows:
<TABLE>
<CAPTION>
NUMBER EXERCISE EXPIRATION
OF SHARES PRICE DATE
- --------- -------- -----------------
<S> <C> <C>
444,443 $.11 September 1, 1999
83,333 $.11 September 1, 2000
83,333 $.22 July 13, 2002
64,815 $.11 February 15, 2005
46,298 $.90 May 8, 2005
</TABLE>
On October 8, 1997, the Company granted options to purchase 46,298 shares of
the Company's Class A common stock to an officer of the Company at an option
price of $.90 per share. The Company has recognized compensation expense of
$745 in connection with this transaction. In addition, 46,298 of previously
outstanding options to purchase the Company's Class A common stock were
canceled.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Basis Compensation, but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its option
plan. If the Company had elected to recognize compensation cost for the plan
based on the fair value at the grant dates for awards under the plan consistent
with the method prescribed by SFAS No. 123, the effect on net income and
earnings per share would not have been significant.
On January 25, 1995, the Board of Directors authorized the issuance of 666,667
warrants, each representing the right to purchase one share of the Company's
common stock, as part of the consideration for the purchase of the $25,000
senior notes as discussed at Note 7. The warrants may be exercised at any time
prior to their expiration date of January 31, 2005 for the exercise price of
$.002 per share. There was no value assigned to the warrants upon issuance.
The 666,667 shares under the warrant agreement have been reserved.
NOTE 12 - CONCENTRATION OF SALES
Sales to customers in excess of 10 percent of total net sales for the six
months ended December 31, 1997 and each of the years ended June 30, 1997, 1996,
and 1995 are as follows:
<TABLE>
<CAPTION>
CUSTOMER A CUSTOMER B
---------- ----------
<S> <C> <C>
Periods ended:
December 31, 1997 34% 53%
June 30, 1997 39% 46%
June 30, 1996 53% 34%
June 30, 1995 63% 20%
</TABLE>
F-17
<PAGE> 30
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands, Except Per Share Data)
NOTE 12 - CONCENTRATION OF SALES (CONTINUED)
Trade accounts receivable with these customers totaled $5,027, $6,502, and
$3,964 at December 31, 1997 and June 30, 1997 and 1996, respectively.
NOTE 13 - EMPLOYEE PARTICIPATION PLAN
The Morton Metalcraft Co. Employee Participation Plan allows substantially all
employees to defer up to 15 percent of their income through payroll deduction
of pre-tax contributions under section 401(k) of the Internal Revenue Code.
The Company matches 25 percent of the first 6 percent of pre-tax income
contributed by each employee. Employees may also make contributions of
after-tax income.
Additionally, the Company may make discretionary contributions to the plan for
the benefit of participating employees. The expense charged to operations for
Company matching and discretionary contributions was $70, $116, $87, and $70
for the six months ended December 31, 1997 and the years ended June 30, 1997,
1996, and 1995, respectively.
NOTE 14 - LEASED PROPERTIES
The Company leases certain portions of its office, warehouse, and factory space
under operating leases to other companies.
Rental revenue earned under noncancelable operating leases amounted to $13,
$22, $55, and $74 for the six months ended December 31, 1997 and the years
ended June 30, 1997, 1996, and 1995, respectively.
