<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[ x ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended October 31, 1995
-----------------------------------------------------------
OR
[ ] Transition Report Pursuant To Section 13 Or 15(d) of The Securities
Exchange Act of 1934
For the transition period from to
-------------------------------------- --------
Commission file number: 0-1363
--------------------------------------------------------
MRL, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Missouri 43-0614403
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
112 Point West Blvd., Suite 500, St. Charles, Missouri 63301
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(314) 946-6900
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 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
---- ----
<TABLE>
<CAPTION>
Title of class of Common Stock Number of Shares outstanding as of this report date
- ------------------------------ ---------------------------------------------------
<S> <C>
Common Stock, par value $.10 per share 2,685,694
-----------
</TABLE>
<PAGE> 2
PART I
FINANCIAL INFORMATION
<PAGE> 3
<TABLE>
CONDENSED BALANCE SHEETS
OCTOBER 31 AND JANUARY 31, 1995
<CAPTION>
OCTOBER 31 JANUARY 31
---------- ----------
(Unaudited)
<S> <C> <C>
Assets
- ------
Current Assets:
Cash and cash equivalents $ 56,000 $ 47,000
Accounts receivable, net 623,000 547,000
Notes receivable -- 278,000
Inventories 863,000 853,000
Prepaid expenses and
other current assets 45,000 57,000
Deferred income taxes 39,000 35,000
------------- -------------
1,626,000 1,817,000
Property, plant and equipment, net 296,000 443,000
Other assets 19,000 16,000
Deferred income taxes 300,000 362,000
------------- -------------
$ 2,241,000 $ 2,638,000
============= =============
Liabilities and Shareholders' Equity (Deficit)
- ----------------------------------------------
Current Liabilities:
Current maturities of long-term debt
and capital lease obligations $ 403,000 $ 750,000
Accounts payable 729,000 388,000
Accrued expenses 232,000 245,000
Accrued payroll and payroll taxes 100,000 97,000
------------- -------------
Total current liabilities 1,464,000 1,480,000
Long-Term Obligations:
Long-term debt and capital lease obligations 1,130,000 1,486,000
Less current maturities of
long-term obligations 403,000 750,000
------------- -------------
727,000 736,000
Shareholders' Equity (Deficit):
Common stock 279,000 269,000
Additional paid-in capital 1,351,000 1,339,000
Deficit (1,383,000) (989,000)
------------- -------------
247,000 619,000
Less treasury stock (197,000) (197,000)
------------- -------------
50,000 422,000
------------- -------------
$ 2,241,000 $ 2,638,000
============= =============
</TABLE>
-3-
<PAGE> 4
<TABLE>
UNAUDITED
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1995 AND 1994
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
10/31/95 10/31/94 10/31/95 10/31/94
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $1,065,000 $1,366,000 $3,462,000 $4,161,000
Cost of goods sold 750,000 997,000 2,630,000 3,115,000
----------- ----------- ----------- -----------
Gross profit 315,000 369,000 832,000 1,046,000
Selling and administrative expenses 378,000 442,000 1,243,000 1,417,000
----------- ----------- ----------- -----------
Operating income (loss) (63,000) (73,000) (411,000) (371,000)
Other income (expenses)
Interest expense (41,000) (44,000) (124,000) (124,000)
Gain on sale of assets 176,000 -- 205,000 --
----------- ----------- ----------- -----------
Income (loss) from continuing
operations before income taxes 72,000 (117,000) (330,000) (495,000)
Income taxes (benefit) 27,000 (43,000) 60,000 (183,000)
----------- ----------- ----------- -----------
Income (loss) from continuing
operations 45,000 (74,000) (390,000) (312,000)
Discontinued operations
Loss (gain) from discontinued
segment -- -- (4,000) 425,000
----------- ----------- ----------- -----------
Net income (loss) $ 45,000 $ (74,000) $ (394,000) $ 113,000
=========== =========== =========== ===========
Earnings (loss) per common share:
Continuing operations $ .02 $ (.03) $ (.15) $ (.12)
Discontinued operations -- -- -- .16
----------- ----------- ----------- -----------
Net income (loss) $ .02 $ (.03) $ (.15) $ .04
=========== =========== =========== ===========
</TABLE>
-4-
<PAGE> 5
<TABLE>
UNAUDITED
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 31, 1995 AND 1994
<CAPTION>
1995 1994
--------- ----------
<S> <C> <C>
Cash flow from operating activities:
Net income $(394,000) $ 113,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 94,000 120,000
Provision for bad debts 3,000 18,000
(Gain) loss on sale of assets (205,000) (676,000)
Common stock issuance 22,000 --
Changes in assets and liabilities:
Increase in accounts payable 341,000 41,000
Increase in accounts receivable (78,000) (305,000)
Decrease in deferred income taxes 58,000 66,000
(Decrease) increase in accrued expenses (11,000) 24,000
Decrease (increase) in inventories (10,000) 36,000
Decrease in other, net 9,000 20,000
---------- -----------
Net cash (used in) operating activities (171,000) (543,000)
Cash flows from investing activities:
Capital expenditures (5,000) (10,000)
Proceeds from disposal of fixed assets 7,000 818,000
Collections on notes receivable 534,000 16,000
---------- -----------
Net cash provided by investing activities 536,000 824,000
Cash flows from financing activities:
Proceeds from (payment on) line of credit (108,000) 315,000
Payments on long-term obligations (658,000) (172,000)
Proceeds from long-term obligation 410,000 --
Payment on short-term obligation -- (300,000)
---------- -----------
Net cash used in financing activities (356,000) (157,000)
Net increase in cash and cash equivalents 9,000 124,000
Cash and cash equivalents at beginning of year 47,000 99,000
---------- -----------
Cash and cash equivalents at October 31 $ 56,000 $ 223,000
========== ===========
Supplemental cash flow information:
Interest paid $ 143,000 $ 130,000
========== ===========
Income taxes paid $ -- $ 5,000
========== ===========
Schedule of noncash financing and investing activities:
Credit sale of property, plant and equipment $ 338,000 $ --
========== ===========
</TABLE>
-5-
<PAGE> 6
MRL, INC.
UNAUDITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note A - In the opinion of the Company, the accompanying unaudited
condensed financial statements contain all adjustments necessary to present
fairly the Company's results of operations and changes in financial position
for the three month and nine month periods ended October 31, 1995 and 1994.
All significant intercompany accounts and transactions are eliminated in
consolidation.
The unaudited condensed statement of operations for the three
month and nine month periods ended October 31, 1994 have been restated to
conform to the presentation of the unaudited condensed statement of
operations for the three month and nine month periods ended October 31, 1995.
<TABLE>
Note B - The composition of inventory for the periods ended October 31,
1995 and January 31, 1995 is as follows:
<CAPTION>
10/31/95 1/31/95
----------- ------------
<S> <C> <C>
Finished goods $ 72,000 $ 41,000
Work in process 106,000 78,000
Raw materials and supplies 685,000 734,000
--------- ----------
Total inventory $863,000 $ 853,000
========= ==========
</TABLE>
Note C - Notes receivable at January 31, 1995 is a New Mexico Real Estate
Contract (NOTE) receivable from the sale of a property in Albuquerque, New
Mexico that occurred in fiscal 1994. This New Mexico Real Estate Contract
was sold on February 23, 1995.
A second New Mexico Real Estate Contract received in connection
with the sale of a second property in Albuquerque, New Mexico, was assigned
to the Company's primary lender, Norwest Business Credit, Inc. ("Norwest").
This New Mexico Real Estate Contract was sold in August 1995, with 50% of the
net proceeds being paid to Norwest under the terms of a Standstill Agreement
between the Company and Norwest.
Note D - The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS No. 109"), issued in February 1992. The Company adopted "SFAS No.
109" as of February 1, 1993.
-6-
<PAGE> 7
<TABLE>
Total income tax expense (benefit) for the three and nine month
periods ended October 31, 1995 and 1994 was allocated as follows:
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Three Months Ended October 31:
Income from
Continuing Operations $ 27,000 $ (43,000)
Discontinued Operations -- --
--------- ----------
$ 27,000 $ (43,000)
========= ==========
Nine Months Ended October 31:
Income from
Continuing Operations $ 60,000 $(183,000)
Discontinued Operations (2,000) 250,000
--------- ----------
$ 58,000 $ 67,000
========= ==========
</TABLE>
<TABLE>
Income tax expense (benefit) attributed to income from continuing
operations consists of:
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Three Months Ended October 31, 1995:
U.S. Federal $ -- $ 25,000 $ 25,000
State and Local -- 2,000 2,000
---------- ---------- ----------
$ -- $ 27,000 $ 27,000
========== ========== ==========
Three Months Ended October 31, 1994:
U.S. Federal $ 1,000 $ (38,000) $ (37,000)
State and Local -- (6,000) (6,000)
---------- ---------- ----------
$ 1,000 $ (44,000) $ (43,000)
========== ========== ==========
Nine Months Ended October 31, 1995:
U.S. Federal $ -- $ 55,000 $ 55,000
State and Local -- 5,000 5,000
---------- ---------- ----------
$ -- $ 60,000 $ 60,000
========== ========== ==========
Nine Months Ended October 31, 1994:
U.S. Federal $ 1,000 $(160,000) $(159,000)
State and Local -- (24,000) (24,000)
---------- ---------- ----------
$ 1,000 $(184,000) $(183,000)
========== ========== ==========
</TABLE>
-7-
<PAGE> 8
<TABLE>
The significant components of deferred income tax expense
(benefit) attributable to income from continuing operations for the three and
nine month periods ended October 31 are as follows:
<CAPTION>
Three Months Ended Nine Months Ended
10/31/95 10/31/94 10/31/95 10/31/94
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Deferred Tax
Expense (Benefit) $ 27,000 $(44,000) $(122,000) $(184,000)
Decrease in beginning
of period balance of the
valuation allowance for
deferred tax assets -- -- 182,000 --
--------- --------- --------- ----------
$ 27,000 $(44,000) $ 60,000 $(184,000)
========= ========= ========= ==========
</TABLE>
<TABLE>
The provision for (reduction in) income taxes differs from the amount of
income tax determined by applying the applicable U.S. statutory federal
income tax rate to income from continuing operations before income taxes as a
result of the following differences:
<CAPTION>
Three Months Ended Nine Months Ended
10/31/95 10/31/94 10/31/95 10/31/94
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Computed statutory
tax (32.3%) $ 25,000 $(38,000) $(112,000) $(160,000)
Increase (reduction) in
income taxes resulting from:
State income taxes, net of
federal income tax benefit 2,000 (6,000) (10,000) (24,000)
Alternative minimum
tax provision -- 1,000 -- 1,000
Change in the beginning
of the period balance of
the valuation allowance
for deferred tax assets -- -- 182,000 --
--------- --------- --------- ----------
Income taxes (benefit) $ 27,000 $(43,000) $ 60,000 $(183,000)
========= ========= ========= ==========
</TABLE>
-8-
<PAGE> 9
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets at October 31, 1995 and
January 31, 1995 are presented below.
<TABLE>
<CAPTION>
10/31/95 1/31/95
---------- ---------
<S> <C> <C>
Net operating loss carryforward $1,629,000 $1,442,000
Plant and equipment, principally due
to difference in depreciation 62,000 62,000
Inventories, principally due to additional
costs inventoried for tax purposes
pursuant to the Tax Reform Act of 1986 15,000 15,000
Accrued vacation pay 13,000 13,000
Provision for loss on asset sale and
lawsuit settlement 8,000 40,000
Accounts receivable, principally due to
allowance for doubtful accounts 4,000 35,000
Alternative minimum tax carryforward 5,000 5,000
----------- -----------
Total gross deferred tax assets 1,736,000 1,612,000
Less valuation allowance 1,397,000 1,215,000
----------- -----------
Net deferred tax assets $ 339,000 $ 397,000
=========== ===========
</TABLE>
At October 31, 1995, the Company had net operating loss
carryforwards for federal income tax purposes of approximately $4,600,000
which are available to offset future federal taxable income, if any, for
periods ending from fiscal 2004 through fiscal 2009. In addition, the
Company had alternative minimum tax credit carryforwards of approximately
$5,000 which are available to reduce future federal regular income taxes, if
any, over an indefinite period.
Note F - Earnings (loss) per share are computed using the weighted average
number of shares of common stock outstanding of 2,685,694 and 2,670,676 for
the three months and nine months ended October 31, 1995, respectively, and
2,585,694 for the three months and nine months ended October 31, 1994.
-9-
<PAGE> 10
MRL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
Capital Resources and Liquidity
- -------------------------------
The May 1, 1995, Piggott, Arkansas IRB payment of principal and
interest of approximately $84,000 was made by the Arkansas Industrial
Development Commission ("AIDC") which had guaranteed the IRB payment. In
October, 1995, the AIDC agreed to cure the default on the existing IRB and
restructure the debt. The City of Piggott issued a Refunding IRB in the
amount of $405,000 to AIDC and on November 1, 1995, AIDC made the final
payment of $285,000 due May 1, 1996 on the existing IRB. The Refunding IRB
has a 9.5% interest rate with monthly principal and interest payable over 65
months, beginning in December, 1995. The Refunding IRB is secured by certain
equipment used in the operation of Precision Metals Group.
As of October 31, 1995, the Company was also delinquent on
approximately $52,000 of principal and interest payments required under
certain other long-term debt and capital lease obligations. Discussions are
in progress to negotiate repayment schedules on such obligations and reduced
payments are being made. There is no assurance, however, that the current
repayment schedules will continue to be acceptable to the parties involved.
As of October 31, 1995, the Company was in violation of the debt
service coverage ratio covenant in its loan agreement entered into with
Norwest Business Credit, Inc. ("Norwest"). This covenant is contained in the
agreement entered into with Norwest for a standstill period expiring March
31, 1996 (the "Standstill Agreement"). Effective August 9, 1995, the Company
and Norwest amended the Standstill Agreement to permanently reduce the line
of credit to $475,000 from $900,000 and to provide for the payment of a
minimum interest charge of $5,500 per month. On November 16, 1995, the
Company signed a loan agreement with Concord Growth Corporation ("Concord")
to replace the Norwest financing. The new loan agreement provides for a
credit line of $400,000. Under the terms of the agreement, the Company
assigns eligible account receivable invoices to Concord for collection. In
turn, Concord advances 85% of the invoice amount to the Company. The loan is
secured by all accounts receivable and inventory of the Company. Daily
interest of 0.09% of the amount outstanding is payable under the Concord
agreement, with a minimum interest charge of $4,000 per month. The term of
the loan is six months and is automatically renewable at the end of each
period unless Concord or the Company gives notice of intent not to renew. A
semi-annual fee of 1% of the facility is due at the start of each period.
In addition, the Company may terminate the agreement during the first term by
paying a termination fee or obtaining financing to satisfy all obligations to
Concord through the proceeds from a conventional bank or new equity funding.
The Company can terminate the agreement at anytime during subsequent periods
without a termination fee. On November 22, 1995, payment of the outstanding
balance of the Norwest loan was made, satisfying all obligations to Norwest.
-10-
<PAGE> 11
The Company failed to make principal and interest payments to the Bank
of Hoffman on a real estate mortgage secured by the Utility Products Group
facility in Hoffman, Illinois for the months of May through October, 1995.
The Company has reached an agreement with the Bank of Hoffman for payment of
interest only through April 30, 1996 at which time principal payments will
resume. The balance of the principal due will be paid in monthly
installments over the remaining term of the loan, which is due April 30,
2003. All past due interest payments have now been made. The current
principal amount of the loan is approximately $130,000.
The Company has made personnel reductions in the Utility Products Group
and implemented cost reductions for the entire Company. However, if the
Company continues to experience significant operating losses, there is no
assurance sufficient capital will be available to meet its obligations.
On August 11, 1995, the Company received $255,000 in proceeds from the
sale of the New Mexico Real Estate Contract. Under the Standstill Agreement
with Norwest, the Company received 50% of the net proceeds from this sale and
the balance was paid to Norwest, which payment was applied against the
Norwest loan when it was repaid on November 22, 1995.
After the Company sold the second New Mexico Real Estate Contract, the
Company's Board of Directors determined not to repurchase 250,000 shares of
the Company's common stock for $78,125 by September 1, 1995 under an
agreement with its former president, the purchase of which was subject to the
Board of Directors' approval.
Accounts payable increased $341,000 from January 31, 1995 to October
31, 1995. The increase was directly related to the amount of losses incurred
during the first three quarters of fiscal 1996. Accounts payable decreased
$9,000 from July 31, 1995 to October 31, 1995, principally as a result of the
application of substantially all of the portion of the proceeds from the sale
of the second New Mexico Real estate Contract received by the Company to
reduce outstanding accounts payable. As a result of the current level of
accounts payable, the Company has experienced difficulty in obtaining
materials from certain of its vendors. However, as of October 31, 1995,
agreements had been reached with all essential vendors and the Company has
been able to obtain materials needed to fulfill its orders. Accounts payable
decreased $41,000 for the nine month period ended October 31, 1994. The
decrease was directly related to funds provided by the sale of real estate
during the first quarter of fiscal 1995.
Accounts receivable increased $76,000 from January 31, 1995 to October
31, 1995, reflecting higher sales at the Precision Metals Group in September
and October 1995 compared to December 1994 and January 1995.
