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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended FEBRUARY 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-14203
MERIDIAN NATIONAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 34-1470518
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
805 Chicago Street, Toledo, Ohio 43611
(Address of principal executive offices) (Zip Code)
(419) 729-3918
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.01 par value
Series B Convertible Voting Preferred Stock, $.001 par value
Common Stock Purchase Warrants expiring 1999
Common Stock Purchase Warrants expiring 1998
(Title of each class)
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, 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. [ ]
As of May 31, 1996, 3,355,145 shares of Meridian National Corporation
common stock were outstanding, and the aggregate market value of voting stock
(based upon the closing price on the Automated Quotation System of the National
Association of Securities Dealers, Inc.) held by non-affiliates was
approximately $2,297,000 for common stock and $672,000 for Series B convertible
voting preferred stock.
Documents Incorporated by Reference
Portions of the registrant's definitive proxy statement for its 1996
Annual Meeting of Stockholders to be held on August 2, 1996 (the "1996 Proxy
Statement"), which the registrant intends to file within 120 days after the
close of its fiscal year ended February 29, 1996, are incorporated by reference
into Part III.
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PART I
------
ITEM 1. DESCRIPTION OF BUSINESS
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Meridian National Corporation ("Meridian National" or the "Company",
which, unless otherwise indicated, refers to Meridian National and its
subsidiaries) is engaged in the steel distribution and processing business and
in the waste management business.
GENERAL DEVELOPMENT OF BUSINESS
-------------------------------
Meridian National was incorporated as a Delaware corporation in 1985.
Shortly thereafter, the Company acquired from certain present and former members
of management, who were also principal stockholders of the Company, all of the
outstanding capital stock of Ottawa River Steel Co. ("Ottawa River Steel"),
National Metal Processing, Inc. ("National Metal") and two other companies whose
operations have since been combined with Ottawa River Steel and National Metal.
The Company continued the operations of these acquired companies as the
foundation of its steel distribution and processing business.
The Company entered the waste management industry in 1985. Through a
newly-formed subsidiary, Meridian Environmental Services, Inc. ("Meridian
Environmental"), the Company began to recycle and remarket spent acids generated
by its own steel processing operations and by other spent acid generators in the
Detroit, Michigan and the Toledo, Ohio areas. As further discussed in
Management's Discussion and Analysis of Results of Operations, the Company will
be exiting the spent acid recycling business by June 30, 1996.
In 1989 the Company formed National Purification, Inc. ("National
Purification") as a wholly-owned subsidiary to enter into a general partnership
with Haden Purification, Inc. ("Haden Purification"), an affiliate of Haden
MacLellan Investments Ltd. ("Haden Investments"). The partnership, Environmental
Purification Industries Company ("EPI"), was formed to own and operate one or
more facilities for the recycling of paint waste using a proprietary paint waste
drying system (DryPureTM) developed by Haden Environmental Corporation ("Haden
Environmental"), an affiliate of Haden Investments and Haden Purification, and
for the marketing of the reclaimed solids. EPI's first paint waste recycling
facility started operations in 1990. National Purification and Haden
Purification were equal partners in EPI and were otherwise unaffiliated. In 1992
Haden Purification terminated and abandoned its interest in EPI, and EPI became
wholly-owned by the Company.
As a result of federal environmental regulations issued in 1991, EPI is
required to and has submitted in July 1994 to the U.S. Environmental Protection
Agency ("U.S. EPA") an operating permit application under the Resources
Conservation Recovery Act of 1980. The final approval for such a permit may take
several years. During the application and review process, EPI's operations
continue on interim status and are unaffected. EPI may be required to make
modifications to its operating procedures or equipment in the future, although
EPI's management believes its operations meet the existing requirements.
The Company has previously announced plans for a public offering of
approximately 50% of the Company's interest in its paint waste recycling
operation. Proceeds of the offering are expected to be used principally to
expand this business using new technology and construction of additional
facilities.
In January 1994, the Company acquired real property and equipment
previously operated as a steel service center located in Detroit, Michigan, to
expand its steel processing services to the end-user market. Shortly thereafter,
the Company reopened the facility, using many of the personnel formerly employed
by the seller at the facility.
In November 1995, the Company acquired the business and assets of a
steel service center located in Gary, Indiana. The operations at this facility
are being continued using many of the personnel previously employed by the
seller. This facility supplies steel products to primarily non-automotive
markets, providing additional diversification of the Company's customer base and
increasing its presence in the midwest marketplace.
The Company's principal executive offices are located at 805 Chicago
Street, Toledo, Ohio 43611 and its telephone number is (419) 729-3918.
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FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
---------------------------------------------
The Company's operations are classified within two separate industry
segments. The steel distribution and processing segment handles flat-rolled
steel products primarily for the automotive, truck and appliance industries. The
waste management segment recycles paint wastes and spent acids for companies in
the steel, automotive and waste management industries, as well as arranging for
disposal of paint wastes and spent acids at third-party disposal sites.
For financial information about the Company's industry segments, see
Note 11 to the consolidated financial statements of the Company which are
included elsewhere in this report as listed in PART IV, ITEM 14.
NARRATIVE DESCRIPTION OF BUSINESS
---------------------------------
STEEL DISTRIBUTION AND PROCESSING SEGMENT
Steel service centers and steel distributors represent a major market
for primary steel producers, serving as a source of supply for smaller
manufacturers whose product requirements are more limited, making mill-direct
purchases unfeasible. Companies operating in this industry generally are
classified as steel service centers when they operate facilities that process
steel products. Companies that acquire steel products for warehousing and/or
direct redistribution to other steel consumers are generally classified as
distributors. Steel service centers and distributors acquire steel products from
primary steel producers and from other distributors. It is not uncommon for
steel products to pass through the hands of one or more steel distributors
and/or steel service centers before reaching an end user. Steel service centers
and distributors normally specialize in particular grades of steel products. The
majority of the companies operating in this industry are small to medium in size
with no single company or group of companies exercising control over the
industry. The products handled by the Company's steel distribution and
processing business are carbon steel coils, sheets, plates, bars and coil
rounds.
STEEL DISTRIBUTION During the fiscal years ended February 29, 1996 and
February 28, 1995 and 1994, 49%, 63% and 78%, respectively, of the Company's net
sales were generated through its steel distribution operations. The Company's
steel distribution operations involve purchasing, storing and reselling steel
products in their original form. The Company acquires steel under various steel
purchase programs and some of these programs involve the purchase of steel which
did not meet order specifications of customers of primary steel producers for
whom the steel was originally intended. The Company also acquires steel products
from steel producers under excess steel purchase programs. In times of low steel
consumption, primary steel producers will make steel offerings to distributors
to maintain higher production rates at the steel mills. Ottawa River Steel is
among the oldest companies operating in steel distribution and has attained a
good reputation and name identification in its industry. Historically, Ottawa
River Steel has maintained strong relationships with various steel producers.
These relationships and a broad base of steel suppliers have allowed Ottawa
River Steel access to steel supplies when steel availability within the industry
has been limited due to high demand.
STEEL PROCESSING During the fiscal years ended February 29, 1996 and
February 28, 1995 and 1994, 42%, 26% and 10%, respectively, of the Company's net
sales were generated by steel processing. The Company provides slitting,
cut-to-length, batch pickling and coating services for steel products. These
services are provided to customers for customer-owned material (toll processing)
or as a value-added process to the Company's inventory for sale to end-user
customers. As a result of the establishment and development of additional steel
service centers in Detroit, Michigan and Gary, Indiana over the last several
years, value-added steel sales have increased dramatically.
* SLITTING AND CUT-TO-LENGTH Flat rolled steel products are generally
manufactured by the steel mills in wide width, coil form. Consumers of these
flat rolled products may require the steel to be cut into several coils of
narrower widths. The steel slitting process involves the passing of the coil
through roller knives which cut the steel into the desired widths. Additionally,
others may require coils to be cut-to-length into sheets prior to taking
delivery.
* PICKLING Steel is rolled at high temperatures at steel mills which
creates a scaly surface on the steel. This scale must be removed for surface
sensitive steel applications which require polishing, plating or other finished
surfaces. The pickling process removes this scale by the application of acid to
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the surface of the steel. This application can be performed while the steel is
in coil form through a continuous pickling process or when the steel is in sheet
form through a batch pickling process. Generally, hydrochloric acid is used in
the continuous pickling process and sulfuric acid is used in the batch pickling
process. After pickling, the steel is rinsed in baths of neutralizer and water
and then is coated with oil to prevent rust.
* COATING To prevent the fracturing of steel during certain
manufacturing processes, steel can be coated with special lubricants known as
drawing compounds.
CUSTOMERS The Company's steel distribution and processing services are
marketed to the automotive, truck, building, appliance, furniture and
agriculture industries and to companies servicing these industries in the upper
midwest, as well as other areas east of the Mississippi River. The majority of
North American car and truck final assembly plants and primary metal industries
are located within a 500-mile radius of the Company's facilities. Sales to
Production Stamping, Inc. accounted for 12% of the Company's net sales in fiscal
1996.
COMPETITION In the steel distribution and processing business,
competitive factors include quality of service, timeliness and cost. The
Company's success in this business depends on its ability to continue to provide
quality products and services on a timely basis at a competitive cost.
The Company faces substantial competition in the steel distribution and
processing business from other independent steel distributors and processors as
well as from steel mills that perform these functions internally. Among the
Company's competitors and potential competitors are numerous companies that have
substantially greater financial and other resources than the Company.
RAW MATERIALS The raw materials required for the Company's steel
processing operations are acids, oils and banding supplies. All materials are
readily available from a number of suppliers.
WASTE MANAGEMENT SEGMENT
In 1985 faced with rising waste and disposal costs as a result of
increased environmental regulations, the Company began to explore the
possibility of handling its own waste acid from its steel pickling operations
rather than contracting with third parties for its disposal. Realizing the
potential market for such services for other similarly situated companies in the
metal finishing industry, the Company entered the waste management business in
1985 through the recycling of spent acids. In 1991 the Company expanded its
waste acid handling operation by offering to manage the entire waste acid stream
of companies. To implement this concept, the Company entered into an arrangement
with a major waste management company whereby the Company would utilize the
waste management company's deep well disposal facility for spent acids which
cannot be recycled. Later in 1991, the Company began managing the complete waste
acid requirements for a primary steel producer.
In early 1989, the Company became aware of the magnitude of the
disposal problems facing generators of paint wastes and learned of a unique
process for the handling of these wastes. The process, known as DryPureTM and
patented by Haden Environmental, heats the paint wastes, driving off liquids and
volatile organic compounds, resulting in a dry inert powder that represents a
reduction in volume of paint waste by up to 90%. The powder from the initial
application of this process was disposed at landfills. The Company began
exploring the possibility of selling the dry powder and was successful in
finding commercial applications for the product. As a result of the Company's
success in finding uses and markets for the dry powder generated by the
DryPureTM process, Haden Purification and the Company formed EPI for the purpose
of constructing commercial facilities to recycle paint wastes. EPI commenced
commercial operations at its newly-constructed paint waste recycling facility in
Toledo, Ohio late in fiscal 1991.
PAINT WASTE RECYCLING 6% of the Company's net sales in each of the
fiscal years February 29, 1996 and February 28, 1995 and 1994, were generated by
paint waste recycling.
Paint wastes, because of their stickiness and leaching characteristics,
are one of the most difficult wastes to legally dispose of and therefore pose a
significant disposal problem for their generators. Approximately 40% to 60% of
the paint used in industrial spray painting processes becomes waste that
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requires disposal or recycling. Currently, the only legal disposal methods
available for paint wastes are landfill and incineration. While the short-term
costs associated with landfilling (currently the most widely-used disposal
method) are less than the short-term costs of incineration, generators using
this method of paint waste disposal could be "potentially responsible parties"
for liabilities associated with remediation of landfills where their paint waste
has been disposed. Additionally, there continues to be a trend in the regulatory
environment toward greater restrictions and liabilities associated with
landfilling, including the disposal of paint wastes. As a result, many
generators are electing to use incineration which is a more expensive disposal
process than direct disposal into landfills. Incineration involves either (i)
directly consolidating paint wastes into a concentrated form (ash) which
contains the hazardous constituents (heavy metals) of the paint waste, which
must then be disposed of in a landfill, and accordingly involves, similar to
direct landfilling, potential long-term liability, or (ii) fuel blending, in
which solvent laden paint waste is blended into specific fuel mixtures for
incineration in cement kilns. However, fuel blending cannot be used for a
majority of paint wastes and is more expensive than direct incineration.
Recycling of waste materials is considered by the U.S. EPA to be a
desirable means of reducing waste. According to the U.S. EPA's definition,
recycle is a broad term that includes "to use, reuse, or reclaim." A material is
reclaimed if it is processed to recover a useful product or if it is
regenerated. When customers send paint waste to the Company's facility, the
Company reclaims the paint waste by processing it to recover a useful product.
The U.S. EPA encourages this type of waste management because it preserves
limited landfill space. Avoiding the need to place hazardous paint waste in
landfills also allows generators to significantly reduce the threat of incurring
liability under the Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA"), also known as Superfund liability.
The DryPureTM process heats the paint wastes, driving off liquids and
volatile organic compounds, resulting in a dry, inert powder that represents a
reduction in the volume of paint waste by up to 90%. Originally DryPureTM
systems were sold directly to automobile manufacturers which disposed of the
resultant dry powder from the process in landfills. Meridian recognized that
small and mid-size paint waste generators presented a market for the DryPureTM
system. In addition, Meridian began exploring the possibility of selling the
resultant dry powder, EPI-PURETM, and was successful in finding commercial
applications for it. In 1989, as a result of Meridian's success in finding
applications and markets for EPI-PURETM, Meridian and Haden Purification formed
EPI as a general partnership for the purpose of constructing commercial
facilities to recycle paint wastes. EPI commenced commercial operations at its
newly-constructed paint waste recycling facility in Toledo, Ohio late in fiscal
1991.
In 1992, Haden Investments terminated its 50% partnership interest in
EPI and the Company became the sole owner of EPI. In connection with the
withdrawal by Haden Investments from EPI, the Company retained its perpetual,
non-exclusive license for its installed DryPureTM systems and the Company's
exclusive license for additional DryPureTM system installations was extended
through June 1999 for an area having a 200 mile radius surrounding Toledo, Ohio,
which encompasses the industrial center of the midwestern region of the U.S. and
a significant portion of the Company's customer base.
The Company has previously announced plans for a public offering of
approximately 50% of the Company's interest in its paint waste recycling
operation. Proceeds of the offering are expected to be used principally to
expand this business using new technology and construction of additional
facilities.
ACID WASTE RECYCLING AND DISPOSAL During the fiscal years ended
February 29, 1996 and February 28, 1995 and 1994, 3%, 5% and 6%, respectively,
of the Company's net sales were generated by its waste acid recycling and
disposal operations. As further discussed in Management's Discussion and
Analysis of Results of Operations, the Company will be exiting the acid waste
recycling and disposal business by June 30, 1996.
* RECYCLING Spent acids which have sufficiently high iron contaminant
concentrations to justify recycling may be recycled by separating the acids from
the iron contaminants and returning the acid to a useful strength. Some spent
acids cannot be recycled due to their toxicity or their low iron contaminant
concentrations.
* INJECTION WELL DISPOSAL Deepwell injection facilities are
fully-regulated by the U.S. EPA, state and local environmental agencies.
Properly located, designed, constructed and monitored, a deepwell injection
system is an effective method of permanently isolating industrial wastes from
the environment.
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Sulfuric and hydrochloric acids are used by metal finishing industries
to clean and pickle steel and to prepare the steel for use in the manufacturing
process. After repeated use, the acids lose their effectiveness due to an
increase in contaminant concentration (primarily iron). Once the acids have
become "spent" they must be recycled for reuse, treated for disposal or
remarketed to other users for whom the contaminant levels are acceptable.
The Company's spent acid recycling center handles only spent sulfuric
acid and operates under U.S. EPA, state and local environmental regulations.
During the recycling process, the absorbed iron is precipitated out through a
chilling process in which the temperature of the acid is lowered causing a
crystallization of the iron. The iron, in a crystal form, drops out of the acid
and is collected and sold for use in animal food supplements, magnetic tape
production and fertilizers. The removal of the iron crystals allows the acids to
be reused in the pickling process. In fiscal 1992, the Company added the
capability of handling for customers spent acids which are not recyclable or
exceed the capacity of the Company's spent acid recycling center. These spent
acids are sent to an injection well facility of a major waste management company
for treatment and disposal.
CUSTOMERS The Company markets its paint waste recycling services to
businesses that have spray painting operations. The Company's marketing
activities are concentrated in the midwest region of the United States where
over 80% of its revenues are generated, with the majority of annual revenues
derived from customers in the automotive assembly business. The Company's
customers generally are environmentally conscientious and demand that the
Company maintain stringent quality controls. The Company has built its
reputation in the industry through consistent customer service by addressing
these customer needs. Since one of the primary benefits of using the Company's
services is the elimination of the potential long-term liability associated with
landfill disposal of paint waste, many customers conduct thorough reviews and
audits of the Company's operations, including the Company's compliance with
environmental laws and regulations.
The Company's acid waste recycling and disposal operations have been
heavily dependent on the business generated from a nearby primary steel
producer. In September 1995 this customer filed for Chapter 11 bankruptcy
protection and in March 1996 ceased operations. Sales to this customer amounted
to 22% of the 1996 sales of the waste management segment. The Company has been
unable to expand the customer base and will not be able to replace the loss of
this business. As further discussed in Management's Discussion and Analysis of
Results of Operations for the year ended February 29, 1996, the Company will be
exiting the acid waste recycling and disposal business by June 30, 1996.
COMPETITION Presently, approximately 99% of paint waste nationally is
disposed of through landfills or by incineration, and approximately 1% is
processed and recycled by methods utilized by the Company and its other
competitors. The Company is aware of only three other companies that compete
directly with the Company by providing processing and recycling services to
generators of paint waste. These competitors utilize similar methods of thermal
drying to those of the Company; however, over the years the Company has
developed the capability to process a broader range of paint waste than its
competitors.
Competitive factors in paint waste processing or disposal include
price, service and the potential long-term liability associated with paint waste
generation and disposal. While paint wastes generally can be landfilled or
incinerated at a lower initial cost than recycling, these disposal methods
expose the generators to potential long-term liability under stringent federal
and state regulations. On the other hand, although the costs of the Company
initially are greater than landfill or incineration, the Company's recycling
process substantially eliminates continuing generator liability. Landfill and
incineration are provided by national, regional and local companies, many of
which have substantially greater resources than the Company. In addition, the
Company's direct recycling competitors have substantially greater financial,
marketing and other resources than the Company. There can be no assurance that
one of the Company's competitors or a new company will not develop a method of
recycling paint waste which is more efficient and profitable than the methods
currently employed by the Company. Additionally, there can be no assurance that
large industrial customers or other waste management companies will not attempt
to develop their own methods of recycling or otherwise minimizing, treating or
disposing of wastes.
Competitive factors in the acid waste recycling and disposal business
include pricing and the ability to handle the complete acid waste needs of the
customers. The Company knows of no other
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company which offers off-premise acid waste recycling of sulfuric acid. However,
the Company faces competition from other entities which also offer treatment and
disposal of waste acids. Many competitors are substantially larger and possess
substantially greater marketing, financial and other resources and experience
than the Company.
RAW MATERIALS In the DryPureTM system, trap rock (a small, inexpensive
stone) is used to facilitate heat transfer, to keep paint waste from adhering to
the equipment and to reduce the size of the EPI-PURETM particles. Trap rock is
readily available at reasonable prices. The waste acid recycling operation
require no raw materials.
BACKLOG
The Company's paint waste recycling operation typically processes
shipments within a relatively short time of receipt. Accordingly, no large
volume of paint waste is stored at the Company's Toledo, Ohio facility at any
time. Because the generators and the Company need to carefully control the
shipment and processing of paint waste, upon execution of a sales contract, the
Company establishes a long-term schedule for delivery and processing of the
customer's paint waste at the Company's facility. Accordingly, the Company
normally has its maximum processing capacity scheduled for one to three months
in advance.
SEASONALITY
The Company primarily provides products and services to the automotive,
truck and appliance industries. Therefore, the Company's results are affected by
cycles in such industries. Traditionally, automotive plants operate at reduced
levels to allow for retooling and inventory adjustments during the summer months
and are closed during the last part of December which adversely affects the
Company's revenues for those periods.
EMPLOYEES
As of April 24, 1996, the Company had 152 employees, of whom 110 were
employed in steel distribution and processing (includes 37 leased employees), 31
were employed in waste management (includes 2 leased employees), with the
remainder serving in executive and administrative capacities. The Company
believes that its relations with its own employees and with the leased employees
presently employed at its facilities are good.
ITEM 2. PROPERTIES
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The Company's corporate offices are located in Toledo, Ohio and occupy
approximately one-half of an 8,500 square foot building pursuant to a lease with
Greenbelt Associates which expires in 1997. Greenbelt is a general partnership
owned by William D. Feniger, Yale M. Feniger, Real P. Remillard and Karen
DeGrazia, who are current or former officers and/or stockholders in the Company.
The Company leases the remainder of the building for the offices of its steel
distribution operations under an identical lease. The monthly rent on each such
lease is subject to adjustment based on changes in the Consumer Price Index and
amounts to $4,472 at February 29, 1996.
On a site adjacent to its corporate offices, the Company maintains
office space and its active steel pickling operation in a 23,000 square foot
building. Also on the site the Company utilizes an additional 62,000 square feet
in a building for steel warehousing and a steel slitting operation. The
facilities at this site, including an additional 60,000 square feet of outside
storage space, is leased pursuant to a lease with Chicago Investors expiring in
February, 1998, with three additional one year options. Chicago Investors is a
general partnership which is owned, in turn, by two other partnerships. One of
these partnerships is Champlain Investors, a general partnership, which is owned
by William D. Feniger, Yale M. Feniger and Karen DeGrazia. The Company pays a
monthly rent for these facilities, including certain equipment, of $14,255,
subject to annual increases based on increases in the Consumer Price Index. The
Company also sub-leases another 22,000 square feet used for steel storage at
this site.
The Company's steel service center in Detroit, Michigan is housed in
two adjacent buildings situated on approximately two acres of land. The main
building consists of 58,500 square feet, including
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8,500 square feet of office space. The second building consists of 8,000 square
feet and is being used for steel storage. This property is subject to a mortgage
having an outstanding balance of $554,000 at February 29, 1996.
In November 1995, the Company acquired the business and assets of a
steel service center located in Gary, Indiana. This steel service center is
operated in a 59,000 square foot facility in a common building in an industrial
park pursuant to a lease expiring in November 1998 with two renewal options of
three years each. Monthly rental payments amount to $13,049 and are increased
annually by the lesser of 3% or the percentage increase in the Consumer Price
Index.
In March 1996 the Company shut down its steel pickling operation in
Detroit, Michigan. The Company leases the majority of this facility,
encompassing 220,000 square feet, to an unrelated company. The Company still
uses 26,000 square feet for storage of steel and office space. This facility is
subject to a lease purchase obligation covering industrial revenue bonds with an
outstanding balance of $614,000 at February 29, 1996.
The Company conducts its paint waste recycling operations in an 18,000
square foot building in Toledo, Ohio. This property, along with the recycling
equipment, is owned by EPI and is subject to a mortgage of which 50% of the
obligation has been assumed by the former partner of EPI. EPI's obligation with
respect to this mortgage was $1,652,000 at February 29, 1996.
In addition, an adjacent 14,000 square foot building is leased by EPI
from Chicago Investors where the recycled product is screened, packaged and
warehoused prior to shipment. Lease payments are $1,375 per month, subject to
annual increases, through February 1998.
The Company's waste acid recycling operations are located in an
approximately 28,000 square foot building located in Detroit, Michigan.
The Company believes that its existing facilities and properties are
adequate for its current operations.
ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------
There are no material legal proceedings pending against the Company.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
- ------- -------------------------------------------------
There were no matters submitted to a vote of security holders during
the last quarter of the Company's fiscal year ended February 29, 1996.
EXECUTIVE OFFICERS
Set forth below is certain information regarding the executive officers
of the Company. Officers, who are elected annually by the Board of Directors of
the Company, serve at the pleasure of the Board of Directors.
William D. Feniger 49 Chief Executive Officer and President
James L. Rosino 41 Chief Financial Officer, Vice President-
Finance, Secretary and Treasurer
William D. Feniger has served as Chairman of the Board of Directors and
Chief Executive Officer of the Company since August 1985. On March 21, 1991, Mr.
Feniger was named President of the Company.
James L. Rosino has been Chief Financial Officer and Vice-President -
Finance of the Company since February 1996. On May 31, 1996, Mr. Rosino was
named Secretary and Treasurer of the Company. Previously, Mr. Rosino has served
as Corporate Controller since May 1988.
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PART II
ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
- ------- -------------------------------------------------------
The Common Stock of the Company is quoted on the National Association
of Securities Dealers Automated Quotation System ("NASDAQ") under the symbol
"MRCO". The following table sets forth, for the quarterly periods indicated, the
high and low sales price for the Common Stock as reported by NASDAQ.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 29, 1996 HIGH LOW
- ---------------------------- ---- ---
<S> <C> <C>
First Quarter 2 11/16 1 5/8
Second Quarter 2 5/16 1 11/16
Third Quarter 1 7/8 1 1/4
Fourth Quarter 1 5/8 1 1/8
YEAR ENDED FEBRUARY 28, 1995
- ----------------------------
First Quarter 4 2 1/2
Second Quarter 3 3/4 2 1/2
Third Quarter 3 5/8 2 1/2
Fourth Quarter 2 7/8 1 13/16
</TABLE>
As of May 31, 1996 there were approximately 520 stockholders of record
of the Company's Common Stock.
To date, the Company has not paid any dividends on its Common Stock.
The payment by the Company of dividends, if any, in the future rests within the
discretion of its Board of Directors and will depend, among other things, on the
Company's earnings, its capital requirements and its financial condition, as
well as other relevant factors. The Board does not presently intend to pay any
dividends on its Common Stock in the immediate future, but it intends to retain
all earnings for use in its business operations. Pursuant to an outstanding
credit agreement with a bank, the Company cannot pay dividends on its Common
Stock.
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ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
The selected financial data of the Company set forth below should be
read in conjunction with the audited consolidated financial statements, the
notes thereto and other financial information included elsewhere in this report
and in "Management's Discussion and Analysis of Financial Condition and Results
of Operations" included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29
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1996 1995 1994 1993 1992
---------------------------------------------------------------------------
OPERATIONS STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Net sales $56,606,860 $53,238,574 $44,186,296 $31,952,651 $36,108,955
Gross margin 6,275,204 8,046,595 7,080,270 3,771,048 3,878,784
Income (loss) before
extraordinary gain (1,498,814) (1,352,642) (4) 1,114,235 (1,311,886) (2,511,177)
Net income (loss) (1,349,608) (1,126,366) (4) 1,114,235 (1,311,886) (2,511,177)
Net income (loss) applicable
to common stock (1) (1,479,370) (1,262,744) (4) 592,952 (1,853,545) (3,116,831)
Earnings (loss) per common share -
Primary and fully diluted (2)(3):
Income (loss) before
extraordinary gain $ ( .62) $ ( .61) (4) $ .41 $ ( 1. 69) $ ( 3.50)
Net income (loss) ( .56) ( .52) (4) .41 ( 1 .69) ( 3.50)
Weighted average common
shares and dilutive common
equivalent shares (2)(3):
Primary 2,638,126 2,423,864 1,430,930 1,094,122 889,367
Fully diluted 2,638,126 2,423,864 1,432,409 1,094,122 889,367
BALANCE SHEET DATA:
Working capital
(deficiency) $ (1,443,113) $ 1,254,643 $ 377,576 $ (912,575) $ (686,612)
Total assets 25,253,266 25,059,980 19,235,307 17,874,100 17,377,642
Long-term debt 5,488,791 4,929,292 5,844,759 5,146,725 2,822,194
Stockholders' equity 904,925 2,125,442 3,169,709 2,053,005 3,398,204
<FN>
- -----------
(1) Represents net income (loss) reduced by dividends paid on preferred stock
in cash and in shares of common stock. To date, the Company has not paid
any dividends on its common stock.
(2) All share and per share amounts presented have been retroactively restated
to reflect a one-for-ten reverse stock split of common shares effective
August 18, 1993.
(3) Common shares issued in the July 1994 exchange of Series B preferred stock
are included in weighted average shares outstanding in the computation of
earnings per share as if the exchange had occurred at the beginning of
fiscal 1995.
(4) Includes a $2,285,548 charge or 94 cents per share, net of income tax, from
write-down of noncurrent assets.
</TABLE>
10
<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS
---------------------
YEAR ENDED FEBRUARY 29, 1996 COMPARED TO YEAR ENDED FEBRUARY 28, 1995
In fiscal 1996, the Company achieved its highest sales volume ($56.6
million) in the past seven years and the second highest sales volume in Company
history. Sales volume increased 6% over the prior year. The Company's expansion
of its steel service center business through acquisition of facilities in
Detroit, Michigan (January 1994) and Gary, Indiana (November 1995) is
principally responsible for the overall sales increase, offsetting sales
decreases in certain other of the Company's operations.
The Company reported a net loss of $1,350,000 in fiscal 1996. The loss
is principally attributable to 1) reduced margins on sales of steel products
primarily due to excess supplies, 2) costs and unprofitable operating results
($647,000) from the unsuccessful attempt to convert a bumper stock pickling
operation to a bar coil pickling operation and shutdown subsequent of this
operation and 3) costs amounting to $296,000 associated with new technology to
be utilized in EPI's paint waste recycling operation.
In fiscal 1995, the Company reported a $1,126,000 net loss principally
because the Company substantially reduced its batch pickling operation due to
the loss of a major customer and recorded a $2,286,000 pre-tax charge for the
write-down of assets related to the pickling operation. See Note 10 to
Consolidated Financial Statements for further description of this write-down.
STEEL DISTRIBUTION AND PROCESSING SEGMENT A $3.9 million (8%) sales gain was
recorded by the segment in fiscal 1996. The addition of the steel service
centers previously described are responsible for the increase, despite a slight
softening of demand during fiscal 1996. The increased emphasis on providing
value-added processing of steel products sold to end-user customers make the
segment's revenue base less subject to fluctuations in market conditions than is
its steel distribution business. Also, the recently acquired Gary, Indiana steel
service center provides a presence in the Chicago market and has a greater
diversity of customers who are in industries other than automotive.
In March 1995 the Company shutdown its bumper stock pickling business.
The Company made certain changes to its pickling facility in order to be able to
handle bar coil pickling. The Company was unable to secure sufficient bar coil
pickling business to operate profitably during fiscal 1996 and the business was
discontinued in March 1996. Sales for this facility decreased to $556,000 in
fiscal 1996 from $1,886,000 in fiscal 1995. An operating loss from this
operation of $647,000 was recorded in fiscal 1996. No additional write offs
related to this facility are required as the majority of this facility has been
leased.
Excluding the effects of the shutdown of the bumper stock and bar coil
pickling business, gross margin (net sales less costs of sales) as a percentage
of net sales was 9.1% in fiscal 1996 compared to 11.2% in fiscal 1995. The
decrease is due to somewhat softer demand in the market while excess inventories
continue to be reduced. Pricing is expected to firm up in the upcoming year as
management expects demand will remain generally strong and excess steel supplies
work through the distribution channels.
WASTE MANAGEMENT SEGMENT Net sales for this segment decreased to $5.5 million in
fiscal 1996 from $6.1 million in the prior year. The segment's paint waste
recycling operation reported net sales of $3.5 million in fiscal 1996,
paralleling net sales reported last year; however, the segment's waste acid
recycling and disposal operation reported a $666,000 sales decrease in fiscal
1996. This sales decrease was due to reduced sales volume with a nearby primary
steel producer (McLouth Steel). Sales to McLouth Steel comprised 63% of this
operation's sales volume or about 22% of the segment's sales in fiscal 1996 (64%
and 28%, respectively, in fiscal 1995). On September 29, 1995, this customer
filed a voluntary petition seeking reorganization under Chapter 11 of the U.S.
Bankruptcy Code. The Company has recorded a $60,000 charge for an anticipated
credit loss. The Company continued to conduct business with this customer, at
slightly lower volume levels, until McLouth Steel ceased operations in March
1996. Management has determined that it will exit this business and is currently
negotiating to sell the assets of the acid waste recycling and disposal
business. If the Company is unable to complete the sale as an operating business
by June 30, 1996, the facility will be shutdown and the property and equipment
will be held for resale. The shutdown of this operation is not expected to have
a materially adverse effect on the
11
<PAGE> 12
Company's financial condition or operating results. No substantial write off of
assets would result from the disposition or shutdown of this operation.
This segment reported a $422,000 operating profit for fiscal 1996 representing a
$208,000 decrease compared to last year. The operating profit decrease
principally resulted from expenses of $296,000 incurred in fiscal 1996 in
connection with new technologies to be implemented at the paint waste
recycling facility. Such expenses amounted to $63,000 in fiscal 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES The $497,000 (8%) increase in
selling, general and administrative expenses is primarily attributable to the
development of the Company's steel service center business previously described.
Accelerated goodwill amortization in fiscal 1995 related to the pickling
operations assets, which were ultimately written down as previously described,
amounted to $369,000. Additional increases related to payroll costs and bad debt
write-offs.
INTEREST EXPENSE Interest expense increased $383,000 (35%) in fiscal 1996. The
Company's average outstanding borrowing base rose as a result of the increase in
working capital requirements associated with the expansion and growth of the
business in fiscal 1995.
YEAR ENDED FEBRUARY 28, 1995 COMPARED TO YEAR ENDED FEBRUARY 28, 1994
In fiscal 1995, the Company achieved its highest sales volume ($53.2
million) in the prior six years. The Company's acquisition of the assets of the
Detroit, Michigan steel service center and the development of this operation in
fiscal 1995, principally contributed to the overall sales increase.
In fiscal 1995, the Company reported a $1,126,000 net loss principally
because the Company substantially reduced its batch pickling operation due to
the loss of a major customer and recorded a $2,286,000 pre-tax charge for the
write-down of assets related to the pickling operation. See Note 10 to
Consolidated Financial Statements for further description of this write-down.
Excluding this pre-tax charge, the Company would have reported net income of
$1,159,000 for fiscal 1995 (such net income amount includes $226,000
attributable to an extraordinary gain, net of income tax, resulting from the
early retirement of debt obligations at a discount).
STEEL DISTRIBUTION AND PROCESSING SEGMENT This segment reported an $8.3 million
(21%) sales increase in fiscal 1995 compared to fiscal 1994. The development of
the Company's steel service center previously described largely contributed to
this sales increase. The continued strong performance of the U.S. automotive
industry and the overall economic strengthening of the industrial sectors which
utilize steel products maintained a strong sales market for the segment.
Excluding the aforementioned pre-tax charge, this segment reported operating
profit of $2.4 million representing a 9% increase over fiscal 1994. Gross margin
(net sales less cost of operations) as a percentage of net sales was 12.2% in
1995 compared to 13.1% in 1994. This gross margin decrease is attributable to a
gradual increase in the availability of the supply of steel occurring in fiscal
1995 coupled with a slightly decreasing demand occurring later in the fiscal
year.
WASTE MANAGEMENT SEGMENT Net sales for this segment increased $763,000 or 14%
and operating profit increased $95,000 or 18% in fiscal 1995 compared to fiscal
1994. The sales increase is mainly due to the continuing increases in volume and
prices charged for paint wastes handled by EPI. The segment's waste acid
recycling and disposal operations reflected small decreases in net sales and
gross margin for fiscal 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES $323,000 of the increase of
$1,071,000 in selling, general and administrative expenses is attributable to
the accelerated goodwill amortization in fiscal 1995 related to the pickling
operations assets, which were ultimately written-down as previously described.
In addition, the development of the Company's steel service center previously
described largely contributed to the selling, general and administrative expense
increase. Additional increases related to increased payroll and other costs.
INTEREST EXPENSE Interest expense increased $247,000 (or 29%) in fiscal 1995 due
to the dramatic rise in interest rates during 1995. In addition, the Company's
average outstanding borrowing base rose as a result
12
<PAGE> 13
of the increase in working capital requirements associated with the expansion
and growth of the business in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company had a $1,443,000 working capital deficit at February 29,
1996 reflecting a $2,698,000 working capital decrease from February 28, 1995.
This decrease is primarily a result of capital expenditures, payment of
long-term debt and funding of net losses during the period offset by net
proceeds from the exchange of common stock purchase warrants. Certain components
of working capital, including accounts receivable, inventories, notes payable
and accounts payable, historically may fluctuate significantly based upon market
conditions, sales volume and steel purchasing strategies of the Company's steel
operations.
The Company's primary sources of liquidity are its cash balances and a
$12 million revolving credit line with a bank. The revolving credit line was
increased in fiscal 1996 from $10 million to $12 million. Borrowing availability
under the revolving credit line is determined using a formula based upon
eligible accounts receivable and inventories. As of February 29, 1996, the
outstanding balance of the revolving credit line amounted to $9,006,000 and
unused availability amounted to $1,661,000.
The revolving credit line agreement prohibits the payment of cash
dividends on the Company's common stock and allows the payment of cash dividends
on the Company's preferred stock issues only if the Company is not in default of
any provisions in the loan agreement and payment of such dividend would not
result in any defaults.
In March 1995, the Company negotiated an agreement with a stockholder
whereby a convertible note payable in an amount of $597,000 was settled, subject
to certain conditions, for $448,000 payable in eighteen monthly payments
commencing March 1995, without interest. The early retirement of this obligation
resulted in the recording of an extraordinary gain of $149,000 in the first
quarter of fiscal 1996.
In the first quarter of fiscal 1997, William D. Feniger, an officer and
stockholder received 600,000 newly-issued shares of common stock in exchange for
a $300,000 reduction of a convertible note payable to him.
As a result of federal environmental regulations issued in 1991,
Environmental Purification Industries Company ("EPI"), the Company's paint waste
recycling operation is required to and has submitted to the U.S. EPA an
operating permit application under the Resources Conservation Recovery Act of
1980. The final approval for such a permit may take several years and require
additional outlays of funds. During the application and review process, EPI's
operations continue on interim status and are unaffected. EPI may be required to
make modifications to its operating procedures or equipment in the future,
although EPI's management believes its operations meet the requirements without
modification.
Haden Purification, the former partner of EPI, retained the right to
receive 10% of the proceeds by the Company from any sale, refinancing or similar
transactions relative to the Company's interests in EPI. The agreement
specifically permits, without payments to the former partner, the repayment of
certain loans or distribution of profits to the Company from the ordinary
business operations of EPI. The Company believes the likelihood of any such
distribution to the former partner is remote. Accordingly, the Company has not
recorded any liability for the contingent interest of the former partner in the
Company's balance sheet.
EPI has entered into a license agreement with Aster, Inc. whereby Aster
has granted the Company the exclusive right, except in Mexico, to use certain
patented processes and technology in its paint recycling process. EPI has agreed
to pay Aster royalties and other fees for ongoing work performed by Aster to
commercialize and to continue to refine the process, formulae and technology.
Minimum monthly payments required under the agreement are $20,000. EPI has begun
planning for construction of a facility which would utilize the Aster
technology. Planned expenditures for property and equipment amount to
$2,200,000, of which $700,000 was committed as of May 20, 1996. These planned
expenditures will be paid for from the anticipated proceeds from a planned
initial offering of approximately 50% of the paint waste recycling operations.
Otherwise, the Company does not have any material capital expenditure
commitments at this time. Capital expenditures are limited under its loan
agreement with the bank.
13
<PAGE> 14
The Company has incurred losses over the last two years, has a working
capital deficiency, and has been unable to meet certain loan covenants.
Management has begun to implement plans to improve the Company's operating
performance and financial position. Certain of these plans are as follows:
- An initial public offering of approximately 50% of its paint
waste recycling operations.
- The sale of its spent acid recycling operations.
- Exchange of 600,000 shares of Common Stock for a $300,000
reduction of a note payable to an officer and stockholder.
- Reduction of certain operating costs and refocusing on the
Company's core steel distribution and processing operations.
Historically, the Company's operations have been funded with cash
generated from operations and bank financing. The Company has also raised funds
through sale of equity securities and has used the proceeds to fund its
investments in EPI, among other items. As previously discussed, management is
taking measures to improve operating results and the Company's financial
position and accordingly, management believes its existing resources, including
available cash, cash provided by operating activities and the Company's credit
facilities will be sufficient to satisfy its working capital and other capital
requirements for fiscal 1996, except for planned capital expenditures of EPI
which will be funded from the proceeds of the planned public offering of 50% of
the paint waste recycling operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
Consolidated financial statements of the Company are included elsewhere
in this report as listed in Part IV, ITEM 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
14
<PAGE> 15
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------
The information required by this Item, except for certain information
relating to Executive Officers set forth at the end of Part I, is omitted
inasmuch as the Company intends to file its definitive 1996 Proxy Statement
containing such information with the Securities and Exchange Commission within
120 days after the close of its fiscal year ended February 29, 1996, and such
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
The information required by this Item is incorporated by reference from
the 1996 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------
The information required by this Item is incorporated by reference from
the 1996 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
The information required by this Item is incorporated by reference from
the 1996 Proxy Statement.
15
<PAGE> 16
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------- ---------------------------------------------------------------
(a) Documents filed as part of this report:
1. The following consolidated financial statements of the Company
are submitted pursuant to the requirements of ITEM 8:
<TABLE>
<S> <C>
Report of Independent Auditors F-1
Consolidated Balance Sheets at February 29, 1996 and February
28,1995 F-2
Consolidated Statements of Operations for each of the three years
in the period ended February 29, 1996 F-4
Consolidated Statements of Stockholders' Equity for each of the
three years in the period ended February 29, 1996 F-5
Consolidated Statements of Cash Flows for each of the three years
in the period ended February 29, 1996 F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
2. All schedules required pursuant to the requirements of ITEM 14
(d) are omitted because they are not applicable, not material,
not required or the required information is included in the
applicable financial statements or notes thereto.
3. EXHIBITS
3.1(a)* Certificate of Incorporation of the Company (incorporated
herein by reference from the Company's Registration
Statement on Form 8-A, dated January 31, 1986).
3.1(b)* Amendment to the Certificate of Incorporation of the
Company, effective September 30, 1986 (incorporated
herein by reference from the Company's Report on Form
10-K for fiscal year ended February 28, 1987).
3.1(c)* Amendment to the Certificate of Incorporation of the
Company, effective August 1, 1988 (incorporated herein by
reference from the Company's Registration Statement on
Form S-1, filed April 15, 1989, File No. 33-27955).
3.1(d)* Amendment to the Certificate of Incorporation of the
Company, effective August 18, 1993 (incorporated herein
by reference from the Company's Report on Form 10-Q for
the quarterly period ended August 31, 1993).
3.2(a)* Certificate of Designation, Preferences and Rights of the
Company (incorporated herein by reference from the
Company's Registration Statement on Form S-1, filed
September 16, 1989, File No. 33-27955).
3.2(b)* Amendment to the Certificate of Designation, Preferences
and Rights of the Company, effective August 25, 1993
(incorporated herein by reference from the Company's
Report on Form 10-Q for the quarterly period ended
August 31, 1993).
3.3(a)* By-Laws of the Company (incorporated herein by reference
from the Company's Registration Statement on Form 8-A,
dated January 31, 1986).
16
<PAGE> 17
3.3(b)* Certificate of Amendment of By-Laws of the Company
(incorporated herein by reference from the Company's
Report on Form 10-K for fiscal year ended February 28,
1990).
4.1* Specimen Stock Certificate (incorporated herein by
reference from the Company's Registration Statement on
Form 8-A, dated January 31, 1986).
4.2* Registration Statement on Form 8-A, dated January 31,
1986 (incorporated herein by reference to File No.
0-14203).
4.3* Form of Series B Preferred Stock (incorporated herein by
reference from the Company's Registration on Form S-1,
filed June 4, 1989, File No. 33-27955).
4.4* Warrant Agreement dated as of December 9, 1992 between
the Company and Whale Securities Co., L.P.("Whale")
(incorporated herein by reference from the Company's
Registration Statement on Form S-3, filed January 17,
1995, File No. 33-83590).
4.5* Warrant Agreement dated as of July 22, 1994 among the
Company, Continental and Whale (incorporated herein by
reference from the Company's registration Statement on
Form S-3, filed January 17, 1995, File No. 33-83590).
4.6* Form of Warrant Agreement among the Company, Continental
and Whale (incorporated herein by reference from the
Company's Registration Statement on Form S-3, filed
January 17, 1995, File No. 33-83590).
10.01(a)* Loan and Security Agreement, dated December 6, 1989,
among the Company, certain of its subsidiaries and Bank
of New England, N.A. (incorporated herein by reference
from the Company's Report on Form 10-K for fiscal year
ended February 28, 1990).
10.01(b)* Demand Note for $7,000,000 dated December 6, 1989, of the
Company to Bank of New England, N.A. (incorporated herein
by reference from the Company's Report on Form 10-K for
fiscal year ended February 28, 1990).
10.01(c)* Amendment No. 1 to Loan and Security Agreement, dated
March 27, 1990, among the Company, certain of its
subsidiaries and Bank of New England, N.A. (incorporated
herein by reference from the Company's Report on For
10-K for fiscal year ended February 28, 1990).
10.01(d)* Amendment No. 2 to the Loan and Security Agreement,
dated September 14, 1990, among the Company, certain of
its subsidiaries and National Canada Finance Corp.
(incorporated herein by reference from the Company's
Report on Form 10-K for fiscal year ended February 28,
1991).
10.01(e)* Amendment No. 3 to the Loan and Security Agreement, dated
May 31, 1991, among the Company, certain of its
subsidiaries and National Canada Finance Corp.
(incorporated herein by reference from the Company's
Report on Form 10-K for fiscal year ended February 28,
1991).
10.01(f)* Amendment No. 4 to the Loan and Security Agreement, dated
June 22, 1992, among the Company, certain of its
subsidiaries and National Canada Finance Corp.
(incorporated herein by reference from the Company's
Report on Form 10-K for fiscal year ended February 28,
1993).
10.01(g)* Amendment No. 5 to the Loan and Security Agreement, dated
May 11, 1993, among the Company, certain of its
subsidiaries and National Canada Finance Corp.
(incorporated herein by reference from the Company's
Report on Form 10-K for fiscal year ended February 28,
1993).
17
<PAGE> 18
10.01(h)* Amendment No. 6 to the Loan and Security Agreement, dated
October 20, 1993, among the Company, certain of its
subsidiaries and National Canada Finance Corp.
(incorporated herein by reference from the Company's
Report on Form 10-K for fiscal year ended February 28,
1994).
10.01(i)* Amendment No. 7 to the Loan and Security Agreement, dated
January 31, 1994, among the Company, certain of its
subsidiaries and National Canada Finance Corp.
(incorporated herein by reference from the Company's
Report on Form 10-K for fiscal year ended February 28,
1994).
10.01(j)* Term Note for $300,000, dated January 31, 1994, of the
Company to National Canada Finance Corp.(incorporated
herein by reference from the Company's Report on Form
10-K for fiscal year ended February 28, 1994).
10.01(k)* Amendment No. 8 to the Loan and Security Agreement,
dated November 30, 1994 among the Company, certain of its
subsidiaries and National Canada Finance Corp.
(incorporated herein by reference from the Company's
Report on Form 10-K for fiscal year ended February 28,
1995).
10.01(l)* Amendment No. 9 to the Loan and Security Agreement,
dated February 14, 1995 among the Company, certain of its
subsidiaries and National Canada Finance Corp.
(incorporated herein by reference from the Company's
Report on Form 10-K for fiscal year ended February 28,
1995).
10.01(m) Amendment No. 10 to the Loan and Security Agreement,
dated May 25, 1995, among the Company, certain of its
subsidiaries and National Canada Finance Corp.
10.01(n) Amendment No. 11 to the Loan and Security Agreement,
dated February 29, 1996, among the Company, certain of
its subsidiaries and National Canada Finance Corp.
10.01(o) Term Note for $300,000, dated February 29, 1996, of the
Company and Environmental Purification Industries, Inc.
to National Canada Finance Corp.
10.02(a)* Form of Amended and Restated Non-negotiable Promissory
Note for $596,822.79 issued to William D. Feniger
(incorporated herein by reference from the Company's
Registration Statement on Form S-1, filed June 9, 1989,
File No. 33-27955).
10.02(b)* Form of Amended and Restated Non-negotiable Promissory
Note for $596,822.79 issued to Melvin G. DeGrazia
(incorporated herein by reference from the Company's
Registration Statement on Form S-1, filed June 9, 1989,
File No. 33-27955).
10.02(c)* Escrow Agreement, dated January 4, 1990,by and among
Yale M. Feniger, William D. Feniger, Melvin G. DeGrazia,
Ted R. Meyers and David A. Katz (incorporated herein by
reference from the Company's Report on Form 10-K for
fiscal year ended February 28, 1990).
10.02(d)* Amendment to Non-negotiable Promissory Note, dated
November 1, 1992, between the Company and Karen DeGrazia,
executrix (incorporated herein by reference from the
Company's Report on Form 10-K for fiscal year ended
February 28, 1993).
10.02(e)* Amendment to Non-negotiable Promissory Note, dated
November 1, 1992, between the Company and William D.
Feniger (incorporated herein by reference from the
Company's Report on Form 10-K for fiscal year ended
February 28, 1993).
18
<PAGE> 19
10.02(f)* Compromise Agreement, dated June 2, 1994, between the
Company and Ruth A. Feniger (incorporated herein by
reference from the Company's Report on Form 10-K for
fiscal year ended February 28, 1994).
10.02(g)* Agreement dated February 10, 1995 modifying terms of the
Amended and Restated Non-negotiable Promissory Note for
$596,822.79 issued to Melvin G. DeGrazia, between the
Company and Karen A. DeGrazia. (incorporated herein by
reference from the Company's Report on Form 10-K for
fiscal year ended February 28, 1995).
10.02(h) Agreement to Defer Principal Payments on Promissory Note,
dated May 21, 1996, between the Company and William D.
Feniger.
10.02(i) Subscription Agreement, dated May 31, 1996, between the
Company and William D. Feniger.
10.03(a)* Lease between the Company and Greenbelt Associates, dated
February 14, 1992 (incorporated herein by reference from
the Company's Report on Form 10-K for fiscal year ended
February 29, 1992).
10.03(b)* Lease between Ottawa River Steel and Greenbelt
Associates, dated February 14, 1992 (incorporated herein
by reference from the Company's Report on form 10-K for
fiscal year ended February 29, 1992).
10.04(a) Lease between Ottawa River Steel Co. and Chicago
Investors, dated March 1, 1996.
10.04(b) Lease between Environmental Purification Industries
Company and Chicago Investors, dated March 1, 1996.
10.05(a)* Lease Purchase Agreement, dated June 30, 1986, between
The Economic Development Corporation of the City of
Detroit and National Metal (incorporated herein by
reference from the Company's Report on Form 10-K for
fiscal year ended February 28, 1987).
10.05(b)* Form of Bond No. R-1 (Roney & Co.) and Bond No R-2
(SeaGate Corporation), dated June 30, 1986,
(incorporated herein by reference from the Registrant's
Report on Form 10-K for fiscal year ended February 28,
1987).
10.05(c)* Guaranty Agreement, dated June 30, 1986, between National
Metal and The Toledo Trust Company (incorporated herein
by reference from the Company's Report on Form 10-K for
fiscal year ended February 28, 1987).
10.06(a)* Meridian National Corporation 1990 Non-Qualified and
Incentive Stock Option Plan, dated August 20, 1990
(incorporated herein by reference from the Company's
Report on Form 10-K for fiscal year ended February
28, 1991).
10.06(b) Amendment No. 1 to the Meridian National Corporation 1990
Non-Qualified and Incentive Stock Option Plan, effective
May 12, 1994.
10.06(c) Amendment No. 2 to the Meridian National Corporation 1990
Non-Qualified and Incentive Stock Option Plan, effective
June 6, 1995.
10.07(a)* Amended and Restated 1987 Non-Employee Directors' Stock
Option Plan of Meridian National Corporation, dated
August 20, 1990 (incorporated herein by reference from
the Company's Report on Form 10-K for fiscal year ended
February 28, 1991).
19
<PAGE> 20
10.07(b)* Amendment No. 1 to the Amended and Restated 1987
Non-Employee Directors' Stock Option Plan of Meridian
National Corporation, effective May 27, 1993
(incorporated herein by reference from the Company's
Report on Form 10-K for fiscal year ended February 28,
1994).
10.07(c) Amendment No. 2 to the Amended and Restated 1987
Non-Employee Directors' Stock Option Plan of Meridian
National Corporation, effective May 12, 1994.
10.07(d) Amendment No. 3 to the Amended and Restated 1987
Non-Employee Directors' Stock Option Plan of Meridian
National Corporation, effective June 6, 1995.
10.08* Meridian National Corporation Tax Deferred Retirement and
Savings Plan , as amended and restated (incorporated
herein by reference from the Company's Report on Form
10-K for fiscal year ended February 28, 1995).
10.09(a)* Employment Agreement of William D. Feniger, dated
June 23, 1989 (incorporated herein by reference from the
Company's Registration Statement on Form S-1, filed
July 17, 1989, File No. 33-27955).
10.09(b)* Amendment of Employment Agreement of William D. Feniger,
dated April 23, 1992 (incorporated herein by reference
from the Company's Report on Form 10-K for fiscal year
ended February 29, 1992).
10.09(c)* Employment Agreement of Joseph Klobuchar, Jr., dated
January 16, 1995 (incorporated herein by reference
from the Company's Report on Form 10-K for fiscal year
ended February 28, 1995).
10.10* Agreement and Plan of Merger, dated May 19, 1989 among
the Company, National Chemical Services, Inc. and Westco,
Inc. (incorporated herein by reference from the Company's
Report on Form 10-K for year ended February 28, 1989).
10.11(a)* Bond Purchase Agreement, dated February 12, 1990, between
the Company, EPI, Haden MacLellan Holdings, plc, Miller
& Schroeder Financial, Inc. and The Toledo-Lucas County
Port Authority (incorporated herein by reference from the
Company's Report on Form 10-K for fiscal year ended
February 28, 1990).
10.11(b)* Guaranty Agreement, dated as of December 15, 1989,
between the Company and Society Bank & Trust, Trustee
(incorporated herein by reference from the Company's
Report on Form 10-K for fiscal year ended February 28,
1990).
10.11(c)* Loan Agreement, dated as of December 15, 1989 (including
the Note as an Exhibit thereto) between Toledo-Lucas
County Port Authority and EPI (incorporated herein by
reference from the Company's Report on Form 10-K for
fiscal year ended February 28, 1990).
10.11(d)* Open-End Mortgage and Security Agreement, dated as of
December 15, 1989, between EPI and Society Bank & Trust,
Trustee (incorporated herein by reference from the
Company's Report on Form 10-K for fiscal year ended
February 28, 1990).
10.12* Amended and Restated Partnership Agreement of
Environmental Purification Industries Company
(incorporated herein by reference from the Company's
Report on Form 10-K for fiscal year ended February 28,
1994).
20
<PAGE> 21
10.13(a)* Memorandum of Understanding, dated November 1, 1991,
between the Company and Yale M. Feniger (incorporated
herein by reference from the Company's Report on Form
10-K for fiscal year ended February 29, 1992).