NOTE 15 - EARNINGS (LOSS) PER SHARE
The following reflects the reconciliation of the numerators and denominators of
the earnings (loss) per share and net earnings (loss) per share assuming
dilution computations:
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1997
-----------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- ------------
<S> <C> <C> <C>
Basic loss per share $ (5,198) 1,944,444 $ (2.67)
============
Effect of dilutive securities:
Stock options - 714,948
Warrants - 666,582
------------ -------------
DILUTED LOSS PER SHARE $ (5,198) 3,325,974 $ (1.56)
============ ============= ============
</TABLE>
F-18
<PAGE> 31
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands, Except Per Share Data)
NOTE 15 - EARNINGS (LOSS) PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1997
------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ -------------- ------------
<S> <C> <C> <C>
Basic earnings per share $ 7 1,944,444 $ -
============
Effect of dilutive securities:
Stock options - 716,226
Warrants - 666,571
------------ ------------
DILUTED EARNINGS PER SHARE $ 7 3,327,241 $ -
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1996
-----------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- ------------
<S> <C> <C> <C>
Basic earnings per share $ 537 1,944,444 $ .28
============
Effect of dilutive securities:
Stock options - 699,086
Warrants - 666,297
------------ ------------
DILUTED EARNINGS PER SHARE $ 537 3,309,827 $ .16
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1995
-------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- ------------
<S> <C> <C> <C>
Basic earnings per share $ 562 3,535,006 $ .16
============
Effect of dilutive securities:
Stock options - -
Warrants - 16,000
------------ --------------
DILUTED EARNINGS PER SHARE $ 562 3,551,006 $ .16
============ ============== ============
</TABLE>
Options to purchase 722,222 shares of Class A common stock at an average price
of $.12 per share were outstanding at June 30, 1995, but were not included in
the computation of diluted earnings per share because they were anti-dilutive.
F-19
<PAGE> 32
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands, Except Per Share Data)
NOTE 16 - COMMITMENTS AND CONTINGENCIES
SELF INSURANCE
The Company provides health benefits to its employees under the Morton
Metalcraft Co. Health Care Payment Plan (Plan). The Plan is a partially
self-insured program funded by contributions from the Company and its
employees. The Plan has purchased stop-loss insurance coverage for individual
claims in excess of $50.
PURCHASE COMMITMENTS
At December 31, 1997, the Company had outstanding purchase commitments for
certain manufacturing equipment totaling approximately $2,000.
NOTE 17 - SUBSEQUENT EVENT
On January 20, 1998, the Company merged (the "Merger") with MLX Corp. ("MLX")
with MLX being the surviving corporation. As a result of the Merger, the
Company will cease to exist as a separate corporate entity and MLX amended its
Articles of Incorporation to change the corporate name of MLX to Morton
Industrial Group, Inc.
The Merger, for financial accounting and reporting purposes, will be treated as
a purchase in accordance with generally accepted accounting principles. The
Merger will be accounted for as though the Company purchased MLX because (i)
the Chairman and CEO of the Company will maintain voting control in the
surviving corporation, (ii) the Chairman of the Board of Directors, CEO, and
directors of the surviving corporation will consist of individuals appointed by
the Chairman and CEO of the Company, (iii) the revenues, net earnings, and
current market value of the Company exceed those of MLX, and (iv) the market
value of the consideration received by the former shareholders of the Company
and former holders of options and warrants for Company common stock, including
MLX common stock, MLX options, and cash exceeds the market value of the
securities to be retained by the shareholders of MLX common stock.
The historical financial statements of Morton Metalcraft Holding Co. will,
after the date of the merger, become the historical financial statements of
MLX, Inc. as the result of the reverse merger.
Immediately preceding the Merger, the Company recapitalized its existing common
stock, no par value, into Class A common stock, par value $.01, and Class B
common stock, par value $.01, and approved a 9.259 to 1.0 common stock split in
order to provide for the one-for-one stock exchange rate in the Merger. Class
B common stock contains the identical rights and preferences as Class A common
stock but have limited voting rights. Each share of Class B common stock is
convertible into one share of Class A common stock at the option of the
shareholder. The capital structure and per share amounts in the accompanying
financial statements have been adjusted for the recapitalization and split.
F-20
<PAGE> 33
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND JUNE 30, 1997, 1996, AND 1995
(Dollars in Thousands, Except Per Share Data)
NOTE 17 - SUBSEQUENT EVENT (CONTINUED)
In connection with the Merger, MLX purchased 612,121 shares of common stock and
721,211 options and warrants to acquire common stock from certain officers,
directors, and warrant holders of the Company for an aggregate purchase price
of $19,991 immediately prior to the consummation of the Merger. These shares,
warrants, and options were canceled when the Merger was consummated.