Inventories increased $10,000 from January 31, 1995 to October 31,
1995. The Company has adopted an inventory reduction program to more
efficiently utilize working capital. This program has resulted in a reduction
of $225,000 in inventory since May 31, 1995, primarily at the Utility
Products Group.
-11-
<PAGE> 12
Results of Operations
- ---------------------
<TABLE>
Sales decreased 22% for the three month period and decreased 17% for
the nine month period ended October 31, 1995, when compared to the same
periods in fiscal 1995. Changes in sales by operating group, are as follows:
<CAPTION>
Three Months Ended Nine Months Ended
October 31, 1995 October 31, 1995
------------------------------------- -------------------------------------
Net % Change Net % Change
Increase Over Increase Over
(Decrease) Prior Year (Decrease) Prior Year
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Utility Products $(523,000) (50%) $(966,000) (32%)
Precision Metals 159,000 38% 170,000 12%
---------- ----------
Net Total $(364,000) $(796,000)
========== ==========
</TABLE>
The decrease in sales for the Utility Products Group in each of the
first three quarters of fiscal 1996 compared with the same periods in the
prior year is a continuation of the reduced level of demand by this group's
customers. The Company has restructured this group in light of current
reduced sales levels and is negotiating to obtain certain additional
business. Sales in the fiscal fourth quarter are expected to exceed those of
the previous two quarters. However, there is no assurance that higher sales
will continue under current industry conditions.
The Precision Metals Group experienced an increase in sales for the
three month and nine month periods ended October 31, 1995, compared with the
same periods in the prior year, principally from sales to new customers and
new programs with existing customers. The Company believes this is primarily
the result of increased sales efforts. The Company anticipates a continuing
growth in sales from the Precision Metals Group for the balance of fiscal
1996 at reasonable operating margins.
Selling and administrative expenses for the three month and nine month
periods ended October 31, 1995 were less than the comparable periods in the
prior year, primarily as a result of the Company's cost reduction and
restructuring efforts.
Interest expense for the three month and nine month periods ended
October 31, 1995 was $41,000 and $124,000, respectively. This reflects a
$3,000 decrease in the third quarter, compared to the same period in fiscal
1995. Interest for the nine month period ended October 31, 1995 was the same
as the prior year period. Higher interest rates on borrowings in the fiscal
1996 periods were offset by lower levels of borrowing. It is anticipated
that the Concord loan arrangement will increase overall interest expense.
-12-
<PAGE> 13
During the three month period ended October 31, 1995, the Company
realized a $176,000 gain on the sale of the New Mexico Real Estate Contract,
which was reflected as a gain on the sale of assets. A $29,000 gain was
previously recorded during the quarter ended April 30, 1995 at the time of
the sale of the real property in which the Company received the Real Estate
Contract. During the three month and nine month periods ended October 31,
1994, the Company realized a gain of $676,000 from the sale of its St.
Charles, Missouri real property which was reflected as a gain on the sale of
assets of a discontinued operation.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
No. 109") issued in February 1992. For the three month period ended October
31, 1995, the Company recorded $27,000 of income tax expense compared to
$(43,000) of income tax benefit in the same period in fiscal 1995. For the
nine month period ended October 31, 1995, the Company recorded $58,000 of
income tax expense compared to $67,000 for the same period in fiscal 1995.
For the three month and nine month periods ended October 31, 1995,
discontinued operations contained a $2,000 benefit for income taxes, and for
the nine month period ended October 31, 1994 discontinued operations
contained $250,000 of income tax expense. The valuation allowance for
deferred income taxes was increased by $182,000 during the three month period
ended October 31, 1995, while in the comparable prior year period, the
valuation allowance for deferred income taxes was not adjusted. The fiscal
1996 and 1995 income tax expense amounts were recorded as reductions to the
deferred income tax asset and will not require a cash payment.
For the three months ended October 31, 1995, the Company experienced a
$45,000 net profit compared to a net loss of $74,000 for the same period in
the prior year. For the nine months ended October 31, 1995, the Company had
a net loss of $394,000 compared to net income of $113,000 for the same period
in the prior year. The three and nine month periods ended October 31, 1995
included a gain realized upon the sale of a New Mexico Real Estate Contract.
The fiscal 1996 periods were adversely affected by the decreased sales volume
in the Utility Products Group mentioned above and by the adjustment to the
valuation allowance for deferred income taxes. The three and nine month
periods ended October 31, 1994 contained the gain from the St. Charles real
estate sale.
The Company has been contacted regarding a paint warranty issue by the
end user of standby power units supplied during fiscal 1994 with powder
coated paint, in connection with substantial paint imperfections on such
units. In late December 1994 the Company's customer, who had received the
standby power units and ultimately shipped them to the end user, filed a
breach of contract lawsuit against the Company for damages of an amount to be
determined, but in excess of $1,100,000. It is the opinion of the Company
that the liability for correction of this problem is the responsibility of an
independent vendor that performed the powder coating for the Company. Should
the vendor be unable to satisfy this liability, which the Company understands
is likely to be the case, it is the opinion of management that the Company
has insurance coverage that will satisfy this liability. However, in
December 1994 the Company's insurance carrier denied coverage. The Company
has brought suit against its insurance carrier seeking to be defended and
indemnified by the carrier against the Customer's suit. In addition, the
Company has a separate suit against the company that performed the powder
coating. Management cannot predict the outcome of these legal actions at
this time. A ruling against the Company resulting in a substantial financial
liability for the Company would have an adverse effect on the ability of the
Company to continue to operate in a normal manner.
-13-
<PAGE> 14
The Company has been named as defendant in a lawsuit pertaining to
merchandise sold in a discontinued line of business in 1987. The lawsuit was
originally filed in 1990, voluntarily dismissed and then refiled in 1992. The
matter became subject to court appointed, non-binding arbitration, and in May
1995, the arbitrator ruled against the Company. The Company has exercised
its right to appeal the arbitrator's ruling and proceed to trial, in which
the matter will be tried without reference to the arbitrator's ruling. The
Company has made provision of an amount for the settlement of this matter in
its current liabilities at January 31, 1995. The Company will continue to
pursue an out of court settlement.
-14-
<PAGE> 15
PART II
OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
-------------------------------
The May 1, 1995, Piggott, Arkansas IRB payment of principal and
interest of approximately $84,000 was made by the Arkansas Industrial
Development Commission ("AIDC") which had guaranteed the IRB payment. In
October, 1995, the AIDC agreed to cure the default on the existing IRB and
restructure the debt. The City of Piggott issued a Refunding IRB in the
amount of $405,000 to AIDC and on November 1, 1995, AIDC made the final
payment of $285,000 due May 1, 1996 on the existing IRB. The Refunding IRB
has a 9.5% interest rate with monthly principal and interest payable over 65
months, beginning in December, 1995. The Refunding IRB is secured by certain
equipment used in the operation of Precision Metals Group.
As of October 31, 1995, the Company was also delinquent on
approximately $52,000 of principal and interest payments required under
certain other long-term debt and capital lease obligations. Discussions are
in progress to negotiate repayment schedules on such obligations and reduced
payments are being made. There is no assurance, however, that the current
repayment schedules will continue to be acceptable to the parties involved.
As of October 31, 1995, the Company was in violation of the debt
service coverage ratio covenant in its loan agreement entered into with
Norwest Business Credit, Inc. ("Norwest"). This covenant is contained in the
agreement entered into with Norwest for a standstill period expiring March
31, 1996 (the "Standstill Agreement"). Effective August 9, 1995, the Company
and Norwest amended the Standstill Agreement to permanently reduce the line
of credit to $475,000 from $900,000 and to provide for the payment of a
minimum interest charge of $5,500 per month. On November 16, 1995, the
Company signed a loan agreement with Concord Growth Corporation ("Concord")
to replace the Norwest financing. The new loan agreement provides for a
credit line of $400,000. Under the terms of the agreement, the Company
assigns eligible account receivable invoices to Concord for collection. In
turn, Concord advances 85% of the invoice amount to the Company. The loan is
secured by all accounts receivable and inventory of the Company. Daily
interest of 0.09% of the amount outstanding is payable under the Concord
agreement, with a minimum interest charge of $4,000 per month. The term of
the loan is six months and is automatically renewable at the end of each
period unless Concord or the Company gives notice of intent not to renew. A
semi-annual fee of 1% of the facility is due at the start of each period.
In addition, the Company may terminate the agreement during the first term by
paying a termination fee or obtaining financing to satisfy all obligations to
Concord through the proceeds from a conventional bank or new equity funding.
The Company can terminate the agreement at anytime during subsequent periods
without a termination fee. On November 22, 1995, payment of the outstanding
balance of the Norwest loan was made, satisfying all obligations to Norwest.
-15-
<PAGE> 16
The Company failed to make principal and interest payments to the Bank
of Hoffman on a real estate mortgage secured by the Utility Products Group
facility in Hoffman, Illinois for the months of May through October, 1995.
The Company has reached an agreement with the Bank of Hoffman for payment of
interest only through April 30, 1996 at which time principal payments will
resume. The balance of the principal due will be paid in monthly
installments over the remaining term of the loan, which is due April 30,
2003. All past due interest payments have now been made. The current
principal amount of the loan is approximately $130,000.
The Company failed to make required principal and interest payments for
the months of June through November of approximately $12,000 per payment on a
note payable to one of its vendors. Due to this violation, the total
principal and interest of approximately $105,000 was due and payable at
October 31, 1995. Since July 14, 1995, the Company has made voluntary
payments of a reduced amount of $1,000 per week on the note, although no
formal reduced payment schedule has been agreed to by the vendor.
Item 5. Other Information
-----------------
William C. Cottle resigned as a director of the Company effective
August 22, 1995. Mr. Cottle resigned as the President of the
Company on March 15, 1995.
Duane E. Obert, Treasurer and Chief Financial Officer of the
Company, resigned effective November 30, 1995.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) See Exhibit Index on Page 18.
(b) There were no Reports on Form 8-K filed during the quarter ended
October 31, 1995.
-16-
<PAGE> 17
MRL, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MRL, Inc.
Date: December 13, 1995 By: /s/ Larry J. Stallings
-----------------------------------
Larry J. Stallings
President,
Chief Executive Officer and
Chief Financial Officer
-17-
<PAGE> 18
<TABLE>
MRL, Inc.
EXHIBIT INDEX
<CAPTION>
Exhibit
Number Description
- ------- -----------------------------------------
<C> <S>
4(f) First Supplemental Lease and Agreement entered into as of
November 1, 1995 between the City of Piggott, Arkansas and the
Company relating to $405,000 City of Piggott, Arkansas Industrial
Development Refunding Revenue Bond.
4(g) Guaranty Agreement entered into as of November 1, 1995,
between the Company and the Department of Industrial Development of
the State of Arkansas relating to $405,000 City of Piggott, Arkansas
Industrial Development Refunding Revenue Bond.
4(h) Subordination Agreement entered into as of November 1, 1995,
between the City of Piggott, Arkansas, the Company and the
Department of Industrial Development of the State of Arkansas
relating to $405,000 City of Piggott, Arkansas Industrial
Development Refunding Revenue Bonds.
4(i) Release Agreement entered into as of November 1, 1995, between
the City of Piggott, Arkansas and the Company, relating to original
Lease and Agreement dated as of May 1, 1984.
10(p) Factoring Agreement with Concord Growth Corporation, dated
November 14, 1995, filed herewith.
10(q) Amendment to Factoring Agreement with Concord Growth Corporation,
effective November 14, 1995, filed herewith.
11 Computation of Weighted Average Number
of Shares, filed herewith.
</TABLE>
-18-
<PAGE> 1
Exhibit 4(f)
FIRST SUPPLEMENTAL LEASE AGREEMENT
between
CITY OF PIGGOTT, ARKANSAS
and
MRL, INC.
(formerly Missouri Research Laboratories, Inc.)
Dated as of November 1, 1995
Relating to $405,000 City of Piggott, Arkansas Industrial
Development Refunding Revenue Bond - MRL, Inc. Project, Series 1995
<PAGE> 2
FIRST SUPPLEMENTAL LEASE AND AGREEMENT
This FIRST SUPPLEMENTAL LEASE AND AGREEMENT made as of
the first day of November, 1995, by and between the CITY OF
PIGGOTT, ARKANSAS ("Lessor") and MRL, INC., a corporation organized
under and existing by virtue of the laws of the State of Missouri
("Lessee");
W I T N E S E T H:
WHEREAS, Lessor and Lessee (formerly Missouri Research
Laboratories, Inc.) have heretofore entered into a Lease and
Agreement dated as of May 1, 1984, which is recorded in the office
of the Circuit Clerk and Ex-Officio Recorder of Clay County,
Arkansas in Misc. Record Book Misc. 10, at page 770 (the "Original
Lease Agreement") covering certain machinery, equipment and other
personal property (the "Project") located on the lands described in
Exhibit A attached hereto (the "Plant"); and
WHEREAS, Lessor has heretofore issued its Industrial
Development Revenue Bonds Missouri Research Laboratories, Inc.
Project, Series A, dated May 1, 1984 and in the principal amount of
$1,000,000 (the "Prior Bonds") secured by a Trust Indenture by and
between Lessor and Boatmen's Trust Company (as successor to
Centerre Trust Company of St. Louis), as Trustee (the "Trustee"),
dated as of May 1, 1984 (the "1984 Indenture"); and
WHEREAS, the Prior Bonds are guaranteed by the Department
of Industrial Development of the State of Arkansas (the
"Department"), pursuant to a Guaranty of Payment of Industrial
Development Revenue Bonds dated as of May 1, 1984 (the "1984
Guaranty"), among Lessor, the Department and the Trustee; and
WHEREAS, the Prior Bonds are secured by a mortgage lien
on the Plant and a security interest in the Project in favor of the
Trustee; and
WHEREAS, Lessor has assigned its rights to payments due
under the Original Lease Agreement to pay the principal of and
interest on the Prior Bonds when due; and
WHEREAS, the Department is subrogated to the rights of
Lessor and the Trustee to the extent of payments made under the
1984 Guaranty; and
WHEREAS, the Department made the principal and interest
payment due on the Prior Bonds on May 1, 1995, because Lessee
failed to make its rental payment due under the Original Lease
Agreement on that date; and
<PAGE> 3
WHEREAS, Lessee remains in default under the Original
Lease Agreement; and
WHEREAS, the Department proposes to redeem the Prior
Bonds on November 1, 1995, by paying the outstanding principal
amount of the Prior Bonds, plus accrued interest; and
WHEREAS, in lieu of exercising its right to foreclose on
the Plant and the Project, the Department has offered, and Lessor
and Lessee have agreed, to restructure the debt represented by the
Prior Bonds by Lessor issuing its refunding bond to the Department,
and by continuing to lease the Project to the Company with an
extension of the term of the Original Lease Agreement and a
restructuring of the payments due as rent thereunder; and
WHEREAS, the refunding bond will be issued in the
principal amount of $405,000 which is equal to the principal amount
of the Prior Bonds presently outstanding, the interest on the Prior
Bonds due November 1, 1995, the amounts that have been heretofore
advanced by the Department to pay principal and interest on the
Prior Bonds, and the expenses of issuing the refunding bond; and
WHEREAS, Lessee represents and warrants that it is a
corporation duly incorporated under the laws of the State of
Missouri and in good standing under the laws of such state, is duly
authorized to do business in the State of Arkansas, is not in
violation of any provision of its Articles of Incorporation or its
Bylaws, has power to enter into this First Supplemental Lease and
Agreement, and has duly authorized the execution and delivery of
this First Supplemental Lease and Agreement by proper corporate
action; and
WHEREAS, Lessee represents and warrants that neither the
execution and delivery of this First Supplemental Lease and
Agreement, the consummation of the transactions contemplated hereby
nor the fulfillment of or compliance with the terms and conditions
of this First Supplemental Lease and Agreement conflicts with or
results in a breach of the terms, conditions or provisions of any
restriction or any agreement or instrument to which Lessee is now
a party or by which Lessee is bound, or constitutes a default under
any of the foregoing or results in the creation or imposition of
any lien, charge or encumbrance whatsoever upon any of the property
or assets of Lessee except any interests herein under the terms of
any instrument or agreement; and
WHEREAS, Lessee represents and warrants that no approval,
consent or authorization of, or registration, declaration or filing
with, any governmental or public body or authority is required in
connection with the valid execution delivery and performance by
-2-
<PAGE> 4
the Lessee of this First Supplemental Lease and Agreement which has
not heretofore been obtained; and
WHEREAS, Lessee represents and warrants that when
executed and delivered, this First Supplemental Lease and Agreement
will be a valid and binding obligation or agreement of Lessee
enforceable in accordance with its terms (subject to bankruptcy
insolvency, reorganization, moratorium and other similar laws
affecting creditors' rights heretofore or hereafter enacted to the
extent constitutionally applicable) and that their enforcement may
also be subject to the exercise of judicial discretion in
appropriate cases;
NOW, THEREFORE, for valuable consideration, receipt of
which is hereby acknowledged by Lessor and Lessee, and in
consideration of the mutual benefits and covenants of the parties
under the Original Lease Agreement and under this First
Supplemental Lease and Agreement, Lessor and Lessee agree as
follows:
ARTICLE I
AMENDMENTS AND SUPPLEMENTS
TO ORIGINAL LEASE AGREEMENT
---------------------------
Section 101. Section 101 of the Original Lease Agreement
-----------
is hereby amended and supplemented as follows:
"Authorized Lessee Representative" - The person at the
time designated to act in behalf of Lessee by written certificate
furnished to Lessor and the Department containing the specimen
signature of such person and signed on behalf of Lessee by the
President of Lessee. Such certificate may designate an alternate
or alternates.
