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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10K
ANNUAL REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the calendar year ended December 31, 1995 Commission file no 1-11013
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SPECIALTY CHEMICAL RESOURCES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 34-1366838
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(State of incorporation) (I.R.S. Employer I.D. No.)
9100 Valley View Road, Macedonia, Ohio 44056
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 468-1380
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Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $.10 per share.
Securities registered pursuant to Section 12(g) of the Act: None
----
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes __x__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of voting stock held by nonaffiliates of the
Registrant as of February 22, 1996 was $5,848,744.
As of February 22, 1996, 3,947,768 shares of the Registrant's Common Stock
were outstanding.
Documents Incorporated by Reference: The registrant's definitive proxy
statement for its 1996 Annual Meeting of Stockholders, which the registrant
intends to file with the Securities and Exchange Commission within 120 days of
the close of its fiscal year end, December 31, 1995, is incorporated by
reference in Part III of this Annual Report on Form 10-K from the date of
filing of such document.
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PART I
ITEM 1. BUSINESS
GENERAL. The Company was incorporated in Delaware in 1982 for the purpose of
operating family oriented restaurants and entertainment centers. By 1988, the
Company had concluded that enhanced growth required a change in the Company's
business focus from the operation of the restaurants to the building of an
industrial corporation. As a result, the Company acquired Aerosol Systems,
Inc. ("ASI"), effective December 31, 1988, for an aggregate purchase price of
approximately $40,000,000, of which approximately $14,750,000 was paid for
stock and approximately $25,250,000 of liabilities were assumed. The Company
disposed of the restaurants October 31, 1991. ASI was merged into the Company
on December 30, 1992.
The Company's principal executive offices are located at 9100 Valley View
Road, Macedonia, Ohio 44056; telephone (216) 468-1380. Unless the context
otherwise indicates, the term "Company" refers to Specialty Chemical Resources,
Inc.
On February 26, 1992, the Company effected a 1-for-14 reverse stock split,
whereby each share of the Common Stock of the Company outstanding immediately
prior to the reverse split was converted into 1/14 of a share of the Common
Stock. Unless otherwise indicated, the information in this Report is adjusted
to reflect the 1-for-14 reverse stock split.
BUSINESS. The Company is a leading custom formulator and packager of specialty
chemical products, primarily for the automotive service and industrial
maintenance markets. The Company specializes in developing, formulating and
packaging new products for customers which do not have the expertise or volume
to maintain captive research and development departments and manufacturing
operations. The Company produces and sells over 1000 "proprietary" chemical
formulations, substantially all of which are packaged in aerosol containers.
In 1995, the Company sold approximately 35 million units. These proprietary
formulations represent know-how of the Company developed through the skill and
experience of its employees. These proprietary formulations are not generally
patented. Approximately 84% of the Company's sales are of its proprietary
products sold under the brand names of the Company's customers. The Company's
products include cleaners, sealants, gasket components, lubricants, waxes,
adhesives, paints, coatings, degreasers, polishes, anti-statics and tire
inflators. Substantially all of the Company's products are used by
professionals in commercial applications. In addition, the Company produces
and sells its own branded products. Approximately 16% of the Company's sales
are of its branded products.
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The Company acts as an extension of its customers' marketing, research and
development, procurement, production and quality control departments. It
provides a wide range of services including: aerosol product design and concept
origination; chemical formulation; container selection; marketing program
development; labeling; filling and packaging; component and raw materials
purchasing; vendor verification; regulatory compliance; inventory control and
overall program management. As such, the Company differentiates itself from
contract packagers, which fill aerosol cans for a fee but do not provide the
same range of services. The Company believes that it is one of three companies
providing such a wide range of services in the Company's product markets.
The Company's customers are principally distribution companies. The
Company sells to approximately 350 core accounts with no single customer
accounting for 10% of the Company's sales. The Company provides customers with
prompt shipment, normally within six weeks after receipt of order, and will
accept short production run orders (as few as 100 cases), thereby reducing the
inventory requirements of its customers. Markets served by the Company include
automotive service, janitorial, industrial maintenance and sanitation, high
tech electronic and electrical manufacturing, and art and crafts. Less than 6%
of the Company's sales are to chain store merchandisers. The Company believes,
based on its experience with its customers and its knowledge of its industry,
that it is the only custom packager in its principal markets that provides this
wide range of services, and on a routine basis will produce as few as 100 cases
of a product and offers delivery within six weeks.
The Company relies heavily on its pre-sale consultation and ongoing
involvement with customers to establish long-term relationships. Its
specialized equipment permits it to meet the varied needs of its customers.
The Company's strong technical capabilities, proprietary products and
formulations, manufacturing expertise and customer support are key elements in
the Company's operating strategy.
In December, 1992, the Company experienced a non-chemical fire at its
Macedonia, Ohio facility. Machinery and equipment were damaged affecting the
Company's production capabilities. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
PRODUCT DEVELOPMENT PROCESS. The product development process typically takes
six to nine months from new product concept origination to completion.
Existing formulations may also serve as the basis for new products, in which
case the product development process may be substantially accelerated.
The Company's product development activities typically originate
through the identification by the Company's sales or research and development
personnel of a perceived product need for its customers and its potential
customers. The Company also develops products by utilizing technology
developed by third parties. After the product
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concept is originated, the Company develops the formula and manufactures
samples of the product. The Company's sales staff then demonstrates the
product for its customers, who field test the product through end-users.
Concurrently, the Company conducts product stability tests in its laboratories.
The Company makes any necessary adjustments resulting from customer and
end-user comments. These adjustments may include changes in formulation,
valve, spray pattern and propellant chemistry. Then, the Company, with
customer input, designs the label, both for the aerosol cans and for the carton
in which it is packaged. The Company's package and container design services
include artistic design, writing of product instructions, product name creation
and regulatory compliance, if necessary. Alternatively, the product concept
origination may be initiated by the customer with the product development
activity continuing in substantially the same way from that point forward.
PRODUCTS. Aerosol containers are a convenient, effective and efficient way to
deliver thousands of products. The containers, 3.1 billion of which were sold
in the United States in 1994, are generally made of steel or aluminum and can
be recycled. Since 1978, when the use of chlorofluorocarbons ("CFC's") as
propellant was discontinued in the United States, the Company's aerosol
products generally have used compressed gases, such as carbon dioxide and
nitrogen and liquified gases, such as propane and butane, as propellants. The
Company's aerosol containers range from 4 ounces to 24 ounces in capacity. The
Company combines its chemical formulation, an appropriate propellant, dip tube,
valve, actuator, cap and the aerosol container to produce the final product.
Products developed by the Company for the automotive service and
industrial maintenance markets include cleaners, degreasers, lubricants and
paints. The Company has also developed specialized products for the automotive
service market, such as its patented non-flammable tire inflator, carburetor,
brake and choke cleaners, gasket and trim adhesives, undercoatings, silicones,
belt dressings, fabric protectors, and the Company's patented automobile fuel
injection system cleaner, a specially formulated cleaner and a patented
propellant system. Specialized products for the industrial maintenance market
include molybdenum lubricants, food-grade lubricants and cleaners, release
agents and protectors for injection and cast molding applications.
In 1991 the Company introduced its environmentally responsive,
water-carried (as opposed to solvent-carried), aerosol products under the
program name of SmartLine (TM). Products using this system significantly
reduce solvent release. Additionally, these products meet the National Fire
Prevention Agency's most stringent fire prevention and storage standards for
aerosol products. Products using this technology include a range of cleaners,
degreasers and lubricants produced for the Company's principal markets.
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The Company has developed a number of products using barrier packages.
In a typical aerosol, the propellant and product are mixed and released from
the can as a foam or spray. In a barrier package, the product is separated
from the propellant by a liner (a can within a can) and only the product, and
not the propellant, is released. This is important with products that cannot
be mixed with a propellant, such as room temperature vulcanizing silicones
(RTV's), or products which are too viscous to be propelled through a standard
aerosol, such as caulking compounds.
The Company also produces its own brand name products through its
Taylor Made Products Division (TMP), which are sold principally to the
automotive do-it-yourself market through chain store merchandisers. The
products include, cleaners, lubricants and degreasers. In addition, the
Company produces its own brand name products through its Aerosol Maintenance
Products Division (AMP). These products are sold principally to janitorial and
sanitation supply distributors and include cleaning compounds and
disinfectants.
MARKETING AND DISTRIBUTION. The Company's marketing and sales activities are
carried out by eight full-time salaried salespersons, except for sales of the
Company's brand name products, which are marketed and sold by 21 manufacturer's
representative agencies. The Company's customers are distributors of a broad
range of products to the automotive service and industrial maintenance markets.
The Company's efforts to obtain sales involve detailed pre-production and
ongoing involvement with a customer. The Company seeks to develop long-term
customer relationships. More than 64% of the Company's current sales volume is
attributable to customers who have been with the Company for more than 10
years. The Company's active core customers number more than 350, with no
single customer accounting for 10% of the Company's net sales. Substantially
all of the Company's customers are located in the eastern two-thirds of the
United States.
RESEARCH AND DEVELOPMENT. The Company's research and development activities
are directed toward aerosol product development and improvement, product
screening and custom applications designed to meet the specific requirements of
its customers. The Company's research and development activities involve both
the formulation of proprietary chemical compounds and the development of
associated aerosol delivery systems. The Company works with its customers to
develop new products and to modify existing products for them. It also seeks
to develop new, proprietary products such as its patented fuel injection system
cleaner, water-carried aerosol products, and patented tire inflators. The
Company's technical activities are carried out by 3 chemists and 10 laboratory
technicians. The Company holds several registered trademarks and patents.
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MANUFACTURING. During 1995, the Company completed a restructuring plan
pursuant to which it has consolidated its two manufacturing plants into an
expanded Macedonia facility. The expanded facility contain seven production
lines. Each line has different characteristics, providing the Company with
flexibility to accommodate the short production runs required for many
customized products, the longer high speed production runs, and the specialized
barrier packaging production. In addition, the Company is able to package its
products in one gallon cans, five gallon pails, and fifty-five gallon drums.
In 1995, the Company sold approximately 35 million units. The handling
of large volumes of liquid propellants requires that the manufacturing area be
compartmentalized, permitting the isolation of each step in the production
process. Control systems automatically shut down operation if safety limits
are exceeded. Raw materials are stored within the plant, while propellants and
solvents are stored in above-ground tanks outside the plant. The raw
materials are moved as needed to the mixing area and the product is piped into
a separate filling area where cans are filled. The cans are then conveyed into
propellant charging rooms, two lines per room, where the propellant is loaded
and the cans are crimped (sealed) automatically. After leaving the propellant
charging room, the cans are run through a hot water test tank to test for
leaking and container integrity at elevated temperatures. In cases where the
can label has not been preprinted, a label is applied. The cans are coded,
then packed and palletized for shipment or, in some cases, stored in the
warehouse on racks for order picking.
COMPETITION. The aerosol industry is highly fragmented geographically, along
product lines and by production capacity. Within these areas, the industry is
highly competitive. Although many companies perform some of the
individual operations and services carried out by the Company, and some of its
competitors have greater financial and other resources, the Company believes it
has few competitors that offer the same type of technical assistance, product
formulation and packaging. Further, the Company's competitors do not routinely
offer to produce as few as 100 cases of product and to deliver products within
six weeks. These services are provided by the Company. Most of the Company's
customers do not have their own aerosol research or production facilities.
Because of the highly specialized nature of the Company's business, price,
while important, is not normally the principal competitive factor. The Company
believes that the principal competitive factors in the industry are quality of
product and the product's ease of use by its end-user.
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EMPLOYEES. As of February 16, 1996, the Company employed approximately 254
people on a full-time basis, of whom 88 are salaried and the remainder are
hourly. All of the Company's hourly employees are represented by one collective
bargaining unit with one collective bargaining agreement. The Company's
current collective bargaining agreement expires in 1997. The Company considers
its relationship with its employees to be good. There have not been any work
stoppages or slowdowns due to labor related problems.
ENVIRONMENTAL MATTERS. The Company's manufacturing facilities are subject to
extensive environmental laws and regulations concerning, among other things,
emissions to the air, discharges to the land, surface, subsurface strata and
water, and the generation, handling, storage, transportation, treatment and
disposal of waste and materials, and are also subject to other federal, state
and local laws and regulations regarding health and safety matters. Management
believes that the Company's business, operations and facilities are being
operated in substantial compliance in all material respects with applicable
environmental and health and safety laws and regulations. As a result,
compliance with existing federal, state and local environmental laws is not
expected to have a material effect upon the earnings or competitive position of
the Company. However, management of the Company cannot predict the effect, if
any, of environmental laws that may be enacted in the future. Capital
expenditures for environmental control facilities for the next two fiscal years
(exclusive of expenses that are expected to be substantially reimbursed) are
not expected to be material. See "Legal Proceedings". Such costs, if any,
should comprise a part of normal purchases of new or replacement equipment or
facilities.
ITEM 2. PROPERTIES
PROPERTY. The Company's Macedonia production facility is leased. Under a
lease amendment dated July 25, 1994, upon completion of certain leasehold
improvements, the term of the Macedonia lease was extended through the year
2005, with four (4) five-year unilateral options to extend the lease through
the year 2025. The Company leases 8,000 square feet of space for its executive
offices, which are located adjacent to the Macedonia plant. The lease expires
in 1996. On October 6, 1995 the Company purchased its previously leased
distribution center in Macedonia, Ohio as the final phase of its facilities
consolidation plan.
ITEM 3. LEGAL PROCEEDINGS
LEGAL PROCEEDINGS. The Company continues to be involved in implementing a
settlement reached pursuant to a Consent Order, entered between the State of
Ohio and Aerosol Systems, Inc. on July 9, 1990, pertaining to environmental
concerns which preceded the Company's acquisition of ASI. ASI is now operated
as a division of the Company.
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Pursuant to the July 9, 1990 Consent Order, the Company had submitted a
closure plan for its facility located at 9150 Valley View Road in Macedonia,
Ohio (the "Macedonia Facility") which was modified unilaterally by the Ohio
EPA. The Company appealed the Ohio EPA's unilateral modifications to the Ohio
Environmental Board of Review. On January 6, 1995, AEROSOL SYSTEMS, A
DIVISION OF SPECIALTY CHEMICAL RESOURCES, INC. V. DONALD R. SCHREGARDUS,
DIRECTOR, OHIO ENVIRONMENTAL PROTECTION AGENCY (Environmental Board of Review,
Case No. EBR 773188), was resolved through a settlement agreement. The January
6, 1995 settlement agreement resulted in a termination of the Company's appeal
of this matter before the Environmental Board of Review.
On May 3, 1995, Ohio EPA issued a supplemental closure plan approval
letter that established certain deadlines with regard to the Company's
implementation of a Groundwater Extraction and Treatment System, a Soil Vapor
Extraction System, and certain other closure plan tasks. On February 12, 1996,
the Company submitted a revised closure cost estimate to address closure costs
anticipated the Macedonia Facility. Based on an estimate of closure costs
received from the Company's environmental consultant, the revised closure cost
estimate totalled $975,000. As of February 8, 1996, approximately $981,534 was
available in an Ohio EPA trust fund, comprised of funds deposited by former
owners of the Company, to meet these expenses (the "Ohio EPA Trust Fund").
Further, as of February 12, 1996, the Company had paid $764,309 directly toward
closure activities.
Pursuant to the Ohio Administrative Code, the Company requested
reimbursement from the Ohio EPA Trust Fund of those expenses which the Company
had paid directly. As of March 21, 1996, the Director of Ohio EPA has approved
reimbursement to the Company in the amount of $620,800 from the Ohio EPA Trust
Fund. Therefore, approximately $361,000 remains in the Ohio EPA Trust Fund to
complete closure activities. It is difficult to predict at this time when
remaining funds in the Ohio EPA Trust Fund will be released. However, the
Company does expect additional reimbursement of approximately $140,000 during
1996.
If the remediation techniques proposed in the closure plan are not
successful, or if supplemental or alternative technologies are required to be
used, then the Company may incur costs in excess of the $975,000 closure cost
estimate. The Company believes, based on discussions with its technical
consultants, that the cost of additional testing and operation of the proposed
remedial systems will be approximately $150,000 and that the costs of the
supplemental or alternative cleanup measures, if determined to be necessary,
will not exceed $2,000,000.
On January 31, 1996, the Company received a Notice of Violation (NOV)
from Ohio EPA in association with an inspection conducted by Ohio EPA on June
23, 1995 regarding operations at the Macedonia Facility. Thirty-six violations
were alleged by Ohio EPA. At this time the Company does not know whether these
violations had in fact occurred or for what time period the alleged violations
lasted. A majority of the alleged violations will be addressed by the
completion of closure activities described above. Other violations will be
addressed through negotiations with the Ohio EPA. The Company is subject to
stipulated penalties provided in the July 9, 1990 Consent Order. The
stipulated penalties section of the July 9, 1990 Consent Order provides
penalties for each day of violation of the Consent Order of $1,000 per day for
up to 30 days, $2,000 per day for days 31-60, $3,000 per day for days 61-90 and
$5,000 per day for each day over 90 days. The Company cannot predict whether
the Ohio EPA will seek penalties or, if it does so, what the extent of those
penalties as a result of the NOV will be.
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Other than the environmental matters discussed above, the Company is
involved only in claims, legal actions and complaints arising in the ordinary
course of its business. In the opinion of management, the outcome of such
matters will not have a material adverse effect on the financial position or
results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of 1995.
Executive Officers
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Set forth below is certain information concerning the Executive Officers
of the Company. Officers of the Company are elected annually by the Board of
Directors of the Company, and serve at the pleasure of the Board of Directors
that elects them.
<TABLE>
<CAPTION>
NAME AGE POSITION
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<S> <C> <C>
Edwin M. Roth 68 President, Chairman of the
Board and Director
Corey B. Roth 38 Vice President, Treasurer,
Asst. Secretary and
Director
John H. Ehlert 43 Vice President and President of
the Aerosol Systems Division
</TABLE>
Mr. Edwin M. Roth has been a Director and President of the Company and
Chairman of the Board of Directors of the Company since its formation in June
1982. Mr. Roth was Chief Executive Officer of ASI from the time of its
acquisition in December 1988 until its merger into the Company in December
1992. Mr. Roth is the father of Mr. Corey B. Roth.
Mr. Corey B. Roth has been Vice President of the Company since June 1982,
a Director since October 1984 and Asst. Secretary since June, 1992. Mr. Roth
served as Treasurer from November 1987 until January 30, 1990 and has again
served in that capacity since June, 1992. Mr. Roth served as secretary from
October 1984 until June 1992. Mr. Roth was Vice President of Administration of
ASI from April 1989 until December 1992. Mr. Roth is the son of Mr. Edwin M.
Roth.
Mr. John H. Ehlert joined the Company in 1990. He has been Vice President
of the Company since April 1992. Mr. Ehlert was President of ASI from April
1992 until December 1992. In December of 1992, he was named President of the
Aerosol Systems Division.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Common Stock was listed on the American Stock Exchange ("AMEX") under
the symbol "CHM".
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During 1995, the closing sales prices on the AMEX ranged from $1.88 to
$4.94. During 1994, the closing sales prices on the AMEX ranged from $2.88 to
$7.25. The following table sets forth the high and low sale prices by quarter
for 1995 and 1994.
<TABLE>
<CAPTION>
Calendar Year Ended December 31,
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1995 1994
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Quarter High Low High Low
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<S> <C> <C> <C> <C>
First Quarter........ 4.188 2.375 7.250 4.125
Second Quarter....... 4.938 2.750 4.813 3.250
Third Quarter........ 4.625 3.750 4.500 3.500
Fourth Quarter....... 4.500 1.875 4.063 2.875
</TABLE>
____________________
As of February 22, 1996, the closing price for the Common Stock on AMEX
was $1.81. As of February 22, 1996, there were 589 holders of record of Common
Stock.
The Company has not paid cash dividends on its Common Stock and intends to
follow a policy of retaining earnings in order to finance the continued growth
and development of its business. Payment of dividends will be within the
discretion of the Company's Board of Directors and will depend, among other
factors, on earnings, capital requirements, and the operating and financial
condition of the Company. The terms of outstanding loans to the Company
currently prohibit the Company from paying cash dividends to its stockholders
in any fiscal year in excess of 20% of the Company's net income for such fiscal
year.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the fiscal years 1991 through 1995 are
derived from the Company's audited financial statements. All financial data
have been restated to reflect the discontinued restaurant operations and the
adoption of Financial Accounting Standards Board (FASB) Statement 109,
"Accounting for Income Taxes". This information should be read in conjunction
with the Company's Financial Statements and Notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations, each
of which is included elsewhere in this Report.
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<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(in thousands, except per share data)
Year Ended December 31,
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1995 1994 1993 1992 1991
------- -------- --------- -------- ------
<S> <C> <C> <C> <C> <C>
Statement of operations
Data (1) (2) (3):
Net sales ...................................... $ 43,419 $ 44,931 $ 47,362 $ 47,927 $ 43,937
Cost of goods sold ............................. 39,123 38,066 36,988 38,149 34,222
---------- --------- --------- ---------- ----------
Gross profit ................................... 4,296 6,865 10,374 9,778 9,715
Selling, general and
administrative expenses ....................... 7,648 6,995 6,327 6,128 5,001
Amortization of intangibles .................... 869 874 862 865 865
Restructuring charges .......................... - 954 - - -
---------- --------- --------- ---------- ----------
Operating profit (loss) ........................ (4,221) (1,958) 3,185 2,785 3,849
Other income (expense)
Interest expense .............................. (779) (560) (531) (1,051) (3,836)
Amortization of debt issuance expenses ........ - - - (30) (180)
Other ......................................... 10 39 29 69 2
---------- --------- --------- ---------- ----------
(769) (521) (502) (1,012) (4,014)
---------- --------- --------- ---------- ----------
Earnings (Loss) from continuing operations
before income taxes, extraordinary items and
cumulative effect of a change in accounting
principle ..................................... (4,990) (2,479) 2,683 1,773 (165)
Income tax benefits (expense) .................. 2,981 840 (944) (775) (31)
---------- --------- --------- ---------- ----------
Earnings (Loss) from continuing operations
before extraordinary items and cumulative
effect of a change in accounting principle .... (2,009) (1,639) 1,739 998 (196)
Earnings (Loss) from discontinued
operations .................................... - - - - (169)
---------- --------- --------- ---------- ----------
Earnings (Loss) before extraordinary items and
cumulative effect of a change in accounting
principle ..................................... (2,009) (1,639) 1,739 998 (365)
Extraordinary items:
Gain (loss) due to fire (net of income taxes).. - 2,265 (884) - -
Deferred financing cost and original issue
discount (net of income taxes) ............... - - - (714) -
---------- --------- --------- ---------- ----------
Net earnings (loss) $ (2,009) $ 626 $ 855 $ 284 $ (365)
=========== =========== =========== =========== ===========
Share Data (4):
Earnings (Loss) per common share from:
Continuing operations before extraordinary
items and cumlative effect of a change in
accounting principle ........................ $ (0.51) $ (0.42) $ 0.44 $ 0.29 $ (0.19)
Discontinued operations ...................... - - - - (0.17)
Extraordinary items .......................... 0.00 0.58 (0.22) (0.21) -
---------- --------- --------- ---------- ----------
Net earnings (loss) .......................... $ (0.51) $ 0.16 $ 0.22 $ 0.08 $ (0.36)
=========== =========== =========== =========== ===========
Supplemental earnings per share (5) ............ N/A N/A N/A $ 0.34 N/A
=========== =========== =========== =========== ===========
Dividends paid ................................. - - - - -
Weighted average common shares
outstanding .................................. 3,939 3,935 3,946 3,443 1,008
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
---------- ---------- ----------- --------- --------
1995 1994 1993 1992 1991
---------- ---------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data (1) (2):
Working capital ................................ $ 7,142 $ 6,420 $ 10,883 $ 8,212 $ 4,608
Total assets ................................... $ 47,272 $ 44,558 $ 49,914 $ 41,520 $ 43,888
Long-term debt ................................. $ 10,399 $ 4,512 $ 9,948 $ 6,055 $ 29,924 (6)
Redeemable preferred stock (7) ................. $ 350 - - - -
Stockholders' equity ........................... $ 28,444 $ 30,439 $ 29,814 $ 28,958 $ 3,904
</TABLE>
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(1) A plan was adopted, effective April 1, 1991, to dispose of
the Company's restaurant operations and on October 31, 1991, the Company
completed disposition of the restaurants. All financial data have been
restated to reflect the restaurant operations, as a discontinued business.