Upon consummation of the Merger, each share of the Company's common stock was
exchanged for one share of the Surviving Corporation's common stock with
equivalent voting rights and all outstanding options to purchase the Company's
common stock were exchanged for options to purchase equivalent common stock of
the Surviving Corporation.
At December 31, 1997, the Company has recorded accrued bonuses in the amount of
$4,000 and various accrued consulting and legal expenses in the amount of
$1,000 in connection with the Merger.
The following unaudited pro forma summary presents the Company's consolidated
results of operations for the six months ended December 31, 1997, as if the
Merger had occurred on July 1, 1997.
<TABLE>
<S> <C>
Net sales $ 46,598
=========
Net loss $ 5,466
=========
Net loss per share - diluted $ 1.39
=========
</TABLE>
This information is an integral part of the accompanying
consolidated financial statements.
F-21
<PAGE> 34
MORTON METALCRAFT HOLDING CO.
SCHEDULE IX - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- --------------------------- ---------- -------------------- ---------- ---------
ADDITIONS
--------------------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- --------------------------- ---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Six months ended
December 31, 1997 $ 40 $ 60 $ - $ - $ 100
========== ========== ======== ========== =========
Year ended June 30, 1997 $ 10 $ 42 $ - $ 12 $ 40
========== ========== ======== ========== =========
Year ended June 30, 1996 $ 10 $ - $ - $ - $ 10
========== ========== ======== ========== =========
</TABLE>
F-22
<PAGE> 35
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(Dollars In Thousands, Except Share Data)
<TABLE>
<CAPTION>
ASSETS
(UNAUDITED)
1997 1996
---------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 138 $ 58
---------- -----------
Accounts and notes receivable:
Trade 7,678 5,120
Employees and other 90 16
---------- -----------
7,768 5,136
Less allowance for doubtful accounts 100 10
---------- -----------
Net receivables 7,668 5,126
---------- -----------
Inventories 7,510 8,752
Prepaid expenses and other current assets 815 840
Refundable income taxes 2,060 59
Deferred income taxes 70 -
---------- -----------
Total current assets 18,261 14,835
---------- -----------
NOTE RECEIVABLE - STOCKHOLDER 250 260
---------- -----------
DEFERRED INCOME TAXES 114 -
---------- -----------
PROPERTY, PLANT, AND EQUIPMENT
Cost 28,078 18,319
Less accumulated depreciation 9,265 7,366
---------- -----------
Net property, plant, and equipment 18,813 10,953
---------- -----------
INTANGIBLE ASSETS, at cost, less accumulated
amortization 1,950 3,094
---------- -----------
$ 39,388 $ 29,142
========== ===========
</TABLE>
F-23
<PAGE> 36
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
(UNAUDITED)
1997 1996
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Note payable to bank $ 6,740 $ 1,410
Current installments of long-term debt 2,000 -
Current installments of obligations under
capital leases 195 152
Current installments of covenants payable 195 173
Accounts payable 11,892 7,192
Accrued salaries and wages 4,615 308
Accrued payroll taxes and withholding 316 158
Accrued acquisition costs 1,826 -
Accrued interest payable 1,198 1,198
Deferred income taxes - 63
Other 599 312
----------- -----------
Total current liabilities 29,576 10,966
----------- -----------
LONG-TERM DEBT, excluding current installments 23,000 25,000
----------- -----------
OBLIGATIONS UNDER CAPITAL LEASES,
excluding current installment 221 255
----------- -----------
COVENANTS PAYABLE, excluding current installments 143 338
----------- -----------
DEFERRED INCOME TAXES - 1,971
----------- -----------
Total liabilities 52,940 38,530
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Class A common stock, $.01 par value. Authorized
9,159,257 shares; issued 5,066,665 shares;
1,388,889 shares reserved 51 51
Class B common stock, convertible, $.01 par value.