10.13(b)* Amendment to Memorandum of Understanding, dated June 2,
1994, between the Company and Yale M. Feniger
(incorporated herein by reference from the Company's
Report on Form 10-K for fiscal year ended February 28,
1994).
10.14(a)* Termination Agreement, dated July 1, 1992, among the
Company, National Purification, MEPI Corp., EPI, Haden
MacLellan Holdings, plc, Haden, Inc., Haden Environmental
Corporation and Haden Purification, Inc. (incorporated
herein by reference from the Company's Report on Form
10-K for fiscal year ended February 28, 1993).
10.14(b)* Guaranty and Security Agreement, dated July 1, 1992,
among National Purification, MEPI Corp. and Haden
Purification, Inc. (incorporated herein by reference
from the Company's Report on Form 10-K for fiscal year
ended February 28, 1993).
10.14(c)* First Amendment to Termination Agreement, dated as of
June 1993, among the Company, National Purification, MEPI
Corp., EPI, Haden MacLellan Holdings, plc, Haden, Inc.,
Haden Environmental Corporation and Haden Purification,
Inc. (incorporated herein by reference from the Company's
Report on Form 10-K for fiscal year ended February 28,
1993).
10.14(d)* Promissory Note, dated as of June 1993, between EPI and
Haden Purification, Inc. (incorporated herein by
reference from the Company's Report on Form 10-K for
fiscal year ended February 28, 1993).
10.14(e)* Security Agreement, dated as of June 1993, between EPI
and Haden Purification, Inc. (incorporated herein by
reference from the Company's Report on Form 10-K for
fiscal year ended February 28, 1993).
10.14(f)* Second Amendment to Termination Agreement, dated as of
April 28, 1994, among the Company, National Purification,
MEPI Corp., EPI, Haden MacLellan Holdings, plc, Haden,
Inc., Haden Environmental Corporation and Haden
Purification, Inc. (incorporated herein by reference from
the Company's Report on Form 10-K for fiscal year ended
February 28, 1994).
10.14(g)* Guaranty and Security Agreement, dated as of April 28,
1994 among the Company, National Purification, MEPI Corp.
and Haden Purification, Inc. (incorporated herein by
reference from the Company's Report on Form 10-K for
fiscal year ended February 28, 1994).
10.15(a)* Real Estate Sale and Purchase Agreement, dated January
26, 1994, between Ottawa River Steel and Klockner Namasco
Corporation (incorporated herein by reference from the
Company's Report on Form 10-K for fiscal year ended
February 28, 1994).
10.15(b)* Mortgage Note and Promissory Note and related agreements,
dated January 26, 1994, between Ottawa River Steel and
Klockner Namasco Corporation (incorporated herein by
reference from the Company's Report on Form 10-K for
fiscal year ended February 28, 1994).
10.16* Agreement dated April 20, 1995 between Company and The
Wall Street Group, Inc. (incorporated herein by reference
from the Company's Report on Form 10-K for fiscal year
ended February 28, 1995).
10.17 Lease between National Metal Processing, Inc. and MNP
Corporation, dated June 1, 1995.
21
<PAGE> 22
10.18(a)* Asset Purchase Agreement, dated November 17, 1995, by and
among Ottawa River Steel Co., Doolan Industries, Inc.,
Timothy Stein and Juergen H. Weberbauer (incorporated
herein by reference from the Company's Current Report on
Form 8-K, dated November 17, 1995).
10.18(b) Loan and Security Agreement, dated November 17, 1995,
between Ottawa River Steel Co. and FINOVA Capital
Corporation.
10.18(c) Lease Agreement, dated October 31, 1995, between Ottawa
River Steel Company and USL Capital Corporation.
10.18(d) Industrial Building Lease, dated November 10, 1995,
between Ottawa River Steel Co. and Centerpoint Properties
Corporation.
10.19 License Agreement, dated September 7, 1995, between
Environmental Purification Industries Company and Aster,
Inc.
11 Statement of Computation of Earnings per Share
21 List of Subsidiaries of Registrant
23 Consent of Independent Auditors
27 Financial Data Schedule
(b) Reports filed on Form 8-K.
One report on Form 8-K was filed during the quarter ended February 29,
1996. A February 23, 1996 report was filed to disclose under Item 5.
Other Events, that the Company would cease operating its pickling
business in Detroit, Michigan effective March 15, 1996.
- ------------------------
* Indicates an exhibit previously filed with the Securities and Exchange
Commission and incorporated herein by reference.
22
<PAGE> 23
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 to be signed on
its behalf by the undersigned, thereunto duly authorized on the 12th day of
June, 1996.
MERIDIAN NATIONAL CORPORATION
By: /s/ William D. Feniger
------------------------
William D. Feniger
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ William D. Feniger Chairman of the Board June 12, 1996
- ------------------------ of Directors, President
William D. Feniger and Chief Executive Officer
(Principal Executive Officer)
/s/ James L. Rosino Vice President - Finance June 12, 1996
- ------------------------ Principal Financial and
James L. Rosino Accounting Officer)
/s/ Wayne Gardenswartz Director June 12, 1996
- ------------------------
Wayne Gardenswartz
/s/ Jeffrey A. Slade Director June 12, 1996
- ------------------------
Jeffrey A. Slade
23
<PAGE> 24
Report of Independent Auditors
The Board of Directors and Stockholders
Meridian National Corporation
We have audited the accompanying consolidated balance sheets of Meridian
National Corporation as of February 29, 1996 and February 28, 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended February 29, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Meridian National
Corporation at February 29, 1996 and February 28, 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended February 29, 1996, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Toledo, Ohio
May 20, 1996
F-1
<PAGE> 25
Meridian National Corporation
Consolidated Balance Sheets
<TABLE>
<CAPTION>
FEBRUARY 29, 1996 FEBRUARY 28, 1995
----------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 176,667 $ 655,373
Accounts receivable, net of allowance of $249,700 ($171,800
in 1995) for doubtful accounts 8,221,356 9,103,949
Inventories 8,860,574 9,308,691
Other current assets 157,840 191,876
---------------------------------
Total current assets 17,416,437 19,259,889
Property and equipment, at cost:
Buildings, building improvements and leasehold improvements
3,868,286 3,812,292
Machinery and equipment 7,493,001 5,057,408
Office furniture and equipment 709,753 559,150
Land and land improvements 224,419 214,134
---------------------------------
12,295,459 9,642,984
Less accumulated depreciation and amortization 5,403,083 4,772,164
---------------------------------
Net property and equipment 6,892,376 4,870,820
Other assets 944,453 929,271
=================================
$25,253,266 $25,059,980
=================================
</TABLE>
F-2
<PAGE> 26
<TABLE>
<CAPTION>
FEBRUARY 29, 1996 FEBRUARY 28, 1995
---------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 9,006,182 $ 9,525,341
Accounts payable 8,461,959 6,914,456
Accrued liabilities 442,933 676,020
Long-term debt due within one year:
Related parties 149,206 349,325
Other 799,270 540,104
--------------------------------
Total current liabilities 18,859,550 18,005,246
Long-term debt due after one year:
Related parties 596,822 895,233
Other 4,891,969 4,034,059
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.001; 5,000,000 shares authorized:
$100 Series A, 5,000 shares authorized, 4,000 shares
issued and outstanding 400,000 400,000
$3.75 Series B, 1,375,000 shares authorized, 206,752
shares issued and outstanding 775,320 775,320
Common stock, par value $.01; 20,000,000 shares authorized,
2,755,145 shares issued and outstanding (2,534,639 in 1995)
27,551 25,346
Capital in excess of stated value 10,042,327 9,785,677
Deficit (10,340,273) (8,860,901)
--------------------------------
Total stockholders' equity 904,925 2,125,442
--------------------------------
$ 25,253,266 $ 25,059,980
================================
</TABLE>
See accompanying notes.
F-3
<PAGE> 27
Meridian National Corporation
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------
FEBRUARY 29, FEBRUARY 28,
1996 1995 1994
-----------------------------------------------
<S> <C> <C> <C>
Net sales $56,606,860 $53,238,574 $44,186,296
Costs of sales 50,331,656 45,191,979 37,106,026
-----------------------------------------------
Gross margin 6,275,204 8,046,595 7,080,270
Other costs and expenses:
Selling, general and administrative 6,483,814 5,986,857 4,915,588
Interest expense 1,469,843 1,086,587 840,061
Write-down of noncurrent assets - 2,285,548 200,000
Miscellaneous - net (179,639) 15,245 10,386
-----------------------------------------------
7,774,018 9,374,237 5,966,035
-----------------------------------------------
Income (loss) before income taxes and
extraordinary gain (1,498,814) (1,327,642) 1,114,235
Provision for federal income taxes - current - 25,000 -
-----------------------------------------------
Income (loss) before extraordinary gain (1,498,814) (1,352,642) 1,114,235
Extraordinary gain - extinguishment of debt, net
of federal income tax of $5,000 in 1995 149,206 226,276 -
-----------------------------------------------
Net income (loss) $(1,349,608) $(1,126,366) $ 1,114,235
===============================================
Earnings (loss) applicable to common stock
-----------------------------------------------
$(1,479,370) $(1,262,744) $ 592,952
===============================================
Earnings (loss) per common share - primary and fully diluted:
Income (loss) before extraordinary gain
$(0.62) $(0.61) $0.41
Extraordinary gain 0.06 0.09 -
-----------------------------------------------
Net income (loss) $(0.56) $(0.52) $0.41
===============================================
</TABLE>
See accompanying notes.
F-4
<PAGE> 28
Meridian National Corporation
Consolidated Statements of Stockholders' Equity
Years ended February 29, 1996 and February 28, 1995 and 1994
<TABLE>
<CAPTION>
$100 $3.75 Capital in
Series A Series B excess of
preferred preferred Common stated
stock stock stock value Deficit Total
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at February 28, 1993 $400,000 $4,680,004 $13,179 $5,153,180 $ (8,193,358) $2,053,005
Net income for 1994 1,114,235 1,114,235
Dividends:
Cash dividends on Series A preferred stock (25,202) (25,202)
Cash dividends on Series B preferred stock (79) (79)
139,530 shares of common stock issued to
holders of Series B preferred stock 1,395 494,607 (496,002) -
17,760 shares of common stock issued upon
exercise of options 178 27,572 27,750
----------------------------------------------------------------------------
Balance at February 28, 1994 400,000 4,680,004 14,752 5,675,359 (7,600,406) 3,169,709
Net loss for 1995 (1,126,366) (1,126,366)
Dividends:
Cash dividends on Series A preferred stock (27,900) (27,900)
Cash dividends on Series B preferred stock (128) (128)
39,267 shares of common stock issued to
holders of Series B preferred stock 392 105,709 (106,101) -
Exchange of 1,041,249 shares of Series B
preferred stock for 10,403 units, each
consisting of 90 shares of common stock and
100 warrants to purchase common stock (3,904,684) 9,362 3,804,346 (90,976)
Exchange of 84,000 warrants to purchase common
stock for 84,000 units, each consisting of one
share of common stock and one warrant to
purchase common stock 840 200,263 201,103
-----------------------------------------------------------------------------
Balance at February 28, 1995 400,000 775,320 25,346 9,785,677 (8,860,901) 2,125,442
Net loss for 1996 (1,349,608) (1,349,608)
Dividends:
Cash dividends on Series A preferred stock (36,000) (36,000)
Cash dividends on Series B preferred stock (65) (65)
64,091 shares of common stock issued to
holders of Series B preferred stock 641 93,058 (93,699) -
Exchange of 156,415 warrants to purchase common
stock for 156,415 units, each consisting of
one share of common stock and one warrant to
purchase common stock 1,564 163,592 165,156
-----------------------------------------------------------------------------
Balance at February 29, 1996 $400,000 $775,320 $27,551 $10,042,327 $(10,340,273) $ 904,925
=============================================================================
</TABLE>
See accompanying notes.
F-5
<PAGE> 29
Meridian National Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------------
FEBRUARY 29, FEBRUARY 28,
1996 1995 1994
-----------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(1,349,608) $(1,126,366) $ 1,114,235
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 723,831 673,641 634,675
Extraordinary gain (149,206) (226,276) -
Amortization of intangible assets 6,148 481,357 158,775
Write-down of noncurrent assets - 2,285,548 200,000
Loss related to property and equipment - 48,041 121,112
Changes in operating assets and liabilities:
Accounts receivable 882,593 (2,988,240) (1,117,411)
Inventories 1,247,117 (5,341,061) 165,342
Other current assets 34,036 16,123 (47,759)
Accounts payable 1,547,503 3,194,696 (703,508)
Accrued liabilities (233,087) 196,451 191,439
-----------------------------------------------------
Net cash provided by (used in) operating activities
2,709,327 (2,786,086) 716,900
INVESTING ACTIVITIES
Cash paid for acquired business (2,499,000) - -
Additions to property and equipment (1,078,474) (372,942) (571,707)
Changes in other assets (178,413) (150,782) (22,442)
Proceeds from disposals 69,992 - -
-----------------------------------------------------
Net cash used in investing activities (3,685,895) (523,724) (594,149)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 1,700,000 - 557,895
Payments on long-term debt (951,048) (1,049,152) (684,748)
Change in notes payable (519,159) 4,753,221 (161,575)
Net proceeds from exchange of warrants 304,134 201,103 -
Cash dividends paid (36,065) (28,028) (25,281)
Costs related to warrant exchange - (128,062) -
Costs of exchange of Series B preferred shares - (90,976) -
Issuance of common stock - - 27,750
-----------------------------------------------------
Net cash provided by (used in) financing activities
497,862 3,658,106 (285,959)
-----------------------------------------------------
Increase (decrease) in cash (478,706) 348,296 (163,208)
Cash at beginning of year 655,373 307,077 470,285
-----------------------------------------------------
Cash at end of year $ 176,667 $ 655,373 $ 307,077
=====================================================
Supplemental cash flow information:
Cash paid for interest $1,475,254 $ 1,105,592 $ 778,788
=====================================================
</TABLE>
Significant noncash investing and financing activities:
In fiscal 1995, the Company acquired certain property and equipment, in part,
by issuance of $1,045,000 of long-term debt.
See accompanying notes.
F-6
<PAGE> 30
Meridian National Corporation
Notes to Consolidated Financial Statements
February 29, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Company has incurred losses over the last two years, has a working capital
deficiency, and has been unable to meet certain bank loan covenants. The loan
covenant violations have been waived by the bank. Management has begun to
implement plans to improve the Company's operating performance, liquidity and
financial position. Certain of these plans are as follows:
o An initial public offering of approximately 50% of the common stock of
its paint waste recycling operations.
o The sale of its spent acid recycling operations.
o Elimination of unprofitable bar coil processing operations and rental
of the related facilities.
o Exchange of 600,000 shares of common stock for a reduction of $300,000
to a convertible note payable to an officer and stockholder.
o Reduction of certain operating costs and refocusing on the Company's
core steel distribution and processing operations.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all subsidiaries in which it has in excess of a 50% interest. All material
intercompany items have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures 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 may differ from these estimates.
INVENTORY VALUATION
Inventories are carried at the lower of cost, using the specific identification
method, or market.
F-7
<PAGE> 31
Meridian National Corporation
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Depreciation and amortization are provided, principally by means of accelerated
methods, except for the paint waste recycling subsidiary for which all assets
are depreciated using the straight-line method, based on the following estimated
useful lives:
<TABLE>
<S> <C>
Land improvements 15 - 20 years
Buildings, building improvements and leasehold
improvements 31.5 - 40 years
Machinery and equipment 5 - 12 years
Office furniture and equipment 5 - 10 years
</TABLE>
INTANGIBLE ASSETS
The Company evaluates the recoverability of long-lived assets based on
undiscounted projected cash flows, excluding interest and taxes, when factors
indicate that an impairment may exist. As more fully described in Note 10, the
Company has written off all of the goodwill associated with one of its steel
pickling operations and all of the costs of noncompete and related agreements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Based on the Company's financial condition, the collateral securing outstanding
debt and the frequently redetermined interest rates associated with the majority
of the Company's debt instruments, the Company believes that the aggregate fair
values of short-term notes payable and long-term debt approximate the carrying
values.
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share is computed based upon the weighted average
number of common shares and, when material in the aggregate, dilutive common
equivalent shares outstanding during each period. Common shares issued for
dividends on preferred stock are included in weighted average shares outstanding
beginning on the date issued. In July 1994 the Company completed an exchange
offer for a significant portion of its Series B preferred stock. Common shares
issued in the exchange are included in weighted average shares outstanding as if
the exchange had occurred at the beginning of fiscal 1995. The effects of
convertible securities, options and warrants are excluded from
F-8
<PAGE> 32
Meridian National Corporation
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
earnings per share calculations when the effect would be anti-dilutive. Fully
diluted earnings per common share exclude the effects of convertible securities
as such effects are anti-dilutive in all periods. The weighted average number of
common and common equivalent shares used to compute earnings per share for each
period is:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------
<S> <C> <C> <C>
Primary 2,638,126 2,423,864 1,430,930
Fully diluted 2,638,126 2,423,864 1,432,409
</TABLE>
Cash dividends on preferred stock and the value of common shares issued as
dividends on Series B preferred stock ($129,764 in 1996, $136,378 in 1995 and
$521,283 in 1994) are deducted in arriving at earnings (loss) applicable to
common shares.
STOCK OPTIONS
All options have been granted at prices not less than the market price on the
date granted. Accordingly, the Company recognizes no compensation expense
related to these options in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB No. 25). In October
1995, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," which
encourages, but does not require, expense recognition for stock-based awards
based on their estimated fair value on the date of grant. The Company presently
intends to continue to account for stock-based awards under the provisions of
APB No. 25.
2. CONCENTRATION OF CREDIT RISK
The Company and its subsidiaries are engaged in the trading and processing of
steel products for the automotive, truck, and appliance industries and the
recycling or disposal of paint and acid wastes for generators of such wastes in
the automotive and steel industries located primarily in the Midwestern United
States. Substantially all of the Company's accounts receivable as of February
29, 1996 and February 28, 1995 are due from companies which operate in these
industries. The Company extends credit based on an evaluation of credit reports,
payment practices and, in most cases, financial condition. Generally, collateral
or letters of credit are not required. Credit losses are provided for in the
financial statements and consistently have been within management's
expectations.
F-9
<PAGE> 33
Meridian National Corporation
Notes to Consolidated Financial Statements (continued)
3. SHORT-TERM NOTES PAYABLE
The Company has a $12,000,000 revolving demand line of credit with a bank under
a Loan and Security Agreement with interest at 1% above the bank's prime rate.
The agreement allows borrowings under a lending formula based upon eligible
accounts receivable and inventories less outstanding letters of credit issued
under the agreement. At February 29, 1996, approximately $1,700,000 was
available under the revolving demand loan. The agreement provides for a
commitment fee equal to 1/4% of the excess of $12,000,000 over average daily
borrowings and is secured by substantially all of the Company's personal
property not otherwise pledged.
The agreement contains covenants which require the maintenance of certain
financial ratios, restrict the payment of dividends, restrict the incurrence of
indebtedness and limit certain activities and transactions. Violations of
certain covenants during 1996 have been waived by the bank. In connection with
the waivers, the bank has agreed to amend certain other covenants after
completion of the transactions discussed under Basis of Presentation in Note 1
above.
Weighted average interest rates at year end were 9.25% in 1996, 10% in 1995 and
7.5% in 1994.
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28,
1996 1995
--------------------------------
<S> <C> <C>
8-1/2% mortgage note payable to trustee bank, due in
monthly installments, including interest, of
approximately $36,500 until final maturity in November
2000 $1,651,875 $1,925,625
Mortgage and other notes payable, due in monthly
installments of approximately $12,700, including interest
(9.5% at February 29, 1996) at 2% above prime
rate (maximum rate of 9.5%), with final payment of
$605,000 due January 1999 852,909 977,012
</TABLE>
F-10
<PAGE> 34
Meridian National Corporation
Notes to Consolidated Financial Statements (continued)
4. LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28,
1996 1995
------------------------------
<S> <C> <C>
Note payable, due in monthly installments of $17,675
including interest at 11.7% through December 1, 2000 770,087 -
Note payable to HPI, due in monthly installments based
on the volume of paint waste recycled by EPI, with
interest (9.25% at February 29, 1996) at 1% over
prime 700,722 713,459
Convertible note payable to an officer and stockholder
payable quarterly at 9%, secured by a pledge of common
stock of certain subsidiaries. The note is subordinate
to bank borrowings and is convertible into shares of
common stock at a conversion price of $15.60 per share 596,822 596,822
Note payable to bank under the Loan and Security Agreement,
due in monthly installments of $5,000 through December 1998,
plus interest (9.75% at February 29, 1996) at 1 1/2%
above the bank's prime rate 170,000 230,000
Note payable to a stockholder, due in monthly installments
of $24,867, without interest, through July 1996 149,206 596,822
Obligations under long-term capital leases:
Lease purchase obligation payable in monthly installments
of $14,904 plus interest at 9.92% through October 30, 2002 869,772 -
Lease purchase obligation covering industrial revenue
bonds, payable in monthly installments of $9,444 plus
interest (7.79% at February 29, 1996) at 92% of prime
through July 1, 2001 613,889 727,223
Lease purchase obligation payable in monthly installments
of $1,736 plus interest at 12.83% through February 1, 2000 61,985 -
Other - 51,758
------------------------------
6,437,267 5,818,721
Less amounts due within one year 948,476 889,429
------------------------------
$5,488,791 $4,929,292
==============================
</TABLE>
F-11
<PAGE> 35
Meridian National Corporation
Notes to Consolidated Financial Statements (continued)
4. LONG-TERM DEBT (CONTINUED)
In June 1994, the Company negotiated agreements with a former common stockholder
and officer and a former employee, whereby the Company settled notes with unpaid
balances aggregating $666,013 which were scheduled to mature in September 1995.
Under the agreements the Company made payments on the notes in June 1994 of
approximately $346,000, plus accrued interest. One of the agreements calls for
additional payments aggregating $100,000, including interest, over a period of
two years. The early retirement of these obligations resulted in the recording
in fiscal 1995 of an extraordinary gain of $226,276, net of federal income tax
of $5,000.
HPI assumed 50% of the remaining principal, interest and fee payments due under
the 8 1/2% mortgage note payable and was assigned 50% of the amount held in
trust to meet future debt service requirements. The above amount due under the 8
1/2% mortgage note payable has been guaranteed by the Company and is
recorded net of the amount assumed by HPI pursuant to the Termination Agreement.
In fiscal 1996, the Company negotiated an agreement with a stockholder whereby a
convertible note payable in an amount of $596,822 was settled, subject to
certain conditions, for approximately $448,000 payable in 18 monthly payments
commencing in March 1995, without interest. The settlement resulted in the
recording of an extraordinary gain of approximately $149,000.
An officer and stockholder of the Company has agreed to defer payment of a
convertible note payable of $596,822 until after February 28, 1997. The note was
scheduled to mature in September 1995. Accordingly, the note payment has been
excluded from long-term debt due within one year in the accompanying balance
sheets. In May 1996 the Board of Directors authorized the issuance of 600,000
shares of the Company's common stock to an officer and stockholder in exchange
for a reduction of $300,000 to the convertible note payable to the officer and
stockholder.
Borrowings under the note payable to HPI are charged interest at 1% over the
prime rate. Accrued but unpaid interest through June 30, 1994 has been added to
the principal balance outstanding and bears interest in accordance with the
terms of the loan. At June 30, 1994 and 1993, $50,055 and $33,222, respectively,
of accrued but unpaid interest was added to the principal balance. Commencing
July 1994, principal is being repaid in monthly installments based on the volume
of paint wastes processed through EPI's facility. EPI is required to make
additional quarterly installments based on a percentage of its net cash flow for
the quarter as outlined in the loan agreement. The
F-12
<PAGE> 36
Meridian National Corporation
Notes to Consolidated Financial Statements (continued)
4. LONG-TERM DEBT (CONTINUED)
Company's partnership interests in EPI are pledged as security for borrowings
from HPI.
Maturities of long-term debt in each of the five fiscal years subsequent to
February 29, 1996, including the principal portion of minimum payments under
long-term lease obligations, are approximately as follows:
<TABLE>
<S> <C>
1997 $ 948,000
1998 1,437,000
1999 895,000
2000 1,426,000
2001 825,000
</TABLE>
5. LEASE COMMITMENTS
CAPITALIZED LEASES
The Company leases certain property and equipment under long-term agreements
classified as capital leases. Certain facilities and related equipment were
financed through proceeds from the issuance of industrial revenue bonds; the
leases provide for annual rentals sufficient to amortize principal and interest
on the bonds. The property and equipment can be purchased at the expiration of
the lease for nominal amounts. In addition, a facility is leased from an
affiliate of an officer and certain stockholders of the Company.
The cost and accumulated amortization of property leased under capital leases
are as follows:
<TABLE>
<CAPTION>
FEBRUARY 29, 1996 FEBRUARY 28, 1995
-----------------------------------------
<S> <C> <C>
Buildings $1,195,316 $1,232,395
Machinery and equipment 922,600 117,350
-----------------------------------------
2,117,916 1,349,745
Less accumulated amortization 663,193 574,543
-----------------------------------------
$1,454,723 $ 775,202
=========================================
</TABLE>
F-13
<PAGE> 37
Meridian National Corporation
Notes to Consolidated Financial Statements (continued)
5. LEASE COMMITMENTS (CONTINUED)
Future minimum payments and their present value under these leases at February
29, 1996 are approximately as follows:
<TABLE>
<S> <C>
1997 $ 353,000
1998 347,000
1999 338,000
2000 330,000
2001 301,000
Thereafter 346,000
----------------------
Total minimum lease payments 2,015,000
Less amount representing interest 469,000
======================
Present value of minimum lease payments
included in long-term debt
$1,546,000
======================
</TABLE>
The Company has subleased certain facilities, including a facility leased under
a capital lease. Minimum aggregate sublease payments to be received subsequent
to February 29, 1996 amounted to $348,532.
OPERATING LEASES
The Company leases certain property and equipment under agreements classified as
operating leases. Total rent expense charged to operations for 1996, 1995 and
1994 approximated $373,000, $257,000 and $336,000, respectively. Minimum future
rental commitments under noncancellable operating leases at February 29, 1996,
including aggregate payments of $485,000 to an affiliate of an officer and
certain stockholders, are $549,000 in 1997, $434,000 in 1998, and $13,000 in
1999.
F-14
<PAGE> 38
Meridian National Corporation
Notes to Consolidated Financial Statements (continued)
6. COMMITMENTS AND CONTINGENCIES
Effective July 1, 1992 Environmental Purification Industries Company ("EPI")
became a wholly-owned subsidiary of the Company when, pursuant to a Termination
Agreement, Haden Purification, Inc. ("HPI") terminated and abandoned its 50%
partnership interest in EPI. HPI is entitled to receive 10% of the proceeds
realized by the Company from any sale, refinancing or similar transactions
relative to the Company's interests in EPI. The agreement specifically permits,
without payment to HPI, the repayment of certain loans or distribution of
profits to the Company from the ordinary business operations of EPI. The Company
believes the likelihood of any such distribution to HPI is remote. Accordingly,
the Company has not recorded any liability for the contingent interest of HPI in
the Company's balance sheet.
EPI has entered into a license agreement with Aster, Inc. whereby Aster has
granted the Company the exclusive right, except in Mexico, to use certain
patented processes and technology in its paint recycling process. EPI has agreed
to pay Aster royalties and other fees for ongoing work performed by Aster to
commercialize and to continue to refine the processes, formulae and technology.
Minimum monthly payments required under the agreement are $20,000. EPI has begun
planning for construction of facilities which would utilize Aster technology.
Planned expenditures for property and equipment amount to $2,200,000, of which
$700,000 was committed as of May 20, 1996.
The Company is involved in certain litigation and claims, principally relating
to labor relations matters. The ultimate liability with respect to such
proceedings cannot be estimated with certainty. However, the Company believes,
based on its examination and review of such matters, that such ultimate
liability will not be material in relation to the Company's consolidated
financial statements.
7. CAPITAL STOCK
The Series B preferred stock has a mandatory dividend payable semiannually at an
annual rate of $.375 per share, if paid in cash, or, at the Company's option,
$.4875 per share if paid in shares of common stock based on the average market
value of the common stock for the 20 days prior to the record date. Holders of
the Series B preferred stock are entitled to one-tenth vote for each share held
and, subject to certain conditions, vote together with the holders of common
stock as a single class. Each share of the Series B preferred stock is
convertible, at the option of the holder into .25 shares of common stock,
subject to adjustment under certain circumstances. The Series B preferred stock
may be
F-15
<PAGE> 39
Meridian National Corporation
Notes to Consolidated Financial Statements (continued)
7. CAPITAL STOCK (CONTINUED)
redeemed by the Company, in whole or in part, at a redemption price of $4.875
per share if the average of the closing prices of the common stock has been at
least $22.50 per share during twenty consecutive trading days.
During the period from June 22 to July 26, 1994, the Company extended a special
offer to holders of its Series B preferred stock to exchange for each 100 shares
of Series B preferred stock, one unit, consisting of 90 newly issued shares of
common stock and 100 warrants (the "1999 warrants") to purchase shares of common
stock at an exchange price of $2.75 per share, subject to adjustment in certain
circumstances. The 1999 Warrants are exercisable through June 1999. A total of
1,041,249 shares, or 83% of the Series B preferred shares outstanding, were
validly tendered for exchange. The number of 1999 Warrants outstanding at
February 29, 1996 was 1,040,300.
The Company issued 1,265,000 common stock purchase warrants in 1989 (the
"Original Warrants"). The terms of the Original Warrants were modified by the
Company during a special exercise period which extended through July 31, 1995,
at which time the Original Warrants expired. During this period holders of the
Original Warrants could purchase, at a purchase price of $2.75, a unit
consisting of one share of common stock and one common stock purchase warrant
("1998 Warrant"). The 1998 Warrants entitle the holder to purchase one share of
common stock at any time commencing on May 1, 1996 and ending May 31, 1998, at a
per share exercise price of $2.75. Through July 31, 1995, 240,415 Original
Warrants were exercised. All 1998 Warrants remain outstanding at February 28,
1996.
The Company has also issued to a financial consulting firm stock warrants
exercisable into 30,000 shares of the Company's common stock. The warrants are
exercisable at a price of $1.25 per share and expire in December 1997.
Holders of the Series A preferred stock are entitled to receive quarterly,
cumulative dividends of $2.25 per share. The Series A preferred stock does not
have voting rights and is redeemable at the Company's discretion for $100 plus
accrued and unpaid dividends.
F-16
<PAGE> 40
Meridian National Corporation
Notes to Consolidated Financial Statements (continued)
7. CAPITAL STOCK (CONTINUED)
Common shares reserved for future issuance at February 29, 1996 aggregated
1,943,809 and related to the following:
<TABLE>
<S> <C>
Common stock purchase warrants 1,333,386
Stock options 482,220
Convertible debt 76,515
Convertible preferred stock 51,688
</TABLE>
On August 6, 1993, stockholders approved a change in the par value of the common
stock from $.001 par value per share to $.01 par value per share and a
one-for-ten reverse split of the common stock effective August 18, 1993. All
references in the financial statements to the number of common shares, stock
options and per common share amounts have been retroactively restated to reflect
the reverse split. Stockholders concurrently adjusted the voting rights of the
Series B preferred stock to one-tenth of a vote per Series B preferred share in
order to maintain proportionate voting power among common and Series B preferred
stockholders. The conversion and exercise rights of all convertible securities
have been adjusted to reflect the reverse stock split.
8. STOCK OPTIONS
The Company has a nonqualified and incentive stock option plan for its officers
and key employees under which 350,000 shares of common stock may be issued.
Incentive stock options issued to stockholders possessing more than ten percent
of the combined voting rights of the Company may be granted at an exercise price
of not less than 110 percent of the fair market value of the common stock at the
date of the grant and are exercisable for a period not exceeding five years from
the date of the grant. All other options under the plan may be granted at
amounts not less than the fair market value of the common stock at the date of
the grant and are exercisable for a period not exceeding ten years from the date
of the grant.
The Company has also established a nonemployee directors' stock option plan
under which 150,000 shares of common stock may be issued. Under this plan,
eligible directors who have served twelve consecutive months are annually
granted options to purchase 1,500 shares. Under the plan, options may be granted
at an exercise price equal to the fair market value on the date of grant and are
exercisable for a period not exceeding ten years from the date of grant.
F-17
<PAGE> 41
8. STOCK OPTIONS (CONTINUED)
Information on stock options is as follows:
<TABLE>
<CAPTION>
Shares Under Exercise
Option Price
----------------------------------------
<S> <C> <C>
Outstanding at February 28, 1994 95,100 $1.72 to $17.20
Granted 40,250 $2.81 to $3.50
Cancelled (50) $17.20
---------
Outstanding at February 28, 1995 135,300 $1.72 to $17.20
Granted 106,000 $1.78 to $2.22
Cancelled (11,500) $1.72 to $2.81
=========
Outstanding at February 29, 1996 229,800
=========
Exercisable at February 29, 1996 128,200
=========
</TABLE>
9. INCOME TAXES
The Company has net operating loss, alternative minimum tax credit and business
credit carryforwards for federal tax purposes of approximately $5,259,000,
$9,000 and $18,000, respectively, available for the reduction of future federal
income tax. Net operating loss carryforwards begin expiring in fiscal 2005.
The effective income tax rate, excluding extraordinary gains, for 1996,
1995 and 1994 differs from the U. S. federal income tax rate due to the
following:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------------
<S> <C> <C> <C>
Tax (benefit) based on statutory U. S. federal
income tax rate (34.0)% (34.0)% 34.0%
Change in valuation allowance 36.2 6.5 (46.9)
State and local tax effects (5.4) (2.5) 5.2
Amortization of goodwill 0.1 9.4 1.4
Writedown of goodwill - 18.0 6.1
Other 3.1 4.5 0.2
==================================
Effective rate - % 1.9% - %
==================================
</TABLE>
F-18
<PAGE> 42
Meridian National Corporation
Notes to Consolidated Financial Statements (continued)
9. INCOME TAXES (CONTINUED)
Deferred income taxes are measured based on temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
FEBRUARY 29, 1996 FEBRUARY 28, 1995
-----------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $2,104,000 $1,545,000
Property and equipment - 224,000
Other 322,000 206,000
-----------------------------------------
Total deferred tax assets 2,426,000 1,975,000
Valuation allowance (2,337,000) (1,951,000)
-----------------------------------------
Net deferred tax assets 89,000 24,000
Deferred tax liabilities (89,000) (24,000)
-----------------------------------------
Net deferred tax assets and liabilities $ - $ -
=========================================
</TABLE>
Change in the valuation allowance equals the change in net deferred tax assets.
10. WRITE-DOWN OF NONCURRENT ASSETS
In October 1993, the principal customer for one of its steel pickling operations
notified the Company of its intention to transfer its business in house, except
for certain products which it could not then process. As a result of this
notice, the Company revised its projections of undiscounted future cash flows of
this operation based on its evaluation of the expected future business with this
customer. The Company determined that the projected results would not fully
support the carrying value nor the remaining life of goodwill attributable to
the operation. Accordingly, in the fourth quarter of fiscal 1994, the Company
wrote off $200,000 of goodwill related to the operation and also reduced the
remaining amortization period to five years, the estimated future economic
benefit period of this business.
F-19
<PAGE> 43
Meridian National Corporation
Notes to Consolidated Financial Statements (continued)
10. WRITE-DOWN OF NONCURRENT ASSETS (CONTINUED)
In December 1994 the Company received written notice that the customer will not
require any more services from the Company as of March 15, 1995. Based on this
loss of business and based on a reevaluation of the potential uses of facilities
at the location of this operation, the Company recorded a pretax charge of
$2,286,000 in the fourth quarter of fiscal 1995 to write down noncurrent assets.
The charge is comprised of (i) a write-down of $1,199,000 of property and
equipment at this location to its net realizable value, (ii) a write-off of
goodwill of $703,000 related to this operation and (iii) a write-off of the
unamortized costs of noncompete and related agreements of $384,000, which were
being amortized on an eight year life.
11. INDUSTRY SEGMENT INFORMATION
The Company has two operating segments which are in separate industries. The
steel distribution and processing segment handles flat-rolled steel products for
the automotive, truck and appliance industries. The waste management segment
recycles paint wastes and spent acids for companies in the automotive and steel
industries. This segment also arranges for disposal of paint wastes and spent
acids at third-party disposal sites.
Net sales by segment includes sales to unaffiliated customers and intersegment
sales at prices which the Company believes approximate market. Intersegment
sales represent services provided by the waste management segment for the steel
distribution and processing segment. Corporate charges incurred on behalf of the
segments are allocated based on the percentage of time devoted to segment
business by corporate personnel. Operating profit (loss) by segment excludes
unallocated general corporate expenses and net interest expense. Corporate
assets consist primarily of cash and other short term assets.
F-20
<PAGE> 44
Meridian National Corporation
Notes to Consolidated Financial Statements (continued)
11. INDUSTRY SEGMENT INFORMATION (CONTINUED)
Net sales of the steel distribution and processing segment include $6,718,000 in
1996 for slitting of coil steel for a steel stamping customer. No customer
accounted for 10% or more of consolidated net sales in 1995 or 1994.
The following summarizes the Company's operations and identifiable assets:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
Steel distribution and processing $51,198,434 $47,343,329 $39,085,051
Waste management 5,467,387 6,058,918 5,296,073
Eliminations (58,961) (163,673) (194,828)
--------------------------------------------------------------
Total net sales $56,606,860 $53,238,574 $44,186,296
==============================================================
Operating profit:
Steel distribution and processing $ 645,356 $ 108,002 (a) $ 2,187,214
Waste management 422,471 630,824 535,781
--------------------------------------------------------------
Total operating profit 1,067,827 738,826 (a) 2,722,995
General corporate expenses (1,141,743) (1,031,038) (801,185)
Interest expense - net (1,424,898) (1,035,430) (807,575)
==============================================================
Income (loss) before income taxes and
extraordinary gain $ (1,498,814) $ (1,327,642)(a) $ 1,114,235
==============================================================
Identifiable assets:
Steel distribution and processing $21,729,311 $21,015,824 $15,569,288
Waste management 3,207,237 3,592,975 3,436,446
Corporate 383,611 551,930 322,019
Eliminations (66,893) (100,749) (92,446)
--------------------------------------------------------------
Total assets $25,253,266 $25,059,980 $19,235,307
==============================================================
</TABLE>
F-21
<PAGE> 45
Meridian National Corporation
Notes to Consolidated Financial Statements (continued)
11. INDUSTRY SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------------------------------
<S> <C> <C> <C>
Depreciation and amortization:
Steel distribution and processing $ 375,474 $ 798,304 $ 445,757
Waste management 324,514 333,542 326,497
Corporate assets 29,991 23,152 21,196
--------------------------------------------------------------
Total depreciation and amortization $ 729,979 $ 1,154,998 $ 793,450
==============================================================
Capital expenditures:
Steel distribution and processing $ 2,528,038 $ 229,311 $ 1,448,788
Waste management 164,985 98,297 242,750
Corporate assets 104,251 45,334 2,792
--------------------------------------------------------------
Total capital expenditures $ 2,797,274 $ 372,942 $ 1,694,330
==============================================================
</TABLE>
(a) Includes $2,285,548 write-down of noncurrent assets.
12. BUSINESS COMBINATIONS
On November 17, 1995 the Company acquired the business and assets of a steel
processing operation located in Gary, Indiana (the "Gary Facility"). The assets
acquired included inventory, supplies and equipment. The purchase price was
$2,499,000. The acquisition of assets was funded through an $800,000 equipment
loan and a $900,000 sale and leaseback arrangement for certain other equipment
included in the acquisition. The remainder of the purchase price was funded
through the Company's existing revolving credit facility. The acquisition was
accounted for as a purchase. Operations of the Gary Facility are included in the
consolidated financial statements beginning November 17, 1995.
F-22
<PAGE> 46
Meridian National Corporation
Notes to Consolidated Financial Statements (continued)
12. BUSINESS COMBINATIONS (CONTINUED)
The following unaudited pro forma financial information gives effect to the
acquisition of the Gary Facility by the Company assuming the transaction was
consummated as of March 1, 1994. The pro forma financial information is not
necessarily indicative of the actual results that would have occurred had the
transaction been consummated March 1, 1994 or of the future results of
operations which will be obtained by the Company as a result of the acquisition.
<TABLE>
<CAPTION>
1996 1995
------------------- --------------------
<S> <C> <C>
Net sales $66,626,860 $64,760,574
Loss before extraordinary gain (1,360,814) (1,352,642)
Net loss (1,211,592) (1,126,366)
Earnings (loss) per common share:
Loss before extraordinary gain $ (0.57) $ (0.61)
Extraordinary gain 0.06 0.09
=================== ====================
Net loss $ (0.51) $ (0.52)
=================== ====================
</TABLE>
In fiscal 1986, the Company acquired all of the common stock of certain
subsidiaries for $4,600,000 (exclusive of acquisition costs of $215,200), made
up of $2,000,000 in cash and $2,600,000 in promissory notes. The controlling
interests in the subsidiaries were purchased from certain present and former
members of management who were also principal stockholders of the Company. The
acquisitions have been accounted for as purchases. The SEC staff questioned the
Company's accounting for the acquisitions and indicated that the accounting
differs from the staff's position on accounting for similar transactions. Under
the staff position, the transfer of assets and liabilities to the Company would
have been accounted for at historical cost, i.e., at the carryover basis of the
acquired companies. If the Company had applied such accounting, the accompanying
consolidated statements of operations would reflect reductions of costs of sales
and other costs and expenses aggregating $6,000, $1,263,000 and $336,000 in
1996, 1995 and 1994, respectively. These reductions reflect the elimination of
charges to write off and/or amortize the goodwill and increased bases in other
assets which would not have been recorded under the staff position. As a result,
there would have been net income of $136,000 in 1995 and $1,451,000 in 1994 and
the net loss would decrease to $1,343,000 in 1996.
F-23
<PAGE> 1
Exhibit 10.01(m)
AMENDMENT NO. 10 TO THE
-----------------------
LOAN AND SECURITY AGREEMENT
---------------------------
THIS AMENDMENT NO. 10 TO THE LOAN AND SECURITY AGREEMENT ("Amendment No.
10") is made and entered into by and among MERIDIAN NATIONAL CORPORATION, a
Delaware corporation ("MNC"), OTTAWA RIVER STEEL CO., an Ohio corporation
("ORS"), NATIONAL METAL PROCESSING, INC., a Michigan corporation ("NMP"),
INTERSTATE METAL PROCESSING, INC., an Ohio corporation ("IMP"), PRECISE PAC,
INC. (f/k/a National Metal Shearing Corp.), a Michigan corporation ("PPI"), and
MERIDIAN ENVIRONMENTAL SERVICES, INC., a Michigan corporation ("MES", and
together with MNC, ORS, NMP, IMP, and PPI sometimes shall be referred to
collectively as "Borrowers" and individually as a "Borrower"), and NATIONAL
CANADA FINANCE CORP. ("Bank").
RECITALS
--------
A. On December 6, 1989, Borrowers and the Bank of New England, N.A.
("BNE") entered into a certain Loan And Security Agreement (the "Loan
Agreement," all terms defined therein being used in this Amendment No. 10 with
the same meaning unlessotherwise stated) under the terms of which BNE loaned to
Borrowers $1,000,000 on a term loan basis, and $7,000,000 on a revolving loan
basis, pursuant to the provisions set forth in the Loan Agreement.
B. In March 1990, Borrowers and BNE entered into Amendment No. 1 to Loan
And Security Agreement ("Amendment No. 1") to provide for (1) an increase in the
amount of funds Borrowers could borrow under the Revolving Loan Borrowing Base
in the form of an over-advance of not more than Five Hundred Thousand Dollars
($500,000), and (2) such other items as are set forth in Amendment No. 1.
C. On September 14, 1990, Borrowers and Bank (as the
successor-in-interest to BNE and BNE's rights, duties, and remedies under the
Loan Agreement) entered into Amendment No. 2 To The Loan And Security Agreement
("Amendment No. 2") to (1) decrease the Revolving Loan Borrowing Base on
Eligible Inventory from $4,000,000 to $3,000,000, (2) decrease the amount of the
Revolving Loan Borrowing Base by the face amount of the Letters of Credit issued
by Bank to Borrowers, (3) modify the definition of "Revolving Loan Borrowing
Base", and (4) establish a compensating balance of $1,000,000 in Borrowers'
Collateral.
D. Effective as of May 31, 1991, Borrowers and Bank entered into
Amendment No.3 To The Loan And Security Agreement ("Amendment No. 3") to (1)
decrease the maximum amount of the Revolving Loan from $7,000,000 to $5,300,000,
(2) reduce the outstanding principal balance of the Term Loan to $400,000, and
(3) reduce the compensating balance to $700,000.
E. Effective as of June 22, 1992, Borrowers and Bank entered into
Amendment No. 4 To The Loan And Security Agreement ("Amendment No. 4") to modify
certain covenants set forth in the Loan Agreement.
<PAGE> 2
F. On or about February 1, 1993, ORS and Canterbury Steel Corporation
(kna CSX, Inc.), a Michigan corporation ("Canterbury"), entered into that
certain Partnership Agreement of Canterbury Steel Company ("CSC") to engage in,
among other things, the steel service center business. ORS and Canterbury
acquired a 50.1% and a 49.9% general partnership interest, respectively, in CSC.
G. On May 11, 1993, Borrowers, CSC and Bank entered into Amendment No. 5
To The Loan And Security Agreement ("Amendment No. 5") to (1) add CSC as a
co-obligor for the repayment of all loans to Borrowers and CSC by Bank, (2)
provide for certain representations, warranties and covenants of CSC, and (3)
provide for such other amendments and modifications as are set forth in
Amendment No. 5.
H. In a letter from Borrowers and CSC to Bank dated June 9, 1993 (the
"Letter Amendment"), Borrowers, CSC and Bank amended the Loan Agreement, as
amended, to modify certain financial covenants of Borrowers and CSC.
I. On October 20, 1993, Borrowers, CSC and Bank entered into Amendment
No. 6 To The Loan And Security Agreement ("Amendment No. - 6") to (1) increase
the maximum amount of funds Borrowers and CSC may borrow under the Revolving
Loan from $5,300,000 to $6,000,000, (2) modify certain financial covenants of
Borrowers and CSC, and (3) provide for such other modifications as are set forth
in the provisions of Amendment No. 6.
J. In or about January of 1994, CSC was dissolved and liquidated by ORS
and Canterbury.
K. On January 31, 1994, Borrowers and Bank entered into Amendment No. 7
To The Loan And Security Agreement ("Amendment No. 7") to (1) increase the
maximum amount of funds Borrowers may borrow under the Revolving Loan from
$6,000,000 to $7,200,000, (2) provide Borrowers with a $300,000 Term Loan
facility, (3) modify certain financial covenants of Borrowers, and (4) provide
for such other amendments and modifications as are set forth in Amendment No. 7.
L. Effective as of November 30, 1994, Borrowers and Bank
entered into Amendment No. 8 To The Loan And Security Agreement
("Amendment No. 8") to (1) increase the maximum amount of funds
Borrowers may borrow under the Revolving Loan from $7,200,000 to
$9,000,000, (2) increase the Revolving Loan Borrowing Base on
Eligible Inventory to $4,500,000, (3) decrease the Contract Rate on
the Revolving Loan to one (1) percentage point above the Base Rate,
(4) modify certain financial covenants of Borrowers, and (5)
provide for such other amendments and modifications as are set
forth in Amendment No. 8.
-2-
<PAGE> 3
M. Effective as of February 14, 1995, Borrowers and Bank entered into
Amendment No. 9 To The Loan And Security Agreement ("Amendment No. 9") to (1)
increase the maximum amount of funds Borrowers may borrow under the Revolving
Loan from $9,000,000 to $10,000,000, (2) increase the Revolving Loan Borrowing
Base on Eligible Inventory from $4,500,000 to $5,000,000, and (3) provide for
such other amendments and modifications as are set forth in Amendment No. 9.
N. Borrowers and Bank now desire to amend the Loan Borrowers may
borrower under the Revolving Loan from $10,000,000 to $12,000,000, (2) increase
the Revolving Loan Borrowing Base on Eligible Inventory from $5,000,000 to
$5,500,000, (3) modify certain covenants of Borrowers, and (4) provide for such
other amendments and modifications as are set forth in this Amendment No. 10.
0. Due to the affiliation and financial interdependence of Borrowers,
Bank and Borrowers have determined that it would be in their respective best
interests for each Borrower to be a joint and several obligor of each other
Borrower's obligations to Bank in accordance with the provisions set forth in
the Loan Agreement, as amended by Amendment No. 1, Amendment No. 2, Amendment
No. 3, Amendment No. 4, Amendment No. 5, the Letter Amendment, Amendment No. 6,
Amendment No. 7, Amendment No. 8, Amendment No. 9, and this Amendment No. 10.
PROVISIONS
----------
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and provisions set forth in this Amendment No. 10, the parties agree
as follows:
I. AMENDMENTS TO LOAN AGREEMENT.
-----------------------------
The Loan Agreement is amended as follows:
A. On and after the effective date of this Amendment No. 10, each
reference in the Loan Agreement, Amendment No. 1, Amendment No. 2, Amendment No.
3, Amendment No. 4, Amendment No. 5, the Letter Amendment, Amendment No. 6,
Amendment No. 7, Amendment No. 8 and Amendment No. 9 to "this Agreement,"
"hereunder," and "hereof," or words of like import referring to the Loan
Agreement shall mean and refer to the Loan Agreement as amended by Amendment
No.1, Amendment No.2, Amendment No. 3, Amendment No. 4, Amendment No. 5, the
Letter Amendment, Amendment No. 6, Amendment No. 7, Amendment No. 8, Amendment
No. 9 and this Amendment No. 10. The Loan Agreement, as amended by Amendment No.
1, Amendment No. 2, Amendment No. 3, Amendment No. 4, Amendment No. 5, the
Letter -Amendment, Amendment No. 6, Amendment No. 7, Amendment No. 8, Amendment
No.9 and this Amendment No. 10 is, and shall continue to be, in full force and
effect and hereby is ratified and confirmed in all respects.
-3-
<PAGE> 4
B. The definition of "Revolving Loan Borrowing Base" set forth in
Section 1.1 of the Loan Agreement, as amended, is amended and restated in its
entirety as follows:
REVOLVING LOAN BORROWING BASE - Subject to the provisions of Section
2.3(B) of this Agreement, an amount equal to the lesser of the following
amounts:
(i) the sum of (a) eighty percent (80%) of the unpaid face
amount of Eligible Accounts (less the maximum discounts, credits
and allowances which may be taken by or granted to Account
Debtors in connection therewith) plus (b) fifty percent (50%) of
the lesser of the cost (determined on a first-in, first-out
basis) or market value of Eligible Inventory; provided, however,
that the Revolving Loan Borrowing Base on Eligible Inventory
shall in no event exceed $5,500,000, minus (c) the face amount
of all Letters of Credit issued by Bank on behalf of any
Borrower or Borrowers; or
(ii) $12,000,000.
C. The definition of "Credit Note" set forth in Section 1.1 of the Loan
Agreement, as amended, is amended and restated in its entirety as follows:
CREDIT NOTE - The demand note executed by Borrowers and
delivered to Bank, dated December 6, 1989, evidencing the revolving
credit loan made by Bank pursuant to Section 2.3 of this Agreement,
together with (a) Amendment No. 1 To Demand Note, executed by Borrowers
and delivered to Bank, dated effective as of May 31, 1991, (b) Amendment
No. 2 To Demand Note, executed by Borrowers and CSC and delivered to
Bank, dated May 11, 1993, (c) Amendment No. 3 To Demand Note, executed
by Borrowers and CSC and delivered to Bank, dated effective as of
October 20, 1993, (d) Amendment No. 4 To Demand Note, executed by
Borrowers and delivered to Bank, dated January 31, 1994, (e) Amendment
No. 5 To Demand Note, executed by Borrowers and delivered to Bank, dated
effective as of November 30, 1994, (f) Amendment No. 6 To Demand Note,
executed by Borrowers and delivered to Bank, dated effective as of
February 14, 1995, and (g) Amendment No. 7 To Demand Note, a copy of
which is attached to Amendment No. 10 as Exhibit 1, and all other
amendments to, and all notes issued in substitution for or replacement
of, such demand note.
D. The reference in lines 4 and 5 of Section 7.1(I) of the Loan
Agreement, as amended, to "statement of changes in financial position" is hereby
amended to mean and refer to "statement of cash flows".
E. The first sentence of Section 7.1(N) of the Loan Agreement, as
amended, is hereby amended and restated in its entirety as follows:
-4-
<PAGE> 5
(N) TANGIBLE NET WORTH. Commencing on February 28, 1995, and
continuing on the last day of each fiscal quarter of Borrowers thereafter,
Borrowers shall maintain, on a consolidated basis, a Tangible Net Worth which is
equal to or greater than as follows:
<TABLE>
<CAPTION>
Date Tangible Net Worth
---- ------------------
<S> <C>
February 28, 1995 $3,500,000
May 31, 1995 3,500,000
August 31, 1995 3,500,000
November 30, 1995 4,000,000
February 29, 1996
and thereafter 4,300,000
</TABLE>
F. The first sentence of Section 7.1(0) of the Loan Agreement, as
amended, is hereby amended and restated in its entirety as follows:
(0) DEBT/TANGIBLE NET WORTH RATIO. Commencing on February 28,
1995, and continuing on the last day of each fiscal quarter of Borrowers
thereafter, Borrowers shall maintain, on a consolidated basis, a Debt to
Tangible Net Worth ratio which is equal to or less than the following:
<TABLE>
<CAPTION>
Debt to Tangible
Date Net Worth Ratio
---- ---------------
<S> <C>
February 28, 1995 6.0 to 1.0
May 31, 1995 6.0 to 1.0
August 31, 1995 6.0 to 1.0
November 30, 1995 5.5 to 1.0
February 29, 1996
and thereafter 5.0 to 1.0
</TABLE>
II. BANK'S WAIVER OF CERTAIN DEFAULTS.
----------------------------------
For the sole purpose of completing the transactions described in this
Amendment No. 10, Bank hereby acknowledges the covenant defaults committed by
Borrowers and referred to in the letter to Bank from MNC, dated May 19, 1995,
attached hereto as EXHIBIT 2, and waives, solely as to the specific defaults
referred to in such letter, the rights of Bank to pursue remedies under the Loan
Agreement, as amended, with respect to such defaults.
III. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWERS.
-------------------------------------------------------
A. Each Borrower represents, warrants and covenants that it has good and
marketable title to the Collateral free and clear of all liens, claims,
mortgages, security interests, pledges, charges or encumbrances whatsoever,
except as have been granted to Bank.
B. To the extent such representations, warranties and covenants pertain
to or are to be performed by Borrowers, all representations, warranties and
covenants in the Loan Agreement, as
-5-
<PAGE> 6
amended, shall continue and be binding on Borrowers under this
Amendment No. 10.
IV. CONDITIONS PRECEDENT.
--------------------
Each Borrower acknowledges that the effectiveness of this Amendment No.
10 is subject to the following:
A. The receipt by Bank on the effective date of this
Amendment No. 10, in form and substance satisfactory to Bank and
its counsel, of the following:
1. A certified copy of resolutions of Members of the Board of
Directors of each Borrower approving this Amendment No. 10 and all of
the matters described in this Amendment No. 10, and every other document
or instrument required to be delivered pursuant to this Amendment No.