(2) The Company adopted FASB Statement 109, "Accounting for Income
Taxes", effective January 1, 1993. All financial data prior to 1993 have
been restated to reflect its adoption.
(3) At December 31, 1995, the Company had approximately $7,998,000 of
net operating loss carryforwards available for federal income tax purposes.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Income Taxes and Net Operating Loss Carryforwards"
regarding limitations on the usage of these carryforwards.
(4) Common Stock data are restated to reflect a one for fourteen reverse
stock split effective on February 26, 1992.
(5) The supplemental earnings per share is computed assuming the public
stock offering had been effective on January 1, 1992.
(6) Includes long-term obligations (less current maturities),
subordinated note payable and common stock warrants of ASI subject to put
options, which were exchanged for Company warrants in 1992 in conjunction
with the common stock offering. (See Notes C and D to Financial
Statements.)
(7) On October 6, 1995, the Company issued 3,500 shares of
redeemable preferred stock to an officer/director at a $100 per share
price, which aggregated to $350,000. (See Note G to Financial Statements.)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL. This discussion should be read in conjunction with the information
contained in the Financial Statements and Notes thereto of the Company
contained elsewhere in this Report.
In December, 1992, the Company experienced a non-chemical fire at its
Macedonia, Ohio facility. The fire has adversely affected production
capabilities, which adverse affect continued through 1993 and 1994.
Page 12 of 91
<PAGE> 13
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
net sales of certain items included in the Company's Statement of Operations.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Net Sales.......................... 100.0% 100.0% 100.0%
Cost of goods sold............... 90.1% 84.7% 78.1%
------ ------ ------
Gross profit....................... 9.9% 15.3% 21.9%
Selling, general and administrative
expenses......................... 17.6% 15.6% 13.4%
Amortization of intangibles........ 2.0% 1.9% 1.8%
Restructuring charge............... - 2.1% -
----- ----- -----
Operating profit................. (9.7%) (4.3%) 6.7%
Interest and expense............... 1.8% 1.2% 1.1%
</TABLE>
FISCAL YEAR ENDED DECEMBER 31, 1995 AS COMPARED TO 1994
Net sales of $43,419,000 for the year ended December 31, 1995 were
$1,512,000 or 3.4% below the prior year. The decrease is due to production
shortfalls which were a result of startup problems for a new manufacturing
information system as well as operational inefficiencies associated with the
facilities consolidation into the Macedonia plant.
Cost of goods sold for the year ended December 31, 1995 increased by
$1,057,000 or 2.8% as compared to the prior year. As a percentage of net
sales, cost of goods increased from 84.7% to 90.1%. The increase in cost of
goods sold is due to raw materials inefficiencies, inventory shrinkage and
increased labor and overhead, all the result of the startup of a new
manufacturing information system and the facilities consolidation.
Selling, general, and administrative expenses increased from $6,996,000
for the year ended December 31, 1994 to $7,648,000 for the year ended December
31, 1995. As a percentage of net sales these expenses were 15.6% for
the year ended December 31, 1994 and 17.6% for the year ended December 31,
1995. The increase was due principally to charges of $650,000 incurred by the
Company in responding to the "Proxy Contest" (described below).
During the second quarter of 1995, a group of stockholders (the
"Committee") solicited proxies in opposition to the Company's nominees for its
Board of Directors (the "Proxy Contest"). The purpose of the Proxy Contest was
to attempt to remove, by stockholder vote, the then-current Board of Directors
and to replace them with a slate of new directors nominated by the Committee.
The Proxy Contest was unsuccessful and the Company's incumbent Board nominees
were reelected.
Interest expense for the year ended December 31, 1995 was 1.8% of net
sales versus 1.2% for the comparable period in the prior year. Interest
expense was $779,000 for the year ended December 31, 1995, an increase of
$219,000, from the year ended December 31, 1994. This increase is due to
increased borrowing under the senior credit facility. See "Liquidity and
Capital Resources".
Page 13 of 91
<PAGE> 14
The Company recorded a net loss for the year ended December 31, 1995 of
$2, 008,606, or $.51 per share on weighted average shares outstanding of
3,939,348. This compared to a 1994 net loss before an extraordinary gain of
$1,639,573 or $.42 per share on weighted average shares outstanding of
3,935,431 for the same period in the prior year. The loss for the year ended
December 31, 1995 was partially the result of expenses totaling $650,000
related to the proxy contest discussed above and the effects of both the
startup of a new manufacturing information system and the facilities
consolidation. Net earnings for the year ended December 31, 1994 were
$625,579 or $.16 per share on 3,935,431 weighted average shares
outstanding after an extraordinary gain of $2,265,152 (net of taxes). The
extraordinary gain resulted from the insurance settlement on the property and
business interruption claims related to the December, 1992 fire at the
Macedonia, Ohio plant.
During 1995 the Company completed substantially all of the spending
associated with the restructuring reserve established in 1994 (see Note I).
Operations streamlining activities are continuing into the 1st quarter of 1996
related to the facilities consolidation plan. Management believes that
completion of these activities will result in cost savings throughout the
remainder of 1996. In addition; management is taking steps to improve the new
manufacturing information system in the 1st quarter of 1996. It is
management's belief that these actions will improve operations in the
remainder of 1996.
FISCAL YEAR ENDED DECEMBER 31, 1994 AS COMPARED TO 1993
Net sales of $44,931,000 for the year ended December 31, 1994 were
$2,431,000, or 5.1% below the prior year. The decrease is due to softness in
the markets for the Company's automotive and industrial maintenance products
in the early part of the year and production inefficiencies as a result of fire
related replacement equipment and operating procedures in the latter half of
the year.
Cost of goods sold for the year ended December 31, 1994 increased by
$1,077,000 or 2.9% as compared to the prior year. As a percentage of net
sales, cost of goods increased from 78.1% to 84.7%. This increase is due to
production inefficiencies associated with the functioning of new equipment
throughout 1994, coupled with a reduction in sales dollars for the year ended
December 31, 1994 as compared to the same, period in 1993.
Selling, general, and administrative expenses increased from $6,327,000
for the year ended December 31, 1993 to $6,996,000 for the year ended
December 31, 1994. As a percentage of net sales these expenses were 13.4% for
the year ended December 31, 1993 and 15.6% for the year ended December 31,
1994. The increase was due principally to higher freight charges as well as
increased charges for medical insurance, professional fees and commissions
related to the sale of branded products.
Interest expense and amortization of debt issuance expense for the year
ended December 31, 1994 was 1.2% of net sales versus 1.1% for the comparable
period in the prior year. Interest expense was $560,000 for the year ended
December 31, 1994, an increase of $29,000 from the year ended December 31,
1993.
In the fourth quarter of 1994, the Company's Board of Directors
approved a plan to reduce the Company's cost structure and to improve
operations through the consolidation of facilities and reductions in the number
of employees The Plan provided for the Company to accrue $941,000 of
restructuring charges which are comprised of the following: $168,000
Page 14 of 91
<PAGE> 15
related to the abandonment of lease-hold improvements and lease termination
costs; $457,000 for the abandonment of certain property and equipment;
$254,000 related to the discontinuation of a product line and $62,000 for
employee termination benefits. During 1994, the Company also expended
approximately $13,000 for employee termination benefits under the Plan. The
Company anticipated the Restructuring Plan to be completed by August 1995.
During 1993 and 1994, in conjunction with the fire, the company
incurred an aggregate extraordinary loss of $3,801,000 which is comprised of
$2,208,000, representing the write-off of the net book value of the
machinery and equipment destroyed by the fire, and $1,593,000 of expenses
related to restoration, property damage and unreimbursed expenditures by the
Company. Additionally, the Company recognized an aggregate extraordinary
gain of $5,888,000 related to the insurance replacement value of machinery and
equipment. For financial reporting, the Company recorded, based upon the
above transactions, an extraordinary loss of $1,338,000 ($884,000 net of tax
benefits) for the year ended December 31, 1993 and an extraordinary gain of
$3,245,000 ($2,265,000 net of taxes) for the year ended December 31, 1994.
INCOME TAXES AND NET OPERATING LOSS CARRYFORWARDS
The income tax benefit of $2,981,000 for the year ended December 31, 1995,
consists of $1,006,000 of current refundable federal income taxes and
approximately $1,975,000 of deferred federal income tax benefits The
income tax provision of $320,000 for the year ended December 31, 1994
consisted of $1,040,000 of current federal tax and local taxes, and $720,000 of
def erred federal income tax benefits. The income tax provision of $489,000
for the year ended December 31, 1993 consisted of $29,000 of current federal
alternative minimum tax and local taxes and $460,000 of deferred federal income
tax. The Company recognized $452,000, and $598,000 of tax benefits from the
utilization of net operating loss carryforwards ("NOLs") for tax purposes
during the years ended December 31, 1994 and 1993 respectively.
As of December 31, 1995, the Company's NOLs were approximately
$7,998,000. Approximately $6,615,000 of the NOLs arose from the operations of
the Company prior to the acquisition of ASI and $1,383,000 arose in the current
year. Except as discussed below, and subject to limitations of the Internal
Revenue Code of 1986, as amended (the "Code"), the NOLs should be available to
off set future income of the Company. Use of the NOLs to reduce future taxable
income may subject the Company to an alternative minimum tax.
Section 382 of the Code limits the amount of a corporation's taxable
income which can be offset by NOLs arising prior to an "ownership change". An
ownership change occurs when the percentage of stock owned by 5 percent
shareholders, or group of 5 percent shareholders, increases over 50 percent
over a three year period. For example, an ownership change would occur if
shares comprising more than 50 percent of a corporation's stock are sold to new
public shareholders. As a result of the public offering in February 1992 and
the ownership change that occurred in connection therewith, the Limitation on
the utilization of the NOLs imposed by Section 382 of the Code will apply.
Under the limitation, the amount of the Company's taxable income that each
year can be offset by NOLs attributable to periods before the ownership change
cannot exceed the product of (i) the fair market value of the stock of the
Company immediately prior to the ownership change and (ii) the Long-term
tax-exempt rate prescribed by the IRS. The limitation imposed by the change in
ownership may result in the Company paying income taxes in excess of the
amount payable in the absence of a change in ownership.
Page 15 of 91
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1995, the Company's ratio of current assets to
current liabilities was 1.90 to 1 and the quick ratio (cash and cash
equivalents, and accounts receivable, divided by current liabilities) was 1.03
to 1. As of December 31, 1994, the Company's ratio of current assets to
current liabilities was 1.83 to 1 and the quick ratio (described above) was .9
to 1. The increase in liquidity is due primarily to $1,134,079 in refundable
income taxes accrued at the end of 1995.
During the twelve months ended December 31, 1995, the Company incurred
$779,000 in interest expense and made interest payments totaling $687,000.
Accrued interest at December 31, 1995, was $154,000.
The Company, as borrower, is a party to a credit agreement (the Credit
Agreement) that provides for a $10,000,000 revolving line of credit. The
Credit Agreement, entered into on March 30, 1992 and expiring on May 31, 1997,
is a facility that allows for borrowings based upon collateral comprised
of inventory, accounts receivable and fixed assets, less an environmental
compliance reserve, if any. No compliance reserve has been required.
Under the terms of the Credit Agreement, the Company is required to
comply with various covenants, the most restrictive of which relate to
maintenance of certain financial ratios, levels of tangible net worth,
limits on capital expenditures, and restrictions on distributions from the
Company to its stockholders. As of December 31, 1995, approximately $480,000
was unused and available under the Credit Agreement.
On March 28, 1996 the Credit Agreement was amended to, among other things,
increase the interest rate from the prime rate to the prime rate plus 2 1/4%,
waive certain covenant defaults and add a deferred extension fee of $55,000
payable on March 31, 1997 contingent upon the occurrence of certain future
events.
On February 6, 1996, the Company entered into & Commercial Demand Note to
borrow an additional $750,000 from its senior lender. The Demand Note is
secured by a collateral assignment of the Company's right to receive funds in
the Ohio EPA Trust Fund (see "Legal Proceedings") as well as by the
collateralized guarantee of Edwin M. Roth, the Company's President and Chief
Executive Officer. The Demand Note is required to be repaid with the
proceeds of any disbursements to the Company from the Ohio EPA Trust Fund. On
March 15, 1996, $621,000 was received as partial reimbursement from the Ohio
EPA Trust Fund and applied to partially repay the Demand Note.
Net cash used by operating activities was $2,650,000 in 1995, versus cash
provided of $1,735,000 for 1994, and $5,032,000 for 1993. Net capital
expenditures were $3,685,000, $612,000, and $6,084,000 respectively, for the
three years 1995, 1994 and 1993. The increase in capital expenditures in 1995
compared to 1994 is principally due to expenditures for the facilities
consolidation plan. The decreased cash flow from operating activities in 1995
compared to 1994 and 1993 is due principally to greater losses from operations.
Some of the larger contributing factors to the decreased cash flow from
operating activities were $541,000 of payments made related to the Proxy
Contest, $322,000 of payments related to the Restructuring Plan, and payments
of $810,000 made by the Company which are to be reimbursed from the Ohio EPA
Trust Fund (all discussed above). The Company expects to spend approximately
$500,000 in capital expenditures for 1996 to be funded from operating cash
flows.
Page 16 of 91
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PART IV
ITEM 14. EXHIBITS; FINANCIAL STATEMENT SCHEDULES;
REPORTS ON FORM 8-K
The Index to Financial Statements and Financial Statement schedules is
listed below.
The Company filed no reports on Form 8-K during the quarter ending
December 31, 1995.
INDEX TO FINANCIAL STATEMENTS, AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Pg No.
-----
<S> <C>
Report of Independent Certified Public Accountants F-1
Balance sheets
December 31, 1995 and 1994 F-2 & F-3
Statements of Operations
December 31, 1995, 1994 and 1993 F-4
Statements of Stockholders' Equity
December 31, 1995, 1994, and 1993 F-5
Statements of Cash Flows
December 31, 1995, 1994, and 1993 F-6 & F-7
Notes to Financial Statements F-8 - F-21
Report of Independent Certified Public Accountants
on Schedules F-22
Schedule II - Valuation and Qualifying Accounts
December 31, 1995, 1994 and 1993 F-23
</TABLE>
Page 17 of 91
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
Stockholders of
Specialty Chemical Resources, Inc.
We have audited the accompanying balance sheets of Specialty Chemical
Resources, Inc. as of December 31, 1995 and 1994, and the related statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentations. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Specialty Chemical Resources,
Inc. as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Cleveland, Ohio
February 7, 1996, except for the 6th paragraph of
Note E and the 4th paragraph of Note C as to which
the dates are March 15, 1996 and March 28, 1996,
respectively.
F-1
<PAGE> 19
SPECIALTY CHEMICAL RESOURCES, INC.
BALANCE SHEETS
December 31
ASSETS
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,238 $ 15,025
Accounts receivable - trade, less
allowance for doubtful accounts of
$345,000 and $123,000, respectively
(note C) 6,218,508 6,791,243
Receivables - other (note E) 810,102 82,013
Inventories (notes A, B and C) 6,717,310 6,832,213
Prepaid expenses 201,420 383,084
Refundable income taxes 1,134,079 51,898
---------- ----------
Total current assets 15,082,657 14,155,476
PROPERTY AND EQUIPMENT - AT COST
(notes A, C and L)
Building 959,199 -
Leasehold improvements 2,572,720 763,660
Office equipment and furniture 956,454 470,706
Machinery and equipment 9,523,179 9,579,336
---------- ----------
14,011,552 10,813,702
Less accumulated depreciation
and amortization 3,426,847 2,739,671
Land 118,690 -
---------- ----------
10,703,395 8,074,031
OTHER ASSETS
Goodwill (note A) 20,354,406 20,970,474
Product formulation (note A) 911,755 1,164,379
Other 220,236 194,092
---------- ----------
21,486,397 22,328,945
---------- ----------
$47,272,449 $44,558,452
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE> 20
SPECIALTY CHEMICAL RESOURCES, INC.
BALANCE SHEETS - CONTINUED
December 31
LIABILITIES
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 44,500 $ -
Accounts payable 6,695,517 5,764,259
Deferred income taxes (notes A and J) - 242,219
Accrued liabilities
Compensation and payroll taxes 504,798 341,278
Taxes - other 55,935 34,500
Interest 154,290 62,106
Accrued costs related to Restructuring
Plan (note I) - 941,460
Other 485,643 349,449
----------- -----------
1,200,666 1,728,793
----------- -----------
Total current liabilities 7,940,683 7,735,271
LONG-TERM DEBT (note C) 10,399,126 4,512,247
DEFERRED INCOME TAXES (notes A and J) 138,805 1,871,586
COMMITMENTS AND CONTINGENCIES (note E) - -
REDEEMABLE PREFERRED STOCK, $.01 par value
and $100 redemption value; authorized
and issued 3,500 shares in 1995
(note G) 350,000 -
STOCKHOLDERS' EQUITY (notes D, G and H)
Preferred stock - $.01 par value;
authorized 1,996,500 shares - -
Common stock - $.10 par value;
authorized 13,000,000 shares;
issued and outstanding 3,947,769
and 3,932,776 shares, respectively 394,777 393,277
Additional paid-in capital 41,935,125 41,878,575
Accumulated deficit (13,847,367) (11,832,504)
Unearned compensation (38,700) -
----------- -----------
28,443,835 30,439,348
----------- -----------
$ 47,272,449 $ 44,558,452
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 21
Specialty Chemical Resources, Inc.
STATEMENTS OF OPERATIONS
For the year ended December 31
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $43,419,021 $44,931,250 $47,362,420
Cost of goods sold 39,123,444 38,066,017 36,988,528
---------- ---------- ----------
Gross profit 4,295,577 6,865,233 10,373,892
Selling, general and administrative
expenses 7,647,938 6,995,505 6,326,516
Amortization of intangibles 868,692 874,101 862,597
Restructuring charges (note I) - 954,000 -
---------- ---------- ----------
Operating profit (loss) (4,221,053) (1,958,373) 3,184,779
Other income (expense)
Interest expense (779,041) (559,793) (531,151)
Other 10,488 38,593 29,542
---------- ---------- ----------
(768,553) (521,200) (501,609)
---------- ---------- ----------
Earnings (loss) before income
taxes and extraordinary item (4,989,606) (2,479,573) 2,683,170
Income taxes (benefits)
(notes A and J) (2,981,000) (840,000) 944,000
---------- ---------- ----------
Earnings (loss) before
extraordinary item (2,008,606) (1,639,573) 1,739,170
Extraordinary item
Gain (loss) due to fire (net of
income tax of $1,160,000 in 1994
and income tax benefit of
$455,000 in 1993) (note L) - 2,265,152 (883,772)
---------- --------- ----------
NET EARNINGS (LOSS) $(2,008,606) $ 625,579 $ 855,398
========== ========== ==========
EARNINGS (LOSS) PER COMMON SHARE (note K)
Earnings (loss) before extraordinary
item $(.51) $(.42) $ .44
Earnings (loss) from extraordinary
item - .58 (.22)
----- ----- -----
$(.51) $ .16 $ .22
===== ==== ====
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 22
Specialty Chemical Resources, Inc.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
$.10 PAR VALUE ADDITIONAL
--------------------- PAID-IN ACCUMULATED UNEARNED
SHARES AMOUNT CAPITAL DEFICIT COMPENSATION TOTAL
---------- --------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 3,768,154 $376,815 $41,895,037 $(13,313,481) $ - $28,958,371
Issuance of common stock in
conjunction with warrants
exercised 164,635 16,464 (16,464) - - -
Retirement of fractional
shares received from
prior reverse stock split (9) (1) 1 - - -
Net earnings for the year - - - 855,398 - 855,398
--------- ------- ---------- ----------- ------- ----------
BALANCE AT DECEMBER 31, 1993 3,932,780 393,278 41,878,574 (12,458,083) - 29,813,769
Retirement of fractional
shares received from
prior reverse stock split (4) (1) 1 - - -
Net earnings for the year - - - 625,579 - 625,579
--------- ------- ---------- ----------- ------- -----------
BALANCE AT DECEMBER 31, 1994 3,932,776 393,277 41,878,575 (11,832,504) - 30,439,348
Retirement of fractional
shares received from
prior reverse stock split (7) - - - - -
Net loss for the year - - - (2,008,606) - (2,008,606)
Dividends ($1.79 per share) - - - (6,257) - (6,257)
Issuance of restricted stock 15,000 1,500 56,550 - (38,700) 19,350
--------- ------- ---------- ----------- ------- ----------
BALANCE AT DECEMBER 31, 1995 3,947,769 $394,777 $41,935,125 $(13,847,367) $(38,700) $28,443,835
========= ======= ========== =========== ======= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 23
Specialty Chemical Resources, Inc.
STATEMENTS OF CASH FLOWS
For the year ended December 31
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $(2,008,606) $ 625,579 $ 855,398
Adjustments to reconcile net earnings
(loss) to net cash provided by
(used in) operating activities:
Depreciation 907,718 783,168 504,661
Amortization of intangibles 868,692 874,101 862,597
Deferred income taxes (benefits) (1,975,000) (719,558) 460,000
Loss on destroyed assets - - 2,208,452
Stock compensation 19,350 - -
Change in assets and liabilities:
(Increase) decrease in accounts
receivable 572,735 33,351 (1,460,704)
(Increase) in accounts receivable -
other (728,089) (82,013) -
(Increase) decrease in inventories 114,903 (489,834) (656,972)
(Increase) decrease in prepaid
expenses 181,664 (217,353) (36,458)
(Increase) decrease in refundable
income taxes (1,082,181) 801,885 (853,783)
Increase in other assets (26,144) (48,291) (36,960)
Increase (decrease) in accounts
payable 925,001 (895,829) 3,468,409
Increase (decrease) in accrued
liabilities (419,824) 1,070,197 (282,617)
---------- ---------- ----------
Total adjustments (641,175) 1,109,824 4,176,625
---------- ---------- ----------
Net cash provided by
(used in) operating
activities (2,649,781) 1,735,403 5,032,023
</TABLE>
(CONTINUED ON NEXT PAGE)
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 24
Specialty Chemical Resources, Inc.