Authorized 100,000 shares; issued 100,000 shares 1 1
Additional paid-in capital 1,203 458
Retained earnings (deficit) (2,037) 2,872
Treasury stock, 3,222,221 shares, at cost (12,770) (12,770)
----------- -----------
Total stockholders' equity (deficit) (13,552) (9,388)
----------- -----------
$ 39,388 $ 29,142
=========== ===========
</TABLE>
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
F-24
<PAGE> 37
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(Dollars In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
(UNAUDITED)
1997 1996
------------- ------------
<S> <C> <C>
NET SALES $ 46,598 $ 32,958
COST OF SALES 41,932 29,206
------------- ------------
Gross profit 4,666 3,752
------------- ------------
OPERATING EXPENSES
Selling expenses 1,202 803
Administrative expenses 10,350 1,775
------------- ------------
Total operating expenses 11,552 2,578
------------- ------------
Operating income (loss) (6,886) 1,174
------------- ------------
OTHER INCOME (EXPENSE)
Interest income 9 -
Interest expense (1,737) (1,628)
Miscellaneous 46 31
------------- ------------
Total other income (expense) (1,682) (1,597)
------------- ------------
Loss before income taxes (8,568) (423)
INCOME TAXES (3,370) (282)
------------- ------------
NET LOSS ($5,198) ($141)
============= ============
LOSS PER SHARE
Basic $ (2.67) $ (.07)
============= ============
Diluted $ (1.56) $ (.04)
============= ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic 1,944,444 1,944,444
============= ============
Diluted 3,325,974 3,323,925
============= ============
</TABLE>
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
F-25
<PAGE> 38
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(Dollars In Thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (5,198) $ (282)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization of plant and
equipment 1,094 724
Other amortization 185 481
Write-off of intangible assets 552 660
Interest income capitalized as note receivable -
stockholder - (7)
Compensation expense from issuance of
stock options 745 -
Increase in allowance for doubtful accounts 60 -
Decrease in deferred taxes (2,530) -
Decrease (increase) in accounts and
notes receivable 77 (198)
Decrease in inventories 495 128
Decrease in prepaid expenses and other
current assets 6 135
Increase in refundable income taxes (1,148) (59)
Increase (decrease) in accounts payable 1,458 (75)
Increase (decrease) in accrued expenses and
other current liabilities 5,481 (411)
------------ ------------
Net cash provided by operating activities 1,277 1,096
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (5,571) (1,599)
Increase in intangible assets (676) -
Repayment of note receivable - stockholder 18 -
------------ ------------
Net cash used in investing activities (6,229) (1,599)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of note payable to bank 51,726 33,967
Principal payments on note payable to bank (46,652) (33,562)
Principal payments under capital lease obligations (98) (69)
Principal payments on covenants payable (90) (79)
------------ ------------
Net cash provided by financing activities 4,886 257
------------ ------------
NET DECREASE IN CASH (66) (246)
CASH AT BEGINNING OF PERIOD 204 304
------------ ------------
CASH AT END OF PERIOD $ 138 $ 58
============ ============
</TABLE>
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
F-26
<PAGE> 39
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(Dollars In Thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
1997 1996
---------- ------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid during the period for:
Interest $ 1,737 $ 1,644
========== ============
Income taxes $ 307 $ -
========== ============
NONCASH FINANCING AND INVESTING ACTIVITIES
Capital lease obligations incurred for machinery
and equipment $ - $ 77
=========== ============
</TABLE>
These consolidated financial statements should be read only in connection with
the accompanying notes to consolidated financial statements.
F-27
<PAGE> 40
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1
The Company changed its fiscal year end to December 31 subsequent to June 30,
1997.
The Company's consolidated financial statements as of and for the six months
ended December 31, 1997 have been audited by the Company's independent auditor
and are presented in Exhibit 99.1. The Company's consolidated financial
statements as of and for the six months ended December 31, 1996 have been
prepared without audit.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of (a) the consolidated
balance sheet at December 31, 1996, (b) the consolidated statement of
operations for the six months ended December 31, 1996, and (c) the consolidated
statement of cash flows for the six months ended December 31, 1996 have been
made.