10.
2. A Certificate signed by a duly authorized officer of each
Borrower to the effect that:
(a) As of the date hereof, no Event of Default has
occurred and is continuing, and no event has occurred which,
with the giving of notice or passage of time or both, would
constitute an Event of Default.
(b) Except as otherwise disclosed, the representations
and warranties of Borrowers set forth in Section 6 of the Loan
Agreement are true and correct on the date of this Amendment No.
10 with the same force and effect as if made on this date.
3. A Certificate of an officer of each Borrower certifying (a)
to the incumbency and signatures of the officers of such Borrower
signing this Amendment No. 10 and every other document and instrument to
be delivered pursuant to this Amendment No. 10, and (b) to the effect
that such Borrower's Articles (or Certificate) of Incorporation and Code
of Regulations (or By-laws) have not been amended since the execution of
the Loan Agreement except for (i) the name change by PPI from "National
Metal Shearing Corp." to Precise Pac, Inc. on or about April, 1992, and
(ii) the reverse stock split by MNC in August of 1993.
4. Amendment No.7 To Demand Note, in substantially the form of
EXHIBIT 1 attached to this Amendment No. 10, duly executed by each
Borrower.
5. Such other documents and instruments as Bank may reasonably
request to implement this Amendment No. 10 and the transactions
described in this Amendment No. 10.
B. The payment by Borrowers to Bank of an amendment fee in the amount of
$5,000.
-6-
<PAGE> 7
V. APPLICABLE LAW.
---------------
This Amendment No. 10 shall be deemed to be a contract under the laws of
the State of Ohio, and for all purposes shall be construed in accordance with
the laws of such State.
VI. COUNTERPARTS.
-------------
This Amendment No. 10 may be executed in any number of counterparts, all
of which taken together shall constitute one and the same instrument, and any
one of the parties to this Amendment No. 10 may execute this Amendment No. 10 by
signing any such counterpart.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 10 by
their duly authorized officers effective as of May 25, 1995.
NATIONAL CANADA FINANCE CORP. MERIDIAN NATIONAL CORPORATION
By: /s/ Jack Jankovic By: /s/ Real P. Remillard
-------------------------- --------------------------
Title: Vice President Title: Secretary
----------------------- ------------------------
PRECISE PAC, INC. (f/k/a
NATIONAL PROCESSING, INC. National Metal Shearing Corp.)
By: /s/ Real P. Remillard By: /s/ Real P. Remillard
-------------------------- --------------------------
Title: Secretary Title: Secretary
----------------------- ------------------------
OTTAWA RIVER STEEL CO. MERIDIAN ENVIRONMENTAL SERVICES,
By: /s/ Real P. Remillard By: /s/ Real P. Remillard
-------------------------- --------------------------
Title: Secretary Title: Secretary
----------------------- ------------------------
INTERSTATE METAL PROCESSING, INC.
By: /s/ Real P. Remillard
--------------------------
Title: Secretary
-----------------------
- -7-
<PAGE> 1
EXHIBIT 10.01(n)
AMENDMENT NO. 11 TO THE
-----------------------
LOAN AND SECURITY AGREEMENT
---------------------------
THIS AMENDMENT NO. 11 TO THE LOAN AND SECURITY AGREEMENT ("Amendment No.
11") is made and entered into by and among MERIDIAN NATIONAL CORPORATION, a
Delaware corporation ("MNC"), OTTAWA RIVER STEEL CO., an Ohio corporation
("ORS"), NATIONAL METAL PROCESSING, INC., a Michigan corporation ("NMP"),
INTERSTATE METAL PROCESSING, INC., an Ohio corporation ("IMP"), PRECISE PAC,
INC. (f/k/a National Metal Shearing Corp.), a Michigan corporation ("PPI"), and
MERIDIAN ENVIRONMENTAL SERVICES, INC., a Michigan corporation ("MES"; and
together with MNC, ORS, NMP, IMP and PPI sometimes shall be referred to
collectively as "Borrowers" and individually as a "Borrower"), and NATIONAL
CANADA FINANCE CORP. ("Bank").
RECITALS
--------
A. On December 6, 1989, Borrowers and the Bank of New England, N.A. ("BNE")
entered into a certain Loan And Security Agreement (the "Loan Agreement," all
terms defined therein being used in this Amendment No. 11 with the same meaning
unless otherwise stated) under the terms of which BNE loaned to Borrowers
$1,000,000 on a term loan basis, and $7,000,000 on a revolving loan basis,
pursuant to the provisions set forth in the Loan Agreement.
B. In March 1990, Borrowers and BNE entered into Amendment No. 1 to Loan
And Security Agreement ("Amendment No. 1") to provide for (1) an increase in the
amount of funds Borrowers could borrower under the Revolving Loan Borrowing Base
in the form of an over-advance of not more than Five Hundred Thousand Dollars
($500,000), and (2) such other items as are set forth in Amendment No. 1.
C. On September 14, 1990, Borrowers and Bank (as the successor-in-interest
to BNE and BNE's rights, duties, and remedies under the Loan Agreement) entered
into Amendment No. 2 To The Loan And Security Agreement ("Amendment No. 2") to
(1) decrease the Revolving Loan Borrowing Base on Eligible Inventory from
$4,000,000 to $3,000,000, (2) decrease the amount of the Revolving Loan
Borrowing Base by the face amount of the Letters of Credit issued by Bank to
Borrowers, (3) modify the definition of "Revolving Loan Borrowing Base", and (4)
establish a compensating balance of $1,000,000 in Borrowers' Collateral.
D. Effective as of May 31, 1991, each Borrowers and Bank entered into
Amendment No. 3 To The Loan And Security Agreement ("Amendment No. 3") to (1)
decrease the maximum amount of the Revolving Loan from $7,000,000 to $5,300,000,
(2) reduce the outstanding principal balance of the Term Loan to $400,000, and
(3) reduce the compensating balance to $700,000.
<PAGE> 2
E. Effective as of June 22, 1992, Borrowers and Bank entered into Amendment
No. 4 To The Loan And Security Agreement ("Amendment No. 4") to modify certain
covenants set forth in the Loan Agreement.
F. On or about February 1, 1993, ORS and Canterbury Steel Corporation (kna
CSX, Inc.), a Michigan corporation ("Canterbury"), entered into that certain
Partnership Agreement of Canterbury Steel Company ("CSC") to engage in, among
other things, the steel service center business. ORS and Canterbury acquired a
50.1% and a 49.9% general partnership interest, respectively, in CSC.
G. On May 11, 1993, Borrowers, CSC and Bank entered into Amendment No. 5 To
The Loan And Security Agreement ("Amendment No. 5") to (1) add CSC as a
co-obligor for the repayment of all loans to Borrowers and CSC by Bank, (2)
provide for certain representations, warranties and covenants of CSC, and (3)
provide for such other amendments and modifications as are set forth in
Amendment No. 5.
H. In a letter from Borrowers and CSC to Bank dated June 9, 1993 (the
"Letter Amendment"), Borrowers, CSC and Bank amended the Loan Agreement, as
amended, to modify certain financial covenants of Borrowers and CSC.
I. On October 20, 1993, Borrowers, CSC and Bank entered into Amendment No.
6 To The Loan And Security Agreement ("Amendment No. 6") to (1) increase the
maximum amount of funds Borrowers and CSC may borrow under the Revolving Loan
from $5,300,000 to $6,000,000, (2) modify certain financial covenants of
Borrowers and CSC, and (3) provide for such other modifications as are set forth
in the provisions of Amendment No. 6.
J. In or about January of 1994, CSC was dissolved and liquidated by ORS and
Canterbury.
K. On January 31, 1994, Borrowers and Bank entered into Amendment No. 7 To
The Loan And Security Agreement ("Amendment No. 7") to (1) increase the maximum
amount of funds Borrowers may borrow under the Revolving Loan from $6,000,000 to
$7,200,000, (2) provide Borrowers with a $300,000 Term Loan facility, (3) modify
certain financial covenants of Borrowers, and (4) provide for such other
amendments and modifications as are set forth in Amendment No. 7.
L. Effective as of November 30, 1994, Borrowers and Bank entered into
amendment No. 8 To The Loan And Security Agreement ("Amendment No. 8") to (1)
increase the maximum amount of funds Borrowers may borrow under the Revolving
Loan from $7,200,000 to $9,000,000, (2) increase the Revolving Loan Borrowing
Base on Eligible Inventory to $4,500,000, (3) decrease the Contract Rate on the
Revolving Loan to one (1) percentage point above the Base Rate,
-2-
<PAGE> 3
(4) modify certain financial covenants of Borrowers, and (5) provide for such
other amendments and modifications as are set forth in Amendment No. 8.
M. Effective as of February 14, 1995, Borrowers and Bank entered into
Amendment No. 9 To The Loan And Security Agreement ("Amendment No. 9") to (1)
increase the maximum amount of funds Borrowers may borrow under the Revolving
Loan from $9,000,000 to $10,000,000, (2) increase the Revolving Loan Borrowing
Base on Eligible Inventory from $4,500,000 to $5,000,000, and (3) provide for
such other amendments and modifications as are set forth in Amendment No. 9.
N. Effective as of May 25, 1995, Borrowers and Bank entered into Amendment
No. 10 To The Loan And Security Agreement ("Amendment No. 10") to (1) increase
the maximum amount of funds Borrowers may borrow under the Revolving Loan from
$10,000,000 to $12,000,000, (2) increase the Revolving Loan Borrowing Base on
Eligible Inventory from $5,000,000 to $5,500,000, (3) modify certain covenants
of Borrowers, and (4) provide for such other amendments and modifications as are
set forth in Amendment No. 10.
0. Borrowers and Bank now desire to amend the Loan Agreement, as amended,
to (1) provide a $300,000 Term Loan facility to Environmental Purification
Industries, Inc. ("EPI"), a subsidiary of MNC, and (2) provide for such other
amendments and modifications as are set forth in this Amendment No. 11.
P. Due to the affiliation and financial interdependence of Borrowers, Bank
and Borrowers have determined that it would be in their respective best
interests for each Borrower to be a joint and several obligor of each other
Borrower's obligations to Bank in accordance with the provisions set forth in
the Loan Agreement, as amended by Amendment No. 1, Amendment No. 2, Amendment
No. 3, Amendment No. 4, Amendment No. 5, the Letter Amendment, Amendment No .6,
Amendment No. 7, Amendment No. 8, Amendment No. 9, Amendment No. 10 and this
Amendment No. 11.
PROVISIONS
----------
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and provisions set forth in this Amendment No. 11, the parties agree as follows:
I. AMENDMENTS TO LOAN AGREEMENT.
-----------------------------
The Loan Agreement is amended as follows:
A. On and after the effective date of this Amendment No. 11, each reference
in the Loan Agreement, Amendment No. 1, Amendment No. 2, Amendment No. 3,
Amendment No. 4, Amendment No. 5, the Letter Amendment, Amendment No. 6,
Amendment No. 7, Amendment No.
-3-
<PAGE> 4
8, Amendment No. 9 and Amendment No. 10 to "this Agreement," "hereunder," and
"hereof," or words of like import referring to the Loan Agreement shall mean and
refer to the Loan Agreement as amended by Amendment No. 1, Amendment No. 2,
Amendment No. 3, Amendment No. 4, Amendment No. 5, the Letter Amendment,
Amendment No. 6, Amendment No. 7, Amendment No. 8, Amendment No. 9, Amendment
No. 10 and Amendment No. 11. The Loan Agreement, as amended by Amendment No. 1,
Amendment No. 2, Amendment No. 3, Amendment No. 4, Amendment No. 5, the Letter
Amendment, Amendment No. 6, Amendment No. 7, Amendment No. 8, Amendment No. 9,
Amendment No. 10 and Amendment No. 11 is, and shall continue to be, in full
force and effect and hereby is ratified and confirmed in all respects.
B. A new definition of "EPI Term Note" is added to Section 1.1 of the Loan
Agreement, as amended, as follows:
EPI TERM NOTE - The term note to be executed by Environmental
Purification Industries, Inc. and MNC in the form attached to Amendment No.
11 as EXHIBIT 1 (with such changes or modifications, if any, to which Bank
may agree) evidencing the EPI Term Loan made by Bank pursuant to Section
2.1(B) of this Agreement, together with all amendments, and all notes
issued in substitution or replacement of, such term note.
C. The definition of "Notes" set forth in Section 1.1 of the Loan
Agreement, as amended, is amended and restated in its entirety as follows:
NOTES - The Credit Note, Term Note, EPI Term Note and other notes or
other instruments evidencing Borrowers' obligation to repay any
Obligations.
D. The definition of "Term Note" set forth in Section 1.1 of the Loan
Agreement, as amended, is amended and restated in its entirety as follows:
TERM NOTE - The term note executed and delivered to Bank by Borrowers,
dated January 31, 1994 (with such changes or modifications, if any, to
which Bank may agree) evidencing the term loan made by Bank pursuant to
Section 2.1(A) of this Agreement, together with all amendments, and all
notes issued in substitution or replacement of, such term note.
E. Section 2.1 of the Loan Agreement, as amended, is amended and restated
in its entirety as follows:
2.1 Term Loan and EPI Term Loan.
----------------------------
(A) TERM LOAN. Bank shall make a term loan (the "Term Loan") to
Borrowers in the original principal amount of Three Hundred Thousand
Dollars ($300,000). The
-4-
<PAGE> 5
Term Loan shall be subject to repayment in accordance with, and bear
interest as provided in, Section 2.2(A) of this Agreement and shall
otherwise be evidenced by, and repayable in accordance with, the Term
Note.
(B) EPI TERM LOAN. Bank shall make a term loan (the "EPI Term
Loan") to Environmental Purification Industries, Inc., a subsidiary of
MNC, in the original principal amount of Three Hundred Thousand
Dollars ($300,000). The EPI Term Loan shall be co-signed by MNC and
shall be subject to repayment in accordance with, and bear interest as
provided in, Section 2.2(B) of this Agreement and shall otherwise be
evidenced by, and repayable in accordance with, the EPI Term Note.
F. Section 2.2 of the Loan Agreement, as amended, is amended and restated
in its entirety as follows:
2.2 Payment Terms of Term Loan and EPI Term Loan.
---------------------------------------------
(A) TERM LOAN.
(1) INTEREST. The Term Loan shall bear interest on the
unpaid principal balance until the date paid in full at
a rate per annum equal to the Contract Rate in effect
from time to time, such interest being payable monthly
on the last day of each month commencing January 31,
1994. Any increase or decrease in the interest rate
resulting from a change in the Base Rate shall become
effective on the date of such change. Interest shall be
computed on a 360-day year basis based upon the actual
number of days elapsed.
(2) FIXED PRINCIPAL INSTALLMENTS. Subject otherwise to the
provisions of the Term Note, the principal balance of
the Term Loan shall be payable in sixty (60) equal
monthly installments of Five Thousand Dollars ($5,000)
each, commencing on January 31, 1994, and continuing on
the last day of each successive month thereafter until
paid in full.
(B) EPI TERM LOAN.
(1) INTEREST. The EPI Term Loan shall bear interest on the
unpaid principal balance until the date paid in full at
a rate per annum equal to the Contract Rate in effect
from time to time, such interest being payable monthly
on the last day of each month commencing March
-5-
<PAGE> 6
31, 1996. Any increase or decrease in the interest
rate resulting from a change in the Base Rate shall
become effective on the date of such change. Interest
shall be computed on a 360 day year basis based upon
the actual number of days elapsed.
(2) PRINCIPAL. Subject otherwise to the provisions of the
EPI Term Note, the principal amount of the EPI Term
Loan shall be payable in full on June 30, 1996.
II. REPRESENTATIONS. WARRANTIES AND COVENANTS OF BORROWERS.
-------------------------------------------------------
A. Each Borrower represents, warrants and covenants that it has good and
marketable title to the Collateral free and clear of all liens, claims,
mortgages, security interests, pledges, charges or encumbrances whatsoever,
except as have been granted to Bank.
B. To the extent such representations, warranties and covenants pertain to
or are to be performed by Borrowers, all representations, warranties and
covenants in the Loan Agreement, as amended, shall continue and be binding on
Borrowers under this Amendment No. 11.
III. CONDITIONS PRECEDENT.
---------------------
Each Borrower acknowledges that the effectiveness of this Amendment No. 11
is subject to the following:
A. The receipt by Bank on the date of this Amendment No. 11 in form and
substance and satisfactory to Bank and its counsel of the following:
1. A certified copy of resolutions of Members of the Board of
Directors of each Borrower approving this Amendment No. 11 and all of the
matters described in this Amendment No. 11, and every other document or
instrument required to be delivered pursuant to this Amendment No. 11.
2. A Certificate signed by a duly authorized officer of each Borrower
to the effect that:
(a) As of the date hereof, except for Events of Default which
have been disclosed to Bank concerning Borrower's compliance with
certain financial covenants, no Event of Default has occurred and is
continuing, and no event has occurred which, with the giving of notice
or passage of time or both, would constitute an Event of Default.
-6-
<PAGE> 7
(b) Except as otherwise disclosed, the representations and
warranties of Borrowers set forth in Section 6 of the Loan Agreement
are true and correct on the date of this Amendment No. 11 with the
same force and effect as if made on this date.
3. A Certificate of an officer of each Borrower certifying (a) to the
incumbency and signatures of the officers of such Borrower signing this
Amendment No. 11 and every other document and instrument to be delivered
pursuant to this Amendment No. 11, and (b) to the effect that such Borrower's
Articles (or Certificate) of Incorporation and Code of Regulations (or By-laws)
have not been amended since the execution of the Loan Agreement except for (i)
the name change by PPI from "National Metal Shearing Corp." to Precise Pac, Inc.
on or about April, 1992, and (ii) the reverse stock split by MNC in August of
1993.
4. A Certificate signed by a duly authorized officer of EPI certifying:
(a) to the incumbency and signatures of the officers of EPI signing the
EPI Term Note;
(b) to the effect that EPI is a corporation duly organized, validly
existing and in good standing under the laws of its state of
incorporation and is duly qualified and authorized to do business and
is in good standing as a foreign corporation in each other state or
jurisdiction where the character of its property or the nature of its
activities makes such qualification necessary; and
(c) to the effect that EPI has the right and power and is duly authorized
and empowered to enter into, execute, deliver and perform its
obligations under the EPI Term Note and that the EPI Term Note has
been duly authorized and approved by the Board of Directors of EPI and
is the legal, valid and binding obligation of EPI enforceable against
EPI in accordance with its terms.
5. A certified copy of resolutions of Members of the Board of Directors of
EPI approving the EPI Term Note and every other document or instrument required
to be delivered by EPI pursuant to this Amendment No. 11.
6. The EPI Term Note, in substantially the form of EXHIBIT 1 attached to
this Amendment No. 11, duly executed by EPI and MNC.
-7-
<PAGE> 8
7. Such other documents and instruments as Bank may reasonably request to
implement this Amendment No. 11 and the transactions described in this Amendment
No. 11.
B. The receipt by Bank from Borrowers of an amendment fee in the amount of
$6,000.
IV. APPLICABLE LAW.
---------------
This Amendment No. 11 shall be deemed to be a contract under the laws of
the State of Ohio, and for all purposes shall be construed in accordance with
the laws of such State.
V. COUNTERPARTS.
-------------
This Amendment No. 11 may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument, and any one
of the parties to this Amendment No. 11 may execute this Amendment No. 11 by
signing any such counterpart.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 11 by
their duly authorized officers this 29th day of February, 1996.
NATIONAL CANADA FINANCE CORP. MERIDIAN NATIONAL CORPORATION
By: /s/ Jack Jankovic By: /s/ Real P. Remillard
-------------------------- --------------------------
Title: Vice President Title: Secretary
------------------------ ------------------------
PRECISE PAC, INC. (f/k/a
NATIONAL METAL PROCESSING, INC. National Metal Shearing Corp.)
By: /s/ Real P. Remillard By: /s/ Real P. Remillard
-------------------------- --------------------------
Title: Secretary Title: Secretary
------------------------ ------------------------
OTTAWA RIVER STEEL CO. MERIDIAN ENVIRONMENTAL SERVICES,
INC,
By: /s/ Real P. Remillard By: /s/ Real P. Remillard
-------------------------- --------------------------
Title: Secretary Title: Secretary
------------------------ ------------------------
INTERSTATE METAL PROCESSING, INC.
By: /s/ Real P. Remillard
--------------------------
Title: Secretary
------------------------
-8-
<PAGE> 1
Exhibit 10.01(o)
TERM NOTE
---------
$300,000 Cleveland, Ohio
February 29, 1996
FOR VALUE RECEIVED, the undersigned, jointly and severally, promise to pay
to the order of NATIONAL CANADA FINANCE CORP. ("Bank") the principal amount of
THREE HUNDRED THOUSAND DOLLARS ($300,000) as hereinafter provided, with interest
on the unpaid principal balance from time to time outstanding at a rate per
annum equal to one and one-half (1 1/2) percentage points above Bank's Base Rate
(as defined in the Loan Agreement, as described below). Interest shall be
payable monthly commencing on March 31, 1996, and continuing on the last day of
each month thereafter until the entire principal amount has been repaid in full.
Any increase or decrease in the interest rate resulting from a change in Bank's
Base Rate shall become effective on the date of such change. Interest shall be
computed on a 360-day year basis based on the actual number of days elapsed.
The undersigned agree to pay the principal of this Term Note (the "Note")
in full on June 30, 1996.
Payment of the principal of and interest on this Note shall be made in
lawful money of the United States of America to Bank at 125 West 55th Street,
New York, New York, or at such other place as the holder shall have designated
to the undersigned in writing.
This Note is issued pursuant to the Loan And Security Agreement, entered
into by and among Meridian. National Corporation, Ottawa River Steel Co.,
National Metal Processing, Inc., Interstate Metal Processing, Inc., Precise Pac,
Inc., Meridian Environmental Services, Inc. (collectively "Borrowers") and Bank
of New England, N.A., dated December 9, 1989, as amended (the "Loan Agreement"),
to which reference is hereby made for a statement of the rights and obligations
of Bank and the duties and obligations of the Borrowers in relation thereto, but
neither this reference to the Loan Agreement nor any provision thereof shall
affect or impair the absolute and unconditional obligation of the undersigned to
pay the principal of, and interest on, this Note when due.
This Note is secured by, among other things, the security interests and
liens described in the Loan Agreement.
The undersigned may prepay all or any portion of this Note at any time and
in any amount without penalty.
Page 1 of 3
<PAGE> 2
In the event the undersigned fail to pay, when due, any principal or
interest owed under this Note, or upon the occurrence of an Event of Default (as
defined in the Loan Agreement) which has not been waived in writing by Bank, the
undersigned shall pay Bank interest on the daily average balance of all amounts
outstanding under this Note at a rate per annum (the "Default Rate") of two (2)
percentage points plus the rate otherwise applicable to all amounts outstanding
under this Note from the date when due or the date such Event of Default has
occurred, as applicable, until all amounts due herein are paid in full or such
Event of Default has been waived by Bank; provided, however, that the Default
Rate shall not exceed the maximum rate permitted by applicable law.
Upon the nonpayment or partial payment of any payment of principal or
interest or any other obligation due and owing to Bank, all or any portion of
the principal and interest due or to become due under this Note shall become at
once due and payable at the option of the holder of this Note without notice,
demand, presentment, or dishonor, which the undersigned hereby waive.
The undersigned agree to pay upon default the costs of collection including
reasonable fees of attorneys.
No delay or omission on the part of the holder in exercising any right
under this Note shall operate as a waiver of such right or of any other right of
such holder, nor shall any delay, omission or waiver on any one occasion be
deemed a bar to or waiver of the same or any other right on any future occasion.
The undersigned and every endorser of this Note regardless of the time, order or
place of signing waive presentment, demand, protest and notices of every kind
and assent to any one or more extensions or postponements of the time of payment
or any other indulgences, and to any substitutions, exchanges, or releases of
any other parties or persons primarily or secondarily liable.
The undersigned authorize any attorney-at-law to appear before any court of
record, state or Federal, in the county of the State of Ohio in which this Note
was executed or in any other State of the United States of America after the
unpaid principal of this Note becomes due, waive the issuance and service of
process, admit the maturity of this Note, confess judgment against the
undersigned in favor of Bank for the amount then appearing due, together with
interest thereon and costs of suit, and thereupon to release all errors and
waive all rights of appeal and stay of execution. The foregoing warrant of
attorney shall survive any judgment, it being understood that should any
judgment be vacated for any reason, the foregoing warrant of attorney
nevertheless may thereafter be used for obtaining an additional judgment or
judgments.
Page 2 of 3
<PAGE> 3
This Note is being executed and delivered in Cleveland, Ohio.
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
ENVIRONMENTAL PURIFICATION MERIDIAN NATIONAL CORPORATION
INDUSTRIES, INC.
By: /s/ Bruce F. Maison By: /s/ Real P. Remillard
---------------------- --------------------------
Title: President Title: Secretary
------------------- -----------------------
Page 3 of 3
<PAGE> 1
Exhibit 10.02(h)
AGREEMENT TO DEFER PRINCIPAL PAYMENTS ON PROMISSORY NOTE
--------------------------------------------------------
WHEREAS, the Undersigned is the Payee of an Amended and Restated
Non-Negotiable Promissory Note dated July 28, 1989 in the amount of $596,821.79
issued by Meridian National Corporation; and
WHEREAS, the entire principal balance of said Note became due and payable
on September 15,1995; and
WHEREAS, pursuant to said Note, its Payee may convert the Note, in whole or
in part, into shares of Common Stock of Meridian National Corporation; and
WHEREAS, for due consideration the receipt of which is hereby acknowledged:
NOW THEREFORE, THE UNDERSIGNED AGREES, AS FOLLOWS:
That Payee will not seek payment from Meridian National Corporation of the
principal payments stipulated in the Note prior to March 1,1997.
Dated: May 21,1996, Toledo, Ohio
By: /s/ William D. Feniger
--------------------------
William D. Feniger
Acknowledged By:
MERIDIAN NATIONAL CORPORATION
By: /s/ James Rosino
--------------------------
<PAGE> 1
Exhibit 10.02(i)
MERIDIAN NATIONAL CORPORATION
SUBSCRIPTION AGREEMENT
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THE SHARES
CANNOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFERABILITY
CONTAINED IN THIS AGREEMENT AND APPLICABLE FEDERAL AND STATE
SECURITIES LAWS AND WILL NOT BE TRANSFERRED OF RECORD EXCEPT IN
COMPLIANCE WITH SUCH AGREEMENTS AND SUCH LAWS.
Meridian National Corporation
805 Chicago Street
Toledo, Ohio 43611
Gentlemen:
On July 2, 1989 Meridian National Corporation (the "Company")
issued its Amended and Restated Non-Negotiable Promissory Note dated July 28,
1989 in the amount of $596,821.79 due September 30, 1996 (the "Promissory
Note") to the undersigned and on May 7, 1996 the Board of Directors approved
the issuance of 600,000 shares of the Company's Common Stock, par value $.01
per share (the "Shares") to the undersigned in exchange for a $300,000
reduction in the principal amount due and owing on the Promissory Note.
The undersigned acknowledges that the Shares issued in
connection with the foregoing transaction will be "restricted securities" as
defined in Section (a)(3) of Rule 144 promulgated under the Securities Act of
1933, as amended (the "1933 Act").
1. TERMS OF OFFERING. Subject to the terms and conditions
of this Subscription Agreement, the undersigned hereby subscribes to purchase
the Shares of the Company.
2. SUBSCRIPTION. The undersigned hereby subscribes for and
agrees to purchase the Shares for $300,000. The purchase price shall be pald by
a reduction of $300,000 principal amount of the Promissory Note due and owing
the undersigned by the Company.
<PAGE> 2
3. ACCESS TO INFORMATION. The undersigned acknowledges
that the Company has made available to him, or his personal advisors, the
opportunity to obtain information about the Company and to evaluate the merits
and risks of his investment in the Shares. The undersigned acknowledges that
the Company has answered all inquiries that he has made of the Company
concerning the Company, its business and financial condition or any other
matter relating to the Company and the offer and sale of the Shares. The
undersigned acknowledges that no oral or written statement or inducement which
is contrary to the information set forth herein has been made by or on behalf
of the Company to the undersigned.
4. REPRESENTATIONS REGARDING THE UNDERSIGNED. The
undersigned hereby represents and warrants to the Company that:
(a) The undersigned has such knowledge and
experience in financial and business matters in
general, and financial and business matters
relating to the Company, that he is capable of
evaluating the merits and risks of an
investment in the Shares. The undersigned
represents that he is an "accredited investor"
as defined in Securities Exchange Commission
Rule 506 of Regulation D under the
Securities Act of 1933, as amended.
(b) The undersigned is familiar with the nature of,
and the risks attendant to, an investment of
this type, the tax aspects of an investment of
this type and is financially capable of bearing
the economic risk of this investment and
could afford the loss of the total amount of
such investment.
5. INVESTMENT REPRESENTATIONS. The undersigned hereby
represents and warrants to the Company that:
(a) The undersigned understands that the Shares
have not been registered under the 1933 Act, or
the securities laws of any state and that he is
purchasing the Shares for his own account and
for investment only and not with a view to the
further sale, assignment or other distribution
of all or any portion thereof; the undersigned
agrees and represents that he will not sell,
assign, pledge or otherwise dispose of the
Shares or any portion thereof other than in
compliance with the terms of applicable state
and federal securities laws and, then, only to
the extent that the same may be legally sold or
disposed of without registration or
qualification under the applicable state or
federal securities laws, or the Shares shall
have been so registered or qualified and an
appropriate registration statement shall then
be in effect; and the undersigned understands
that he must bear the economic risk of his
investment in the Company for an indefinite
period of time.
-2-
<PAGE> 3
(b) The undersigned is fully aware that the Shares
are being issued and sold in reliance upon the
exemption provided for by Section 4(2) of the
1933 Act and the rules promulgated thereunder
and similar exemptions provided under state
securities laws on the grounds that no public
offering is involved, and that the
representations, warranties and agreements set
forth in this Subscription Agreement are
essential to the claiming of such exemptions.
(c) The undersigned is purchasing the Shares with
his own funds and not with the funds of any
other person, firm or entity; he is acquiring
the Shares for his own account; he has no
reason to anticipate any change in
circumstances, financial or otherwise, which
would cause him to sell or distribute, or
necessitate or require any sale or distribution
of the Shares; and no person, firm or entity
other than he has any beneficial interest in
the Shares.
6. INDEMNIFICATION. The undersigned agrees to indemnify
and hold harmless the Company, its officers and directors, employees and
affiliates, and any person acting on behalf of the Company, from and against
any and all damage, loss, liability, cost and expense (including attorneys'
fees) which any of them may incur by reason of the failure by the undersigned
to fulfill any of the terms and conditions of this Subscription Agreement, or
by reason of any misrepresentation or breach of warranty made by the
undersigned herein or in any other document provided by the undersigned to the
Company. All representations, warranties and covenants contained in this
Subscription Agreement, and the indemnification contained in this Section 6,
shall survive the acceptance of this Subscription Agreement and the purchase
and sale of the Shares.
7. TRANSFERABILITY; BINDING EFFECT. The undersigned hereby
agrees that this Subscription Agreement may not be sold, assigned, pledged,
transferred or otherwise disposed of, except as otherwise provided for herein,
in any manner by the undersigned, without the prior written consent of the
Company. This Subscription Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns and the undersigned and
its heirs, personal representatives, successors and permitted assigns.
8. LEGENDS. The undersigned acknowledges that the Company
will instruct its Transfer Agent to legend the certificates representing the
Shares to reflect the restrictions on transferability.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the undersigned has executed this
Subscription Agreement this 31st day of May, 1996.
/s/ William D. Feniger
---------------------------------
William D. Feniger
-4-
<PAGE> 5
ACCEPTANCE
On behalf of Meridian National Corporation, the undersigned hereby
accepts the Subscription Agreement of William D. Feniger this 31st day of May,
1996.
MERIDIAN NATIONAL CORPORATION
By: /s/ James Rosino
---------------------------
-5-
<PAGE> 1
Exhibit 10.04(a)
LEASE
-----
Lease made this 1st day of March 1996 between Chicago Investors, a
general partnership organized under the law of the State of Ohio, having its as
principal office at 805 Chicago Street, Toledo, Ohio 43611, herein referred to
as "Lessor," and Ottawa River Steel Co., a corporation organized under the laws
of the State of Ohio, having its principal office at 805 Chicago Street,
Toledo, Ohio 43611, herein referred to as "Lessee."
In consideration of the mutual covenants contained herein, the parties
agree as follows:
Section 1. SUBJECT AND PURPOSE. Lessor leases the land, buildings and
equipment located at 810 Chicago Street, Toledo, Lucas County, Ohio, consisting
of the land (the "Land") described in Schedule A, the buildings and other
improvements outlined in red on Schedule B including the outside area under
crane, approximating 27,000 square feet (the "Improvements"), the personal
property described on Schedule C (the "Equipment"), and the respective
easements, rights and appurtenances relating to the Land, the Improvements and
the Equipment (hereinafter referred to as the "Leased Premises"). The Leased
Premises are leased to Lessee in their present condition without representation
or warranty by Lessor, and subject to the rights of parties in possession and
to the existing state of title. Lessee has examined the Leased Premises and
title to the Leased Premises and has found all of the same satisfactory for its
purposes. Lessee is aware and agrees that its rights in the Land and the
buildings thereon (except for the buildings outlined in red on Schedule B),
shall be non-exclusive, and that Lessor and other tenants shall also have
rights in the Land and such buildings. Lessee may use the Leased Premises for
the operation of a steel processing, fabrication and storage center and for no
other purposes.
Section 2. TERM. A. Lessor leases the Leased Premises for an initial
term ("Initial Term") of 24 months commencing March 1, 1996, and terminating
February 28, 1998. At the end of the Initial Term, Lessee has the options to
extend this Lease for up to three (3) additional option periods of one (1) year
each (each of said renewals is a "Renewable Term" upon the following terms and
conditions:
(a) Lessee gives Lessor written notice of its exercise of the
applicable renewal options at least sixty (60) days prior to the expiration of
the Initial Term and at least sixty (60) days prior to the expiration of each
Renewal Term if Lessee desires to exercise its options to renew the Lease for
any Renewal Term.
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<PAGE> 2
(b) Lessee is not in default under this Lease beyond the expiration of
any cure period either on a date Lessee delivers the notice required above or
at any time thereafter prior to the commencement of the Renewal Term so
exercised.
(c) All of the terms and provisions of this Lease shall be applicable
to the Renewal Term, except that the rental for each Renewal Term shall be as
set forth in Section 3 RENTAL of this Lease. After the Initial Term and Renewal
Term (s), Lessee shall be deemed a tenant of the Leased Premises from month-
to-month at the rents in effect at the later of the Initial Term or Renewal
Term (s), subject to all the terms and provisions hereof, except only as to the
term of this Lease. After the Initial Term or the Renewal Term (s), either
party may cancel this Lease upon giving the other party sixty (60) days written
notice. In the event Lessor secures a new tenant for the Leased Premises during
the month-to-month tenure of Lessee, Lessor shall grant the Lessee the first
right of refusal to match the terms of the proposed lease agreed to by and
between the Lessor and the new tenant.
B. Notwithstanding the above, until Lessee removes all of its equipment
and personal property from the Leased Premises, Lessee shall be liable for
monthly rental based on the same amount as stated herein for such additional
period of the time until all equipment and personal property are completely
removed.
Section 3. RENTAL. Lessee agrees to pay Lessor rent for the Leased
Premises, without deduction or set-off and without demand, as follows;
(a) From March 1,1996 through February 28, 1998, Lessee agrees to
pay Lessor as annual rent the sum of One hundred-seventy-one
thousand, sixty dollars ($171,060) per year payable in equal
consecutive monthly installments of Fourteen thousand, two hundred-
fifty-five dollars ($14,255) each.
(b) From March 1,1998 through February 28,1999, the annual rent
described in subparagraph (a) of this Section plus any increase
necessary to reflect any decrease in the purchasing power of the
consumer dollar, which shall be determined as follows:
(i) the index number of the "Consumer Price Index - All
Urban Consumers, All Items" (1982 - 84 = 100) ("CPI"),
published by the Bureau of Labor Statistics of the United
States Department of Labor, for the "All Cities" Average for
December, 1995 shall be the denominator of a fraction and
the index number for December, 1997 shall be the numerator
of said fraction.
(ii) multiply said fraction, if in excess of 1.00, by One
hundred-seventy-one thousand, sixty dollars ($171,060).
2
<PAGE> 3
(iii) the resulting amount shall be the annual base rent for
the applicable period.
Said resulting sum shall be payable in equal monthly
installments each on the first day of every month in advance. If the Bureau of
Labor Statistics shall change its Base Period and/or the index number of the
Base Period, the new index numbers shall be substituted for the old index
numbers in making the above computation. If the Consumer Price Index of the
United States Bureau of Labor Statistics is discontinued, comparable statistics
on the purchasing power of the consumer dollar, as published by the United
States Government or, in the absence thereof, by a responsible financial
periodical of recognized authority selected by Lessor shall be used for making
such computation.
(c) From March 1,1999 through February 29, 2000, as annual
rent, the resulting annual rent described in subparagraph (b) of
this Article multiplied by a fraction with the CPI index number for
December 1997 as the denominator of said fraction and the CPI index
number for December 1998 as the numerator of said fraction. Said
resulting amount shall be payable in equal monthly installments. In
no event shall annual rent payable in accordance with this
subparagraph (c) of this Article be less than the annual rent paid
in accordance with subparagraph (b) of this Article.
(d) From March 1, 2000 through February 28, 2001, as annual
rent, the resulting annual rent described in subparagraph (c) of
this Article multiplied by a fraction with the CPI index number for
December 1995 as the denominator of said fraction and the CPI index
number for December 1999 as the numerator of said fraction. Said
resulting amount shall be payable in equal monthly installments. In
no event shall annual rent payable in accordance with this
subparagraph (d) of this Article be less than the annual rent paid
in accordance with subparagraph (c) of this Article.
(e) Fixed rent shall be paid at the office of Landlord or
Landlord's agent, in advance, on the first day of each month
commencing March 1,1996.
Section 4. ADDITIONAL RENT. All charges, costs, and expenses
that Lessee assumes or agrees to pay hereunder, together with all interest and
penalties it may accrue thereon in the event of the failure of Lessee to pay
those items, and all other damages, costs, expenses, and sums that Lessor may
suffer or incur, or that may become due, by reason of any default of Lessee or
failure by Lessee to comply with the terms and conditions of this Lease shall
be deemed to be additional rent, and in the event of non-payment, Lessor shall
have all available rights and remedies for failure to pay rent.
3
<PAGE> 4
Section 5. TAXES AND ASSESSMENTS; UTILITIES; COMPLIANCE WITH LAW. A.
Lessee shall pay , prior to such becoming delinquent: (i) all taxes,
assessments, levies, fees, and all other governmental charges which are at any
time imposed or levied upon or assessed against the Leased Premises, any Basic
Monthly Rent, additional rent or other sum payable hereunder, or against this
Lease, or the leasehold estate hereby created or which arises in respect of the
operation, possession or use of the Leased Premises; (ii) all gross receipts or
similar taxes imposed or levied upon, assessed against or measured by any basic
Monthly Rent, or any additional rent or other sum payable hereunder; (iii) all
sales, value added, use and similar taxes at any time levied, assessed or
payable on account of Lessee's leasing or use of the Leased Premises; (iv) all
charges of the utilities and communications services serving the Leased
Premises. Lessee will furnish to Lessor, promptly after demand therefor, proof
of payment of all items referred to above which are payable by Lessee. Lessee
shall promptly reimburse Lessor for all utilities and similar costs paid by
Lessor and attributable to the Leased Premises.
Where taxes, assessments, and utilities cannot be directly allocated to
the Leased Premises, such items shall be allocated based on the per cent of
square footage of the Leased Premises to the whole square footage on which such
items have been determined or shall be allocated on more appropriate bases as
agreed between Lessor and Lessee.
B. Lessee shall comply with and cause the Leased Premises to comply
with (i) all laws, ordinances and regulations, and other governmental rules,
orders and determinations now or hereafter enacted, applicable to the Leased
Premises or the use thereof, and (ii) all contracts, agreements, covenants,
conditions and restrictions applicable to the Leased Premises or the ownership,
occupancy or use thereof. However, Lessee shall not be required to comply with
any such contracts, agreements, covenants, conditions or restrictions affecting
the Leased Premises if entered into on or after the commencement date of this
Lease unless Lessee has consented thereto.
Section 6. INSURANCE. A. Lessee will maintain cause to be maintain or
failing to do so, shall reimburse Lessor for, insurance on the Leased Premises
of the following character:
(a) Insurance against loss by fire, flood, lightning, vandalism,
malicious mischief and other risks which are the time are included under
"extended coverage" endorsements, in amounts sufficient to prevent Lessor or
Lessee from becoming a co-insurer of any loss, but in any event in amounts not
less than one hundred percent (100%) of the actual replacement value or actual
cash value, as the Lessor may require, of the Equipment and Improvements,
exclusive of foundations and excavations. If Lessor provides such insurance for
the entire
4
<PAGE> 5
parcel described in Schedule A and all improvements thereon including the
Equipment, then Lessee shall promptly reimburse Lessor for the cost of insuring
the Equipment and the pro rata cost of the insurance on the remaining Leased
Premises based on the ratio of the square footage of the Leased Premises to the
total square footage on which such insurance has been determined or shall be
allocated on more appropriate bases as agreed between Lessor and Lessee.
(b) Comprehensive public liability insurance against claims
for bodily injury, death or property damage occurring on, in or about the
Leased Premises and adjoining streets and sidewalks, in the minimum amounts of
Three million dollars ($3,000,000) for bodily injury or death in any one
occurrence, Three million dollars ($3,000,000) in the aggregate, and Three
million dollars ($3,000,000) for property damage, or in such greater amounts as
are then customary for property similar in use to the Leased Premises.
(c) Workers compensation insurance to the extent required
by the law of the State of Ohio, and to the extent necessary to protect lessor
and the Leased Premises against workers compensation claims.
(d) At any time when construction in being performed,
completed value builder's risk insurance for the Leased Premises, including
building materials on the Leased Premises, covering loss or damage for fire,
lightning, extended coverage perils, sprinkler leakage, vandalism and malicious
mischief and perils covered under a difference in conditions policy and in any
amount not less than the final cost, as estimated by Lessee, of such
construction.
(e) Such other insurance, in such amounts and against such
risks, as is commonly obtained in the case of property similar in use to the
Leased Premises and located in the State of Ohio, including war risk insurance
when and to the extent obtainable from the United States Government or any
agency thereof.
B. All of the above described insurance shall be written by
companies of recognized financial standing and legally qualified to issue such
insurance, and shall name Lessor as an insured party and shall include any
mortgagees of the Leased Premises, and Lessee, as their interests may appear.
Every policy referred to above shall provide that it will not
be canceled or materially modWied except after thirty (30) days written notice
to Lessor and all mortgagees of the Leased Premises, and that it shall not be
invalidated by any act or negligence of Lessor, Lessee or any person or entity
having an interest in the property, nor by occupancy or use of the Leased
Premises for purposes more hazardous than permitted by such policy, nor by any
foreclosure or other proceedings relating to the Leased Premises, nor by change
in title to or ownership of the Leased Premises or Lessor's interest therein.
5
<PAGE> 6
C. Lessee shall deliver to Lessor and all mortgagees of the
Leased Premises original or duplicate certificates of insurance evidencing the
existence of all insurance which is required to be maintained by Lessee
hereunder, such delivery to be made (i) promptly after the execution and
delivery hereof, and (ii) at least thirty (30) days prior to the expiration of
any such insurance. Lessee shall not obtain or carry separate insurance
concurrent in form or contributing in the event of loss with that required by
this Section unless Lessor and all mortgagees of the Leased Premises are named
insureds therein, with loss payable as provided herein.
Lessee shall at all times comply with and cause the Leased
Premises to comply with all insurance policies to the extent necessary to
prevent cancellation thereof and to insure full payment of any claims made
under such policies.
D. Lessor and Lessee hereby release each other from any and all
liability of responsibility (to the other or any one claiming through or under
them) by way of subrogation or otherwise for any loss or damage to property
caused by fire or any of the extended coverage or supplementary contract
casualties; even if such fire or other casualty shall have been caused by the
fault or negligence of the other party, or any one for whom such party may be
responsible; provided, however, that this release shall be applicable and
enforced and effect only with respect to loss and damage occurring during such
time as the releaser's policies shall contain a clause or endorsement to the
effect that any such release shall not adversely affect and impair said
policies or prejudice the right of the releaser to recover thereunder. Lessor
and Lessee each agree that their policies would include such a clause or
endorsement so long as the same shall be obtainable.
Section 7. MAINTENANCE AND REPAIR. Throughout the term of
this Lease, Lessee at is expense will maintain all parts of the Improvements
and Equipment in good repair and condition, except for ordinary wear and tear.
Lessor, at is option, shall have the right, but shall not be required, to
maintain, repair and/or rebuild any part of the Improvements and Equipment.
Lessee shall promptly reimburse Lessor for any and all costs incurred by Lessor
in connection with any repair, maintenance or rebuilding of the Improvements
and Equipment.
Section 8. ALTERATIONS; LESSEE'S EQUIPMENT. Lessee may, at its
expense, make non-structural alterations of the Improvements provided that (i)
the market value of the Leased Premises shall not be lessened thereby, (ii)
such work shall be expeditiously completed in a good and workmanlike manner and
in compliance with all applicable legal requirements and the requirements of
all insurance policies required to be maintained by Lessee hereunder, and (iii)
the character and use of the Leased Premises shall not be changed as a
consequence thereof. Lessee shall make no structural alterations or construct
any additions to the Leased Premises without first having obtained the written
6
<PAGE> 7
consent of Lessor. All additions and alterations shall be and remain part of
the realty and the property of Lessor, and shall be subject to this Lease.
Lessee may place upon the Leased Premises any trade fixtures,
machinery, equipment, materials, inventory, furniture, computers and/or other
personal property belonging to Lessee or third parties, whether or not the same
shall be affixed to the Leased Premises, which are used in connection with any
of Lessee's business operations on the Leased Premises, and may remove the same
at any time during the term of this Lease. Lessee shall repair any damage to
the Leased Premises caused by such removal.
Section 9. CONDEMNATION AND CASUALTY. A. Lessee hereby
irrevocably assigns to Lessor any award, compensation or insurance payment to
which Lessee may become entitled by reason of Lessee's interest in the Leased
Premises (i) if the use, occupancy or title of the Leased Premises or any part
thereof is taken, requisitioned or sold in, by or on account of any actual or
threatened eminent domain proceeding or other action by any person having the
power of eminent domain, or (ii) if the Leased Premises or any part thereof are
damaged or destroyed by fire, flood of other casualty. Lessee shall, promptly
upon obtaining knowledge of such damage or destruction, or of any such
proceeding or action for the taking of the Leased Premises or any part thereof,
notify Lessor of the pendency thereof. Lessor may appear at any proceeding or
action to negotiate, prosecute and adjust any claim for any award, compensation
or insurance payment on account of any such damage, destruction, taking,
requisition or sale, and Lessor shall collect any such award, compensation or
insurance payment. All amounts paid in connection with any such damage,
destruction, taking, requisition or sale, shall be applied pursuant to this
paragraph, and all such amounts (minus the expense of collecting such amounts)
are herein call the Net Proceeds. Lessor shall pay all reasonable costs and
expenses in connection with each such proceeding, action, negotiation,
prosecution and adjustment, for which costs and expenses Lessor shall be
reimbursed out of any award, compensation or insurance payment received.
Lessee shall be entitled to participate in any such proceedings, action,
negotiation, prosecution or adjustment. The foregoing notwithstanding, nothing
in this Lease shall impair Lessee's right to any award or payment on account of
Lessee's trade fixtures, equipment and other tangible personal property, moving
expenses and loss of business, if available, to the extent Lessee shall have
the right to make a claim therefore against the person having the power of
eminent domain, but in no event shall any such claim be based upon the value of
Lessee's leasehold interest.
B. In the event an occurrence of the character referred to in
clause A above shall affect all or a substantial portion of the Leased Premises
and shall render them unsuitable for restoration for continued use and
occupancy for the purpose set forth in the Lease, Lessee shall have the option
to terminate this Lease, in
7
<PAGE> 8
which event Lessor shall retain all awards or compensation granted for the
occurrence of such event, except for those awards or compensations which are
payable to Lessee and/or any subtenant as set forth above.
Section 10. UNLAWFUL OR DANGEROUS ACTIVITY. Lessee shall neither use
nor occupy the Leased Premises or any part thereof for any unlawful,
disreputable, or ultrahazardous business purpose or operate or conduct any
business which constitutes a nuisance of any kind.
Section 11. INDEMNITY. Lessee shall indemnify Lessor against all
expenses, liability, or claims of every kind, including reasonable counsel
fees, by or on behalf of any person or entity, arising out of either (i) a
failure by Lessee to perform any of the terms and conditions of the Lease, (ii)
any injury or damage happening on or about the Leased Premises which is not
covered by Lessor's insurance and/or the insurance required to be carried by
Lessor, or (iii) failure to comply with any law of any governmental authority.
Section 12. DEFAULT OR BREACH. Each of the following events shall
constitute a default or breach of the Lease by Lessee:
(a) If Lessee, or any successor or assignee of Lessee, while in
possession shall file a petition in bankruptcy or insolvency or for
reorganization under any bankruptcy act, or shall voluntarily take advantage of
any such act by answer or otherwise, or shall make any assignment for the
benefit of creditors;
(b) If involuntary proceedings under any bankruptcy law or
insolvency act shall be instituted against Lessee, or if a receiver or trustee
shall be appointed of all or substantially all of the property of Lessee, and
such proceedings shall not be dismissed or the receivership or trustee vacated
within thirty (30) days after the institution or appointment;
(c) If Lessee shall fail to perform or comply with any of the
conditions of the Lease, including the failure to pay rent, and if such
nonperformance shall continue for a period of fifteen (15) days after notice
thereof by Lessor to Lessee, or, except for the failure to pay rent, such
longer period of time as is reasonable under the circumstances.
Section 13. EFFECT OF DEFAULT. In the event of any default hereunder,
as set forth in Section 12, the rights of Lessor shall be as follows:
(a) Lessor shall have the right to cancel and terminate this Lease,
as well as all of the right, title, and interest of Lessee in the Lease by
sending a written notice of termination to Lessee; and on termination of the
Lease, the interest of Lessee hereunder shall terminate, except as to Lessee's
liability existing on the date of termination or accruing thereafter; and,
8
<PAGE> 9
(b) Lessor may re-enter the Leased Premises and remove the property
of Lessee in accordance with applicable law. Re-entry will not terminate the
Lease and the termination shall not be effective until Lessor sends written
notice of the termination to Lessee. On termination, Lessor may recover from
Lessee all damages approximately resulting from the breach, including the cost
of removing Lessee's property and recovering the Leased Premises.
Section 14. SUBORDINATION. All rights of Lessee under this lease shall
be subject and subordinate to the lien of any and all mortgages that may now or
hereafter affect the Leased Premises, or any part thereof, and to any and all
renewals, modifications, or extensions of any such mortgages, Lessee shall on
demand execute, acknowledge and deliver to Lessor, without expense to Lessor,
any and all instruments that may be necessary or proper to subordinate this
Lease or all rights therein to the lien of any such mortgage or mortgages and
each renewal, modification, or extension. Lessor shall provide to Lessee a non-
disturbance agreement in form and substance reasonably satisfactory to Lessee
executed by any mortgagee which now or in the future has a lien against the
Leased Premises.
Section 15. ACCESS TO PREMISES. Lessee shall permit Lessor or its
agents to enter the Leased Premises at all reasonable hours to inspect the
Leased Premises or make repairs that may become necessary from time to time.
Section 16. LIABILITY OF LESSOR. Lessee shall be in exclusive control
and possession of the Leased Premises, and Lessor shall not be liable for any
injury or damages to any property or to any person on or about the Leased
Premises, nor for any injury or damage to any property of Lessee unless caused
by Lessor or its agents. The provisions herein permitting Lessor to enter and
inspect the Leased Premises are made to insure that Lessee is in compliance
with the terms and conditions hereof. Lessor shall not be liable to Lessor for
damages arising from any entry by Lessor on the Leased Premises for inspection
purposes.
Section 17. REPRESENTATION BY LESSOR. At the commencement of the term,
Lessee shall accept the Leased Premises in the existing condition and state of
repair, and Lessee agrees that no representations, statements, or warranties,
express or implied, have been made by or on behalf of Lessor in respect thereto
except as contained in the provisions of the Lease and Lessor shall in no event
be liable for any latent defects.
Section 18. WAIVERS. The failure of Lessor to insist on a strict
performance of any of the terms and conditions hereof shall be deemed a waiver
of the rights or remedies that Lessor may have regarding that specific instance
only, and
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<PAGE> 10
shall not be deemed a waiver of any subsequent breach or default in any terms
and conditions.
Section 19. SURRENDER OF POSSESSION. Lessee shall, on the last
day of the term specified in Section 2 herein, or on earlier termination and
forfeiture of the Lease, peaceably and quietly surrender and deliver the Leased
Premises to Lessor.
Section 20. ASSIGNMENT AND SUBLETTING. Lessee may not assign
this Lease or sublet any portion of the Leased Premises without the prior
written consent of Lessor. Notwithstanding the foregoing, Lessee may assign
this lease or sublease any portion of the Leased Premises to any subsidiary
affiliate or parent of Lessee. My assignee or subtenant shall be bound by all
of the terms and conditions of this Lease and shall agree to assume Lessee's
responsibilities hereunder. Any assignment or subletting shall not relieve
Lessee from liability for payment of rent or other sums herein provided or from
the obligation to keep and be bound by the terms, conditions and covenants of
this Lease. The acceptance of rent from any other person shall not be deemed
to be a waiver of any of the provisions of this Lease or to be a consent to the
assignment of this Lease or subletting of the Leased Premises. Lessor may
assign, mortgage, pledge or encumber this Lease or any of the rents becoming
due hereunder without Lessee's consent provided Lessee is given written notice
of such assignment and the transferee must assume the obligations to Lessee
under this Lease.
Section 21. NOTICES. All notices given pursuant to this Lease
shall be in writing and shall be validly given when actually delivered or sent
by certified or registered mail, return receipt requested, (a) if to Lessor; to
Chicago Investors, 805 Chicago Street, Toledo, Ohio 43611, and (b) if to
Lessee: to Ottawa River Steel Co., 805 Chicago Street, Toledo, Ohio 43611.
Section 22. HEADINGS AND TABLE OF CONTENTS. The headings of the
various sections and schedules of this Lease have been inserted for reference
only and shall not to any extent have the effect of modifying, amending or
changing the expressed terms and provisions of this Lease.
Section 23. SCHEDULES. The following are schedules A, B, and C
referred to in this Lease, which Schedules are hereby incorporated be
reference.
Schedule A - Legal Description
Schedule B - Site Plan
Schedule C - Equipment
Section 24. TOTAL AGREEMENT; APPLICABLE TO SUCCESSORS. This
Lease contains the entire agreement between the parties and cannot be
10
<PAGE> 11
changed or modified except by a written instrument subsequently executed by the
parties hereto. This Lease and the terms and conditions hereof apply to and are
binding on the heirs, legal representatives, successors, and assigns of both
parties. Provided Lessee performs all of its material obligations under this
Lease, then Lessor represents and warrants that Lessee shall have the quiet and
peaceful enjoyment of the Leased Premises without any hinderance or claim by
any party claiming by, through or under Lessor.