STATEMENTS OF CASH FLOWS - CONTINUED
For the year ended December 31
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets $ 39,966 $ - $ 100,000
Expenditures for property and
equipment - net (3,685,351) (611,797) (6,083,890)
Expenditures related to fire
damage - (663,179) (10,301,341)
Proceeds from insurance claim,
net of cash gain - 4,971,660 7,314,458
----------- ----------- -----------
Net cash provided by (used in)
investing activities (3,645,385) 3,696,684 (8,970,773)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of redeemable
preferred stock 350,000 - -
Payments on other long-term
obligations (2,371) (1,753) -
Proceeds from note payable 913,750 -
Proceeds on revolver 11,965,000 12,167,000 19,970,000
Payments on revolver (6,945,000) (17,615,000) (16,077,330)
---------- ----------- -----------
Net cash (used in) provided by
financing activities 6,281,379 (5,449,753) 3,892,670
---------- ----------- -----------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (13,787) (17,666) (46,080)
Cash and cash equivalents at beginning
of year 15,025 32,691 78,771
---------- ----------- -----------
Cash and cash equivalents at end
of year $ 1,238 $ 15,025 $ 32,691
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE> 25
Specialty Chemical Resources, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Specialty Chemical Resources, Inc. (SCR, Inc.) formulates, blends, and
packages pressurized specialty chemical products for sale to marketers,
distributors, and retailers. Its largest markets are the automotive
aftermarket and industrial/maintenance.
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
by the last-in, first-out (LIFO) method for raw materials and the first-in,
first-out (FIFO) method for finished goods.
PROPERTY AND EQUIPMENT
Depreciation is provided for in amounts sufficient to relate the costs of
depreciable assets to operations over their estimated service lives. The
straight-line method of depreciation is used for financial reporting
purposes. Accelerated methods are used for tax purposes.
The estimated lives used in determining depreciation and amortization for
financial reporting purposes are as follows:
Building . . . . . . . . . . . . . . . . . . . . 20 years
Leasehold improvements . . . . . . . . . . . . . 15 years
Office equipment and furniture . . . . . . . . . 7-10 years
Machinery and equipment . . . . . . . . . . . . . 10-16 years
F-8
<PAGE> 26
Specialty Chemical Resources, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
INTANGIBLES
Goodwill, resulting from the excess of the purchase price over the fair
value of net assets acquired is being amortized over 40 years. The
Company evaluates potential impairment of goodwill on the basis of whether
goodwill is recoverable from the projected undiscounted profit from
operations before goodwill amortization. Should the projected amounts
indicate that goodwill will not be recoverable, the Company's carrying
value of the goodwill will be reduced by the estimated short fall of the
undiscounted profit from operations as adjusted. The projected amounts
are based upon management's best estimates utilizing information currently
available. Inherent in these projections are estimates for which the
ultimate outcome cannot be predicted with a high degree of certainty.
Therefore, the actual results could materially differ from the projected
amounts.
Purchased product formulations are being amortized on a straight-line
basis over 10 years, and all research and development costs are being
expensed as incurred.
Accumulated amortization for intangibles amounted to approximately
$5,970,000 and $5,102,000 for the years ended December 31, 1995 and 1994,
respectively.
NEWLY ISSUED ACCOUNTING STANDARDS
In March 1995, the FASB adopted SFAS No. 121, Accounting For The
Impairment Of Long-Lived Assets and For Long-Lived Assets To Be Disposed
Of. This Statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the
review for recoverability, the entity should estimate the future cash
flows expected to result from the use of the asset and its eventual
disposition. If the sum of the expected future cash flows (undiscounted
and without interest charges) is less than the carrying amount of the
asset, an impairment loss is recognized. Otherwise, an impairment loss is
not recognized. Measurement of an impairment loss for long-lived assets
and identifiable intangibles that an entity expects to hold and use should
be based on the fair value of the asset. The Company will adopt SFAS No.
121 in the first quarter of 1996.
F-9
<PAGE> 27
Specialty Chemical Resources, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
NEWLY ISSUED ACCOUNTING STANDARDS (CONTINUED)
Additionally, the FASB has issued SFAS 123, Accounting for Stock-Based
Compensation, which establishes financial accounting and reporting
standards for stock-based employee compensation plans. This Statement
defines and encourages the use of a fair value based method of accounting
for an employee stock option or similar equity instrument. The Statement
allows the use of the intrinsic value based method of accounting as
prescribed by current existing accounting standards for options issued to
employees; however, there is a requirement to disclose the pro forma net
income as if the fair value based method had been used. SFAS 123 is
effective for fiscal years beginning after December 15, 1995. The
disclosures must include awards granted in fiscal years beginning after
December 15, 1994. Management has determined that the Company will
utilize the intrinsic value based method of accounting for stock-based
compensation.
INCOME TAXES
The Company utilizes the asset and liability method in accounting for
income taxes. The asset and liability method requires the recognition of
deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between tax bases and financial
reporting bases of assets and liabilities.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1994 financial statements
in order to conform to the 1995 financial statement presentation.
F-10
<PAGE> 28
Specialty Chemical Resources, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with a maturity of three months or
less to be cash equivalents.
Cash payments for interest amounted to $687,000, $556,000, and $512,000 in
the years ended December 31, 1995, 1994 and 1993, respectively. Cash
payments for income taxes amounted to $79,000, $228,000, and $1,216,000
for the years ended December 31, 1995, 1994 and 1993, respectively.
During 1995, the Company accrued $6,257 of preferred stock dividends and
issued $58,050 of restricted stock to an employee.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective January 1, 1995, the Company adopted the Statement of Financial
Accounting Standards No. 107 (SFAS 107), Disclosures About Fair Value of
Financial Instruments. At December 31, 1995, the following assumptions
were used to estimate the fair value of the Company's financial
instruments for which it is practicable to estimate that value.
The carrying amount of "Cash and cash equivalents" and "Receivables -
other" approximates fair value because of the short maturity of those
instruments.
The carrying amount of the Company's "Long-term obligations" approximates
fair value. Fair value is estimated based upon borrowing rates currently
available to the Company for obligations with similar terms and maturity
dates.
NOTE B - INVENTORIES
Inventories consist of the following at:
<TABLE>
<CAPTION>
------------------------------
December 31,
------------------------------
1995 1994
------------------------------
<S> <C> <C>
Raw materials $4,111,440 $4,368,396
Finished goods 3,323,426 3,049,421
------------------------------
7,434,866 7,417,817
Less excess of FIFO over LIFO cost 717,556 585,604
-----------------------------
$6,717,310 $6,832,213
=============================
</TABLE>
F-11
<PAGE> 29
Specialty Chemical Resources, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE B - INVENTORIES - CONTINUED
Had the Company historically followed the FIFO cost method for raw
material inventories, the net loss for the year ended December 31, 1995
would have decreased by approximately $79,000, and the net earnings for
1994 and 1993 would have increased by approximately $8,000 and $37,000,
respectively.
NOTE C - LONG-TERM DEBT
Long-term debt consists of the following at:
<TABLE>
<CAPTION>
=============================
December 31,
-----------------------------
1995 1994
-----------------------------
<S> <C> <C>
Revolver $ 9,520,000 $4,500,000
Note payable - bank 913,750 --
Other 9,876 12,247
-----------------------------
10,443,626 4,512,247
Less current portion 44,500 --
-----------------------------
$10,399,126 $4,512,247
=============================
</TABLE>
The Company has a revolving credit agreement with a bank. The revolver
provides for maximum borrowings of $10,000,000 through May 31, 1997 with
any amounts then outstanding payable in full at that date. In certain
circumstances, the maximum borrowings under the agreement are reduced
pursuant to a formula based upon the amount of SCR, Inc.'s receivables,
inventory and fixed assets. In addition, the lender can reduce the
maximum borrowings under the revolver by establishing an environmental
compliance reserve in certain circumstances. No compliance reserves have
been required as of December 31, 1995. Borrowings are collateralized by
substantially all of the Company's assets and interest is payable monthly
at the lender's prime rate (8-1/2% at December 31, 1995).
Under the terms of the credit agreement, the Company is required to comply
with various covenants, the most restrictive of which relate to
maintenance of certain financial ratios, levels of tangible net worth,
limits on capital expenditures, and restrictions on distributions from the
Company to its stockholders. As of December 31, 1995, approximately
$480,000 was unused and available under the credit agreement.
On March 28, 1996, the credit agreement was amended to, among other things
increase the interest rate from the prime rate to the prime rate plus
2-1/4%, amend certain financial covenants and add a deferred extension fee
of $55,000 payable on March 31, 1997 contingent upon the occurrence of
certain future events.
F-12
<PAGE> 30
Specialty Chemical Resources, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE C - LONG-TERM DEBT - CONTINUED
The note payable - bank consists of a $1,075,000 installment note dated
October 6, 1995. As of December 31, 1995, the Company had drawn $913,750 on
the note. A second installment on the note may be drawn within six months
of the date of the note and upon completion of certain building
improvements. The borrowing is collateralized by a warehouse which serves
as the Company's distribution center. Monthly principal payments of
approximately $6,000 begin May 1, 1996, with the balance due on November 1,
1998. Interest is payable monthly at an annual rate of 8-3/4%.
Aggregate maturities of long-term debt at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996 . . . . . . . . . . $ 44,500
1997 . . . . . . . . . . 9,595,000
1998 . . . . . . . . . . 804,126
-----------
$ 10,443,626
==========
</TABLE>
NOTE D - COMMON STOCK WARRANTS
In connection with a subordination agreement, the subordinated noteholder
was granted warrants to acquire 168,555 shares of the Company's common stock
at an exercise price of $.14 per share pursuant to a Warrant Purchase
Agreement. During 1993, the subordinated noteholder, upon the exercise of
its warrants, was issued 164,635 shares. The value of the remaining shares,
in conjunction with the warrants, was used to offset the $.14 per share
exercise price.
NOTE E - COMMITMENTS AND CONTINGENCIES
Certain operations of the Company are conducted in leased facilities under
noncancellable operating leases which expire at various dates through 2005.
One of the leases which relates to the manufacturing facility can be
extended at the option of the Company to the year 2025.
F-13
<PAGE> 31
Specialty Chemical Resources, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE E - COMMITMENTS AND CONTINGENCIES - CONTINUED
The following table details scheduled minimum rental payments.
<TABLE>
<CAPTION>
RENTAL
YEAR ENDING DECEMBER 31, COMMITMENT
------------------------ ----------
<S> <C>
1996 . . . . . . . . . . . $ 276,000
1997 . . . . . . . . . . . 230,000
1998 . . . . . . . . . . . 220,000
1999 . . . . . . . . . . . 216,000
2000 . . . . . . . . . . . 216,000
Thereafter . . . . . . . . 1,009,000
---------
$2,167,000
=========
</TABLE>
Rent expense for the years ended December 31, 1995, 1994 and 1993 was
approximately $512,000, $606,000 and $545,000, respectively.
The Company is currently involved in litigation and investigations
pertaining to environmental concerns by the State of Ohio in connection with
several potential problems at its Macedonia, Ohio manufacturing plant.
With respect to the environmental concerns at its Macedonia plant, in 1990 the
Company entered into a Consent Order with the State of Ohio. The Company was
required to submit to the Ohio Environmental Protection Agency (Ohio EPA), a
closure plan to address contamination identified at the property. The Company
submitted the closure plan as required. Ohio EPA also requested, in the event
the remedial measures in the proposed closure plan are not successful within a
two-year period, that at that time the Company provide supplemental or
alternative measures to clean up the remaining contamination.
F-14
<PAGE> 32
Specialty Chemical Resources, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE E - COMMITMENTS AND CONTINGENCIES - CONTINUED
On May 17, 1994, the Ohio EPA approved the revised closure plan which
included unilateral modifications as deemed necessary by the Ohio EPA. On
June 17, 1994, the Company appealed the Ohio EPA's action on the grounds
that the unilateral modifications were unreasonable and unlawful. On
January 6, 1995, the Company and the State of Ohio entered into a settlement
agreement, which resulted in a termination of the Company's appeal of this
matter before the Environmental Board of Review. On May 3, 1995, the Ohio
EPA issued a supplemental closure plan approval letter that established
certain deadlines with regard to the Company's implementation and a
Groundwater Extraction and Treatment System, a Soil Vapor Extraction System,
and certain other closure plan tasks. On February 12, 1996, the Company
submitted a revised closure cost estimate to address closure costs at the
Macedonia facility. Based on estimates of closure costs received from the
Company's environmental consultant, the revised closure costs are estimated
at approximately $975,000, substantially all of which will be paid by former
owners of the Company from funds that have been deposited in a Trust account
with Ohio EPA (the Trust) for that purpose. As of December 31, 1995, the
Trust contained approximately $836,000. Additionally, the Company had
approximately $227,000 available from an environmental escrow established by
former owners of the Company. On January 15, 1996, the Company entered into
a release and settlement agreement whereby approximately $145,000 of those
funds were distributed into the Trust increasing the balance in the Trust to
approximately $981,000 and approximately $26,000 was distributed to the
Company. The remainder of the funds were distributed to the former owners.
Further, as of February 12, 1996, the Company has paid approximately
$810,000 toward closure activities and has requested reimbursement for those
expenditures from the Trust, which amount is recorded as an "Account
receivable - other" on the December 31, 1995 Balance Sheet. The Company
believes that the expenditures for which reimbursement has been requested
are in accordance with the closure activities contemplated by the Trust
requirements. While we are not aware of any reason the Company would not
receive reimbursement for these expenditures, the Ohio EPA has discretion in
responding to the Company's request. In March of 1996, the Director of the
Ohio EPA approved reimbursement to the Company from the Trust in the amount
of $621,000 which was received by the Company on March 15, 1996.
If the remediation techniques proposed in the closure plan are not
successful, or if supplemental or alternative technologies are required to
be used, then the Company may incur costs in excess of the $975,000 closure
cost estimate. The Company believes, based on discussions with its
technical consultants, that the cost of additional testing and operation of
the proposed remedial systems will be approximately $150,000 and that the
costs of the supplemental or alternative cleanup measures, if determined to
be necessary, would not exceed $2,000,000.
F-15
<PAGE> 33
Specialty Chemical Resources, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE E - COMMITMENTS AND CONTINGENCIES - CONTINUED
On January 31, 1996, the Company received a Notice of Violation (NOV) from
the Ohio EPA in association with an inspection conducted by the Ohio EPA in
June of 1995 regarding the operations at the Macedonia facility. At this
time, the Company does not know whether these violations had, in fact,
occurred or for what time period the alleged violations lasted. A number of
the alleged violations will be addressed by the completion of closure
activities described above. Other violations will be addressed through
negotiations with the Ohio EPA. At this time, the Ohio EPA has not
stipulated any penalties, nor can it be predicted whether the Ohio EPA will
seek penalties or to what extent those penalties will aggregate.
NOTE F - EMPLOYEE BENEFIT PLANS
The Company has a defined contribution 401(k) profit-sharing plan (the Plan)
covering certain salaried employees with one year of credited service. The
Company's profit-sharing contributions are at the discretion of the Board of
Directors and are credited to each participant's account based on a
percentage of gross compensation subject to a maximum contribution for each
participant. The Company is also required under the 401(k) provisions to
match employee contributions equal to 50% of each such participant's
deferred compensation up to a maximum of 4% of the participant's annual
compensation. Contributions by the Company under the 401(k) provisions for
1995, 1994 and 1993 were approximately $51,700, $35,400 and $32,900,
respectively. The Company did not make any profit-sharing contributions to
the Plan for the years ended December 31, 1995, 1994 and 1993.
The Company has a Retirement Savings Trust and Plan covering full-time
hourly employees who have completed six months of service. The Company's
contributions are made on an annual basis and are credited to each
participant's account at an amount equal to 12 cents per hour of
compensation (maximum of 48 hours per week). In addition, qualified
employees are eligible to make voluntary contributions to the Retirement
Savings Trust and Plan which are fully vested and nonforfeitable.
Contributions by the Company for the years ended December 31, 1995, 1994 and
1993 approximated $35,200, $36,700 and $14,000, respectively.
NOTE G - REDEEMABLE PREFERRED STOCK
The Company designated 3,500 shares of its previously authorized 2,000,000
preferred shares as cumulative, convertible preferred stock. On October 6,
1995, the Company issued 3,500 shares of cumulative, convertible preferred
stock to an officer/director at a $100 per share price, which aggregated to
$350,000. The cumulative, convertible preferred stock pays quarterly
dividends of $1.875 per share.
F-16
<PAGE> 34
Specialty Chemical Resources, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE G - REDEEMABLE PREFERRED STOCK - CONTINUED
Each share of preferred stock may be converted, at the option of the holder,
into 20 shares of common stock at an effective conversion price of $5.00 per
share. The Company may redeem the preferred stock, in whole or in part,
after October 6, 1998 for $100 per share plus accrued dividends and unpaid
dividends. Mandatory redemption of all outstanding cumulative, convertible
preferred stock is required on November 6, 2000 at $100 per share plus
accrued and unpaid dividends. In the event of dissolution, liquidation, or
winding up of the Company, the holders of outstanding cumulative,
convertible preferred stock shall be entitled to receive a distribution of
$100 per share plus accrued and unpaid dividends.
NOTE H - STOCKHOLDERS' EQUITY
On July 25, 1995, the Company entered into a Restricted Stock Award
Agreement with a key employee for 15,000 shares of common stock. Upon the
issuance of the certificates for the shares, the employee has the rights of
a stockholder, including the right to vote the shares and to receive
dividends. The certificates, along with an executed stock power, are being
held by the Company in its control for the account of the employee until the
restrictions lapse. The restrictions call for forfeiture of the remaining
restricted shares and include selling or otherwise disposing of the shares
and termination, under certain circumstances, of employment. The Company
distributed one-third (1/3) of the shares to the employee at the award date
and charged $19,350 to compensation expense. The remaining shares, if not
forfeited, will be distributed one-third (1/3) on each anniversary date of
the agreement, at which time the restrictions will lapse. The value of the
shares under restriction at December 31, 1995 has been charged to equity as
unearned compensation and will be amortized to operations over the remaining
life of the agreement.
The Company has a Nonqualified and Incentive Stock Option Plan (the Plan)
under which 650,000 shares of common stock have been reserved. The Plan
provides for grants to officers and key employees of the Company of both
nonqualified and incentive stock options. The exercise price for options
granted under the Plan must be at least equal to fair market value of the
shares on the date of grant. The Plan will terminate in January 1999 but
will not affect any outstanding options previously granted. Such options
granted may be exercised after one year from the date of grant for not more
than one-third of the shares originally subject to the option and an
additional one-third for each of the two years thereafter. The options
granted under the Plan expire five years from the date of grant.
F-17
<PAGE> 35
Specialty Chemical Resources, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE H - STOCKHOLDERS' EQUITY - CONTINUED
The Company also has an Outside Directors' Stock Option Plan (Directors'
Plan) under which 150,000 shares of common stock have been reserved. Under
the Directors' Plan, each outside director will be granted an option to
purchase 10,000 shares of common stock and an additional option to purchase
5,000 shares of common stock every two years thereafter as long as the
individual remains on the Company's Board of Directors and remains an
"outside" director. The exercise price for options granted shall be the
fair market value of the shares on the date of grant. Directors vest in
their options in 25% annual increments commencing one year after the date of
grant. Options granted, to the extent the director has vested, shall be
exercisable for a term of ten years from the date of grant. In addition,
the Directors' Plan calls for the exercising of options by directors upon
their termination and by their beneficiaries upon their death for a
designated period of time. The Directors' Plan will terminate in January
1999 but will not affect any outstanding options previously granted.
On March 9, 1995, the Company cancelled certain old and issued new employee
options at the then market price of $3.78 per share. The options which were
cancelled were previously granted at prices ranging from $4.50 to $10.50.
Approximately 86,928 options were affected by this transaction.
Transactions for both stock option plans for 1995, 1994 and 1993 are as
follows:
<TABLE>
<CAPTION>
==========================================
1995 1994 1993
------------------------------------------
<S> <C> <C> <C>
Options outstanding January 1 405,715 341,786 254,286
Granted 236,570 105,500 94,000
Exercised - - -
Cancelled (96,857) (41,571) (6,500)
------------------------------------------
OPTIONS OUTSTANDING AT DECEMBER 31 545,428 405,715 341,786
==========================================
Option price range at December 31 $3.38 to $3.75 to $5.11 to
$10.50 $10.50 $10.50
------------------------------------------
OPTIONS EXERCISABLE AT DECEMBER 31 249,024 174,547 95,548
------------------------------------------
OPTIONS AVAILABLE FOR GRANT AT
DECEMBER 31 254,572 394,285 458,214
==========================================
</TABLE>
As of December 31, 1995, no incentive stock options have been granted.
F-18
<PAGE> 36
Specialty Chemical Resources, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE I - RESTRUCTURING CHARGES
In the fourth quarter of 1994, the Company's Board of Directors
approved a plan to reduce the Company's cost structure and to improve
operations through the consolidation of facilities and reductions in the
number of employees.
The Company accrued $941,000 of restructuring charges at December 31,
1994. As of August 31, 1995, a substantial portion of the restructuring
plan had been completed. The actual costs related to the restructuring are
comprised of the following: $148,000 related to the abandonment of
leasehold improvements and lease termination costs; $468,000 for the
abandonment of certain property and equipment; $260,000 related to the
discontinuation of a product line and $65,000 for employee termination
benefits. During 1994, the Company has also expended approximately $13,000
for employee termination benefits under the Plan.
NOTE J - INCOME TAXES
As of December 31, 1995, the Company had approximately $7,998,000 of net
operating loss and $51,000 of investment tax credit carryforwards. However,
due to a change in ownership during 1992, the Company has an annual
limitation of approximately $850,000 in the utilization of its net operating
loss and investment tax credit carryforwards. In addition, due to current
year losses and the realization in 1994 of built in gains, approximately
$4,847,000 of the carryforwards may be utilized beyond the current annual
limitation to offset future taxable income. The net operating loss
carryforward and investment tax credit carryforwards, to the extent unused,
will expire as follows:
<TABLE>
<CAPTION>
=======================================
Net Operating Investment Tax
Loss Credit
---------------------------------------
Fiscal year ending
December 31,
<S> <C> <C>
1997 $ -- $47,000
1998 -- 3,000
1999 3,079,000 --
2000 2,477,000 1,000
2001 919,000 --
2003 1,000 --
2004 139,000 --
2010 1,383,000 --
---------------------------------
$7,998,000 $51,000
=================================
</TABLE>
F-19
<PAGE> 37
Specialty Chemical Resources, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE J - INCOME TAXES -- CONTINUED
The above-mentioned carryforwards gave rise to deferred tax assets of
approximately $3.2 million, $2.6 million and $2.1 million at December 31,
1995, 1994 and 1993, respectively. Due to the uncertainty of the ultimate
realization of a portion of the deferred tax asset, a valuation allowance in
the amounts of $1.3 million, $2.6 million and $2.1 million was recorded by
the Company for the years ended December 31, 1995, 1994 and 1993,
respectively.