"Authorized Lessor Representative" - The person at the
time designated to act in behalf of Lessor by written certificate
furnished to Lessee and the Department containing the specimen
signature of such person and signed on behalf of Lessor by the
Mayor. Such certificate may designate an alternate or alternates.
"Department of Industrial Development" or "Department" -
The Department of Industrial Development of the State of Arkansas,
and any successor department or agency. Whenever referred to
herein, it is intended by Lessor and Lessee that so long as the
Refunding Bond is outstanding under the Indenture, the Department
of Industrial Development shall have and be entitled to all rights
set forth in connection with such reference as though and to the
extent as if it were a signatory party hereto and shall be entitled
to exercise such rights on its own behalf and in its own name.
-3-
<PAGE> 5
"Guaranty" - The Guaranty Agreement dated as of
November 1, 1995, by and between Lessee and the Department,
pursuant to which Lessee guarantees the payment of the principal of
and interest on the Refunding Bond and any amendments and
supplements thereto.
"Indenture" or "Trust Indenture" - Prior to November 1,
1995, such term shall mean the Trust Indenture between Lessor and
the Trustee, dated as of May 1, 1984, which is recorded in the
office of the Circuit Clerk and Ex Officio Recorder of Clay County,
Arkansas. Thereafter, such term shall mean the Indenture between
Lessor and the Department dated as of November 1, 1995, which is
recorded in the office of the County Clerk and Ex Officio Recorder
of Clay County, Arkansas. All references in the Indenture, in this
Lease Agreement, and in the authorizing ordinances to "Indenture"
shall mean the definition as expressed herein.
"Lease Agreement" - The Lease and Agreement between
Lessor and Lessee, dated as of May 1, 1984, recorded in the office
of the Circuit Clerk and Ex Officio Recorder of Clay County
Arkansas, together with all supplements thereto, including
particularly the First Supplemental Lease and Agreement, dated as
of November 1, 1995. All references in this Lease Agreement, in
the Indenture (particularly, but without limitation, the granting
clauses), and in the authorizing ordinances to "Lease Agreement"
shall mean the definition as expressed herein.
"Lessee" - MRL, Inc., a corporation organized and
existing under the laws of the State of Missouri, and its permitted
successors and assigns hereunder.
"Refunding Bond" - The City of Piggott, Arkansas
Industrial Development Revenue Refunding Bond - MRL, Inc. Project,
Series 1995, in the principal amount of $405,000.
Section 102. Article IV of the Original Lease Agreement
-----------
is hereby amended to read as follows:
"Section 401. Lessor, for and in consideration of the
-----------
rents, covenants and agreements herein reserved, mentioned and
contained, on the part of Lessee to be paid, kept and performed,
agrees to and does hereby lease, take and hire from Lessor, subject
to the terms, conditions and provisions of this Lease Agreement
expressed, all machinery, equipment and other personal property of
every kind and nature whatever acquired by Lessor and paid for from
the proceeds of the Bonds and placed on or in the lands and/or the
improvements described in Exhibit A hereto, or elsewhere, whether
or not such machinery and equipment becomes affixed thereto,
including, without limitation, all machinery and equipment
-4-
<PAGE> 6
described in Exhibit B hereto and all replacements and
substitutions which become the property of the Lessor pursuant to
the provisions of this Lease Agreement. The machinery, equipment
and other personal property leased hereby shall be referred to
herein as 'Leased Equipment.'
TO HAVE AND TO HOLD the Leased Equipment unto the Lessee
for the term of this Lease Agreement as hereafter set forth.
Section 402. The initial term of this Lease Agreement
-----------
shall commence on May 1, 1984, and shall continue until April 1,
2001, and as long thereafter as the Refunding Bond remains
outstanding under the Indenture.
Section 403. (a) Basic Rent.
----------- ----------
(1) Lessee covenants to pay to Lessor, in the manner
hereinafter provided in Section 404, Basic Rent monthly in the
amounts necessary to pay interest on and principal of the Refunding
Bond as the same becomes due under the provisions of the Indenture.
Basic Rent shall be payable on November 29, 1995 and the 29th day
of each month thereafter until the principal of and interest on the
Refunding Bond shall have been fully paid. In the event a Basic
Rent payment date falls on a Saturday or Sunday or a day on which
banking institutions are authorized by law to close, the Basic Rent
payment involved shall not be due and payable until the time of
opening of business on the next succeeding day thereafter that is
a banking day.
(b) Additional Rent. During the term hereof, Lessee
---------------
shall pay as Additional Rent the expenses and charges payable to
the Department, any expenses which are required to be incurred by
Lessor pursuant to the provisions of the Lease Agreement or the
Indenture the payment of which is not otherwise provided for by
applicable provisions of the Lease Agreement or the Indenture, and
all impositions (as defined in Section 501), expenses, liabilities,
obligations and other payments of whatever nature which Lessee has
agreed to pay or assume under the provisions of this Lease
Agreement. If at any time any amounts paid by Lessee as Additional
Rent hereunder are or become in excess of the amounts required for
the purposes for which they were paid, such excess amounts shall be
refunded to Lessee.
(c) Until the principal of and interest on the
Refunding Bond shall have been paid, Lessee's obligation to pay
Basic Rent and Additional Rent shall be absolute and unconditional
and the Basic Rent and the Additional Rent shall be certainly
payable on the dates or at the times specified, and without
abatement or set-off, and regardless of any contingencies
whatsoever, and
-5-
<PAGE> 7
notwithstanding any circumstances or occurrences that may now exist
or that may hereafter arise or take place, including, but without
limiting the generality of the foregoing
(1) The unavailability of the Leased Equipment, or any
part thereof, for use by the Lessee at any time by reason of the
failure to complete the Project by any particular time or at all or
by reason of any other contingency, occurrence or circumstances
whatsoever;
(2) Damage to or destruction of the Leased Equipment,
or any part thereof;
(3) Legal curtailment of Lessee's use of the Leased
Equipment, or any part thereof;
(4) Change in Lessor's legal organization or status;
(5) The taking of title to or the temporary use of the
whole or any part of the Leased Equipment by condemnation;
(6) Any assignment under the provisions of Article III
including, without limitation, an assignment as part of a
transaction involving merger, consolidation or sale of all or
substantially all of Lessee's assets, as provided in Section 1701;
subject, however, to the provisions of Section 1701 that
performance by an assignee or sublessee shall be considered as
performance pro tanto by Lessee;
(7) Any termination of this Lease Agreement for any
reason whatsoever, including, without limitation, termination under
Article XX;
(8) Failure of consideration or commercial frustration
of purposes;
(9) Any change in the tax or other laws of the United
States of America or of the State of Arkansas; or
(10) Any default of the Lessor under this Lease
Agreement, or any other fault or failure of the Lessor whatsoever.
Lessee covenants that it will not enter into any
contract, indenture or agreement of any nature whatsoever which
shall in any way limit, restrict or prevent Lessee from performing
any of its obligations under this Lease Agreement.
Section 404. Payments of Basic Rent shall be made to
-----------
Lessor by Lessee's remitting the same directly to the Department,
-6-
<PAGE> 8
for the account of Lessor. Such payments shall be applied to pay
the principal of and interest on the Refunding Bond. Additional
Rent specified in Section 403(b) shall be paid by Lessee's
remitting the same directly to the Department, for the account of
Lessor, in the case of the Department's expenses and charges, and
either making direct payment in the case of impositions and other
costs, expenses, liabilities and payments assumed and agreed to be
paid by Lessee under this Lease Agreement, or reimbursing Lessor or
Department, if, pursuant to the provisions of this Lease Agreement,
or Department shall make payment thereof.
Section 405. Lessor covenants that Lessee, upon paying
-----------
the rentals and performing all covenants, obligations and
agreements on the part of Lessee to be performed under this Lease
Agreement, shall and may peaceably and quietly have, hold and enjoy
the Leased Equipment for the term of this Lease Agreement."
Section 103. Section 501 of the Original Lease Agreement
-----------
is hereby amended to read as follows:
"Section 501. Subject to the provisions of Section 502,
-----------
Lessee shall pay all taxes and assessments, general and specific,
if any, levied and assessed on the Leased Equipment and the Plant
during the term, and all water and sewer charges, assessments, and
other governmental charges and impositions whatsoever, foreseen and
unforeseen, which if not paid when due, would impair the lien of
the Indenture on the Leased Equipment and the Plant or the security
of the Refunding Bond, encumber Lessor's title, or impair the right
of the Lessor and the Department to receive the rent hereunder or
in any manner whatsoever diminish the amounts thereof, all of which
are herein called impositions; provided, however, that any
impositions relating to a fiscal period of the taxing authority,
part of which extends beyond the term, shall be apportioned as of
the expiration of the term. Lessor shall promptly forward to Lessee
any notice, bill or other statement received by Lessor concerning
any impositions. Lessee may pay any imposition in installments if
so payable by law, whether or not interest accrues on the unpaid
balance."
Section 104. Section 601 of the Original Lease Agreement
-----------
is hereby amended to read as follows:
"Section 601. A. Lessee shall, at Lessee's sole cost and
-----------
expense, keep the Plant and Leased Equipment insured:
(i) Against the perils of fire and the hazards
ordinarily included under broad form extended coverage
endorsements in amounts not less than their sound
-7-
<PAGE> 9
replacement value but not less than the outstanding
principal amount of the Refunding Bond.
(ii) If there are boiler or pressure vessels, from
boiler or pressure vessel explosion in an amount
customarily carried in the case of similar industrial
operations.
The term "sound replacement value" means such value as
shall be determined from time to time at the request of Lessor,
Lessee or Department (but not more frequently than once in every
forty-eight (48) months) by one of the insurers selected by Lessee.
B. At all times during the term, Lessee shall, at no
cost or expense to Lessor, maintain or cause to be maintained:
(i) General public liability insurance against
claims for bodily injury or death occurring upon, in or
about the Leased Equipment and the Plant, with such
insurance to afford protection to the limits of not less
than $500,000 in respect of bodily injury or death to any
one person and to the limit of not less than $1,000,000
in respect of any one accident; and
(ii) Property damage insurance against claims for
damage to property occurring upon, in or about the Leased
Equipment and the Plant with such insurance to afford
protection to the limit of not less than $100,000 in
respect of damages to the property of any one owner.
C. The insurance required by this Article VI shall be
maintained in full force and effect at all times during the term of
this Lease Agreement.
D. Copies or certificates of the insurance provided
for by this Article or elsewhere in this Lease Agreement shall be
delivered to Lessor and the Department. And, in the case of
expiring policies throughout the term, copies or certificates of
any new or renewal policies shall be delivered by Lessee to Lessor
and the Department. At the time of the delivery of this Lease
Agreement, copies or certificates of all insurance meeting the
requirements of this Lease Agreement shall be delivered to the
Department.
E. Policies of insurance provided for in Section 601
A. of this Article VI shall name Lessor and Lessee as insureds as
their respective interests may appear, provided, however, that the
Department shall also be named as a party insured pursuant to a
standard mortgagee clause as its interests may appear.
-8-
<PAGE> 10
F. All insurance required by this Section 601 shall
be effected with insurance companies qualified to do business in
the State of Arkansas selected by the Lessee and acceptable to the
Department. Lessee shall cause appropriate provisions to be
inserted in each insurance policy making each policy noncancellable
without at least ten (10) days prior written notice to Lessor,
Lessee and the Department. Also, it is agreed that no claim shall
be made and no suit or action at law or in equity shall be brought
by the Lessor or by anyone claiming by, through or under Lessor,
against Lessee for any damage to the Leased Equipment or the Plant
covered by the insurance provided for by this Article VI, however
caused, but nothing in this Subsection F shall diminish Lessee's
obligation to repair or rebuild as provided in Article XV. The
Lessee shall have the sole right and responsibility to adjust any
loss with the insurer involved and to conduct any negotiations in
connection therewith."
Section 105. Section 1001 of the Original Lease
-----------
Agreement is hereby amended to read as follows:
"Section 1001. If any lien shall be filed against the
------------
interest of Lessor, Lessee or the Department in the Plant or the
Leased Equipment or asserted against any rents payable hereunder,
by reason of work, labor, services or materials supplied or claimed
to have been supplied on or to the Leased Equipment or the Plant at
the request or with the permission of Lessee, or anyone claiming
under Lessee, Lessee shall, within thirty (30) days after receipt
of notice of the filing thereof or the assertion thereof against
such rents, cause the same to be discharged of record, or
effectively prevent the enforcement or foreclosure thereof against
the Plant or Leased Equipment or such rents, by contest, payment,
deposit, bond, order of Court or otherwise. Nothing contained in
this Lease Agreement shall be construed as constituting the express
or implied consent to or permission of Lessor for the performance
of any labor or services or the furnishing of any materials that
would give rise to any such lien against Lessor's interest in the
Leased Equipment or the Plant."
Section 106. Section 1101 of the Original Lease
-----------
Agreement is hereby amended to read as follows:
"Section 1101. Commencing with the completion of the
------------
Project or when the Lessee takes possession if prior to the
completion, Lessee shall and agrees to indemnify and save Lessor
and the Department harmless against and from all claims by or on
behalf of any person, firm or corporation arising from the conduct
or management of, or from any work or thing done with, the Leased
Equipment or the Plant during the term, and against and from all
claims arising during the term from (a) any condition of the Leased
-9-
<PAGE> 11
Equipment or the Plant, (b) any breach or default on the part of
Lessee in the performance of any of its obligations under this
Lease Agreement, (c) any act or negligence of Lessee or of any of
its agents, contractors, servants, employees or licensees, or (d)
any act or negligence of any assignee or sublessee of Lessee, or of
any agents, contractors, servants, employees or licensees of any
assignee or sublessee of Lessee. Lessee shall indemnify and save
Lessor and the Department harmless from and against all costs and
expenses incurred in or in connection with any such claim arising
as aforesaid, or in connection with any action or proceeding
brought thereon, and upon notice from Lessor, or the Department,
Lessee shall defend them or either of them in any such action or
proceeding."
Section 107. Article XV of the Original Lease Agreement
-----------
is hereby amended to read as follows:
"Section 1501. A. Lessee covenants and agrees that in the
------------
event of damage to or destruction of the Plant or the Leased
Equipment, or any part thereof, by fire or other casualty, the
Lessee shall immediately notify the Lessor and the Department. If
the damage to the Leased Equipment is in the amount of $25,000 or
less, Lessee shall proceed to restore, repair, rebuild or replace
the Leased Equipment to the same extent, if any, required so that
in the judgment of the Lessee, the Leased Equipment is suitable for
use for Lessee's purpose under this Lease Agreement subject to such
alterations as Lessee may elect to make in conformity with the
provisions of Article XXVI hereof. If the damage exceeds $25,000,
Lessee shall, at no cost and expense to Lessor or Department,
proceed to restore, repair, rebuild or replace the Leased Equipment
as nearly as possible to the condition it was in immediately prior
to such damage or destruction, subject to such alterations as
Lessee may elect to make in conformity with the provisions of
Article XVI hereof. Any item of machinery and equipment acquired
as a replacement hereunder, or any item acquired, in whole or in
part, out of insurance proceeds under this Article XV, whether or
not a replacement of or substitute for any item of damaged or
destroyed machinery and equipment, if the insurance proceeds with
which such item of machinery and equipment was purchased, in whole
or in part, were derived from insurance on property which was part
of the Leased Equipment, shall be and become the property of Lessor
and shall be part of the Leased Equipment and subject to this Lease
Agreement. Such restoration, repairs, replacements or rebuilding
shall be commenced promptly and prosecuted with reasonable
diligence.
B. All insurance money paid on account of damage or
destruction involving $25,000 or less shall be paid to Lessee and
all insurance money paid on account of damage or destruction
-10-
<PAGE> 12
involving $25,000 or more shall be paid to the Department and
applied as hereinafter set forth to the payment of the cost of the
aforesaid restoration, repairs, replacements or rebuilding,
including expenditures made for temporary repairs or for the
protection of property pending the completion of permanent
restoration, repairs, replacements, or rebuilding or to prevent
interference with the business operated thereon (sometimes referred
to as the "restoration"). In the case of damage involving a loss
of $25,000 or less, the insurance proceeds shall be paid by the
Department to Lessee upon receipt by Lessor and the Department of
a certificate signed by an officer of Lessee that the restoration
has been made, or is in the process of being made in accordance
with the provisions of Subsection A hereof pertaining to Lessee's
obligation to restore. In the case of damage involving a loss of
more than $25,000, the insurance proceeds shall be paid by the
Department to the Lessee upon receipt by Lessor and the Department
of:
A certificate signed by an officer of Lessee:
(i) requesting payment of a specified amount of
such insurance proceeds;
(ii) detailing the progress of the restoration and
repair work;
(iii) stating that such specified amount does not
exceed the estimated cost of the work and materials in
connection with the restoration, including as part
thereof the estimated fees of any architect or engineer,
if any; and
(iv) stating that no part of such cost has
previously been made the basis of any request for the
withdrawal of insurance proceeds under this Article.