Section 25. APPLICABLE LAW. This agreement shall be governed
and construed in accordance with the laws of the State of Ohio.
Section 26. TIME IS OF THE ESSENCE. Time is of the essence in
all provisions of this Lease.
This agreement executed on the date first written above.
Lessor: Chicago Investors, an Ohio
general partnership
/s/ James Rosino By /s/ Yale M. Feniger
- ----------------------------------- --------------------------------
Witness GeneraI Partner
/s/ Real P. Remillard
- -----------------------------------
Witness
Lessee: Ottawa River Steel Co.
/s/ James Rosino By /s/ William D. Feniger
- ----------------------------------- --------------------------------
Witness
/s/ Real P. Remillard
- -----------------------------------
Witness
11
<PAGE> 12
STATE OF OHIO )
) SS:
COUNTY OF LUCAS )
On the 5th day of June, 1996, Yale M. Feniger, the General
Partner of Chicago Investors, appeared before me and duly acknowledged that he
executed the foregoing instrument.
/s/ Laura Contos (Kenyon)
------------------------------------
Notary Public
Laura Contos
STATE OF OHIO ) Notary Public, State of Ohio
) SS: My Commission Expires Sept. 11, 1999
COUNTY OF LUCAS )
On the 5th day of June, 1996, William D. Feniger, the
of Ottawa River Steel Co., appeared before me and duly acknowledged
that he executed the foregoing instrument.
/s/ Laura Contos (Kenyon)
------------------------------------
Notary Public
Laura Contos
Notary Public, State of Ohio
My Commission Expires Sept. 11, 1999
12
<PAGE> 1
Exhibit 10.04(b)
LEASE
-----
Lease made this 1st day of March 1996 between Chicago Investors, a
general partnership organized under the law of the State of Ohio, having its as
principal office at 805 Chicago Street, Toledo, Ohio 43611, herein referred to
as "Lessor," and Environmental Purification Industries Company, a general
partnership organized under the laws of the State of Ohio, having its principal
office at 2111 Champlain, Toledo, Ohio 43611, herein referred to as "Lessee."
In consideration of the mutual covenants contained herein, the parties
agree as follows:
Section 1. SUBJECT AND PURPOSE. A. Lessor leases the Building and land
located at 805 Chicago Street, Toledo, Lucas County, Ohio, and more
particularly described and shown in Exhibit A attached hereto and made a part
hereof (hereinafter referred to as the "Premises") for purposes incident to the
operations conducted by the Lessee and for no other purpose.
B. Lessor grants Lessee access to and from the Premises and public
streets over Lessor's properties located at or adjacent to Chicago Street,
Toledo, Ohio. Lessee shall not, however, interfere with Lessor's operations and
Lessor's tenants' operations conducted on Lessor's properties.
Section 2. TERM. A. Lessor leases the Premises for an initial term
("Initial Term") of 24 months commencing March 1, 1996, and terminating
February 28, 1998. At the end of the Initial Term, Lessee has the options to
extend this Lease for up to three (3) additional option periods of one (1) year
each (each of said renewals is a "Renewal Term") upon the following terms and
conditions:
1. Lessee gives Lessor written notice of its exercise of the
applicable renewal options at least sixty (60) days prior to the expiration of
the Initial Term and at least sixty (60) days prior to the expiration of each
Renewal Term if Lessee exercises its options to renew the Lease for any
Renewal Term.
2. Lessee is not in default under this Lease beyond the expiration of
any cure period either on a date Lessee delivers the notice required above or
at any time thereafter prior to the commencement of the Renewal Term so
exercised.
3. All of the terms and provisions of this Lease shall be applicable to
the Renewal Term, except that the rental for each Renewal Term shall be as set
forth in Section 3 RENTAL of this Lease. After the Initial Term and Renewal
Term (s), Lessee shall be deemed a tenant of the Premises from month-to-month
at the rents in effect at the later of the Initial Term or Renewal Term (s),
subject to all the terms and provisions hereof, except only as to the term of
this Lease. After the Initial Term and the Renewal Term (s), either party may
cancel this Lease upon giving the other party sixty (60) days written notice.
In the event Lessor secures a new tenant for the Premises during the
month-to-month tenure of Lessee, Lessor shall grant the Lessee the first right
of first refusal to match the terms of the proposed lease agreed upon by and
between the Lessor and the new tenant.
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<PAGE> 2
B. Notwithstanding the above, until Lessee removes all of its equipment
and personal property from the Premises, Lessee shall be liable for a pro-rata
monthly rental based on the same amount as stated herein for such additional
period of the time until all equipment and personal property are completely
removed. Lessee shall have a maximum of sixty (60) days to remove all of its
equipment and personal property from the date of cancellation after which
period the Lessor shall have the option to cause Lessee to immediately remove
its equipment and personal property or to restore the monthly rental to the
full amount.
Section 3. RENTAL. Lessee agrees to pay Lessor the monthly rental in
advance on the first day each month for that month's rental during the term of
this Lease or any Renewal Term hereunder as follows:
1. March 1, 1996 through February 28, 1998 $ 1,375.00
2. March 1, 1998 through February 28, 1999 $ 1,550.00
3. March 1, 1999 through February 29, 2000 $ 1,700.00
4. March 1, 2000 through February 28, 2001 $ 1,800.00
All rental payments shall be made to the Lessor at the address
specified above. If any rent payment is delinquent, a late charge of ten ($10)
per day shall be charged until rent is paid.
Section 4. TAXES AND ASSESSMENTS; UTILITIES. In consideration of the
rentals specified in this Lease, Lessor shall be responsible for all taxes and
assessments directly attributable to the Premises and for the utilities (gas,
electricity and water) consumed on the Premises. However, should the
operations and use of the Premises by the Lessee cause the utilities to
increase by more than 15% over the average monthly cost of utilities for the
twelve-month period preceding March 1,1996, stated to be $750.00 per month, the
Lessee shall be obligated to pay as additional rent the cost of utilities
exceeding such 15% increase. The Lessor will provide substantiation to include
but not be limited to meter readings, for the computation of the increase.
Lessee shall pay Lessor for such increase upon receipt of billing for such
increase from the Lessor.
Section 5. INSURANCE. A. Lessee will maintain or cause to be maintained
or, or failing to do so, shall reimburse Lessor for, insurance on the Premises
of the following character:
1. Comprehensive general liability insurance against claims for
bodily injury, death or property damage occurring on, in or about the Premises
in the minimum amounts of Three Million Dollars ($3,000,000) for bodily injury
or death in any one occurrence, Three Million Dollars ($3,000,000) in the
aggregate, and Three Million Dollars ($3,000,000) for property damage.
2. Workers compensation insurance to the extent required by the
law of the State of Ohio, and to the extent necessary to protect lessor and the
Premises against workers compensation claims.
2
<PAGE> 3
B. All of the above described insurance shall be written by
companies of recognized financial standing and legally qualified to issue such
insurance.
C. Lessee shall deliver to Lessor original or duplicate
certificates of insurance evidencing the existence of all insurance which is
required to be maintained by Lessee hereunder, such delivery to be made (i)
promptly after the execution and delivery hereof, and (ii) at least thirty (30)
days prior to the expiration of any such insurance.
D. Lessee shall at all times comply with and cause the Premises
to comply with all insurance policies required of Lessee under this Section 5
to the extent necessary to prevent cancellation thereof and to insure full
payment of any claims made under such policies.
E. Lessor shall maintain property insurance on the
improvements constituting the Premises in an amount equal to the Actual Cash
Value thereof.
F. Lessor and Lessee hereby release each other from any and all
liability or responsibility (to the other or any one claiming through or under
them) by way of subrogation or otherwise for any loss or damage to property
caused by fire or any of the extended coverage or supplementary contract
casualties; even if such fire or other casualty shall have been caused by the
fault or negligence of the other party, or any one for whom such party may be
responsible; provided, however, that this release shall be applicable and
enforced and effect only with respect to loss and damage occurring during such
time as the releaser's policies shall contain a clause or endorsement to the
effect that any such release shall not adversely affect and impair said
policies or prejudice the right of the releaser to recover thereunder. Lessor
and Lessee each agree that their policies will include such a clause or
endorsement so long as the same shall be obtainable.
Section 6. MAINTENANCE AND REPAIR. Throughout the term of
this Lease, Lessee at its expense will maintain all parts of the Premises in
good repair and condition, except for ordinary wear and tear. Lessor is
responsible for the repair and maintenance of the structural components of the
Premises. However, in the event of any casualty to the Premises, the Lessor
shall not be obligated to repair such casualty if the cost of making such
repairs exceeds $15,000 over insurance proceeds collected or to be collected.
In the event Lessor elects not to make such repairs, Lessee shall have the
option to make such repairs or to terminate the lease.
If the Premises become unsuitable for the purpose set forth in
the Lease for a period of fifteen (15) consecutive days due to structural
disrepair or failure, the rental shall be thereafter suspended until the
Premises are brought into a suitable condition for use.
Section 7. ALTERATIONS; LESSEE'S EQUIPMENT. Lessee may, at its
expense, make non-structural alterations of the Building provided that (i) the
market value of the Premises shall not be lessened thereby, (ii) such work
shall be expeditiously completed in a good and workmanlike manner and in
3
<PAGE> 4
compliance with all applicable legal requirements and the requirements of all
insurance policies required to be maintained by Lessee hereunder, and (iii) the
character and use of the Premises shall not be changed as a consequence
thereof. Lessee shall make no structural alterations or construct any additions
to the Premises without first having obtained the written consent of Lessor,
which consent Lessor shall not unreasonably withhold. All additions and
alterations shall be and remain part of the realty and the property of Lessor,
and shall be subject to this Lease.
Lessee may place upon the Premises any trade fixtures,
machinery, equipment, materials, inventory, furniture, computers and/or other
personal property belonging to Lessee or third parties, whether or not the same
shall be affixed to the Premises, which are used in connection with any of
Lessee's business operations on the Premises, and may remove the same at any
time during the term of this Lease. Lessee shall repair any damage to the
Premises caused by such removal.
Section 8. CONDEMNATION AND CASUALTY. A. Lessee hereby
irrevocably assigns to Lessor any award, compensation or insurance payment to
which Lessee may become entitled by reason of Lessee's interest in the Premises
(i) if the use, occupancy or title of the Premises or any part thereof is
taken, requisitioned or sold in, by or on account of any actual or threatened
eminent domain proceeding or other action by any person having the power of
eminent domain, or (ii) if the Premises or any part thereof are damaged or
destroyed by fire, flood of other casualty. Lessee shall, promptly upon
obtaining knowledge of such damage or destruction, or of any such proceeding or
action for the taking of the Premises or any part thereof, notify Lessor of the
pendency thereof. Lessor may appear at any proceeding or action to negotiate,
prosecute and adjust any claim for any award, compensation or insurance payment
on account of any such damage, destruction, taking, requisition or sale, and
Lessor shall collect any such award, compensation or insurance payment. All
amounts paid in connection with any such damage, destruction, taking,
requisition or sale shall be applied pursuant to this paragraph, and all such
amounts (minus the expense of collecting such amounts) are herein call the Net
Proceeds. Lessor shall pay all reasonable costs and expenses in connection with
each such proceeding, action, negotiation, prosecution and adjustment, for
which costs and expenses Lessor shall be reimbursed out of any award,
compensation or insurance payment received. Lessee shall be entitled to
participate in any such proceedings, action, negotiation, prosecution or
adjustment. The foregoing notwithstanding, nothing in this Lease shall impair
Lessee's right to any award or payment on account of Lessee's trade fixtures,
equipment and other tangible personal property, moving expenses and loss of
business, if available, to the extent Lessee shall have the right to make a
claim therefore against the person having the power of eminent domain, but in
no event shall any such claim be based upon the value of Lessee's leasehold
interest.
B. In the event an occurrence of the character referred to
in clause (A.) above shall affect all or a substantial portion of the Premises
and shall render the Premises unsuitable for restoration for continued use and
occupancy for the purpose set forth in the Lease, Lessee shall have the option
to terminate this
4
<PAGE> 5
Lease, in which event Lessor shall retain all awards or compensation granted
for the occurrence of such event, except for those awards or compensations
which are payable to Lessee and/or any subtenant as set forth above.
Section 9. UNLAWFUL OR DANGEROUS ACTIVITY. Lessee shall neither
use nor occupy the Premises or any part thereof for any unlawful, disreputable
business purpose or operate or conduct any business which constitutes a
nuisance of any kind.
Section 10. INDEMNITY. A. Lessee shall indemnify Lessor
against all expenses, liability, or claims of every kind, including reasonable
counsel fees, by or on behalf of any person or entity, arising out of either
(1) a failure by Lessee to perform any of the terms and conditions of the
Lease, (2) any injury or damage happening on or about the Premises not covered
by Lessor's insurance and/or the insurance required to be carried by Lessor, or
(3) failure to comply with any law of any governmental authority. The foregoing
indemnification will not apply where the damages arise from the acts or
omissions of Lessor or its employees, agents or contractors.
B. Lessor shall indemnify Lessee against all expenses,
liability of every kind, including reasonable counsel fees, by or on behalf of
any person arising our of a failure by Lessor to perform any of the terms and
conditions of the Lease or Lessor's failure to comply with any law of any
governmental authority.
Section 11. DEFAULT OR BREACH. Each of the following events
shall constitute a default or breach of the Lease by Lessee:
1. If Lessee, or any successor or assignee of Lessee,
while in possession shall file a petition in bankruptcy or insolvency or for
reorganization under any bankruptcy act, or shall voluntarily take advantage of
any such act by answer or otherwise, or shall make any assignment for the
benefit of creditors;
2. If involuntary proceedings under any bankruptcy law or
insolvency act shall be instituted against Lessee, or if a receiver or trustee
shall be appointed for all or substantially all of the property of Lessee, and
such proceedings shall not be dismissed or the receivership or trustee vacated
within thirty (30) days after the institution or appointment;
3. If Lessee shall fail to perform or comply with any of
the conditions of the Lease, including the failure to pay rent, and if such
nonperformance shall continue for a period of fifteen (15) days after notice
thereof by Lessor to Lessee, or, except for the failure to pay rent, such
longer period of time as is reasonable under the circumstances.
Section 12. EFFECT OF DEFAULT. In the event of any default
hereunder, as set forth in Section 11, the rights of Lessor shall be as
follows:
1. Lessor shall have the right to cancel and terminate
this Lease, as well as all of the right, title, and interest of Lessee in the
Lease by sending a written notice of termination to Lessee; and on termination
of the Lease, the interest of
5
<PAGE> 6
Lessee hereunder shall terminate, except as to Lessee's liability existing on
the date of termination; and
2. Lessor may re-enter the Premises thirty (30) days after written
notice of default and remove the property of Lessee in accordance with
applicable law. Re-entry will not terminate the Lease and the termination
shall not be effective until Lessor sends written notice of the termination to
Lessee. On termination, Lessor may recover from Lessee all damages proximately
resulting from the breach, including the cost of removing Lessee's property and
recovering the Premises.
Section 13. SUBORDINATION. All rights of Lessee under this lease shall
be subject and subordinate to the lien of any and all mortgages that may now or
hereafter affect the Leased Premises, or any part thereof, and to any and all
renewals, modifications, or extensions of any such mortgages, Lessee shall on
demand execute, acknowledge and deliver to Lessor, without expense to Lessor,
any and all instruments that may be necessary or proper to subordinate this
Lease or all rights therein to the lien of any such mortgage or mortgages and
each renewal, modification, or extension. Lessor shall provide to Lessee a non-
disturbance agreement in form and substance reasonably satisfactory to Lessee
executed by any mortgagee which now or in the future has a lien against the
Premises.
Section 14. ACCESS TO PREMISES. Lessee shall permit Lessor or its
agents to enter the Premises at all reasonable hours to inspect the Premises or
make repairs that may become necessary from time to time.
Section 15. LIABILITY OF LESSOR. Lessee shall be in exclusive control
and possession of the Premises, and Lessor shall not be liable for any injury
or damages to any property or to any person on or about the Premises, nor for
any injury or damage to any property of Lessee unless caused by Lessor or its
employees, agents or contractors. The provisions herein permitting Lessor to
enter and inspect the Premises are made to insure that Lessee is in compliance
with the terms and conditions hereof. Lessee shall not be liable to Lessor for
damages arising from any entry by Lessor on the Premises for inspection
purposes.
Section 16. WAIVERS. The failure of Lessor to insist on a strict
performance of any of the terms and conditions hereof shall not be deemed a
waiver of the rights or remedies that Lessor may have regarding that specific
instance only, and shall not be deemed a waiver of any subsequent breach or
default in any terms and conditions.
Section 17. SURRENDER OF POSSESSION. Lessee shall, on the last day of
the term specified in Section 2 herein, or on earlier termination and
forfeiture of the Lease, peaceably and quietly surrender and deliver the
Premises to Lessor.
Section 18. ASSIGNMENT. Lessee may not assign this Lease or sublease
the Premises without the written permission of Lessor, which Lessor shall not
6
<PAGE> 7
unreasonably withhold. Lessor may assign, mortgage, pledge or encumber this
Lease or any of the rents becoming due hereunder without Lessee's consent
provided Lessee is given written notice of such assignment and the transferee
must assume the obligations of Lessee under this Lease.
Section 19. TOTAL AGREEMENT; APPLICABLE TO SUCCESSORS. This Lease
contains the entire agreement between the parties and cannot be changed or
modified except by a written instrument subsequently executed by the parties
hereto. This Lease and the terms and conditions hereof apply to and are binding
on the heirs, legal representatives, successors, and assigns of both parties.
Section 20. APPLICABLE LAW. This agreement shall be governed and
construed in accordance with the laws of the State of Ohio.
Section 21. TIME IS OF THE ESSENCE. Time is of the essence in all
provisions of this Lease.
This agreement executed on the date first written above.
Lessor: Chicago Investors, an Ohio
General Partnership
/s/ Real P. Remillard By: /s/ Yale M. Feniger
- ------------------------------- --------------------------------
Witness General Partner
/s/ Joseph D. Van Brackel
- -------------------------------
Witness
Lessee: Environmental Purification
Industries Company, An Ohio
General Partnership
/s/ Real P. Remillard By: /s/ Bruce F. Maison
- ------------------------------- --------------------------------
Witness General Partner
/s/ Joseph D. Van Brackel
- -------------------------------
Witness
7
<PAGE> 8
STATE OF OHIO )
) SS:
COUNTY OF LUCAS )
On the 4th day of June, 1996, Yale M. Feniger the General Partner of
Chicago Investors, appeared before me and duly acknowledged that he executed
the foregoing instrument.
/s/ Laura M. Contos (Kenyon)
--------------------------------
Notary Public
Laura Contos
Notary Public, State of Ohio
My Commission Expires Sept. 11, 1999
STATE OF OHIO )
) SS:
COUNTY OF LUCAS )
On the 4th day of June, 1996, Bruce F. Maison, a General Partner of
Environmental Purification Industries Company, appeared before me and duly
acknowledged that he executed the foregoing instrument.
/s/ Laura M. Contos (Kenyon)
---------------------------------
Notary Public
Laura Contos
Notary Public, State of Ohio
My Commission Expires Sept. 11, 1999
8
<PAGE> 1
Exhibit 10.06(b)
AMENDMENT NO.1
TO THE MERIDIAN NATIONAL CORPORATION
1990 NON-QUALIFIED AND INCENTIVE
STOCK OPTION PLAN
1. Upon the effectiveness of the reverse stock split whereby each share of
Common Stock of the Company was split into one-tenth (1/10) of a share
of Common Stock, which reverse stock split was approved by the
stockholders of the Company at the Annual Meeting of the Stockholders
held on August 6, 1993, the number of Shares reserved for use under the
Plan was adjusted from One Million (1,000,000) Shares to One
Hundred Thousand (100,000) Shares.
2. Section 3 of the Plan is hereby amended to increase the number of
Shares reserved for use, upon the exercise of Options to be granted
under the Plan from One Hundred Thousand (100,000) Shares to One
Hundred Seventy-five Thousand (175,000) Shares.
3. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Plan.
4. This Amendment No. 1 to the Plan shall be effective as of May 12, 1994.
Unless this Amendment No. 1 to the Plan is approved by the affirmative
votes of the holders of shares having a majority of the voting power of
all shares represented at a meeting duly held in accordance with
Delaware law within twelve (12) months after being approved by the
Board, this Amendment No. 1 and all Options granted under it shall be
void and of no force and effect.
<PAGE> 1
Exhibit 10.06(c)
AMENDMENT NO.2
TO THE MERIDIAN NATIONAL CORPORATION
1990 NON-QUALIFIED AND INCENTIVE
STOCK OPTION PLAN
1. Section 3 of the Plan is hereby amended to increase the number of
Shares reserved for use, upon the exercise of Options to be granted
under the Plan from One Hundred Seventy-five Thousand (175,000) shares
to Three Hundred Fifty Thousand (350,000) Shares.
2. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Plan.
3. This Amendment No. 2 to the Plan shall be effective as of June 6, 1995.
Unless this Amendment No. 2 to the Plan is approved by the affirmative
votes of the holders of shares having a majority of the voting power of
all shares represented at a meeting duly held in accordance with
Delaware law within twelve (12) mouths after being approved by the
Board, this Amendment No. 2 and all Options granted under it shall be
void and of no force and effect.
<PAGE> 1
Exhibit 10.07(c)
AMENDMENT NO.2
TO THE AMENDED AND RESTATED
1987 NON-EMPLOYEE DIRECTOR'S
STOCK OPTION PLAN OF
MERIDIAN NATIONAL CORPORATION
1. Upon the effectiveness of the reverse stock split whereby each share of
Common Stock of the Company was split into one-tenth (1/10) of a share
of Common Stock, which reverse stock split was approved by the
stockholders of the Company at the Annual Meeting of the Stockholders
held on August 6, 1993, the number of Shares automatically granted to
each Director as provided in Section 5 of the Plan was adjusted from
6,000 to 600 and the number of Shares reserved for use under the Plan
was adjusted from Five Hundred Thousand (500,000) Shares to Fifty
Thousand (50,000) Shares.
2. Section 5 of the Plan is hereby amended by deleting the first paragraph
thereof and substituting the following therefor:
"An Option to purchase One Thousand Five Hundred (1,500) Shares
shall be automatically granted on the 31st of May of each year, if not
a legal holiday, and if a legal holiday, then on the next business day
following, beginning on May 31, 1994, to each Director who has been a
member of the Board for at least twelve (12) consecutive months prior
to the date of grant and who during the twelve (12) months preceding
the date of grant, has not been an employee of the Company and its
subsidiaries or been eligible to receive any award under any other
benefit plan of the Company or its Affiliates entitling him to acquire
stock options or stock appreciation rights of the Company or any of its
Affiliates. Notwithstanding the foregoing, if the number of Shares
available to grant under the Plan on a scheduled date of grant is
insufficient to make all automatic grants made pursuant to the Plan on
such date, then each eligible Director shall receive an Option to
purchase a pro rata number of the remaining shares available under the
Plan; provided, however, that if such proration results in fractional
Shares, then such option shall be rounded down to the nearest number
of whole Shares."
3. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Plan.
4. This Amendment No. 2 to the Plan shall be effective as of May 12, 1994.
Unless this Amendment No. 2 to the Plan is approved by the affirmative
votes of the holders of shares having a majority of the voting power
of all shares represented at a meeting duly held in accordance with
Delaware law within twelve (12) months after being approved by the
Board, this Amendment No. 2 and all Options granted under it shall be
void and of no force and effect.
<PAGE> 1
Exhibit 10.07(d)
AMENDMENT NO. 3
TO THE AMENDED AND RESTATED
1987 NON-EMPLOYEE DIRECTOR'S
STOCK OPTION PLAN OF
MERIDIAN NATIONAL CORPORATION
1. Section 3 of the Plan is hereby amended to increase the number of Shares
reserved for use, upon the exercise of Options to be granted from time
to time under the Plan, from Fifty (50,000) Thousand Shares to One
Hundred Fifty Thousand (150,000) Shares.
2. Section 5 of the Plan is hereby amended by deleting the first paragraph
thereof and substituting the following therefor:
"An Option to purchase Two Thousand Five Hundred (2,500) Shares
shall be automatically granted on the 31st of May of each year, if not
a legal holiday, and if a legal holiday, then on the next business day
following, beginning on May 31, 1996, to each Director who, during the
twelve (12) months preceding the date of grant, has not been an
employee of the Company and its subsidiaries or been eligible to
receive any award under any other benefit plan of the Company or its
Affiliates entitling him to acquire stock, stock options or stock
appreciation rights of the Company or any of its Affiliates. In
addition, an Option to purchase Ten Thousand Shares shall be
automatically granted to each of the existing Directors as of June 6,
1995 and to all incoming Directors in the year such incoming Director
becomes a member of the Board, which Options will be fully vested when
and if such Director has been a member of the Board for at least twelve
(12) consecutive months and who during the twelve (12) months preceding
the date of grant, has not been an employee of the Company and its
subsidiaries or been eligible to receive any award under any other
benefit plan of the Company or its Affiliates entitling him to acquire
stock options or stock appreciation rights of the Company or any of its
Affiliates. Notwithstanding the foregoing, if the number of shares
available to grant under the Plan on a scheduled date of grant is
insufficient to make all automatic grants made pursuant to the Plan on
such date, then each eligible Director shall receive an Option to
purchase a pro rata number of the remaining shares available under the
Plan; provided however, that if such proration results in fractional
Shares, then such option shall be rounded down to the nearest number
of whole Shares."
3. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Plan.
4. This Amendment No. 3 to the Plan shall be effective as of June 6, 1995.
Unless this Amendment No. 3 to the Plan is approved by the affirmative
votes of the holders of shares having a majority of the voting power of
ail shares represented at a meeting duly held in accordance with
Delaware law within twelve (12) months after being
<PAGE> 2
approved by the Board, this Amendment No. 3 and all Options granted under it
shall be void and of no force and effect.
<PAGE> 1
Exhibit 10.17
LEASE
BETWEEN
NATIONAL METAL PROCESSING, INC.
AND
MNP CORPORATION
Date: June 1, 1995
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I LEASED PREMISES .......................... 1
ARTICLE II TERM OF LEASE ............................ 3
ARTICLE III RENT ..................................... 3
ARTICLE IV TAXES .................................... 4
ARTICLE V UTILITY EXPENSES ......................... 5
ARTICLE VI USE OF PREMISES .......................... 6
ARTICLE VII ALTERATIONS............................... 7
ARTICLE VIII MAINTENANCE OF LEASED PREMISES ........... 7
ARTICLE IX MECHANIC'S LIEN........................... 8
ARTICLE X DESTRUCTlON OF LEASED PREMISES ........... 8
ARTICLE XI TRADE FIXTURES IN LEASED PREMISES ........ 9
ARTICLE XII ACCESS TO LEASED PREMISES ................ 9
ARTICLE XIII SURRENDER OF LEASED PREMISES ............. 10
ARTICLE XIV INDEMNITY AND INSURANCE BY
TENANT ................................... 10
ARTICLE XV OPTION TO PURCHASE ....................... 11
ARTICLE XVI ASSIGNMENT AND SUBLETTING ................ 17
ARTICLE XVII EMINENT DOMAIN ........................... 17
ARTICLE XVIII DEFAULT BY TENANT ........................ 18
ARTICLE XIX WAIVER OF TENANT'S DEFAULT ............... 19
ARTICLE XX DEFAULT BY LANDLORD ...................... 19
ARTICLE XXI DEFAULT INTEREST ......................... 19
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE XXII HOLDING OVER ............................. 19
ARTICLE XXIII QUIET ENJOYMENT .......................... 20
ARTICLE XXIV WAIVER OF SUBROGATION .................... 20
ARTICLE XXV NOTICES .................................. 20
ARTICLE XXVI PROVISIONS BINDING ....................... 21
ARTICLE XXVII COMPLETE AGREEMENT ....................... 22
EXHIBITS
EXHIBIT A Outline of High-Bay Space
EXHIBIT B Outline of Mid-Range Space
EXHIBIT C Outline of Office Space
EXHIBIT D Outline of Low Area Space
EXHIBIT E Outline of Additional Low Area Space
EXHIBIT F Description of Adjacent Parcel
EXHIBIT G Owner's Policy of Title Insurance and Owner of Record and
Encumbrance Search Report
</TABLE>
ii
<PAGE> 4
LEASE
THIS LEASE ("Lease"), effective as of the 1st day of June,
1995, by and between NATIONAL METAL PROCESSING, INC., a Michigan corporation,
having an office at 3105 Beaufait, Detroit, Michigan 48207 ("Landlord"), and
MNP CORPORATION, a(n) Michigan corporation, having an office at 6440 Mack
Avenue, Detroit, Michigan 48207 ("Tenant").
WHEREAS, Landlord is the lessee of the leased Premises
(hereinafter defined) pursuant to a lease Purchase Agreement dated June 30,1986
(the "Main lease"), between The Economic Development Corporation of the City of
Detroit ("Development Corporation") and Landlord, a copy of which lease was
previously delivered to Tenant.
WHEREAS, to the extent that the Main lease remains in full
force and effect, this deemed a sublease from Landlord to Tenant. Upon
termination or expiration of the Main lease due to Landlord's redemption of the
Bond (as hereinafter defined), this Lease shall be deemed a direct lease from
Landlord to Tenant.
W I T N E S S E T H:
- - - - - - - - - -
ARTICLE I
---------
LEASED PREMISES
---------------
1. Landlord, for and in consideration of the payment of
the rent and the performance by Tenant of the covenants and agreements as
hereinafter set forth, does hereby demise, let and lease unto Tenant and Tenant
does hereby accept from Landlord the following, all of which is located in that
certain building (the "Building") located on the real property (the "land"),
known for street numbering purposes as 6440 Mack Avenue, Detroit, Michigan
48207:
(a) approximately sixty-one thousand nine hundred
fifty-eight (61,958) square feet of high-bay space (the
"High-Bay Space"), as outlined on EXHIBIT "A" attached hereto
and made a part hereof;
(b) approximately twenty-two thousand six hundred
fifty-seven (22,657) square feet of mid-range and office space
(the "Mid-Range Space"), as outlined on EXHIBIT "B" attached
hereto and made a part hereof;
(c) approximately nineteen thousand (19,000)
square feet of office space (the "Office Space") located on the
second floor of the Building, as outlined on EXHIBIT "C"
attached hereto and made a part hereof.
The High-Bay Space, the Mid-Range Space and the Office Space are collectively
referred to herein as the "Leased Premises."
<PAGE> 5
(d) Commencing upon the beginning of the second
Lease Year (hereinafter defined), Landlord shall demise, let
and lease unto Tenant and Tenant will accept from Landlord,
approximately thirty-two thousand four hundred eighty-three
(32,483) square feet of low area space (the "Low Area Space"),
as outlined on EXHIBIT "D" attached hereto and made a part
hereof. Upon the commencement of the second Lease Year, any
references to the Leased Premises in this Lease shall be deemed
to include the low Area Space. Tenant acknowledges that the
Low) Area Space is being leased in its "AS-IS", "WHERE-IS"
condition existing as of the date that possession of the low
Area Space is delivered to Tenant.
(e) Commencing upon the beginning of the third
Lease Year, Landlord shall demise, let and lease unto Tenant
and Tenant will accept from Landlord, approximately fifteen
thousand four hundred eighty (15,480) square feet of additional
low area space (the "Additional low Area Space"), as outlined
on EXHIBIT "E" attached hereto and made a part hereof. Upon the
commencement of the third Lease Year, any references to the
Leased Premises in this Lease shall be deemed to include the
Additional low Area Space. Tenant acknowledges that the
Additional low Area Space is being leased in its "AS-IS",
"WHERE-IS" condition existing as of the date that possession of
the Additional low Area Space is delivered to Tenant.
2. During the term of this Lease, Tenant shall have a nonexclusive
license and right to use the sidewalks, driveways and parking areas (the
"Common Areas") located on the land as reasonably necessary for Tenant's use
and occupancy of the Leased Premises, subject to the control, management and
direction of Landlord. Such use shall be jointly with Landlord and any other
tenants of the Building, subject to such reasonable rules and regulations as
Landlord may from time to time establish, and shall be limited to the purposes
for which such areas are intended. Landlord reserves the right to alter or vary
the Common Areas from time to time provided such alteration does not materially
impact Tenant's use of and operation from the Leased Premises. Tenant agrees
not to obstruct or unnecessarily interfere with the use of the Common Areas by
Landlord and any other tenants of the Building and to keep all such areas free
and clear of rubbish, litter and debris resulting from Tenant's use and
operation of the Leased Premises.
3. The term "Lease Year" as used herein shall mean the period of
twelve (12) months commencing with the Commencement Date of the term of this
Lease and ending on the day immediately preceding the first anniversary of the
Commencement Date, and each successive period of twelve (12) months thereafter
during the term of this Lease.
4. To the extent that the Main Lease remains in full force and
effect, this Lease shall be deemed a sublease from Landlord to Tenant and
Landlord shall continue to remain primarily liable for the performance and
observance of the terms and conditions of the Main Lease. Upon termination or
expiration of the Main Lease due to landlord's redemption of the Bond, this
Lease shall be deemed a direct lease from Landlord to Tenant. This Lease is
conditioned upon Landlord obtaining the consent required under Article IX of
the Main Lease, and such consent shall be deemed to be an acknowledgement by
the Development Corporation that, in the event that the Main Lease is
terminated (other than due to the redemption of the Bond), the Development
Corporation agrees to recognize all
2
<PAGE> 6
of the terms and conditions of this Lease for the balance of the term thereof
remaining, including, without limitation, the "Options" set forth in Article
XV, with the same force and effect as if the Development Corporation is the
landlord under this Lease, and Tenant's use of the Leased Premises shall not be
disturbed provided that Tenant is not in default under this Lease. If such
consent is not obtained as required therein, then this Lease shall be null and
void. Tenant agrees to furnish to Landlord any documents or information
necessary or required in order to comply with the terms of the Main Lease and
to obtain the necessary consent thereunder; provided, however, Tenant shall not
be required to assume any of Landlord's obligations under the Main Lease except
as provided in this Lease.
5. Tenant acknowledges that the Leased Premises are being leased
in an "AS-IS", "WHERE-IS" condition. Tenant further acknowledges that Landlord
has made no representations or warranties of any kind whatsoever, either
express or implied, with respect to the condition of the Leased Premises.
ARTICLE II
----------
TERM OF LEASE
-------------
To have and to hold the Leased Premises unto Tenant for a term
commencing on June 1, 1995 (the "Commencement Date") and ending three (3) years
thereafter.
ARTICLE III
-----------
RENT
----
Tenant covenants and agrees to pay to Landlord rent for the Leased
Premises during the term of this Lease, without deduction or set-off and
without demand as follows:
(a) For the High-Bay Space, the sum of Ninety Two
Thousand Nine Hundred Thirty Seven Dollars ($92,937) per annum,
payable in equal monthly installments of Seven Thousand Seven
Hundred Forty-Four and 75/100 Dollars ($7,744.75) each.
(b) For the Mid-Range Space, the sum of Twenty Two
Thousand Six Hundred Fifty-Seven Dollars ($22,657) per annum,
payable in equal monthly installments of One Thousand Eight
Hundred Eighty-Eight and 08/100ths Dollars ($1,888.08)
each.
(c) Tenant shall not be obligated to pay rent for
the Office Space. Notwithstanding the foregoing, Tenant shall
be obligated to pay to Landlord for Tenant's proportionate
share (hereinafter defined) of the terms set forth in Articles
IV, V, VIII and XIV of this Lease.
3
<PAGE> 7
(d) Commencing upon the second Lease Year, for the
Low Area Space, the sum of Thirty Two Thousand Four Hundred
Eighty-Three Dollars ($32,483) per annum, payable in equal
monthly installments of Two Thousand Seven Hundred Six and
92/100 Dollars ($2,706.92) each.
(e) Commencing upon the third Lease Year, for the
Additional low Area Space, the sum of Fifteen Thousand Four
Hundred Eighty Dollars ($15,480) per annum, payable in equal
monthly installments of One Thousand Two Hundred Ninety
Dollars ($1,290) each.
Based upon the foregoing, the aggregate monthly rent during the term of this
Lease shall be as follows:
From the Through the Monthly Rent
-------- ----------- ------------
Commencement Date Twelfth month $ 9,632.83
Thirteenth month Twenty-fourth month $12,339.75
Twenty-fifth month Thirty-sixth month $13,629.75
Each monthly payment of rent shall be payable on the first (1st) day of every
calendar month in advance, prorated for any partial month based on a thirty
(30) day calendar month.
ARTICLE IV
----------
TAXES
-----
1. Landlord shall pay or cause to be paid all real estate
taxes and assessments, both general and special, levied and assessed against
the Land and the Building wherein the Leased Premises are situated or which may
be added thereto and actually paid by Landlord ("Taxes"), including, without
limitation, taxes on building cranes. During the term of this Lease, Tenant
shall pay to Landlord, as additional rent, monthly, in advance, an amount equal
to one-twelfth (1/12th) of Tenant's proportionate share of Taxes for the
current tax year, as reasonably estimated by Landlord. If Tenant's
proportionate share of Taxes with respect to any tax year is less than the
total amount theretofore paid by Tenant for such period, then Tenant shall,
upon receipt of invoices from Landlord, pay the difference between the actual
amount paid by Tenant and Tenant's proportionate share of Taxes. If Tenant's
proportionate share of Taxes for any tax year exceeds the total amount
theretofore paid by Tenant for such period, the excess shall be credited
against the payments with respect to Taxes next becoming due. For purposes of
this Article IV, Tenant's proportionate share of Taxes shall be the total
amount of such Taxes multiplied by a fraction, the numerator of which shall be
the square feet of floor area within the Leased Premises, as the same is
adjusted from time to time as provided in this Lease, and the denominator of
which shall be the number of square feet of leasable floor area within the
Building. Based upon
4
<PAGE> 8
the foregoing, the term Tenant's proportionate share as used in this Article IV
and in Article XIV of this Lease shall mean:
Tenant's
From the Through the Proportionate Share
-------- ----------- -------------------
Commencement Date Twelfth month 68.4%
Thirteenth month Twenty-fourth month 89.8%
Twenty-fifth month Thirty-sixth month 100%
2. Tenant shall pay, before delinquency, all municipal,
county, state and federal taxes assessed against any leasehold interest of
Tenant or any fixtures, furnishings, equipment, stock-in-trade or other
personal property of any kind owned, installed or used in or on the Leased
Premises owned by Tenant or Landlord.
3. Should any governmental taxing authority levy, assess
or impose any tax excise or assessment (other than income or franchise tax)
upon or against the rentals payable by Tenant to Landlord, either by way of
substitution for or in addition to any existing tax on land and buildings or
otherwise, Tenant shall be responsible for and shall pay any such tax, excise
or assessment, or shall reimburse Landlord as additional rent for the amount
thereof, as the case may be.
ARTICLE V
---------
UTILITY EXPENSES
----------------
1. Landlord shall, during the term of this Lease, pay and
discharge all water, rents, rates and charges, sewer rents and other
governmental impositions and charges of every kind and nature whatsoever, which
shall or may during the term of this Lease be charged, levied, laid, assessed,
imposed, become due and payable, with respect to the Leased Premises and of all
other governmental authorities whatsoever and all sewer rents and charges for
water, steam, heat, gas, hot water, electricity, light and power, and other
services, furnished to the Leased Premises (collectively, the "Utilities").
Tenant shall pay to Landlord, within ten (10) days of receipt of Landlord's
invoice therefor, the cost of the Utilities provided to the Leased Premises, if
separately metered or, if not separately metered, Tenant's proportionate share
of the Utilities. In addition, Tenant shall pay to Landlord, within ten (10)
days of receipt of Landlord's invoice therefor, Tenant's proportionate share of
the Utilities furnished to the Common Areas and the Building. For purposes of
this Article V, Tenant's proportionate share shall be a fraction, the numerator
of which shall be the square feet of floor area of the Leased Premises, as the
same is adjusted from time to time as provided in this Lease, and the
denominator of which shall be the total square feet of floor area within the
Building which is then actually leased to rent-paying tenants during the period
in question.
5
<PAGE> 9
2. Landlord and Tenant acknowledge that it is the present
intention of Landlord not to use or lease any of the unleased space in the
Building either for Landlord's own use or for use by any other tenant. In the
event that Landlord does use any space in the Building either for Landlord's own
use or for use by any other tenant, Landlord agrees to equitably adjust the
amount of the Utilities due from Tenant as set forth in this Article in a
manner consistent with any such usage.
ARTICLE VI
----------
USE OF PREMISES
---------------
1. Tenant covenants and agrees that during the term of
this Lease, the Leased Premises shall be occupied and used for warehousing,
light manufacturing and various processing operations performed on steel rod
and wire and flat roll steel and for no other purpose without the written
consent of Landlord. Tenant shall, at Tenant's expense, obtain any and all
permits or governmental approvals which may be required in order for Tenant to
use the Leased Premises for the uses contemplated herein.
2. Tenant covenants and agrees to use, maintain and occupy
the Leased Premises in a careful, safe and proper manner and will not permit
waste therein. Tenant agrees to indemnify Landlord for all costs including
attorneys' fees, to the extent permitted by applicable law, due to Tenant's
activities or any other activities at the Leased Premises during the term of
this Lease (other than for the activities of Landlord or its agents, employees
or contractors), involving the use, shipment, storage or discharge of hazardous
or toxic wastes or substances, solid wastes, wastewater or process water, that
may result in any requirements, liability or claims to remedy or clean-up such
wastes, whether based upon a statute, regulation, order of a governmental
agency or a private claim.
3. Tenant agrees to indemnify Landlord for all costs and
expenses including attorneys' fees, due, in whole or in part, to Tenant's
activities involving the use, shipment, storage or discharge of hazardous
wastes, hazardous substances, solid wastes, wastewater or process water
(collectively, "Hazardous Substances"), that may result in any requirements,
liability or claims to remedy or clean-up such wastes, whether based upon a
statute, regulation, order of a governmental agency or a private claim. These
requirements, liabilities or claims include, but are not limited to, those
arising out of the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Toxic Substances Control Act, the Safe
Drinking Water Act, and the state counterparts of such foregoing statutes.
This indemnification applies to, but is not limited to, claims or liability
regarding air pollution, water pollution, land pollution, groundwater
pollution, solid and hazardous waste management, and toxic or hazardous
substances control. Notwithstanding the foregoing, Landlord agrees to indemnity
Tenant for all costs and expenses including attorney's fees, due as a result of
any requirements, liability or claims made to remedy or clean-up any Hazardous
Substances existing at the Leased Premises prior to the Commencement Date or
which are caused by Landlord, its agents, employees or contractors during the
term of this Lease.
6
<PAGE> 10
ARTICLE VII
-----------
ALTERATIONS
-----------
1. Tenant covenants and agrees not to make or permit to be
made any alterations, improvements and additions to the Leased Premises or any
part thereof except by and with the written consent of Landlord first obtained.
Landlord will not unreasonably withhold Landlord's consent to any alterations,
improvements and additions to be made by Tenant in order for Tenant to conduct
Tenant's operations in the Leased Premises as contemplated in this Lease.
2. All alterations, improvements and additions to the
Leased Premises permitted to be made by Tenant shall be made in accordance with
all applicable laws and, except for removable trade fixtures, shall at once
when made or installed, be deemed to have attached to the freehold and to have
become the property of Landlord and shall remain for the benefit of Landlord at
the end of the term or other expiration of this Lease in as good order and
condition as they were when installed, reasonable wear and tear excepted;
provided, however, if prior to the termination of this Lease, or within fifteen
(15) days thereafter, Landlord so directs by written notice to Tenant, Tenant
shall promptly remove the additions, improvements, fixtures and installations
which were placed on the Leased Premises by Tenant and which are designated in
said notice and repair any damage occasioned by such installation and/or
removal and if Tenant fails to promptly remove such items, Landlord may effect
the removals and repairs at Tenant's sole cost and expense.
ARTICLE VIII
------------
MAINTENANCE OF LEASED PREMISES
------------------------------
1. Tenant shall be responsible, at Tenant's sole cost and
expense, for the maintenance, repair and upkeep of the interior of the Leased
Premises, including, without limitation, the fixtures, pipes, heating, air
conditioning, plumbing and electrical systems and appliances thereof, and
agrees to keep and maintain the nonstructural portions of the Leased Premises
in good order, condition and repair, and to promptly make all repairs or
replacements becoming necessary during the term of this Lease, including,
without limitation, windows, doors, glass (which shall be replaced with glass
of the same size and quality), and fixtures within the Leased Premises.
Landlord may perform, on behalf of Tenant, any maintenance, repair and/or
upkeep of the Leased Premises provided for herein which Tenant has failed to
perform hereunder, provided that Landlord has given Tenant thirty (30) days'
prior written notice of any such failure; the cost of such performance by
Landlord together with default interest as provided in Article XXI hereof shall
be payable by Tenant to Landlord upon demand. Tenant acknowledges that the
Leased Premises are being leased in an "AS-IS", "WHERE-IS" condition. Tenant
further acknowledges that Landlord has made no representations or warranties of
any kind whatsoever, either express or implied, with respect to the condition
of the Leased Premises.
7
<PAGE> 11
2. Landlord shall be responsible for the maintenance,
repairs and replacements to the Common Areas and the exterior of the Building,
unless such maintenance, repairs or replacements are necessitated by any act or
negligence of Tenant, its agents, contractors, employees or invitees, in which
event such damage shall be repaired by Landlord at Tenant's sole cost and
expense. Tenant shall pay to Landlord, within ten (10) days of receipt of
Landlord's invoice therefor, Tenant's proportionate share of the cost of the
maintenance and repairs provided by Landlord to the Common Areas and the
Building and Landlord shall be responsible, at Landlord's sole cost and
expense, for replacements to the Common Areas and the Building. For purposes of
this Article VIII, Tenant's proportionate share shall be as provided in Article
V of this Lease.
ARTICLE IX
----------
MECHANIC'S LIEN
---------------
If, because of any act or omission of Tenant, any mechanic's
lien or other lien, charge or order for the payment of money shall be filed
against any portion of the Leased Premises, then Tenant shall, at Tenant's own
cost and expense, cause the same to be discharged of record or bonded within
sixty (60) days after the filing thereof, and Tenant shall indemnity and save
Landlord harmless from and against all costs, liabilities, suits, penalties,
claims and demands on account thereof.
ARTICLE X
---------
DESTRUCTlON OF LEASED PREMISES
------------------------------
1. If the Leased Premises or any material portion thereof
shall be destroyed or damaged by any cause and such destruction or damage could
reasonably be repaired within ninety (90) days thereafter, Landlord shall with
diligence undertake and substantially complete repairs within ninety (90) days
after the happening of such destruction or damage. If Tenant shall be deprived
of the occupancy of any portion of the Leased Premises due to any destruction
or damage but can nevertheless continue to engage in its regular business, a
rental abatement shall be allowed in proportion to the area rendered
untenantable and continuing until the Leased Premises are restored. No rent
shall be payable during any period that Tenant is unable to engage in its
regular business.
2. If the destruction or damage cannot reasonably be
repaired within ninety (90) days after the happening thereof, Landlord shall
notify Tenant within thirty (30) days after the happening of such destruction
or damage whether or not Landlord will repair or rebuild. If Landlord elects
not to repair or rebuild, this Lease shall terminate. If Landlord shall elect
to repair or rebuild, Landlord shall specify the time within which repairs or
reconstruction will be completed and Tenant shall have the option, within
thirty (30) days after the receipt of such notice, to terminate this Lease. If
Tenant fails to notify Landlord of Tenant's election to terminate this Lease
within the aforesaid thirty (30) day period, such
8
<PAGE> 12
failure by Tenant shall be deemed to be a waiver of Tenant's election to
terminate and Landlord shall proceed with the repairs or reconstruction as
provided herein.
ARTICLE XI
----------
TRADE FIXTURES IN LEASED PREMISES
---------------------------------
1. Removable trade fixtures shall not be deemed to become a part
of the Leased Premises unless so affixed to the realty as to damage the same in
removal. Tenant may, at the expiration of the term of this Lease, remove all of
Tenant's trade fixtures which can be removed without costly injury to, or
undue defacement of the Leased Premises, provided all rents stipulated herein
are paid in full and Tenant is not otherwise in default hereunder, and provided
further that any and all damage to the Leased Premises resulting from or caused
by such installation and/or removal shall be promptly repaired at Tenant's sole
cost and expense. Notwithstanding the foregoing, Tenant shall not be permitted
to remove any trade fixtures from the Leased Premises if such trade fixtures
relate to any leasehold improvements which are subject to the provisions of
Article XV, Paragraph 7 of this Lease.
2. All personal property belonging to Tenant or to any other person
located in or about the Building or the Leased Premises shall be there at the
sole risk of Tenant or such other person, and neither Landlord nor Landlord's
agents shall be liable for: (a) the theft or misappropriation thereof (unless
such theft or misappropriation is caused by the act or negligence of Landlord
or its agents, employees or contractors), (b) any damage or injury thereto, or
for damage or injury to Tenant or said other persons or to other property,
caused by water, snow, frost, steam, heat or cold, dampness, falling plaster,
sewers or sewage, gas, odors, noise, the bursting or leaking of pipes,
plumbing, electrical wiring and equipment and fixtures of all kinds, (unless
such damage or injury is caused by the act or negligence of Landlord or its
agents, employees or contractors) or (c) any act, neglect or omission of any
occupant of the Building or of any other person or caused in any other manner
whatsoever (unless caused by the act, neglect or omission of Landlord or its
agents, employees or contractors). Tenant agrees to protect, indemnity and save
harmless Landlord from all losses, costs or damages sustained by reason of any
act or other occurrence causing injury to any person or property whomsoever or
whatsoever due to the use of the Leased Premises or any part thereof by Tenant.
ARTICLE XII
-----------
ACCESS TO LEASED PREMISES
-------------------------
Tenant covenants and agrees to permit Landlord and Landlord's agents to
inspect and examine the Leased Premises at any reasonable time to permit
Landlord to make such repairs, decorations, alterations, improvements or
additions in and to the Leased Premises that Landlord may deem desirable or
necessary for the preservation of the Leased Premises or which Tenant has
failed to do.
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<PAGE> 13
ARTICLE XIII
------------
SURRENDER OF LEASED PREMISES
----------------------------
1. Tenant covenants and agrees to deliver up and surrender
to Landlord possession of the leased Premises upon the expiration or earlier
termination of this Lease, broom clean and in as good condition and repair as
the same shall be at the commencement of the term of this Lease, or may have
been put by Landlord or Tenant during the continuance thereof, ordinary wear
and tear excepted.
2. Prior to Tenant's vacating or delivering up the Leased
Premises to Landlord, Tenant shall, at Tenant's sole cost and expense, remove
all property of Tenant and all alterations, additions and improvements as to
which Landlord shall have made the election provided for in Article VII of this
Lease, and shall repair any damage to the Leased Premises caused by such
installation and/or removal and restore the Leased Premises to the condition in
which they were prior to the installation of the articles so removed. Any
property not so removed and as to which Landlord shall have not made said
election shall be deemed to have been abandoned by Tenant and may be retained
or disposed of by Landlord, as Landlord shall desire. Tenant's obligation to
observe or perform this covenant shall survive the expiration or termination of
the term of this Lease.
ARTICLE XIV
-----------
INDEMNITY AND INSURANCE BY TENANT
---------------------------------
1. Tenant covenants and agrees that Tenant will protect,
save and keep Landlord forever harmless and indemnified against and from any
penalty, damages, charges or costs imposed or resulting from any violation of
any law, order of governmental agency or ordinance, whether occasioned by the
neglect of Tenant or those holding under Tenant, and that Tenant will at all
times protect, indemnify, save and keep harmless Landlord from and against all
claims, losses, costs, damages or expenses arising out of the use of the
Leased Premises or out of or from any accident or other occurrence on or about
the Leased Premises causing injury to any person or property whomsoever or
whatsoever, and will protect, indemnify, save and keep harmless Landlord from
and against any and all claims and from and against any and all losses, costs,
damages or expenses arising out of any failure of Tenant in any respect to
comply with or perform all the requirements and provisions of this Lease,
unless such losses, costs, damages or expenses arise due to the act or
negligence of Landlord or its agents, employees or contractors.
2. Tenant agrees that, at Tenant's sole cost and expense,
Tenant will procure and continue in force, in the name of Landlord, and at
Landlord's request, Landlord's mortgagee(s), and Tenant as their interests may
appear, comprehensive general liability insurance coverage with combined single
limit of not less than Three Million Dollars ($3,000,000) per occurrence.
Tenant shall deliver to Landlord customary insurance certification evidencing
such paid-up insurance and copies of the policies.
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<PAGE> 14
3. Tenant will pay Landlord, as additional rental, Tenant's
proportionate share of all insurance as Landlord may from time to time maintain
with respect to the Common Areas, the Land and the Building (including, but
without limitation, broad form comprehensive general liability insurance, fire,
extended coverage, vandalism and malicious mischief and all-risk insurance,
rent insurance and boiler and sprinkler insurance in an amount equal to the
full replacement cost of the improvements constituting the Common Areas and the
Building). Such insurance may include Landlord's interest in the improvements
and betterments installed in the Leased Premises by Tenant (except inventory,
trade fixtures, wall and floor coverings, furniture and other personal property
of Tenant removable by Tenant under the provisions of this Lease), whether the
same have been paid for entirely or partially by Tenant. For purposes of this
Article XIV, Tenant's proportionate share shall be as provided in Article IV of
this Lease.
ARTICLE XV
----------
OPTION TO PURCHASE
------------------
1. Tenant shall have the option to purchase the Land and
Building (the "Mack Option") of which the Leased Premises are a part (the "Mack
Property") and the option to purchase the adjacent property (the "Adjacent
Parcel Option"), including the pickling facility and all equipment contained
thereon, located at 3105 Beaufait, Detroit, Michigan (the "Adjacent Property"),
as the same is more particularly described on EXHIBIT "F" attached hereto and
made a part hereof, upon the terms and conditions stated in this Article XV.
The Mack Option and the Adjacent Parcel Option are sometimes collectively
referred to as the "Options".
2. The Mack Option and the Adjacent Parcel Option shall be
exercisable during the term of the Lease as provided in this Article XV. If
Tenant desires to exercise the Options with a Closing Date (as hereinafter
defined) prior to the expiration of the term of this Lease, such exercise by
Tenant shall be for the acquisition of both the Mack Property and the Adjacent
Property. If, however, Tenant desires to exercise the Options with a Closing
Date at the expiration of the term of this Lease, then, in such event, such
exercise, at Tenant's election, shall be for the acquisition of the Mack
Property and/or the Adjacent Property.
3. If Tenant fails to exercise the Options or if Tenant
exercises an Option and the Closing Date does not occur on or prior to the
expiration of the term of this Lease, then the Options shall terminate and be
of no further force or effect, time being of the essence.
4. The Options are conditioned upon Landlord's redemption
of the Bond (as defined in the Main Lease) as provided in Section 9.3 of the
Main Lease and Landlord shall pay all monies necessary to redeem the Bond.