The asset recognition for 1995 is based principally on the recognition of
the net operating loss carryforwards which, as discussed above, are not
limited as to their use. These net operating loss carryforwards offset the
deferred tax credits that are scheduled to reverse in the carryforward
period. Therefore, the Company has reduced the valuation allowance related
to this offset.
The provision for income taxes is different from that which would be
obtained by applying the statutory federal income tax rate for 1995, 1994
and 1993 due primarily to amortization of goodwill and the recognition of
net operating loss carryforwards.
Deferred tax (assets) liabilities are as follows:
<TABLE>
<CAPTION>
==================================
December 31,
----------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Depreciation $ 1,341,000 $ 1,406,000
Amortization of product
formulation costs 365,000 466,000
Accounts receivable allowance (138,000) (49,000)
Excess of book inventory over
tax inventory 346,000 337,000
Other (152,805) (46,000)
Net operating loss carryforwards (3,200,000) (2,600,000)
Valuation allowance 1,300,000 2,600,000
---------------------------------
$ 138,805 $2,114,000
---------------------------------
DEFERRED
Current liability $ - $ 242,000
Long-term liability 138,805 1,872,000
--------------------------------
$138,805 $2,114,000
================================
</TABLE>
F-20
<PAGE> 38
Specialty Chemical Resources, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995, 1994 and 1993
NOTE J - INCOME TAXES -- CONTINUED
The income tax benefit of $2,981,000 for the year ended December 31, 1995
consists of approximately $1,006,000 of current refundable federal income
taxes and approximately $1,975,000 of deferred tax benefits. The income tax
provision of $320,000 for the year ended December 31, 1994 consists
principally of $1,040,000 of current federal income taxes and $720,000 of
deferred tax benefits. The income tax provision of $489,000 for the year
ended December 31, 1993 consisted of $29,000 of current federal alternative
minimum taxes and local taxes and $460,000 of deferred federal income tax.
NOTE K - EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Net earnings (loss) per share of common stock has been computed based upon
the weighted average number of common shares and common share equivalents
outstanding for each year as follows: 3,939,348 for the year ended December
31, 1995, 3,935,431 for the year ended December 31, 1994 and 3,946,167 for
the year ended December 31, 1993. Common share equivalents include dilutive
employee stock options, cumulative convertible preferred stock and the
shares exercisable under the common stock warrants (less the number of
treasury shares assumed to be repurchased).
NOTE L - INSURANCE CLAIM
During 1992, a portion of the Macedonia, Ohio plant, machinery and
equipment, and inventory was damaged by a non-chemical fire. The Company
carried (and continues to carry) replacement cost insurance and business
interruption insurance and had notified the insurance company. The Company
had incurred various expenditures related to the repair and restoration of
the fire damaged property as well as business interruption costs. The
replacement cost portion of the claim for property and restoration costs has
been settled with the insurance company for approximately $7.6 million, of
which approximately $5.8 million was received during 1993 and an additional
$1.8 million was received during 1994. The business interruption portion of
the claim for reimbursement of expenses incurred and lost sales experienced
was settled with the insurance company for approximately $8.1 million, of
which $1.5 million was received during 1993 and an additional $6.6 million
was received during 1994.
During 1993 and 1994, in conjunction with the fire, the Company incurred an
aggregate extraordinary loss of $3,801,000 which is comprised of $2,208,000,
the write-off of the net book value of the machinery and equipment destroyed
by the fire, and $1,593,000 of expenses related to restoration, property
damage and unreimbursed expenditures by the Company. Additionally, the
Company recognized an aggregate extraordinary gain of $5,888,000 related to
the insurance replacement value of machinery and equipment. For financial
reporting, the Company recorded, based upon the above transactions, an
extraordinary loss of $1,338,000 ($884,000 net of tax benefits) for the year
ended December 31, 1993 and an extraordinary gain of $3,425,000 ($2,265,000
net of taxes) for the year ended December 31, 1994.
F-21
<PAGE> 39
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON SCHEDULES
Stockholders of
SPECIALTY CHEMICAL RESOURCES, INC.
In connection with our audit of the financial statements of Specialty Chemical
Resources, Inc. referred to in our report dated February 7, 1996, we have also
audited Schedule II for each of the three years in the period ended December
31, 1995. In our opinion, this schedule presents fairly, in all material
respects, the information required to be set forth therein.
GRANT THORNTON LLP
Cleveland, Ohio
February 7, 1996
F-22
<PAGE> 40
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
SPECIALTY CHEMICAL RESOURCES, INC.
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
ADDITIONS
BALANCE AT ------------------------------------- BALANCE AT
BEGINNING OF CHARGED TO CHARGED TO END OF
YEAR DESCRIPTION PERIOD COSTS AND EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD
- ---- ------------- ------------ ------------------ --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1993 Allowance for doubtful
accounts $ 76,000 $120,000 $ - $ (83,000) $113,000
1994 Allowance for doubtful
accounts $113,000 $120,300 $ - $(110,300) $123,000
1995 Allowance for doubtful
accounts $123,000 $260,400 $ - $ (38,400) $345,000
</TABLE>
F-23
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this Report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, this 29th day of March, 1996.
SPECIALTY CHEMICAL RESOURCES, INC.
By: /s/ EDWIN M. ROTH
--------------------------------
Edwin M. Roth, Chairman of
the Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report on Form 10-K has been signed by the following persons in the
capacities, on the date indicated. This Report may be signed in multiple
counterparts, all of which taken together shall constitute one document.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ EDWIN M. ROTH President and Chairman March 29, 1996
- --------------------- of the Board (principal
Edwin M. Roth executive officer)
/s/ COREY B. ROTH Vice President, Treasurer March 29, 1996
- --------------------- and Director (principal
Corey B. Roth financial and accounting
officer)
Director March 29, 1996
- ---------------------
George N. Aronoff
Director March 29, 1996
- ---------------------
Victor Gelb
Director March 29, 1996
- ---------------------
Norton W. Rose
Director March 29, 1996
- ---------------------
Lionel N. Sterling
Director March 29, 1996
- ----------------------
Leonard P. Judy
</TABLE>
Page 18 of 91
<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this Report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, this 29th day of March, 1996.
SPECIALTY CHEMICAL RESOURCES, INC.
By:_______________________________
Edwin M. Roth, Chairman of
the Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report on Form 10-K has been signed by the following persons in the
capacities, on the date indicated. This Report may be signed in multiple
counterparts, all of which taken together shall constitute one document.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
President and Chairman March 29, 1996
- --------------------- of the Board (principal
Edwin M. Roth executive officer)
Vice President, Treasurer March 29, 1996
- --------------------- and Director (principal
Corey B. Roth financial and accounting
officer)
Director March 29, 1996
- ---------------------
George N. Aronoff
/s/ VICTOR GELB Director March 29, 1996
- ---------------------
Victor Gelb
Director March 29, 1996
- ---------------------
Norton W. Rose
Director March 29, 1996
- ---------------------
Lionel N. Sterling
Director March 29, 1996
- ----------------------
Leonard P. Judy
</TABLE>
Page 19 of 91
<PAGE> 43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this Report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, this 29th day of March, 1996.
SPECIALTY CHEMICAL RESOURCES, INC.
By:_______________________________
Edwin M. Roth, Chairman of
the Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report on Form 10-K has been signed by the following persons in the
capacities, on the date indicated. This Report may be signed in multiple
counterparts, all of which taken together shall constitute one document.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
President and Chairman March 29, 1996
- --------------------- of the Board (principal
Edwin M. Roth executive officer)
Vice President, Treasurer March 29, 1996
- --------------------- and Director (principal
Corey B. Roth financial and accounting
officer)
Director March 29, 1996
- ---------------------
George N. Aronoff
Director March 29, 1996
- ---------------------
Victor Gelb
/s/ NORTON W. ROSE Director March 29, 1996
- ---------------------
Norton W. Rose
Director March 29, 1996
- ---------------------
Lionel N. Sterling
Director March 29, 1996
- ----------------------
Leonard P. Judy
</TABLE>
Page 20 of 91
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this Report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, this 29th day of March, 1996.
SPECIALTY CHEMICAL RESOURCES, INC.
By:_______________________________
Edwin M. Roth, Chairman of
the Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report on Form 10-K has been signed by the following persons in the
capacities, on the date indicated. This Report may be signed in multiple
counterparts, all of which taken together shall constitute one document.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
President and Chairman March 29, 1996
- --------------------- of the Board (principal
Edwin M. Roth executive officer)
Vice President, Treasurer March 29, 1996
- --------------------- and Director (principal
Corey B. Roth financial and accounting
officer)
Director March 29, 1996
- ---------------------
George N. Aronoff
Director March 29, 1996
- ---------------------
Victor Gelb
Director March 29, 1996
- ---------------------
Norton W. Rose
/s/ LIONEL N. STERLING Director March 29, 1996
- ---------------------
Lionel N. Sterling
Director March 29, 1996
- ----------------------
Leonard P. Judy
</TABLE>
Page 21 of 91
<PAGE> 45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this Report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, this 29th day of March, 1996.
SPECIALTY CHEMICAL RESOURCES, INC.
By:_______________________________
Edwin M. Roth, Chairman of
the Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report on Form 10-K has been signed by the following persons in the
capacities, on the date indicated. This Report may be signed in multiple
counterparts, all of which taken together shall constitute one document.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
President and Chairman March 29, 1996
- --------------------- of the Board (principal
Edwin M. Roth executive officer)
Vice President, Treasurer March 29, 1996
- --------------------- and Director (principal
Corey B. Roth financial and accounting
officer)
Director March 29, 1996
- ---------------------
George N. Aronoff
Director March 29, 1996
- ---------------------
Victor Gelb
Director March 29, 1996
- ---------------------
Norton W. Rose
Director March 29, 1996
- ---------------------
Lionel N. Sterling
/s/ LEONARD P. JUDY Director March 29, 1996
- ----------------------
Leonard P. Judy
</TABLE>
Page 22 of 91
<PAGE> 46
<TABLE>
<CAPTION>
Index to Exhibits
Exhibit Page
Number Number
- ------- ------
<S> <C> <C>
3.01 The Amended and Restated Bylaws of the Company were filed
as Exhibit 3.03 to the Company's Form S-1 Registration
Statement (Registration No. 2-78134) and are incorporated
herein by reference.........................................
3.02 The Restated Certificate of Incorporation of the Company was
filed as an exhibit to Company's Second Modified Plan of
Reorganization which was filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K dated December 9,
1986, and is incorporated herein by reference................
3.03 Amendment, effective December 12, 1991, to the Company's
Restated Certificate of Incorporation was filed as Exhibit
3.03 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1991 and is incorporated herein by
reference.....................................................
3.04 Amendment, effective February 26, 1992, to the Company's
Restated Certificate of Incorporation was filed as Exhibit
3.04 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1991 and is incorporated herein by
reference.....................................................
3.05 The Amended and Restated Bylaws of the Company were filed as
Exhibit 3.01 to the Company's Form 8-K on June 8, 1995 and are
incorporated by reference herein..............................
3.06 Certificate of Powers, Designations, Preferences, and Rights
providing for an issue of 3,500 shares of Cumulative Convertible
preferred Stock, $.01 par value, designated "Cumulative
Convertible Preferred Stock" and dated October 6, 1995 was
filed as Exhibit 3 on Form 10-Q for the quarter ended September
30, 1995 and is incorporated by reference herein...............
4.01 Credit Agreement, dated as of March 30, 1992, between ASI
and National City Bank was filed as Exhibit 4(a) to the
Company's Current Report on Form 8-K dated April 8, 1992,
and is incorporated herein by reference........................
4.02 Guaranty, dated as of March 30, 1992, executed by the Company
for National City Bank was filed as Exhibit 4(b) to the
Company's current Report on Form 8-K dated April 8, 1992,
and is incorporated herein by reference.......................
4.03 Amendment to Credit Agreement, dated as of March 5, 1993,
between the Company and National City Bank was filed as
exhibit 4.03 to the company's Annual Report on From 10-K
for the year ended December 31, 1992 and is incorporated herein
by reference..................................................
4.04 Specimen Stock Certificate of the Company was filed as
Exhibit 4.5 to the Company's Registration Statement on Form
S-2, File No. 33-43092, and is incorporated herein by
reference.....................................................
</TABLE>
-Ex 1-
<PAGE> 47
<TABLE>
<CAPTION>
Exhibit
Number Page
- ------
Number
- ------
<S> <C>
4.05 $1,500,000 Time Commercial Note dated January 4, 1994 between
the Company and National City Bank was filed as exhibit 4.05
on the Company's annual report on form 10-K for the year
ended December 31, 1993 and is incorporated by reference
herein
4.06 Extension Agreement dated as of November 15, 1993 by and
between the Company and National City Bank was filed as
exhibit 4.06 on the Company's annual report on form 10-K for
the year ended December 31, 1993 and is incorporated by
reference herein
4.07 Extension Agreement dated as of December 2, 1994 by/and
between the Company and National City (incorporated by
reference herein)
4.08 Open ended mortgage note dated October 6, 1995 between the
Company and National City Bank
4.09 Commercial Demand Note dated February 6, 1996 between the
Company and National City Bank
4.10 Security Agreement dated February 12, 1996 between Edwin M.
Roth and National City Bank
4.11 Collateral Assignment of Right to Payment dated February 12,
1996 between the Company and National City Bank
4.12 Amendment to the Credit Agreement, dated as of August 1,
1995, between the Company and National City Bank was filed as
Exhibit 4.01 to the Company's Form 8-K on June 8, 1995 and
are incorporated by reference herein
4.13 Amendment to the Credit Agreement, dated as of March 28,
1996, between the Company and National City Bank was filed as
Exhibit 4.13 on the Company's annual report on Form 10-K for
the year ended December 31, 1995
10.01 Lease between ASI and 9150 Group, dated September 30, 1977
and amended January 1, 1989 was filed as Exhibit 10.10 to
the Company's Annual Report on Form 10-K for the year ended
January 1, 1989 and is incorporated herein by reference
10.02 Lease between ASI and 9150 Group, dated September 25, 1977
and amended January 1, 1989, was filed as Exhibit 10.11 to
the Company's Annual Report on Form 10-K for the year ended
January 1, 1989 and is incorporated herein by reference
10.03 1989 Non-Qualified and Incentive Stock Option Plan of the
Company was filed as Exhibit 10.13 to the Company's Annual
Report on Form 10'-K for the year ended January 1, 1989 and is
incorporated herein by reference
10.04 Form of option agreement pursuant to 1989 Incentive Stock
Option Plan of the Company was filed as Exhibit 10.14 to
the Company's Annual Report on Form 10-K for the year ended
January 1, 1989 and is incorporated herein by reference
</TABLE>
-Ex 2-
<PAGE> 48
<TABLE>
<CAPTION>
Exhibit
Number
- ------ Page
Number
- ------
<S> <C>
10.05 1989 Outside Directors' Stock Option Plan of the Company was
filed as Exhibit 10.5 to the Company's Registration Statement
on Form S-2, File No. 33-43092 and is incorporated by
reference herein
10.06 First Amendment to 1989 Non-Qualified and Incentive Stock
Option Plan of the Company, adopted October 3, 1991, was
filed as Exhibit 10.12 to the Company's Registration
Statement on Form S-2, File No. 33-43092 and is incorporated
by reference herein
10.07 Second Amendment to 1989 Non-Qualified and Incentive Stock
Option Plan of the Company, dated February 26, 1992, was
filed as Exhibit 10.12 to the Company's Registration
Statement on Form S-2, File No. 33-43092 and is incorporated
by reference herein
10.08 First Amendment to 1989 Outside Directors' Stock Option Plan
of the Company, adopted October 3, 1991, was filed as 10.9 to
the Company's Registration Statement on Form S-2, File No.
33-43092 and is incorporated by reference herein
10.09 Second Amendment to the 1989 Outside Directors' Stock Option
Plan, dated February 26, 1992, was filed as Exhibit 10.13 to
the Company's Registration Statement on Form S-2, File No.
33-43092 and is Incorporated by reference herein
10.10 Agreement between ASI and Teamsters Local Union No. 416,
dated November 17, 1993 and effective as ,of August 15, 1993
was filed as exhibit 10.10 on the Company s annual report on
for the year ended December 31, 1993 and is incorporated by
reference herein
10.11 Agreement between ASI and Teamsters Local Union No. 416,
dated January 12, 1992, and effective as of December 23, 1991
was filed as Exhibit 10.11 to the Company's Registration
Statement on Form S-2, File No. 33-43092 and is incorporated
by reference herein
10.12 Lease between ASI and Dutton Company, dated October 7, 1987
as amended May 4, 1989, wad filed &s Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1990, File No. 2-78134, and is incorporated
herein by reference
10.13 Lease amendment between Specialty Chemical Resources, Inc.
(assignee of ASI) and the 9150 Group dated July 25, 1994
10.14 Agreement between ASI and Teamsters Union Local No. 416 dated
May 1, 1995 and effective as of December 16, 1994 was filed
as Exhibit 10.14 on the Company's Form 10-Q for the quarter
ended March 31, 1995 and is incorporated by reference herein.
</TABLE>
-Ex 3-
<PAGE> 49
<TABLE>
Exhibit
Number
- ------
Number
- ------ Page
<S> <C>
10.15 Restricted Stock Award Agreement dated July 25, 1995 between
the Company and John H. Ehlert was filed as Exhibit 10.15 on
the company's Annual Report on Form 10-K for the year ended
December 31, 1995
10.16 Agreement of Settlement and Release, dated as of July 21,
1995, among the Company, the Directors, the Committee and the
individual members of the Committee was filed as Exhibit
10.01 to the Company's Form 8-K on July 8, 1995 and is
incorporated by reference herein
10.17 Stock Purchase Agreement between the Company and Edwin M.
Roth dated October 6, 1995 was filed as Exhibit 10 to the
Company's form 10Q for the quarter ended September 30, 1995
and is incorporated by reference herein
23.00 Independent Auditors Report
27.00 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 4.08
OPEN END MORTGAGE SECURITY AGREEMENT AND ASSIGNMENT OF RENTS AND
----------------------------------------------------------------
LEASES
------
KNOW ALL MEN BY THESE PRESENTS THAT: SPECIALTY CHEMICAL RESOURCES, INC.
(the "Borrower"), an Ohio corporation, whose address is 9100 Valley View Road,
Macedonia, Ohio 44056, for the consideration of One Million Seventy-Five
Thousand and 00/1OOths Dollars ($1,075,000) received or to be received to
Borrower's full satisfaction and to Borrower or on Borrower's behalf paid or to
be paid by NATIONAL CITY BANK, a national banking association, having its
principal place of business located at 1900 East Ninth Street, Cleveland, Ohio
44114 ("Bank"), gives, grants, bargains, sells, assigns and conveys unto Bank,
its successors and assigns, the following described real propenty, appurtenances
and nights:
Situated in the City of Macedonia, Summit County, Ohio as is more
particularly described on EXHIBIT A which is attached to and made a
part of this Open End Mortgage, Security Agreement and Assignnnent of
Rents and Leases (this "Mortgage")
TOGETHER with, all and singular, the right, title and interest of Borrower,
including any after acquired title or reversion, in and to the ways, easements,
streets, alleys, passages, water, water courses, riparian rights, minerals,
royalties, rights, liberties and privileges in any way relating or appertaining
to the Premises (as defined below), whether now or hereafter acquired by
Borrower; and
TOGETHER with, all present and future rents. issues, proceeds, income,
revenues and profits accruing from the Premises; and
TOGETHER with, all buildings and improvements of every kind and description
now or hereafter constructed or placed thereon or therein and all materials
intended for construction, reconstruction, alteration and repairs of such
improvements now or hereafter erected thereon or therein, all of which materials
shall be deemed to be included within the property subject to this Mortgage
immediately upon the deliverv thereof to the Premises, and all fixtures and
articles of personal propertv in which Borrower now has or at any time hereafter
acquires an interest and which are attached to or contained in and used in
connection with the Premises, and all renewals or replacements thereof or
articles in substitution therefor, whether or not the same are or shall be
attached to the buildings or other improvements in any manner; it being mutually
agreed that all the aforesaid property owned by Borrower and placed by it on the
Premises shall, so far as permitted by law, be deemed to be fixtures and a part
of the realty, security for the indebtedness and covered by this Mortgage, and
as to the balance of the property aforesaid, this Mortgage is a security
agreement for the purpose of creating hereby a security interest in the
property, securing the indebtedness, for the benefit of Bank; and
TOGETHER with, all right, title and interest now owned or hereafter
acquired by Borrower in and to any leases for equipment of any kind or nature
used in connection with the Premises; and
<PAGE> 2
TOGETHER with, all awards and other compensation heretofore or hereafter to
be made to the present and all subsequent owners of the property subject to this
Mortgage for any taking by eminent domain, either permanent or temporary, of all
or any part of property or any easement or appurtenance thereof, including
severance and consequential damage and change in grade of streets, which awards
and compensation are hereby assigned to Bank.
The property mentioned above is referred to as the "Premises" to the extent
the same is realty and as the "Collateral" to the extent the same is personalty.
The Premises and the Collateral are collectively referred to as "Mortgaged
Property", except where the reference is to the Premises or the Collateral
specifically.
TO HAVE AND TO HOLD the Mortgaged Property, with the appurtenances
thereunto belonging, unto Bank, its successors and assigns, forever, against
all lawful claims and demands whatsoever.
Borrower represents to Bank, its successors and assigns, that at and until
the ensealing of these presents, Borrower is the owner of the Premises and has
good right to bargain, sell and convey the same in manner and form as above
written, and Borrower will execute, acknowledge and deliver any further
assurances as may be necessary or required hereto to evidence or confirm the
interest in the Premises granted by this Mortgage.
THE CONDITION OF THIS MORTGAGE IS, whereas Borrower has executed and
delivered this Mortgage for the purpose of securing the performance of the
covenants and agreements contained in this Mortgage and in any loan agreement
made with respect to the loans secured hereby, and to secure the payment when
due of:
(a) the principal and interest of the promissory note (together with all
amendments thereto and all notes issued in substitution therefore or replacement
thereof, the "Note"), of even date herewith, executed by Borrower, in the
principal sum of One Million Seventy-Five Thousand and 00/100ths Dollars
($1,075,000), executed by Borrower in favor of Bank with interest at the rate
specified in such Note, the balance of such Note being due and payable on
October ____, 1998 or such earlier date as such Note provides;
(b) all sums expended or advanced by Bank pursuant to any term or provision
of this Mortgage or to any other agreement or other document delivered in
connection with this transaction;
(c) all unpaid advances or disbursements of Bank with respect to the
Mortgaged Property for the payment of taxes, levies, assessments, insurance
premiums or costs incurred in the protection or operation of the Mortgaged
Property as provided in Section 5301.233 of the Ohio Revised Code;
(d) the unpaid balances of any loan advances made this date or subsequent
to recordation hereof and all other liabilities, obligations and/or indebtedness
of Borrower to Bank, direct or contingent, whether now or hereafter owing, to
the extent that the total unpaid loan indebtedness secured hereby, exclusive of
the interest thereon and amounts referenced in clause (c) above, does not exceed
the
-2-
<PAGE> 3
maximum amount specified in this Mortgage which is One Million Seventy-Five
Thousand and OO/1OOths Dollars ($1,075,000).