The Department shall have no responsibility as to the
application by Lessee of the insurance proceeds. If requested by
Lessee, all insurance proceeds delivered to the Department pursuant
to the terms of this Lease Agreement shall be held by the
Department in a separate account in trust for the Lessee.
If the insurance money shall be insufficient to pay all
costs of the restoration, Lessee shall pay the deficiency and shall
nevertheless proceed to complete the restoration and pay the cost
thereof. Any balance of the insurance proceeds remaining over and
above the cost of the restoration shall be used by the Department
to redeem the Refunding Bond upon receipt by Lessor and the
-11-
<PAGE> 13
Department of certificates as required by this Article to the
effect that the restoration has been completed.
The total amount collected under any and all policies of
insurance covering such damage or destruction shall be placed in a
special fund and the same may be invested in any investments
authorized to be made by the Department under the laws of the State
of Arkansas. Such investments shall be made by the Department as
directed and designated by an Authorized Lessee Representative, and
in the Department's discretion, in the absence of such direction.
Section 1502. Lessee's obligation to make payment of the
------------
Basic Rent and all other covenants on the part of Lessee to be
performed shall not be affected by any such destruction or damage,
and Lessee hereby waives the provisions of any statute or law now
or hereafter in effect contrary to such obligation of Lessee as
herein set forth, or which releases Lessee therefrom.
Section 1503. Notwithstanding the provisions of the
------------
foregoing sections of this Article XV, Lessee shall not be required
to repair, restore, replace or rebuild the Leased Equipment, or any
part thereof, (a) if Lessee, pursuant to the provisions of Article
XXI, shall elect to purchase the Leased Equipment and shall proceed
to pay the specified purchase price or (b) if the full amount
necessary under the provisions of the Indenture to pay or fully
redeem the Refunding Bond shall have been paid and Lessee has not
elected to purchase the Leased Equipment. If Lessee shall so elect
to purchase, the proceeds of all insurance may be used as part of
the purchase price and upon the request of Lessee shall be so
applied. If there be any excess insurance proceeds over and above
the amount necessary to pay the purchase price, such excess shall
be paid to and shall belong to Lessee. If Lessee shall have paid
the full amount necessary to pay or fully redeem the Refunding
Bond, any insurance proceeds shall be paid to and shall belong to
Lessee.
Section 1504. If the Plant or part thereof is damaged or
------------
destroyed by fire or other casualty and Lessor is not obligated to
repair, rebuild or replace the Plant in accordance with the
provisions of Section 9 of the Land Lease within the 180 day period
provided for therein or if Lessee does not proceed to repair,
rebuild or replace the Plant as nearly as possible to the condition
it was in immediately prior to such damage or destruction, then the
Lessee shall be required to pay as Additional Basic Rent hereunder,
the full amount necessary under the provisions of the Indenture to
pay or fully redeem the Refunding Bond within thirty days after
such 180 day period."
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<PAGE> 14
Section 108. Section 1601 of the Original Lease
-----------
Agreement is hereby amended to read as follows:
"Section 1601. A. If during the term of this Lease
------------
Agreement title to all or substantially all of the Leased Equipment
shall be taken or condemned by a competent authority for any public
use or purpose, the net amount awarded as damages or paid as a
result of such taking (being the gross award less attorneys' fees
and other expenses and costs incurred in the condemnation
proceedings, hereinafter referred to as the "net award") shall be
used on the next redemption date to pay in accordance with the
provisions of the Indenture, the entire principal and interest on
the Refunding Bond. If the net award shall be insufficient to pay
in full, on the next redemption date, the amount necessary to pay
the principal and interest on the Refunding Bond (all of which, for
purposes of this Section, shall be called total bond redemption
expense"), Lessee agrees to pay, promptly upon payment of the net
award, as Additional Rent hereunder, the amount by which the total
bond redemption expense shall exceed the net award. For purposes
of this Article XVI and of Article XXI, "title to all or
substantially all of the Leased Equipment shall be taken or
condemned" shall be deemed to mean a taking of all of the Leased
Equipment or a taking of such substantial portion of the Leased
Equipment that the Lessee, as determined by the Lessee in its sole
discretion, cannot reasonably operate with the remainder in
substantially the same manner as before. In the event the net
award shall be in excess of the amount necessary to pay the total
bond redemption expense, such excess shall belong to and be paid to
Lessee.
B. If less than substantially all of the Leased
Equipment shall be taken or condemned by a competent authority for
any public use or purpose, neither the term nor any of the
obligations of either party under this Lease Agreement shall be
affected or reduced in any way, and
(i) Lessee shall proceed to repair, rebuild and
replace the remaining part of the Leased Equipment as
nearly as possible to the condition existing prior to
such taking, to the extent that the same may be feasible,
subject to the right on the part of Lessee to make
alterations which, in the reasonable judgment of Lessee,
will improve the efficiency of the Leased Equipment for
the purposes of its intended use under this Lease
Agreement; and
(ii) The net award shall be paid to the Department
and by it to Lessee, and Lessor hereby assigns the same
to the Department for the use of Lessee in repairing,
-13-
<PAGE> 15
rebuilding and replacing as provided in (i) above. The
net award shall be transferred to the Lessee in the same
manner as is provided in Section 1501 with respect to
insurance proceeds, provided that the words "insurance
proceeds" there referred to shall for purposes of this
subparagraph (ii) refer to "net award." If the net award
is in excess of the amount necessary to repair, rebuild
and replace as specified in (i) above, such excess shall
be applied to the redemption of the Refunding Bond or if
the Refunding Bond is no longer outstanding under the
Indenture the excess shall belong to and shall be paid to
Lessee. If the net award is less than the amount
necessary for Lessee to repair, rebuild and replace as
set forth in (i) above, Lessee shall nevertheless
complete the repair, rebuilding and replacement work and
pay the cost thereof.
C. In the event of a taking under either A or B
above, the Lessee shall have the right to participate in and to
prove in the condemnation proceedings and to receive any award (by
way of negotiation, settlement or judgment) which may be made for
damages sustained by Lessee by reason of the condemnation;
provided, however, nothing in this subsection C shall be construed
to diminish or impair in any way Lessee's obligation under
subsection A of this Section 1601 to pay as Additional Rent the
amount of any insufficiency of the net award to pay the total bond
redemption expense as therein defined.
D. If the temporary use of the whole or any part of
the Leased Equipment shall be taken by right of eminent domain,
this Lease Agreement shall not be thereby terminated and the
parties shall continue to be obligated under all of its terms and
provisions and Lessee shall be entitled to receive the entire
amount of the award made for such taking, whether by way of
damages, rent or otherwise."
Section 109. Section 1701 of the Original Lease
-----------
Agreement is hereby amended to read as follows:
"Section 1701. A. Lessee may assign this Lease Agreement
------------
or sublet the Leased Equipment or part thereof provided that no
such assignment or subletting and no dealings or transactions
between Lessor or the Department and any sublessee or assignee
shall relieve Lessee of any of its obligations under this Lease
Agreement and Lessee shall remain as fully bound as though no
assignment or subletting had been made, and performance by any
assignee or sublessee shall be considered as performance pro tanto
by Lessee; provided, however, that Lessee may assign this Lease
Agreement, and be thereby relieved of further obligation hereunder,
-14-
<PAGE> 16
in connection with a transaction involving merger, consolidation or
sale as permitted under Section 2409 provided the requirements
thereof are met or if the Lessee obtains the written consent of the
Department and Lessor.
B. It is understood and agreed that this Lease
Agreement (and the Leased Equipment and rents hereunder) and the
Land Lease (and the leased Plant and rents thereunder) will be
assigned to the Department as security for the payment of the
principal of and interest on the Refunding Bond, but otherwise
Lessor shall not assign, encumber, sell or dispose of all or any
part of its rights, title and interest in and to the Leased
Equipment or the Plant and this Lease Agreement, except to Lessee
in accordance with the provisions of the Lease Agreement and to the
Department, but subject to the provisions of Article XVIII hereof,
without the prior written consent of Lessee."
Section 110. Section 2001 of the Original Lease
-----------
Agreement is hereby amended to read as follows:
"Section 2001. The following shall be 'events of default'
------------
under this Lease Agreement and the terms `event of default' or
'default' shall mean, whenever they are used in this Lease
Agreement, any one or more of the following events:
(a) Failure by Lessee to pay the rents or any part
thereof when due and the continuance of said failure for a period
of two days.
(b) Failure by Lessee to observe and perform any
covenant, condition or agreement on its part to be observed or
performed, other than as referred to in subsection (a) of this
Section, (i) for a period of thirty (30) days after written notice,
specifying such failure and requesting that it be remedied, given
to Lessee by Lessor or the Department unless Lessor and the
Department shall agree in writing to an extension of such time
prior to its expiration or (ii) for such longer period as may be
reasonably necessary to remedy such default provided that the
Lessee is proceeding with reasonable diligence to remedy the same.
(c) The dissolution or liquidation of the Lessee or
failure by Lessee promptly to lift any execution, garnishment or
attachment of such consequence as will impair its ability to carry
on its operations at the Plant. The term "dissolution or
liquidation of Lessee," as used in this subsection, shall not be
construed to include the cessation of the corporate existence of
the Lessee resulting either from a merger or consolidation of the
Lessee into or with another corporation or a dissolution or
liquidation of the Lessee following a transfer of all or
-15-
<PAGE> 17
substantially all of its assets as an entirety, under the
conditions permitting such actions contained in this Lease
Agreement.
(d) The occurrence of a default under the Land Lease
by Lessee and failure by Lessee to cure the default within the
applicable grace period under the Land Lease.
(e) A court having jurisdiction in the premises shall
enter a decree or order for relief in respect of Lessee in an
involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of Lessee or for any substantial part of its
property, or ordering the winding-up or liquidation of its affairs
and such decree or order shall remain unstayed and in effect for a
period of sixty (60) consecutive days.
(f) Lessee shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case under any such law, or shall consent
to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of Lessee or for any substantial part of its
property, or shall make any general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become
due, or shall taken any corporate action in furtherance of any of
the foregoing."
Section 111. Section 2002 of the Original Lease
-----------
Agreement is hereby amended to read as follows:
"Section 2002. Whenever any event of default shall happen
------------
and then be continuing, Lessor or the Department may take any of
the following remedial steps:
(a) Lessor, with the prior written consent of the
Department, or the Department may, at its option, declare all
installments of rent payable for the remainder of the term to be
immediately due and payable, whereupon the same shall become
immediately due and payable.
(b) Lessor, with the prior written consent of the
Department, or the Department may re-enter the Plant and take
possession of the Leased Equipment without terminating this Lease
Agreement, and sublease the Leased Equipment for the account of
Lessee, holding Lessee liable for the difference in the rent and
other amounts payable by Lessee hereunder.
-16-
<PAGE> 18
(c) Lessor, with the prior written consent of the
Department, or the Department may terminate the term, exclude
Lessee from possession of the Leased Equipment and use its best
efforts to lease the Leased Equipment to another for the account of
Lessee, holding Lessee liable for all rent and other payments due
up to the effective date of any such leasing.
(d) Lessor or the Department shall have access to and
inspect, examine and make copies of the books and records relating
to the Leased Equipment.
(e) Lessor, with the prior consent of the Department,
or the Department may take whatever action at law or in equity may
appear necessary or desirable to collect the rent and any other
amounts payable by Lessee hereunder, then due and thereafter to
become due, or to enforce performance and observance of any
obligation, agreement or covenant of the Lessee under this Lease
Agreement.
Any amounts collected pursuant to action taken under this
Section shall be applied in accordance with the provisions of the
Indenture."
Section 112. Section 2003 of the Original Lease
-----------
Agreement is hereby amended to read as follows:
"Section 2003. No remedy herein conferred upon or
------------
reserved to Lessor or the Department is intended to be exclusive of
any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other
remedy given under this Lease Agreement or now or hereafter
existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any default shall impair
any such right or power or shall be construed to be a waiver
thereof but any such right or power may be exercised from time to
time as often as may be deemed expedient."
Section 113. Section 2007 of the Original Lease
-----------
Agreement is hereby deleted.
Section 114. Section 2102 of the Original Lease
-----------
Agreement is hereby amended to read as follows:
"Section 2102. A. Lessee shall have the right and option
------------
to purchase the Leased Equipment at any time if:
(i) The Leased Equipment or the Plant shall sustain
major damage or destruction; or
-17-
<PAGE> 19
(ii) Title to all or substantially all of the Leased
Equipment shall be condemned as provided in
Article XVI hereof; or
(iii) As a result of changes in the Constitution of the
United States or of the State of Arkansas, or of
legislative action, or by the final decree,
judgment or order of any court or administrative
body entered after Lessee's contest thereof in
good faith, or change in Lessor's legal
organization or status, this Lease Agreement
becomes void or unenforceable or impossible of
performance in accordance with the intent and
purposes of the parties as expressed in this
Lease Agreement, or unreasonable burdens or
excessive liabilities are imposed upon either
party to it; or
(iv) There is legal curtailment of Lessee's use and
occupancy of all or substantially all of the
Leased Equipment or the Plant for any reason
other than condemnation referred to in subsection
(ii).
The term "major damage or destruction" as used in
subsection (i) is defined to mean any damage or injury to or
destruction of the Leased Equipment or the Plant or any part
thereof (whether or not resulting from an insured peril) such that
the Leased Equipment or the Plant cannot reasonably be restored to
its condition immediately preceding such damage, injury or
destruction within a period of seventy-five (75) working days, or
which would prevent Lessee from carrying on its manufacturing
operations therein for a period of seventy-five (75) working days
or the restoration cost of which would exceed the total amount of
insurance carried on the Leased Equipment or the Plant in
accordance with the provisions of Article VI hereof, or such that
it would not be economically feasible for Lessee to repair the
Leased Equipment or the Plant, as determined by Lessee in its
discretion.
B. At any time during the initial term or any
extension term and for a period of ninety (90) days thereafter, if
the purchase options under the provisions of Paragraph A of this
Section 2102 have not been exercised, Lessee shall have the further
unconditional right and option to purchase the Leased Equipment.
C. The purchase price payable if Lessee exercises
Lessee's option to purchase the Leased Equipment under the
provisions of Paragraphs A or B of this Section, shall be the full
amount necessary under the provisions of the Indenture to pay or
fully redeem the Refunding Bond. In any case, if the Refunding
-18-
<PAGE> 20
Bond has been fully paid at the time of purchase, the purchase
price of the Leased Equipment shall be One Hundred Dollars
($100.00).
D. Any of the foregoing options may be exercised by
giving written notice to Lessor, with a copy to the Department, of
the exercise thereof specifying the time and place of closing. At
the closing, Lessor shall, upon payment of the purchase price
hereinabove specified, deliver to Lessee bills of sale and other
appropriate conveyance instruments transferring good and
merchantable title to the Leased Equipment free and clear of all
liens and encumbrances except those to which title was subject when
leased hereunder, Permitted Encumbrances under this Lease
Agreement, or resulting from any failure of Lessee to perform any
of its obligations under this Lease Agreement; provided, however,
that if such option is exercised under the provisions of
subparagraph A (ii) of this Section, such title may be subject to
the rights, titles and interests of any party having taken or who
is attempting to take title to or use of all or substantially all
or part of the Leased Equipment by eminent domain."
Section 115. Section 2201 of the Original Lease
-----------
Agreement is hereby amended to read as follows:
"Section 2201. All notices, demands and requests which
------------
may or are required to be given by either party to the other or to
the Department shall be in writing, and each shall be deemed to
have been properly given when served personally on an executive
officer of the party to whom such notice is to be given, or when
sent postage prepaid by certified mail by deposit thereof in a duly
constituted United States Post Office or branch thereof located in
one of the present states of the United States of America in a
sealed envelope addressed as follows:
If intended for Lessee: MRL, Inc.
112 Point West Blvd, Suite 500 St. Charles,
Missouri 63301
Attention: President
If intended for Lessor: City of Piggott
194 West Court
Piggott, Arkansas 72454
Attention: Mayor
-19-
<PAGE> 21
If intended for
Department: Department of Industrial Development
of the State of Arkansas
One Capitol Mall
Little Rock, Arkansas 72201
Attention: Deputy Director
Any party or the Department may change the address and
the name of addressee to which subsequent notices are to be sent by
notice to the other parties given as aforesaid."
Section 116. Section 2301 of the Original Lease
-----------
Agreement is hereby amended to read as follows:
"Section 2301. Lessee shall cause this Lease Agreement
------------
and the Indenture, and all instruments supplemental to any of them,
to be recorded in the office of the Circuit Clerk and Ex Officio
Recorder of Clay County (Eastern District), Arkansas, and to be
kept recorded and filed in such manner and in such places (if any)
as may be required by law in order fully to preserve and protect
the security of the Department and the rights of the Department
under the Indenture."
Section 117. Section 2405 of the Original Lease
-----------
Agreement is hereby amended to read as follows:
"Section 2405. It is agreed that in the event of any
------------
non-payment of rent by Lessee or the failure or refusal by Lessee
to observe, keep or perform any other covenant, condition, promise
or agreement set forth in this Lease Agreement to be observed, kept
or performed by Lessee, the Department shall be entitled, in the
name of Lessor, or in its own name (in accordance with the
provisions of the Indenture), to enforce each and every right or
remedy here in accorded in this Lease Agreement to Lessor in the
event of the non-performance or non-observance by Lessee of any
such promise, covenant or agreement."