5. If Tenant exercises the Mack Option and/or the Adjacent
Parcel Option, the purchase and sale of the Mack Property and/or the Adjacent
Property, as the case may be, shall be closed on a date specified by Landlord
which is not less than forty-five (45) days
11
<PAGE> 15
nor more than sixty (60) days following the receipt by Landlord of Tenant's
exercise of such Option or upon the date on which Landlord redeems the Bond,
whichever shall first occur (the "Closing Date") on the following terms and
conditions:
(a) Subject to the provisions of Paragraph 6 of this
Article XV, the purchase price for the Mack Property shall be
Seven Hundred and Fifty Thousand Dollars ($750,000.00) and the
purchase price for the Adjacent Property shall be Eight Hundred
and Fifty Thousand Dollars ($850,000.00).
(b) The purchase price for the Mack Property and/or
the Adjacent Property, as the case may be, shall be payable as
follows:
(i) If Tenant exercises the Mack Option, the purchase
price for the Mack Property shall be payable as follows:
(A) The sum of Four Hundred Eighty-seven
Thousand Five Hundred Dollars ($487,500) shall be
payable in cash on the Closing Date.
(B) The balance of Two Hundred Sixty-two
Thousand Five Hundred Dollars ($262,500) shall be
evidenced by a promissory note ("Mack Note") from
Tenant to Landlord providing for monthly payments of
principal and interest based on an amortization period
of six (6) years, with interest at the rate of two
percent (2%) in excess of the "prime rate" of interest
as published in the WALL STREET JOURNAL from time to
time, with all outstanding amounts of principal and
interest due and payable three (3) years from the
Closing Date. The Mack Note shall be secured by a
first mortgage ("Mack Mortgage") on the Mack Property.
The Mack Note and the Mack Mortgage shall be in form
and substance reasonably acceptable to Landlord.
(ii) If Tenant exercises the Adjacent Parcel Option, the
purchase price for the Adjacent Property shall be payable as
follows:
(A) The sum of Five Hundred Fifty-two
Thousand Five Hundred ($552,500) shall be payable in
cash on the Closing Date.
(B) The balance of Two Hundred Ninety-
seven Thousand Five Hundred Dollars ($297,500) shall
be evidenced by a promissory note ("Adjacent Parcel
Note") from Tenant to Landlord providing for monthly
payments of principal and interest based on an
amortization period of six (6) years, with interest at
the rate of two percent (2%) in excess of the "prime
rate" of interest as published in the WALL STREET
JOURNAL from time to time, with all outstanding
amounts of principal and interest due and payable
three (3) years from the Closing Date. The Adjacent
Parcel Note shall be secured by a first mortgage
("Adjacent Parcel Mortgage") on the Adjacent Parcel.
The Adjacent
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<PAGE> 16
Parcel Note and the Adjacent Parcel Mortgage shall be
in form and substance reasonably acceptable to
Landlord.
(iii) If Tenant exercises the Options, the purchase
price for the Mack Property and the Adjacent Property shall
be payable as follows:
(A) Fifty percent (50%) of the purchase
price determined in accordance with Paragraph 6 of
this Article XV ("Entire Facility Purchase Price")
shall be payable in cash on the Closing Date.
(B) The balance of the Entire Facility
Purchase Price shall be evidenced by a promissory note
("Facility Note") from Tenant to Landlord providing
for monthly payments of principal and interest based
on an amortization period of ten (10) years, with
interest at the rate of one percent (1%) in excess of
the "prime rate" of interest as published in the WALL
STREET JOURNAL from time to time, with all outstanding
amounts of principal and interest due and payable five
(5) years from the Closing Date. The Facility Note
shall be secured by a first mortgage ("Facility
Mortgage") on the Mack Property and the Adjacent
Property. The Facility Note and the Facility Mortgage
shall be in form and substance reasonably acceptable
to Landlord.
(c) Transfer of title shall be by limited warranty deed,
in fee simple, conveying title to the Mack Property and/or the Adjacent
Property, as the case may be, free and clear of all liens and encumbrances,
except those presently in existence, other than those relating to the Bond, as
set forth on the Policy of Title Insurance issued by Lawyers Title Insurance
Corporation (the "Tide Company") dated July 8, 1986, as updated by the Owner of
Record and Encumbrance Search Report dated June 20, 1995, copies of which are
attached hereto and made a part hereof as EXHIBIT "G", taxes and assessments,
both general and special, which are a lien, but not yet due and payable, and
any liens or encumbrances caused or created by or consented to by Tenant.
(d) Landlord shall furnish an Owner's Policy of Title
Insurance issued by the Title Company equal to the purchase price for the Mack
Property and/or the Adjacent Property, as the case may be.
(e) Rent prepaid under this Lease shall be prorated as of
the Closing Date. There shall be a proration of Taxes, Utilities and Common
Area Charges as of the Closing Date.
(f) This Article XV shall serve as escrow instructions
subject to the escrow agent's usual conditions of acceptance where not contrary
to the terms hereof. Landlord shall designate the escrow agent which shall be
a title company, bank or savings and loan institution in the Detroit, Michigan
area.
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<PAGE> 17
(g) All funds and documents are to be deposited by the respective
parties with the escrow agent not later than five (5) days prior to the Closing
Date, time being of the essence.
(h) If and when the Title Company is in a position to issue the
above required evidence of title and the escrow agent has received all funds
and documents to be deposited, the escrow agent shall cause the deed to the
Mack Property and/or the Adjacent Property, as the case may be, to be filed for
record and the funds disbursed in accordance with this Article XV.
(i) The escrow agent shall charge Landlord with the cost of
evidence of title, all state and county transfer taxes and one-half (1/2) of
the escrow fee and Tenant with all recording fees and one-half (1/2) of the
escrow fee.
(j) If for any reason the transfer of title to the Mack Property
and/or the Adjacent Property, as the case may be, does not occur prior to the
expiration of the term of this Lease, then, at the option of Landlord, the term
of this Lease shall be deemed extended for no more than sixty (60) days until
the date of transfer and Tenant shall continue to pay the rent and other
charges required to be paid by Tenant and to observe its obligations under this
Lease.
(k) If Tenant, for any reason, is not in a position to close the
Options upon the date that Landlord is obligated to deposit funds with the
Trustee (as defined in the Main Lease), then, in such event, any penalty or
interest associated with such delay shall be assessed to Tenant on the Closing
Date.
(l) No real estate brokerage commission shall be paid in connection
with this transaction, since no real estate broker or salesman has been
involved with this Lease or the Options.
(m) If after Tenant has exercised the Options hereunder, but prior
to the Closing Date, the Mack Property and/or the Adjacent Property, as the
case may be, or any portion thereof are damaged or destroyed by fire or other
cause, or title to or temporary use of the Mack Property and/or the Adjacent
Property, as the case may be, or any portion thereof is taken by exercise of
condemnation or eminent domain or by amicable acquisition in lieu thereof,
then, in such event, Tenant shall complete the purchase without any reduction
in the purchase price and, in such event, the entire insurance proceeds payable
on account of such damage or destruction or the net proceeds payable for such
taking shall be paid over to Landlord to the extent of the full purchase price
of the Mack Property and/or the Adjacent Property, as the case may be, with any
balance, if any, to be paid to Tenant.
(n) This Lease shall terminate immediately upon the date of
transfer of title to the Mack Property.
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<PAGE> 18
6. (a) In the event that Tenant (i) exercises both the
Mack Option and the Adjacent Parcel Option prior to June 1, 1996, the purchase
price for the Mack Property and the Adjacent Property shall be as provided in
Paragraph 5(a) of this Article XV.
(b) In the event that Tenant (i) exercises both the Mack
Option and the Adjacent Parcel Option at the expiration of the term of this
Lease and (ii) utilizes Landlord's pickling facility located on the Adjacent
Property, then upon the occurrence of both (i) and (ii) above, the purchase
price for the Mack Property and the Adjacent Property shall be reduced as
follows: (A) if Tenant processes more than seventy-two thousand (72,000) tons
of materials in the aggregate during the term of this Lease at such pickling
facility, then the aggregate purchase price for both the Mack Property and the
Adjacent Property shall be reduced to One Million Five Hundred Thousand Dollars
($1,500,000), or (B) if Tenant processes more than one hundred eight thousand
(108,000) tons of material in the aggregate during the term of this Lease at
such pickling facility, then the aggregate purchase price for both the Mack
Property and the Adjacent Property shall be reduced to One Million Four Hundred
Thousand Dollars ($1,400,000).
(c) In the event that Tenant (i) simultaneously exercises
both the Mack Option and the Adjacent Parcel Option at any time after June 1,
1996, but prior to the expiration of the term of this Lease and (ii) utilizes
Landlord's pickling facility located on the Adjacent Property, then upon the
occurrence of both (i) and (ii) above, the purchase price for the Mack Property
and the Adjacent Property shall be reduced as follows: (A) if, as of the date
of the exercise of the Options by Tenant, the aggregate tons of material
processed by Tenant at such pickling facility during the term of this Lease
averages at least two thousand (2,000) tons per month, but less than three
thousand (3,000) tons per month, then the purchase price pursuant to Paragraph
5(a) of this Article XV shall be reduced by the product resulting by
multiplying the sum of One Hundred Thousand Dollars ($100,000) by a fraction,
the numerator of which shall be the number of months which have elapsed from
the Commencement Date of the term of this Lease until the month in which Tenant
exercises the Options and the denominator of which shall be thirty-six (36), or
(B) if, as of the date of the exercise of the Options by Tenant, the aggregate
tons of material processed by Tenant at such pickling facility during the term
of this Lease averages at least three thousand (3,000) tons per month, then the
purchase price pursuant to Paragraph 5(a) of this Article XV shall be reduced
by the product resulting by multiplying the sum of Two Hundred Thousand Dollars
($200,000) by a fraction, the numerator of which shall be the number of months
which have elapsed from the Commencement Date of the term of this Lease until
the month in which Tenant exercises the Options and the denominator of which
shall be thirty-six (36).
Notwithstanding the foregoing, there shall be no reduction in
the purchase price for either the Mack Property or the Adjacent Property if
Tenant exercises either the Mack Option or the Adjacent Parcel Option, but does
not exercise both Options simultaneously.
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<PAGE> 19
7. Notwithstanding anything contained in this Article XV
to the contrary, Tenant shall provide Landlord sixty (60) days' prior written
notice of Tenant's intention to exercise ("Intention Letter") the Mack Option
and/or the Adjacent Parcel Option. Upon Landlord's receipt of the Intention
Letter, Landlord will cause, at Landlord's sole cost and expense, a Phase I
Environmental Report ("Environmental Report") to be prepared for the Mack
Property and/or the Adjacent Property, as the case may be, and upon Landlord's
receipt of the completed Environmental Report shall provide Tenant with a copy
thereof. Tenant shall have a period of thirty (30) days after receipt of the
Environmental Report to advise Landlord if Tenant, acting reasonably, is
satisfied with the environmental condition of the Mack Property and/or the
Adjacent Property, as the case may be, and to exercise the Mack Option and/or
the Adjacent Parcel Option, as the case may be, in the manner provided for in
this Article XV. The failure of Tenant to notify Landlord of Tenant's
dissatisfaction with the Environmental Report prior to the expiration of the
aforesaid thirty (30) day period shall be deemed to be approval by Tenant of
the environmental condition of the Mack Property and/or the Adjacent Property,
as the case may be, and Tenant shall be deemed to have exercised the Mack
Option and/or the Adjacent Parcel Option, as the case may be, as of the
expiration of the aforesaid thirty (30) day period. The transfer of the Mack
Property and/or the Adjacent Property shall be on an "as is" "where is" basis
without any representation or warranty of any kind or nature with regard to the
condition thereof.
8. (a) If Tenant, acting reasonably, is not satisfied
with the environmental condition of the Mack Property and/or the Adjacent
Property, as the case may be, and Tenant has notified Landlord in writing of
Tenant's dissatisfaction within the thirty (30) day period provided in
paragraph 7 of this Article XV, then provided Tenant is not in default under
this Lease at the time of exercise of the applicable renewal option or as of
the date immediately preceding the scheduled commencement date of the
applicable renewal term, Tenant shall have the option to renew the term of this
Lease for six (6) additional periods of five (5) years each, each such renewal
term to commence immediately upon the expiration of the then current term, upon
the same terms and conditions of this Lease except as to rent payable pursuant
to Article III of this Lease. To exercise an option to renew, Tenant shall
provide Landlord with ninety (90) days prior written notice of such renewal.
Notwithstanding the foregoing, Tenant may exercise the first such renewal
option simultaneously with the delivery to Landlord of Tenant's notice to
Landlord that Tenant is dissatisfied with the environmental condition of the
Mack Property and/or the Adjacent Property, as the case may be.
(b) If an option to renew is properly exercised, the rent
payable by Tenant to Landlord shall be as follows:
For the Monthly Rent
------- ------------
First five (5) year renewal term $10,000.00
Second five (5) year renewal term 9,000.00
Third five (5) year renewal term 8,000.00
Fourth five (5) year renewal term 7,500.00
Fifth five (5) year renewal term 7,000.00
Sixth five (5) year renewal term 6,000.00
16
<PAGE> 20
9. In the event that due to circumstances beyond Tenant's
control, Tenant does not exercise the Options, Landlord shall at the end of the
term of this Lease reimburse Tenant for the depreciated value of the leasehold
improvements installed and paid for by Tenant relating to the structural
components of the Building, provided that such improvements are approved in
advance by Landlord.
10. In the event that Tenant exercises the Options and
thereafter, as a result of a default by Tenant, Tenant fails to close on the
acquisition as provided in this Article XV, then, in such event, Landlord, in
addition to any other remedies available to Landlord at law or in equity, shall
be entitled to reimbursement from Tenant for all costs associated with the
redemption of the Bond.
ARTICLE XVI
-----------
ASSIGNMENT AND SUBLETTING
-------------------------
Tenant shall not sublease (in whole or in part) the Leased
Premises or assign this Lease, without the written consent of Landlord, which
consent may be withheld in Landlord's sole discretion. Notwithstanding any
consent by Landlord to any such sublease or assignment, Tenant shall remain
fully liable for all the terms, conditions and covenants of this Lease.
Notwithstanding the foregoing, but subject in all events to the consents
required by the documents evidencing the Bond, Landlord agrees not to
unreasonably withhold Landlord's consent to an assignment of this Lease to an
entity which is directly affiliated with Tenant provided that Tenant pays all
costs associated with Landlord's obtaining the consents to any such assignment
required by the documents evidencing the Bond.
ARTICLE XVII
------------
EMINENT DOMAIN
--------------
In the event the Leased Premises, or any part thereof or the
Common Areas, or any part thereof (to the extent that such taking results in
the inability to effectively operate in the Leased Premises), shall be taken or
condemned either permanently or temporarily for any public or quasi public use
or purpose by any competent authority in appropriation proceedings or by any
right of eminent domain, the entire compensation award therefor, both leasehold
and reversion, shall belong to Landlord, except that Tenant shall be entitled
to claim an award for Tenant's reasonable moving costs, loss of Tenant's
business, relocation expenses, and depreciation to and the cost of removal of
Tenant's personal property. If the Leased Premises shall be taken as aforesaid,
then this Lease shall terminate and shall become null and void from the time
possession thereof is required for public use and from that date the parties
hereto shall be released from further obligation hereunder.
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<PAGE> 21
ARTICLE XVIII
-------------
DEFAULT BY TENANT
-----------------
All rights and remedies of Landlord herein enumerated shall be
cumulative, and none shall exclude any other right or remedy allowed by law.
Tenant covenants and agrees that if:
(a) Tenant fails, neglects or refuses to pay any
installment of rent at the time and in the amount as herein
provided, or to pay any other monies agreed by it to be paid
promptly when and as the same shall become due and payable under
the terms hereof, and if any such default should continue for a
period of more than ten (10) days; or
(b) Any voluntary or involuntary petition or similar
pleading under any section or sections of any bankruptcy act shall
be filed by or against Tenant, or any voluntary or involuntary
proceeding in any court or tribunal shall be instituted to declare
Tenant insolvent or unable to pay Tenant's debts, and the same
shall not be dismissed or discharged within thirty (30) days
thereafter; or
(c) Tenant makes any assignment of its property for the
benefit of creditors or the Leased Premises are taken under a levy
of execution or attachment in any action against Tenant and such
levy, attachment or assignments is not dismissed or discharged
within thirty (30) days; or
(d) Tenant abandons or vacates the Leased Premises or
fails, neglects or refuses to keep and perform any of the other
covenants, conditions, stipulations or agreements herein contained,
covenanted and agreed to be kept and performed by it, and in the
event any such default shall continue for a period of more than
fifteen (15) days after notice thereof given in writing to
Tenant by Landlord;
then Tenant does hereby authorize and fully empower Landlord to cancel or annul
this Lease at once and to re-enter and take possession of the Leased Premises
immediately, and by force if necessary, without any previous notice of
intention to re-enter, and to remove all persons and their property therefrom,
and to use such force and assists in effecting and perfecting such removal of
Tenant as may be necessary or advisable to recover at once first and exclusive
possession of the Leased Premises whether in possession of Tenant or of third
persons or otherwise, without being deemed guilty of any manner of trespass and
without prejudice to any remedies which might otherwise be used by Landlord, in
which event this Lease shall terminate and Tenant shall indemnify Landlord
against all loss of rent which Landlord may incur by reason of such termination
during the residue of the term therein specified. Landlord may, however, at
Landlord's option, at any time after such default or violation of any condition
or covenant, re-enter and take possession of the Leased Premises without such
re-entry working as a forfeiture of the rents to be paid and the covenants,
agreements and conditions to be kept and performed by Tenant for the full term
of this Lease.
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ARTICLE XIX
-----------
WAIVER OF TENANT'S DEFAULT
--------------------------
No waiver of any covenant or any condition or of any breach of any
covenant or condition of this Lease shall be taken to constitute a waiver of
any subsequent breach of such covenant or condition.
ARTICLE XX
----------
DEFAULT BY LANDLORD
-------------------
Notwithstanding anything herein stated to the contrary, if Landlord
shall fail to perform any covenant, term or condition of this Lease upon
Landlord's part to be performed and, as a consequence of such default Tenant or
any person claiming through Tenant suffers any loss, injury or damage, it is
specifically understood and agreed that Landlord (its successors and assigns)
shall not have any personal liability therefor, except with respect to
Landlord's indemnification provided in Article VI, Paragraph 3 of this Lease,
Tenant hereby agreeing to look solely to the equity of Landlord (its successors
and assigns) in the Leased Premises for the satisfaction of each and every
remedy of Tenant or any person claiming through Tenant in the event of such
failure by Landlord.
ARTICLE XXI
-----------
DEFAULT INTEREST
----------------
If, during the term of this Lease or any extension period, Tenant
shall fail to timely pay the rent or other charges payable by Tenant pursuant
to this Lease following ten (10) days' written notice from Landlord to Tenant,
then, in such event, interest at the monthly rate of one and one-half percent
(1 1/2%) shall accrue from and after the date on which any such sum shall be
due and payable until such delinquent sums paid, and such interest shall be
paid to Landlord, as additional rent, at the time of payment of the delinquent
sum.
ARTICLE XXII
------------
HOLDING OVER
------------
If Tenant shall remain in possession of all or any part of the Leased
Premises after the expiration of the term of this Lease or any renewal thereof,
with the consent of Landlord, then Tenant shall be deemed a Tenant from
month-to-month at a rental equal to one hundred fifty percent (150%) of the
rental previously paid by Tenant to Landlord and subject to all of the terms
and provisions hereof, except only as to the term of this Lease.
19
<PAGE> 23
ARTICLE XXIII
-------------
QUIET ENJOYMENT
---------------
Landlord covenants and agrees that if Tenant pays the rental
and other charges herein provided and shall perform all of the covenants and
agreements herein stipulated to be performed on Tenant's part, Tenant shall, at
all times during the term of this Lease, have the peaceable and quiet enjoyment
and possession of the Leased Premises without any manner of hindrance from
Landlord or any persons lawfully claiming through Landlord, except as to such
portion of the Leased Premises as shall be taken under the power of eminent
domain or condemnation and subject at all times to the terms of the Main
Lease. Tenant assumes the obligations under the Main Lease to the extent of
the interest in the Main Lease subleased hereunder.
ARTICLE XXIV
------------
WAIVER OF SUBROGATION
---------------------
Neither party shall be liable to the other party or to anyone
claiming through the other party or to any insurance company (by way of
subrogation or otherwise) insuring the other party for any business
interruption or for any loss or damage to any building, structure or other
personal property of the other occurring on or about the Leased Premises, or in
any manner growing out of or connected with Tenant's use or occupation of the
Leased Premises, or the use or occupation of the Leased Premises by Tenant's
licensees, concessionaires or tenants, even though such business interruption,
loss or damage might have been occasioned by the negligence of such party;
provided, however, that such business interruption, loss, damage, injury or
death is or could be covered by a fire and extended coverage insurance policy
(with vandalism and malicious mischief endorsement attached), by a contents
insurance policy or by a sprinkler leakage or water damage policy in Michigan
regardless of whether such insurance policies are actually carried. Each
insurance policy carried by the parties hereto shall contain a clause to the
effect that the foregoing waiver shall not affect the right of the insured
party to recover under such policy. If by reason of the foregoing waiver,
either party shall be unable to obtain any such insurance without the payment
of an additional premium therefor, then, unless the party claiming the benefit
of such waiver shall agree to pay such party for the cost of such additional
premium within thirty (30) days after notice setting forth such requirement and
the amount of the additional premium, the within waiver shall be of no force
and effect as between such party and such claiming party.
ARTICLE XXV
-----------
NOTICES
-------
The term "Notice" shall mean any notice, demand, request or
other communication or document to be provided under this Lease by or on behalf
of one party to the other. The
20
<PAGE> 24
Notice shall be in writing and shall be given to the party at its address set
forth in this Lease or such other address as the party may later specify for
that purpose by notice to the other party. Each Notice shall, for all purposes,
be deemed given and received: (a) If hand delivered to a party against
receipted copy, when the copy of the Notice is receipted; (b) If given by a
nationally recognized and reputable overnight delivery service, the day on
which the Notice is actually received by the party; or (c) If given by United
States mail, by registered or certified mail, return receipt requested, postage
prepaid two (2) business days after it is posted with the United States Postal
Service. The provisions above governing the date on which the Notice is deemed
to have been received by a party to this Lease shall mean and refer to the date
on which a party to this Lease, and not its counsel or other recipient to which
a copy of the Notice may be sent, is deemed to have received the Notice. If
the Notice is tendered under the provisions of this Lease and is refused by the
intended recipient of the Notice, the Notice shall nonetheless be considered to
have been given and shall be effective as of the date provided in this Lease.
The contrary notwithstanding, any Notice given to Tenant in a manner other than
that provided in this Lease that is actually received by Tenant shall be
effective with respect to Tenant on receipt of the Notice.
ARTICLE XXVI
------------
PROVISIONS BINDING
------------------
Except as herein otherwise expressly provided, the terms and
provisions of this Lease shall be binding upon and shall inure to the benefit
of the heirs, executors, administrators, successors, and permitted assigns,
respectively, of Landlord and Tenant. Each term and provision of this Lease to
be performed by Tenant shall be construed to be both a covenant and a
condition. The reference contained to successors and assigns of Tenant is not
intended to constitute a consent to assignment by Tenant, but has reference
only to those instances in which Landlord may have given written consent to a
particular assignment as required hereunder.
21
<PAGE> 25
ARTICLE XXVII
-------------
COMPLETE AGREEMENT
------------------
This writing contains the entire agreement between the parties
hereto, and no agent, representative, salesman or officer of Landlord hereto
has authority to make or has not made any statement, agreement or
representation, oral or written, in connection herewith, modifying, adding or
changing the terms and conditions herein set forth. No dealings between the
parties or custom shall be permitted to contradict various additions to or
modify the terms hereof. No modification of this Lease shall be binding unless
such modification shall be in writing and signed by the parties hereto.
IN TESTIMONY WHEREOF, Landlord and Tenant have caused this
Lease to be signed as of the day and year first above written.
Signed and acknowledged LANDLORD:
in the presence of:
NATIONAL METAL PROCESSING, INC.,
a Michigan corporation
Sign: /s/ Catherine Oberly By: /s/ Joseph Klobuchar, Jr.
------------------------- -----------------------------
Print Name: Catherine Oberly
--------------------
Sign: /s/ Darlene D. Lorenzen Its: Vice President
-------------------------- ----------------------------
Print Name: Darlene D. Lorenzen
--------------------
TENANT:
MNP CORPORATION,
a(n) Michigan Corporation
---------------------------
Sign: /s/ Elizabeth Milton By: /s/ Craig L. Stormer
------------------------- -----------------------------
Print Name: Elizabeth Milton
--------------------
Sign: /s/ Evelyn Johnson Its: Vice President
-------------------------- ----------------------------
Print Name: Evelyn Johnson
--------------------
Sign: And:
------------------------- ----------------------------
Print Name:
--------------------
Sign: Its:
-------------------------- ----------------------------
Print Name:
--------------------
22
<PAGE> 26
STATE OF OHIO )
) SS:
COUNTY OF LUCAS )
Personally appeared before me, a Notary Public in and for said
County and State, National Metal Processing, Inc., by Joseph Klobuchar, Jr.,
its Vice President, who acknowledged that he did sign the foregoing instrument
for and on behalf of the Corporation being thereunto duly authorized by its
Board of Directors; that the same is his free act and deed individually and as
such officer and the free act and deed of the Corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at Toledo, Ohio, this 11th day of October, 1995.
/s/ Laura Contos (Kenyon)
-------------------------------------
Notary Public
STATE OF MICHIGAN )
) SS: My commission expires: 9/11/99
COUNTY OF MACOMB ) ---------------
Laura Contos
Notary Public, State of Ohio
My Commission Expires September 11, 1999
Personally appeared before me, a Notary Public in and for said
County and State, MNP Corporation, by Craig L. Stormer and , its
Vice President and , respectively, who acknowledged
that they did sign the foregoing instrument for and on behalf of the
Corporation being thereunto duly authorized by its Board of Directors; that the
same is their free act and deed individually and as such officers and the free
act and deed of the Corporation.
IN TESTIMONY WHEREOF I have hereunto set my hand and official
seal at Ihica, Michigan this 1st day of November, 1995.
/s/ Karen K. O'Bryan
-------------------------------------
Notary Public
My commission expires: 5/13/99
---------------
This instrument prepared by:
Edward A. Hurtuk, Esq.
Benesch, Friedlander, Coplan & Aronoff
2300 BP America Building, 200 Public Square
Cleveland, Ohio 44114-2378
(216) 363-4500
23
<PAGE> 1
Exhibit 10.18(b)
LOAN AND SECURITY AGREEMENT
dated as of 11/17/95
by and between
Ottawa River Steel Co.
as Borrower,
and
FINOVA Capital Corporation
as Lender
<PAGE> 2
LOAN AND SECURITY AGREEMENT
---------------------------
AGREEMENT, dated as of 11/17/95 by and between Ottawa River Steel Co.,
a Ohio corporation ("Borrower") having its principal place of business at 805
Chicago Street, Toledo, Ohio, 43611 and FINOVA Capital Corporation, a Delaware
corporation ("Lender") having its principal place of business at 1850 N.
Central Avenue, Phoenix, Arizona, 85002.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrower has requested Lender to make a loan to Borrower and Lender is
willing to make such loan to Borrower upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein contained and intending to be legally bound hereby, the parties hereto
covenant and agree as follows:
ARTICLE 1. DEFINITIONS; CONSTRUCTION
1.1 Certain Definitions.
-------------------
In addition to other words and terms defined elsewhere in this
Agreement, as used herein the following words and terms have the following
meanings, respectively, unless the context hereof otherwise clearly requires:
"AGREEMENT" means this Loan and Security Agreement as amended, modified
or supplemented from time to time.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which banking institutions are authorized or obligated to close in New
Jersey.
"CASUALTY" means any damage to, or destruction or loss of, any
Equipment, whether caused by fire or other cause.
"CLOSING DATE" means the date on which the parties enter into this
Agreement.
"COLLATERAL" has the meaning given to that term in Section 6.1.
"CONSTITUENT DOCUMENTS" means the certificate of incorporation,
agreement of partnership or limited partnership, organizational agreement,
operating agreement, by-laws, or such other similar document pursuant to which
Borrower was organized or its affairs are governed.
"DISBURSEMENT DATE" means the date the Loan proceeds are disbursed to
Borrower or to other persons at Borrowee's direction.
- 2 -
<PAGE> 3
"EQUIPMENT" means equipment, as such term is defined in Section 9-109(2)
of the UCC, now owned or hereafter acquired by Borrower and financed or
refinanced with the proceeds of the Loan and any and all additions thereto and
substitutions and replacements of any of the foregoing, wherever located, and
which forms a part of the Collateral.
"EVENT OF DEFAULT" means any of the Events of Default described in
Section 7.1 hereof.
"EXECUTIVE OFFICER" means the President, the Chief Executive Officer,
or the Chief Financial Officer of Borrower elected from time to time.
"GAAP" means generally accepted accounting principles in the United
States of America (as such principles may change from time to time) applied on
a consistent basis (except for changes in application in which Borrowees
independent certified public accountants concur), applied both to
classification of items and amounts.
"GUARANTEE" means the unconditioned Guaranty of the Obligations of
Borrower to Lender, executed by the Guarantor, in form and substance
satisfactory to Lender.
"GUARANTOR" means Meridian National Corporation.
"INTEREST RATE" means the Index Rate plus six and five hundredths
percent (6.05%). The "INDEX RATE" shall be the highest yield, as published in
the Wall Street Journal, on the first (1st) business day preceding the Loan
Commencement Date, for five (5) year Treasury Notes having a maturity date on
or closest to the Maturity Date. Interest shall be calculated on the basis of
a year of 360 days and twelve months of thirty (30) days each and charged on a
daily basis.
"LAW" means any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, order, injunction, writ, decree or award
of any government.
"LEGAL REQUIREMENTS" means any and all present and future judicial, and
administrative rulings or decisions, and any and all present and future
federal, state, and local laws, ordinances, rules, regulations, permits and
certificates, in each case, in any way applicable to Borrower, (or the
ownership or use of the Equipment), or this transaction.
"LIEN" means any mortgage, pledge, lien, security interest (including
without limitation any conditional sale or other title retention agreement),
grant of a leasehold, charge or other encumbrance of any nature whatsoever, and
also means the filing of or the agreement to give any financing statement or
analogous document under the UCC or analogous law of any jurisdiction.
"LOAN" means the aggregate principal amount loaned by Lender to Borrower
hereunder.
"LOAN COMMENCEMENT DATE" means the date the Loan is made to Borrower.
- 3 -
<PAGE> 4
"LOAN DOCUMENTS" means this Agreement, the Note, and any other documents
required to be, or which are, executed by Borrower in connection with this
Agreement or the Loan.
"MATURITY DATE" has the meaning given to that term in Section 2.6.2
hereof.
"NOTE" means the promissory note or notes of Borrower executed and
delivered under this Agreement, in substantially the form attached hereto as
Exhibit A with the blanks appropriately filled in.
"OBLIGATIONS" means all of the indebtedness, liabilities and obligations
of every kind and nature of Borrower to Lender, whether now existing or
hereafter arising, whether or not currently contemplated, including, without
limitation, those under, in connection with or evidenced by this Agreement, the
Note or the other Loan Documents.
"OFFICE", when used in connection with Lender, means its office located
at 95 N Route 17 South, Paramus, New Jersey 07653, or at such other office of
Lender as may be designated in writing from time to time by Lender to Borrower.
"PERSON" means an individual, corporation, national banking
association, partnership, trust, unincorporated association, joint venture,
joint-stock company, government (including political subdivisions),
governmental authority or agency, Indian tribe, or any other entity.
"PLAN" means any employee benefit plan which is covered by Title IV of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
which is maintained by Borrower or, in the case of a plan to which more than
one employer contributes, to which Borrower made contributions at any time
within the five plan years preceding the date of termination.
"TERM" means the period beginning on the Loan Commencement Date and
ending on the Maturity Date.
"UCC" means the Uniform Commercial Code as adopted in the State of New
Jersey.
1.2 Construction.
------------
Unless the context of this Agreement otherwise clearly requires,
references to the plural include the singular, the singular the plural, the
part the whole, and "or" has the inclusive meaning frequently identified by the
phrase "and/or." References to "determination" by Lender include a good-faith
estimate by Lender (in the case of a quantitative determination) and a good
faith belief by Lender (in the case of a qualitative determination). The words
"herein", "hereunder" and "hereof" and similar terms in this Agreement refer to
this Agreement as a whole and not to any particular provision of this
Agreement. The Section and other headings contained in this Agreement are for
reference purposes only and shall not control or affect the construction of
this Agreement or the interpretation thereof in any respect.
- 4 -
<PAGE> 5
ARTICLE 2. THE CREDIT
2.1 The Loan.
--------
Subject to the terms and conditions and relying upon the representations
and warranties herein set forth, Lender agrees to make a Loan to Borrower in a
principal amount of Eight Hundred Thousand Dollars ($800,000.00), provided
however, Lender shall not be required to make the Loan after December 29, 1995.
2.2 The Note.
--------
The obligation of Borrower to repay the Loan and to pay interest thereon
shall be evidenced by the Note. The Note shall be dated the Closing Date and
shall be delivered to Lender on the Closing Date.
2.3 Disbursements.
-------------
Subject to the conditions set forth herein, Lender shall, on the
Disbursement Date, credit, by wire transfer, the amount of the Loan to the
account of Borrower or the Person or Persons specified by Borrower.
2.4 Loan Account.
------------
Lender shall maintain a loan account on its books in the name of
Borrower for the Loan in which will be recorded all payments of principal
thereof and all accruals and payments of interest thereon. The entries in the
loan account (in the absence of manifest error in the making thereof shall be
conclusive evidence of the outstanding principal thereof and accrued interest
thereon from time to time. Lender shall provide Borrower with statements of
said account from time to time on request.
2.5 Interest Rates.
--------------
2.5.1 INTEREST PRIOR TO MATURITY. Prior to maturity (whether
by acceleration or otherwise) the unpaid principal amount of the Loan shall
bear interest at the Interest Rate.
2.5.2 INTEREST AFTER MATURITY. Commencing with the day after
the principal amount of any part of the Loan shall have become due and payable
(by acceleration or otherwise), such part of the Loan shall bear interest at
the daily rate of two percent (2%) per annum above the then applicable Interest
Rate.
- 5 -
<PAGE> 6
2.6 Payments.
--------
2.6.1 TIME; PLACE; MANNER. All payments to be made in respect of
principal, interest, or other amounts due from Borrower hereunder or under the
Note shall become due at 12:00 o'clock noon, New Jersey time, on the day when
due without presentment, demand, protest or notice of any kind, all of which
are hereby expressly waived. Such payments shall be made to Lender in lawful
money of the United States of America in immediately available funds.
2.6.2 PAYMENT DATES. From and after the Loan Commencement Date,
the Loan shall be repaid as follows: if the Loan Commencement Date is not the
first day of a month, Borrower shall pay, on the first day of the month
succeeding the month in which the Loan Commencement Date occurs, interest only
at the Interest Rate from the Loan Commencement Date to the last day of the
month in which the Loan Commencement Date occurs; thereafter, Borrower shall
make sixty (60) consecutive equal monthly payments of principal and interest
which will fully amortize the Loan at the Interest Rate on the first day of
each successive calendar month commencing with the first day of the second
month succeeding the Loan Commencement Date, (the date upon which the sixtieth
(60th) consecutive equal monthly payment of principal and interest is due is
hereinafter referred to as the "Maturity Date") provided, however, that if the
Loan Commencement Date is the first day of a month such payment shall commence
on the first day of the immediately succeeding month. Lender shall compute
the amount of such payment and advise Borrower of such amount. Each monthly
payment shall be applied, first to charges, if any, owing to Lender, then to
interest as may be due hereunder, and the balance of such payment shall be
applied to the principal balance of the Loan. The entire unpaid principal,
together with any unpaid interest, shall be due and payable on the Maturity
Date. After the maturity of all or any part of the Loan (by acceleration or
otherwise), interest on the Loan or such part thereof shall be due and payable
on demand.
2.6.3 NET PAYMENTS. All payments hereunder and under the Note
shall be made by Borrower to Lender without defense, set-off or counterclaim
and without deduction for any present or future income, stamp or other taxes,
levies, imposts, deductions, charges or withholdings whatsoever imposed,
assessed, levied or collected by or for the benefit of any jurisdiction or
taxing authority. In addition, Borrower shall pay any and all taxes (stamp or
otherwise) payable or determined to be payable in connection with the execution
and delivery of this Agreement, the Note and on all payments to be made by
Borrower hereunder and under the Note (other than the Lender's income taxes) and
all taxes payable in connection with or related to the Collateral.
2.7 PREPAYMENTS.
Borrower may prepay the entire Loan on any regularly scheduled payment
date after the second anniversary of the Loan Commencement Date, but not
before, only in accordance with the following conditions:
- 6 -
<PAGE> 7
2.7.1 Borrower shall give Lender at least fifteen days' prior
written notice, which shall be irrevocable, of the proposed prepayment,
specifying the date (which shall be a regularly scheduled monthly payment date)
thereof.
2.7.2 With such prepayment Borrower shall pay the Lender a
premium therefor calculated on the principal sum prepaid in accordance with the
following schedule:
Prepayment Date Premium Percentage
- --------------- ------------------
Month 1-12 7.10%
Month 13-24 6.00%
Month 25-36 3.50%
Month 37-48 2.50%
Month 49-60 1.00%
Notice of prepayment having been given by Borrower as aforesaid, the principal
amount specified therein and the premium therefor shall be due and payable on
the designated prepayment date.
In the event that: (a) the Borrower desires to sell the Equipment and purchase
different equipment in substitution thereof, and (b) the Borrower obtains
financing for such substitute equipment from Lender, Borrower shall have the
right to prepay the Loan in conjunction with such refinancing and the
prepayment fee set forth in Section 2.7.2 shall be 0.00% for months 25 through
60.
2.7.3 Borrower expressly agrees that in the event of the
acceleration of the Maturity Date, as a result of any Event of Default, any
payment on account of the principal balance of the Loan shall be deemed to be a
voluntary prepayment hereunder made as of the date of acceleration. Therefore,
with any such payment, Borrower shall pay the premium percentage which would
have been due pursuant to Section 2.7.2. had the Loan been voluntarily prepaid.
If acceleration occurs poor to the second anniversary of the Loan Commencement
Date, the applicable premium percentage is ten percent (10%). To the extent
permitted by law, Borrower expressly waives the provisions of any present or
future statute or law which prohibits, or may prohibit, the collection of the
foregoing premium percentage in connection with any such acceleration.
Borrower acknowledges that the premium percentage is not, and is not intended
to be a penalty, but rather is to compensate Lender for the loss of its bargain
if a default by Borrower results in the acceleration of Maturity Date.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
3.1 Organization and Qualification.
------------------------------
- 7 -
<PAGE> 8
Borrower is a duly organized and validly existing Corporation with
full power and authority to own its properties and to transact its business as
now transacted. Borrower is qualified to transact business in each
jurisdiction where the ownership of its properties or the transaction of its
business requires such qualification.
3.2 Authority and Authorization.
---------------------------
Borrower has full power and authority to execute, deliver and carry out
the provisions of this Agreement, the Note and the Loan Documents to make the
borrowing and to create the security interest provided for herein, and to
perform its obligations hereunder and thereunder, and all such action has been
duly and validly authorized by all necessary proceedings on its part.
3.3 Execution and Binding Effect.
----------------------------
This Agreement has been duly and validly executed and delivered by
Borrower and constitutes a legal, valid and binding obligation of Borrower
enforceable in accordance with its terms, and the Note, and the other Loan
Documents when duly and validly executed and delivered by Borrower, will
constitute legal, valid and binding agreements and obligations of Borrower
enforceable in accordance with their terms. The Guarantee has been duly and
validly executed and delivered by the Guarantor and constitutes a legal, valid
and binding obligation of the Guarantor executing the same enforceable in
accordance with its terms.
3.4 Authorizations and Filings.
--------------------------
Except for the filing of UCC financing statements, no authorization,
consent, approval, license, exemption or other action by, and no registration,
qualification, designation, declaration or filing with, any governmental
authority is or will be necessary or advisable in connection with the execution
and delivery of this Agreement, Note, the Guaranty, the other Loan Documents or
the consummation by Borrower and the Guarantor of the transactions herein and
therein contemplated, or performance by Borrower of or compliance by Borrower
and the Guarantor with, the terms and conditions hereof or thereof.
3.5 Absence of Conflicts.
--------------------
Neither the execution and delivery of this Agreement, the Note or the
other Loan Documents, nor consummation of the transactions therein contemplated
nor performance of, or compliance with the terms and conditions thereof will
(a) result in any violation of the provisions of Borrowees Constituent
Documents or any Law, or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over Borrower, or any of its
property, or (b) result in the creation or imposition of any Lien upon any
property (now owned or hereafter acquired) of Borrower or any Guarantor, except
for the Lien created by this Agreement.
- 8 -
<PAGE> 9
3.6 Financial Statements.
--------------------
Borrower and the Guarantor have heretofore furnished to Lender certain
financial statements and related financial information ("Financial
Statements"). Such Financial Statements (including the notes thereto) present
fairly the financial condition of Borrower and the Guarantor as of the dates of
the balance sheets contained therein, and the results of its operations for the
periods then ended, all in conformity with GAAP on a basis consistent with that
of Financial Statements for corresponding prior periods. Except as disclosed
therein, Borrower and the Guarantor have no material contingent liabilities
(including liabilities for taxes), unusual forward or long-term commitments or
unrealized or anticipated losses from unfavorable commitments.
3.7 No Event of Default.
-------------------
No event has occurred and is continuing and no condition exists which
constitutes or which, with the giving of notice, the passage of time, or both,
would constitute an Event of Default.
3.8 Litigation.
----------
There is no pending or threatened, proceeding by or before any court or
governmental agency against or affecting Borrower or the Guarantor, which, if
adversely decided would have a material adverse effect on the business,
operations or financial condition of Borrower or the Guarantor or on the
ability of Borrower or the Guarantor to perform their respective obligations
under this Agreement, the Note or the other Loan Documents.
3.9 Title to Collateral.
-------------------
At the time the Loan is made, Borrower will have good title to the
Equipment or will acquire good title thereto upon the disbursement of the
proceeds of the Loan, subject to no Lien other than the Lien created hereby.
3.10 Title to Property.
-----------------
Borrower has good title to all property owned by it, including all
properties reflected in the most recent audited balance sheet referred to in
Section 3.6 hereof (except as sold or otherwise disposed of in the ordinary
course of business).
3.11 Taxes.
-----
All tax returns required to be filed by Borrower have been property
prepared, executed and filed. All taxes, assessments, fees and other
governmental charges upon Borrower or upon any of its properties, incomes,
sales or franchises which are due and payable have been paid.
- 9 -
<PAGE> 10
3.12 Financial Accounting Practices.
------------------------------
Borrower makes and keeps books, records and accounts which, in
reasonable detail, accurately and fairly reflect Borrowers transactions and
dispositions of its assets.
3.13 Power To Carry On Business.
---------------------------
Borrower has all requisite power and authority to own and operate its
properties and to carry on its businesses as now conducted and as presently
planned to be conducted.
3.14 No Material Adverse Change.
--------------------------
Since the date of the Financial Statements referred to in Section 3.6,
there has been no material adverse change in the business, operations or
financial condition of Borrower or the Guarantor.
3.15 Compliance with Laws.
--------------------
Neither the Borrower nor the Guarantor is in violation of any Law,
except for violations which in the aggregate do not have a material adverse
effect on the business, operations or financial condition of Borrower.
3.16 Accurate and Complete Disclosure.
--------------------------------
No representation or warranty made by Borrower in this Agreement and no
statement made by Borrower or the Guarantor in the Financial Statements
furnished pursuant to Section 3.6 hereof or otherwise, any certificate, report,
exhibit or document furnished by Borrower or the Guarantor to Lender pursuant
to or in connection with this Agreement is false or misleading in any material
respect (including by omission of material information necessary to make such
representation, warranty or statement not misleading).
3.17 Regulations G and U.
-------------------
Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying "margin stock", as such term is used in
Regulations G or U promulgated by the Board of Governors of the Federal Reserve
System as amended from time to time. No part of the proceeds of the Loan will
be used to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any "margin stock". Borrower does not
own any "margin stock".
3.18 Perfection.
----------
Except for the filings under Article 9 of the UCC specified in Section
4.7 hereof (and continuation statements at periodic intervals) or under
applicable certificate of title acts with respect to the security interest
created by this Agreement, no further filing or recording is necessary under
the UCC or under any other laws of any jurisdiction, in order to perfect in all
applicable jurisdictions the security interest of Lender in the Collateral.
- 10 -
<PAGE> 11
3.19 Place of Business.
-----------------
Both the place of business (or chief executive office if there is more
than one place of business) of Borrower and the place where it keeps its
corporate records concerning the Collateral and all of its interest in, to and
under this Agreement are located at the address set forth at the beginning of
this Agreement.
3.20 Location of Collateral.
----------------------
For all purposes, including, without limitation, perfection of security
interests therein under Article 9 of the UCC, the Collateral is deemed located
at Doolan Industries, Inc., 201 Mississippi Street, Gary, Indiana, 46402.
ARTICLE 4. CONDITIONS OF LENDING
The obligation of Lender to make the Loan hereunder is subject to the
accuracy in all material respects, as of the date hereof and the Disbursement
Date, of the representations and warranties herein contained, to the
performance by Borrower of its obligations to be performed hereunder on or
before such Disbursement Date and to the satisfaction of the following further
conditions.
4.1 Representations and Warranties.
------------------------------
The representations and warranties contained in Article 3 hereof shall
be true on the Closing Date and on and as of the Disbursement Date with the
same effect as if made on and as of such date, and on such date no Event of
Default or any event which, with the giving of notice or the passage of time,
or both, would become an Event of Default shall have occurred and be continuing
or exist or shall occur or exist after giving effect to the Loan.
4.2 Corporate Action.
----------------
On the Closing Date, Borrower shall deliver to Lender a certificate in
form and substance satisfactory to Lender, dated the Closing Date, signed by a
duly authorized officer of Borrower, certifying as to (a) true copies of the
Constituent Documents of Borrower, all as in effect on such date, (b) true
copies of all action taken by Borrower relative to this Agreement, the Note and
the other Loan Documents, (c) compliance with Section 3.4 hereof, and (d) the
names, true signatures and incumbency of the officer or officers of Borrower
authorized to execute and deliver this Agreement, the Note and the other Loan
Documents (and Lender may conclusively rely on such certificate unless and
until a later certificate revising the poor certificate has been furnished to
Lender).
- 11 -
<PAGE> 12
4.3 No Change of Law or Facts.
-------------------------
No change shall have occurred after the date of execution and delivery
of this Agreement in applicable Law or regulations thereunder or
interpretations thereof by appropriate regulatory authorities which, in the
opinion of Lender or its counsel, would make it illegal for Lender to acquire
the Note, make the Loan, or otherwise to participate in the Loan, nor shall any
facts come to the attention of Lender, concerning Borrower, its business or
financial condition which, in the opinion of Lender, would increase the risk to
Lender of repayment of the Loan by Borrower.
4.4 Documents.
---------
The following documents shall have been duly authorized, executed and
delivered by the respective party or parties thereto, shall be in form and
substance satisfactory to Lender and its counsel and shall be in full force and
effect on the Closing Date and on the Disbursement Date, and an executed
counterpart of each thereof shall have been delivered to Lender and its
counsel:
4.4.1 this Agreement;
4.4.2 the Note;
4.4.3 insurance certificates or policies of insurance evidencing
the coverages required by Section 5.3 hereof;
4.4.4 the Guarantee
4.4.5 other Loan Documents, if any.
4.5 Equipment.
---------
Borrower shall provide to Lender a complete description of each item of
Equipment the cost of which will be paid or refinanced with the proceeds of the
Loan.
4.6 Financing Statements.
--------------------
Prior to the disbursement of the proceeds of the Loan, UCC financing
statements covering the security interest created by this Agreement in the
Equipment shall have been duly filed in the office of the Secretary of State of
the State where the Equipment is located and in all other places as, in the
opinion of Lender, or its counsel, are necessary or desirable to perfect such
security interests.
- 12 -
<PAGE> 13
4.7 Licenses and Permits.
--------------------
All appropriate action shall have been taken prior to the Closing Date
in order to permit consummation of the transactions contemplated herein and all
licenses, permits, waivers, exemptions, authorizations and approvals required
(or, in the opinion of Lender or its counsel, advisable) to be in effect on the
Closing Date shall have been issued and shall be in full force and effect on
such date, and copies thereof shall have been delivered to Lender.
4.8 Proceedings and Documents.
-------------------------
All legal details and proceedings in connection with the transactions
contemplated by this Agreement shall be in form and substance reasonably
satisfactory to counsel for Lender and Lender shall have received all such
counterpart originals or certified or other copies of such documents and
proceedings in connection with such transactions, in form and substance, as to
certification and otherwise, reasonably satisfactory to said counsel for
Lender, as Lender or counsel for Lender may reasonably request.
ARTICLE 5. COVENANTS
Borrower covenants that from and after the date hereof and until payment
in full of the Note and interest thereon and all other amounts due from
Borrower hereunder or under the Note or the other Loan Documents, unless Lender
shall otherwise consent in writing:
5.1 Reporting and Information Requirements.
--------------------------------------
5.1.1 ANNUAL AUDIT REPORTS. As soon as practicable, and in any
event within 90 days after the close of each fiscal year of Borrower, Borrower
shall furnish to Lender statements of income, retained earnings and changes in
financial position of Borrower for such fiscal year and a balance sheet of
Borrower as of the close of such fiscal year, and notes to each, all in
reasonable detail, setting forth in comparative form the corresponding figures
for the preceding fiscal year where such presentation is appropriate under
GAAP, certified by independent certified public accountants of recognized
standing selected by Borrower and satisfactory to Lender, together with (or
included in such certification) a written statement of such accountants
substantially to the effect that (i) such accountants examined such financial
statements in accordance with generally accepted auditing standards and
accordingly made such tests of accounting records and such other auditing
procedures as they considered necessary in the circumstances and (ii) in the
opinion of such accountants such financial statements present fairly the
financial position of Borrower as of the end of such fiscal year and the
results of its operations and the changes in its financial position for the
fiscal year then ended, in conformity with generally accepted accounting
principles applied on a basis consistent with that of the preceding fiscal year
(except for changes in application in which such accountants concur).
- 13 -
<PAGE> 14
5.1.2 QUARTERLY REPORTS. Within 45 days after the end of each of
the first three fiscal quarters of each fiscal year, Borrower shall furnish to
Lender a copy of its interim financial statements certified by an Executive
Officer of Borrower.
5.1.3 FURTHER REQUESTS. Borrower will promptly furnish to Lender
such other information concerning Borrower in such form as Lender may
reasonably request.
5.1.4 NOTICE OF EVENT OF DEFAULT. Promptly upon becoming aware
of any Event of Default, or any event which, with the giving of notice or the
passage of time, or both, would become an Event of Default, Borrower shall give
Lender notice thereof, together with a written statement of an Executive
Officer of Borrower setting forth the details thereof and any action with
respect hereto taken or contemplated to be taken by Borrower.
5.1.5 NOTICE OF MATERIAL ADVERSE CHANGE. Promptly upon
becoming aware thereof Borrower shall give Lender written notice about any
material adverse change in the business, operations or financial condition of
Borrower.
5.1.6 NOTICE OF MATERIAL PROCEEDINGS. Promptly upon becoming
aware thereof Borrower shall give Lender written notice of the commencement,
existence or threat of any proceeding by or before any court or administrative
agency against or affecting Borrower which, if adversely decided, would have a
material adverse effect on the business, operations or financial condition of
Borrower or on the ability of Borrower to perform its obligations under this
Agreement, the Note, or the other Loan Documents.
5.1.7 VISITATION. Borrower shall permit such persons as Lender
may designate, at Lenders expense to visit and inspect the Collateral and to
examine the books and records of Borrower and take copies and extracts
therefrom, and to discuss its affairs with officers of Borrower and its
independent accountants, at such reasonable times and as often as Lender may
reasonably request.
5.2 Preservation of Existence and Franchises.
----------------------------------------
5.2.1 Borrower shall not enter into any merger, reorganization,
or consolidation or wind up, liquidate or dissolve, nor agree to do any of the
foregoing.
5.2.2 Borrower will qualify to do business and will remain in
good standing under the laws of each jurisdiction in which it is required to be
qualified by reason of the location of the properties owned or leased by it or
the conduct of its business.
5.2.3 Borrower will comply with all Laws relative to the conduct
of its business or the location of the properties owned or leased by it, the
non-compliance with which could have a material adverse effect on the business,
operations, assets or financial or other condition of the Borrower, as
contemplated hereby, or the ability of Borrower to perform its obligations
under this Agreement, the Note, or the other Loan Documents and will obtain or
cause to be obtained as promptly as possible any permit, license, consent or
approval of any
- 14 -
<PAGE> 15
governmental authority and make any filing or registration therewith which at
the time shall be required with respect to the performance of its obligations
under this Agreement, the Note or the other Loan Documents for the operation of
its business as presently conducted or as contemplated by it.
5.2.4 Borrower shall not, (i) convey, assign, sell, mortgage,
encumber, pledge, hypothecate, grant a security interest in, grant options with
respect to, lease or otherwise dispose of all or any part of any legal or
beneficial interest in any part or all of the Collateral or any interest
therein; or (ii) directly or indirectly sell, assign, lease or otherwise
dispose of or permit the sale, assignment or other disposition of (a) any legal
or beneficial interest in the stock of any corporation which is either Borrower
or is a beneficial owner of all or part of Borrower or of the Collateral or (b)
any legal or beneficial interest in Borrower if Borrower is a limited or
general partnership, joint venture, tenancy in common or tenancy by the
entirety; or (iii) convey, assign, transfer or otherwise dispose of a material
portion of the assets of Borrower (other than the Collateral), other than in
the ordinary course of business of Borrower.
5.3 Insurance.
---------
Borrower shall maintain with financially sound and reputable insurers
insurance with respect to its properties and business and against such
liabilities, casualties and contingencies and of such types and in such amounts
as required by Lender. Policies of casualty insurance for the Collateral shall
be for not less than the full "replacement" costs of the Collateral, including
a waiver of depreciation, shall contain a Lender's long form endorsement in
favor of Lender, providing, among other matters, for thirty (30) days prior
written notice of cancellation or amendment and the right, but not the
obligation, to pay unpaid premiums and Lender shall at all times during the
Term and until all Obligations are paid in full, be named in such policies as
an additional insured or as a loss payee, as applicable.
5.4 Maintenance of Properties.
-------------------------
Borrower shall maintain or cause to be maintained in good repair,
working order and condition the properties now or hereafter owned, leased or
otherwise possessed by it, including the Equipment, and shall make or cause to
be made all needful and proper repairs, renewals, replacements and improvements
thereto so that the business carried on in connection therewith may be properly
and advantageously conducted at all times.