AND WHEREAS, Borrower further covenants and agrees as follows:
1. To pay promptly the principal of and interest on the indebtedness
evidenced by the Note at the time and in the manner herein and in the Note
provided.
2. In order more fully to protect the security of this Mortgage, to
pay to Bank, if so required by Bank, in addition to the payments of
principal and interest under the terms of the Note and concurrently
therewith until the Note is fully paid, the following sums:
(a) a sum equal to taxes and assessments, both general and special,
next due upon the Mortgaged Property;
(b) the premiums that will next become due and payable on policies of
insurance covering the Mortgaged Property and required under the
provisions hereof.
Sums due for taxes and insurance premiums shall be divided by the number of
payment dates to elapse before the date such taxes, assessments and insurance
premiums, respectively, will become due and payable. These sums shall be held by
Bank in trust, but without interest accruing thereon, to pay each of the
particular items.
3. To keep the Mortgaged Property free from statutory liens of every kind
except current taxes and assessments not yet due and payable; to pay, before
delinquency and before any penalty for nonpayment attaches thereto, all taxes,
assessments, and other governmental or municipal or public dues, charges, fines
or impositions of every character which are or may be levied against the
Mortgaged Property or any part thereof, and, except when payment for all such
items has theretofore been made under paragraph 2 hereof, to timely deliver to
Bank receipted bills evidencing payment therefor.
4. To keep the improvements now existing or hereafter erected on or in the
Mortgaged Property insured against loss or damage by, or abatement of rental
income, resulting from fire and "all risk" perils. Borrower covenants to
maintain flood insurance as required by the Flood Disaster Protection Act of
1973, as amended, and to maintain any additional flood insurance required by the
Bank. All perils insured, with the exception of flood, shall be in an amount not
less than the replacement value of the Mortgaged Property, and in any event, in
an amount necessary to prevent the operation of any coinsurance provision
contained in any policy of such insurance. Borrower agrees to pay promptly when
due any premiums on such insurance and further agrees, if requested by the Bank,
to furnish a certificate from the company carrying such insurance acknowledging
that such insurance is adequate in an amount to prevent the operation of any
coinsurance provision contained therein. All such insurance shall be carried in
companies approved by the Bank in its reasonable discretion and the policies and
renewals thereof shall be deposited with and held by Bank and have attached
thereto standard non-contributing mortgagee clauses (in favor of and entitling
the Bank to collect any and all proceeds payable under all such
-3-
<PAGE> 4
insurance) as well as the standard waiver of subrogation endorsement, all
to be in a form acceptable to the Bank.
If any such loss or damage occurs as described herein to the improvements
in or on the Premises, Borrower shall give prompt notice to the Bank and the
insurance carrier. Borrower shall be entitled to adjust, compromise, and collect
any such losses, subject to the following conditions: (a) Borrower obtains the
written approval of Bank as to the amount of the losses, which approval shall
not be unreasonably withheld or delayed; (b) Borrower is not then in default
under any of the terms, covenants and conditions of this Mortgage, the Note, or
any other instrument executed in connection with or to additionally secure the
indebtedness evidenced by the Note; (c) Bank shall first be given satisfactory
proof, in accordance with the plans and specifications therefor previously
approved by Bank, that such improvements have been fully restored, or by the
expenditures of such money will be fully restored, free and clear of all
mechanic's and materialman's liens; (d) if such proceeds shall be insufficient
to restore or rebuild the said improvements, Borrower shall deposit promptly
with Bank funds which, together with the insurance proceeds, shall be sufficient
to restore and rebuild the improvements on or in the Premises; and (e) the
excess of the insurance proceeds above the amount necessary to complete such
restoration shall be applied as hereinbefore provided, at the option of Bank, as
a credit upon the indebtedness secured hereby. If Borrower does not meet the
foregoing provisions, Borrower authorizes Bank to collect, adjust and compromise
any losses under any of the insurance aforesaid. After deducting costs of
collection, Bank shall be entitled to apply the proceeds, at its option, as
follows: (x) a credit upon any portion, as selected by Bank, of the indebtedness
secured hereby; or (y) in restoration of the improvements, in which event Bank
shall not be obligated to see to the proper application thereof nor shall the
amount so released or used be deemed a payment on any indebtedness secured
hereby; or (z) so deliver same to the owner of the Mortgaged Property. Under no
circumstances shall Bank become obligated to take any action to restore the
improvements so damaged.
In the event of foreclosure of this Mortgage, or other transfer of title to
the Mortgaged Property in lieu of foreclosure, all right, title and interest of
Borrower in and to any insurance policies then in force shall pass to the
purchaser or grantee thereof.
5. If any action shall be commenced or any written notice shall be received
for the taking by exercise of the power of eminent domain of title to or the
temporary use of the Mortgaged Property, or any part thereof, the Borrower will
promptly give written notice thereof to the Bank describing the nature and
extent of the proposed taking. Any proceeds received from any award made in such
eminent domain proceedings (or conveyance in lieu thereof) are pledged by
Borrower as additional security for the payment of the Note and shall, if
received prior to the release and discharge of this Mortgage, be made available
to Borrower in the same manner and under the same conditions as insurance
proceeds under paragraph 4 hereof.
6. That no building or other improvement on or in the Premises shall be
structurally or materially altered, removed or demolished, nor shall any
fixtures or appliances on, in or about the buildings or improvements be severed,
removed, sold or mortgaged, without the consent of Bank. If any of the fixtures,
chattels or articles of personal property covered by this Mortgage is destroyed
in whole or
-4-
<PAGE> 5
in part, the same shall be replaced promptly by similar fixtures, chattels
and articles of personal property at least equal in quality and condition as
those replaced, free from any security interest in or encumbrance thereon or
reservation of title thereto.
7. To permit, commit or suffer no waste, impairment or deterioration of the
Mortgaged Property or any part thereof, to keep and maintain the Mortgaged
Property and every part thereof with buildings, fixtures, machinery and
appurtenances in good repair and condition; to effect such repairs as Bank may
reasonably require and from time to time make all needful and proper
replacements so that the buildings, fixtures, machinery and appurtenances will,
at all times, be in good condition, fit and proper for the respective purposes
for which they were erected or installed; to comply with all statutes, orders,
requirements or decrees relating to the Mortgaged Property by any federal, state
or municipal authority to the extent necessary to avoid any violations thereof,
and to permit Bank or its agents, at all reasonable times, to enter upon and
inspect the Mortgaged Property.
8. That Borrower will not cause or permit any toxic or hazardous substance
or waste, or underground storage tanks, or any other pollutants which could be
detrimental to the Mortgaged Property, human health, or the environment, or that
would violate any local, state or federal laws or regulations (collectively,
"Environmental Conditions") to be present on or affect or contaminate the
Mortgaged Property. Borrower agrees to absolutely and unconditionally indemnifv,
defend and save Bank, its successors and assigns, harmless, from and against any
of the following which may result from the existence of any Environmental
Conditions at the Mortgaged Property: (a) any liability (including, without
limitation, strict liability), loss, cost, damage, action, penalty or expense
(including, without limitation, attorneys' fees and expenses) arising from the
imposition or recording of a lien, the incurrence of any clean-up and/or
removal costs under or other noncompliance with or violation of any hazardous
waste, environmental protection, spill compensation, clean air and water, or
other local, state or federal law or regulation (collectively, the
"Environmental Laws") with respect to the Mortgaged Property or any
Environmental Condition, or liability to any third party in connection with any
violation of any Environmental Laws or other action by Borrower or its agents;
(b) any loss of value in the Mortgaged Property as a result of any such lien,
clean-up and/or removal costs; and/or (c) any liability, loss, cost, damage or
expense arising from any failure or defect in title occasioned by any applicable
Environmental Laws. Borrower shall, at all times comply with, and cause all
occupants of the Mortgaged Property to comply with, all applicable Environmental
Laws. Borrower agrees to promptly notify Bank of any litigation or proceedings
pending, threatened or commenced (whether or not served) against Borrower or any
other party in connection with Environmental Conditions and/or Environmental
Laws and of the receipt of any notice from any governmental agency or authority
in regard to Environmental Conditions and/or Environmental Laws. Borrower shall
immediately, upon receipt, provide the Bank with true, complete and correct
copies of all such notices and other documentation related to said notices,
litigation or proceedings. Borrower agrees that Borrower's indemnification of
Bank and other obligations as set out above in this paragraph 8 shall survive
the satisfaction and release of this Mortgage (in whole or in part) and remain
in effect notwithstanding the payment in full of the Note and any other
indebtedness secured hereby or any foreclosure of any lien or securitv interest.
-5-
<PAGE> 6
9. That, unless approval is first obtained in writing from Bank, Borrower
will not voluntarily create or permit to be created or filed against the
Mortgaged Property any mortgage lien or other lien or liens inferior or superior
to the lien of this Mortgage, or if filed, will have same discharged of record
either by payment, the bonding thereof or other lawful means for discharging any
such lien, within thirty (30) days after notice of filing, and further, Borrower
will keep and maintain the same free from the claims of all persons supplying
labor or materials which will enter into the construction of any and all
buildings and improvements now being constructed or which hereafter may be
constructed on or in the Premises, notwithstanding by whom such labor or
materials may have been contracted. If Bank consents to any lien inferior to the
lien of this Mortgage, any default in the performance or observance of the terms
and conditions contained in the instrument creating, extending or otherwise
evidencing such lien or the obligation to which it relates shall be a default
hereunder.
10. That Borrower shall pay for appraisals that Bank is required to obtain
by laws or regulations that apply to national banks.
11. To save Bank harmless from all loss, cost and expense (including,
without limitation, attorneys' fees and expenses), incurred by reason of any
action, suit, proceeding, hearing, motion or application before any court or
administrative body (excepting an action to foreclose or to collect the debt
secured hereby) wherein proof of claim is required to be filed or in which it
becomes necessary to defend or uphold the terms of and the lien created by this
Mortgage. All money paid or expended by Bank in that regard, together with
interest thereon from date of such payment at the highest rate then applicable
under the Note, shall constitute additional indebtedness secured hcreby and
shall be immediately and without notice due and payable.
12. That Borrower will at all times promptly and faithfully keep and
perform, or cause to be kept and performed, all covenants and conditions
contained in any easement agreements, panty wall agreements, deeds or other
instruments, which in any way affect the Mortgaged Property and are to be kept
and performed by Borrower, and Borrower further covenants that it will not do
or permit anything to be done under such instruments, the doing of which, or
refrain from doing anything, the omission of which, will impair or tend to
impair the security of this Mortgage.
13. That nothing contained in this Mortgage nor any transaction related
thereto shall be construed or shall so operate either presently or
prospectively, to require Borrower to make any payment or do any act contrary to
law, but if any clause and provision herein contained shall otherwise so operate
to invalidate this Mortgage in whole or in part then such clauses and
provisions only shall be held for naught as though not herein contained and the
remainder of this Mortgage shall remain operative and in full force and effect.
14. That this Mortgage is a security agreement for the purpose of creating
a securiry interest securing the indebtedness secured hereby in and to the
Collateral and any other indebtedness hereinafter due from Borrower to Bank.
-6-
<PAGE> 7
Borrower authorizes Bank to file, in the jurisdiction where this Mortgage
will be given effect, financing statements covering the Collateral and, at the
request of Bank, Borrower will join Bank in executing one or more such financing
statements pursuant to the Uniform Commercial Code in a form satisfactory to
Bank, and will pay the cost of filing the same or filing or recording this
instrument, as a financing statement, in all public offices at any time and from
time to time wherever Bank deem filing or recording of any financing statements
or of this instrument to be desirable or necessary.
Borrower, within five (5) days upon request by mail, shall execute,
acknowledge and deliver to Bank a security agreement or other similar instrument
in form satisfactory to Bank, covering all property, of any kind whatsoever
owned by Borrower, which, in the sole opinion of Bank is essential to the
operation of the Mortgaged Property and concerning which there may be any doubt
as to its being subject to the lien of this Mortgage under the laws of the State
of Ohio, and shall further execute, acknowledge and deliver any financing
statement, affidavit, continuation statement or certificate or other document as
Bank may request in order to protect, preserve, maintain, continue and extend
the security interest under and the priority of such security agreement or other
instrument. Borrower further agrees to pay to Bank on demand all costs and
expenses incurred by Bank in connection with the preparation, execution,
recording and filing of any such documents.
15. That Borrower will furnish to Bank forthwith upon Bank's written
request, such information in writing about Borrower's financial condition or
properties as Bank may from time to time reasonably request.
16. That the occurrence of any one or more of the following events shall be
an "Event of Default" hereunder:
(a) failure by Borrower to pay the principal sum secured by the Mortgage or
to pay any installment thereof or interest thereon, as they severally
become due or within any grace period applicable thereto as set forth in
the Note; or
(b) failure by Borrower to perform or observe any of the terms, covenants
or conditions herein or in the Note contained, or upon the occurrence of
any event of default under any other instrument executed in connection with
or additionally to secure the indebtedness evidenced by the Note, and the
continuation of such failure for a period of thirty (30) or more days after
the giving or written notice thereof by Bank to Borrower, provided that if
such failure cannot be cured by the payment of monies and cannot reasonably
be cured within thirty (30) days, Borrower shall have a reasonable time to
effect a cure, if curative action is commenced within said thirty (30) day
period and is thereafter pursued diligently and in good faith to
completion; or
(c) filing by, or against, Borrower, of any complaint or action for relief
under any bankruptcy, insolvency, or similar laws provided, however, that
if Borrower contests the filing of an involuntary petition in bankruptcy
that is filed against it and such petition is dismissed within sixty (60)
days after the date it was filed, then such filing shall not, in and of
itself, constitute an event of default hereunder; or
-7-
<PAGE> 8
(d) seeking or acquiescing by Borrower in the appointment of, or the entry
by a court of competent jurisdiction of an order appointing, any trustee,
receiver or liquidator of Borrower or of all or a part of Borrower's
assets, rents, revenues, earnings, profits or income thereof, or
(e) making by Borrower of any general assignment for the benefit of
creditors, or the admission in writing of its inability to pay its debts
generally as they become due; or
(f) if, without Bank's prior written consent, Borrower should hereafter
deed, quitclaim, assign, convey, transfer, sell, sell under contract of
sale, land contract, lease with option to purchase, dispose of or further
encumber the Mortgaged Property, or any part thereof, or any interest
therein, or agree to do so, or such shall occur by any means, voluntary or
involuntary, by operation of law or otherwise, or if the controlling
interest in Borrower is transferred by sale, assignment, pledge or other
transfer. Consent to one such transaction shall not be deemed to be a
waiver of the right to require such consent to future or successive
transactions.
17. Upon the occurrence of any Event Of Default, Bank may exercise any or
all or any combination of the rights, powers and remedies conferred upon or
reserved to them under this Mortgage, the Note, or any other instrument
supplemental or collateral thereto, or executed and delivered in connection
therewith, as well as all rights, powers and remedies now or hereafter existing
at law, in equity or by statute including, without limitation, the following:
(a) Bank may, at its option and whether electing to declare the whole
indebtedness due and payable or not, perform any such term, covenant or
condition which Borrower has failed to perform or observe without waiver of
any other remedy, and any amount paid or advanced by Bank in connection
therewith, or any other costs, charges or expenses incurred in the
protection or operation of the Mortgaged Property and the maintenance of
this lien with interest thereon at the highest rate then applicable under
the Note shall be repayable by Borrower upon demand, shall be a lien upon
the Mortgaged Property prior to any right or title to, interest in or claim
thereon attaching or accruing subsequent to the lien of this Mortgage and
shall be deemed to be included in and secured by this Mortgage; or
(b) at the option of Bank, the whole indebtedness secured hereby shall
become immediately due and payable, although the period for payment thereof
may not have expired, anything hereinbefore or in Borrower's loan documents
contained to the contrary notwithstanding, and thereupon, Bank may proceed
at law or in equity to collect the entire indebtedness secured hereby
and/or proceed to foreclose this Mortgage as against all or any part of the
Mortgaged Property or otherwise pursue any other right or remedy herein or
by law provided; or
(c) the Bank may exercise any rights, powers, or remedies it may have as a
secured party under the Uniform Commercial Code as adopted in the State of
Ohio.
-8-
<PAGE> 9
18. That Bank, in any suit to foreclose this Mortgage, shall be entitled to
the appointment of a receiver of the rents, leases and profits of the Mortgaged
Property as a matter of right and without notice, with power to manage and
operate the Mortgaged Property, to collect the rents, issues and profits of the
Mortgaged Property due and to become due during the pendency of such foreclosure
suit to and including the date of confirmation of the sale under such
foreclosure and during the redemption period, if any, after such confirmation,
such rents and profits being expressly assigned and pledged as additional
security for the payment of the indebtedness secured by this Mortgage without
regard to the value of the Mortgaged Property or the solvency of any person or
persons liable for the payment of the Mortgage indebtedness, and regardless of
whether Bank has an adequate remedy at law. Borrower for itself and any
subsequent owner waives any and all defenses to the application for a receiver
and specifically consents to such appointment without notice, but nothing herein
contained is to be construed to deprive the holder of the Mortgage of any other
right, remedy or privilege it may now have under the law to have a receiver
appointed. The provision for the appointment of a receiver and the assignment of
such rents, issues and profits is made an express condition upon which the loan
hereby secured is made. The rights and remedies herein provided for shall be
deemed to be cumulative and in addition to, and not in limitation of, those
provided by law.
19. That the mailing of a written notice or demand, addressed to the owner
of record of the Mortgaged Property, directed to the owner at the last address
actually furnished to Bank, or directed to said owner at the Mortgaged Property,
and mailed by United States mail, certified or registered, return receipt
requested, shall be sufficient notice and demand in any case arising under this
instrument and required by the provisions hereof or by law.
20. That all the covenants hereof shall run with the land.
21. That failure of Bank to exercise the option for acceleration of
maturity and/or foreclosure following any Event Of Default as aforesaid or to
exercise any other option granted to Bank hereunder in any one or more
instances, or the acceptance by Bank of partial payments shall not constitute a
waiver of any such default, nor extend or affect the grace period, if any, but
such option shall remain continuously in force. Acceleration of maturity, once
claimed hereunder by Bank may, at the option of Bank, be rescinded by written
acknowledgment to that effect by Bank, but the tender and acceptance of partial
payments alone shall not in any way affect or rescind such acceleration of
maturity, nor extend or affect the grace period, if any.
22. That Borrower hereby grants and conveys to the Bank, and its agents,
assigns and designees, an easement to enter upon the Premises at any time and
from time to time for the purpose of making such audits, tests, inspections and
examinations as Bank and its agents, assigns and designees may, in their
reasonable discretion, deem necessary or appropriate in order to determine
whether Borrower's ownership, use and operation of the Premises and the conduct
of the activities engaged thereon are in compliance with the terms hereof or
with applicable law. Notwithstanding the foregoing, Bank shall not have or be
deemed to have any obligation or responsibility whatsoever to perform or
otherwise conduct any such audits, tests, inspections or examinations. All of
the reasonable costs and expenses incurred by Bank, or its agents, assigns or
designees, with respect to any of the foregoing shall
-9-
<PAGE> 10
be paid by Borrower. Bank may, but shall not be required to, advance such
costs and expenses on behalf of Borrower. All sums so advanced shall bear
interest at the highest rate then applicable under the Note from the date so
expended until the date of repayment. The easement granted by this paragraph 22
shall exist and continue until the satisfaction or release of this Mortgage, at
which time this easement shall be terminated without the necessity of any
further documentation. Borrower acknowledges that no adequate remedy or law
exists for a violation of the easement granted hereby and agrees that Bank, or
its agents, assigns or designees, shall have the right to enforce this easement
by equitable writ or decree, including temporary and preliminary injunctive
relief. The exercise of the rights granted in this paragraph shall not
constitute Bank as a mortgagee-in-possession with respect to the Premises.
PROVIDED, ALWAYS, NEVERTHELESS, if Borrower shall pay all of the
indebtedness and shall fully keep and perform all of the terms, covenants and
conditions by Borrower to be kept and performed herein and/or contained in the
Note or Borrower's other loan documents, then this Mortgage shall be void and
shall be released by Bank, at the cost and expense of Borrower; otherwise this
Mortgage is to be and shall remain in full force and effect.
ALL OF THE COVENANTS herein contained are joint and several and shall also
bind, and the benefits and advantages thereof shall also inure to, the
respective heirs, executors, administrators, successors and permitted assigns of
the parties. Whenever used, the singular shall include the plural, the plural
the singular, and the use of any gender or the neuter shall include and be
equally applicable to all genders and the neuter.
TIME IS OF THE ESSENCE with respect to each and every covenant, agreement
and obligation of Borrower under this Mortgage.
IN WITNESS, this Mortgage has been executed in Cleveland, Ohio this 6th
day of October, 1995.
Signed and Acknowledged SPECIALTY CHEMICAL RESOURCES, INC.
(as to each signature) an Ohio corporation
in the presence of the undersigned witnesses
/s/ Martin J. McCormick
- ---------------------------------
Witness Name: Martin J. McCormick By: /s/ E.M. Roth
-------------------- --------------------------
/s/ Mona Pimpo Printed Name: E.M. Roth
- --------------------------------- ----------------
Witness Name: Mona Pimpo Title: President
-------------------- -----------------------
And By:_________________
Printed Name:___________________
Title:_____________________________
-10-
<PAGE> 11
STATE OF OHIO )
)SS.
COUNTY OF Cuyahoga )
BEFORE ME, a Notary Public in and for said County and State, personally
appeared Edwin M. Roth, President ___________________________
- ---------------------------------
___________________________________ _____________________________________ of
SPECIALTY CHEMICAL RESOURCES, INC., who acknowledged that he did sign the
foregoing instrument for and on behalf of said company, by authority granted by
its board of directors, and that the same is his free act and deed and the free
act and deed of said company.
IN TESTIMONY, I set my hand and official seal, this 6th day of October,
1995.
/s/ Monica D. Pimpo
------------------------
Notary Public
My Commission Expires 5/14/96
This instrument was prepared by Bank.