Section 118. Section 2407 of the Original Lease
-----------
Agreement is hereby amended to read as follows:
"Section 2407. It is agreed that Lessor and Lessee shall
------------
not alter, modify or amend any of the terms of this Lease Agreement
without the prior written approval of the Department, as set forth
in the Indenture."
Section 119. Section 2601 of the Original Lease
-----------
Agreement is hereby amended to read as follows:
-20-
<PAGE> 22
"Section 2601. Lessee may, provided Lessee is not in
------------
default in the payment of Basic Rent or Additional Rent as required
by the provisions of this Lease Agreement and has not received
notice of any other default on its part hereunder, remove, free of
any right or claim of Lessor or the Department, any building
service equipment paid for and installed at the expense of the
Lessee (hereinafter defined) which is a part of the Plant, subject
however, in all cases to the following:
(a) Building service equipment may be so removed upon
the substitution thereof, then or theretofore, by Lessee of other
building service equipment of a utility or value at least equal to
that, at the time of removal, of the building service equipment
removed;
(b) Worn out or obsolete building service equipment
may be so removed and building service equipment added by Lessee
after the full completion of a building (and not by way of repair,
replacement or the like) may be removed, provided the original
efficiency, utility and value of the building is not impaired;
(c) Lessee shall pay all the costs and expenses of any
such removal and shall immediately repair at its expense all
damages caused thereby.
The term "building service equipment" is intended to
refer to such things as are affixed to or incorporated in a
building for its operation, such as boilers, pumps, tanks,
electrical panel switchboards, sprinklers, lighting equipment and
wiring, heating, plumbing and ventilating equipment, elevators,
escalators, refrigerating, air conditioning and air cooling
equipment, and items similar in general to any of the foregoing."
Section 120. Section 2602 of the Original Lease
-----------
Agreement is hereby amended to read as follows:
"Section 2602. Lessor and Lessee recognize that after the
------------
Leased Equipment is installed portions thereof may become
inadequate, obsolete, worn out, unsuitable, undesirable or
unnecessary in the operation of the Plant. Lessor shall not be
under any obligation to renew, repair or replace any such
inadequate, obsolete, worn out, unsuitable, undesirable or
unnecessary items of Leased Equipment. In any instance where
Lessee in its sound discretion determines that any items of Leased
Equipment have become inadequate, obsolete, worn out, unsuitable,
undesirable or unnecessary in the operation of the Plant,
(a) Lessee may remove such items of Leased Equipment
from the Plant, and (on behalf of Lessor) sell, trade-in, exchange
or
-21-
<PAGE> 23
otherwise dispose of them without any responsibility or
accountability to Lessor or the Department therefor, provided that
Lessee substitute (either by direct payment of the cost thereof or
by advance to Lessor of the funds necessary therefor, as
hereinafter provided) and install anywhere in the Plant other
machinery or equipment having equal or greater utility (but not
necessarily the same function) in the operation of the Plant and
provided further that such removal and substitution shall not
impair the operating unity of the Plant, and all such substituted
machinery or equipment shall be the sole property of Lessor, shall
be and become a part of the Leased Equipment subject to this Lease
Agreement and shall be held by Lessee on the same terms and
conditions as items originally comprising Leased Equipment; or
(b) Lessee may remove such items of Leased Equipment from
the Plant and sell, trade-in or exchange them on behalf of Lessor,
either to itself or to another, or scrap them (in whole or in
part), without being required to substitute and install in the
Plant other items of machinery or equipment in lieu thereof,
provided (i) that in the case of the sale of any such machinery or
equipment to anyone other than itself or in case of the scrapping
thereof, Lessee pays to the Department the proceeds from such sale
or the scrap value thereof, as the case may be, (ii) that in the
case of the trade in of such machinery or equipment for other
machinery or equipment, Lessee pays to the Department, the amount
of the credit received by it on such trade in, and (iii) that in
the case of the sale of any such machinery or equipment to Lessee,
Lessee pays to the Department an amount equal to the original cost
thereof less depreciation at rates calculated in accordance with
generally accepted accounting principles. The amounts paid to the
Department shall be used to redeem the Refunding Bond.
In any case where Lessee purchases, installs and
substitutes in the Plant any item of machinery or equipment, Lessee
may, in lieu of purchasing and installing said items of machinery
and equipment itself, advance to Lessor the funds necessary
therefor, whereupon Lessor will purchase and install such machinery
or equipment in the Plant.
Lessee will promptly report such removals, substitutions,
sales and other dispositions of items of Leased Equipment to the
Department, will certify to the Department that it is in compliance
with this Article XXVI when such reports are made, will pay to the
Department such amounts as are required by the provisions of the
preceding subsection (b) to be paid to the Department promptly
after the sale, trade-in or scrapping requiring such payment, and
will execute and deliver to Lessor and the Department such
documents as may from time to time be requested to confirm the
title of Lessor (subject to this Lease Agreement) to any items of
-22-
<PAGE> 24
machinery and equipment that under the provisions of this section
are to become a part of Leased Equipment. Lessee will pay any
costs (including counsel fees) incurred in subjecting to the lien
of the Indenture any items of machinery or equipment that under the
provisions of this section are to become a part of Leased
Equipment. Lessee will not remove or permit the removal of any of
Leased Equipment from the leased premises except in accordance with
the provisions of this section."
Section 121. Exhibit B to the Original Lease Agreement
-----------
is hereby amended to read as follows:
"See Exhibit B to this First Supplemental Lease and Agreement"
ARTICLE II
MISCELLANEOUS
-------------
Section 201. The provisions of the Original Lease
-----------
Agreement, as amended and supplemented by this First Supplemental
Lease and Agreement, shall continue in full force and effect.
Section 202. This First Supplemental Lease and Agreement
-----------
may be simultaneously executed in several counterparts, each of
which shall be an original and all of which shall constitute but
one and the same instrument. A copy hereof shall be recorded in the
office of the Circuit Clerk and Ex Officio Recorder of Clay County,
Arkansas, and a copy shall be filed and remain on file with the
Department.
Section 203. It is agreed that after the Refunding Bond
-----------
is fully paid and discharged, and all proper and reasonable
expenses of the Department are paid for, the Department shall cease
to have any right, title and interest in, to or under this Lease
Agreement. Thereafter, all rights of approval or other rights
herein specified with reference to the Department shall inure to
the benefit of and be applicable to Lessor.
-23-
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have caused this
First Supplemental Lease and Agreement to be executed by their duly
authorized officials and officers as of the day and year first
above written.
CITY OF PIGGOTT, ARKANSAS
ATTEST:
By: /s/ Garland Holcomb
---------------------------------
/s/Jean Doty Mayor
- -----------------------------
City Clerk
(SEAL)
MRL, INC.
ATTEST:
By: /s/ Larry J. Stallings
/s/ Duane E. Obert ---------------------------------
- -----------------------------
Chief Financial Officer President
- ----------------------------- ---------------------------------
(Title) (Title)
(SEAL)
-24-
<PAGE> 26
DEPARTMENT'S CONSENT TO EXECUTION OF
FIRST SUPPLEMENTAL LEASE AND AGREEMENT
The execution and delivery of this First Supplemental
Lease and Agreement is hereby consented to and approved by the
undersigned.
DEPARTMENT OF INDUSTRIAL
DEVELOPMENT OF THE STATE
OF ARKANSAS
By: ---------------------------------
---------------------------------
(Title)
-25-
<PAGE> 27
ACKNOWLEDGMENT
STATE OF ARKANSAS
COUNTY OF CLAY
On this ----- day of -----------, 1995, before me, a
Notary Public duly commissioned, qualified and acting, within and
for the County and State aforesaid, appeared in person the within
named Garland Holcomb and Jean Doty, Mayor and City Clerk,
respectively, of the City of Piggott, Arkansas, a municipality of
the State of Arkansas, to me personally known, who stated that they
were duly authorized in their respective capacities to execute the
foregoing instrument for and in the name of the municipality, and
further stated and acknowledged that they had signed, executed and
delivered the foregoing instrument for the consideration, uses and
purposes therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal.
/s/ John R. Lingle
---------------------------------
Notary Public
My Commission Expires:
10-16-2002
- -------------------------------
(SEAL)
-26-
<PAGE> 28
ACKNOWLEDGMENT
STATE OF MISSOURI
COUNTY OF ST. CHARLES
On this 31st day of October , 1995, before me
---- ----------
a Notary Public duly commissioned, qualified and acting, within and
for the County and State aforesaid, appeared in person the within
named Larry J. Stallings and Duane E. Obert, President and Chief
--------------------- -------------- --------- -----
Financial Officer, respectively, of MRL, Inc., a Missouri
- -----------------
corporation, to me personally known, who stated that they were duly
authorized in their respective capacities to execute the foregoing
instrument for and in the name and behalf of the corporation, and
further stated and acknowledged that they had so signed, executed
and delivered the foregoing instrument for the considerations, uses
and purposes therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal.
/s/ Susan L. Couch
---------------------------------
Notary Public
My Commission Expires:
6-12-98
- -------------------------------
(SEAL)
-27-
<PAGE> 29
ACKNOWLEDGEMENT
STATE OF ARKANSAS
COUNTY OF PULASKI
On this ----- day of ----------, 1995, before me, a
Notary Public duly commissioned, qualified and acting, within and
for the County and State aforesaid, appeared in person the within
named ---------------------------, ------------------ of the
Department of Industrial Development of the State of Arkansas, to
me personally known, who stated that he was duly authorized in his
capacity to execute the foregoing instrument for and in the name
and behalf of the Department, and further stated and acknowledged
that he had so signed, executed and delivered the foregoing
instrument for the consideration, uses and purposes therein
mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal.
------------------------------------
Notary Public
My Commission Expires:
- -------------------------
(SEAL)
-28-
<PAGE> 1
Exhibit 4(g)
GUARANTY AGREEMENT
This GUARANTY AGREEMENT made and entered into as of
November 1, 1995, by and between MRL, INC., a corporation organized
and existing under the laws of the State of Missouri (the
"Guarantor"), and the Department of Industrial Development of the
State of Arkansas, an agency of the State of Arkansas (the
"Department"), together with any successor thereof or any assignee
of the City of Piggott, Arkansas Industrial Development Refunding
Revenue Bond - MRL, Inc. Project, Series 1995 (the "Bond").
WITNESSETH:
WHEREAS, the City of Piggott, Arkansas (the "City") is
authorized and empowered under the provisions of Title 14, Chapter
164, Subchapter 2 of the Arkansas Code of 1987 Annotated (the
"Act"), to issue revenue bonds and to expend the proceeds thereof
to finance and refinance land, buildings and facilities which can
be used in securing or developing industry; and
WHEREAS, the City has heretofore authorized and issued
its Industrial Development Revenue Bonds - Missouri Research
Laboratories, Inc. Project, Series A, dated May 1, 1984 (the "Prior
Bonds"), in the original principal amount of $1,000,000, for the
purpose of financing the costs of acquiring and installing
equipment (the "Project") at a manufacturing plant located at 1258
East Main Street in the City (the "Plant"); and
WHEREAS, the Project is being leased by the City to the
Guarantor (formerly Missouri Research Laboratories, Inc.), pursuant
to a Lease and Agreement dated as of May 1, 1984 (the "Original
Lease Agreement"); and
WHEREAS, the Prior Bonds are guaranteed by the
Department, pursuant to a Guaranty of Payment of Industrial
Development Revenue Bonds dated as of May l, 1984 (the "1984
Guaranty"), among the City, the Department and Boatmen's Trust
Company (as successor to Centerre Trust Company of St. Louis), as
Trustee (the "Trustee"); and
WHEREAS, the Prior Bonds were issued under and are
secured by a Trust Indenture between the City and the Trustee,
dated as of May 1, 1984 (the "1984 Indenture"), pursuant to which
the City granted a security interest in the Project in favor of the
Trustee to secure the Prior Bonds; and
WHEREAS, the City has assigned its rights to payments due
under the Original Lease Agreement to pay the principal of and
interest on the Prior Bonds when due; and
<PAGE> 2
WHEREAS, the Department is subrogated to the rights of
the City and the Trustee to the extent of payments made under the
1984 Guaranty; and
WHEREAS, the Department made the principal and interest
payment due on the Prior Bonds on May 1, 1995, because the
Guarantor failed to make its rental payment due under the Original
Lease Agreement on that date; and
WHEREAS, the Guarantor remains in default under the
Original Lease Agreement; and
WHEREAS, the Department proposes to redeem the Prior
Bonds on November 1, 1995, by paying the outstanding principal
amount of the Prior Bonds, plus accrued interest; and
WHEREAS, the Department has the option to foreclose on
the Project and accelerate payments due from the Guarantor under
the Original Lease Agreement; and
WHEREAS, in lieu of exercising its right to foreclose on
the Project, the Department has offered, and the City and the
Guarantor have agreed, to restructure the debt represented by the
Prior Bonds by the City issuing its Industrial Development
Refunding Bond - MRL, Inc. Project, series 1995 (the "Bond") to the
Department under the Act, and by continuing to lease the Project to
the Guarantor through an extension of the term of the Original
Lease Agreement and a restructuring of the payments due as rent
thereunder pursuant to a First Supplemental Lease and Agreement,
dated as of November 1, 1995 (the "First Supplemental Lease"); and
WHEREAS, the Bond is being issued in an amount equal to
the principal amount of the Prior Bonds outstanding on October 31,
1995, the interest on the Prior Bonds due November 1, 1995, the
amounts that have been heretofore advanced by the Department to pay
principal and interest on the Prior Bonds, and the expenses of
issuing the Bond; and
WHEREAS, the Original Lease Agreement, as amended and
supplemented by the First Supplemental Lease, is hereinafter
collectively referred to as the "Lease Agreement;" and
WHEREAS, the Bond will be issued under and pursuant to an
Indenture, dated as of November 1, 1995 between the City and the
Department (the "Indenture"); and
WHEREAS, Guarantor is desirous that the City issue the
Bond and is willing to enter into this Guaranty in order to induce
the Department to purchase the Bond;
2
<PAGE> 3
NOW, THEREFORE, in consideration of the premises and as
an inducement to the purchase of the Bond by the Department and all
who shall thereafter at any time become a registered owner of the
Bond, Guarantor does hereby, subject to the terms hereof, covenant
and agree with the Department as follows:
ARTICLE I
Representations and Warranties of Guarantor
-------------------------------------------
Section 1.1. Guarantor does hereby represent and
-----------
warrant that:
(a) it is a corporation duly incorporated and in
good standing under the laws of the State of Missouri, is duly
authorized to do business in the State of Arkansas, is not in
violation of any provision of its Articles of Incorporation or its
bylaws, has power to enter into this Guaranty Agreement, has duly
authorized the execution and delivery of this Guaranty Agreement by
proper corporate action and neither this Guaranty Agreement, the
execution and delivery hereof nor the agreements herein contained
are prevented, limited by or contravene or constitute a default
under any agreement, instrument or indenture to which Guarantor is
a party or by which it is bound or any provisions of its Articles
of Incorporation; and
(b) the assumption by Guarantor of its
obligations hereunder will result in a financial benefit to
Guarantor.
ARTICLE II
Covenants and Agreements
------------------------
Section 2.1. Guarantor hereby unconditionally guarantees
-----------
to the Department (a) the full and prompt payment of the principal
of the bond when and as the same becomes due, whether at the stated
maturity thereof, by acceleration, call for redemption or
otherwise, and (b) the full and prompt payment of interest on the
Bond when and as the same becomes due. All payments by Guarantor
shall be paid in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the
payment of public and private debts. Each and every default in
payment of the principal of or interest on the Bond shall give rise
to a separate cause of action hereunder, and separate suits may be
brought hereunder as each cause of action arises.
Section 2.2. The obligations of Guarantor under this
-----------
Guaranty Agreement shall be absolute and unconditional and shall
remain in full force and effect until the entire principal of and
interest on the Bond shall have paid, and such obligations shall
not be affected, modified or impaired upon the happening from time
to time of any event, including, without limitation, any of the
3
<PAGE> 4
following whether or not with notice to, or the consent of,
Guarantor:
(a) the compromise, settlement, release or termination
of any or all of the obligations, covenants or agreements
of the City under the Indenture or the Lease Agreement;
(b) the failure to give notice to Guarantor of the
occurrence of an event of default under the terms and
provisions of this Guaranty Agreement, the Indenture or
the Lease Agreement;
(c) the assignment or mortgaging or the purported
assignment or mortgaging of all or any part of the
interest of the City in the Project or any failure of
title with respect to the City's interest in the Project;
(d) the waiver by the Department or the City of the
payment, performance or observance by the City or
Guarantor of any of the obligations, covenants or
agreements of either of them contained in the Indenture
or this Guaranty Agreement;
(e) the extension of the time for payment of any
principal of or interest on the Bond under this Guaranty
Agreement or of the time for performance of any other
obligations, covenants or agreements under or arising out
of the Indenture or this Guaranty Agreement or the
extension or the renewal of either thereof;
(f) the modification or amendment (whether material or
otherwise) of any obligation, covenant or agreement set
forth in the Indenture or the Lease Agreement;
(g) the taking or the omission of any of the actions
referred to in the Indenture, or the taking of any action
under this Guaranty Agreement;
(h) any failure, omission, delay or lack on the part
of the City or the Department to enforce, assert or
exercise any right, power or remedy conferred on the City
or the Department in this Guaranty Agreement or the
Indenture, or any other act or acts on the part of the
City or the Department;
4
<PAGE> 5
(i) the voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or
substantially all the assets, marshalling of assets and
liabilities, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization,
arrangement, composition with creditors or readjustment
of, or other similar proceeding affecting Guarantor or
the City or any of the assets of either of them, or any
allegation or contest of the validity of this Guaranty
Agreement in any such proceeding;
(j) to the extent permitted by law, the release or
discharge of Guarantor from the performance or observance
of any obligation, covenant or agreement contained in
this Guaranty Agreement by operation of law; or
(k) the default or failure of Guarantor fully to
perform any of its obligations set forth in this Guaranty
Agreement.