5.5 Payment of Taxes and Other Potential Charges.
--------------------------------------------
Borrower shall pay or discharge
5.5.1 all taxes, assessments and other governmental charges or
levies imposed upon it or any of its properties, including the
Collateral, or income (including such as may arise under ERISA or any
similar provision of law), on or prior to the date on which penalties
attach thereto,
- 15 -
<PAGE> 16
5.5.2 all lawful claims of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons which, if unpaid, might
result in the creation of a Lien upon any such property, on or prior to
the date when due; provided, that unless and until foreclosure,
distraint, levy, sale or similar proceedings shall have been commenced,
Borrower need not pay or discharge any such tax, assessment, charge,
levy, claim or current liability so long as (i) the validity thereof
is contested in good faith and by appropriate proceedings diligently
pursued, (ii) in Lender's sole judgment there is no reasonably
foreseeable risk of forfeiture of the Collateral, and (iii) such
reserves or other appropriate provisions as may be required by GAAP
shall have been made therefor, and so long as such failure to pay or
discharge does not have a material adverse effect on the business,
operations or financial condition of Borrower.
5.6 Financial Accounting Practices.
------------------------------
Borrower shall make and keep books, records and accounts which, in
reasonable detail, accurately and fairly reflect its transactions and
dispositions of its assets.
5.7 Compliance with Laws.
--------------------
Borrower shall comply with all applicable Laws in all respects,
provided, that Borrower shall not be deemed to be in violation of this Section
5.7 as a result of any failures to comply which would not result in fines,
penalties, injunctive relief or other civil or criminal liabilities which, in
the aggregate, would not materially affect the business or operations of
Borrower or the ability of Borrower to perform its obligations under this
Agreement, the Note or the other Loan Documents.
5.8 Maintenance of Collateral.
-------------------------
Borrower will maintain and preserve the Collateral in good condition
and repair, promptly repairing, replacing or rebuilding any part of the
Collateral which may be destroyed by any casualty, or become damaged, worn or
dilapidated.
5.9 Further Assurances.
------------------
Borrower shall cause to be done, executed, acknowledged and delivered
all and every such further act, conveyance and assurance as Lender shall
require for accomplishing the purposes of this Agreement, the Note and the
other Loan Documents. Borrower will defend and protect its title with respect
to the Collateral and will indemnify Lender with respect thereto. Any payment
in respect of such indemnity shall be made directly to Lender on demand in
immediately available funds. Forthwith after notice from Lender, Borrower
shall promptly, without further consideration, execute, acknowledge and deliver
such further instruments and documents and will take such other actions as
Lender may deem necessary or advisable from time to time to ensure the
enforceability or priority of the liens granted hereby, or otherwise to confirm
and carry out the intent and purpose of this Agreement.
- 16 -
<PAGE> 17
ARTICLE 6. SECURITY INTEREST
6.1 Security.
--------
As security for the full and timely payment of all of the Obligations of
Borrower to Lender, Borrower hereby assigns, pledges, transfers and sets over
to Lender, and hereby agrees that Lender shall have, and hereby grants to and
creates in favor of Lender, a first security interest under the UCC, subject to
no other Liens in and to all of Borrowees right, title and interest in, to and
under the following, in each case whether now existing or hereafter arising,
now owned or hereafter acquired, wherever located ("Collateral"):
6.1.1 All Equipment described in the Schedule "A" attached
hereto; and
6.1.2 All proceeds of, and accessions and additions thereto,
substitutions for, and all replacements of, any of the foregoing, cash and
non-cash, including insurance proceeds.
6.2 Lender Has Rights and Remedies of a Secured Party.
-------------------------------------------------
In addition to all rights and remedies given to Lender by this
Agreement, Lender shall have all the rights and remedies of a secured party
under the UCC.
6.3 Provisions Applicable to the Collateral.
---------------------------------------
The parties agree that, at all times during the term of this Agreement,
the following provisions shall be applicable to the Collateral:
6.3.1 Borrower covenants and agrees that it will keep accurate
and complete books and records concerning the Collateral owned or acquired by
it in accordance with GAAP.
6.3.2 Lender shall have the night to review the books and records
of Borrower pertaining to the Collateral and to copy the same and to make
excerpts therefrom, all at such reasonable times upon reasonable notice and as
often as Lender may reasonably request.
6.3.3 Borrower shall maintain and keep its principal place of
business and its chief executive office at the address set forth at the
beginning of this Agreement, and at no other location without giving Lender at
least thirty (30) days prior written notice of any move. Borrower shall
maintain and keep its records concerning the Collateral at such address and at
no other location without giving Lender at least thirty (30) days prior written
notice of any move. Borrower shall keep any Equipment comprising the
Collateral only at such address. Borrower may change any such location only
if it has given Lender thirty (30) days prior written notice of the new
location. Borrower may not move the Collateral without the poor written
consent of Lender.
- 17 -
<PAGE> 18
6.3.4 Borrower shall not sell, lease, transfer or
otherwise dispose of or encumber any of the Collateral.
6.3.5 Borrower shall cause the Equipment and any other Collateral
to be maintained and preserved in the same condition, repair and working order
as when new, ordinary wear and tear excepted, and shall promptly make or cause
to be made all repairs, replacements and other improvements in connection
therewith which are necessary or desirable to that end.
6.3.6 Borrower shall not affix or permit the Collateral to
become affixed to real estate or to any other goods.
6.4 Certain Covenants.
-----------------
Borrower covenants and agrees with Lender for the benefit of Lender
that:
6.4.1 Borrower has and Will have good and merchantable title to
all Collateral, in each case as from time to time owned or acquired by it, free
and clear of all Liens. Borrower will defend such title against the claims and
demands of all Persons whomsoever.
6.4.2 Borrower will faithfully preserve and protect Lender's
security interest in the Collateral and will, at its own cost and expense,
cause said security interest to be perfected and continued perfected, and for
such purpose Borrower will from time to time at the request of Lender and at
the expense of Borrower, make, execute, acknowledge and deliver, and file or
record, or cause to be filed or recorded, in the proper filing places, all such
instruments, documents and notices, including without limitation financing
statements and continuation statements, as Lender may deem necessary or
advisable from time to time in order to perfect and continue perfected said
security interest. Borrower will do all such other acts and things and make,
execute, acknowledge and deliver all such other instruments and documents,
including without limitation further security agreements, pledges,
endorsements, assignments and notices, as Lender may deem necessary or
advisable from time to time in order to perfect and preserve the priority of
said security interest as a first lien security interest in the Collateral poor
to the rights of all other Persons therein or thereto.
6.4.3 Borrower will not, without the prior written consent of
Lender, (i) borrow or permit any Person to borrow against the Collateral other
than the Loan to Borrower from Lender pursuant to this Agreement; (ii) create,
incur, assume or suffer to exist any Lien with respect to any of the
Collateral; (iii) permit any levy or attachment to be made against any of the
Collateral except any levy or attachment relating to this Agreement; or (iv)
permit any financing statement to be on file with respect to any of the
Collateral, except financing statements in favor of Lender.
6.4.4 Risk of loss of, damage to or destruction of the
Collateral is and shall remain upon Borrower. Borrower will insure the
Collateral as provided in Section 5.3 of this Agreement. If Borrower fails to
effect and keep in full force and effect such insurance or fails to pay the
premiums thereon when due, Lender may do so for the account of Borrower and add
the cost thereof to the Obligations and the same shall be payable to Lender on
demand.
- 18 -
<PAGE> 19
Borrower hereby assigns and sets over unto Lender for the benefit of Lender all
moneys which may become payable on account of such insurance, including without
limitation any return of unearned premiums which may be due upon cancellation
of any such insurance, and directs the insurers to pay Lender any amount so
due. Lender, its officers, employees and authorized agents and its successors
and assigns, are hereby appointed attorneys-in-fact of Borrower, for the
purpose of endorsing any draft or check which may be payable to Borrower in
order to collect the proceeds of such insurance or any re turn of unearned
premiums. Such appointment is irrevocable and coupled with an interest. The
proceeds of insurance shall be applied to reduction of the Obligations in any
order Lender may choose or, in Lender's sole discretion, to the repair or
replacement of the Collateral, or any part thereof, in which case Lender may
impose such conditions on the disbursement of the proceeds as Lender in its
sole discretion deems appropriate.
6.4.5 Upon the occurrence and during the continuation or
existence of any Event of Default, Borrower shall promptly upon demand by
Lender assemble the Equipment and any other Collateral and make it available to
Lender at the place or places to be designated by Lender. The right of Lender
to have the Equipment and any other Collateral assembled and made available to
it is of the essence of this Agreement and Lender may, at its election, enforce
such right in equity for specific performance.
6.4.6 Lender shall have no duty as to the collection or
protection of the Collateral or any part thereof or any income thereon, or as
to the preservation of any rights pertaining thereto, beyond exercising
reasonable care in the custody of any Collateral actually in the possession of
Lender. Lender shall be deemed to have exercised reasonable care in the
custody and preservation of such of the Collateral as may be in its possession
if it takes such action for that purpose as Borrower shall request in writing,
provided that such requested action shall not, in the judgment of Lender,
impair Lender's security interest in the Collateral or its rights in, or the
value of, the Collateral, and provided further that such written request is
received by Lender in sufficient time to permit it to take the requested
action.
ARTICLE 7. DEFAULTS
7.1 Events of Default.
------------------
The occurrence of one or more of the following described events is an
Event of Default:
7.1.1 Borrower defaults in the payment, when due, of principal
of or interest on the Note; or
7.1.2 Borrower voluntarily creates, suffers to exist, incurs or
assumes any Lien, security interest, charge or encumbrance on, or with respect
to, any part of or all the Collateral; or
7.1.3 Borrower defaults in the performance or observance of any
of its covenants which cannot be cured; or
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<PAGE> 20
7.1.4 Borrower sells, assigns, leases, or otherwise disposes of
or relinquishes possession of, any Collateral; or
7.1.5 Borrower fails to perform or observe any other covenant or
agreement to be performed or observed by it hereunder and such failure
continues unremedied for a period of fifteen (15) days after such failure; or
7.1.6 any representation or warranty made by Borrower herein or
in any Loan Document or in any document or certificate furnished by Borrower to
Lender in connection herewith or therewith at any time proves to have been
incorrect in any material respect when made and, if curable, the same is not
cured within thirty (30) days after written notice thereof given by Lender; or
7.1.7 this Agreement or any Loan Document at any time for any
reason ceases to be in full force and effect or is declared by a court or
governmental agency of competent jurisdiction to be null and void; or
7.1.8 Borrower breaches or defaults under the terms of any
agreement, instrument or document with or for the benefit of Lender which is
not a Loan Document, including, without limitation, other promissory notes,
guarantees, equipment leases and security agreements; or
7.1.9 there is a material adverse change in the financial
condition of Borrower or the Guarantor or the Collateral; or
7.1.10 a proceeding is instituted seeking a decree or order
for relief in respect of Borrower in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect or for
the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of Borrower, or for any substantial
part of its properties or for the dissolution, winding-up or liquidation of it
or its affairs or any substantial part of any of its properties and such
proceeding remains undismissed or unstayed for a period of sixty (60)
consecutive days or such court enters a decree or order granting the relief
sought in such proceeding; or
7.1.11 Borrower voluntarily suspends transaction of its
business, commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, consents to the
entry of an order for relief in an involuntary case under any such law or
consents to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official) of
Borrower for any substantial part of any of its properties, or makes a general
assignment for the benefit of creditors, or takes any action in furtherance of
any of the foregoing.
7.2 Consequences of Event of Default.
--------------------------------
7.2.1 If an Event of Default occurs, Lender may, by notice to
Borrower, declare the unpaid principal amount of the Note and interest accrued
thereon and all other liabilities of Borrower hereunder or under the Note or
the Loan Documents to be immediately due and
- 20 -
<PAGE> 21
payable and the same shall thereupon become and be immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, and an action therefor shall immediately accrue.
7.2.2 In addition, Lender shall have all rights and remedies
granted herein and all rights or remedies available at law or equity (including
specifically those granted by the Uniform Commercial Code as in effect in the
jurisdiction or jurisdictions where the Collateral is located) and, except as
limited by Law, they (i) shall be cumulative and concurrent; (ii) may be
pursued separately, successively or concurrently against Borrower or against
all or any portion of the Collateral, at the sole discretion of Lender; (iii)
may be exercised as often as occasion therefor shall arise, it being agreed by
Borrower that the exercise or failure to exercise any rights or remedies shall
in no event be construed as a waiver or release thereof or of any other right,
remedy or recourse; and (iv) are intended to be, and shall be, nonexclusive.
To the fullest extent permitted by applicable Law, Lender may resort to the
rights, remedies and recourses set forth herein and any other security therefor
in such order and manner as Lender may elect.
7.2.3 Without limiting any of the foregoing, Borrower agrees
that (i) Lender may, with or without notice, enter upon any property owned,
leased or otherwise under the real or apparent control of Borrower or any agent
thereof where the Collateral may be located and disassemble, disconnect, render
unusable or repossess all or any item. of the Collateral; (ii) written notice
mailed to Borrower, as provided in this Agreement for the giving of notice,
shall be reasonable if given ten (10) days prior to (a) any public sale or (b)
the date after which a private sale may be made; (iii) a sale of the Collateral
may be made as a unit or in parcels and for cash and upon terms; and (iv)
Lender may buy the Collateral at any public sale and at any private sale as
permitted by the UCC.
ARTICLE 8. MISCELLANEOUS
8.1 Indemnity.
---------
Borrower shall indemnify, defend and hold harmless Lender from and
against, and, upon demand, reimburse Lender for, all claims, demands,
liabilities, losses, damages, judgments, penalties, costs and expenses,
including, without limitation, reasonable attorneys' fees and disbursements,
which may be imposed upon, asserted against or incurred or paid by Lender, on
account of any act performed or omitted to be performed under this Agreement,
the Note or the other Loan Documents or on account of any transaction arising
out of or in any way connected with the Collateral or this Agreement, the Note
or the other Loan Documents, except as a result of the willful misconduct or
gross negligence of Lender.
8.2 No Implied Waiver; Cumulative Remedies.
--------------------------------------
No course of dealing and no delay or failure of Lender in exercising
any right, power or privilege under this Agreement, the Note or any of the
other Loan Documents shall affect such night, power or privilege except as and
to the extent that the assertion of any such right, power
- 21 -
<PAGE> 22
or privilege shall be barred by an applicable statute of limitations; nor shall
any single or partial exercise thereof or any abandonment or discontinuance of
steps to enforce such a right, power or privilege preclude any further exercise
thereof or of any other right, power or privilege. The rights and remedies of
Lender under this Agreement, the Note or the other Loan Documents are
cumulative and not exclusive of any rights or remedies which Lender would
otherwise have.
8.3 Taxes.
-----
Borrower agrees to pay or reimburse Lender for any and all stamp,
document, transfer, recording or filing taxes or fees and all similar
impositions payable or hereafter determined by Lender to be payable in
connection with this Agreement, the Note or the other Loan Documents (including
but not limited to those necessary or advisable to record or to ensure the
enforceability or priority of this Agreement, the Note or the other Loan
Documents), as determined by Lender in its sole discretion from time to time,
and any other documents, instruments or transactions pursuant to or in
connection herewith, and Borrower agrees to save Lender harmless from and
against any and all present or future claims or liabilities with respect to or
resulting from any delay in paying or omission to pay any such taxes, fees or
similar impositions.
8.4 Modifications, Amendments or Waivers.
------------------------------------
Lender and Borrower may from time to time enter into written agreements
amending, modifying or supplementing this Agreement, the Note or the other Loan
Documents or changing the rights of Lender or Borrower hereunder or thereunder,
and Lender may from time to time grant waivers or consents to a departure from
the due performance of the obligations of Borrower thereunder. Any such
agreement, waiver or consent must be in writing and shall be effective only to
the extent set forth in such writing. In the case of any such waiver or
consent, any Event of Default so waived or consented to shall be deemed to be
cured and not continuing, but no such waiver or consent shall extend to any
subsequent or other Event of Default or impair any night consequent thereto.
8.5 Holidays.
--------
Except as otherwise provided herein, whenever any payment or action to
be made or taken hereunder or the Note or any other Loan Document shall be
stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day, unless such next
succeeding Business Day falls in a different calendar month, in which case
payment or action shall be made or taken on the next preceding Business Day.
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<PAGE> 23
8.6 Notices.
-------
Except as otherwise provided herein, all notices and
other communications required under the terms and provisions of this Agreement,
the Note or the other Loan Documents shall be in writing and shall become
effective when delivered by hand or received by overnight courier, telex,
facsimile, telegram or registered first class mail, postage prepaid, addressed
as follows:
IF TO LENDER, AT:
FINOVA Capital Corporation
95N Route 17 South
Paramus, New Jersey 07652
Facsimile No. 201-712-3739
Attention: Pamela Marchant
with a copy to: Winick & Rich, P.C.
919 Third Avenue
New York, NY 10022
Attention: Alan C. Winick, Esq.
Facsimile No. 212-308-5945
IF TO BORROWER, AT:
with a copy to:
or at such other address as either party may, from time to time, designate in
writing to the other party hereto.
8.6.2 If any notice is given by telex, facsimile transmission,
or telegram, the party giving such notice shall confirm such notice by a
writing delivered by hand or overnight courier; PROVIDED, HOWEVER, that for all
purposes hereunder, notice shall be deemed effective at the time given by
telex, telecopier or telegram.
- 23 -
<PAGE> 24
8.7 Reimbursement for Certain Expenses.
----------------------------------
Borrower agrees to pay or cause to be paid and to save Lender harmless
against liability for the payment of all reasonable out-of-pocket expenses,
including counsel fees, incurred by Lender from time to time (i) arising in
connection with the negotiation, execution, delivery, and recordation of this
Agreement, the Note or the other Loan Documents, which such costs not to exceed
Two-thousand ($2,000.00) dollars (ii) relating to any requested amendments,
waivers or consents to or in connection with this Agreement, the Note or any
other Loan Document, and (iii) arising in connection with Lendees enforcement
or preservation of rights under this Agreement, the Note or any other Loan
Document, including but not limited to such expenses as may be incurred by
Lender in the collection of the Note.
8.8 Personal Jurisdiction and Service of Process; Waiver of Jury
------------------------------------------------------------
Trial.
-----
Borrower hereby irrevocably consents to personal jurisdiction and venue
in any state or federal court located in Maricopa County, State of Arizona, and
hereby waives any claim either may have that such court is an inconvenient
forum for the purposes of any suit, action or other proceeding arising out of
this Agreement, the Note or any other Loan Document or any of the agreements or
transactions contemplated hereby or thereby, which is brought against Borrower
by Lender, and hereby agrees that all claims in respect of any such suit,
action or proceeding may be heard or determined in any such court; and Borrower
further consents to the service of process in any such suit, action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to Borrower at its address set forth herein for the giving of
notices, such service to become effective on the earlier of the date of receipt
as evidenced by a signed return receipt or ten (10) days after mailing.
BORROWER HEREBY WAIVES ANY AND ALL RIGHTS TO A JURY TRIAL.
8.9 Severability.
------------
The provisions of this Agreement, the Note and the other Loan Documents
are intended to be severable. If any such provision is held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
8.10 Governing Law.
-------------
This Agreement, the Note, the other Loan Documents and the rights and
obligations of the parties hereto and thereto shall be governed by and
construed and enforced in accordance with the laws of the State of Arizona.
8.11 Prior Understandings.
--------------------
This Agreement supersedes all prior understandings and agreements,
whether written or oral, between the parties hereto relating to the
transactions provided for herein in accordance with Lenders proposal letter to
Borrower dated October 16, 1995 and related letter dated October 30, 1995.
- 24 -
<PAGE> 25
8.12 Survival.
--------
All representations and warranties of Borrower contained in this
Agreement or any other Loan Document or made in writing in connection herewith
or therewith shall survive the execution and delivery of this Agreement, the
Note and the other Loan Documents, any investigation or inspection by Lender,
the making of the Loan hereunder, the payment of the Note or the expiration of
this Agreement. All covenants and agreements of Borrower contained herein
shall continue in full force until payment in full of all Obligations.
Borrowers obligation to pay the principal of and interest on the Note and all
such other amounts shall be absolute and unconditional under any and all
circumstances.
8.13 Successors and Assigns.
----------------------
This Agreement shall be binding upon and shall inure to the benefit of
Lender and Borrower and their respective successors and permitted assigns,
except that Borrower may not assign or transfer any of its rights or
obligations hereunder or any interest herein without the consent of Lender
which Lender may withhold in its absolute discretion. Any actual or attempted
assignment by Borrower without Lender's consent shall be null, void and of no
effect whatsoever. Lender may assign its rights and obligations hereunder and
under the Note and the other Loan Documents in whole or in part. If Lender
makes such an assignment, the assignee shall have all of the rights of the
Lender and Borrower shall not assert against the assignee any defense,
counterclaims or setoff which Borrower may have against Lender. Except to the
extent otherwise required by its context, the word "Lender" where used in this
Agreement shall mean and include the holder of the Note originally issued to
Lender, and the holder of such Note shall be bound by and have the benefits of
this Agreement to the same extent as if such holder had been a signatory
hereto.
8.14 Counterparts.
------------
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts each of which, when so
executed and delivered by the parties, constituting an original but all such
counterparts together constituting but one and the same instrument.
8.15 Publicity.
---------
Lender is hereby authorized to issue appropriate press releases and to
cause a tombstone to be published announcing the consummation of this
transaction and the aggregate amount thereof.
- 25 -
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed and delivered this Agreement effective as of the day
and year first above written.
OTTAWA RIVER STEEL CO.
By: /s/ Joseph Klobuchar, Jr.
-----------------------------------
Printed Name: Joseph Klobuchar, Jr.
--------------------------
Title: Vice President
--------------------------------
Tax Identification Number: 34-1186790
-------------
FINOVA CAPITAL CORPORATION
By: P. Merckel
------------------------------------
Title: Vice President
---------------------------------
- 26 -
<PAGE> 27
SCHEDULE "A"
EQUIPMENT LOCATION: Doolan Industries, Inc.
201 Mississippi Street
Gary, IN 46402
(Lake County)
EQUIPMENT DESCRIPTION:
(1) Mfg. unknown 72" X 1/4" cut to length line, Serial # N/A (1970), 130
FPM line speed, gauge: .018"-1/4" including but not limited to:
rail mounted entry coil car; overhung mandrel type uncoiler, 50,000
lb. X 72" cap., hydraulic expansion with I.D. range of 20" to 24",
Wichita water cooled brake, powered roll; extending blade type peeler;
straightener vath 7" dia. entry pinch rolls, (9) 5" dia. work rolls,
top & bottom center backups; center adjustable edge conditioning side
guide rolls; leveler with (17) work rolls, 75 HP, variable speed
drive; power adjusted hump table; Wysond Model HS-778-RKB 1/4" shear,
Serial #P91-100; pinch roll feed to stacker; 24' Spaulding Stacker,
powered side tempers, powered end top, powered roller conveyor, (24'),
end discharge; 36" powered runout conveyor, controls, assorted dies.
(1) P&H 5 ton single girder bridge crane, approximately 30" span
(1) Robbins & Meyers 5 ton single girder overhead bridge crane, 30"
span
(1) Lot, miscellaneous coil lifting attachments
(1) American 38" X 3/8" cap. slitting line including but not limited to:
American model 1000 approximately 20,000 lb. cap. coil loader,
hydraulic mandrel and hold down; American coil straightener, 8" dia.
pinch roll, peeler pnd straightener, Torrington 38" X 3/8" pinch roll
& slitter stand, 7" dia. arbors, 125 HP American; Model 1000 approx.
20,000 lb. uncoiler, hydraulic Mandrel and snubber rolls; Loopco
30,000 lb. 4-arm turnstyle, scrap winders, assorted dies and
controls
(1) Lot, approximately (16) sections 72" X 28" X 120" medium duty racking
(1) Orbit Model OR-1758F 17" pedestal type drill press, Serial #N/A
(1) Wissota Model E-7 7" double end pedestal grinder, Serial #N/A W12-76,
1/2 HP
(1) Lincoln Model AC-250 Idealarcwelding power supply, Serial #399730
(2) Wilson Rockwell Model 23-612-52-1-0-5 Hardness Tester
(1) Wilkerson Model A06RH-800 Refrigerated dryer, Serial #08-03-81-5206
(1) Ingersoll-Rand Model 15T tank mounted reciprocating type air
compressor, Serial #3OT539372, 20 HP
(1) Joy Model Twistair tank mounted rotary screw type air compressor,
Serial #N/A, 20 HP
(1) Joy tank mounted type 15 HP air compressor, Serial #N/A
(1) Rigid Model "200" pipe threader
(1) Tennant Model 42 power floor sweeper, Serial #5850
(1) Lot, Miscellaneous shop equipment & furniture including but not
limited to: machine parts, hand tools, pneumatic & power tools,
banding carts, shop carts, benches, stools, dump hoppers, vises, shop
vacs, miscellaneous perishable tooling, etc.
(1) 1987 Mack model R688ST tractor, E6-350 diesel engine, 10-speed
transmission, VIN #1M2N187YXHAO16026
(1) 1985 Mark model R688ST tractor, E6-350 diesel engine, 10-speed
transmission, VIN #1N2N187Y4FA011613
(1) 1988 Trailmobile Model F71T-JUA1 flatbed trailer, VIN #1PTF71
TJGJ9802767 with wood side board inserts and tape and supports
(1) 1979 Trailmobile flatbed trailer, VIN #V31793
(1) Lot, lunchroom furniture and applicances including but not limited to:
chairs, tables, refrigerator, microwave, coffeemaker, water cooler,
flle cabinets, etc.
(1) Lot, office equipment including but not limited to: desks, credenzas,
chairs, book cases, file cabinets, adding machines, typewriters,
calculators, conference tables, tables and chairs, office machines and
miscellaneous office sundries, etc.
(1) IBM Model PS2 386 personal computer
Please Initial Here
Page 1 of 1
<PAGE> 28
SECURED PROMISSORY NOTE
$800,000.00 11/17/1995
FOR VALUE RECEIVED, the undersigned, Ottawa River Steel Co.
("Borrower"), hereby promises to pay to the order of FINOVA Capital
Corporation, ("Lender"), the principal sum of Eight-hundred thousand dollars
($800,000.00), together with interest on the unpaid principal balance hereof
from time to time outstanding at the rate per annum and on the dates and as
otherwise provided in the Loan and Security Agreement dated the date of this
Note ("Loan Agreement") between Borrower and Lender.
This Note is the Note referred to in the Loan Agreement, is secured as
set forth in the Loan Agreement, may be prepaid only as provided in the Loan
Agreement and is entitled to the benefits of the Loan Agreement. All
capitalized terms used in this Note which are not otherwise defined herein
shall have the respective meanings ascribed to them in the Loan Agreement.
All payments of principal and interest on this Note are to be made in
lawful money of the United States of America in immediately available funds,
without setoff, counterclaim or deduction of any nature, at the office of
Lender at 95 N Route 17 South, Paramus, New Jersey 07653 (or such other place
as the holder hereof shall designate to the Borrower in writing), prior to
12:00 Noon, local time, on the day when due.
If any payment of principal or interest becomes due on a day which is
not a Business Day, that payment shall be made on the next Business Day unless
such next Business Day falls in another calendar month in which event that
payment shall be made on the next preceding Business Day.
Lender and Borrower intend this Note to comply in all respects with all
provisions of law and not to violate, in any way, any legal limitations on
interest charges. Accordingly, if, for any reason, Borrower is required to
pay, or has paid, interest at a rate in excess of the highest rate of interest
which may be charged by the Lender or which Borrower may legally contract to
pay under applicable law (the "Maximum Rate"), then the interest rate shall be
deemed to be reduced, automatically and immediately, to the Maximum Rate, and
interest payable hereunder shall be computed and paid at the Maximum Rate and
the portion of all prior payments of interest in excess of the Maximum Rate
shall be deemed to have been prepayments of the outstanding principal of this
Note and applied to the installments in the inverse order of their maturities.
If Borrower fails to make any payment of principal or interest within
ten (10) days after the payment is due, Borrower shall pay a late charge of
five percent (5%) of the unpaid amount, but in no event more than the maximum
amount permitted by applicable law, and such amount shall be payable upon
demand. Such payment is not interest for the use of money, but is intended to
cover Lenders administrative costs occasioned by such delay.
<PAGE> 29
Upon the occurrence of an Event of Default, Lender shall have all of
the rights and remedies contained in the Loan Agreement, including, without
limitation, the right, at its option, to declare all indebtedness under this
Note to be immediately due and payable.
Borrower hereby expressly waives presentment for payment, demand for
payment, notice of dishonor, protest, notice of protest, notice of
non-payment, and all lack of diligence or delays in collection or enforcement
of this Note or the Loan Agreement.
Lender may extend the time of payment of this Note, postpone the
enforcement hereof, release any Collateral, or grant any other indulgences
whatsoever, without affecting or diminishing the Lendees Light of recourse
against Borrower, as provided herein and in the Loan Agreement and in the
other Loan Documents, which right is hereby expressly reserved. The failure
to assert any right by Lender shall not be deemed a waiver thereof.
Borrower agrees to pay all costs, fees and expenses of collection,
including, without limitation, Lender's reasonable attorneys' fees and
disbursements, in the event that any action suit or proceeding is brought by
the holder hereof to collect this Note or if an Event of Default occurs.
THIS NOTE IS DEEMED TO HAVE BEEN MADE IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF, THE STATE OF ARIZONA. BORROWER IRREVOCABLY
CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING AGAINST BORROWER UNDER, ARISING
OUT OF, OR IN ANY MANNER RELATING TO THIS NOTE, THE LOAN AGREEMENT OR THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN AN COURT OF THE STATE OF ARIZONA OR
ANY UNITED STATES DISTRICT COURT LOCATED IN THE STATE OF ARIZONA. BORROWER,
BY ITS EXECUTION AND DELIVERY OF THIS NOTE, EXPRESSLY AND IRREVOCABLY
CONSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF ANY OF SUCH COURTS IN
ANY SUCH ACTION OR PROCEEDING. BORROWER ALSO IRREVOCABLY CONSENTS TO THE
SERVICE OF ANY COMPLAINT, SUMMONS, NOTICE OR OTHER PROCESS RELATING TO SUCH
ACTION OR PROCEEDING BY DELIVERY THEREOF TO BORROWER IN THE MANNER PROVIDED
FOR NOTICES IN THE LOAN AGREEMENT. BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE IN ANY SUCH ACTION OR PROCEEDING
BASED ON ANY ALLEGED LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
NON CONVENIENS OR ANY SIMILAR BASIS. BORROWER SHALL NOT BE ENTITLED IN ANY
SUCH ACTION OR PROCEEDING TO ASSERT ANY DEFENSE GIVEN OR ALLOWED UNDER THE
LAWS OF ANY STATE OTHER THAN THE STATE OF ARIZONA, UNLESS SUCH DEFENSE IS
ALSO GIVEN OR ALLOWED BY THE LAWS OF THE STATE OF ARIZONA. NOTHING HEREIN
SHALL AFFECT OR IMPAIR IN ANY MANNER OR TO ANY EXTENT THE RIGHT OF LENDER TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER IN ANY
OTHER JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
BORROWER HEREBY WAIVES ANY AND ALL RIGHTS TO A JURY TRIAL.
- 2 -
<PAGE> 30
IN WITNESS WHEREOF, Borrower has duly executed this Note on the date
first above written.
OTTAWA RIVER STEEL CO.
By: Joseph Klobuchar, Jr.
---------------------------------
Title: Vice President
------------------------------
- 3 -
<PAGE> 1
EXHIBIT 10.18(c)
[USL CAPITAL LOGO] [FORD LOGO]
MASTER LEASE AGREEMENT
LESSOR: USL CAPITAL CORPORATION LESSEE: Ottawa River Steel Company
---------------------------
ADDRESS: 733 Front Street ADDRESS: 805 Chicago Street
---------------------------
San Francisco, California 94111 Toledo, OH 43611
---------------------------
TERMS AND CONDITIONS OF LEASE
The undersigned Lessee hereby requests Lessor to purchase the personal property
described in any Equipment Schedule hereunder (herein called "Equipment") from
supplier listed in any Equipment Schedule hereunder (herein called "Vendor"
and/or "Manufacturer", as applicable) and to lease the Equipment to Lessee on
the terms and conditions of the lease set forth below.
Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the
Equipment upon the following terms and conditions:
1. NO WARRANTIES BY LESSOR. Lessee has selected the Equipment and may have
entered into certain purchase, licensing, or maintenance agreements with the
Vendor and/or Manufacturer (herein referred to as an "Acquisition Agreement")
covering the Equipment as further described in Paragraph 26 hereof. If Lessee
has entered into any Acquisition Agreement, each agreement shall provide for
certain rights and obligations of the parties thereto with respect to the
Equipment, and Lessee shall perform all of the obligations set forth in each
Acquisition Agreement as if this lease did not exist. LESSOR MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING THE CONDITION OF THE
EQUIPMENT, ITS MERCHANTABILITY OR ITS FITNESS FOR ANY PARTICULAR PURPOSE, AND,
AS TO LESSOR, LESSEE LEASES THE EQUIPMENT "AS IS." LESSOR SHALL HAVE NO
LIABILITY FOR ANY LOSS, DAMAGE OR EXPENSE OF ANY KIND WHATSOEVER RELATING
THERETO, INCLUDING WITHOUT LIMITATION ANY SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OF ANY CHARACTER.
2. CLAIMS AGAINST VENDOR AND/OR MANUFACTURER. If the Equipment is not properly
installed, does not operate as represented or warranted by Vendor and/or
Manufacturer, or is unsatisfactory for any reason, Lessee shall make any claim
on account thereof solely against Vendor and/or Manufacturer pursuant to the
Acquisition Agreement, if any, and shall, nevertheless, pay Lessor all rent
payable under this lease. All warranties from Vendor and/or Manufacturer are, to
the extent they are assignable, hereby assigned to Lessee for the term of the
lease or until an Event of Default occurs hereunder, for Lessee's exercise at
Lessee's expense. Lessee may directly inquire with Vendor and/or Manufacturer to
receive an accurate and complete statement of such warranties, including any
disclaimers or limitations of such warranties or of any remedies with, respect
thereto.
3. VENDOR NOT AN AGENT. Lessee understands and agrees that neither Vendor, nor
any sales representative or other agent of Vendor, is an agent of Lessor. Sales
representatives or agents of Vendor, and persons that are not employed by Lessor
(including brokers and agents) are not authorized to waive or after any term or
condition of this lease, and no representation as to the Equipment or any other
matter by Vendor or any other person that is not employed by Lessor (including
brokers and agents) shall in any way affect Lessee's duty to pay the rent and
perform its other obligations as set forth in this lease.
4. NON-CANCELLABLE LEASE. This lease and any Equipment Schedule hereto cannot be
cancelled or terminated except as expressly provided herein. Lessee agrees that
its obligation to pay all rent and other sums payable hereunder and the rights
of Lessor in and to such rent are absolute and unconditional and are not subject
to any abatement, reduction, setoff, defense, counterclaim or recoupment due or
alleged to be due to, or by reason of, any past, present or future claims which
Lessee may have against Lessor, any assignee, any Manufacturer or Vendor, or
against any person for any reason whatsoever.
5. ORDERING EQUIPMENT. Lessee shall arrange for delivery of the Equipment so
that it can be accepted in accordance with Paragraph 6 hereof within 90 days
after the date on which Lessor accepts Lessee's offer to enter into this lease
with respect to any Equipment Schedule or by such other date as may be set forth
in an Equipment Schedule or Commitment Letter issued by Lessor as the Commitment
Expiration Date. Unless otherwise specified on the Equipment Schedule, Lessee
shall be responsible for all transportation, packing, installation, testing and
other charges in connection with the delivery, installation and use of the
Equipment. Lessee hereby authorizes Lessor to insert in any Equipment Schedule
hereunder the serial numbers and other identification data of Equipment when
determined by Lessor.
6. ACCEPTANCE. Lessee acknowledges that for purposes of receiving or accepting
the Equipment from Vendor, Lessee is acting on Lessors behalf. Upon delivery of
the Equipment to Lessee and Lessee's inspection thereof, Lessee shall furnish
Lessor a written statement (a) acknowledging receipt of the Equipment in good
condition and repair and (b) accepting it as satisfactory in all respects for
the purposes of this lease (the "Certificate of Acceptance"). The date of
receipt and acceptance of the Equipment covered by an Equipment Schedule (or any
later date that Lessor chooses) shall be the Rent Commencement Date therefor.
Lessor is authorized to fill in on any Equipment Schedule hereunder the Rent
Commencement Date in accordance with the foregoing.
7. TERMINATION BY LESSOR. If, by the Commitment Expiration Date, the Equipment
described in any Equipment Schedule has not been delivered to Lessee and
accepted by Lessee as provided in Paragraph 6 hereof, or if other conditions of
Lessor's Commitment Letter, if any, have not been met, then Lessor may, at its
option, terminate this lease and its obligations hereunder with respect to such
Equipment Schedule at any time after the expiration of such 90 days or any date
after the Commitment Expiration Date, as applicable. Lessor shall give Lessee
written notice whether or not it elects to exercise such option within 10 days
after Lessor's receipt of Lessee's written request for such notice.
8. TERM. The term of this lease commences upon the Rent Commencement Date, as
provided in Paragraph 9 below. The term shall continue until all of Lessee's
obligations are fulfilled hereunder. The Initial Term with respect to any
Equipment Schedule begins on the Rent Commencement Date for such Equipment
Schedule (as defined in Paragraph 6) and expires after the later of (i) the
number of periods for which the rent payments are due, or (ii) the date Lessee
fulfills all Lessee's obligations hereunder.
9. RENTAL. Lessee shall pay the rent payments as stated on each Equipment
Schedule, the first of which shall be due on the Rent Commencement Date for said
Equipment Schedule, and subsequent payments shall be due on the same day of each
calendar period as indicated on the Equipment Schedule for the balance of the
Initial Term. Rent payments shall be due whether or not Lessee has received any
notice that such payments are due. All rent payments shall be paid to Lessor at
its address set forth on the Equipment Schedule or as otherwise directed by
Lessor in writing.
10. RENEWAL. If no default shall have occurred and be continuing, Lessee shall
be entitled to renew the lease with respect to all, but not less than all, of
the Equipment covered by an Equipment Schedule for a minimum 12 month period at
an amount equal to the fair market rental value thereof, in use and operational,
in the condition required by the lease, payable on a periodic basis, as mutually
agreed by Lessor and Lessee ("Renewal Rent"). Lessee must give Lessor written
notice of its intention to exercise said option, which notice must be received
by Lessor at least 90 days before expiration of the Initial Term. The first
installment of the Renewal Rent shall be due at expiration of the Initial Term
of the lease. Should Lessee fail to comply with the provisions described above
covering Renewal, upon expiration of the Initial Term, the term of the
<PAGE> 2
lease shall be automatically extended for a term of 3 months. Thereafter, the
term of the lease will be extended for subsequent full month periods, on a month
to month basis, until Lessee has given at least 90 days written notice
terminating the lease. Such termination will take effect upon completion of all
Lessee's obligations under the lease (including payment of all periodic rental
payments due during such 90 day period, as provided in Paragraph 9 of the
lease). At any time after the expiration of the Initial Term, if the lease has
been automatically extended as set forth herein, Lessor reserves the right to
terminate the lease by 30 days written notice to Lessee.
11. LOCATION; INSPECTION; LABELS. The Equipment shall be delivered to and shall
not be removed without Lessor's prior written consent from the "Equipment
Location" shown on the related Equipment Schedule, or if none is specified.
Lessee's billing address shown on the Equipment Schedule. Lessor shall have the
right to inspect the Equipment at any reasonable time. If Lessor supplies Lessee
with labels stating that the Equipment is owned by Lessor, Lessee shall affix
such labels to and keep them in a prominent place on the Equipment.
12. REPAIRS; USE; ALTERATIONS. Lessee, at its own cost and expense, shall keep
the Equipment in good repair and working order, in the same condition as when
delivered to Lessee, reasonable wear and tear excepted, and in accordance with
the manufacturers recommended specifications; shall use the Equipment lawfully;
shall not alter the Equipment without Lessor's prior written consent; shall use
the Equipment in compliance with any existing Manufacturer's service and
warranty requirements and any insurance policies applicable to the Equipment and
shall furnish all parts and servicing required therefor. All parts, repairs,
additions, alterations and attachments placed on or incorporated into the
Equipment which cannot be removed without damage to the Equipment shall
immediately become part of the Equipment and shall be the property of the
Lessor. Lessee will obtain and maintain all permits, licenses and registrations
necessary to lawfully operate the facility where the Equipment is located.
Lessee shall comply with all applicable environmental and industrial hygiene
laws, rules and regulations (including but not limited to federal, state, and
local environmental protection, occupational, health and safety or similar laws,
ordinances and restrictions). Lessee shall, not later than 5 days after the
occurrence of any event, provide Lessor with copies of any report of such event
that is required to be filed with governmental agencies regulating environmental
claims. Lessee shall immediately notify Lessor in writing of any existing,
pending or threatened investigation, inquiry, claim or action by any
governmental authority in connection with any law, rule or regulation relating
to industrial hygiene or environmental conditions that could affect the
Equipment.
13. MAINTENANCE. If the Equipment is such that Lessee is not normally capable of
maintaining it, Lessee, at its expense, shall enter into and maintain in full
force and effect throughout the Initial Term, and any renewal term, Vendor
and/or Manufacturer's standard maintenance contract, and shall comply with ail
its obligations thereunder. An alternate source of maintenance may be used with
Lessor's prior written consent. Such consent shall be granted if, in Lessor's
reasonable opinion, the Equipment will be maintained in an equivalent state of
good repair, condition and working order.
14. SURRENDER. Provided that Lessee does not exercise the purchase option as set
forth in Paragraph 28 hereof, upon the expiration of the Initial Term, or any
renewal term, or upon demand by Lessor made pursuant to Paragraph 22 of the
lease, Lessee, at its expense, shall return all, but not less than all, of the
Equipment by delivering it to such place or on board such carrier, packed for
shipping, as Lessor may specify. Lessee agrees that the Equipment, when
returned, shall be in the same condition as when delivered to Lessee, reasonable
wear and tear excepted. and in a condition which will permit Lessor to be
eligible for Manufacturer's standard maintenance contract without incurring any
expense to repair or rehabilitate such Equipment. Lessee shall be liable for
reasonable and necessary expenses to place the Equipment in such condition.
Lessee shall remain liable for the condition of the Equipment until it is
received and accepted at the destination designated by Lessor as set forth
above. If any items of Equipment are missing or damaged when returned, such
occurrence shall be treated as an event of Loss or Damage with respect to such
missing or damaged items and shall be subject to the terms specified in
Paragraph 15 below. Lessee shall provide Lessor with a Letter of Maintainability
from the Manufacturer of the Equipment, which letter shall state that the
Equipment will be eligible for the Manufacturer's standard maintenance contract
when sold or leased to a third party. Lessee shall give Lessor prior written
notice that it is returning the Equipment as provided above, and such notice
must be received by Lessor at least 90 days prior to such return. Should Lessee
fail to comply with the provisions described above covering surrender, upon
expiration of the Initial Term, the term of the lease shall be automatically
extended for a term of 3 months. Thereafter, the term of the lease will be
extended for subsequent full month periods, on a month to month basis, until
Lessee has given at least 90 days written notice terminating the lease. Such
termination will take effect upon completion of all Lessee's obligations under
the lease (including payment of all periodic rental payments due during such 90
day period. as provided in Paragraph 9 of the lease).
15. LOSS OR DAMAGE. Lessee shall bear the entire risk of loss, theft,
destruction of or damage to the Equipment or any item thereof (herein "Loss or
Damage") from any cause whatsoever. No Loss or Damage shall relieve Lessee of
the obligation to pay rent or of any other obligation under this lease. In the
event of Loss or Damage, Lessee, at the option of Lessor, shall: (a) place the
same in good condition and repair; (b) replace the same with like equipment
acceptable to Lessor in good condition and repair with clear title thereto in
Lessor: or (c) pay to Lessor the total of the following amounts: (i) the total
rent and other amounts due and owing at the time of such payment, plus (ii) an
amount calculated by Lessor which is the present value at 5% per annum simple
interest discount of all rent and other amounts payable by Lessee with respect
to said item from date of such payment to date of expiration of its Initial
Term, plus (iii) the "reversionary value" of the Equipment, which shall be
determined by Lessor as the total cost of the Equipment less 60% of the total
rent (net of sales/use taxes, if any) required to be paid pursuant to Paragraph
9. Upon Lessor's receipt of such payment, Lessee and/or Lessee's insurer shall
be entitled to Lessor's interest in said item, for salvage purposes, in its then
condition and location, "as-is", without any warranty, express or implied.
16. INSURANCE. Lessee shall provide, maintain and pay for (a) all risk property
insurance against the loss or theft of or damage to the Equipment, for the full
replacement value thereof, naming Lessor as a loss payee, and (b) commercial
general liability insurance (and if Lessee is a doctor, hospital or other health
care provider, medical malpractice insurance). All such policies shall name
Lessor as an additional insured and shall have combined single limits in amounts
acceptable to Lessor. All such insurance policies shall be endorsed to be
primary and non-contributory to any policies maintained by Lessor. In addition,
Lessee shall cause Lessor to be named as an additional insured on any excess or
umbrella policies purchased by Lessee. A copy of each paid-up policy evidencing
such insurance (appropriately authenticated by the insurer) or a certificate of
the insurer providing such coverage proving that such policies have been issued,
providing the coverage required hereunder shall be delivered to Lessor prior to
the Rent Commencement Date. All insurance shall be placed with companies
satisfactory to Lessor and shall contain the insurers agreement to give 30 days
written notice to Lessor before cancellation or any material change of any
policy of insurance.
17. TAXES. Lessee shall reimburse to Lessor (or pay directly if, but only if,
instructed by Lessor) all charges and taxes (local, state and federal) which may
now or hereafter be imposed or levied upon the sale, purchase, ownership,
leasing, possession or use of the Equipment, excluding, however, all income
taxes levied on (a) any rental payments made to Lessor hereunder, (b) any
payment made to Lessor in connection with Loss or Damage to the Equipment under
Paragraph 15 hereof, or (c) any payment made to Lessor in connection with
Lessee's exercise of its purchase option under Paragraph 28 hereof.
18. LESSOR'S PAYMENT. If Lessee fails to provide or maintain said insurance, to
pay said taxes, charges and fees, or to discharge any levies, liens and
encumbrances created by Lessee, Lessor shall have the light, but shall not be
obligated, to obtain such insurance, pay such taxes, charges and fees, or effect
such discharge. In that event, Lessee shall remit to Lessor the cost thereof
with the next rent payment.
19. INDEMNITY. (a) GENERAL INDEMNITY. Lessee shall indemnity Lessor against and
hold Lessor harmless from any and all claims, actions, damages, costs, expenses
including reasonable attorneys' fees, obligations, liabilities and liens
(including any of the foregoing arising or imposed under the doctrines of
"strict liability" or "product liability" and including without limitation the
cost of any fines, remedial action, damage to the environment and cleanup and
the fees and costs of consultants and experts), arising out of the manufacture,
purchase, lease, ownership, possession, operation, condition, return or use Of
the Equipment, or by operation of law, excluding however, any of the foregoing
resulting from the sole negligence or willful misconduct of Lessor. Lessee
agrees that upon written notice by Lessor of the assertion of such a claim,
action, damage, obligation, liability or lien, Lessee shall assume full
responsibility for the defense thereof. Lessee's choice of counsel shall be
mutually acceptable to both Lessee and Lessor. This indemnity also extends to
any environmental claims arising out of or relating to prior acts or omissions
of any party whatsoever. The provisions of this paragraph shall survive
termination of this lease with respect to events occurring prior to such
termination.
(b) TAX INDEMNITY. Lessee acknowledges that Lessor shall be entitled to all tax
benefits of ownership with respect to the Equipment (the "Tax Benefits").
including but not limited to, (i) the accelerated cost recovery deductions
determined in accordance with Section 168(b)(1) of the Internal Revenue Code of
1986 for the Equipment based on the original cost of the Equipment to Lessor
(ii) deductions for interest on any indebtedness incurred by Lessor to finance
the Equipment and (iii) sourcing of income and losses attributable to this lease
to the United States. Lessee represents that the Equipment shall be depreciable
for Federal tax purposes utilizing the MACRS Recovery Period as set forth in
the Equipment Schedule, with such depreciation commencing
<PAGE> 3
as of the date of Equipment acceptance by Lessee as set forth on the Certificate
of Acceptance. Lessee agrees to take no action inconsistent with the foregoing
or any action which would result in the loss, disallowance or unavailability to
Lessor of all or any part of the Tax Benefits. Lessee hereby indemnities and
holds harmless Lessor and its assigns from and against (i) the loss,
disallowance, unavailability or recapture of all or any part of the Tax Benefits
resulting from any action, statement, misrepresentation or breach of warranty or
covenant by Lessee of any nature whatsoever including but not limited to the
breach of any representations, warranties or covenants contained in this
paragraph, plus (ii) all interest, penalties, fines or additions to tax
resulting from such loss, disallowance, unavailability or recapture, plus (iii)
all taxes required to be paid by Lessor upon receipt of the indemnity set forth
in this paragraph. Any payments made by Lessee to reimburse Lessor for lost Tax
Benefits shall be calculated (i) on the assumption that Lessor is subject to the
maximum Federal Corporate Income Tax with respect to each year and that all Tax
Benefits are currently utilized, and (ii) without regard to whether Lessor or
any members of a consolidated group of which Lessor is also a member is then
subject to any increase in tax as a result of the loss of Tax Benefits. For the
purposes of this paragraph, "Lessor" includes for all tax purposes the
consolidated taxpayer group of which Lessor is a part.
(c) PAYMENT. The amounts payable pursuant to this Paragraph 19 shall be payable
upon demand of Lessor, accompanied by a statement describing in reasonable
detail such claim, action, damage, cost, expense, fee, obligation, liability,
lien or tax and setting forth the computation of the amount so payable, which
computation shall be binding and conclusive upon Lessee, absent manifest error.
The indemnities and assumptions of liabilities and obligations contained in this
Paragraph 19 shall continue in full force and effect notwithstanding the
expiration or other termination of this Lease.
20. ASSIGNMENT. Without Lessor's prior written consent, Lessee shall not assign,
transfer, pledge, hypothecate or otherwise dispose of this lease, the Equipment,
or any interest therein. Lessee's interest in this lease may not be assigned or
transferred by operation of law without Lessor's prior written consent, which
will not be unreasonably withheld. Without Lessor's prior written consent,
Lessee shall not sublet or lend the Equipment or permit it to be used by anyone
other than Lessee or Lessee's employees. Lessor may assign this lease in whole
or in part without notice to Lessee. If Lessee is given notice of such
assignment it agrees to acknowledge receipt thereof in writing. Each such
assignee shall have all of the rights, but none of the obligations, of Lessor
under this lease. Lessee shall not assert against assignee any defense,
counterclaim or offset that Lessee may have against Lessor. Notwithstanding any
such assignment, Lessor warrants that Lessee shall quietly enjoy use of the
Equipment subject to the terms and conditions of this lease so long as Lessee is
not in default hereunder. Subject to the foregoing, this lease inures to the
benefit of and is binding upon the successors and assigns of the parties hereto.
21. DELINQUENT PAYMENTS. (a) Service Charge. Since it would be impractical or
extremely difficult to fix Lessor's actual damages for collecting and accounting
for a late payment, if any payment to Lessor required herein (including, but not
limited to, rental, renewal, tax, purchase and other amounts) is not paid on or
before its due date, Lessee shall pay to Lessor an amount equal to 5% of any
such late payment. (b) Interest. Lessee shall also pay interest on any such late
payment from the due date thereof until the date paid at the lesser of 18% per
annum or the maximum rate allowed by law.
22. DEFAULT; REMEDIES. Any of the following shall constitute an Event of
Default: If a) Lessee fails to pay when due any rent or other amount required
herein to be paid by Lessee, or b) Lessee makes an assignment for the benefit of
creditors, whether voluntary or involuntary, or c) a petition is filed by or
against Lessee under any bankruptcy, insolvency or similar legislation, or d)
Lessee violates or fails to perform any provision of either this lease or any
Acquisition Agreement, or violates or fails to perform any covenant or
representation made by Lessee herein, or e) Lessee makes a bulk transfer of
furniture, furnishings, fixtures or other equipment or inventory, or f) Lessee
ceases doing business as a going concern or there is a change in the legal
structure of ownership of Lessee, or a consolidation or merger of Lessee into or
with another entity, which results, in the opinion of Lessor, in a material
adverse change in Lessee's ability to perform its obligations under the lease,
or g) any representation or warranty made by Lessee in this lease or in any
other document or agreement furnished by Lessee to Lessor shall prove to have
been false or misleading in any material respect when made or when deemed to
have been made. An Event of Default with respect to any Equipment Schedule shall
constitute an Event of Default for all Equipment Schedules. Lessee shall
promptly notify Lessor of the occurrence of any Event of Default.
If an Event of Default occurs, Lessor shall have the right to exercise any
one or more of the following remedies in order to protect the interests and
reasonably expected profits and bargains of Lessor: a) Lessor may terminate this
lease with respect to all or any part of the Equipment, b) Lessor may recover
from Lessee all rent and other amounts then due and as they shall thereafter
become due hereunder, c) Lessor may take possession of any or all Items of
Equipment, wherever the same may be located, without demand or notice, without
any court order or other process of law and without liability to Lessee for any
damages occasioned by such taking of possession, and any such taking of
possession shall not constitute a termination of this lease, d) Lessor may
recover from Lessee, with respect to any and all items of Equipment, and with or
without repossessing the Equipment the Sum of (1) the total amount due and owing
to Lessor at the time of such default, plus (2) an amount calculated by Lessor
which is the present value at 5% per annum simple interest discount of all rent
and other amounts payable by Lessee with respect to said item(s) from date of
such payment to date of expiration of its Initial Term, plus (3) the
"reversionary value" of the Equipment, which shall be determined by Lessor as
the total cost of the Equipment less 60% of the total rent (net of sales/use
taxes, if any) required to be paid pursuant to Paragraph 9; and which the
parties agree is a reasonable estimate of such value; and upon the payment of
all amounts described in clauses (1), (2) and (3) above, Lessee will become
entitled to the Equipment AS IS, WHERE IS, without warranty whatsoever;
provided, however, that it Lessor has repossessed or accepted the surrender of
the Equipment, Lessor shall sell, lease or otherwise dispose of the Equipment
in a commercially reasonable manner, with or without notice and on public or
private bid, and apply the net proceeds thereof (after deducting all expenses,
including attorneys' fees incurred in connection therewith), to the sum of (1),
(2) and (3) above, and e) Lessor may pursue any other remedy available at law or
in equity, including but not limited to seeking damages or specific performance
and/or obtaining an injunction.
No right or remedy herein conferred upon or reserved to Lessor is exclusive
of any right or remedy herein or by law or equity provided or permitted; but
each shall be cumulative of every other right or remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise, and may be
enforced concurrently therewith or from time to time, but Lessor shall not be
entitled to recover a greater amount in damages than Lessor could have gained by
receipt of Lessee's full, timely and complete performance of its obligations
pursuant to the terms of this lease plus accrued delinquent payments under
Paragraph 21.
23. LESSOR'S EXPENSE. Lessee shall pay Lessor all costs and expenses, including
reasonable attorneys' fees and the fees of collection agencies, incurred by
Lessor in enforcing any of the terms, conditions, or provisions hereof or in
protecting Lessor's rights herein. Lessee's obligation hereunder includes all
such costs and expenses expended by Lessor (a) prior to filing of an action, (b)
in connection with an action which is dismissed, and (c) in the enforcement of
any judgment. Lessee's obligation to pay Lessor's attorneys' fees incurred in
enforcing any judgment is a separate obligation of Lessee, severable from
Lessee's other obligations hereunder, which obligation will survive such
judgment and will not be deemed to have been merged into such judgment.