-11-
<PAGE> 12
Situated in the City of Macedonia, County of Summit and State of Ohio,
and known as being a part of Original Lot No. 23, Northfield Township, further
bounded and described as follows:
Beginning at an iron pin monument found at a point of curvature, being
Station 140 + 40.53, in the center line survey of Interstate Route 271
(SUM-271-11.50), thence along said center line, which is the arc of a curve
deflecting to the right, said curve having a radius of 3.906.53 feet and an arc
distance of 1,338.50 feet, which chord bears North 03 degrees 51'34" West,
1,345.14 feet to Station 153 + 85.67 in said center line of survey; thence
South 83 degrees 59'43" East, 230.00 feet to a point on the easterly line of
Freeway Drive, and the northwesterly corner of a parcel of land conveyed to
Golda Sicherman by deed recorded in Volume 5491, Page 253 of Summit County
Records; thence southerly, along said easterly line of Freeway Drive, which is
the arc of a curve deflecting to the left, said curve having a radius of
3,676.53 feet and an arc distance of 293.75 feet, which chord bears
South 03 degrees 42'58" West, 293.76 feet to an iron pin monument set and the
principal place of beginning:
Thence continuing southerly, along said easterly line of Freeway Drive,
which is the arc of a curve deflecting to the left, said curve having a radius
of 3,676.53 feet and an arc distance of 266.02 feet, which chord bears South 00
degrees 38'45" East, 265.97 feet to a point therein (a 5/8" iron pin monument
was found 0.03 feet North and 0.11 feet East);
Thence South 89 degrees 35'09" East, 596.66 feet to a 5/8" iron pin
monument set on the westerly line of Pennsylvania Railroad right-of-way, said
point being 50.00 feet westerly by rectangular measurement, from the center
line of the East track;
Thence North 09 degrees 01'55" West, along said westerly line of the
Pennsylvania Railroad right-of-way, 269.58 feet;
Thence North 89 degrees 35'09" West, 557.33 feet to a point in the
aforementioned easterly line of Freeway Drive and the principal place of
beginning and containing 3.532 acres of land according to a survey by Dempsey &
Neff, Inc. dated October 2, 1995.
PARCEL 2:
- ---------
Situated in the City of Macedonia, County of Summit and State of Ohio,
and known as being a part of Original Lot No. 23, Northfield Township, further
bounded and described as follows:
Beginning at a point of curvature, being Station 140 + 40.53, in the
center line survey of Interstate Route 271 (SUM-271-11.50); thence along said
center line, which is the arc of a curve deflecting to the right, said curve
having a radius of 3,906.53 feet and an arc distance of 1,338.50 feet, which
chord bears North 03 degrees 51'34" West, 1,345.14 feet to a Station 153 +
85.67 in said center line survey; thence South 53 degrees 59'43" East, 230.00
feet to a point on the easterly line of Freeway Drive and the northwesterly
corner of a parcel of land conveyed to Golda Sicherman by deed recorded in
Volume 5491, Page 253 of Summit County Records; thence southerly along said
easterly line of Freeway Drive, which is the arc of curve deflecting to the
left, said curve having a radius of 3,676.53 feet and an arc distance of 230.00
feet, which chord bears South 04 degrees 12'45" West, 229.97 feet to an iron
pin monument set and the principal place of beginning:
Thence, continuing southerly, along said easterly line of Freeway
Drive, which is the arc of a curve deflecting to the left, said curve having a
radius of 3,676.53 feet and an arc distance of 63.75 feet, which chord bears
South 01 degrees 55'26" West, 63.75 feet to a point therein;
Thence South 89 degrees 35'09" East, 557.33 feet to a point in the
westerly line of Pennsylvania Railroad right-of-way, said point being 50.00
feet westerly by rectangular measurement, from the center line of the East
track:
Thence, North 09 degrees 01'55" West, along said westerly line of the
Pennsylvania Railroad right-of-way, 64.60 feet to an iron pin monument set;
Thence, North 89 degrees 35'09" West, 545.06 feet to the easterly line
of Freeway Drive and the principal place of beginning and containing 0.806
acres of land according to a survey by Dempsey & Neff, Inc. dated October 2,
1995.
Exhibit A
<PAGE> 1
Exhibit 4.09
<TABLE>
<S> <C> <C>
COMMERCIAL DEMAND NOTE (Simple/Grid) FOR BANK USE ONLY SPECIALTY
(Ohio version) 00728-6 (3/93) INV. 803279 (03/93) Debtor Name CHEMICAL RESOURCES, INC.
====================================================================== ___________________________________________
Amount City, State Date Debtor # __________________________________
$ 750,000.00 Cleveland, Ohio February 6, 1996 Obligation # ______________________________
Metro/Ohio
Office ____________________________________
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
ON DEMAND, for value received, the undersigned ("Debtor") promises to pay to the
order of National City ("Bank"), which has its principal place of business in
Cleveland, Ohio, at any office of Bank, seven hundred fifty thousand and 00/100
DOLLARS (or, if less, the unpaid principal balance shown on an attachment to
this note or on Bank's loan account records) in lawful money of the United
States, together with interest payable commencing on March 1, 1996, and monthly
thereafter and on demand. Prior to demand, principal and any overdue interest
shall bear interest computed daily (on the basis of a 360-day year and actual
days elapsed) at a fluctuating rate which is one-quarter percent (1/4%) per
annum above the Prime Rate.
EMR
_________ Debtor is not permitted to obtain advances other than the initial
Initials amount borrowed hereunder.
OR
This note represents an arrangement that allows Debtor to obtain
advances without giving Bank a separate note for each advance.
_________ However, THIS NOTE DOES NOT OF ITSELF CONSTITUTE A COMMITMENT BY
Initials BANK TO MAKE ANY ADVANCES TO DEBTOR. Bank will record the date and
amount of each advance on an attachment to this note or on Bank's loan
account records. Debtor agrees that each advance so recorded shall be
prima facie evidence that an advance was made on the date and in the
amount indicated. The number of advances and the amount of each
advance are not limited; provided, however, that the maximum unpaid
principal balance outstanding at any time shall not exceed the face
amount of this note.
If Debtor fails to pay any amount due hereunder, or any fee in connection
herewith, in full within ten (10) days after its due date or the date of demand
therefor, whichever is applicable, Debtor, in each case, will incur and shall
pay a late fee equal to the greater of twenty dollars ($20.00) or five percent
(5%) of the unpaid amount. The payment of a late charge will not impair any
holder's right to demand repayment of this note.
Except as otherwise agreed in writing, payments will be applied first to accrued
but unpaid interest and fees, in that order, on an invoice by invoice basis
in the order of their respective due dates, until paid in full, then to late
charges and then to principal.
In its discretion, Bank may, from time to time, unilaterally change any
provision for the application of payments by mailing a written notice to Debtor
of the change. The notice shall be mailed to the address indicated herein or
such other address that Debtor may furnish in writing to an appropriate officer
of Bank and shall be mailed not less than fifteen (15) days prior to the
effective date of such change.
If this note is not paid in full on demand, the interest rate otherwise in
effect hereunder shall be increased by three percent (3%) per annum, provided
that in no event shall the principal of and interest on this note bear interest
after demand at a rate less than the interest rate actually in effect
hereunder immediately after demand.
In this note, (a) DEBT means, collectively, all monetary liabilities, and any
charges or expenses incurred in connection therewith, now or hereafter owing by
the Person or Persons in question, including, without limitation, every such
liability whether owing by such Person or one (1) of such Persons alone or
jointly, severally or jointly and severally, whether owing absolutely or
contingently, or directly or indirectly, and whether created by loan, overdraft,
guaranty or other contract or by quasi-contract, tort, statute or other
operation of law; (b) BANK DEBT means Debt payable to Bank, whether initially
payable to Bank or acquired by Bank by purchase, pledge or otherwise and whether
assigned to or participated to or from Bank in whole or in part; (c) PRIME RATE
means the fluctuating rate of interest which is publicly announced from time to
time by Bank at its principal place of business as being its "prime rate" or
"base rate" thereafter in effect, with each change in the Prime Rate
automatically, immediately and without notice changing the fluctuating interest
rate thereafter applicable hereunder, it being agreed that the Prime Rate is not
necessarily the lowest rate of interest then available from Bank on fluctuating
rate loans; (d) OBLIGOR means any Person who is or shall become obligated or
whose property is or shall serve as collateral for the payment of Debtor's Bank
Debt or any part thereof in any manner and, in addition to Debtor, includes,
without limitation, any maker, endorser, guarantor, subordinating creditor,
assignor, pledgor, mortgagor or hypothecator of property; (e) RELATED WRITING
means a writing of any form or substance signed by any Obligor (whether as
principal or agent) or by any attorney, accountant or other representative of
any Obligor and received by Bank in respect of Debtor's Bank Debt or any part
thereof, including, without limitation, any credit application, credit
agreement, reimbursement agreement, financial statement, promissory note,
guaranty, indenture, mortgage, security agreement, authorization, subordination
agreement, certificate, opinion or any similar writing, but shall not include
any commitment letter issued by Bank, without regard to whether Debtor or any
other Person signed or acknowledged receipt thereof; and (f) PERSON means a
natural person or entity of any kind, including, without limitation, any
corporation, partnership, trust, governmental body or any other form or kind of
entity.
Debtor certifies to Bank that all funds disbursed under this note will
be used for business or commercial purposes.
Debtor and the undersigned guarantors, if any, hereby authorize Bank to share
all credit and financial information relating to Debtor and the undersigned
guarantors, if any, with Bank's parent company, and with any subsidiary or
affiliate company of Bank or of Bank's parent company.
In no event shall the interest rate in effect on this note exceed the
maximum rate permissible under the law governing this note.
If Debtor consists of more than one Person, Debtor shall be jointly and
severally liable on this note.
Any holder's delay or omission in the exercise of any right under this note
shall not operate as a waiver of that right or of any other right under this
note.
If any provision of this note is determined by a court of competent jurisdiction
to be invalid, illegal or unenforceable, that determination shall not affect any
other provision of this note, and each such other provision shall be construed
and enforced as if the invalid, illegal or unenforceable provision were not
contained herein.
This note and the Related Writings set forth the entire agreement between the
parties regarding the transactions contemplated hereby, and supercede all prior
agreements, commitments, discussions, representations and understandings,
whether written or oral, and any all contemporaneous oral agreements,
commitments, discussions, representations and understandings between the
parties relating to the subject matter hereof.
No amendment, modification or supplement to this note or any Related Writing
shall be binding unless executed in writing by all parties thereto, and this
provision shall not be subject to waiver by any party and shall be strictly
enforced.
<PAGE> 2
This note shall be governed by the law of the state in which Bank has its
principal place of business.
Debtor and the undersigned guarantors, if any, jointly and severally authorize
any attorney-at-law to appear in any state or federal court of record in the
United States after demand; to waive the issuance and service of process; to
confess judgment against Debtor and/or any undersigned guarantor in favor of
the holder of this note for the amount then appearing due, together with
interest and costs of suit; and to release all errors and waive all rights of
appeal and stay of execution. If any judgment against Debtor and/or any
undersigned guarantor is vacated for any reason, this warrant of attorney may
be used to obtain additional judgments.
- -------------------------------------------------------------------------------
WARNING-- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO
COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR
WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH
THE AGREEMENT, OR ANY OTHER CAUSE.
- -------------------------------------------------------------------------------
Address and Telephone:
9100 VALLEY VIEW ROAD SPECIALTY CHEMICAL RESOURCES, INC.
- ---------------------------- ------------------------------------
MACEDONIA, OH 44056 By /s/ Edwin M. Roth
- ---------------------------- ----------------------------------
(216) 468-1380 President-CEO
- ---------------------------- ------------------------------------
Debtor
By /s/
- ---------------------------- ----------------------------------
FOR VALUE RECEIVED, each undersigned guarantor (a) consents to the provisions
of the note, including without limitation, the warrant of attorney; (b)
guarantees, absolutely and unconditionally, and jointly and severally with the
other undersigned guarantors, if any, the prompt payment in full of the note
(and any extensions thereof in whole or in part) when due and whether or not
the holder of the note shall resort or shall have resorted to any other Obligor
or to security, if any; (c) waives presentment, demand for payment, notice of
dishonor and every other kind of notice to which the undersigned guarantor
might be entitled but for this waiver; and (d) waives any and all claims,
rights or remedies the undersigned guarantor may now have or hereafter acquire
against Debtor that arises from the undersigned guarantor's performance
hereunder or is in any way related hereto including, without limitation,
subrogation, reimbursement, contribution or indemnification, whether direct or
indirect or arising by contract, law, equity or otherwise; and (e) agrees that
the liability of the undersigned guarantor(s) shall not be affected by any act,
omission or course of dealing on the part of the holder including, without
limitation, any extension of time, any release or exchange of security
(irrespective of the consideration, if any, received therefor) or any other
indulgence granted to any Obligor, in each case whether with or without notice
to the undersigned guarantor(s).
- -------------------------------------------------------------------------------
WARNING-- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER
FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
- -------------------------------------------------------------------------------
Address and Telephone:
- --------------------------- ------------------------------------
Guarantor
By
- --------------------------- ---------------------------------
- --------------------------- ------------------------------------
Guarantor
By
- --------------------------- ---------------------------------
-25-
<PAGE> 3
COMMERCIAL LOANS
LOAN DISBURSEMENT AUTHORIZATION
Borrower's Name SPECIALTY CHEMICAL RESOURCES, INC.
---------------------------------------------------------------
Dept. or Office METRO/OHIO Date FEBRUARY 6, 1996
------------------------- ----------------------------------
You are hereby authorized and directed to disburse the proceeds of the loan
which you are making to the undersigned in the following manner.
/ / ISSUE CASHIER'S PAYABLE TO THE ORDER OF:
CHECK NUMBER
--------------------------------------- -------------- $---------------
--------------------------------------- -------------- $---------------
/ / CREDIT ACCOUNT SHOWN BELOW:
NAME ACCOUNT NUMBER
SPECIALTY CHEMICAL RESOURCES, INC. 3395028 750,000.00
--------------------------------------- -------------- $---------------
--------------------------------------- -------------- $---------------
/ / PAY EXISTING COMMERCIAL & COLLATERAL LOAN OBLIGATION(S)
--------------------------------------- -------------- $---------------
--------------------------------------- -------------- $---------------
/ / OTHER (WIRE TRANSFER, INTER-DEPARTMENT TRANSFER)
--------------------------------------- -------------- $---------------
--------------------------------------- -------------- $---------------
ADDITIONAL ADVANCES, IF ANY, MAY BE DISBURSED TO ANY NATIONAL CITY BANK ACCOUNT
IN THE NAME OF THE BORROWER UPON REQUEST OF THE UNDERSIGNED, NOT TO EXCEED
TOTAL APPROVAL/NOTE.
* /S/Specialty Chemical Resources, Inc. TOTAL DISBURSED
------------------------------------- (TODAY) $-------------
BORROWER'S SIGNATURE
/S/ Edwin M. Roth, Pres. TOTAL APPROVAL/ 750,000.00
* ------------------------------------- NOTE $------------
BORROWER'S SIGNATURE
BUSINESS PURPOSE STATEMENT
If loan is to individual(s) or proprietorship and if for business purposes,
Borrower(s) signature(s) required stating loan purpose (use non truth in
lending note form).
LOAN IS FOR BUSINESS PURPOSE
*
----------------------------- -------------------------------
BORROWER'S SIGNATURE DATE BORROWER'S SIGNATURE DATE
<PAGE> 1
Exhibit 4.10
SECURITY AGREEMENT
(U.S. Government Agency Securities)
This Security Agreement is executed and delivered at Cleveland, Ohio as
of February 12, 1996 by EDWIN M. ROTH ("Grantor"), whose mailing address
is 9100 Valley View Macedonia, Ohio, to National City Bank ("Bank"), a
national banking association having its main office at 1900 East
Ninth Street, Cleveland, Ohio 44114.
WHEREAS, Grantor is a shareholder, officer and director of
Specialty Chemical Resources, Inc., an Ohio corporation ("Borrower");
and
WHEREAS, Borrower has requested a loan in the amount of $750,000
from Bank to be evidenced by a certain Commercial Demand Note (the
"Note") dated of even date herewith issued by Borrower to Bank and the
making of such loan by Bank to Borrower is of acknowledged benefit to
Grantor; and
WHEREAS, Grantor has executed and delivered a certain Continuing
Guaranty of Payment (Limited) (the "Guaranty") in favor of Bank relating
to the Debt evidenced by the Note;
WHEREAS, as partial security for the making of the loan evidenced
by the Note and Grantor's obligations pursuant to the Guaranty, Bank has
required Grantor to grant a security interest in certain property of
Grantor referenced below;
NOW, THEREFORE, in consideration of the foregoing, and for other
valuable consideration, the receipt and sufficiency of which is
acknowledged by Grantor, Grantor agrees as follows:
1. GRANT OF INTEREST. To secure the prompt payment in full of the
Subject Debt as and when the respective parts thereof become due,
whether by lapse of time, by acceleration of maturity, or otherwise,
Grantor hereby grants Bank a security interest in the Collateral. As to
Collateral not now in existence or in which Grantor does not presently
have any rights, Bank's security interest shall automatically attach
thereto immediately when the same comes into existence and Grantor
acquires any rights therein, in each case without the making or doing of
any further or other act or thing. "Collateral" means, collectively,
the following property:
$250,000 Federal Farm Credit Bank obligation described as follows:
Cusip #31331M4G8 maturing 8/27/96 with a coupon rate of 4.4%; and
$500,000 Federal Home Loan Mortgage Corp. obligation described as
follows: Cusip #313400WM1 maturing 8/26/96 with a coupon rate of
4.75%
and any and all replacements and substitutions (whether by reason of
conversions, exchanges, or otherwise) for all or any part thereof, all
additions to all or any part thereof, all income, gains, profits, and
similar items, and all payments and other distributions in respect of
all or any part thereof, and all now existing or hereafter arising
claims and rights in respect of all or any part thereof, and all
Proceeds of all or any part of the property hereinbefore described.
<PAGE> 2
1.1 FURTHER ASSURANCE. Grantor will, at Grantor's expense, make
and do all such acts and things (including, without limitation, the
delivery to Bank of any chattel paper, document, instrument, or
other writing of any kind the possession of which perfects a
security interest therein) as Bank may from time to time require
for the better evidencing, perfection, protection, or validation
of, or realization of the benefits of, its security interest.
Without limiting the generality of the foregoing, Grantor will, at
Grantor's expense, upon each request of Bank, (a) sign and file or
permit Bank to file such financing statements and other writings as
Bank may from time to time require and in such public offices as
Bank may from time to time require, (b) comply with every other
requirement deemed necessary by Bank for the perfection of its
security interest and (c) execute and deliver such affidavits,
assignments, financing statements, indorsements of specific items
of Collateral, powers of attorney, security agreements and other
writings as Bank may from time to time require, each in form and
substance satisfactory to Bank. Without diminishing or impairing
any obligation of Grantor under this Agreement, a carbon,
photographic, or other reproduction of this Agreement shall be
sufficient as a financing statement. Grantor shall deliver the
securities comprising the Collateral to Bank.
1.2 NOTICE. Grantor will give Bank
(a) not less than seven (7) days' prior notice of any
change in Grantor's residence or in the location at which
Grantor keeps any records relating to the Collateral or any
part thereof; or of any other change in circumstances which
affects or may affect the continuing efficacy of any financing
statement filed in respect of Bank's security interest or the
continuing status of Bank's security interest as the first
priority lien on the Collateral or any part thereof,
(b)immediate written notice if any Person other than Grantor
or Bank claims any lien or other right or interest of any kind
in any of the Collateral,
(c) immediate written notice whenever Grantor learns of
the granting of any option, warrant or other right in respect
of any Collateral Security, or any other event, condition or
thing that would result in Grantor's receipt of any Collateral
which Grantor is not entitled to receive under subsection 4.2,
and
(d) upon Grantor's acquiring possession or custody
thereof, a true and complete copy of each writing received or
possessed by, or otherwise in the custody of; Grantor in
respect of any of the foregoing.
1.3 RECORDS. Grantor will at all times keep accurate and
complete records of the Collateral. Bank (or one or more Persons
selected by Bank) shall have the right at all reasonable times to
examine, inspect and make extracts from Grantor's books and records
and to examine, appraise and protect the Collateral.
1.4 DISPOSITIONS AND ENCUMBRANCES. Grantor will not, without in
each case obtaining Bank's prior consent,
2
<PAGE> 3
(a) sell or otherwise dispose of any Collateral or any
interest therein or
(b) suffer or permit any Collateral (i) to be or become
subject to any assignment, lease, license, attachment,
mortgage, security interest or other lien, or any other claim,
right or interest of any kind, except for any in favor of or
consented to by Bank or (ii) to be described in any mortgage,
financing Statement or other writing, except any evidencing
any lien or interest expressly permitted by this Agreement.
1.5 RELEASE OF COLLATERAL. If a Default does not exist, upon
repayment of the principal amount of the Note in an amount greater
than or equal to the face amount of any of the securities
comprising the Collateral (together with all accrued interest due
at such time), Bank agrees to release such security from the lien
and operation of this Agreement. Borrower shall not be entitled to
reborrow funds repaid to Bank in connection with any such release.
2. DEFINITIONS. As used in this Agreement, except where the context
clearly requires otherwise, "ACCOUNT OFFICER" means that officer who at
the time in question is designated by Bank as the officer having primary
responsibility for giving consideration to Borrower's requests for
credit or, in that officer's absence, that officer's immediate superior
or any other officer who reports directly to that superior officer,
Grantor hereby assuming the burden of ascertaining the identity of each
such officer; "AGREEMENT" means this Security Agreement (including,
without limitation, each amendment, if any, hereto); "BANK DEBT" means,
collectively, all Debt to Bank, whether incurred directly to Bank or
acquired by it by purchase, pledge or otherwise, and whether
participated to or from Bank in whole or in part; "COLLATERAL SECURITY"
means any security in which Bank has a security interest pursuant to
this Agreement; "DEBT" means, collectively, all obligations of the
Person or Persons in question, including, without limitation, every such
obligation whether owing by one such Person alone or with one or more
other Persons in a joint, several or joint and several capacity, whether
now owing or hereafter arising, whether owing absolutely or
contingently, whether created by loan, overdraft, guaranty of payment or
other contract, or by quasi-contract, tort, Statute, other operation of
law or otherwise; "DEFAULT" means (a) the nonpayment of the Subject Debt
or any part thereof when due or (b) the occurrence or existence of any
event, condition, or other thing (other than any event, condition, or
other thing which would constitute a "Default" pursuant to the next
preceding clause (a)) which gives (or which with the lapse of any
applicable grace period, the giving of notice or both would give) Bank
the right to accelerate or which automatically accelerates the maturity
of any of the Subject Debt; "OBLIGOR" means any Person who, or any of
whose property, shall at the time in question be obligated in respect of
all or any part of the Bank Debt of Borrower and (in addition to
Grantor) includes, without limitation, co-makers, indorsers, guarantors,
pledgors, hypothecators, mortgagors and any other Person who agrees,
conditionally or otherwise, to make any loan to, purchase from or
investment in, any other Obligor or otherwise assure such other
Obligor's creditors or any of them against loss; "PERSON" means an
individual or entity of any kind, including, without limitation, any
association, company, cooperative, corporation, partnership, trust,
governmental body or any other form or kind of entity; "PRIME RATE"
means the fluctuating rate per annum which is publicly announced from
time to time by Bank at its main office as being its so-called "prime
rate" or "base rate" thereafter in effect, with each change in the Prime
Rate automatically, immediately, and without notice changing the Prime
Rate thereafter applicable hereunder, it being acknowledged that the
Prime Rate is not necessarily the lowest rate of interest then available
from Bank on fluctuating-rate loans; "PROCEEDS" means whatever is
received or receivable upon sale, exchange, collection or other
disposition of any property or
3
<PAGE> 4
Proceeds, whether directly or indirectly, and includes, without limitation, the
proceeds of any casualty, liability or title insurance relating to any such
property and any goods or other property returned after any such sale,
exchange, collection or other disposition; "RELATED WRITING" means this
Agreement and any indenture, note, guaranty, assignment, mortgage, security
agreement, subordination agreement, notice, financial statement, legal opinion,
certificate or other writing of any kind pursuant to which all or any part of
the Bank Debt of Borrower is issued, which evidences or secures all or any part
of the Bank Debt of Borrower, which governs the relative rights and priorities
of Bank and one or more other Persons to payments made by, or the property of,
any Obligor, which is delivered to Bank pursuant to another such Writing, or
which is otherwise delivered to Bank by or on behalf of any Person (or any
employee, officer, auditor, counsel or agent of any Person) in respect of or in
connection with all or any part of the Bank Debt of Borrower; "SUBJECT DEBT"
means, collectively, all Bank Debt created or incurred by Borrower pursuant to
the Note; and the foregoing definitions shall be applicable to the respective
plurals of the foregoing defined terms.
3. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants to Bank as
follows:
3.1 EXISTENCE. Grantor is an individual.
3.2 TAXPAYER IDENTIFICATION. Grantor's federal taxpayer identification
number (Social Security #)
3.3 AUTHORITY. This Agreement is valid and enforceable against Grantor in
accordance with its terms, subject, however, to any applicable insolvency
or bankruptcy law and general principals of equity. Neither the execution
and delivery of this Agreement, nor any performance or observance by
Grantor of this Agreement, will violate any applicable law or violate or
otherwise constitute a default under any material contract or other
material obligation now existing and binding upon Grantor.
3.4 ISSUANCE AND OWNERSHIP. Grantor owns all of the Collateral absolutely
free from any assignment, attachment, security interest or other lien,
and free from any other claim, right, or interest of any kind, except for
any in favor of or consented to by Bank. No assignment, financing
statement, or other writing (except any evidencing any lien or interest
expressly permitted by this Agreement) describing. the Collateral or any
part thereof is presently on file in any public office.
3.5 LOCATION OF GRANTOR. Grantor's address is as set forth in the opening
paragraph of this Agreement.
3.6 DELIVERY. Prior to or concurrently with the execution and delivery of
this Agreement, Grantor has delivered to Bank all existing instruments in
which Bank has been granted a security interest pursuant to this
Agreement.
3.7 REGISTRATION. All securities in which Bank has been granted a
security interest pursuant to this Agreement are certificated securities
and are in registered form.
4
<PAGE> 5
3.8 CONSENTS. No consent of any other person or entity and no
authorization, approval or other action by, and no notice to or filing
with, any governmental authority, regulatory body or other third party is
required for (i) the grant of a security interest in and pledge of the
Collateral Securities by Grantor pursuant hereto or for the execution,
delivery or performance of this Agreement by the Grantor, (ii) the
perfection or maintenance of the security interest, pledge and assignment
created hereby (including the first priority nature of such pledge,
assignment and security interest), except for the delivery of
certificates for the Collateral Securities as contemplated herein, or
(iii) the exercise by Grantee of the rights provided for in this
Agreement or the remedies in respect of the Collateral Securities
pursuant to this Agreement, except as may be required in connection with
the disposition of any portion of the Collateral Securities by laws
affecting the offering and sale of securities generally or by laws
generally applicable to banking institutions.
4. RIGHTS AND DUTIES. Bank shall have all of the rights of secured party
under the law of the jurisdiction in which Bank's main office is located and,
in addition, the following rights.
4.1 TRANSFER OF RECORD. Bank shall have the right (but not the duty), at
any time and from time to time after a Default shall have occurred, to
transfer into the name of Bank or its nominee all or any part of any
Collateral Security.
4.2 CASH DISTRIBUTIONS. Unless and until any Default shall have occurred,
Grantor shall have the right to receive cash payments of accrued interest
in respect of Collateral Securities registered in the name of Grantor.
Except as provided in the next preceding sentence, Bank shall have the
exclusive right to hold the Collateral and receive replacements and
substitutions (whether by reason of conversions, exchanges, or otherwise)
for all or any part thereof; additions to all or any part thereof; all
income, gains, profits, and similar items, and all payments and other
distributions of cash or other property in respect of all or any part
thereof, and Proceeds of all or any part thereof. If at any time Grantor
shall receive any Collateral (other than accrued interest which Grantor is
permitted to receive under the first sentence of this subsection 4.2),
Grantor shall receive the same in trust and shall promptly deliver the
same to Bank in the very form in which received but with all assignments
or indorsements necessary to facilitate Bank's collection thereof and
together with such powers of attorney and other writings duly executed and
otherwise in such form and substance as Bank shall require.
4.3 DEPOSIT BY BANK. Subject to Grantor's rights pursuant to subsection
4.2, all cash payments received by Bank in respect of the Collateral
Securities shall, at Bank's option, be deposited either to a checking
account maintained by Grantor with Bank or to a cash collateral account
which shall bear no interest, over which Bank shall have sole dominion and
control, and from which only Bank may withdraw funds, whichever option
Bank shall from time to time elect by giving Grantor written notice
thereof. Bank shall have no responsibility to ascertain whether any such
payment or dividend is the correct amount owing. Each such deposit shall
be subject to Bank's general rules and regulations except to the extent,
if any, inconsistent with this Agreement.
4.4 WITHDRAWAL AND APPLICATION OF FUNDS. After a Default shall have occurred,
Bank may from time to time withdraw funds from the cash collateral
account at will. Bank shall be under
5
<PAGE> 6
no obligation to withdraw funds from the cash collateral account, except
that upon each request of Grantor; Bank shall, if no Default then exists,
withdraw all such funds that are then collected, but only if and to the
extent that such funds are derived from cash payments of accrued interest
on the Collateral Securities. All funds so withdrawn shall be applied to
the payment of the Subject Debt with such allocation to the respective
parts thereof and the respective due dates thereof as Bank in its sole
discretion may from time to time deem advisable (except that so long as no
Default exists, Bank shall not apply any such withdrawal to any Subject
Debt that is not then due without first obtaining Grantor's consent). If
any funds so withdrawn and applied are recovered from Bank by any trustee
in bankruptcy or anyone else or are discovered not to have been collected
and collection thereof is denied to Bank, Bank shall have the right to
reverse any such application to the extent the funds are recovered from or
not collected by Bank. Bank in its discretion may from time to time
release to Grantor (or to Grantor's order) all or any of the funds then
held in the cash collateral account, but no such release or releases shall
commit Bank thereafter to make any further or other such releases.
4.5 VOUCHERS, RECEIPTS, AND INDORSEMENTS. Subject to the provisions of
this Agreement, Bank shall have full power and authority to execute and
deliver such vouchers and receipts in respect of the Collateral, such
indorsements of checks, and such other writings in respect of the
foregoing as Bank may from time to time deem advisable. In connection with
the foregoing Bank shall have full power and authority to sign Grantor's
signature to all such vouchers, receipts, indorsements, and other writings
whenever Bank deems such action advisable.
4.6 INAPPLICABILITY TO CERTAIN TRANSFEREES. The provisions of this
section 4 shall not apply to any purchaser of Collateral purchased
pursuant to any sale conducted in accordance with subsection 5.3.
5. EFFECTS OF DEFAULT. Bank shall at all times have all of the rights of a
secured party under the law of the jurisdiction in which Bank's main office is
located, and, in addition, if any Default shall occur or commence to exist,
then, and in each such case, Bank shall have the following rights:
5.1 ENFORCEMENT OF RIGHTS. Bank shall have the right in its sole
discretion to enforce or attempt to enforce rights in respect of the
Collateral by suit or otherwise, but Bank shall have no duty to institute
any suit or to take any other action to realize on the Collateral (or any
security therefor) or, having started any suit or attempt, to thereafter
to continue the same. In each case Bank may proceed with counsel of Bank's
choosing.
5.2 EXERCISE OF RIGHTS. Bank shall have full power and right to exercise
any and all rights and remedies in respect of the Collateral as if Bank
were the sole beneficial owner thereof and may, without limitation, grant
such waivers and consents to, and enter into such compromises with,
Persons liable thereon, release (regardless of whether Bank receives any
consideration therefor) any security for or any Person liable thereon, and
grant such Persons such other indulgences as Bank in good faith may from
time to time deem advisable.
5.3 DISPOSITION. Bank shall have the right to sell or otherwise dispose
of the Collateral or any part thereof or any interest therein at any time
or from time to time. Bank shall give Grantor not less than ten (10) days'
prior notice of either the date after which any intended private sale is
6
<PAGE> 7
to be made or the time and place of any intended public sale, except
that Bank need give no such notice in the case of Collateral which
Bank in good faith determines to be declining speedily in value or
which is customarily sold on a recognized market. Grantor waives
advertisement of any such sale and (except only to the extent notice
is specifically required by the next preceding sentence) waives
notice of any kind in respect of such sale. At any public sale Bank
may purchase the Collateral or any part thereof free from any right
of redemption, which right Grantor hereby waives. After deducting
any and all fees, costs, and expenses (including, without
limitation, the reasonable fees and disbursements of legal counsel)
incurred in assembling, taking, repairing, storing, and selling or
otherwise disposing of the Collateral or any part thereof or any
interest therein, Bank shall have the right to apply the net
proceeds of sale to the Subject Debt with such allocation to the
respective parts thereof and the respective due dates thereof as
Bank in its sole discretion may from time to time deem advisable,
and
6. POWER OF ATTORNEY. Grantor hereby irrevocably constitutes and appoint
Bank, through its employees and agents, with full power of
substitution, as Grantor's true and lawful attorney-in-fact, with full
irrevocable power and authority in the place of Grantor and in the name
of Grantor or in Bank's own name, for the purpose of carrying out the
terms of this Agreement, to perform, at any time and from time to time,
each agreement contained in this Agreement that is on Grantor's part to
be complied with, and to take any and all actions and to execute and
deliver any and all writings which may be necessary or desirable to give
Bank the full benefit of this Agreement, in each case as Bank may from
time to time deem advisable, Grantor hereby agreeing that Bank shall owe
no duty whatever to Grantor to perform any such agreement, to take any
such action, or to execute or deliver any such writing, or, having done
so any one or more times, to thereafter continue doing so. Without
limiting the generality of the foregoing, Grantor hereby irrevocably
authorizes Bank, at any time and from time to time, to (a) fill in any
blank space contained in this Agreement or any other Related Writing,
(b) to correct patent errors, to complete and correct the description of
Collateral, and to complete the date herein or therein and (c) to sign
on Grantor's behalf and file, at Grantor's expense and without Grantor's
signature, such affidavits, assignments, financing statements,
indorsements of specific items of Collateral, powers of attorney,
security agreements and other writings as Bank may from time to time
deem advisable for the better evidencing, perfection, protection or
validation of, or realization of the benefits of; the security interest
granted pursuant to this Agreement.
7. UNCONDITIONAL AND CONTINUING SECURITY INTEREST. Grantor's obligations
under this Agreement and the granting of a security interest to Bank
pursuant to this Agreement are unconditional and effective immediately,
and (except for obligations surviving indefinitely pursuant to section
13 those obligations and the security interest so granted shall continue
in full effect until the Subject Debt shall have been paid in full and
thereafter until Bank shall have delivered to Grantor (or such other
Person or Persons who Bank determines in good faith to be entitled to the
same) all Collateral (except any applied to the Subject Debt) in Bank's
possession, until Bank shall have executed and delivered to Grantor or
its nominee (or such other Person or Persons who Bank determines in good
faith to be entitled to the same) one or more powers of attorney
authorizing the issuer of each Collateral Security registered in the name
of Bank to transfer that Collateral Security, and until each financing
statement describing the Collateral and naming Bank (or its successor or
assigns, if any) as secured party shall have been terminated as to all of
the Collateral, regardless of the lapse of time, regardless of the fact
that there may be a time or times when no Subject Debt is outstanding,
regardless of any act, omission
7
<PAGE> 8
or course of dealing whatever on Bank's part, and regardless of any
other event, condition or thing. Upon payment in full of the Subject
Debt, Bank agrees to release the Collateral to Grantor.
8. GRANTOR 'S ASSENT TO EXTENSIONS, RELEASES, AND SETTLEMENTS. With
respect to the Collateral, Grantor assents to any extension or
postponement of the time of payment thereof or any other indulgence in
connection therewith, to any exchange, release, replacement or
substitution of Collateral, to any addition or release of any Obligor,
to any acceptance of any partial payment thereon and to any adjustment,
compromise or settlement in respect thereof; all in such manner and at
such time or times as Bank shall deem advisable.
9. BANK'S DUTIES LIMITED. Grantor agrees that Bank shall have no
duty as to the collection or protection of Collateral or any income
therefrom, nor to preserve rights against prior parties, nor to exercise
or preserve any option, warrant or other right pertaining thereto beyond
maintaining, subject to Bank's rights hereunder, the safe custody of any
Collateral in Bank's possession. Bank shall have no liability for its
delivery of any property to any Person or Persons who Bank determines in
good faith to be entitled to the same.
10. NO SETOFF. Grantor hereby waives any and all now existing or
hereafter arising rights to recoup or offset any obligation of Grantor
under or in connection with this Agreement or any Related Writing
against any claim or right of Grantor against Bank.
11. INDEMNITY: ADMINISTRATION, ENFORCEMENT AND TERMINATION; INTEREST.
Grantor will reimburse Bank, on Bank's demand from time to time, for
any and all fees, costs and expenses (including, without limitation,
the reasonable fees and disbursements of legal counsel) incurred by
Bank in administering this Agreement and in enforcing, exercising or
protecting its rights under this Agreement or under applicable law, or
in attempting to do any of the foregoing. Grantor agrees that if and
when Bank's security interest shall have terminated in accordance with
the provisions of this Agreement, Grantor will, on Bank's demand from
time to time, reimburse Bank for any and all fees, costs and expenses
(including, without limitation, the fees and disbursements of legal
counsel) incurred by Bank in terminating its security interest. If any
amount owing under this Agreement is not paid when due, then, and in
each such case, Grantor shall pay, on Bank's demand, interest on that
amount from the due date thereof until paid in full at a fluctuating
rate equal to four percent (4%) per annum plus the Prime Rate.
12. WAIVERS; REMEDIES; APPLICATION OF PAYMENTS. Bank may from time to
time in its discretion grant waivers and consents in respect of this
Agreement or any other Related Writing or assent to amendments thereof,
but no such waiver, consent or amendment shall be binding upon Bank
unless set forth in a writing (which writing shall be narrowly
construed) signed by an Account Officer. No course of dealing in
respect of, nor any omission or delay in the exercise of; any right,
power or privilege by Bank shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any further or other
exercise thereof or of any other, as each such right, power or
privilege may be exercised either independently or concurrently with
others and as often and in such order as Bank may deem expedient Each
right, power or privilege specified or referred to in this Agreement is
in addition to and not in limitation of any other rights, powers, and
privileges that Bank may otherwise have or acquire by operation of law,
by other contract, or otherwise. Bank shall be entitled to equitable
remedies with respect to each breach or anticipatory repudiation of any
provision of this Agreement, and Grantor hereby waives any defense
which might be asserted to bar any such equitable remedy.
8
<PAGE> 9
Bank shall have the right to apply Proceeds and payments in respect of
the Subject Debt with such allocation to the respective parts thereof and
the respective due dates thereof as Bank in its sole discretion may from
time to time deem advisable.
13. OTHER PROVISIONS. The provisions of this Agreement shall bind Grantor
and Grantor's heirs and assigns and benefit Bank and its successors and
assigns, including each subsequent holder, if any, of the Subject Debt or
any part thereof Except for Grantor and Bank and their respective
heirs, successors and assigns, there are no intended beneficiaries of
this Agreement. The provisions of sections 8 through 16, both inclusive,
shall survive the payment in full of the Subject Debt and the termination
of the security interest granted pursuant to this Agreement. The several
captions to different sections and subsections of this Agreement are
inserted for convenience only and shall be ignored in interpreting the
provisions thereof If any provision in this Agreement shall be or become
illegal or Unenforceable in any case, then that provision shall be deemed
modified in that case so as to be legal and enforceable to the maximum
extent permitted by law while most nearly preserving its original intent,
and in any case the illegality or unenforceability of that provision
shall affect neither that provision in any other case nor any other
provision. Interest for any given period shall accrue on the first day
thereof but not on the last day thereof (unless the last day is the first
day) and in each case shall be computed on the basis of a 360-day year
and the actual number of days in the period. In no event shall interest
accrue at a higher rate than the maximum rate, if any, permitted by law.
Any term used in this Agreement shall have the meaning ascribed thereto
by the Uniform Commercial Code as in effect on the date hereof in the
jurisdiction in which Bank's main office is located, subject, however, to
such modification, if any, as may be provided in this Agreement This
Agreement shall be governed by the law (excluding conflict of laws rules)
of the jurisdiction in which Bank's main office is located.
14. INTEGRATION. This Agreement and, to the extent consistent with this
Agreement, the other Related Writings, set forth the entire agreement of
Grantor and Bank as to its subject matter, and may not be contradicted by
evidence of any agreement or statement unless made in a writing (which
writing shall be narrowly construed) signed by an Account Officer
contemporaneously with or after the execution and delivery of this
Agreement.
15. NOTICES AND OTHER COMMUNICATIONS. Each notice, demand, or other
communication, whether or not received, shall be deemed to have been
given to Grantor whenever Bank shall have mailed a writing to that effect
by certified or registered mail to Grantor at Grantor's mailing address
(or any other address of which Grantor shall have given Bank notice after
the execution and delivery of this Agreement); however, no other method
of giving actual notice to Grantor is hereby precluded. Except for oral
communications actually given to Bank under those provisions, if any, of
this Agreement expressly authorizing oral communication, Bank shall be
deemed not to have received a particular communication from Grantor
unless an Account Officer shall have received that communication in
writing at Bank's main office (or any other address of which Bank shall
have given notice to Grantor after the execution and delivery this
Agreement). Grantor hereby assumes all risk arising out of or in
connection with each such communication given by Grantor to Bank.
16. JURISDICTION AND VENUE; LIMITATIONS; WAIVER OF JURY TRIAL. Any action,
claim, counterclaim, crossclaim, proceeding, or suit, whether at law or
in equity, whether sounding in tort, contract, or otherwise at any time
arising under or in connection with this Agreement or any other Related
Writing, the administration, enforcement, or negotiation of this
Agreement or any other Related Writing, or the
9
<PAGE> 10
performance of any obligation in respect of this Agreement or any other
Related Writing (each such action, claim, counterclaim, crossclaim,
proceeding, or suit, an "Action") may be brought in any federal or state
court located in the city in which Bank's main office is located.
Grantor hereby unconditionally submits to the jurisdiction of any such
court with respect to each such Action and hereby waives any objection
Grantor may now or hereafter have to the venue of any such Action
brought in any such court Grantor shall be forever barred from bringing
any Action unless Grantor shall have brought the Action within one (1)
year after the date on which the cause of action in respect
thereof accrues, and neither Bank nor any subsequent holder of the
Subject Debt or any part thereof shall have any liability in respect of
any Action for any consequential, exemplary, incidental, punitive, or
special damages. Grantor HEREBY, AND EACH HOLDER OF THE Subject Debt OR
ANY PART THEREOF, KNOWINGLY AND VOLUNTARILY WAIVES JURY TRIAL IN RESPECT
OF ANY Action.
Grantor:
/s/ Edwin M. Roth
--------------------------------
EDWIN M. ROTH
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NATIONAL CITY BANK, CLEVELAND
--------------------------------
AUTHORIZED SIGNATURE
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM
10
<PAGE> 1
Exhibit 4.11
COLLATERAL ASSIGNMENT OF RIGHT TO PAYMENT
-----------------------------------------
This COLLATERAL ASSIGNMENT OF RIGHT TO PAYMENT (the "Assignment") is
made and entered into on the 12th day of February, 1996 by and between SPECIALTY
CHEMICAL RESOURSES, INC., an Ohio corporation (the "Assignor") and NATIONAL
CITY BANK (the "Assignee").
WITNESSETH:
WHEREAS, Aerosol Systems, Inc., a Delaware corporation ("Aerosol") and Bank
One of Akron entered into a certain Trust Agreement dated as of August 7, 1990
(the "Trust Agreement") so as to enable Aerosol to provide assurance that funds
will be available when needed for closure and/or post-closure care of a certain
facility as required pursuant to a Consent Order of Judge Campbell in case
number CV-884-1014 in the Court of Common Pleas, Summit County, Ohio (the
"Consent Order"); and
WHEREAS, Assignor is successor by merger to Aerosol; and
WHEREAS, Assignor has entered into certain financing arrangements with
Assignee pursuant to the terms of a $750,000 Commercial Demand Note dated of
even date herewith (as hereafter amended, the "Note"); and
WHEREAS, as a condition to the closing of the transactions contemplated by
the Note and as an inducement for Assignee to make the loan to Assignor
contemplated thereby, Assignor has agreed to execute this Assignment.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby expressly
acknowledged, the parties hereto agree as follows:
1. As security for the repayment of Assignor's Debt (as such term is
defined in the Note) owed by Assignor to Assignee, Assignor hereby transfers,
assigns and conveys unto Assignee, its successors and assigns, all of
Assignor's right, title and interest in and to the payment of money under the
Trust Agreement, which shall be deemed additional collateral for Assignor's
Debt to Assignee. Assignor shall indemnify and hold Assignee harmless from and
against any and all obligations, liabilities, costs, expenses (including
reasonable attorneys fees and costs through appeals and collection proceedings)
arising under or in any way connected with a breach of Assignor's obligations
pursuant to the Trust Agreement, the remediation of contamination at the
facility referenced in the Consent Order or otherwise arising out of Assignor's
use or operation of such facility.
2. Assignor shall keep Assignee informed in writing of all material
circumstances bearing upon its rights, remedies and obligations under the Trust
Agreement and the Consent Order.
3. Assignor represents and warrants that (a) it has not previously assigned
its right to payment pursuant to the Trust Agreement or any interest therein,
for security or otherwise, (b) it has full right and authority to assign its
right to payment pursuant to the Trust Agreement and, to the knowledge of
Assignor, there exists no circumstance which would prevent this Assignment from
being valid and
<PAGE> 2
binding in all respects, (c) the fund established pursuant to the Trust
Agreement (the "Fund") currently contains approximately $825,000, (d) Assignor
incurred approximately $780,000 in expenses in remediating contamination at the
facility referenced in the Consent Order, which expenses have not yet been
reimbursed to Assignor from any party and (e) to the best of Assignor's
knowledge, its expenses in remediating contamination at the facility referenced
in the Consent Order will be reimbursed from the Fund upon authorization from
the State of Ohio Environmental Protection Agency (the "Ohio EPA") and Assignor
knows of no reason the Ohio EPA would not authorize the reimbursement of such
expenses.
4. This Assignment shall continue to be effective until all of the
Assignor's Debt to Assignee is paid and discharged in full and the Note
terminated.
5. This Assignment shall be construed in accordance with the laws of the
State of Ohio.
IN WITNESS WHEREOF, the parties have caused this Assignment to be executed
as of the date first above written.