NOTE 2
The results for the six months ended December 31, 1997 and 1996 are not
necessarily indicative of the results for their entire respective calendar
years.
NOTE 3 - LOSS PER SHARE
Loss per share is computed under the provisions of Statement of Financial
Accounting Standards No. 128, Earnings Per Share, which was adopted
retroactively by the Company at December 31, 1997. Amounts reported as loss
per share for the six months ended December 31, 1997 and 1996, reflect the loss
to stockholders for the period divided by the weighted average number of common
shares outstanding during the year.
The following reflects the reconciliation of the numerators and denominators of
the loss per share and net loss per share assuming dilution computations:
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1997
----------------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- ------------
<S> <C> <C> <C>
Basic loss per share $ (5,198) 1,944,444 $ (2.67)
============
Effect of dilutive securities:
Stock options - 714,948
Warrants - 666,582
------------ -------------
DILUTED LOSS PER SHARE $ (5,198) 3,325,974 $ (1.56)
============ ============= ============
</TABLE>
F-28
<PAGE> 41
MORTON METALCRAFT HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 3 - LOSS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1996
-----------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- ------------
<S> <C> <C> <C>
Basic loss per share $ (141) 1,944,444 $ (.07)
============
Effect of dilutive securities:
Stock options - 712,962
Warrants - 666,519
------------ -------------
DILUTED LOSS PER SHARE $ (141) 3,323,925 $ (.04)
============ ============= ============
</TABLE>
F-29
<PAGE> 1
EXHIBIT 99.2
MORTON INDUSTRIAL GROUP, INC.
Pro Forma Condensed Combined Financial Statements
(In Thousands except share amounts)
On January 20, 1998 MLX, Inc. merged (the "Merger") with Morton Metalcraft
Holding Co. ("Morton") and the Articles of Incorporation were amended to change
the name of the merged company to Morton Industrial Group, Inc. In connection
with the Merger, MLX, Inc. paid $19,991 for the purchase of 612,121 shares of
Morton common stock and 721,211 options and warrants to purchase Morton common
stock and issued 1,332,323 shares of common stock for the remaining shares of
Morton common stock.
The Merger for accounting and financial reporting purposes, will be treated as
a purchase in accordance with generally accepted accounting principles. The
Merger will be accounted for as though Morton purchased MLX because (i) the
Chairman and Chief Executive Officer of Morton through his common stock
ownership in the merged companies, together with the right to vote certain
shares pursuant to a Shareholders Agreement will have over 50% of the votes of
all classes of stock of the surviving company, (ii) the Chairman of the Board
of Directors, Chief Executive Officer and directors of the surviving company
will consist of individuals appointed by the Chairman and Chief Executive
Officer of Morton, (iii) the revenues, net earnings and current market value of
Morton exceeds those of MLX and (iv) the market value of the consideration
received by the former shareholders of Morton common stock and former holders
of options and warrants for Morton common stock, including MLX Common Stock,
MLX options and cash, exceeds the market value of the securities to be retained
by the shareholders of MLX common stock.
The information contained herein has been derived from historical data included
in the financial statement of MLX and Morton, and should be read in conjunction
with the respective "Management's Discussion and Analysis of Financial
Condition and Result of Operations" and the financial statements and notes
thereto included elsewhere in this Form 10-K or the exhibits thereto.
The pro forma financial information is not necessarily indicative of the
results which actually would have occurred if the transaction had been
completed on the date and for the periods indicated or which may result in the
future.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
The following unaudited pro forma condensed combined balance sheet combines the
consolidated balance sheet of Morton at December 31, 1997 with the balance
sheet of MLX at December 31, 1997, accounting for the merger as a reverse
purchase, as though the merger had occurred on December 31, 1997.