24. OWNERSHIP; PERSONAL PROPERTY. The Equipment shall at all times remain the
property of Lessor and Lessee shall have no right, title or interest therein or
thereto except as expressly set forth in this lease and the Equipment shall at
all times be and remain personal property notwithstanding that the Equipment or
any part thereof may now be, or hereafter become, in any manner, affixed or
attached to real property or any improvements thereon.
25. NOTICES. Service of all notices under this lease shall be sufficient if
given personally or mailed to the respective party at its address set forth on
any Equipment Schedule, or at such address as either party may provide in
writing from time to time. Any such notice mailed to said address shall be
effective when deposited in the United States mail, duly addressed and with
postage prepaid.
26. ACQUISITION AGREEMENTS. If the Equipment is subject to any Acquisition
Agreement, Lessee, as part of this lease, transfers and assigns to Lessor all of
its rights, but none of its obligations (except for Lessee's obligation to pay
for the Equipment conditioned upon Lessee's acceptance in accordance with
Paragraph 6), in and to the Acquisition Agreement. including but not limited to
the right to take title to the Equipment. Lessee shall indemnity and hold Lessor
harmless in accordance with Paragraph 19 from any liability resulting from any
Acquisition Agreement as well as liabilities resulting from any Acquisition
Agreement Lessor is required to enter into on behalf of Lessee or with Lessee
for purposes of this lease.
27. UPGRADES. Any existing lease between Lessor and Lessee subject to an
"upgrade" program shall continue in full force and effect and shall be kept free
of default by Lessee (even if the equipment covered by the existing lease is
sold, traded-in, etc.) until any such existing lease is cancelled by Lessor
when, if applicable, the new Equipment is accepted by Lessee for all purposes of
this lease.
28. PURCHASE OPTION. If no default shall have occurred and be continuing, Lessee
shall be entitled, at its option upon written notice to Lessor, which notice
must be received by Lessor at least 90 days prior to the end of either the
Initial Term or any renewal term of any Equipment Schedule, to purchase all, but
not less than all, of the Equipment covered by such Equipment
<PAGE> 4
Schedule from Lessor at the end of the Initial Term or any renewal term for such
Equipment Schedule at a purchase price equal to the then fair market value of
the Equipment in use and operational, in the condition required by the lease, as
mutually agreed by Lessor and Lessee. On a date which is no later than the
expiration date of the Initial Term or any renewal term, as applicable, Lessee
shall pay to Lessor the purchase price for the Equipment covered by such
Equipment Schedule (plus any taxes levied thereon) and Lessor shall sell the
Equipment "as-is where-is" without any warranties expressed or implied.
29. RELATED EQUIPMENT SCHEDULES. In the event that any Equipment Schedule
hereunder shall include Equipment that may become attached to, affixed to, or
used in connection with Equipment covered under another Equipment Schedule
hereunder ("Related Equipment Schedule"), Lessee acknowledges the following: (a)
if Lessee elects to exercise a purchase option or renewal option under any
Equipment Schedule, if provided; or (b) if Lessee elects to return the Equipment
under any Equipment Schedule as described in Paragraph 14, then Lessor, at its
discretion, may require the similar disposition of all Related Equipment
Schedules as provided for by this lease.
30. MISCELLANEOUS. This instrument and any Commitment Letter issued by Lessor
and any Equipment Schedule hereunder constitutes the entire agreement between
Lessor and Lessee, and shall not be amended, altered or changed except by a
written agreement signed by the parties hereto, and in the case of Lessor, such
agreement shall not be valid unless executed by Lessor at Lessor's home office.
Unless specified otherwise, in the event such written agreement is attached to
and made a part of an Equipment Schedule, the terms and conditions of said
written agreement shall apply only to said Equipment Schedule and shall not
apply to any other Equipment Schedule attached to and made a part of this lease.
In the event Lessee issues a purchase order to Lessor covering Equipment to be
leased hereunder, it is agreed that such purchase order is issued for purposes
of authorization and Lessee's internal use only, and none of its terms and
conditions shall modify the terms and conditions of this lease and/or related
documentation, or affect Lessor's responsibility to Lessee as defined in this
lease. An executed Equipment Schedule that incorporates by reference the terms
of this Master Lease Agreement, marked "Original," shall be the original of the
lease for the Equipment described therein for all purposes. All other executed
counterparts of the lease shall be marked "Duplicate." To the extent the lease
constitutes chattel paper, as such term is defined in the Uniform Commercial
Code of the applicable jurisdiction, no security interest in the lease may be
created through the transfer of possession of any counterpart other than the
Original of the lease. Lessor reserves the right to charge Lessee fees for its
provision of additional administrative services related to the lease requested
by Lessee. Lessee shall provide Lessor with such corporate resolutions, opinions
of counsel, financial statements, and other documents (including documents for
filing or recording) as Lessor may request from time to time. LESSEE REPRESENTS
AND WARRANTS THAT ALL CREDIT AND FINANCIAL INFORMATION SUBMITTED TO LESSOR
HEREWITH OR AT ANY OTHER TIME IS TRUE AND CORRECT. LESSEE HEREBY APPOINTS LESSOR
OR ITS ASSIGNEE ITS TRUE AND LAWFUL ATTORNEY IN FACT TO EXECUTE ON BEHALF OF
LESSEE ALL UNIFORM COMMERCIAL CODE FINANCING STATEMENTS OR OTHER DOCUMENTS
WHICH, IN LESSOR'S DETERMINATION, ARE NECESSARY TO SECURE LESSOR'S INTEREST IN
SAID EQUIPMENT. The filing of UCC Financing Statements is precautionary and
shall not be evidence that the lease is intended as security. If for any reason
this agreement is determined not to be a lease, Lessee hereby grants Lessor a
security interest in the lease, the Equipment or collateral pertaining thereto
and the proceeds thereof, including re-lease, sale or disposition of the
Equipment or other collateral. If more than one Lessee is named in this lease,
the liability of each shall be joint and several. Time is of the essence with
respect to this lease. Lessee represents and warrants that the Equipment is
being leased hereunder for business purposes. The descriptive headings which are
used in this lease are for convenience of the parties only and shall not affect
the meaning of any provision of the lease. Any failure of the Lessor to require
strict performance by the Lessee or any waiver by Lessor of any provision herein
shall not be construed as a consent or waiver of any other breach of the same or
of any other provision. This agreement shall be governed by the laws of the
state of California (without giving effect to principles of conflicts of law
thereof).
31. LESSEE'S REPRESENTATIONS; WAIVER OF JURY TRIAL. Lessee represents and
warrants, as of the date of this lease: (a) Lessee is duly organized, validly
existing and in good standing under the laws of the state of its incorporation
or organization, and is duly qualified to do business wherever necessary To
carry on its present business and operations and to own its property; (b) this
lease (and any Equipment Schedule entered into pursuant to this lease) has been
duly authorized by all necessary action on the part of the Lessee, duly executed
and delivered by authorized officers or agents of Lessee, does not require any
further shareholder or partner approval, does not require the approval of, or
the giving notice to, any federal, state, local or foreign governmental
authority, does not contravene any law binding on Lessee or contravene any
certificate or articles of incorporation or by-laws or partnership certificate
or agreement, or any agreement, indenture or other instruments to which Lessee
is a party or by which it or any of its assets or property may be bound; (c)
this lease (and any Equipment Schedule entered into pursuant to this lease)
constitutes the legal, valid and binding obligation of Lessee and is enforceable
in accordance with its terms; (d) all credit and financial information, and all
other information submitted to Lessor at any time is true and correct, and there
does not exist any pending or threatened action or proceeding before any court
or administrative agency which might materially adversely affect Lessee's
financial condition or operations; (e) Lessee agrees to furnish to Lessor (i) as
soon as available, and in any event within 120 days after the last day of each
fiscal year of Lessee, a copy of the financial statements of Lessee as of the
end of such fiscal year, certified by an independent certified public accounting
firm; (ii) at any time if requested by Lessor, a copy of quarterly financial
statements certified by the principal financial officer of Lessee; and (iii)
such additional information concerning Lessee as Lessor may reasonably request.
LESSEE AND LESSOR HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING
OUT OF THIS LEASE OR ANY OTHER AGREEMENT EXECUTED IN CONNECTION HEREWITH.
32. COMMITMENT FEE REQUIREMENT. Lessee agrees, with respect to each transaction,
to pay the commitment fee specified in Lessor's proposal for such transaction or
in the Equipment Schedule related thereto. This commitment fee is given in
consideration for Lessor's costs and expenses in investigating and appraising
and/or establishing credit for Lessee. This commitment fee shall not be refunded
unless Lessor declines to accept Lessee's offer to enter into the lease. Upon
Lessor's acceptance of Lessee's offer to enter into the lease, unless otherwise
specified in the proposal or Equipment Schedule. the amount shall be applied to
the first period's rent payment. Lessee acknowledges that Lessor's act of
depositing any commitment fee into Lessor's bank account shall not in itself
constitute Lessor's acceptance of Lessee's offer to enter into the lease.
IN WITNESS WHEREOF, the parties have executed this Master Lease Agreement
effective as of the first date it is executed by Lessee below.
<TABLE>
<S> <C> <C> <C>
USL CAPITAL CORPORATION (LESSOR) OTTAWA RIVER STEEL CO. (LESSEE) TITLE DATE
----------------------
BY BY
Name /s/ Sandra Oda X /s/ Joseph Klobuchar, Jr. Vice President 10/31/95
----------------------------------- -------------------------------------------------------------
BY
Title Manager X
----------------------------------- -------------------------------------------------------------
Business Unit BEF (CO-LESSEE) TITLE DATE
--------------------------- ---------------------
HOME OFFICE: 733 FRONT STREET, BY
SAN FRANCISCO, CA 94111 (415) 627-9000 X
-------------------------------------------------------------
Not valid unless executed by Lessor at
Lessor's home office
</TABLE>
89-140 (Rev. 6/94)
<PAGE> 5
[USL CAPITAL LOGO] [FORD LOGO]
EQUIPMENT SCHEDULE/CERTIFICATE OF ACCEPTANCE
EQUIPMENT SCHEDULE TO MASTER LEASE AGREEMENT DATED 10-31-95
--------
<TABLE>
<CAPTION>
LESSOR LESSEE
<S> <C>
USL Capital Corporation Ottawa River Steel Company
733 Front Street 805 Chicago Street
San Francisco, California 94111 Toledo, OH 43611
All terms and conditions of the above referenced Master Lease Agreement are
hereby expressly incorporated into this Equipment Schedule and made a part
hereof as if such terms and conditions were fully set forth herein. By their
execution of the Equipment Schedule, the parties reaffirm all terms and
conditions of the Master Lease Agreement except as they may be modified hereby.
TOTAL COST OF EQUIPMENT TO LESSOR: $900,000.00 EQUIPMENT: AS SET FORTH ON THE EXHIBIT A ATTACHED HERETO.
<S> <C> <C> <C> <C>
# OF RENT INITIAL TERM EQUIPMENT LOCATION (ADDRESS, CITY, STATE, ZIP CODE)
PAYMENTS RENTAL AMOUNT FREQUENCY (MONTHS) 201 Mississippi Street
84 $14,904.00 M 84 Gary, IN 46402
<S> <C>
__ IN CITY LIMITS __ NOT IN CITY LIMITS COUNTY
EQUIPMENT CONTACT
COMMITMENT FEE: $ _____ NAME: Joseph Klobuchar
PHONE: 419-729-3918
VENDOR NAME and ADDRESS
Doolan Industires, Inc.
1223 N. Church Street INVOICING ADDRESS
Moorestown, N.J. 08057
805 Chicago Street
Toledo, OH 43611
VENDOR CONTACT INVOICE CONTACT
NAME: NAME: Joseph Klobuchar
PHONE: PHONE: 419-729-3918
MACRS RECOVERY PERIOD __ YEARS LESSEE REFERENCE NUMBER:
</TABLE>
SPECIAL TERMS: THE TERMS AND CONDITIONS OF THE ABOVE REFERENCED MASTER LEASE
AGREEMENT ARE HEREBY MODIFIED FOR THIS EQUIPMENT SCHEDULE AS FOLLOWS:
Commitment Expiration: November 30, 1995
At the end of the Initial Lease Term, Lesse may purchase the Equipment for
$1.00.
WE CERTIFY THAT THE EQUIPMENT DESCRIBED IN THAT ATTACHED EXHIBIT "A" HAS BEEN
INSTALLED, OPERATES PROPERLY, AND IS, THEREFORE, ACCEPTED FOR PURPOSES OF THE
LEASE.
WE REQUEST THAT LESSOR PAY THE VENDOR FOR THE EQUIPMENT AND WE UNDERSTAND THAT
RENTAL PAYMENTS WILL COMMENCE.
ATTACHMENTS: IN ADDITION TO EXHIBIT A, THE FOLLOWING EXHIBITS ARE ATTACHED
HERETO AND INCORPORATED HEREIN.
Exhibit A
IN WITNESS WHEREOF, the parties have executed this Equipment Schedule effective
as of the first date it is executed by Lessee below.
<TABLE>
<S> <C> <C> <C>
USL CAPITAL CORPORATION (LESSOR) LESSEE SIGNATURE TITLE DATE
BY BY
X X /s/ Joseph Klobuchar, Jr. Vice President 10/31/95
- ---------------------------------------- -------------------------------------------------------------
TITLE BUSINESS UNIT BY
X X
- ---------------------------------------- -------------------------------------------------------------
HOME OFFICE: 733 FRONT STREET, CO-LESSEE SIGNATURE TITLE DATE
SAN FRANCISCO, CA 94111 (415) BY
Not valid unless executed by Lessor at X
Lessor's home office -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
INTERNAL USE COMMITMENT DATE RENT COMMENCEMENT DATE BILLING ACCOUNT NO. LEASE NO.
ONLY
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
</TABLE>
LMS-147 Rev. (06/94) ST-1
<PAGE> 6
[USL CAPITAL LOGO] [FORD LOGO]
EXHIBIT A
EQUIPMENT DESCRIPTION
TO EQUIPMENT SCHEDULE DATED 10/31/95
--------
<TABLE>
<CAPTION>
DESCRIPTION (include Quantity, Model #, Serial #) COST
<S> <C>
Cincinnati 72" x 1/4" cap. slitting line including but not limited to: $900,000.00
Cincinnati Rail Mounted Coil Car:
Cincinnati Approx. 50,000 LB. Overhung Mandrel Cincinnati coil
straightener, Peller and Pinch Roll Type Uncoiler.
Cincinnati 72" Slitting Stand.
7' Dia. Arbor, 75 HP Drive.
Adjustable Pinch Roll Feed.
Terminal Equipment Scrap Winder.
Cincinnati Approx. 50.000 LB. Overhung Mandrel Uncoiler, with Rail Mounted
Coil Car.
Loopco 4-Arm Turnstyle and Hydraulic Upender.
Signode Model MZOSUM342 Semi Automatic Banding Machine, Serial NO. 25687,
Work Platform, Assorted Dies and Controls.
SUBTOTAL (THIS PAGE) $900,000.00
-----------
TOTAL COST $900,000.00
-----------
LESSEE INITIALS X JK
-----------
</TABLE>
PAGE 1 OF 1
- -
LMS-142 Rev. (0/94)
<PAGE> 7
AMENDMENT NO. 1
TO
EQUIPMENT SCHEDULE DATED OCTOBER 31, 1995
TO MASTER LEASE AGREEMENT ("LEASE")
DATED OCTOBER 31,1995
BETWEEN USL CAPITAL CORPORATION ("LESSOR")
AND OTTAWA RIVER STEEL COMPANY ("LESSEE")
This Amendment No. 1 amends only the Equipment Schedule dated October 31, 1995,
to the Master Lease Agreement in the following respects, so that the Master
Lease Agreement, and this Equipment Schedule, when taken together, will comprise
a conditional sales agreement, and not a lease transaction.
NOW, THEREFORE, the parties agree as follows:
A. Paragraph 10 is deleted.
B. Paragraph 14. Surrender, In line seventeen, delete "Lessee shall provide"
through "leased to a third party".
C. Paragraph 15. Loss or Damage; In line thirteen delete "(iii) the
reversionary value......" in its entirety.
D. Pursuant to Paragraph 17, Lessor directs Lessee, after Lessor's funding of
the transaction, to make all payments of taxes with respect to the
Equipment or this transaction (except tax Payments based upon Lessor's net
income).
E. Paragraph 19 (b) Tax Indemnity, is deleted from the Master Lease Agreement.
F. Paragraph 22. Default; Remedies; In the second Paragraph, line seventeen,
delete "(3) the reversionary value......" in its entirety.
G. "24. OWNERSHIP; PERSONAL PROPERTY. The Equipment shall at all times remain
the property of Lessee, subject to the obligations of Lessee as expressly
set forth in notwithstanding that the Equipment or any part thereof may now
be, or hereafter become, in any manner, affixed or attached to real
property or any improvements thereon."
H. Paragraph 28, Purchase Option, shall be replaced with the following:
"28. PURCHASE OPTION. If no default shall have occurred and be continuing,
Lessee shall be entitled, at its option to purchase all, but not less than
all, of the Equipment covered by such Equipment Schedule from Lessor at the
end of the Initial Term for a purchase price of $1.00. Lessor shall sell
the Equipment "as-is where-is" without any warranties expressed or
implied."
1 of 2
<PAGE> 8
I. In all other respects the terms of the Lease are hereby confirmed.
IN WITNESS WHEREOF, the parties have had their duly authorized signatories
execute this Amendment No. I to Equipment Schedule as of the date written above.
LESSOR: LESSEE:
USL Capital Corporation Ottawa River Steel Company
By: /s/ Sandra Oda By: /s/ Joseph Klobuchar, Jr.
----------------------------------- --------------------------------
Name: Sandra Oda Name: Joseph Klobuchar, Jr.
--------------------------------- ------------------------------
Title: Manager Title: Vice President
-------------------------------- -----------------------------
2 of 2
<PAGE> 1
EXHIBIT 10.18(d)
INDUSTRIAL BUILDING LEASE
LANDLORD:
CENTERPOINT PROPERTIES CORPORATION,
a Maryland corporation
TENANT:
OTTAWA RIVER STEEL CO., INC.
an Ohio corporation
Property Address:
201 Mississippi Street
Gary, Indiana
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
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<S> <C> <C>
I Lease Terms ................................................ 1
Section 1.1 Definitions ................................ 1
Section 1.2 Significance of Basic Lease Provisions ..... 2
Section 1.3 Enumeration of Exhibits .................... 2
II Premises ................................................... 2
Section 2.1 Lease ...................................... 2
III Term ....................................................... 2
Section 3.1 Term ....................................... 2
IV Condition of Demised Premises .............................. 3
Section 4.1 Condition of Premises ...................... 3
V Rent ....................................................... 3
Section 5.1 Base Rent .................................. 3
Section 5.2 Base Rent Adjustment ....................... 4
Section 5.3 Interest and Late Charges on Late Payments . 6
Section 5.4 Prior Occupancy ............................ 6
VI Utilities .................................................. 6
Section 6.1 Utilities .................................. 6
VII Use ........................................................ 7
Section 7.1 Use ........................................ 7
Section 7.2 Prohibited Uses ............................ 7
VIII Maintenance of Premises ................................... 7
Section 8.1 Maintenance ................................ 7
Section 8.2 Governmental Requirements .................. 7
Section 8.3 Tenant's Responsibilities .................. 8
IX Insurance .................................................. 8
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<TABLE>
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Section 9.1 Commercial General Liability and Workers
Compensation Insurance ..................... 8
Section 9.2 Policies ................................... 8
Section 9.3 Landlord's Insurance ....................... 9
Section 9.3 Subrogation ................................ 9
X Damage or Destruction ...................................... 9
Section 10.1 Total Demise ............................... 9
Section 10.2 Partial Demise ............................. 9
XI Liens ...................................................... 10
Section 11.1 Lien Claims ................................ 10
Section 11.2 Landlord's Right to Cure ................... 10
XII Tenant Alterations ........................................ 10
Section 12.1 Alterations ................................ 10
Section 12.2 Ownership of Alterations ................... 11
Section 12.3 Signs ...................................... 11
Section 12.4 Tenant Indemnity ........................... 11
Section 12.5 Environmental Impact ....................... 12
XIII Condemnation ............................................... 12
Section 13.1 Taking: Lease to Terminate ................. 12
Section 13.2 Taking: Lease to Continue .................. 12
XIV Assignment--Subletting by Tenant ........................... 12
Section 14.1 No Assignment, Subletting or Other Transfer 12
Section 14.2 Operation of Law ........................... 13
Section 14.3 Excess Rental .............................. 13
Section 14.4 Merger or Consolidation .................... 13
</TABLE>
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<TABLE>
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Section 14.5. Unpermitted Transaction .................... 13
XV Annual Statements .......................................... 14
Section 15.1. Annual Statements .......................... 14
XVI Indemnity for Litigation ................................... 14
Section 16.1. Indemnity for Litigation ................... 14
XVII Estoppel Certificates ...................................... 14
Section 17.1. Estoppel Certificate ....................... 14
XVIII Inspection of Premises ..................................... 14
Section 18.1. Inspections ................................ 14
Section 18.2. Signs ...................................... 15
XIX Fixtures ................................................... 15
Section 19.1. Building Fixtures .......................... 15
Section 19.2. Tenant's Equipment ......................... 15
Section 19.3. Removal of Tenant's Equipment .............. 15
XX Default .................................................... 15
Section 20.1. Events of Default .......................... 15
Section 20.2. Waivers .................................... 17
Section 20.3. Bankruptcy ................................. 17
XXI Landlord's Performance of Tenant's Covenants ............... 18
Section 21.1. Landlord's Performance of Tenant's Covenants 18
XXII Exercise of Remedies ....................................... 18
Section 22.1. Cumulative Remedies ........................ 18
Section 22.2. No Waiver .................................. 18
Section 22.3. Equitable Relief ........................... 19
</TABLE>
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<TABLE>
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XXIII Subordination to Mortgages ................................. 19
Section 23.1 Subordination .............................. 19
Section 23.2 Mortgage Protection ........................ 19
XXIV Indemnity and Waiver ....................................... 19
Section 24.1 Tenant's Indemnity ......................... 19
Section 24.2 Waiver of Claims ........................... 20
XXV Surrender .................................................. 20
Section 25.1 Condition .................................. 20
Section 25.2 Removal of Tenant's Equipment .............. 20
Section 25.3 Holdover ................................... 21
XXVI Covenant of Quiet Enjoyment ................................ 21
Section 26.1 Covenant of Quiet Enjoyment ................ 21
XXVII No Recording ............................................... 21
Section 27.1. No Recording ............................... 21
XXVIII Notices .................................................... 21
Section 28.1. Notices .................................... 21
XXIX Covenants Run with Land .................................... 22
Section 29.1. Covenants .................................. 22
Section 29.2. Release of Landlord ........................ 22
XXX Environmental Matters ...................................... 22
Section 30.1. Hazardous Materials ........................ 22
Section 30.2. Conduct of Tenant .......................... 23
Section 30.3. Tenant's Environmental Indemnity ........... 24
Section 30.4. Landlord's Right to Enter Premises ......... 24
</TABLE>
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<TABLE>
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XXXI Security Deposit ........................................... 25
Section 31.1. Security Deposit ........................... 25
XXXII Miscellaneous .............................................. 25
Section 32.1. Captions ................................... 25
Section 32.2. Severability ............................... 25
Section 32.3. Applicable Law ............................. 25
Section 32.4. Amendments in Writing ...................... 25
Section 32.5. Relationship of Parties .................... 25
Section 32.6. Brokerage .................................. 26
Section 32.7. No Accord and Satisfaction ................. 26
Section 32.8. Joint Effort ............................... 26
Section 32.9. Waiver of Jury Trial ....................... 26
Section 32.10. Time ....................................... 26
Section 32.11. Landlord's Consent ......................... 26
Section 32.12. No Partnership ............................. 26
Section 32.13. Landlord's Liability ....................... 26
Section 32.14. Guaranty ................................... 26
XXXIII Renewal Option ............................................. 27
Section 33.1. Renewal Option ............................. 27
Section 33.2. "As Is" Condition .......................... 27
Section 33.3. Amendment .................................. 27
Section 33.4. Termination ................................ 27
Section 33.5. No Commissions ............................. 28
XXXIV Right of First Opportunity ................................. 28
</TABLE>
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<PAGE> 7
Property Address:
201 Mississippi Street
Gary, Indiana
INDUSTRIAL BUILDING LEASE
-------------------------
THIS LEASE, made as of this 10TH day of NOVEMBER, 1995 between
CENTERPOINT PROPERTIES CORPORATION, a Maryland corporation ("Landlord") and
OTTAWA RIVER STEEL CO., INC., an Ohio corporation ("Tenant");
ARTICLE I
---------
LEASE TERMS
-----------
SECTION 1.1. DEFINITIONS. In addition to the other terms, which are
elsewhere defined in this Lease, the following terms and phrases, whenever used
in this Lease shall have the meanings set forth in this Subsection, and only
such meanings, unless such meanings are expressly contradicted, limited or
expanded elsewhere herein.
A. SECURITY DEPOSIT: $13,025.00
B. TENANT'S PROPORTION: 5.67% (which is the percentage obtained by
dividing the rentable area of the Premises [59,278 rentable
square feet] by the rentable area of the Building [1,045,070
rentable square feet])
C. INITIAL MONTHLY RENT ADJUSTMENT DEPOSIT: $6,333.51
(i) Initial Tax Deposit: $2,584.07
(ii) Initial Expense Deposit: $3,749.44
D. INITIAL TERM: The initial three (3) year term, commencing as of
the Commencement Date.
E. COMMENCEMENT DATE: NOVEMBER 16, 1995
------------------
F. TERMINATION DATE: NOVEMBER 30, 1998
------------------
G. TERM: The Initial Term as same may be extended or sooner
terminated
H. USE: Warehouse, light manufacturing and office use incidental
thereto, including, without limitation, use as a metal processing
service center and related uses.
I. OPTION TO RENEW: See Article XXXIII below
J. LANDLORD'S MAILING ADDRESS:
c/o 401 North Michigan
Chicago, Illinois 60611
Attn: Robert L. Stovall
<PAGE> 8
K. TENANT'S MAILING ADDRESS:
805 Chicago Street
Toledo, Ohio 43611
Attn: Joseph Klobuchar, Jr.
L. LANDLORD'S BROKER: C. B. Commercial Real Estate
M. TENANT'S BROKER: None
SECTION 12. SIGNIFICANCE OF BASIC LEASE PROVISIONS. Each reference in
this Lease to any of the Basic Lease Terms contained in Section 1.1 of this
Article shall be deemed and construed to incorporate all of the terms provided
under each such Basic Lease Terms.
SECTION 1.3. ENUMERATION OF EXHIBITS. The exhibits in this Section and
attached to this Lease are incorporated in this Lease by this reference and are
to be construed as a part of this Lease.
EXHIBIT "A" - Premises
EXHIBIT "B" . Legal Description
EXHIBIT "C" - Form of Estoppel Certificate
EXHIBIT "D" - Schedule of Tenant's Equipment
EXHIBIT "E" - Approved Hazardous Materials
EXHIBIT "F" - Guaranty of Lease
ARTICLE II
----------
PREMISES
--------
SECTION 2.1. LEASE. Landlord, for and in consideration of the rents
herein reserved and of the covenants and agreements herein contained on the part
of Tenant to be kept, observed and performed, does by these presents, lease to
Tenant, and Tenant hereby leases from Landlord, the demised premises commonly
referred to as Bays 11A and 11B ("Premises"), being depicted in the plan
attached hereto as EXHIBIT "A" in the building ("Building") located on the land
commonly known as 201 Mississippi Street Gary, Indiana and depicted on the site
plan attached hereto as EXHIBIT "B" and by this reference incorporated herein
("Land") (the Land and Building are sometimes collectively the "Project"),
subject to covenants, conditions, agreements, easements, encumbrances and
restrictions affecting the Land and the Improvements thereon. The Premises shall
not be deemed to include the 2338 square foot trailer attached to the Premises
("Trailer") except that the area of the Trailer shall be included in the
calculation of Tenant's proportion.
ARTICLE III
-----------
TERM
----
SECTION 3.1. TERM. The Initial Term of this Lease shall commence on the
Commencement Date and shall end on the Termination Date, unless sooner
terminated as hereinafter set forth. Rent (as hereinafter defined) during the
period between the Commencement Date and the end of the calendar month in which
the Commencement Date occurs ("Extra Days"), shall be calculated pro rata on a
daily basis. If the Landlord shall be unable to give possession of the Premises
on the Commencement Date for any reason the Rent reserved and covenanted to be
paid herein shall not commence until the Premises are available for occupancy by
Tenant. No such
2
<PAGE> 9
failure to give possession on the Commencement Date of the Term hereof shall
subject Landlord to any liability for failure to give possession nor shall same
affect the validity of this Lease or the obligation of the Tenant hereunder,
nor shall the same be construed to extend the Term. At the option of Landlord
to be exercised within thirty (30) days of the delayed delivery of possession to
Tenant, the Lease shall be amended so that the Term shall be extended by the
period of time possession is delayed. If the Premises are ready for occupancy
prior to the Commencement Date and Tenant occupies the Premises prior to said
date, Tenant shall pay proportionate Rent.
ARTICLE IV
----------
CONDITION OF DEMISED PREMISES
-----------------------------
SECTION 4.1 CONDITION OF PREMISES. Tenant agrees to accept the
Premises in an absolutely "as-is" condition, and Tenant acknowledges that
Landlord, its agents, attorneys, representatives and employees have not and do
not make any representations or warranties, express or implied, to Tenant
regarding the Premises or the Project, including, but not limited to: (i) the
zoning of the Premises or the Project; (ii) the condition of any underground,
above ground or surface improvements; (iii) the size, area, use or type of the
Premises or the fitness of the Premises for any intended or particular use;
(iv) the nature of the soil on and underlying the Premises or the Project or
its suitability for development or any other use thereof; (v) any financial
information pertaining to the operation of the Premises or the Project; (vi)
the status of any requirements or obligations imposed, implied or to be
undertaken by the owner or developer of the Premises of the Project pursuant to
any zoning, subdivision, development laws or agreements with any governmental
entities; (vii) the presence or absence of any toxic wastes, hazardous
materials or structural defects in, on or under the Premises or the Project or
any improvements thereon; or (viii) the presence or absence of any rights of any
governmental authority, or of owners of property in the vicinity of the
Premises or the Project, to obtain reimbursement, recapture or special
assessments from any owner of the Premises or the Project for all or a portion
of the cost of any utilities, roads or other improvements heretofore or
hereafter located on or in the vicinity of the Premises or the Project, any and
all such representations and warranties, express or implied, being hereby
expressly waived by Tenant and disclaimed by Landlord. Tenant waives any claim
that may exist for patent and/or latent defects or for mutual or unilateral
mistake of fact. No promise of Landlord to alter, remodel, decorate, clean or
improve the Premises or any portion thereof and no representation respecting
the condition of the Premises or any portion thereof have been made by Landlord
to Tenant.
ARTICLE V
---------
RENT
----
SECTION 5.1. BASE RENT. In consideration of the leasing aforesaid,
Tenant agrees to pay Landlord, without offset or deduction, base rent ("Base
Rent") for the first (1st) Rent Year (as hereinafter defined) at the annual
amount equal to ONE HUNDRED FIFTY-SIX THOUSAND FIVE HUNDRED EIGHTY-FIVE AND
N0/100 ($156,585.00) DOLLARS payable monthly in advance in the amount of
THIRTEEN THOUSAND FORTY EIGHT 75/100 ($13,048.75) DOLLARS. Base Rent shall be
payable to Tenant throughout the Term on the first (1st) day of the month, and
in addition thereto, Tenant shall pay Landlord such charges as are herein
described as "Additional Rent". The term "Rent" when used in this Lease shall
include all Base Rent payable under this Section 5.1., as well as the charges
herein described as Additional Rent. All Rent payable hereunder shall be
payable to Landlord and Landlord's Mailing Address, or as Landlord may
otherwise from time to time designate in writing. On each anniversary of the
Commencement Date of this Lease, Base Rent shall increase to an amount equal to
the lessor of (i) the product of (a) the Base Rent payable by Tenant for the
previous Rent Year TIMES (b) 1.03, or (ii) (a) the Base Rent payable by Tenant
for the previous Rent Year TIMES (b) the percentage that the CPI (hereinafter
defined) has increased from the month of October, 1995 through the last month
of the Rent Year immediately preceding the applicable Rent Year. The term
"Consumer Price Index" and the term "CPI" when used
3
<PAGE> 10
herein means the Consumer Price Index - U.S. City Averages for Urban Wage
Earners and Clerical Workers, All Items (1982-1984 = 100), of the United States
Bureau of Labor Statistics. If the Consumer Price Index shall be substantially
revised (including but not limited to a change from using the 1982-1984
averages as the Base Index of 100) or become unavailable to the public,
Landlord will substitute therefor, a comparable index based upon changes in the
cost of living or purchasing power of the consumer dollar. For purposes of this
Lease, "Rent Year" shall mean each consecutive twelve (12) month period
commencing with the Commencement Date and expiring on the Termination Date
(except the first (1st) Rent Year shall include the Extra Days).
SECTION 5.2. BASE RENT ADJUSTMENT. In addition to the Base Rent
payable by Tenant hereunder, Tenant shall pay to Landlord, as Additional Rent,
the Rent Adjustment described in this Section 5.2 without set off or deduction.
Until such time as Tenant receives the first Adjustment Statement provided for
in clause (iii) of this Section 5.2, Tenant shall, commencing on the
Commencement Date and on the first (1st) day of each and every month
thereafter, make the Initial Monthly Rent Adjustment Deposit specified in
Article 1 hereof.
A. For the purposes of this Lease:
(1) The term "Calendar Year" shall mean each calendar year
or a portion thereof during the Term.
(2) The term "Expenses" shall mean and include all expenses
paid or incurred by Landlord or its beneficiaries for managing, owning,
maintaining, operating, insuring, replacing and repairing the Project,
the land under the Project, appurtenances and personal property used in
conjunction therewith. Expenses shall not include (i) depreciation
charges, (ii) interest and principal payments on mortgages, (iii) ground
rental payments, (iv) real estate brokerage and leasing commissions,
(v) the cost of capital improvements to the Project or any part thereof
except to the extent the same reduces Expenses, (vi) the cost to repair
or restore any damage caused by casualty or eminent domain, (vii) the
cost for alterations or improvements constructed or installed for any other
tenants of the Building, and (viii) fines and penalties unless due to the
failure of Tenant to pay Rent when due or otherwise due to the act or
neglect of Tenant. If the Building is not fully occupied during all or a
portion of any Calendar Year, then Landlord may elect to make an
appropriate adjustment of the Expenses which vary due to occupancy for such
Calendar Year employing sound accounting and management principles, to
determine the amount of Expenses that would have been paid or incurred by
Landlord had the Building been fully occupied and the amount so determined
shall be the amount of Expenses attributable to such Calendar Year.
(3) The term "Rent Adjustments" shall mean all amounts
owed by Tenant as Additional Rent resulting from an increase in Expenses
or Taxes, or both.
(4) The term "Rent Adjustment Deposit" shall mean an amount
equal to Landlord's estimate of Rent Adjustments due for any Calendar Year
made from time to time during the Term.
(5) The term "Taxes" shall mean real estate taxes,
assessments, sewer rents, rates and charges, transit taxes, taxes based
upon the receipt of rent (excluding any late charges or interest on late
payments unless due to the failure of Tenant to pay Rent when due), and any
other federal, state or local governmental charge, general, special,
ordinary or extraordinary, which may now or hereafter be assessed against
the Project or any portion thereof in any Calendar Year during the Term and
any tax in substitution of any of the foregoing, excluding, however, any
income taxes of Landlord; provided, however, in determining the income of
Landlord with respect to any such substituted tax, only the income derived
from the Building shall be included. In case of special taxes or
assessments which may be payable in installments, only the amount of each
installment and interest paid thereon paid during a Calendar year shall be
included in Taxes for that Calendar Year. Taxes shall also include any
personal property taxes
4
<PAGE> 11
(attributable to the year in which paid) imposed upon the furniture,
fixtures, machinery, equipment, apparatus, systems and appurtenances used
in connection with the operation of the Building. Taxes also include
Landlord's reasonable costs and expenses (including reasonable attorney's
fees) in contesting or attempting to reduce any taxes. Taxes shall be
reduced by any recovery or refund received of taxes previously paid by the
Landlord, provided such refund relates to taxes paid during the Term of
this Lease.
B. Tenant shall pay to the Landlord as Additional Rent Tenant's
Proportion of Expenses and Taxes attributable to each Calendar year of the
Term. The amount of Taxes attributable to a Calendar Year shall be the
amount assessed for any such Calendar Year, even though the assessment for
such Taxes may be payable in a different Calendar Year.
C. As soon as reasonable feasible after the expiration of each
Calendar Year, Landlord will furnish Tenant a statement ("Adjustment
Statement") showing the following:
(1) Expenses and Taxes for Calendar Year last ended and the
amount of Expenses and Taxes payable by Tenant for such Calendar Year;
(2) The amount of Rent Adjustments due Landlord for the
Calendar Year last ended, less credits for Rent Adjustment Deposits paid,
if any; and
(3) The Rent Adjustment Deposit due in the current Calendar
Year.
D. Within thirty (30) days after Tenant's receipt of each
Adjustment Statement, Tenant shall pay to Landlord:
(1) The amount of Rent Adjustment shown on said statement
to be due Landlord for the Calendar Year last ended; plus
(2) The amount, which when added to the Rent Adjustment
Deposit theretofore paid in the current Calendar Year would provide that
Landlord has then received such portion of the Rent Adjustment Deposit as
would have theretofore been paid to Landlord had Tenant paid one twelfth
(1/12) of the Rent Adjustment Deposit, for the current Calendar Year, to
Landlord monthly on the first day of each month of such Calendar Year.
Commencing on the first day of the first month after Tenant's receipt of
each Adjustment Statement, and on the first day of each month thereafter
until Tenant receives a more current Adjustment Statement, Tenant shall pay
to Landlord one-twelfth (1/12) of the Rent Adjustment Deposit shown on said
statement. During the last complete Calendar Year, Landlord may include in
the Rent Adjustment Deposit its estimate of the Rent Adjustment which may
not be finally determined until after the expiration of the Term. The
Tenant's obligation to pay the Rent Adjustment shall survive the Term.
E. Tenant's payment of the Rent Adjustment Deposit for each
Calendar Year shall be credited against the Rent Adjustments for such
Calendar Year. All Rent Adjustment Deposits may be co-mingled and no
interest shall be paid to Tenant thereon. If the Rent Adjustment Deposit
paid by Tenant for any Calendar Year exceeds the Rent Adjustments for such
Calendar Year, then Landlord shall give a credit to Tenant in an amount
equal to such excess against the Rent Adjustments due for the next
succeeding Calendar Year, except that if any such excess relates to the
last Calendar Year of the Term, then, Landlord shall refund such excess to
Tenant after deducting therefrom any amounts necessary to cure any defaults
of Tenant.
F. Tenant or its representative shall have the right to examine
Landlord's books and records with respect to the items in the Adjustment
Statement during normal business hours at any time within thirty
5
<PAGE> 12
(30) days following the furnishing by Landlord to Tenant of such Adjustment
Statement. Unless Tenant shall take written exception to any item within
thirty (30) days after the furnishing of the foregoing statement, such
statement shall be considered as final and accepted by Tenant. Any amount
due to Landlord as shown on any such statement, whether or not written
exception is taken thereto, shall be paid by Tenant within thirty (30)
days after Landlord shall have submitted the statement, without prejudice
to any such written exception.
G. If the Commencement Date is on any day other than the first day
of January, or if the Termination Date is on any day other than the last
day of December, any Rent Adjustments due Landlord shall be prorated.
SECTION 5.3. INTEREST AND LATE CHARGES ON LATE PAYMENTS.
Rent not paid on or before the thirtieth (30th) day after the date when due
shall bear interest from the date when the same is payable under the terms of
this Lease until the same shall be paid at an annual rate of interest equal to
the rate of interest announced from time to time by the First National Bank of
Chicago as its Corporate Base Rate, plus three (3%) percent, unless a lesser
rate shall then be the maximum rate permissible by law, in which event said
lesser rate shall be charged (hereinafter referred to as the "Lease Interest
Rate"). The term "Corporate Base Rate" means that rate of interest announced by
The First National Bank of Chicago (hereinafter referred to as "First") from
time to time as its "Corporate Base Rate" of interest, changing automatically
and simultaneously with each change in the Corporate Base Rate made by First
from time to time. Any publication issued or published by First from time to
time or a certificate signed by an officer of First stating its Corporate Base
Rate as of a date shall be conclusive evidence of the Corporate Base Rate on
that date. Tenant further acknowledges that its late payment of any Rent will
cause Landlord to incur certain costs and expenses not contemplated under this
Lease, the exact amount of which is extremely difficult or impracticable to
fix. Such costs and expenses will include, without limitation, loss of use of
money, administrative and collection costs and processing and accounting
expenses. Therefore, if any installment of monthly Base Rent is not received by
Landlord within five (5) days of the date when due or any other sum due
hereunder is not paid within five (5) days of the date when due, Tenant shall
immediately pay to Landlord a late charge equal to three percent (3%) of the
unpaid amount. Such late charge is in addition to any interest due pursuant to
the first sentence of this Section 5.3. Landlord and Tenant agree that this
late charge represents a reasonable estimate of costs and expenses incurred by
Landlord from, and is fair compensation to Landlord for, its loss suffered, by
such non-payment by Tenant. Acceptance of the late charge shall not constitute a
waiver of Tenant's default with respect to such non-payment by Tenant or
prevent Landlord from exercising any other rights and remedies available to
Landlord under this Lease. Failure to pay the late charge shall constitute a
default under this Lease.
SECTION 5.4. PRIOR OCCUPANCY. In the event the Premises are
delivered to and are occupied by Tenant prior to the Commencement Date of the
Initial Term of this Lease, such occupancy shall be subject to all their terms
and conditions of this Lease, and Rent and all other payments and charges
imposed upon Tenant shall be paid on a prorata basis from the date of such
delivery of possession prior to the Commencement Date.
ARTICLE VI
----------
UTILITIES
---------
SECTION 6.1. UTILITIES. Tenant shall pay, directly to the
appropriate supplier, all costs of natural gas, electricity, heat, light,
power, sewer service, telephone, water, refuse disposal and other utilities and
services supplied to the Premises. Landlord shall, at Landlord's sole cost and
expense, separately meter the Premises. If, however, at any time, any services
or utilities are jointly metered, Landlord shall make a reasonable
determination of Tenant's proportionate share thereof (which share shall not
include any "mark up" or service charge by Landlord) and Tenant shall pay its
proportionate share, as Additional Rent hereunder, within fifteen (15) days
after receipt of
6
<PAGE> 13
Landlord's written statement, provided, however, Tenant shall not be required
to pay a proportionate share of any jointly metered utility costs generated by
the extraordinary utility usage by another tenant of the Building. Landlord
shall not in any way be liable or responsible to Tenant for any cost or damage
or expense which Tenant may sustain or incur if either the quality or character
of such service is changed or is no longer available or suitable for Tenant's
requirements. In the event any utility service to the Premises is interrupted
or terminated without fault to Tenant, Landlord shall take commercially
reasonable action to attempt to have service returned to the Premises upon
notice of such interruption. In the event such interruption continues for a
period of more than twenty-four (24) hours and Tenant cannot therefore operate
its business, Rent shall abate until service is restored to the extent
Landlord's rent loss insurance is paid to Landlord to compensate Landlord for
such abatement.
ARTICLE VII
-----------
USE
---
SECTION 7.1. USE. The Premises shall be used for the Use only, and
for no other purpose.
SECTION 7.2. PROHIBITED USES. Tenant shall not permit the Premises,
or any portion thereof, to be used in such manner which impairs Landlord's
right, title or interest in the Premises or any portion thereof, or in such
manner which gives rise to a claim or claims of adverse possession or of a
dedication of the Premises, or any portion thereof, for public use. Tenant
shall not use or occupy the Premises or permit the Premises to be used or
occupied contrary to any statute, rule, order, ordinance, requirement,
regulation or restrictive covenant applicable thereto or in any manner which
would violate any certificate of occupancy affecting the same or which would
render the insurance thereon void or the insurance risk more hazardous, or
which would cause structural injury to the Improvements or cause the value or
usefulness of the Premises or any part thereof to diminish or which would
constitute a public or private nuisance or waste, and Tenant agrees that it
will, promptly upon discovery of any such use, immediately notify Landlord and
take all necessary steps to compel the discontinuance of such use.
ARTICLE VIII
------------
MAINTENANCE OF PREMISES
-----------------------
SECTION 8.1. MAINTENANCE.
A. TENANT'S MAINTENANCE. Tenant agrees, at Tenant's sole cost and
expense, to take good care of the premises and keep same and all parts
thereof, together with any and all alterations and additions thereto, in
good order, condition and repair, suffering no waste or injury. Tenant
shall, at its sole cost and expense, promptly make all necessary repairs
and replacements, ordinary as well as extraordinary, foreseen as well as
unforeseen, in and to any equipment now or hereafter located in the
Premises, including without limitation, water, sewer, gas, HVAC and
electricity connections, pipes, mains and all other fixtures, machinery,
apparatus, equipment and appurtenances now or hereafter belonging to,
connected with or used in conjunction with the Premises. All such repairs
and replacement shall be of first class quality and sufficient for the
proper maintenance and operation of the Premises. Tenant shall keep and
maintain the Premises safe, secure and clean, specifically including, but
not by way of limitation, removal of waste and refuse matter. Tenant shall
not permit anything to be done upon the Premises (and shall perform all
maintenance and repairs thereto so as not) to invalidate, in whole or in
part, or prevent the procurement of any insurance policies which may, at
any time, be required under the provisions of this Lease. Tenant shall not
obstruct or permit the obstruction of any parking area, adjoining street or
sidewalk.
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B. LANDLORD'S MAINTENANCE. Subject to the provisions of Articles X
and XIII hereof, Landlord shall keep, maintain, repair and replace the roof
and structural members of the Building and the parking lot, sidewalks and
appurtenances thereto, including, as necessary, snow and ice removal and
the cost thereof shall be deemed an Expense unless otherwise provided in
Section 5.2(A)(2) to the contrary.
SECTION 8.2. GOVERNMENTAL REQUIREMENTS. Tenant at its own cost and
expense also shall promptly comply with any and all governmental requirements
to or affecting the Premises or any part hereof which apply to Tenant's use,
occupancy or alteration thereof, irrespective of the nature of the work
required to be done, extraordinary as well as ordinary, whether or not the same
involve or require any structural changes or additions in or to the
Improvements and irrespective of whether or not such changes or additions be
required on account of any particular use to which the Premises or any part
thereof are being put. Landlord shall promptly comply with any and all
government requirements affecting the Premises which are not related to
Tenant's use, occupancy or alteration of the Premises.
SECTION 8.3. TENANT'S RESPONSIBILITIES. Except as expressly set
forth in this Lease, Landlord shall not be required to furnish any services or
facilities whatsoever to the Premises. Except as set forth in Section 8.1.B.
above or as otherwise expressly set forth in this Lease to the contrary, Tenant
hereby assumes full and sole responsibility for condition, operation, repair,
alteration, improvement, replacement, maintenance and management of Premises
and the Trailer. Landlord shall not be responsible for any loss or damage to
the person or property of Tenant, any guests or invitees, any persons using or
working on the Premises, or any persons claiming by, through or under, or any
agents, employees, heirs, legal representatives, successors or assigns of, any
of the foregoing.
ARTICLE IX
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INSURANCE
---------
SECTION 9.1. COMMERCIAL GENERAL LIABILITY AND WORKERS COMPENSATION
INSURANCE. At all times during the Term of this Lease, Tenant, at its own
expense, shall maintain, with insurance companies which are authorized to do
business in the State of Illinois and which are acceptable to Landlord, the
following commercial general liability and workers compensation insurance
(including employer's liability insurance):
(a) COMMERCIAL GENERAL LIABILITY INSURANCE. Written on an
Occurrence basis, insuring against claims for bodily and personal injury,
death and property damage occurring in connection with the use and
occupancy of the Premises by Tenant and shall name by specific endorsement
Landlord, Landlord's managing agent, and mortgagee, if any, as additional
insureds. The coverage afforded the additional insureds under the Tenant's
policy shall be primary insurance. Commercial General Liability Insurance
shall afford a limit of at least $1,000,000.00 for each occurrence and at
least a $2,000,000.00 General Aggregate and at least $1,000,000.00 for each
occurrence Personal and Advertising Injury.
(b) WORKERS COMPENSATION INSURANCE. Workers compensation
insurance shall meet or exceed the statutory requirements set by the State
of Illinois and shall include occupational disease insurance and employer's
liability insurance. The employer's liability insurance shall afford a
limit of not less than $100,000.00.
Tenant shall delivery to Landlord, at least fifteen (15) days prior to
the earlier of (i) the Commencement Date of this Lease or (ii) the date Tenant
takes possession of the Premises, duplicate copies of policies (or certificates
evidencing such policies) of the insurance required by this Section 9.1;
provided, however, that certificates shall not be acceptable with respect to
the insurance required under Section 9.1(d). Such policies
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of insurance shall be renewed and duplicate copies of the new policies (or new
certificates) shall be deposited with Landlord at least thirty (30) days prior
to the expiration of the old policies.
SECTION 9.2. POLICIES. All insurance policies shall be written with
insurance companies and shall be in form satisfactory to Landlord. All
insurance policies shall name Landlord as an additional insured and loss payee
as its interest may appear and shall provide that they may not be terminated or
modified in any way which would materially decrease the protection afforded
Landlord under this Lease without thirty (30) days' advance written notice to
Landlord. All policies shall also contain an endorsement that Landlord,
although named as an additional insured, shall nevertheless be entitled to
recover for damages caused by the negligence of Tenant. The minimum limits of
insurance specified in this section shall in no way limit or diminish Tenant's
liability under this Lease. Tenant shall furnish to Landlord, not less than
fifteen (15) days prior to the date such insurance is first required to be
carried by Tenant, and thereafter at least fifteen (15) days prior to the
expiration of each such policy, true and correct photocopies of all insurance
policies required under this section, together with any amendments and
endorsements to such policies, certificates of insurance, and such other
evidence of coverages as Landlord may reasonably request, and evidence of
payment of all premiums and other expenses owed in connection therewith. Upon
Tenant's default in obtaining or delivering the policy for any such insurance
or Tenant's failure to pay the charges therefor, Landlord may, at its option,
on or after the tenth (10th) day after written notice thereof is given to
Tenant, procure or pay the charges for any such policy or policies and the total
cost and expense (including attorneys' fees) thereof shall be immediately paid
by Tenant to Landlord as additional rent upon receipt of a bill therefor. Any
minimum amount of coverage specified above shall be subject to increase at any
time, and from time to time, after commencement of the third full year of the
term of this Lease, if such increase is commercially reasonable or consistent
with Landlord's then current requirements in its other rental properties and
Landlord shall reasonably deem same to be necessary for adequate protection.
Within thirty (30) days after demand by Landlord that the minimum amount of any
coverage be so increased, Tenant shall furnish Landlord with evidence of
Tenant's compliance with such demand.
SECTION 9.3. LANDLORD'S INSURANCE. Landlord agrees to carry rent
loss insurance in the amount and with coverage as determined by Landlord in its
reasonable discretion. Landlord shall maintain casualty insurance on the
Project in an amount equal to 100% of the replacement value thereof.
SECTION 9.4. SUBROGATION. Landlord and Tenant agree to have all fire
and extended coverage and material damage insurance with may be carried by
either of them endorsed with a clause providing that any release from liability
of or waiver of claim for recovery from the other party or any of the parties
named in Section 9.2 above entered into in writing by the insured thereunder
prior to any loss or damage shall not affect the validity of said policy or the
right of the insured to recover thereunder, and providing further that the
insurer waives all rights of subrogation which such insurer might have against
the other party of any of the parties named in Section 9.2 above. Without
limiting any release or waiver of liability or recovery contained in any other
Section of this Lease but rather in confirmation and furtherance thereof,
Landlord and any beneficiaries of Landlord waive all claims for recovery from
Tenant, and Tenant waives all claims for recovery from Landlord, any
beneficiaries of Landlord and the managing agent for the Project and their
respective agents, partners and employees, for any loss or damage to any of
its property insured under valid and collectible insurance policies to the
extent of any recovery collectible under such insurance policies.
Notwithstanding the foregoing or anything contained in this lease to the
contrary, any release or any waiver of claims shall not be operative, nor shall
the foregoing endorsements be required, in any case where the effect of such
release or waiver is to invalidate insurance coverage or invalidate the right
of the insured to recover thereunder or increase the cost thereof (provided
that in the case of increased cost the other party shall have the right, within
ten (10) days following written notice, to pay such increased cost, thereby
keeping such release or waiver in full force and effect).
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ARTICLE X
DAMAGE OR DESTRUCTION
SECTION 10.1. TOTAL DEMISE. In the event (a) the Premises are made
untenantable by fire or other casualty and Landlord shall decide not to restore
or repair same, or (b) the Building is so damaged by fire or other casualty
that Landlord shall decide to demolish or not rebuild the same, then, in any of
such events, Landlord shall have the right to terminate this Lease by notice to
Tenant given within ninety (90) days after the date of such fire or other
casualty and the Rent shall be apportioned on a per diem basis and paid to the
date of such fire or other casualty. In the event the Premises are made
untenantable by fire or other casualty and Landlord shall decide to rebuild
and restore the same, this Lease shall not terminate and Landlord shall repair
and restore the Premises at Landlord's expense and with due diligence, subject,
however to (i) reasonable delays for insurance adjustments and (ii) delays
caused by forces beyond Landlord's control, and Rent shall abate on a per diem
basis during the period of reconstruction and repair.
SECTION 10.2. PARTIAL DEMISE. In the event the Premises are partially
damaged by fire or other casualty but are not made wholly untenantable, then
Landlord shall, except during the last year of the Term hereof, proceed with
all due diligence to repair and restore the Premises, subject, however, to (i)
reasonable delays for insurance adjustments, and (ii) delays caused by forces
beyond Landlord's control. In such event, Rent shall abate in proportion to the
non-useability of the Premises during the period while repairs are in progress
unless such partial damages are due to the fault or neglect of Tenant. If the
partial damage is the result of the fault or neglect of Tenant, Rent shall not
abate during said period. If the Premises are made partially untenantable as
aforesaid during the last year of the Term hereof, Landlord shall have the right
to terminate this Lease as of the date of fire or other casualty upon thirty
(30) days prior notice to Tenant, in which event, Rent shall be apportioned on
a per diem basis and paid to the date of such fire or other casualty.
SECTION 10.3 FAILURE TO REPAIR. Notwithstanding any provision in this
Article X to the contrary, Landlord shall cause the Premises to be
substantially repaired or restored within two hundred and seventy (270) days
after the date of any such damage or destruction provided, however, that
said 270 day period shall be extended one day for each day of delay in
completing the restoration of the damage or destruction due to changes,
deletion or additions, acts of Tenant, strikes, lockouts, casualties, acts of
God, war, fuel or energy shortages, material or labor shortages, governmental
regulation or control, severe weather conditions or other causes beyond the
actual control of Landlord or Landlord's receipt of insurance proceeds. In the
event Landlord fails to substantially repair or restore the Premises within
said 270 day period, Tenant shall have the option to terminate this lease,
provided such option is exercised with thirty (30) days after the expiration
of said 270 period and prior to substantial completion of such repair or
restoration.