NATIONAL CITY BANK SPECIALTY CHEMICAL RESOURCES
By: /s/ Martin J. McCormick By: /s/ Edwin M. Roth
------------------------- -----------------------------
Printed Name: Martin J. McCormick Printed Name: Edwin M. Roth
-------------------- ------------------------
Title: Assistant Vice President Title: President
--------------------------- -------------------------------
-2-
<PAGE> 1
Exhibit 4.13
CONSOLIDATED AMENDMENT NO. 1
TO
CREDIT AGREEMENT
This Consolidated Amendment No. 1 to Credit Agreement (this
"Amendment"), dated as of March 28, 1996, is entered into by and between
SPECIALTY CHEMICAL RESOURCES, INC. ("Borrower") and National City Bank
("Bank").
WITNESSETH:
WHEREAS, Borrower, successor by merger to Aerosol Systems, Inc., and
Bank have entered into a Credit Agreement dated March 30, 1992, as amended by a
certain First Amendment dated as of March 3, 1993 (the "First Amendment") and a
certain Second Amendment dated as of April 13, 1995 (the "Second Amendment")
(as amended, the "Credit Agreement"; all terms used in the Credit Agreement
being used herein with the same meaning); and
WHEREAS, the parties desire to further amend certain provisions of the
Credit Agreement to (a) extend the expiration date until May 31, 1997 (b)
modify the interest rate applicable to the subject loans, (c) provide for a
deferred extension fee upon certain circumstances and (d) modify various
financial convenants and other provisions of the Credit Agreement; and
WHEREAS, Borrower has requested that Bank waive certain requirements of
the Credit Agreement which have not been met and Bank is willing to honor
Borrower's request subject to the terms and conditions of this Amendment; and
WHEREAS, in light of the fact that certain terms set forth in previous
amendments have been affected by later amendments and/or will be affected by
this Amendment and for ease of reference, the parties also desire to restate
and consolidate in this Amendment all amendments to the Credit Agreement that
are effective on and as of the date hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual
convenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
SECTION I - AMENDMENTS TO CREDIT AGREEMENT
------------------------------
A. Subsection 2A.02 of the Credit Agreement is hereby amended by deleting
the date May 31, 1994 and by substituting for that deleted date the date
"May 31, 1997".
B. Subsection 2B.05 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"2B.05 LOAN MIX -- The subject loans at any one time outstanding shall
consist of RR loans."
C. Subsection 2B.07 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"2B.07 MATURITIES -- The stated maturity of each RR loan shall be the
expiration date."
<PAGE> 2
D. Subsection 2B.12 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"2B.12 INTEREST: RR LOANS -- The principal of and overdue interest on
the RR loans shall bear interest payable in arrears on the first day of
each month, commencing May 1, 1992 and at maturity and computed (in
accordance with subsection 8.10)
(a) prior to maturity, at a fluctuating rate equal to the
reference rate from time to time in effect plus two and
one-quarter percent (2-1/4%) and
(b) after maturity (whether occurring by lapse of time or
by acceleration), at a fluctuating rate equal to the reference
rate from time to time in effect plus three percent (3%) per
annum,
with each change in the reference rate automatically and immediately
changing the rate thereafter applicable to the RR Loans; provided, that
in no event shall the rate applicable to the RR Loans at any time after
the maturity thereof be less than the rate applicable thereto
immediately before maturity regardless of future reductions in the
reference rate."
E. Subsection 2B.15 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"2B.15 PREPAYMENTS -- Borrower may from time to time prepay the
principal of the RR loans in whole or in part, subject to the following:
(a) Each prepayment of the RR loans may be made without
penalty or premium.
(b) No prepayment shall of itself reduce the subject
commitment.
(c) Concurrently with each prepayment, Borrower shall
prepay the interest accrued on the prepaid principal."
F. Subsections 2B.06, 2B.08, 2B.13, 2B.16, 2B.17 and Section 6C of the
Credit Agreement are hereby deleted in their entirety and replaced with the
following:
"2B.06 [Reserved]
2B.08 [Reserved]
2B.13 [Reserved]
2B.16 [Reserved]
2B.17 [Reserved]
6C [Reserved]"
G. Subsections 3B.01 through 3B.03 of the Credit Agreement are hereby
amended in their entirety to read as follows:
"3B.01 TANGIBLE NET WORTH -- Borrower will not suffer or permit the
sum of the consolidated tangible net worth of the companies at any time to be
less than the required minimum amount in effect at the time in question. The
required minimum amount shall be seven million sixty thousand dollars
($7,060,000) during the fourth fiscal quarter of 1995, six million eight
hundred and seventy-five thousand dollars ($6,875,000) during the first fiscal
quarter of 1996, seven million one hundred twenty-nine thousand dollars
($7,129,000) during the second fiscal
2
<PAGE> 3
quarter of 1996, seven million five hundred forty-eight thousand dollars
($7,548,000) during the third fiscal quarter of 1996 and seven million
nine hundred forty-one thousand dollars ($7,941,000) during the fourth
fiscal quarter of 1996 or any time thereafter.
3B.02 LEVERAGE -- Borrower will not suffer or permit the ratio (the
"leverage ratio") of the total liabilities of the companies to the
tangible net worth of the companies, all as determined on a
consolidated basis, at any time to exceed 2.61:1 during the first
fiscal quarter of 1996, 2.36:1 during the second fiscal quarter of
1996, 2.12:1 during the third fiscal quarter of 1996 or 1.94:1 during
the fourth fiscal quarter of 1996 or at any time thereafter.
3B.03 FIXED CHARGE COVERAGE -- Borrower will not, during any fiscal
quarter of Borrower, commencing with the quarter beginning October 1,
1996, suffer or permit the ratio of the aggregate of
(a) the net income of the companies for that quarter and
the three preceding quarters plus
(b) the aggregate interest expense of the companies for
that quarter and the three preceding quarters plus
(c) the aggregate federal, state and local income taxes of
the companies for that quarter and the three preceding quarters
plus
(d) the aggregate operating lease expense of the companies
for that quarter and the three preceding quarters
to the sum of the aggregate interest expense of the companies for
that quarter and the three preceding quarters plus the aggregate
operating lease expense of the companies for that quarter and the three
preceding quarters, all as determined on a consolidated basis, to be
less than ninety-three one hundredths to one (.93:1)."
H. The following new subsection 3B.04 is hereby added to the Credit
Agreement:
"3B.04 PRETAX INTEREST COVERAGE -- Borrower will not, during any
fiscal quarter of Borrower, commencing with the quarter ending June 30,
1996, suffer or permit the aggregate of
(a) the net income of the companies for that quarter plus
(b) the aggregate interest expense of the companies for
that quarter plus
(c) the aggregate federal, state and local income taxes of
the companies for that quarter
to the interest expense of the companies for that quarter, all as
determined on a consolidated basis, to be less than 1.12:1 during the
second fiscal quarter of 1996, 1.71:1 during the third fiscal quarter
of 1996 or 1.66:1 during the fourth fiscal quarter of 1996 or at any
time thereafter."
I. Subsection 3D.04(vi) of the Credit Agreement is hereby amended in its
entirety to read as follows:
3
<PAGE> 4
"(vi) any operating lease (i.e., any lease other than any capitalized
lease, it being agreed that a capitalized lease is a lien rather than a
lease for the purposes of this Agreement),"
J. Section 3D.05 of the Credit Agreement is hereby amended in its entirety
to read as follows
"3D.05 FIXED ASSETS -- The companies viewed on a consolidated basis,
will not invest (net after trade-ins, if any) in fixed assets and
leasehold improvements more than $50,000 during the first fiscal quarter
of 1996, $425,000 during the second fiscal quarter of 1996, $500,000
during the third fiscal quarter of 1996 or $500,000 during the fourth
fiscal quarter of 1996. After the end of the fourth fiscal quarter in
1996, the companies, viewed on a consolidated basis, will not invest
(net after trade-ins, if any) in fixed assets and leasehold improvements
during any fiscal year more than 150% of their allowable depreciation
charges for the prior fiscal year."
K. Section 5A.06 of the Credit Agreement is hereby amended in its entirety
to read as follows:
"5A.06 CONTROL -- If (a) any person or entity (EXCEPT Guarantor or any
present officer or director of Borrower or any two or more of them acting
in concert) shall acquire the power, whether by contract or otherwise,
to elect a majority of Borrower's directors or (b) Edwin M. Roth shall
cease to own at leased twenty percent (20%) of Borrower's outstanding
capital stock. As used in this subsection, in concert means by reason
of common ownership, contract or other common understanding or
arrangement."
L. Any remaining references to "LIBOR," or "LIBOR loans" in the Credit
Agreement shall be deemed to be of no further force and effect.
M. Section 8.15 of the Credit Agreement is hereby amended in its entirety
to read as follows:
"8.15 JURISDICTION -- Borrower and Bank agree that any action or
proceeding commenced by or on behalf of either of them arising out of
this Agreement or relating to the subject loans or any related writings
shall be commenced and maintained exclusively in any federal or Ohio
common pleas court sitting in Cuyahoga County, Ohio; provided, however,
that Bank shall have the right to proceed against Borrower and the
properties of Borrower in any court in enforcing any order of any
federal or Ohio common pleas court sitting in Cuyahoga County, Ohio or
realizing on any security in connection with such order, in which case
Borrower shall have no right to assert any defense if the proceeding is
in any court located outside Cuyahoga County, Ohio."
N. The following new section 8.16 is hereby added to the Credit Agreement:
"8.16 DEFERRED EXTENSION FEE -- In the event Borrower fails to
refinance the subject loan in its entirety with either another division
of Bank or another financial institution before March 31, 1997, Borrower
agrees to pay Bank a deferred extension fee in an amount equal to
fifty-five thousand dollars ($55,000), which amount shall be payable on
March 31, 1997. Borrower acknowledges and agrees that the conditional
payment of such deferred compensation fee is partial consideration and a
bargained-for inducement for Bank entering into a certain Consolidated
Amendment No. 1 to Credit Agreement with Borrower.
4
<PAGE> 5
SECTION II - Waiver
-------
Bank hereby waives all violations of the general financial standards
contained in section 3B of the Credit Agreement (except any violation of the
tangible net worth financial standard contained in subsection 3B.01) which
occurred prior to the date hereof. In addition, Bank hereby waives any
violations of the fixed asset negative covenant contained in section 3D.05 of
the Credit Agreement which occurred prior to the date hereof. The execution,
delivery and effectiveness of this Amendment and the specific waivers set forth
herein shall not operate as a waiver of any other right, power or remedy of
Bank under the Credit Agreement or constitute a continuing waiver of any kind
except as expressly stated.
SECTION III - Effectiveness
-------------
This amendment is effective upon execution, provided, however, the
Amendment shall terminate if Borrower does not, prior to April 4, 1996, deliver
to Bank the following items (in form and substance acceptable to Bank):
(A) a Certificate of the secretary of Borrower certifying (1) that
Borrower's Articles of Incorporation and Code of Regulations
have not been amended since the execution of the Credit Agreement (or
certifying that true, correct and complete copies of any amendments are
attached), (2) that copies of resolutions of the Board of Directors of
Borrower are attached with respect to the approval of this Amendment
and of the matters contemplated hereby and authorizing the execution,
delivery and performance by Borrower of this Amendment and each other
document to be delivered pursuant hereto and (3) as to the incumbency
and signatures of the officers of Borrower signing this Amendment and
each other document to be delivered pursuant hereto;
(B) such other documents as Bank may request to implement this
Amendment and the transactions contemplated hereby.
If Bank shall consummate the transaction contemplated hereby prior to the
fulfillment of the conditions set forth above, the consummation of such
transaction shall constitute only an extension of time for the fulfillment of
such conditions and not a waiver thereof.
SECTION IV - Representations and Warranties:
-------------------------------
Borrower hereby repesents and warrants to Bank that
(A) none of the representations and warranties made in subsections
4B.01 through 4B.08 of the Credit Agreement has ceased to be true
and complete in any material respect as of the date hereof; and
(B) as of the date hereof no "default under this Agreement" has
occurred that is continuing.
SECTION V - Acknowledgments Concerning Outstanding Loans
--------------------------------------------
Borrower acknowledges and agrees that, as of the date hereof, all of
Borrower's outstanding loan obligations to Bank are owed without any offset,
defense, claim or counterclaim of any nature whatsoever.
5
<PAGE> 6
SECTION VI. References
-----------
On and after the effective date of this Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof", or words of
like import referring to the Credit Agreement, and each reference in the
subject, notes or other related writings to the "Credit Agreement", "thereof",
or words of like import referring to the Credit Agreement shall mean and refer
to the Credit Agreement as amended hereby. The Credit Agreement, as amended by
this Amendment, is and shall continue to be in full force and effect and is
hereby ratified and confirmed in all respects. To the extent any amendment set
forth in any previous amendment is omitted from this Amendment, the same shall
be deemed eliminated as between Borrower and the Bank hereto as of the date
hereof. The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of Bank under the Credit
Agreement or constitute a waiver of any provision of the Credit Agreement except
as specifically set forth herein.
SECTION VII - Governing Law
-------------
This Amendment, and the respective rights and obligations of the
parties hereto, shall be construed in accordance with and governed by Ohio law.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Amendment to be executed by their authorized officers as of the date and year
first above written.
NATIONAL CITY BANK SPECIALTY CHEMICAL RESOURCES, INC.
By: /s/ A.J. DiHare By: /s/ Edwin M. Roth
----------------------------- ------------------------------
Printed Name: A. J. DiHare Printed Name: Edwin M. Roth
-------------------
Title: VICE PRESIDENT Title: President
--------------------------
6
<PAGE> 1
RESTRICTED STOCK AWARD AGREEMENT
--------------------------------
This Restricted Stock Award Agreement is made as of the 25th day of
July, 1995, between SPECIALTY CHEMICAL RESOURCES, INC., a Delaware corporation
(hereinafter called the "Company"), and JOHN H. EHLERT, an employee of the
Company or one or more of its subsidiaries (hereinafter called the "Employee").
WHEREAS, the Company desires to evidence the restricted stock award
(the "Restricted Stock Award") granted to the Employee as of the date set forth
above.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and for other good and valuable consideration, the parties hereto
have agreed, and do hereby agree, as follows:
1. GRANT OF AWARD. The Company hereby grants to the Employee a
Restricted Stock Award of an aggregate of Fifteen Thousand (15,000) shares of
the common stock, $.10 par value, of the Company ("Shares") on the terms and
conditions set forth herein.
2. ISSUANCE OF SHARES. As soon as reasonably practical after the
payment by the Employee of an amount equal to the aggregate par value of the
Shares issuable under the Restricted Stock Award, which amount shall be paid by
the Company on the Employee's behalf and charged to the Employee as
compensation, and the delivery by the Employee to the Company of an executed
stock power signed by the Employee and suitable to the Company's Board of
Directors (the "Board"), the Shares shall be issued in the Employee's name.
Upon issuance of the certificate or certificates for the Shares, the Employee
shall be a stockholder with respect to the Shares and shall have all the rights
of a stockholder with respect to the Shares, including but not limited to, the
right to vote the Shares and to receive dividends and other distributions paid
with respect to the Shares. The certificate
<PAGE> 2
or certificates for the Shares, together with the executed stock power shall be
held by the Company in its control for the account of the Employee until the
restrictions set forth in Section 4 of this Restricted Stock Award Agreement
lapse (at which time the appropriate number of Shares shall be delivered to the
Employee) or, if earlier, until the Shares are forfeited to the Company and
cancelled as provided in Section 4 of this Restricted Stock Award Agreement.
3. CASH PAYMENT. The Company will make a cash payment to the Employee
at the time set forth below equal to the aggregate of the amount of federal,
state and local income taxes which the Employee will be required to pay to each
such taxing authority attributable to the realization of taxable income as a
result of the receipt and/or vesting of the Shares pursuant to this Restricted
Stock Award; provided, however, as a condition to the receipt of this cash
payment the Employee must deliver to the Company a copy of a properly executed
election that he has filed with the Internal Revenue Service to be taxed
immediately under Section 83(b) of the Internal Revenue Code of 1986, as
amended (the "Code"), with respect to the Shares to be issued under this
Restricted Stock Award. In computing the amount of this payment, it shall be
assumed that the Employee is subject to tax by each such taxing authority at
the highest marginal tax rate in the respective taxing jurisdiction of the
Employee (provided that the highest marginal tax rate for federal income tax
purposes shall be determined under Section 1 of the Code), taking into account
the city and state in which the Employee resides, but giving effect to the tax
benefit, if any, which the Employee may enjoy to the extent that any such tax
is deductible in determining the tax liability of any other taxing jurisdiction
(disregarding the effects of Code Section 68 in deterrmining deductibility for
federal income tax purposes). In addition to the foregoing, the
-2-
<PAGE> 3
cash payment due to the Employee hereunder shall be increased by the aggregate
of the amount of federal, state and local taxes for which the Employee may be
liable (computed on the same basis) on account of the cash payment to be made
hereunder, such that the Employee will receive the Shares net of all income
taxes imposed on him on account of the receipt of the Shares under this
Restricted Stock Award Agreement. Payment of the cash amount set forth above
shall be made at such time as the Board shall determine, in its sole
discretion, but in no event later than the date that the Employee files his
federal income tax return for the calendar year which includes the date of this
Restricted Stock Award Agreement.
4. RESTRICTIONS ON AWARD. The Restricted Stock Award shall
be subject to the following terms and conditions:
(a) In the event the Employee sells, exchanges, transfers,
pledges, hypothecates or otherwise disposes of (or purports or attempts to do
any of the foregoing) any or all of the Shares then held by the Company
pursuant to Section 2 of this Restricted Stock Award Agreement (including any
Shares issuable, but not yet issued) with respect to which the restrictions set
forth in this Section 4 have not lapsed in accordance with paragraph (c) below,
then all of such disposed (or purportedly disposed) Shares will be immediately
forfeited to the Company without notice and without consideration.
(b) In the event of the termination of the Employee's
employment with the Company and all subsidiaries of the Company, for any reason
whatsoever, prior to a Change in Control (as defined below) of the Company, all
of the Shares then held by the Company pursuant to Section 2 of this Restricted
Stock Award Agreement
-3-
<PAGE> 4
(including any Shares issuable, but not yet issued) with respect to which the
restrictions set forth in this Section 4 have not lapsed in accordance with
paragraph (c) below will be immediately forfeited to the Company without notice
and without consideration.
(c) All restrictions set forth in this Section shall lapse
for those Shares which have not already been distributed to the Employee
shall, subject to the provisions of Section 2 of this Restricted Stock Award
Agreement, be appropriately distributed to the Employee as soon as reasonably
practical after, the earlier of:
(i) a Change in Control of the Company; or
(ii) (A) The date of grant with respect to one-third (1/3) of the
Shares originally awarded herein,
(B) The first anniversary of the date of grant with respect
to an additional one-third (1/3) of the Shares originally
awarded herein, and
(C) The second anniversary of the date of grant with
respect to the balance of the Shares awarded herein.
5. TAXES. The Company shall have the right to deduct, from
the cash payment to be made to the Employee pursuant to Section 3 of this
Restricted Stock Award Agreement or from any other amounts payable then or any
time thereafter to the Employee, the amount of any taxes which the Company is
or will be required by law to withhold, as and when required by law, with
respect to such cash payment or the Shares received or to be received by the
Employee pursuant to this Restricted Stock Award. The Company shall
-4-
<PAGE> 5
have the right to require a person entitled to receive Shares
pursuant to this Restricted Stock Award Agreement to pay the Company
the amount of any taxes which the Company is or will be required to
withhold with respect to such Shares before the certificate for such
Shares are delivery pursuant to the Restricted Stock Award.
6. DELIVERY OF SHARES ON EXERCISE. Delivery of certificates for
Shares pursuant to this Restricted Stock Award may be postponed by the Company
for such period as may be required for it with reasonable diligence to comply
with any applicable requirements of any federal, state or local law or
regulation or any administrative or quasi-administrative requirement applicable
to the sale, issuance, distribution or delivery of such Shares. The Committee
may, in its sole discretion, require the Employee to furnish the Company with
appropriate representations and a written investment letter prior to the
delivery of any Shares pursuant to this Restricted Stock Award.
7. INVALIDITY OF PROVISIONS. The invalidity or unenforceability of
any provision of this Restricted Stock Award Agreement as a result of a
violation of any state or federal law, or of the rules or regulations of any
governmental regulatory body, or any securities exchange shall not affect the
validity or enforceability of the remainder of this Restricted Stock Award
Agreement.
8. WAIVER AND MODIFICATION. The provisions of this Restricted Stock
Award Agreement may not be waived or modified unless such waiver or
modification is in writing and signed by the parties hereto.
9. DEFINITION OF CHANGE IN CONTROL. For purposes of this Agreement,
a "Change in Control" shall mean a change in control of the Company of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A
-5-
<PAGE> 6
promulgated under the Securities Exchange Act of 1934 (as in effect on the date
of this Agreement, the "Exchange Act"), whether or not the Company is then
subject to such reporting requirement; provided that, without limitation, such
a change in Control shall be deemed to have occurred if:
(a) any "person" (as defined in subsections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 51% or more of the combined voting power of the Company's
then outstanding securities; or
(b) there shall cease to be a majority of the Board
comprised of Continuing Directors (as defined below).
Anything in this Section 9 to the contrary notwithstanding, an event or
occurrence (or a series of events or occurrences) that would otherwise
constitute a change in Control under the foregoing shall not constitute a
Change in Control for purposes of this Agreement if the Board, by majority
vote, determines that a Change in Control does not result therefrom; but only
if Continuing Directors constitute a majority of the directors voting in favor
of such determination. Further, an event or occurrence (or series of events or
occurrences) that would not otherwise constitute a Change in Control under the
foregoing shall be deemed to constitute a Change in Control for purposes of
this Agreement if the Board, by majority vote, determines that a Change in
Control does result therefrom; but only if Continuing Directors constitute a
majority of the directors voting in favor of such determination. A
determination by directors under this Section 9 shall be made solely for
purposes of this Agreement and shall not directly or indirectly affect any
determination or analysis of
-6-
<PAGE> 7
whether a change in control results for any other purpose. Any determination
made with respect to whether a change in control results for purposes of any
other agreement or plan of the Company shall have no effect for purposes of
this Agreement.
For purposes of this Section 9, "Continuing Directors" shall mean
individuals who constitute the Board as of the date of this Agreement and any
new director(s) whose election by such Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then in office who either were directors as of the date of this
Agreement or whose election or nomination for election was previously so
approved.
10. INTERPRETATION. All decisions or interpretations made by the Board
with regard to any question arising under this Restricted Stock Award Agreement
shall be binding and conclusive on the Company and the Employee.
11. MULTIPLE COUNTERPARTS. This Restricted Stock Award Agreement may
be signed in multiple counterparts, all of which taken together shall
constitute an original agreement. The execution by one party of any counterpart
shall be sufficient execution by that party, whether or not the same
counterpart has been executed by any other party.
-7-
<PAGE> 8
12. GOVERNING LAW. ThiS Restricted Stock Award Agreement shall be
governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Restricted Stock Award
Agreement to be duly executed by its duly authorized officers, and the Employee
has hereunto set his hand, all as of the day and year first above written.
SPECIALTY CHEMICAL
RESOURCES, INC.
By: [Signature illegible]
-------------------------------
/s/ JOHN H EHLERT
-------------------------------
John H. Ehlert, Employee
-8-
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