PF-1
<PAGE> 2
PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
(Caption>
HISTORICAL
--------------------------- PRO FORMA
MORTON MLX ADJUSTMENTS COMBINED
-------------------------------------------------------------
(In thousands)
(Unaudited)
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash $ 138 $ 36,718 $ (19,991) (1) $ 5,865
(11,000) (3)
Accounts receivable 7,668 - - 7,668
Inventories 7,510 - - 7,510
Refundable income taxes 2,060 - - 2,060
Prepaid expenses and other
current assets 885 10 - 895
-------------------------------------------------------------
Total current assets 18,261 36,728 (30,991) 23,998
Notes receivable -
stockholder 250 - - 250
Property, plant, and
equipment, net 18,813 2 - 18,815
Other assets 114 1,529 - 1,643
Deferred tax asset - - 3,071 (4) 3,071
Intangible assets 1,950 - - 1,950
-------------------------------------------------------------
$ 39,388 $ 38,259 $ (27,920) $ 49,727
=============================================================
LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Notes payable, current
installments under
capital leases and
covenants payable $ 9,130 $ - $ - $ 9,130
Accounts payable and
accrued expenses 20,446 1,345 350 (5) 22,141
-------------------------------------------------------------
Total current liabilities 29,576 1,345 350 31,271
Long-term liabilities 23,364 2,042 (11,000) (3) 14,406
(19,991) (1)
14,881 (2)
(350) (3)
3,071 (4)
Stockholders' equity
(deficit) (13,552) 34,872 (14,881) (6) 4,050
-------------------------------------------------------------
$ 39,388 $ 38,259 $ (27,920) $ 49,727
=============================================================
</TABLE>
PF-2
<PAGE> 3
PRO FORMA CONDENSED COMBINED BALANCE SHEET (CONTINUED)
Notes
(1) Represents cash paid for the purchase of 612,121 shares of Morton common
stock for $9,182, options to purchase 54,545 shares of Morton Class A
Common Stock for $810 and warrants to purchase 666,667 shares of Morton
Class A Common Stock for $9,999.
(2) Represents the value assigned to 1,332,323 shares of surviving company
Common Stock issued for 1,332,323 shares of Morton common stock. Such
dollar amount was determined based on the net assets of MLX after the cash
payment to Morton common shareholders referred to in (1).
(3) Represents payment of $11,000 of Morton's Senior Notes Payable with cash
from MLX. The balance of the Morton Senior Notes Payable will be repaid
with a $50,000 credit facility available to the surviving corporation.
Borrowing under the $50,000 credit facility and a corresponding repayment
of the Senior Notes Payable has not been separately reflected in the pro
forma balance sheet.
(4) Represents deferred tax asset, net of valuation allowance, recognized as
a result of MLX's net operating loss carryforward. Such amounts were
recorded based on Morton's history of profitable operating results and
anticipated profitable operating results in the near term.
(5) Includes, in connection with the Merger, a $350 severance package granted
to the President of MLX, which was approved by the MLX Board of Directors.
(6) Elimination of remaining balance of stockholders' equity of MLX after
cash payment to holders of Morton Common Stock.