Section 2.3. No setoff, counterclaim, reduction or
-----------
diminution of an obligation, or any defense of any kind or nature
which Guarantor has or may have against the City or the Department
shall be available hereunder to Guarantor against the Department.
Section 2.4. In the event of a default in the payment of
-----------
principal of the Bond when and as the same shall become due,
whether at the stated maturity thereof, by acceleration, call for
redemption or otherwise, or in the event of a default in the
payment of any interest on the Bond when and as the same shall
become due, the Department may proceed hereunder and the
Department, in its sole discretion, shall have the right to proceed
first and directly against Guarantor under this Guaranty Agreement
without proceeding against or exhausting any other remedies which
it may have and without resorting to any other security held by the
City or the Department.
Section 2.5. Guarantor hereby expressly waives notice
-----------
from the Department of its acceptance and reliance on this Guaranty
Agreement. Guarantor agrees to pay all costs, expenses and fees,
including all reasonable attorneys' fees, which may be incurred by
the Department in enforcing or attempting to enforce this Guaranty
Agreement following any default on the part of Guarantor hereunder,
whether the same shall be enforced by suit or otherwise.
Section 2.6. Guarantor will maintain its corporate
-----------
existence and will not dissolve or otherwise dispose of all or
substantially all of its assets and will not consolidate with or
5
<PAGE> 6
merge into another corporation or permit one or more other
corporations to consolidate with or merge into it; provided,
however, Guarantor may, without violating such agreement,
consolidate with or merge into another domestic corporation (that
is, a corporation organized and existing under the laws of one of
the states of the United States of America), or permit one or more
other domestic corporations to consolidate with or merge into it,
or sell or otherwise transfer to another domestic corporation all
or substantially all of its assets as an entirety and thereafter
dissolve on the condition that such successor corporation shall
expressly assume in writing all of the obligations of Guarantor
contained in this Guaranty Agreement, that the net tangible assets
of the successor corporation after the consolidation, merger or
sale be at least equal to the net tangible assets of Guarantor
immediately prior to such consolidation, merger or sale, and that
such successor corporation qualifies to do business in the State of
Arkansas. In the event of such consolidation, merger or sale, as
permitted by this Section, and the assumption by the surviving,
resulting or transferee corporation of the obligations hereof,
Guarantor shall be relieved of all further obligations hereunder.
As used herein, "net tangible assets" means all assets of the
corporation (except there shall not be included goodwill) less all
liabilities of Guarantor or the other corporation, as the case may
be.
Section 2.7. This Guaranty Agreement is entered into by
-----------
Guarantor for the benefit of the Department and the subsequent
owners from time to time of the Bond, all of whom shall be entitled
to enforce performance and observance of this Guaranty Agreement to
the same extent provided for enforcement of remedies under the
Indenture.
ARTICLE III
Notice and Service of Process, Pleadings and Other Papers
---------------------------------------------------------
Section 3.1. Guarantor covenants that it is and will
-----------
remain subject to service of process in the State of Arkansas so
long as the Bond is outstanding. If for any reason Guarantor
should not remain so subject, Guarantor hereby designates and
appoints, without power of revocation, the Secretary of State of
the State of Arkansas, as the agent of Guarantor upon whom may be
served all process, pleadings, notices or other papers which may be
served upon Guarantor as a result of any of its obligations under
this Guaranty Agreement.
6
<PAGE> 7
ARTICLE IV
Miscellaneous
-------------
Section 4.1. The obligations of Guarantor hereunder
-----------
shall arise absolutely and unconditionally when the Bond shall have
been issued, sold and delivered by the City to the Department.
Section 4.2. No remedy herein conferred upon or reserved
-----------
to the Department is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall
be cumulative and shall be in addition to every other remedy given
under this Guaranty Agreement or now or hereafter existing at law
or in equity. No delay or omission to exercise any right or power
accruing upon any default, omission or failure of performance
hereunder shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may
be exercised from time to time as often as may be deemed expedient.
In order to entitle the Department to exercise any remedy reserved
to it in this Guaranty Agreement, it shall not be necessary to give
any notice, other than such notice as may be herein expressly
required. In the event any provision contained in this Guaranty
Agreement should be breached by Guarantor and thereafter duly
waived by the Department, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any
other breach hereunder. No waiver, amendment, release or
modification of this Guaranty Agreement shall be established by
conduct, custom or course of dealing, but solely by an instrument
in writing duly executed by the Department.
Section 4.3. This Guaranty Agreement constitutes the
-----------
entire agreement, and supersedes all prior agreements and
understandings, both written and oral, between the parties with
respect to the subject matter hereof and may be executed in several
counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
Section 4.4. The invalidity or unenforceability of any
-----------
one or more phrases, sentences, clauses or sections in this
Guaranty Agreement shall not affect the validity or enforceability
of the remaining portions of this Guaranty Agreement, or any part
thereof.
Section 4.5. This Guaranty Agreement shall be construed
-----------
and enforced in accordance with the laws of the State of Arkansas.
Section 4.6. All the covenants, stipulations,
------------
provisions, agreements, rights, remedies and claims of the parties
hereto in this Guaranty Agreement contained shall bind and inure to
the benefit of their successors and assigns.
7
<PAGE> 8
IN WITNESS WHEREOF, Guarantor has caused this Guaranty
Agreement to be executed in its name and behalf and attested by its
duly authorized officers, and in order to note its acceptance of,
and reliance on, this Guaranty Agreement, the Department has caused
this Guaranty Agreement to be executed in its name and behalf and
attested by its duly authorized officers, all as of the date first
above written.
MRL, INC.
ATTEST:
By: /s/ Larry J. Stallings
/s/ John P. Walsh --------------------------------
- ------------------------------ President
Assistant Secretary --------------------------------
- ------------------------------ (Title)
(Title)
(SEAL) DEPARTMENT OF INDUSTRIAL
DEVELOPMENT OF THE STATE OF
ARKANSAS
ATTEST:
By: --------------------------------
- ------------------------------ --------------------------------
(Title)
- ------------------------------
(Title)
(SEAL)
8
<PAGE> 1
Exhibit 4(h)
SUBORDINATION AGREEMENT
-----------------------
THIS AGREEMENT made and entered into this 1st day of November,
1995, by and between the CITY OF PIGGOTT, ARKANSAS, hereinafter
called the "City," MRL, INC. (formerly Missouri Research
Laboratories, Inc.), hereinafter called "Company" and DEPARTMENT OF
INDUSTRIAL DEVELOPMENT OF THE STATE OF ARKANSAS, hereinafter called
"Department."
WHEREAS, the City has heretofore authorized and issued its
Industrial Development Revenue Bonds - Missouri Research
Laboratories, Inc. Project, Series A, dated May 1, 1984 (the "Prior
Bonds"), in the original principal amount of $1,000,000, for the
purpose of financing the costs of acquiring and installing
equipment (the "Project") at a manufacturing plant located at 1258
East Main Street in the City (the "Plant") and more particularly
described as:
A part of the Southeast Quarter of the Northeast Quarter
(SE 1/4 NE 1/4) of Section Eleven (11) and together with
a part of the Southwest Quarter of the Northwest Quarter
(SW 1/4 (NW 1/4) of Section Twelve (12), all in Township
Twenty (20) North, Range Eight (8) East of the Fifth
Principal Meridian, more particularly described as
follows: Beginning at the Southeast corner of the said
SE 1/4 NE 1/4 of said Section 11 and run thence West 528
feet, thence North 0 degrees 15 minutes West 176 feet,
thence West 132 feet, thence North 0 Degrees 15 minutes
West 484 feet, thence East 520 feet, thence North 0
degrees 15 minutes West 137 feet, thence East 140 feet,
thence South 0 degrees 15 minutes East 137 feet, thence
East 100 feet, thence South 0 degrees 15 minutes East 660
feet, thence West 100 feet to the point of beginning, in
the Eastern District of Clay County, Arkansas;
and
WHEREAS, the Project is being leased by the City to the
Company, pursuant to a Lease and Agreement dated as of May 1, 1984
(the "Project Lease Agreement") filed for record in Miscellaneous
Record Book No. 10 at page 770, Clay County, Arkansas; and
WHEREAS, the City acquired title to the Plant with grant
moneys administered by the Department and is leasing the Plant to
the Company pursuant to a Lease and Loan Agreement dated November
30, 1983 and filed of record in Miscellaneous Record Book 10, at
page 567, Clay County, Arkansas (the "Plant Lease Agreement"); and
WHEREAS, the Prior Bonds are guaranteed by the Department,
pursuant to a Guaranty of Payment of Industrial Development Revenue
Bonds dated as of May 1, 1984 (the "Guaranty"), among the City, the
Department and Boatmen's Trust Company (as successor to Centerre
Trust Company of St. Louis), as Trustee (the "Trustee"); and
-1-
<PAGE> 2
WHEREAS, the Prior Bonds were issued under and are secured by
a Trust Indenture between the City and the Trustee, dated as of May
1, 1984, pursuant to which the City granted a mortgage lien on the
Plant and a security interest in the Project in favor of the
Trustee to secure the Prior Bonds; and
WHEREAS, the City has assigned its rights to payments due
under the Project Lease Agreement to pay the principal of and
interest on the Prior Bonds when due; and
WHEREAS, the Department is subrogated to the rights of the
City and the Trustee to the extent of payments made under the
Guaranty; and
WHEREAS, the Department made the principal and interest
payment due on the Prior Bonds on May 1, 1995, because the Company
failed to make its rental payment due under the Project Lease
Agreement on that date; and
WHEREAS, the Company remains in default under the Project
Lease Agreement; and
WHEREAS, the Department has redeemed the Prior Bonds as of
November 1, 1995, by paying the outstanding principal amount of the
Prior Bonds, plus accrued interest; and
WHEREAS, the Department had the option to foreclose on the
Project and Plant which would result in the loss of substantial
jobs and payrolls for the inhabitants of the City; and
WHEREAS, in lieu of exercising its right to foreclose on the
Plant and the Project, the Department offered, and the City and the
Company have agreed, to restructure the debt represented by the
Prior Bonds by the City issuing its Industrial Development Revenue
Refunding Bond - MRL, Inc. Project, Series 1995 (the "Refunding
Bond") to the Department, and by continuing to lease the Project to
the Company by extending the terms of the Project Lease Agreement
and restructuring the payments due as rent thereunder pursuant to
a First Supplemental Lease and Agreement between the Company and
the City, dated as of November 1, 1995 (the "Supplemental Lease
Agreement"); and
WHEREAS, the Refunding Bond will be issued in an amount not to
exceed $410,000; and
WHEREAS, the City, Company and Department have agreed that in
order to secure the indebtedness evidenced by the Refunding Bond
the City will execute and deliver to the Department an Indenture,
dated as of November 1, 1995 (the "Indenture") granting a valid
first mortgage lien on the Plant and a valid first security
interest in the Project; and
-2-
<PAGE> 3
WHEREAS, in order for the Department to acquire the first
mortgage lien and security interest on the Plant and Project, it is
necessary that the rights, title, interest of the City and the
Company in the Plant and Project evidenced by the Plant Lease
Agreement be subordinated to the mortgage and security interest of
the Department in the Plant and Project as evidenced by the
Indenture and the Supplemental Lease Agreement.
NOW, THEREFORE, in consideration of the premises, the City,
and the Company hereby covenant, consent and agree to and with the
Department, its successors and assigns, that all right, title,
interest, mortgage or security interest it may have in the Plant
and Project pursuant to the Project Lease Agreement, is hereby
subject to and subordinate to the mortgage and security interest of
the Department as evidenced by the Indenture and the Supplemental
Lease Agreement.
Except as to the subordination in priority to the mortgage and
security interest of the Department, any right, title, interest,
mortgage or security interest of the City and Company shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Subordination Agreement to be executed the day and year first above
written.
CITY OF PIGGOTT, ARKANSAS
BY: /s/ Garland Holcomb
---------------------------------
Mayor
ATTEST:
/s/ Jean Doty
- -------------------------------
City Clerk
(SEAL)
MRL, INC.
BY: /s/ Larry J. Stalling
---------------------------------
Title: President
------------------------------
ATTEST:
/s/ Duane E. Obert
- -------------------------------
Title: Chief Financial Officer
-------------------------
-3-
<PAGE> 4
DEPARTMENT OF INDUSTRIAL
DEVELOPMENT OF THE STATE OF ARKANSAS
BY:---------------------------------
Title:------------------------------
-4-
<PAGE> 5
ACKNOWLEDGMENT
--------------
STATE OF ARKANSAS )
)ss.
COUNTY OF CLAY )
On this ----- day of ------------, 1995, before me, a Notary
Public, duly commissioned, qualified and acting, within and for
said County and State, appeared in person the within named Garland
Holcomb and Jean Doty, to me personally well known, who stated at
they we the Mayor and City Clerk, respectively, of the City of
Piggott, Arkansas, and were duly authorized in their respective
capacities to execute the foregoing instrument for and in the name
and behalf of the City of Piggott, Arkansas, and further stated and
acknowledged that they had so signed, executed and delivered said
foregoing instrument for the consideration, uses and purposes
therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal.
/s/ John R. Lingle
-------------------------------------
Notary Public
My Commission Expires:
10-16-2002
- ------------------------------
-5-
<PAGE> 6
ACKNOWLEDGMENT
--------------
STATE OF MISSOURI )
)ss.
COUNTY OF ST. CHARLES )
On this 31st day of October , 1995, before me, a Notary
---- --------
Public, duly commissioned, qualified and acting, within and for
said County and State, appeared in person the within named Larry J.
--------
Stallings and Duane E. Obert, to me personally well known, who
- --------- --------------
stated that they were the President and Chief Financial Officer,
--------- -----------------------
respectively, of MRL, Inc., a corporation, and were duly authorized
in their respective capacities to execute the foregoing instrument
for and in the name and behalf of said corporation, and further
stated and acknowledged that they had so signed, executed and
delivered said foregoing instrument for the consideration, uses and
purposes therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal.
/s/ Susan L. Couch
-------------------------------------
Notary Public
My Commission Expires:
6-12-98
- ------------------------------
-6-
<PAGE> 7
ACKNOWLEDGMENT
--------------
STATE OF ARKANSAS )
)ss.
COUNTY OF PULASKI )
On this ---- day of ------------, 1995, before me, a
Notary Public, duly commissioned, qualified and acting, within and
for said County and State, appeared in person the within named W.
Marcus Day, Jr., to me personally well known, who stated that he
was the ------------------------ of the Department of Industrial
Development of the State of Arkansas, and was duly authorized in
his capacity to execute the foregoing instrument for and in the
name and behalf of the Department of Industrial Development of the
State of Arkansas, and further stated and acknowledged that he had
so signed, executed and delivered said foregoing instrument for the
consideration, uses and purposes therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal.
-----------------------------------
Notary Public
My Commission Expires:
- ------------------------------
-7-
<PAGE> 1
Exhibit 4(i)
RELEASE AGREEMENT
RELEASE AGREEMENT dated as of November 1, 1995,
by and between the City of Piggott, Arkansas (the "Lessor"), and
MRL, Inc. (successor in interest to Missouri Research
Laboratories, Inc.), a corporation organized under and existing
by virtue of the laws of the State of Missouri (the "Lessee"):
WITNESSETH:
WHEREAS, the Lessor and the Lessee entered into
a Lease and Agreement dated as of May 1, 1984 (the "Lease"),
pursuant to which the Lessor leased to the Lessee certain
industrial machinery and equipment described in Exhibit A
attached hereto (the "leased equipment") and located at the
Lessee's plant (for informational purposes only, the plant site
is described in Exhibit B attached hereto), which Lease was filed
and recorded in the office of the Circuit Clerk and Ex Officio
Recorder of Clay County, Arkansas as Instrument No. 786, Book 11,
Page 81; and
WHEREAS, in accordance with the terms of the
Lease, the Lessee has paid in full all rent due under the Lease
and exercised its option to purchase the leased equipment and
terminate the Lease;
NOW, THEREFORE, the Lessor and the Lessee
declare that the Lease, and all obligations and duties of the
Lessor and the Lessee under the Lease, are terminated.
IN WITNESS WHEREOF, the Lessor and the Lessee
have caused this Release Agreement to be executed and delivered
by their duly authorized officials and officers as of the date
first above written.
ATTEST: CITY PIGGOTT, ARKANSAS
/s/ Jean Doty By: /s/ Garland Holcomb
- ------------------------------ ----------------------------
City Clerk Mayor
(SEAL)
MRL, INC.