PF-3
<PAGE> 4
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
The following unaudited pro forma condensed combined statement of operations
combines the consolidated statement of operations of Morton for the six months
ended December 31, 1997 and the year ended June 30, 1997 and the statement of
operations of MLX for the six months ended December 31, 1997 and the twelve
months ended June 30, 1997, accounting for the Merger as a reverse purchase as
though the Merger had occurred at the beginning of the respective period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1997
------------------------------------------------
HISTORICAL
----------------------- PRO FORMA
MORTON MLX ADJUSTMENTS COMBINED
------------------------------------------------
(In thousands, except per share amounts)
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 46,598 $ - $ - $ 46,598
Cost of sales 41,932 - - 41,932
----------------------------------------------
Gross profit 4,666 - - 4,666
Operating expenses:
Selling expenses 1,202 - - 1,202
Administrative expenses 10,350 1,085 - 11,435
----------------------------------------------
Total operating expenses 11,552 1,085 - 12,637
----------------------------------------------
Operating income (loss) (6,886) (1,085) - (7,971)
Other income (expense):
Interest income 9 973 (788)(3) 194
Interest expense (1,737) - 632(2) (1,105)
Other 46 - - 46
----------------------------------------------
Total other income (expense) (1,682) 973 (156) (865)
----------------------------------------------
Earnings (loss) before income taxes (8,568) (112) (156) (8,836)
Income taxes (3,370) - - (3,370)
----------------------------------------------
Net earnings (loss) $ (5,198) $ (112) $ (156) $ (5,466)
=============================================
Earnings (loss) per common
share - diluted $ (1.56) $ (.04) $ (1.39)(6)
=============================================
Average number of common shares
outstanding - diluted 3,326 2,618 3,936 (6)
=============================================
</TABLE>
PF-4
<PAGE> 5
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1997
------------------------------------------------
HISTORICAL
-------------------- PRO FORMA
MORTON MLX ADJUSTMENTS COMBINED
----------------------------------------------------
(In thousands, except per share amounts)
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 80,762 $ - $ - $ 80,762
Cost of sales 70,541 - - 70,541
----------------------------------------------------
Gross profit 10,221 - - 10,221
Operating expenses:
Selling expenses 1,832 - - 1,832
Administrative expenses 5,171 929 - 6,100
Stock appreciation rights
compensation - 2,225 (1) 2,225
----------------------------------------------------
Total operating expenses 7,003 3,154 - 10,157
----------------------------------------------------
Operating income (loss) 3,218 (3,154) 64
Other income (expense):
Interest income 15 1,865 (1,528) (3) 352
Interest expense (3,266) - 1,265 (2) (2,001)
Other 45 - - 45
----------------------------------------------------
Total other income (expense) (3,206) 1,865 (263) (1,604)
----------------------------------------------------
Earnings (loss) before income
taxes 12 (1,289) (263) (1,540)
Income taxes 5 - (5)(4) -
----------------------------------------------------
Net earnings (loss) $ 7 $ (1,289) $ (258) $ (1,540)
====================================================
Earnings (loss) per common
share - diluted $ --- $ (0.49) $ (0.39)(6)
====================================================
Average number of common
shares outstanding - diluted 3,327 2,618 3,936 (6)
====================================================
</TABLE>
PF-5
<PAGE> 6
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (CONTINUED)
Notes
(1) On February 12, 1997, MLX's Board of Directors approved the conversion of
all the common stock options held by its former Chief Executive Officer to
Stock Appreciation Rights (SAR's), and all such SAR's were exercised as of
that date. The resulting liability under this agreement amounted to $2.2
million and was disbursed in February 1997. The non-recurring
compensation expense from this transaction is reported in the accompanying
statement of operations for the twelve months ended June 30, 1997. Pro
forma operating results for the year ended June 30, 1997, without this
nonrecurring compensation charge would be as follows:
Net earnings $ 411
Earnings per common share - diluted $0.09
(2) Represents adjustment to interest expense as a result of the assumed
repayment of $11,000 of 11.5% Senior Notes Payable of Morton with cash
from MLX.
(3) Represents adjustment to interest income as a result of the use of funds
for cash paid for the purchase of Morton Common Stock and the repayment of
$11,000 of 11.5% Senior Notes Payable of Morton. The interest income
adjustment was based on the average earnings on investments by MLX for the
period (5.09% for the six months ended December 31, 1997 and 4.93% for the
year ended June 30, 1997).
(4) Represents adjustment of the income tax provision to the estimated
effective rate.
(5) The pro forma condensed combined statement of operations does not include
the accrual of a $350 severance package granted to an officer of MLX.
Such amount will be charged to MLX's operations in the quarter ending
March 31, 1998, when such amount is awarded.
(6) Income (loss) per common shares - dilutive was computed based on the
weighted average number of shares of common outstanding. Pro forma income
(loss) per common share - diluted is computed using weighted average
shares of Class A Common Stock and Class B Common Stock outstanding after
the Merger (3,936,574 shares for the six months ended December 31, 1997
and the year ended June 30, 1997).
PF-6