ATTEST:
By: /s/ Larry J. Stallings
/s/ Duane E. Obert ----------------------------
- ------------------------------ President
Chief Financial Officer ----------------------------
- ------------------------------
(SEAL)
1
<PAGE> 2
ACKNOWLEDGMENT
STATE OF ARKANSAS )
COUNTY OF CLAY )
Before me, a Notary Public duly commissioned,
qualified and acting, within and for the County and State
aforesaid, appeared in person the within named Garland Holcomb
and Jean Doty, Mayor and City Clerk, respectively, of the City of
Piggott, Arkansas (the "City"), to me personally well known, who
stated that they were duly authorized in their respective
capacities to execute the foregoing instrument for and in the
name and on behalf of the City, and further stated and
acknowledged that they had so signed, executed and delivered the
foregoing instrument for the consideration, uses and purposes
therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my
hand and official seal this ---- day of November, 1995.
/s/ John R. Lingle
--------------------------------
Notary Public
My Commission expires:
10-16-2002
- ------------------------------
(SEAL)
2
<PAGE> 3
ACKNOWLEDGMENT
STATE OF MISSOURI
COUNTY OF ST. CHARLES
Before me, a Notary Public duly commissioned,
qualified and acting, within and for the County and State
aforesaid, appeared in person the within named Larry J.
--------
Stallings and Duane E. Obert, President and Chief Financial
- --------- -------------- --------- ---------------
Officer, respectively, of MRL, Inc., a Missouri corporation, to
- -------
me personally well known, who stated that they were duly
authorized in their respective capacities to execute the
foregoing instrument for and in the name and behalf of the
corporation, and further stated and acknowledged that they had so
signed, executed and delivered the foregoing instrument for the
consideration, uses and purposes therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my
hand and official seal this 31st day of October, 1995.
---- -------
/s/ Susan L. Couch
--------------------------------
Notary Public
My Commission expires:
6-12-98
- ------------------------------
(SEAL)
3
<PAGE> 4
EXHIBIT A
DESCRIPTION OF LEASED EQUIPMENT
-------------------------------
4P-3065, Board Test
System and Accessories
(Hewlett-Packard)
Wave Soldering System
Part No. 700B-16" F
(John Treiber Co.)
TRL-S Aquedus Cleaning System
(John Treiber Co.)
Automatic Dip Inserter
S/N 22084099 (D) Inserter
S/N 22084235 (H) Controller
(Contact Systems, Inc.)
52-Spindle Universal
Cable Brading Machine
Numeridex 7000 EPS
Numeripower Programming
System
Model 2600 Series IV
Automatic Wire Stripper
Tab Model MA-200-BD
Wire Marker
Accessories
(Eubanks Engineering)
Axial Lead Former with
Radial Lead Cutter
S/N 3745801
(Heller Industries)
4
<PAGE> 5
EXHIBIT B
DESCRIPTION OF PLANT SITE
-------------------------
The following described real estate situated in the Eastern
District of Clay County, Arkansas, to wit:
A part of the SE-1/4 NE-1/4 of Section 11 and together
with a part of the SW-1/4 NW-1/4 of Section 12, all in
Township 20 North, Range 8 East of the Fifth Principal
Meridian, more particularly described as follows: Beginning
at the southeast corner of the said SE-1/4 NE-1/4 of Section
11 and run thence west 528 feet, thence north 0 degrees 15
minutes west 176 feet, thence west 132 feet thence north 0
degrees 15 minutes west 484 feet, thence east 520 feet,
thence north 0 degrees 15 minutes west 137 feet thence east
140 feet, thence south 0 degrees 15 minutes east 137 feet,
thence east 100 feet, thence south 0 degrees 15 minutes east
660 feet, thence west 100 feet to the point of beginning,
containing 11.43 acres, more or less, in the Eastern
District of Clay County, Arkansas.
5
<PAGE> 1
Exhibit 10(p)
FACTORING AGREEMENT
This Factoring Agreement (the "Agreement") is made as of the
November 14, 1995, by and between Concord Growth Corporation
- -----------------
("Buyer") having a place of business at 1170 E. Meadow Drive, Palo
Alto, California 94303 and MRL, Inc., a corporation ("Seller")
--------- -------------
having its principal place of business and chief executive office
at 112 Point West Boulevard, Suite 500, St. Charles, MO 63301 with
---------------------------------------------------------------
additional locations at 1258 E. Main, Piggott, AR 72454 and 101
- ---------------------------------------------------------------
South Pine Street, Hoffman, IL 62250.
- ------------------------------------
SECTION 1. DEFINITIONS. When used herein, the following terms
-----------
shall have the following meanings:
1.1 "Account Balance" shall mean, on any given day, the
---------------
gross amount of all Purchased Receivables unpaid on
that day.
1.2 "Account Debtor" shall have the meaning set forth
--------------
in the Uniform Commercial Code and shall include
any person liable on any Purchased Receivable,
including without limitation, any guarantor of the
Purchased Receivable and any issuer of a letter of
credit or banker's acceptance.
1.3 "Adjustments" shall mean all discounts, allowances,
-----------
returns, disputes, counterclaims, offsets,
defenses, rights of recoupment, rights of return,
warranty claims, or short payments, asserted by or
on behalf of any Account Debtor with respect to any
Purchased Receivable.
1.4 "Advance Percentage" shall be eighty-five percent
------------------ -----------
(85%).
---
1.5 "Collections" shall mean all good funds received by
-----------
Buyer from or on behalf of an Account Debtor with
respect to Purchased Receivables.
1.6 "Insolvent" shall mean with respect to an Account
---------
Debtor that such Account Debtor has filed, or has
had filed against it, any bankruptcy case, or has
made an assignment for the benefit of creditors.
1.7 "Schedule of Accounts" shall mean a Bill of Sale
--------------------
signed by a representative of Seller which
accurately identifies the Receivables which Buyer,
at its election, may purchase, and includes for
each such Receivable the correct amount owed by the
Account Debtor, the name and address of the Account
Debtor, the invoice number, and the invoice date.
1.8 "Payment Period" shall be 90 calendar days from an
-------------- --
invoice date.
1.9 "Purchased Receivables" shall mean all Receivables
---------------------
arising out of the invoices and other agreements
identified on or delivered with any Schedule of
Accounts delivered by Seller to Buyer elects
purchase and for which Buyer makes an Advance.
1.10 "Receivable" shall mean accounts, chattel paper,
----------
instruments, contract rights, documents, general
intangibles, letters of credit, drafts, bankers
acceptances, and rights to payment, and all
proceeds thereof.
1.11 "Reconciliation Period" shall, unless otherwise
---------------------
notified by Buyer to Seller, mean a day calendar
---
period.
1.12 "Repurchased Receivable" shall refer to a Purchased
----------------------
Receivable which the Seller has become obligated to
Repurchase under Section 4.1 hereof.
1.13 "Write Off Period" shall mean twelve (12) calendar
----------------
months from the date Buyer purchases a Receivable.
1.14 "Dispute" shall mean a dispute, claim, or defense
-------
of any kind whatsoever, whether valid or invalid,
asserted by an Account Debtor, that may reduce the
amount collectible by Buyer from Account Debtor.
SECTION 2. PURCHASE AND SALE OF RECEIVABLES
--------------------------------
2.1 Offer to Sell Receivables. Seller may, on the
-------------------------
terms provided herein, from time to time factor,
sell and assign to Buyer, Receivables acceptable to
Buyer in its sole discretion, at a discount below
face value. Seller will notify each Account Debtor
of a Receivable purchased by Buyer that all
payments thereon must be made only to Buyer.
Seller shall deliver to Buyer a signed Schedule of
Accounts along with copies of invoices and purchase
orders, contracts, and proof of delivery or
service, with respect to any Accounts along with
copies of invoices and purchase orders, contracts,
and proof of delivery or service, with respect to
any Receivable for which a request for purchase is
made. Buyer shall be entitled to rely on all of
the information provided by Seller to Buyer on the
Schedule of Accounts and to rely on the signature
on any Schedule of Accounts as an authorized
signature of Seller. Each invoice shall bear a
notice, in form satisfactory to Buyer, that it has
been sold and assigned to and is payable only to
Buyer.
2.2 Acceptance of Receivables. Buyer shall have no
-------------------------
obligation to purchase any Receivable listed on
Schedule of Accounts. Upon acceptance, Buyer shall
pay to Seller the Advance Percentage of the face
amount of each Receivable Buyer desires to
purchase. Such payment shall be the "Advance" with
respect to such Receivable. The purchase price of
any Receivables purchased hereunder shall be the
sum of the Advance, plus any Reserve payable by
Buyer to Seller relating to such Receivable. The
aggregate amount of all outstanding Advances shall
not at any time exceed the lesser of $400,000 (the
--------
Maximum Credit) or an amount equal to the sum of
all undisputed Purchased Receivables multiplied by
the Advance Percentage. Seller shall not request
and Buyer shall not make an Advance that would
cause the resulting total of all Advances to exceed
the foregoing limitation. In the event the
aggregate outstanding Obligations shall at any time
exceed the foregoing limitation, Seller shall
immediately repay the Advances in the amount of
such excess.
2.3 Effectiveness of Sale to Buyer. Effective upon
------------------------------
Buyer's payment of an Advance, and for and in
consideration therefore and in consideration of the
covenants of this Agreement, Seller will have
absolutely sold, transferred and assigned to Buyer,
all of Seller's right, title and interest in and to
each Purchased Receivable and all monies due or
which may become due on or with respect to such
Purchased Receivable.
2.4 Establishment of a Reserve. Upon the purchase by
--------------------------
Buyer of each Purchased Receivable, Buyer shall,
unless waived by Buyer in its sole discretion,
establish a Reserve. The Reserve shall be the
amount by which the face amount of the Purchased
Receivable exceeds the Advance, less all accrued
fees and Adjustments on that Purchased Receivable
(the "Reserve"). The Reserve shall be a book
balance maintained on the records of Buyer and
shall not be a segregated fund.
SECTION 3. COLLECTIONS, CHARGES AND REMITTANCES
------------------------------------
3.1 Collections. All Collections will go directly to
-----------
Buyer and Buyer shall apply all Collections to
Seller's Obligations hereunder in such order and
manner as Buyer may determine. Seller will hold in
trust and safekeeping, as the sole property of
Buyer, and immediately turn over to Buyer, in
identical form received, any payment on a Purchased
Receivable that comes into Seller's possession. In
the event Seller comes into possession of a
remittance comprising payments of both a Purchased
Receivable and Receivables which has not been
purchased by Buyer, Seller shall hold same in
accordance with the provisions set forth above and
immediately turn same over to Buyer, in identical
form received. Upon collection of such item, Buyer
shall remit to Seller its portion thereof. Seller
agrees to indemnify and save Buyer harmless from
and against any and all claims, loss, costs and
expenses caused by or arising out of the
Receivables or any attempt by Buyer to collect same
or resolve any Dispute.
<PAGE> 2
3.2 Factoring Fee. Seller shall pay to Buyer upon
-------------
purchase of Receivables by Buyer, a Factoring Fee
("Factoring Fee"), calculated by taking the gross
face value of a Purchased Receivable and
multiplying it by NA percent (0%).
-- --
3.3 Finance Fee. Seller shall pay to Buyer as earned
-----------
for each Fee Period for Purchased Receivables, a
fee calculated by taking 0.09% of the gross face
-----
value of a Purchased Receivable for every one day
---
period or fraction thereof ("Fee Period") from the
date said Purchased Receivable is first purchased
by Buyer until the date said Purchased Receivable
is paid in full or otherwise repurchased by Seller
or otherwise written off by Buyer within the Write
Off Period.
3.4 Accounting. Seller shall immediately upon sale of
----------
Receivables to Buyer, make proper entries on its
books and records disclosing the sale thereof to
Buyer. Seller will immediately furnish Buyer
financial statements, tax records and other
information as reasonably requested by Buyer.
Buyer shall prepare and send to Seller after the
close of business for reach calendar month, an
accounting of the transactions for that calendar
month, including the amount of all Purchased
Receivables, all Collections, Adjustments,
Factoring Fees, and Finance Fees. The accounting
shall be deemed correct and conclusive unless
Seller makes written objection to Buyer within
thirty (30) days after the date Buyer mails the
accounting to Seller.
3.5 Refund to Seller. Provided that there does not
----------------
then exist an Event of Default, as defined in
Section 9, or any event or condition that with
notice, lapse of time or otherwise would constitute
an Event of Default, Buyer shall refund to Seller,
the amount, if any, which Buyer owes to Seller at
the end of Reconciliation Period according to the
accounting prepared by Buyer for that
Reconciliation Period (the "Refund"). The Refund
shall be an amount equal to:
3.5.1 The Reserve as of the beginning of that
Reconciliation Period, plus
3.5.2 The Reserve created for each Purchased
Receivable purchased during that
Reconciliation Period, minus
3.5.3 The total for that Reconciliation Period
of:
3.5.3.1 Finance Fee;
3.5.3.2 Factoring Fee;
3.5.3.3 Adjustments;
3.5.3.4 Repurchase Receivables, to the extent
Buyer has agreed to accept payment
thereof by deduction from the Refund; and
3.5.3.5 The Reserve for the Account Balance as of
the first day of the following
Reconciliation Period.
In the event the formula set forth in this
Section 3.5 results in an amount due to Buyer
from Seller, Seller shall immediately make such
payment to Buyer.
3.6 Facility Fee. Seller shall pay Buyer on the date
------------
hereof, a facility fee (the "Facility Fee") in
the amount of one percent (1.00%) of the Maximum
--- -----
Credit, which fee is fully earned and non-
refundable as of the date of this Agreement.
3.7 Audit Fees. Buyer or its designee may conduct
----------
N/A examinations of the Collateral and Seller's
---
operations, unless an Event of Default has
occurred and is continuing, in which event the
number of audits conducted will be in Buyer's
reasonable discretion. Seller shall pay Buyer
audit fees not to exceed $575.00 per day plus
expenses per audit. Audit fees shall be payable
upon demand by Buyer.
3.8 Monthly Minimum Fee. Buyer would not have
-------------------
entered into this Agreement and agreed to provide
Seller with the factoring arrangements hereunder
unless Seller guaranteed Buyer that the sum of
the Finance Fees and Factoring Fees paid to Buyer
in each month would be at least four thousand
-------------
dollars ($4,000) (the "Monthly Minimum Fee"). In
------
the event the aggregate Finance Fees, and
Factoring Fees paid during any month is less than
the Monthly Minimum Fee, then Seller shall pay to
Buyer the amount of any deficiency (the
"Supplemental Fee"). The Supplemental Fee, if
any, for any month shall be calculated and due
and payable on the first business day of the
succeeding month.
SECTION 4. RECOURSE AND REPURCHASE OBLIGATIONS
-----------------------------------
4.1 Seller's Agreement to Repurchase. Seller agrees
--------------------------------
to pay to Buyer on demand, the full face amount,
or any unpaid portion of, any Purchased
Receivable:
4.1.1 Which remains unpaid for the Payment
Period, unless prior to the expiration of
the Payment Period, the subject Account
Debtor has become Insolvent; or
4.1.2 With respect to which there has been any
breach of warranty or representation set
forth in Section 6 hereof or any breach
of any covenant contained in this
Agreement; or
4.1.3 With respect to which the Account Debtor
asserts any Dispute.
SECTION 5. POWER OF ATTORNEY. In order to carry out the sale
-----------------
of Purchased Receivables to Buyer, hereunder, Seller does hereby
irrevocably appoint Buyer and its successors and assigns as
Seller's true and lawful attorney in fact, with respect to
Purchased Receivables and hereby authorizes Buyer, regardless of
whether there has been an Event of Default, (a) to sell, assign,
transfer or pledge the whole or any part of the Purchased
Receivables; (b) to demand, collect, receive, sue, and give
releases to any Account Debtor for the monies due or which may
become due upon or with respect to the Purchased Receivables and to
compromise, prosecute, or defend any action, claim, case or
proceeding relating to the Purchased Receivables, including the
filing of a claim or the voting of such claims in any bankruptcy
case, all in Buyer's name or Seller's name as Buyer may choose; (c)
to prepare, file and sign Seller's name on any notice, claim,
assignment, demand, draft or notice of satisfaction of lien or
mechanic's lien or similar document; (d) to receive, open, and
dispose of all mail addressed to Seller for the purpose of
collecting the Purchased Receivables; (e) to endorse Seller's name
on any checks or other forms of payment on the Purchased
Receivable; and (f) to do all acts and things necessary or
expedient, in furtherance of any such purposes.
SECTION 6. REPRESENTATIONS, WARRANTIES, AND COVENANTS.
------------------------------------------
6.1 Receivables' Warranties, Representations and
--------------------------------------------
Covenants. To induce Buyer to buy Receivables
---------
and to render its services to Seller, and with
full knowledge that the truth and accuracy of the
following are being relied upon by the Buyer in
determining whether to accept Receivables as
Purchased Receivables, Seller represents,
warrants, covenants and agrees, with respect to
each Schedule of Accounts delivered to Buyer and
each Receivable described therein, that:
6.1.1 Seller is the absolute owner of each
Receivable set forth in the Schedule of
Accounts and has full legal right to
sell, transfer and assign such
Receivables;
6.1.2 The correct face amount of each is as set
forth in the Schedule of Accounts and is
not in Dispute;
6.1.3 The payment of each Receivable is not
contingent upon the fulfillment of any
obligation or contract, past or future,
and any and all obligations required of
the Seller have been fulfilled as of the
date of the Schedule of Accounts;
6.1.4 Each Receivable set forth on the Schedule
of Accounts is based on the actual sale
and delivery of goods and/or services
actually rendered on terms not to exceed
50 days, does not represent a sale to a
--
parent, subsidiary or affiliate of
Seller, is presently due and owing to
Seller, is not past due or in default,
has not been previously sold, assigned,
transferred, or pledged, is not a
consignment sale or bill and hold
transaction, and is free of any and all
liens, security interests and
Page 2
<PAGE> 3
encumbrances other than liens, security
interests or encumbrances in favor of
Buyer or any other division or affiliate
of Buyer;
6.1.5 There are no defenses, offsets, or
counterclaims against any of the
Purchased Receivables, and no agreement
has been made under which the Account
Debtor may claim any deduction or
discount, except as otherwise stated in
the Schedule of Accounts;
6.1.6 At the time that Buyer makes an Advance
relating to a Receivable, the Account
Debtors set forth in the Schedule of
Accounts, are then not insolvent and
Seller has no knowledge that the Account
Debtors are insolvent or may become
insolvent within the Payment Period;
6.1.7 Seller shall not take or permit any
action to countermand notification to
Account Debtors of Buyer's ownership of
Purchased Receivables.
6.2 Additional Warranties, Representations, and
-------------------------------------------
Covenants. In addition to the foregoing
---------
warranties, representations and covenants, to
induce Buyer to buy Receivables and to render its
services to Seller, Seller hereby represents,
warrants, covenants and agrees that:
6.2.1 Seller will not assign, transfer, sell or
grant any security interest in any
Collateral to any other party, without
Buyer's prior written consent;
6.2.2 The Seller's name, form of organization,
place of business and the place where the
records concerning all receivables herein
referred to are kept is set forth at the
beginning of this Agreement, and Seller
will give Buyer 30 days advance notice in
writing if such name, organization, place
of business or record keeping is to be
changed or a new place of business or
record keeping is to be added and shall
execute any documents necessary to
perfect Buyer's interest in Purchased
Receivables and the Collateral;
6.2.3 Seller shall pay all of its normal gross
payroll for employees, and all federal
and state taxes, as and when due,
including without limitation all payroll
and withholding taxes and state sales
taxes;
6.2.4 Seller has not, as of the time Seller
delivers to Buyer a Schedule of Accounts,
or as of the time Seller accepts any
Advance from Buyer, filed a voluntary
petition for relief under the United
States Bankruptcy code or had filed
against it an involuntary petition for
relief;
6.2.5 Seller, if a corporation, is duly
incorporated and, at all times, in good
standing under the laws of the State of
Missouri and is duly qualified in all
--------
States where such qualification is
required. Seller has all required
licenses to operate its business and
transact business under no trade name or
trade styles other than Hesco Division of
-----------------
MRL, Inc. and Precision Metals, Division
----------------------------------------
of MRL, Inc.
------------
SECTION 7. NOTICE OF ADJUSTMENTS. In the event of a breach
---------------------
of any of the representations, warranties, or covenants set forth
in Section 6, or in the event any Dispute is asserted by any
Account Debtor, Seller shall promptly advise Buyer and shall,
subject to the Buyer's approval, resolve such disputes and advise
Buyer of an Adjustment. Until the disputed Purchased Receivable is
repurchased by Seller and the full amount of the Purchased
Receivable is paid, Buyer shall remain the absolute owner of any
Purchased Receivable which is subject to Adjustment or repurchase
under Section 4.1 hereof, and any rejected, returned, or recovered
personal property, with the right to take possession thereof at any
time.
SECTION 8. SECURITY INTEREST. In order to secure all of
-----------------
Seller's now existing or hereafter arising obligations and
indebtedness to Buyer, howsoever arising, whether under this
Agreement or otherwise (collectively the "Obligations"), Seller
hereby grants to Buyer a continuing lien upon and security interest
in all Seller's now existing or hereafter arising: accounts,
chattel paper; general intangibles; Reserves, Reserve Accounts,
Refunds; inventory; equipment and fixtures; documents, instruments,
letters of credit and bankers' acceptances; books and records
relating to any of the above; and (viii) accessions, substitutions
for and all replacements, products, and cash and non-cash proceeds
of the foregoing, in whatever form, including, without limitation,
all insurance proceeds and all claims against third parties for
loss or destruction of or damage to any of the foregoing
(collectively, the "Collateral").
Seller is not authorized to sell, assign, transfer or otherwise
convey any Collateral without Buyer's prior written consent, except
for the sale of finished inventory in the Seller's usual course of
business. Seller agrees to sign and to allow Buyer to file UCC
financing statements, in a form acceptable to Buyer. Seller agrees
to deliver to Buyer the copies of all instruments, chattel paper
and documents evidencing or related to Receivables.
SECTION 9. DEFAULT. The occurrence of any one or more of the
-------
following shall constitute an Event of Default hereunder:
(i) Seller fails to pay or perform any Obligations as and when due;
(ii) there shall be commenced by or against Seller any voluntary or
involuntary case under the United States Bankruptcy Code, or any
assignment for the benefit of creditors, or appointment of a
receiver or custodian for any of its assets, or Seller makes or
sends notice of a bulk transfer, (iii) Seller or any guarantor of
the Obligations shall become insolvent in that its debts are
greater than the fair market value of its assets, or Seller is
generally not paying its debts as they become due or is left with
unreasonably small capital; (iv) any lien, garnishment, attachment,
execution or the like is issued against or attaches to the Seller,
the Purchased Receivables, or the Collateral; (v) Seller shall
breach any covenant, agreement, warranty, or representation set
forth herein; (vi) Seller delivers any document, financial
statement, schedule or report to Buyer which is false or incorrect
in any material respect; or (vii) any present or future guarantor
of the Obligations revokes, terminates or fails to perform any of
the terms of any guaranty, endorsement or other agreement of such
party in favor of Buyer or any affiliate of Buyer.
SECTION 10. REMEDIES UPON DEFAULT. Upon the occurrence of an
---------------------
Event of Default, the Obligations shall bear interest at a rate per
annum equal to the per annum rate of the Finance Fee and Factoring
Fee, and Buyer may, without implying any obligation to buy
Receivables, cease buying Receivables or extending any financial
accommodations to Seller, and (i) declare all Obligations
immediately due and payable; (ii) withhold any further payments to
Seller until all Obligations have been paid in full; (iii) notify
all Account Debtors to pay Buyer directly, whether such Receivable
is a Purchased Receivable or not; (iv) direct the U.S. Post Office
or other party to forward mail to an address specified by Buyer;
(v) exercise all rights under the power of attorney set forth in
Section 5 above with respect to all Collateral and all remedies set
forth herein; (vi) settle, compromise, adjust or litigate
Receivables on such terms as Buyer deems necessary to protect its
rights in said Receivables; (vii) proceed against Seller or any
guarantor directly without any obligation to proceed against the
Collateral; (viii) remove from Seller's premises and take
possession of the Collateral and dispose of same at public or
private sale; (ix) exercise any right or remedy with respect to
Seller or the Collateral granted under applicable law or this
Agreement.
The Seller will pay to Buyer immediately upon demand all reasonable
fees and expenses of attorneys and other professionals that Buyer
incurs in enforcing this Agreement or any other agreement executed
in connection herewith, protecting or enforcing its interest in the
Purchased Receivables or the Collateral, or collection of the
Purchased Receivables and the Obligations.
Page 3
<PAGE> 4
SECTION 11. SEVERABILITY, WAIVER OF RIGHTS. This Agreement
------------------------------
constitutes the entire Agreement between the parties and may not be
modified or amended or any right or remedy of Buyer waived, except
by agreement of the parties in writing. In the event that any
provision of this Agreement is deemed invalid by reason of law,
this Agreement will be construed as not containing such provision
and the remainder of the Agreement shall remain in full force and
effect. This agreement shall be binding upon the Seller and Buyer
and their successors and assigns, but may not be assigned by Seller
without Buyer's written consent. Any delay or failure by Buyer to
exercise any right or remedy hereunder shall not operate as a
waiver thereof. A waiver by Buyer of a right or a remedy on one
occasion shall not be deemed a waiver of the right or remedy on any
subsequent occasion.
SECTION 12. CHOICE OF LAW, JURISDICTION, WAIVER OF JURY TRIAL.
-------------------------------------------------
This Agreement has been transmitted by Seller to Buyer at Buyer's
office in the State of California and has been executed and
accepted by Buyer in the State of California. This Agreement shall
be governed by and interpreted in accordance with the laws of the
State of California. Seller hereby irrevocably submits to the
jurisdiction of any California State or Federal court sitting in
San Francisco County in any action or proceeding arising out of or
relating to this Agreement, or any other agreements, and Seller
hereby irrevocably agrees that all claims with respect to such
action or proceeding may be heard and determined in such California
State court or, to the extent permitted by law, in such Federal
court. Seller consents to the service of any and all process in
any such action or proceeding by the mailing of copies of such
process to Seller's address specified in the Agreement. SELLER
HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY SUIT OR PROCEEDING
ARISING UNDER OR RELATING TO THIS AGREEMENT.
SECTION 13. EFFECTIVENESS; TERM. This Agreement shall only
-------------------
become effective upon execution and delivery by Seller and
acceptance by Buyer and, unless earlier terminated as provided in
this Agreement, shall continue in full force and effect for an
initial term of six months from the date hereof and shall be deemed
----------
automatically renewed for successive six-month periods. Unless
---------
earlier terminated as provided in this Agreement, All Obligations
shall be due and payable in full at the expiration of the last
renewal term. This Agreement may be terminated prior to the end of
the initial term or any renewal term (each, a "Term") as follows:
(a) Seller may terminate this Agreement at any time after giving
Buyer at least thirty (30) days prior written notice and paying
Buyer an Early Termination Fee equal to one percent (1%) of the
--- --
Maximum Credit multiplied by the number of months remaining in the
then-current Term (the "Early Termination Fee"). Any partial month
remaining in such Term shall constitute a full month for the
purpose of calculating the Early Termination Fee. Any such
termination shall be effective upon payment to Buyer in full of all
Obligations, including the Early Termination Fee; and (b) This
Agreement shall automatically terminate following the occurrence of
an Event of Default under Section 9. Upon any such termination
following an Event of Default, all Obligations, including the Early
Termination Fee, shall be due and payable in full.
Notwithstanding the foregoing, any termination of this Agreement
shall not affect Buyer's security interest in the Collateral and
Buyer's ownership of the Purchased Receivables, and this Agreement
shall continue to be effective, and Buyer's rights and remedies
hereunder shall survive such termination, until all transactions
entered into and Obligations incurred hereunder or in connection
herewith have been completed and satisfied in full.
SECTION 14. PARTICIPATIONS; ASSIGNMENTS. Seller understands
---------------------------
that Buyer may from time to time transfer and assign its rights
under this Agreement to one or more assignees. Seller hereby
consents to these transfers and assignments by Buyer to one or more
assignees. Seller hereby consents that any such assignee may
exercise the rights of the Buyer hereunder. Seller further hereby
consents and acknowledges that any and all defenses, claims or
counterclaims that it may have against Buyer shall be limited to,
and may only be brought against, Buyer and may not extend to any
assignee, including but not limited to the funding obligations.
Seller and Buyer intend that any and all direct or indirect
assignees of the Buyer of the type set forth above shall be the
third party beneficiaries of this Agreement.
IN WITNESS WHEREOF, Seller has executed and delivered this
Agreement for acceptance by Buyer as of the day and year above
written. If this Agreement is not witnessed by an authorized
employee of Buyer, Seller must have their signature acknowledged by
a Notary Public.
SELLER CONCORD GROWTH CORPORATION WITNESS:
MRL, Inc.
By: /s/ Larry J. Stalling By: /s/ Thomas R. Toman
-------------------------------------- ---------------------------------
Title: President Print Name: Thomas R. Toman
----------------------------------- -------------------------
Signer's Driver's License No. ###-##-####
------------
BUYER
CONCORD GROWTH CORPORATION
By: /s/ Vince Norez
--------------------------------------
Title: Vice President
-----------------------------------
Date: 11-17-95
------------------------------------
INSTRUCTIONS TO NOTARY PUBLIC: Use an ACKNOWLEDGMENT FORM as the
- ------------------------------
Buyer requires identity verification.
Page 4
<PAGE> 1
EXHIBIT 10(q)
AMENDMENT TO
FACTORING AGREEMENT
Amendment #1
Dated November 14, 1995
The FACTORING AGREEMENT dated November 14, 1995 (the
-----------------
"Agreement"), between Concord Growth Corporation, a California
corporation, and MRL, Inc., a corporation is hereby amended in
---------
the specific section(s) as follows:
Section 2.1 Offer to Sell Receivables. This section has
-------------------------
been amended in its entirety to read: Seller
may, on the terms provided herein, from time to
time factor, sell and assign to Buyer,
Receivables acceptable to Buyer in its sole
discretion, at a discount below face value.
Seller will notify each Account Debtor of a
Receivable purchased by Buyer that all payments
thereon must be made only to Buyer. Seller
shall deliver to Buyer a signed Schedule of
Accounts along with copies of invoices and upon
request, purchase orders, contracts, and proof
of shipment or service, with respect to any
Receivable for which a request for purchase is
made. Buyer shall be entitled to rely on all of
the information provided by Seller to Buyer on
the Schedule of Accounts and to rely on the
signature of the President, Chief Financial
Officer, Executive Assistant, Controller, or
Accounting/Human Resource Manager on any
Schedule of Accounts as an authorized signature
of Seller. Each invoice shall bear a notice, in
form satisfactory to Buyer, that it has been
sold and assigned to and is payable only to
Buyer.
Section 8 Security Interest. Notwithstanding the terms
------------------
set forth in Section 8.
8.1 Buyer, upon written request and in the
absence of a Default, will grant
permissions to allow Seller to sell
obsolete equipment and/or trade-in
equipment on new equipment, and that
permission will not be unreasonably
withheld.
Section 13 Effectiveness; Term. Notwithstanding the terms
--------------------
set forth in Section 13.
13.1 Buyer, absent of an Event of Default,
agrees to waive the Early Termination Fee
after the initial Term, or if all
obligations are paid in full by obtaining
financing from a conventional bank or new
equity funding.
THE AMENDMENT AFFECTS ONLY THE ABOVE LISTED SECTION(S) OF THE
AGREEMENT AND ALL OTHER PROVISIONS OF THE AGREEMENT SHALL REMAIN
UNCHANGED AND IN FORCE AS WRITTEN OR THEREAFTER AMENDED IN
WRITING.
This Amendment shall become effective when it is accepted and
executed by an authorized officer of Buyer.
(Signatures on following page)
<PAGE> 2
AGREED:
SELLER:
MRL, INC.
BY: /s/ Larry J. Stallings
-----------------------------------
Larry J. Stallings
-----------------------------------
(PRINT NAME AND TITLE)
DATE: 11/16/95
---------------------------------
ACCEPTED:
BUYER:
CONCORD GROWTH CORPORATION
BY: /s/ Vince Norez
-----------------------------------
Vince Norez Vice President
-----------------------------------
(PRINT NAME AND TITLE)
DATE: 11-17-95
---------------------------------
<PAGE> 1
<TABLE>
EXHIBIT 11
MRL, INC.
COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES
FISCAL 1996 PERIOD
<CAPTION>
DAYS
MAIN- WEIGHTED
DATE BALANCE TAINED SHARE DAYS AVERAGE
<S> <C> <C> <C> <C> <C>
Common shares
outstanding 08/01/95 2,685,694 92 247,083,848
Weighted average
number of shares,
three months ended
October 31, 1995 2,685,694
=========
Common shares
outstanding 02/01/95 2,585,694 41 106,013,454
03/14/95 2,685,694 232 623,081,008
--- -----------
273 729,094,462
Weighted average
number of shares,
nine months ended
October 31, 1995 2,670,676
=========
<CAPTION>
FISCAL 1995 PERIOD
<S> <C> <C> <C> <C> <C>
Common shares
outstanding 08/01/94 2,585,694 92 237,883,848
Weighted average
number of shares,
three months ended
October 31, 1994 2,585,694
=========
Common shares
outstanding 02/01/94 2,585,694 273 705,894,462
Weighted average
number of shares,
nine months ended
October 31, 1994 2,585,694
=========
</TABLE>
-19-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the condensed financial statements for
period ended October 31, 1995 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-END> OCT-31-1995
<CASH> 56,000
<SECURITIES> 0
<RECEIVABLES> 623,000
<ALLOWANCES> 0<F1>
<INVENTORY> 863,000
<CURRENT-ASSETS> 1,626,000
<PP&E> 296,000
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 2,241,000
<CURRENT-LIABILITIES> 1,464,000
<BONDS> 727,000
<COMMON> 279,000
0
0
<OTHER-SE> (229,000)
<TOTAL-LIABILITY-AND-EQUITY> 2,241,000
<SALES> 3,462,000
<TOTAL-REVENUES> 3,462,000
<CGS> 2,630,000
<TOTAL-COSTS> 3,873,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 124,000
<INCOME-PRETAX> (330,000)
<INCOME-TAX> 60,000
<INCOME-CONTINUING> (390,000)
<DISCONTINUED> (4,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (394,000)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
<FN>
<F1>Allowances are not reported in interim statements.
<F2>Accumulated depreciation is not reported in interim statements.
</TABLE>