ARTICLE XI
LIENS
SECTION 11.1. LIEN CLAIMS. Tenant shall not do any act which shall in
any way encumber the title of Landlord in and to the Premises or the Building,
nor shall any interest or estate of Landlord in the Premises or the Building be
in any way subject to any claim by way of lien or encumbrance, whether by
operation of law or by virtue of any express or implied contract by Tenant, and
any claim to or lien upon the Premises or the Building arising from any act or
omission of Tenant shall accrue only against the leasehold estate of Tenant and
shall in all respects be subject and subordinate to the paramount title and
rights of Landlord in and to the Premises or the Building. Tenant will not
permit the Premises or the Building to become subject to any mechanics',
laborers' or materialmen's lien on account of labor or material furnished to
Tenant or claimed to have been furnished to Tenant in connection with work of
any character performed or claimed to have been performed on the Premises by or
at the direction of sufferance of Tenant; provided, however that Tenant shall
have the right to contest in good faith and with reasonable diligence, the
validity of any such lien or claimed lien if Tenant shall first give to
Landlord, either
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in cash or a bond in form and substance and from a surety satisfactory to
Landlord in an amount equal to one hundred twenty (120%) percent of the amount
of the lien or claimed lien which, together with interest earned thereon, shall
be held by Landlord as security to insure payment thereof and to prevent any
sale, foreclosure or forfeiture of the Premises by reason of non-payment
thereof. The amount so deposited with Landlord shall be held by Landlord in an
account established at a federally insured banking institution until
satisfactory removal of said lien or claim of lien. On any final determination
of the lien or claim for lien, Tenant will immediately pay any judgment
rendered, with all proper costs and charges, and will, at is own expense, have
the lien released and any judgment satisfied. Should Tenant fail to diligently
contest and pursue such lien contest, Landlord may, at its option, use the sums
so deposited to discharge any such lien upon the renewal of such lien or
encumbrance Landlord shall pay all such sums remaining on deposit to Tenant.
SECTION 11.2. LANDLORD'S RIGHT TO CURE. If Tenant shall fail to contest
the validity of any lien or claimed lien or fail to promptly give security to
Landlord to insure payment thereof, or shall fail to prosecute such contest
with diligence, or shall fail to have the same released and satisfy any
judgment rendered thereon, then Landlord may, at its election (but shall not
be so required) and upon ten (10) days prior written notice to Tenant, remove
or discharge such lien or claim for lien (with the right, in its discretion, to
settle or compromise the same), and any amounts advanced by Landlord,
including reasonable attorneys' fees, for such purposes shall be so much
additional rent due from Tenant to Landlord at the next rent date after any
such payment, with interest thereon at the Lease Interest Rate from the date
so advanced.
ARTICLE XII
TENANT ALTERATIONS
SECTION 12.1. ALTERATIONS. Tenant shall not at any time during the Term
of this Lease make any openings in the roof or exterior walls of the Building
or make any Tenant alteration, addition or improvement to the Premises
(collectively "Alterations") or any portion thereof without in each instance,
the prior written consent of Landlord; provided, however, upon notice to, but
without the consent of Landlord, Tenant shall the right to make any Alterations
where same are non-structural, do not require openings on the roof or exterior
walls of the Improvements, do not affect any Building system, and do not exceed
TWENTY FIVE THOUSAND AND N0/100 ($25,000.00) DOLLARS in the aggregate in any
twelve (12) month period. Landlord shall not unreasonably withhold or delay
its consent to other Alterations made by Tenant. No Alteration to the Premises
for which Landlord's consent is required shall be commenced by Tenant until
Tenant has furnished Landlord with a satisfactory certificate or certificates
from an insurance company acceptable to Landlord, evidencing workmen's
compensation coverage, and insurance coverage in amounts satisfactory to
Landlord and protecting Landlord against public liability and property damage
to any person or property, on or off the Premises, arising out of and during the
making of such alterations, additions or improvements. Any Alteration by Tenant
hereunder shall be done in a good and workmanlike manner in compliance with
any applicable governmental law, statute, ordinance or regulation. Upon
completion of any Alteration by Tenant hereunder, Tenant shall furnish Landlord
with a copy of the "as built" plans covering such construction prepared on
behalf of Tenant, if any. Tenant, at its sole cost and expense, will make all
Alterations on the Premises which may be necessary by the act or neglect of
Tenant, its agents, employees, contractors, licensees, invitees, successors,
assigns, employees, or anyone acting by or through Tenant. Before commencing
any Alterations requiring Landlord's approval: (a) plans and specifications
therefor, prepared by a licensed architect, shall be submitted to and approved
by Landlord (such approval shall not be unreasonably withheld or delayed); (b)
Tenant shall furnish to Landlord an estimate of the cost of the proposed work,
certified by the architect who prepared such plans and specifications; (c) all
contracts for any proposed work shall be submitted to and approved by Landlord;
and (d) for proposed work with an estimated cost in excess of TWENTY FIVE
THOUSAND AND NO/00 ($25,000) DOLLARS, Tenant shall either furnish to Landlord a
bond in form and substance satisfactory to Landlord, or such other security
reasonably satisfactory to Landlord to insure payment for the completion of
all work free and clear of liens. Tenant further agrees that all contractors
engaging in any
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construction activity by and for the benefit of Tenant for which Landlord's
consent shall be required shall obtain comprehensive/commercial general
liability, worker's compensation and such other liability insurance in such
amounts as may be reasonably required by Landlord naming Landlord as an
additional insured and providing liability coverage during all phases of
construction including, without limitation: (a) contractor's and owners
protection; (b) blanket contractual liability coverage, (c) broad form property
damage insurance; (d) statutory worker's compensation coverage and employer's
liability coverage; and (e) coverage under the structural work act of the State
of Illinois. Before commencing any Alteration, Tenant shall provide Landlord
with a written certification that the Alteration does not have any
environmental impact on the Premises. Prior to the commencement of any
construction activity for which Landlord's consent shall be required,
certificates of such insurance coverages (and original policies with respect to
environmental liability insurance) shall be provided to Landlord and renewal
certificates shall be delivered to Landlord prior to the expiration date of
the respective policies.
SECTION 12.2. OWNERSHIP OF ALTERATIONS. All Alterations (except
Tenant's Equipment, as defined in Section 19.2 hereof), put in at the expense
of Tenant shall become the property of Landlord and shall remain upon and be
surrendered with the Premises as a part thereof at the termination of his
Lease, or at Landlord's option, provided Landlord shall have advised Tenant in
writing at the time of its consent to said Alteration is sought that same must
be removed and the area from which such Alterations were removed restored
to the same condition as of the Commencement Date.
SECTION 2.3. SIGNS. Tenant shall not place any signs on any part of the
Building without the prior written consent of Landlord. Landlord's consent to
signs identifying Tenant's business shall not be unreasonably withheld.
Notwithstanding any of the immediately foregoing provisions of this Section
12.3, upon notice to, but without the consent of Landlord, Tenant may place a
monument sign adjacent to Premises, provided (i) the installation and
dimensions of said sign is in strict accordance with applicable law and
ordinances, (ii) Tenant continually maintains said sign in a commercially
reasonable manner and (iii) Tenant, at Tenant's sole cost and expense, removes
said sign at the expiration of the Term and restores the area in which said
sign is placed to its condition prior to the installation of said sign.
SECTION 12.4. TENANT INDEMNITY. Tenant hereby agrees to indemnify and
hold the Landlord, its beneficiaries, shareholders, partners or members and
their respective agents and employees harmless from any and all liabilities of
every kind and description which may arise out of or be connected in any way
with said Alterations. Any mechanic's lien filed against the Premises for work
claimed to have been furnished to Tenant shall be discharged of record by
Tenant within (30) days thereafter, at Tenant's expense. Upon completing any
Alteration, Tenant shall furnish Landlord with contractors' affidavits and full
and final waivers of lien and receipted bills covering all labor and materials
expended and used. All Alterations shall comply with all insurance requirements
and with all ordinances and regulations of any pertinent governmental authority.
All alterations and additions shall be constructed in a good and workmanlike
manner and only good grades of materials shall be used.
SECTION 12.5. ENVIRONMENTAL IMPACT. Notwithstanding any other term,
covenant or condition contained in this Lease, in the event that any Alteration
has any environmental impact on the Premises, Landlord may deny the Tenant the
right to proceed in Landlord's sole and absolute discretion.
ARTICLE XIII
CONDEMNATION
SECTION 13.1. TAKING; LEASE TO TERMINATE. If a portion of the Project,
the Building or the Premises shall be lawfully taken or condemned for any
public or quasi-public use or purpose, or conveyed under threat of such
condemnation and as a result thereof the Premises cannot be used for the same
purpose and with the same utility as before taking or conveyance, the Term of
this Lease shall end upon, and not before, the date
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of the taking of possession by the condemning authority, and without
apportionment of the award. Tenant hereby assigns to Landlord, Tenant's
interest in such award, if any. Current Rent shall be apportioned as of the
date of such termination. If any part of the Building shall be so taken or
condemned, or if the grade of any street or alley adjacent to the Building is
changed by any competent authority and such taking or change of grade makes it
necessary or desirable to demolish, substantially remodel, or restore the
Building, the Landlord shall have the right to cancel this Lease upon not less
than ninety (90) days' prior notice to the date of cancellation designed in the
notice.
SECTION 13.2 TAKING; LEASE TO CONTINUE. In the event only a part of the
Premises shall be taken as a result of the exercise of the power of eminent
domain or condemned for a public or quasi-public use or purpose by any
competent authority or sold to the condemning authority under threat of
condemnation, and as a result of the balance of the Premises can be used for
the same purpose as before such taking, sale or condemnation, this Lease shall
not terminate and Landlord, at is sole cost and expense, shall promptly repair
and restore the Premises, subject to extension due to delay of changes, deletion
or additions, acts of Tenant, strikes, lockouts, casualties, acts of God, war,
fuel or energy shortages, material or labor shortages, governmental regulation
or control, severe weather conditions or other causes beyond the actual control
of Landlord and Landlord's receipt of insurance proceeds. Any Award paid as a
consequence of such taking, sale, or condemnation, shall be paid to Landlord.
Any sums not so disbursed shall be retained by Landlord.
ARTICLE XIV
ASSIGNMENT--SUBLETTING BY TENANT
SECTION 14.1. NO-ASSIGNMENT, SUBLETTING OR OTHER TRANSFER. Tenant shall
not assign this Lease or any interest hereunder, nor shall Tenant sublet or
permit the use of the Premises or any part thereof by anyone other than Tenant,
without the express prior written consent of Landlord, not to be unreasonably
withheld. No assignment or subletting shall relieve Tenant of its obligations
hereunder, and Tenant shall continue to be liable as a principal and not as a
guarantor or surety, to the same extent as though no assignment or sublease had
been made, unless specifically provided to the contrary in Landlord's consent.
Consent by Landlord pursuant to this Article shall not be deemed, construed or
held to be consent to any additional assignment or subletting, but each
successive act shall require similar consent of Landlord. Landlord shall be
reimbursed by Tenant for any reasonable out of pocket costs or expenses
incurred pursuant to any request by Tenant for consent to any such assignment
or subletting. In this consideration of the granting or denying of consent,
Landlord may, at its option, take into consideration: (i) the business
reputation and credit worthiness of the proposed subtenant of assignee; (ii)
any required alteration of the Premises; (iii) the intended use of the Premises
by the proposed subtenant or assignee; and (iv) any other factors which
Landlord shall deem relevant.
SECTION 14.2 PROHIBITED TRANSFERS. Tenant shall not allow or permit any
transfer of this Lease, or any interest hereunder, by operation of law, or
convey, mortgage, pledge or encumber this Lease or any interest hereunder.
SECTION 14.3. EXCESS RENTAL. If Tenant shall, with Landlord's prior
consent as herein required, sublet the Premises, an amount equal to fifty (50%)
percent of the rental in excess of the base rent and any additional rent herein
provided to be paid shall be for the benefit of Landlord and shall be paid to
Landlord promptly when due under any such subletting as additional rent due
hereunder.
SECTION 14.4. MERGER OR CONSOLIDATION. If Tenant as a corporation whose
stock is not publicly traded, any transaction or series of transactions
(including, without limitation, any dissolution, merger, consolidation or other
reorganization of Tenant, or any issuance, sale, gift, transfer or redemption
of any capital stock of Tenant, whether voluntary, involuntary or by operation
of law, or any combination of any of the foregoing transactions)
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resulting in the transfer of control of Tenant, other than by reason of death,
shall be deemed to be a voluntary assignment of this Lease by Tenant subject to
the provisions of this Section 14. If Tenant is a partnership, any transaction
or series of transactions (including without limitation any withdrawal or
admittance of a partner or a change in any partner's interest in Tenant,
whether voluntary, involuntary or by operation of law, or any combination of
any of the foregoing transactions) resulting in the transfer of control of
Tenant, other than by reason of death, shall be deemed to be a voluntary
assignment of this Lease by Tenant subject to the provisions of this assignment
of this Lease by Tenant subject to the provisions of this Section 14. If Tenant
is a corporation, a change or series of changes in ownership of stock which
would result in direct or indirect change in ownership by the stockholders or
an affiliated group of stockholders of less than fifty (50%) percent of the
outstanding stock as of the date of the execution and delivery of this Lease
shall not be considered a change of control. Notwithstanding the immediately
foregoing, Tenant may, upon notice to, but without Landlord's consent, assign
this Lease to any corporation resulting from a merger or consolidation of
Tenant, provided that the total assets and the total net worth of such assignee
after such consolidation or merger shall be in excess of the greater of (i) the
net worth of Tenant immediately prior to such consolidation or merger, or (ii)
the net worth of Tenant as of the date hereof, determined by generally accepted
accounting principles and provided that (x) Tenant is not at such time in
default hereunder, (y) such successor shall execute an instrument in writing,
acceptable to Landlord in its reasonable discretion, fully assuming all of the
obligations and liabilities imposed upon Tenant hereunder and deliver the same
to Landlord and (z) Tenant shall not be released from its liability hereunder.
Tenant shall provide in its notice to Landlord such information as may be
reasonably required by Landlord to determine that the requirements of this
Section 14.4 have been satisfied. As used in this Section 14.4, the term
"control" means possession of the power to vote not less than a majority
interest of any class of voting securities and partnership or limited liability
company interests or to direct or cause the direction of the management or
policies of a corporation, or partnership or limited liability company through
the ownership of voting securities, partnership interests or limited liability
company interests, respectively.
SECTION 14.5. UNPERMITTED TRANSACTION. Any assignment, subletting, use,
occupancy, transfer or encumbrance of this Lease or the Premises which requires
and is made without Landlord's prior written consent shall be of no effect and
shall, at the option of Landlord, constitute a default under this Lease.
ARTICLE XV
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ANNUAL STATEMENTS
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SECTION 15.1. ANNUAL STATEMENTS. Tenant agrees to furnish Landlord
annually, within ninety (90) days of the end of such fiscal year with a copy of
its annual audited statements (which are and shall be prepared on a consolidated
basis with Tenant's parent) together with applicable footnotes and any other
financial information reasonably requested by Landlord (hereinafter collectively
referred to as, the "Financial Information") and agrees that Landlord may
deliver such Financial Information to any mortgagee, prospective mortgagee or
prospective purchaser of the Premises.
ARTICLE XVI
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INDEMNITY FOR LITIGATION
------------------------
SECTION 16.1. INDEMNITY FOR LITIGATION. Tenant agrees to pay, and to
indemnify and defend Landlord against, all costs and expenses (including
reasonable attorney's fees) incurred by or imposed upon Landlord by or in
connection with any litigation to which Landlord becomes or is made a party
without fault on its part, whether commenced by or against Tenant, or any other
person or entity or that may be incurred by Landlord in enforcing any of the
covenants and agreements of this Lease with or without the institution of any
action or proceeding relating to the Premises or this Lease, or in obtaining
possession of the Premises after an Event of Default hereunder or upon
expiration or earlier termination of this Lease. The foregoing notwithstanding,
Tenant's
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responsibility under this Section 16.1 to pay Landlord's costs and expenses
(including reasonable attorney's fees) shall not extend to such costs and
expenses incurred in defending an action brought by Tenant to enforce the terms
of this Lease in which there is a court determination that Landlord failed to
perform its obligations under this Lease. Landlord agrees to pay, and to
indemnify and defend Tenant against, all costs and expenses (including
reasonable attorney's) incurred by or imposed upon Tenant by or in connection
with any litigation to which Tenant becomes or is made a party without fault on
its part and commenced against Landlord. The provisions of this Section 16.1
shall survive the expiration or earlier termination of this Lease.
ARTICLE XVII
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ESTOPPEL CERTIFICATES
---------------------
SECTION 17.1. ESTOPPEL CERTIFICATE. Tenant agrees that on the Commencement
Date and at any time and from time to time thereafter, upon not less than ten
(10) days' prior written request by Landlord, it will execute, acknowledge and
deliver to Landlord, or Landlord's mortgagee to the extent factually accurate, a
statement in writing in the form of EXHIBIT "C" attached hereto and by this
reference incorporated herein; provided, however, Tenant agrees to certify to
any prospective purchase or mortgagee any other reasonable information
specifically requested by such prospective purchaser or mortgagee. Landlord
agrees to acknowledge to Tenant from time to time upon not less than ten (10)
days prior written notice the status and amount of Rent payments, whether there
are, to Landlord's actual knowledge, any defaults under the Lease, and that this
Lease, and any subsequent amendments hereto, constitutes the agreement between
Landlord and Tenant with respect to the Premises.
ARTICLE XVIII
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INSPECTION OF PREMISES
----------------------
SECTION 18.1. INSPECTIONS. Tenant agrees to permit Landlord and any
authorized representatives of Landlord, to enter the Premises at all reasonable
times on reasonable advance notice, except in the case of emergency, for the
purpose of inspecting the same. Any such inspections shall be solely for
Landlord's purposes and may not be relied upon by Tenant or any other person.
SECTION 18.2. SIGNS. Tenant agrees to permit Landlord and any authorized
representative of Landlord to enter the Premises at all reasonable times during
business hours on reasonable advance notice to exhibit the same for the purpose
of sale, mortgage or lease, and during the six (6) months of the Term hereof or
any extension thereof, Landlord may display on the Premises customary "For Sale"
or "For Rent" signs. Landlord's signs shall not interfere with the display of
Tenant's signs.
ARTICLE XIX
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FIXTURES AND INVENTORY
----------------------
SECTION 19.1. BUILDING FIXTURES. All improvements and all plumbing,
heating, lighting, electrical and air-conditioning fixtures and equipment, and
other articles of personal property used in the operation of the Premises (as
distinguished from operations incident to the business of Tenant), whether or
not attached or affixed to the Premises (hereinafter referred to as "Building
Fixtures"), shall be and remain a part of the Premises and shall constitute the
property of Landlord.
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SECTION 19.2. TENANT'S EQUIPMENT. All of Tenant's trade fixtures and all
personal property, fixtures, apparatus, machinery and equipment now or hereafter
located upon the Premises and however installed, other than Building Fixtures,
as shall be and remain the personal property of Tenant, and the same are herein
referred to as "Tenant's Equipment" and are set forth in EXHIBIT "D" attached
hereto.
SECTION 19.3. REMOVAL OF TENANT'S EQUIPMENT. Tenant's Equipment may be
removed from time to time by Tenant; provided, however, that if such removal
shall injure or damage the Premises, Tenant shall repair the damage and place
the Premises in the same condition as it would have been if such Tenant's
Equipment had not been installed.
SECTION 19.4. LIENS ON TENANT'S INVENTORY AND OTHER PERSONAL PROPERTY.
Landlord shall subordinate any lien rights or rights of distraint against
Tenant's Equipment, inventory or personal property, to the holder of a lease or
security interest in Tenant's Equipment, inventory or other personal property.
Landlord shall execute an instrument setting forth such subordination for the
benefit of any such lender or equipment lessor, which instrument shall be
acceptable to Landlord in form and content and Tenant shall reimburse Landlord
for all out of pocket costs incurred by it with respect thereto.
ARTICLE XX
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DEFAULT
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SECTION 20.1. EVENTS OF DEFAULT. Tenant agrees that any one or more of the
following events shall be considered "EVENTS OF DEFAULT" as said term is used
herein:
(a) If an order, judgment or decree shall be entered by any court
adjudicating Tenant a bankrupt or insolvent, or approving a petition
seeking reorganization of Tenant or appointing a receiver, trustee or
liquidator of Tenant, or of all or a substantial part of its assets, and
such order, judgment or decree shall continue unstayed and in effect for
any period of sixty (60) days; or
(b) Tenant shall file an answer admitting the material allegations of
a petition filed against Tenant in any bankruptcy, reorganization or
insolvency proceeding or under any laws relating to the relief of debtors,
readjustment or indebtedness, reorganization, arrangements, composition or
extension; or
(c) Tenant shall make any assignment for the benefit of creditors or
shall apply for or consent to the appointment of a receiver, trustee or
liquidator of Tenant, or any of the assets of Tenant; or
(d) Tenant shall file a voluntary petition in bankruptcy, or shall
admit in writing its inability to pay its debts as they come due, or shall
file a petition or an answer seeking reorganization or arrangement with
creditors or take advantage of any insolvency law; or
(e) A decree or order appointing a receiver of the property of Tenant
shall be made and such decree or order shall not have been vacated within
sixty (60) days from the date of entry or granting thereof; or
(f) Tenant shall vacate the Premises without taking adequate steps to
secure the same or abandon same during the Term hereof; or
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(g) Tenant shall default in making any payment when due of
Rent or other payment required to be made by Tenant hereunder for a
period of five (5) days after written notice from Landlord to Tenant,
provided, however, if Tenant shall default in making any payment when
due more often then two (2) times in any calendar year, then no written
notice shall be necessary; or
(h) Tenant shall be in default in the performance of or
compliance with any of the agreements, terms, covenants or conditions in
this Lease other than those referred to in the foregoing subparagraphs
(a) through (g) of this Section for a period of twenty (20) days after
notice from Landlord to Tenant specifying the items in default, or in
the case of a default which cannot, with due diligence be cured within
said twenty (20) day period, Tenant fails to proceed within said twenty
(20) day period to cure the same and thereafter to prosecute the curing
of such default with due diligence. (it being intended in connection
with a default not susceptible of being cured with due diligence within
said twenty (20) day period that the time of Tenant within which to
cure the same shall be extended for such period as may be necessary to
complete the same with all due diligence).
Upon the occurrence of any one or more of such Events of Default,
Landlord may at its election terminate this Lease or terminate Tenant's right
to possession only, without terminating this Lease. Upon termination of this
Lease or of Tenant's right to possession, Tenant shall immediately surrender
possession and vacate the Premises, and deliver possession thereof to Landlord,
and Landlord or Landlord's agents may immediately or any time thereafter
without notice, re-enter the Premises and remove all persons and all or any
property therefrom, either by any suitable actions or proceeding at law or
equity, with out being liable in indictment, prosecution or damages, therefor,
and repossess and enjoy the Premises, together with the right to receive all
income of, and from, the Premises.
Upon termination of this Lease, Landlord shall be entitled to recover
as liquidated damages, because the parties hereto recognize that as of the date
hereof actual damages are not ascertainable and are of imprecise calculation
and not as a penalty, all Rent and other sums due and payable by Tenant through
the date of termination plus (i) an amount equal to sixty (60%) percent of the
Rent and other sums provided herein to be paid by Tenant for the residue of the
Term, and (ii) the costs of performing any other covenants to be performed by
Tenant.
If Landlord elects to terminate Tenant's right to possession only,
without terminating this Lease, Landlord may, at Landlord's option, enter into
the Premises, remove Tenant's signs and other evidences of tenancy, and take
and hold possession thereof as hereinabove provided, without such entry and
possession terminating this Lease or releasing Tenant, in whole or in part,
from Tenant's obligations to pay the Rent hereunder for the full Term or from
any other obligations of Tenant under this Lease. Landlord shall use
commercially reasonable efforts to relet all or any part of the Premises for
such rent and upon terms as are commercially reasonable (including the right to
relet the Premises for a term greater or lesser than that remaining of the Term
of premises and the right to relet the Premises as a part of a larger area, the
right to change the character or use made of the Premises and the right to
grant concessions of free rent). For the purpose of such reletting, Landlord
may decorate or make any repairs, changes, alterations, or additions in or to
the Premises that may be necessary or desirable. If Landlord is unable to relet
the Premises after using such commercially reasonably efforts to do so,
Landlord shall have the right to terminate this Lease, in which event, Tenant
shall pay to Landlord liquidation damages (because the parties hereto recognize
that as of the date hereof actual damages are not ascertainable and are of
imprecise calculation and not as a penalty) equal to sixty (60%) percent of the
Rent, and other sums provided herein to be paid by Tenant for the remainder of
the Term. If the Premises are relet and sufficient sums shall not be realized
from such reletting after payment of all expenses of such decorations, repairs,
change, alterations, additions and the expenses of repossession and such
reletting, and the collection of the Rent herein provided and other payments
required to be made by Tenant under the provisions of this Lease for the
remainder of the Term of this Lease then, in such event, Tenant shall pay to
the Landlord on demand any such deficiency and Tenant agrees that Landlord may
file suit to recover any sums
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falling due under the terms of this Section from time to time, and all costs
and expenses of Landlord, including attorneys' fees, incurred in connection
with any such suit shall be paid by Tenant.
SECTION 20.2. WAIVERS. Tenant hereby expressly waives, so far as
permitted by law, the service of any notice of intention to re-enter provided
for in any statute, and except as is herein otherwise provided. Tenant for and
on behalf of itself and all persons claiming through or under Tenant, also
waives any and all rights of redemption or re-entry or repossession in case
Tenant shall be dispossessed by a judgment or by warrant of any court or judge
or in case of re-entry or repossession by Landlord or in case of any expiration
or termination of this Lease. The terms "enter," "re-enter" or "entry" or
"re-entry" as used in this Lease are not restricted to their technical legal
meanings.
SECTION 20.3. BANKRUPTCY. If Landlord shall not be permitted to
terminate this Lease, as provided in this Article XX because of the provisions
of the United States Code relating to Bankruptcy, as amended (hereinafter
referred to as the "Bankruptcy Code"), then Tenant as a debtor-in-possession or
any trustee for Tenant agrees promptly, within no more than sixty (60) days
after the filing of the bankruptcy petition, to assume or reject this Lease. In
such event, Tenant or any trustee for Tenant may only assume this Lease if: (a)
it cures or provides adequate assurances that the trustee will promptly cure
any default hereunder; (b) compensates or provides adequate assurance that
Tenant will promptly compensate Landlord of any actual pecuniary loss to
Landlord resulting from Tenant's default; and (c) provides adequate assurance
of performance during the fully stated term hereof of all of the terms,
covenants, and provisions of this Lease to be performed by Tenant. In no event
after the assumption of this Lease shall any then-existing default remain
uncured for a period in excess of the earlier of ten (10) days or the time
period set forth herein. Adequate assurance of performance of this Lease, as
set forth hereinabove, shall include, without limitation, adequate assurance:
(i) of the source of rent reserved hereunder; and (ii) that the assumption of
this Lease will not breach any provision hereunder.
If Tenant assumes this Lease and proposes to assign the same pursuant
to the provisions of the Bankruptcy Code to any person or entity who shall have
made a bona fides offer to accept an assignment of this Lease on terms
acceptable to Tenant, then notice of such proposed assignment, setting forth:
(i) the name and address of such person; (ii) all of the terms and conditions
of such offer, and (iii) the adequate assurance to be provided Landlord to
assure such person's future performance under the Lease, including, without
limitation, the assurance referred to in section 365(b)(3) of the Bankruptcy
Code, shall be given to Landlord by the Tenant no later than twenty (20) days
after receipt by the Tenant but in any event no later than ten (10) days prior
to the date that the Tenant shall make application to a court of competent
jurisdiction for authority and approval to enter into such assignment and
assumption, and Landlord shall thereupon have the prior right and option, to be
exercised by notice to the Tenant given at any time prior to the effective date
of such proposed assignment, to accept an assignment of this Lease upon the
same terms and conditions and for the same consideration, if any, as the bona
fide offer made by such person, less any brokerage commissions which may be
payable out of the consideration to be paid by such person for the assignment
of this Lease.
If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code any and all monies or other considerations
payable or otherwise to be delivered to Landlord, shall be and remain the
exclusive property of Landlord and shall not constitute property of Tenant or
of the estate of the Tenant within the meaning of the Bankruptcy Code. Any and
all monies or other considerations constituting the Landlord's property under
the preceding sentence not paid or delivered to the Landlord shall be held in
trust for the benefit of Landlord and shall be promptly paid to the Landlord.
Any person or entity to which this Lease is assigned pursuant to the
provision of the Bankruptcy Code shall be conclusively deemed without further
act or deed to have assumed all of the obligations arising under this Lease on
and after the date of such assignment. Any such assignee shall upon demand
execute and deliver to Landlord an instrument confirming such assumption. Any
such assignee shall be permitted to use the Leased Premises only for the Use.
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Nothing contained in this section shall, in any way, constitute a
waiver of the provisions of Article XV of this Lease relating to alienation.
Tenant shall not, by virtue of this section, have any further rights relating
to assignment other than those granted in the Bankruptcy Code. Notwithstanding
anything in this Lease to the contrary, all amounts payable by Tenant to or on
behalf of Landlord under this Lease, whether or not expressly denominated as
rent, shall constitute rent for the purpose of Section 501(b)(6) or any
successive section of the Bankruptcy Code.
ARTICLE XXI
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LANDLORD'S PERFORMANCE OF TENANT'S COVENANTS
--------------------------------------------
SECTION 21.1. LANDLORD'S PERFORMANCE OF TENANT'S COVENANTS. Should
Tenant at any time fail to do any act or make any payment required to be done
or made by it under the provisions of this Lease, Landlord, at its option may
(but shall not be required to) do the same or cause the same to be done, and
the amounts paid and expenses incurred by Landlord in connection therewith
shall be so much Additional Rent due on the next rent date after such payment,
together with interest at the Lease Interest Rate from the date of payment.
ARTICLE XXII
------------
EXERCISE OF REMEDIES
--------------------
SECTION 22.1. CUMULATIVE REMEDIES. No remedy contained herein or
otherwise conferred upon or reserved to Landlord, shall be considered exclusive
of any other remedy, but the same shall be cumulative and shall be in addition
to every other remedy given herein, now or hereafter existing at law or in
equity or by statute, and every power and remedy given by this Lease to
Landlord may be exercised from time to time and as often as occasion may arise
or as may be deemed expedient. No delay or omission of Landlord to exercise any
right or power arising from any default shall impair any such right or power or
shall be construed to be a waiver of any such default or an acquiescence
therein.
SECTION 22.2. NO WAIVER. No waiver of any breach of any of the
covenants of this Lease shall be construed, taken or held to be a waiver of any
other breach, or a waiver, acquiescence in or consent to any further or
succeeding breach of the same covenant. The acceptance by Landlord of any
payment or Rent or other sums payable hereunder after the termination by
Landlord of this Lease or of Tenant's right to possession hereunder shall not,
in the absence of agreement in writing to the contrary by Landlord, be deemed
to restore this Lease or Tenant's right to possession hereunder, as the case
may be, but shall be construed as a payment on account and not in satisfaction
of damages due from Tenant to Landlord. Receipt of Rent by Landlord, with
knowledge of any breach of this Lease by Tenant or of any default by Tenant in
the observance or performance of any of the conditions or covenants of this
Lease, shall not be deemed to be a waiver of any provision of this Lease.
SECTION 22.3. EQUITABLE RELIEF. In the event of any breach or
threatened breach by Tenant of any of the agreements, terms, covenants or
conditions contained in this Lease, Landlord shall be entitled to enjoin such
breach or threatened breach and shall have the right to invoke any right and
remedy allowed at law or in equity or by statute or otherwise as though
re-entry, summary proceedings, and other remedies were not provided for in
this Lease.
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ARTICLE XXIII
SUBORDINATION TO MORTGAGES
SECTION 23.1. SUBORDINATION. Landlord may execute and deliver a
mortgage or trust deed in the nature of a mortgage (both sometimes hereinafter
referred to as "Mortgage") against the Premises or any portion thereof. This
Lease and the rights of Tenant hereunder, including, without limitation,
Tenant's rights under Articles XXXIII and XXXIV hereof, shall automatically,
and without the requirement of the execution of any further documents, be and
are hereby made expressly subject and subordinate at all times to the lien of
any Mortgage now or hereafter encumbering any portion of the Improvements, and
to all advances made or hereafter to be made upon the security thereof; provided
the holder of said Mortgage agrees in writing not to disturb the rights of the
Tenant under this Lease so long as Tenant is not in default hereunder. Tenant
agrees to execute and deliver such instruments subordinating this Lease to the
lien of any such Mortgage as may be requested in writing by Landlord from time
to time. Notwithstanding anything to the contrary contained herein, any
mortgagee under a Mortgage may, by notice in writing to the Tenant, subordinate
its Mortgage to this Lease.
SECTION 23.2. MORTGAGE PROTECTION. Tenant agrees to give the holder of
any Mortgage, by registered or certified mail, a copy of any notice of default
served upon the Landlord by Tenant, provided that prior to such notice Tenant
has received notice (by way of service on Tenant of a copy of an assignment of
rents and leases, or otherwise) of the address of such mortgagee and containing
a request therefor. Tenant further agrees that if Landlord shall have failed to
cure such default within the time provided for in this Lease, then said
mortgagee shall have an additional thirty (30) days after receipt of notice
thereof within which to cure such default or, if such default cannot be cured
within that time, then such additional time as may be necessary, if, within
such thirty (30) days, any mortgagee has commenced and is diligently pursuing
the remedies necessary to cure such default (including but not limited to
commencement of foreclosure proceedings, if necessary to effect such cure).
Such period of time shall be extended by any period within which such mortgagee
is prevented from commencing or pursuing such foreclosure proceedings by reason
of Landlord's bankruptcy. Until the time allowed as aforesaid for said
mortgagee to cure such defaults has expired without cure, Tenant shall have no
right to, and shall not, terminate this Lease on account of default. This Lease
may not be modified or amended so as to reduce the rent or shorten the term, or
so as to adversely affect in any other respect to any material extent the
rights of the Landlord, nor shall this Lease be cancelled or surrendered,
without the prior written consent, in each instance, of the mortgagee.
ARTICLE XXIV
INDEMNITY AND WAIVER
SECTION 24.1. TENANT'S INDEMNITY. Tenant will protect, indemnify and
save Landlord, its partners, shareholders, employees, officers, directors,
agents and their respective successors and assigns harmless (if Landlord is a
trustee, the term "LANDLORD" for the purposes of this Article XXIV only, shall
include the trustee and all beneficiaries of the trust) from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses (including without limitation, reasonable attorneys' fees and
expenses) imposed upon, incurred by or asserted against Landlord by reason of
(a) any accident, injury to or death or persons or loss of or damage to
property occurring on or about the Premises or any part thereof or the
adjoining properties, sidewalks, curbs, streets or ways, or resulting from an
act or omission of Tenant or anyone claiming by, through or under Tenant; (b)
any failure on the part of Tenant to perform or comply with any of the terms of
this Lease or any other agreements affecting the Premises; (c) the use,
occupation, condition, or operation of the Premises or any part thereof; or (d)
performance of any labor or services or the furnishing of any materials or
other property in respect of the Premises or any part thereof. In case any
action, suit or proceeding is brought against Landlord by reason of any such
occurrence. Tenant will, at Tenant's sole expense, resist and defend such
action, suit or proceeding, or cause the same to be resisted and defended.
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SECTION 24.2. WAIVER OF CLAIMS. Tenant waives all claims it may have
against Landlord and Landlord's agents for damage or injury to person or
property sustained by Tenant or any persons claiming through Tenant or by any
occupant of the Premises, or by any other person, resulting from any part of
the Premises becoming out of repair, or resulting from any accident on or about
the Premises or resulting directly or indirectly from any act or neglect of any
person, including Landlord to the extent permitted by law. This Section 24.2.
shall include, but not by way of limitation, damage caused by water, snow,
frost, steam, excessive heat or cold, sewage, gas, odors, or noise, or caused
by bursting or leaking pipes or plumbing fixtures, and shall apply equally
whether any such damage results from the act or neglect of Tenant or of any
other person, including Landlord to the extent permitted by law and whether
such damage be caused or result from anything or circumstance above mentioned
or referred to, or to any other thing or circumstance whether of a like nature
or of a wholly different nature. All Tenant's Equipment and other personal
property belonging to Tenant or any occupant of the Premises that is in or on
any part of the Premises shall be there at the risk of Tenant or of such other
person only, and Landlord shall not be liable for any damage thereto or for the
theft or misappropriation thereof.
ARTICLE XXV
SURRENDER
SECTION 25.1. CONDITION. Upon the termination of this Lease whether
by forfeiture, lapse of time or otherwise, or upon the termination of Tenant's
right to possession of the Premises, Tenant will at once surrender and deliver
up the Premises to Landlord, broom clean, in the same order, condition and
repair as on the Commencement Date, reasonable wear and tear, damage by fire
and other casualty not caused by Tenant excepted. "Broom clean" means free
from all debris, dirt, rubbish, personal property of Tenant, oil, grease, tire
tracks or other substances, inside and outside of the Improvements and on the
grounds comprising the Premises. Any damage caused by removal of Tenant from
the Premises, including any damages caused by removal of tenant's equipment as
herein defined, shall be repaired and paid for by Tenant prior to the
expiration of the Term.
All Alterations temporary or permanent, excluding Tenant's Equipment,
in or upon the Premises placed there by Tenant, shall become Landlord's
property and shall remain upon the Premises upon such termination of this Lease
by lapse of time or otherwise, without compensation or allowance or credit to
Tenant, unless Landlord requests their removal. If Landlord so requests
removal of said additions, hardware, alterations or improvements and Tenant
does not make such removal by the termination of this Lease. Landlord may
remove the same and deliver the same to any other place of business of Tenant
or warehouse same, and Tenant shall pay the cost of such removal, delivery and
warehousing to Landlord on demand.
SECTION 25.2 REMOVAL OF TENANT'S EQUIPMENT. Upon the termination of
this Lease by lapse of time, or otherwise, Tenant may remove Tenant's Equipment
provided, however, that Tenant shall repair any injury or damage to the
Premises which may result from such removal. If Tenant does not remove
Tenant's Equipment from the Premises prior to the end of the Term, however
ended, Landlord may, at its option, remove the same and deliver the same to any
other place of business of Tenant or warehouse the same, and Tenant shall pay
the cost of such removal (including the repair of any injury or damage to the
Premises resulting from such removal), delivery and warehousing to Landlord on
demand or Landlord may treat tenant's equipment as having been conveyed to
Landlord with this Lease as a Bill of Sale, without further payment or credit
by Landlord to Tenant.
SECTION 25.3 HOLDOVER. If Tenant retains possession of the Premises
or any part thereof after the termination of the Term, by lapse of time and
otherwise, then Tenant shall pay to Landlord monthly rent, at one hundred and
fifty percent (150%) of the rate payable for the month immediately preceding
said holding over (including increases for additional rent which Landlord may
reasonably estimate), computed on a per-month basis, for each month or part
thereof (without reduction for any such partial month) that Tenant thus remains
in possession,
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and in addition thereto, Tenant shall pay Landlord all damages, consequential
as well as direct, sustained by reason of Tenant's retention of possession.
Alternatively, upon Tenant's retention of possession in excess of thirty (30)
days or more, at the election of Landlord expressed in a written notice to
Tenant and not otherwise, such retention of possession shall constitute a
renewal of this Lease for one (1) year, at a rental equal to one hundred twenty
(120) percent of the Rent during the previous year. The provisions of this
paragraph do not exclude the Landlord's rights of re-entry or any other right
hereunder. Any such extension or renewal shall be subject to all other terms
and conditions herein contained.
ARTICLE XXVI
COVENANT OF QUIET ENJOYMENT
SECTION 26.1. COVENANT OF QUIET ENJOYMENT. Landlord covenants that
Tenant, on paying the Rent and all other charges payable by Tenant hereunder,
and on keeping, observing and performing all the other terms, covenants,
conditions, provisions and agreements herein contained on the part of Tenant to
be kept, observed and performed, all of which obligations of Tenant are
independent of Landlord's obligations hereunder, shall, during the Term,
peaceably and quietly have, hold and enjoy the Premises subject to the terms,
covenants, conditions, provisions and agreement hereof free from hindrance by
Landlord or any person claiming by, through or under Landlord.
ARTICLE XXVII
NO RECORDING
SECTION 27.1. NO RECORDING. This Lease shall not be recorded.
ARTICLE XXVIII
NOTICES
SECTION 28.1. NOTICE. All notices, consents, approvals to or demands
upon or by Landlord or Tenant desired or required to be given under the
provisions hereof, shall be in writing. Any notices or demands from Landlord
to Tenant shall be deemed to have been duly and sufficiently given if a copy
thereof has been personally served, forwarded by expedited messenger or
recognized overnight courier service with evidence of delivery or mailed by
United States registered or certified mail in an envelope properly stamped and
addressed to Tenant at Tenant's Mailing Address, or at such other address as
Tenant may theretofore have furnished by written notice to Landlord. Any
notices or demands from Tenant to Landlord shall be deemed to have been duly
and sufficiently given if forwarded by expedited messenger or recognized
overnight courier service evidence of delivery or mailed by United States
registered or certified mail in an envelope properly stamped and addressed to
Landlord at Landlord's Mailing Address, with a copy to Mark S. Richmond, Katz
Randall & Weinberg, 200 North LaSalle Street, Suite 2300, Chicago, Illinois
60601, or at such other address as Landlord amy theretofore have furnished by
written notice to Tenant. The effective date of such notice shall be the date
of actual delivery, except that if delivery is refused, the effective date of
notice shall be the date delivery is refused.
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ARTICLE XXIX
COVENANTS RUN WITH LAND
SECTION 29.1. COVENANTS. All of the covenants, agreements,
conditions and undertakings in this Lease contained shall extend and inure to
and be binding upon the heirs, executors, administrators, successors and
assigns of the respective parties hereto, the same as if they were in every
case specifically named, and shall be construed as covenants running with the
Land, and wherever in this Lease reference is made to either of the parties
hereto, it shall beheld to include and apply to, wherever applicable, the
heirs, executors, administrators, successors and assigns of such party.
Nothing herein contained shall be construed to grant or confer upon any person
or persons, firm, corporation or governmental authority, other than the parties
hereto, their heirs, executors, administrators, successors and assigns, any
right, claim or privilege by virtue of any covenant, agreement, condition or
undertaking in this Lease contained.
SECTION 29.2. RELEASE OF LANDLORD. The term "Landlord" as used in
this Lease, so far as covenants or obligations on the part of Landlord are
concerned, shall be limited to mean and include only the owner or owners at the
time in question of the fee of the Premises, and in the event of any transfer
or transfers of the title to such fee, Landlord herein named (and in the case
of any subsequent transfers or conveyances, the then grantor) shall be
automatically freed and relieved, from and after the date of such transfer or
conveyance, of all personal liability as respects the performance of any
covenants or obligations on the part of Landlord contained in this Lease
thereafter to be performed; provided that any funds in the hands of such
Landlord or the then grantor at the time of such transfer, in which Tenant has
an interest, shall be turned over to the grantee, and any amount then due and
payable to Tenant by Landlord or the then grantor under any provisions of this
Lease, shall be paid to Tenant.
ARTICLE XXX
ENVIRONMENTAL MATTERS
SECTION 30.1. HAZARDOUS MATERIALS. Tenant agrees that it will not
use, handle, generate, treat, store or dispose of, or permit the use, handling,
generation, treatment, storage or disposal of any Hazardous Materials (as
hereinafter defined) in, on, under, around or above the Premises or the Project
now or at any future time and will indemnify, defend and save Landlord harmless
from any and all actions, proceedings, claims, costs, expenses and losses of
any kind, including, but not limited to, those arising from injury to any
person, including death, damage to or loss of use or value of real or personal
property, and costs of investigation and cleanup or other environmental
remedial work, which may arise in connection with the existence of Hazardous
Materials on the Premises occurring or caused in whole or in part during the
Term hereof. The term "HAZARDOUS MATERIALS," when used herein, shall include,
but shall not be limited to, any substances, materials or wastes that are
regulated by any local governmental authority, the state where the Premises or
the Project is located, or the United States of America because of toxic,
flammable, explosive, corrosive, reactive, radioactive or other properties that
may be hazardous to human health or the environment, including without
limitation, above or underground storage tanks, flammables, explosives,
radioactive materials, radon, petroleum and petroleum products, asbestos, urea
formaldehyde foam insulation, methane, lead-based paint, polychlorinated
biphenyl compounds, hydrocarbons or like substances and their additives or
constituents, pesticides and toxic or hazardous substances on materials of any
kind, including without limitation, substances now or hereafter defined as
"hazardous substances," "hazardous materials," "toxic substances" or "hazardous
wastes" in the following statues, as amended: the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. Section 9601, ET
SEQ., "CERCLA"); the Hazardous Materials Transportation Act (49 U.S.C. Section
1801, ET SEQ., "HMTA"); the Toxic Substances Control Act (15 U.S.C. Section
2601, ET SEQ., "TSCA"); the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901, ET SEQ., "RCRA"); the Clean Air Act (42 U.S.C. Section 7401 ET
SEQ., "CAA"); the Clean Water Act (33 U.S.C. Section 1251, ET SEQ., "CWA"); the
Rivers and Harbors Act, (33 U.S.C. Section 401 ET SEQ., "RHA"); the Emergency
Planning and Community Right-to-Know Act of 1986 (41 U.S.C.
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11001 ET SEQ., "EPCRA"), the Federal Insecticide, Fungicide and Rodenticide Act
(7 U.S.C. 136 to 136y, "FIFRA"); the Oil Pollution Act of 1990 (33 U.S.C. 2701
ET SEQ., "OPA"); and the Occupational Safety and Health Act (29 U.S.C. 651 ET
SEQ., "OSHA") ; and any so-called "Superlien Law"; and in the regulations
promulgated pursuant thereto, and any other applicable federal, state or local
law, common law, code, rule, regulation, order, policy or ordinance, presently
in effect or hereafter enacted, promulgated or implemented, or any other
applicable governmental regulation imposing liability or standards of conduct
concerning any hazardous, toxic or dangerous substances, waste or material, now
or hereafter in effect.
SECTION 30.2. CONDUCT OF TENANT. Attached hereto as EXHIBIT "E" is a list
of all Hazardous Materials which Tenant shall use on the Premises as of the
Commencement Date ("Approved Hazardous Materials"). The use of any Hazardous
Materials on the Premises which are not Approved Hazardous materials is strictly
prohibited. Tenant may request Landlord"s written approval for additions to the
list of Approved Hazardous Materials, which approval shall be in Landlord"s sole
land absolute discretion. In connection with Tenant"s use, transport, storage,
treatment or disposal of any Hazardous materials, including the Approved
Hazardous Materials;
(a) Tenant shall, at its own cost and expense, comply with all
environmental laws relating to hazardous or toxic materials;
(b) Tenant shall (i) not dispose of any Hazardous Materials in
dumpsters or trash containers; (ii) not discharge any Hazardous Materials
into drains or sewers; (iii) not cause or allow the release, discharge,
emission or run-off of any Hazardous Materials to air, to surface waters,
to the land, to ground water, whether directly or indirectly; (iv) at
Tenant"s own cost and expense arrange for the lawful transportation and
off-site disposal of all Hazardous Materials generated by Tenant; (v)
provide secondary containment around all Hazardous materials storage
containers, storage facilities and above ground storage tanks; (vi) conduct
all necessary environmental inspections, such as, but not limited to,
asbestos inspections prior to any renovation or demolition, as required by
40 CFR Part 61 and provide copies of all such reports to the Landlord;
(vii) comply with all reporting requirements under any local, state or
federal ordinance, statute or regulation, such as, but not limited to,
toxics inventory reporting under the Emergency Planning and Community
Right-to-Know Act, the provisions under 40 CFR Part 61, or various
regulations controlling the emissions into the atmosphere of volatile
organic compounds and provide copies of all such reports and notifications
to Landlord; (viii) use only highly skilled people to address all
environmental issues associated with the leasehold, that such people and
all employees of the Tenant shall receive all required training or
certification under any local, state or federal law specifically mentioned
or alluded to in Section 30.1 of the Lease;
(c) Tenant shall promptly provide Landlord with copies of all
communications, permits or agreements with any governmental authority or
agency (federal, state or local) or any private entity relating in any way
to the violation or alleged violation of any Environmental Laws by Tenant
or to any violation of Tenant"s obligations under subparagraph (b) above;
(d) Landlord and Landlord"s agents and employees shall have the right
to enter the Premises and/or conduct appropriate tests at reasonable times
and upon reasonable advance notice for the purpose of ascertaining that
Tenant complies with all applicable laws, rules or permits relating in any
way to the presence of Hazardous Materials on the Premises and/or the
Project; and
(e) Upon the written request of Landlord no more frequently than once
every year, or on any other occasion in the event that Landlord in good
faith has reason to believe an environmental problem exists at the
Premises. Tenant shall provide Landlord the results of appropriate tests of
air, water and soil to demonstrate (i) that Tenant is in compliance with
all applicable laws, rules or permits relating in any way to the presence
of any Hazardous Materials on the Premises or the Project and (ii) the lack
of any releases, discharges or emissions.
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<PAGE> 31
If the presence, release, threat of release, placement on or in the
Premises and/or the Project or the generation, transportation, storage,
treatment, or disposal at the Premises and/or the Project of any Hazardous
Materials occurs or is caused in whole or in part during the Term of this Lease
by any acts or omissions of Tenant, its employees, contractors, invitees or
anyone acting by or through Tenant or in any way related to Tenant's use or
occupancy, gives rise to liability (including, but not limited to, a response
action, remedial action, or removal action) under any environmental laws or
common law theory, including, but not limited to nuisance, strict liability,
negligence and trepass, Tenant shall promptly take any and all remedial and
removal action necessary to clean up the Premises and/or the Project containing
such Hazardous Materials and mitigate exposure to liability arising from the
Hazardous Materials, whether or not required by law.
SECTION 30.3. TENANT'S ENVIRONMENTAL INDEMNITY. Tenant does hereby
indemnify, defend and hold hamless Landlord and its agents and their respective
officers, directors, beneficiaries, lenders, shareholders, partners, agents and
employees and their respective successors and assigns from all fines, suits,
procedures, claims liabilities, damages (including consequential damages) and
actions of every kind, and all costs associated therewith (including reasonable
attorneys', experts' and consultants' fees and costs of testing) arising out of
or in any way connected with any deposit, spill, discharge or other release of
Hazardous Materials that occurs or is caused in whole or in part during the
Term of this Lease, at or from the Premises and/or the Project, or which arises
at any time from (i) Tenant's failure to provide all information, make all
submissions, and take all steps required by all applicable governmental
authorities; (ii) any Hazardous Materials on, in, under or affecting all or any
portion of the Premises and/or the Project or the groundwater as a result of
events that took place during the Term of this Lease; (iii) any violation by
Tenant or claim of a violation by Tenant of any governmental law, statute,
rule, regulation, ordinance, requirement, decree, order or judgment now or
hereafter in effect relating to public health, safety, protection of the
environment or any Hazardous Material; (iv) the imposition of any lien for
damages caused by, or the recovery of any costs for, the remediation cleanup of
Hazardous Material as a result of events that took place during the Term of
this Lease; (v) costs of removal of any and all Hazardous Material from all or
any portion of the Premises and/or the Project, which Hazardous Material were
placed on the Premises and/or the Project during the Term of this Lease; (iv)
costs incurred to comply, in connection with all or any portion of the Premises
and/or the Project, with all governmental regulations with respect to Hazardous
Materials on, in, under or affecting the Premises and/or the Project, which
Hazardous Materials were placed on the Premises and/or the Project during the
Term of this Lease; or (vii) any spills, discharges, leaks, escapes, releases,
dumping, transportation, storage, treatment or disposal of any Hazardous
Substances which occur during the Term of this Lease, but only to the extent
that such Hazardous Materials originated from or were or are located on the
Premises and/or the Project. Tenant's obligations and liabilities under this
Article XXX shall survive the expiration of this Lease.
SECTION 30.4. LANDLORD'S RIGHT TO ENTER PREMISES. Landlord shall have
the right and privilege (but not the obligation) to enter the Premises to make
inspections and other tests (including, but not limited to, drilling) of its
condition, including, but not limited to, air, soil and groundwater sampling
and other inspections for Hazardous Materials. In the event any Hazardous
Materials are discovered during the inspections, Tenant shall reimburse
Landlord for the cost of all inspections and tests in addition to its liability
under Section 30.3.
SECTION 30.5. TENANT'S NOTIFICATION REQUIREMENTS. Notwithstanding
anything to the contrary contained in Article XXVIII of this Lease, Tenant
agrees to provide immediate telephone notification to Landlord in the event of
any release of Hazardous Materials in any manner within or outside of the
Premises. Tenant shall further utilize its reasonable efforts to report to
Landlord any other release of Hazardous Materials within or outside of the
Premises by any party other than Tenant.
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<PAGE> 32
ARTICLE XXXI
SECURITY DEPOSIT
SECTION 31.1. SECURITY DEPOSIT. Tenant agrees to deposit with
Landlord, upon the execution of this Lease, the Security Deposit as security
for the full and faithful performance by Tenant of each and every term,
provision, covenant and condition of this Lease. If Tenant defaults in respect
to any of the terms, provisions, covenants and conditions of this Lease
including, but not limited to, payment of all rental and other sums required to
be paid by Tenant hereunder. Landlord may use, apply or retain the whole or any
part of the security deposited for the payment of such rent in default, for any
sum which Landlord may expend or be required to expend by reason of Tenant's
default including, without limitation, any damages or deficiency in the
reletting of the Premises, whether such damages or deficiency shall have
accrued before or after re-entry by Landlord. If any of the security deposit
shall be so used, applied or retained by Landlord at any time or from time to
time, Tenant shall promptly, in each such instance, on written demand therefor
by Landlord, pay to Landlord such additional sums as may be necessary to
restore the security deposit to the original amount set forth in the first
sentence of this section. If Tenant shall fully and faithfully comply with all
the terms, provisions, covenants and conditions of this Lease, the security
deposit, or the balance thereof, shall be returned to Tenant after the
following: (a) the time fixed as the expiration of the Term of this Lease; (b)
the removal of Tenant from the Premises; (c) the surrender of the Premises by
Tenant to Landlord in accordance with this Lease; and (d) final detemination of
all amounts payable by Tenant hereunder and payment of same. Except as
otherwise required by law, Tenant shall not be entitled to any interest on the
aforesaid security deposit. In the absence of evidence satisfactory to Landlord
of an assignment of the right to receive the security deposit or the remaining
balance thereof, Landlord may return the security deposit to the original
Tenant, regardless of one or more assignments of this Lease.
ARTICLE XXXII
MISCELLANEOUS
SECTION 32.1. CAPTIONS. The captions of this Lease are for convenience
only and are not to be construed as part of this Lease and shall not be
construed as defining or limiting in any was the scope or intent of the
provisions hereof.
SECTION 32.2. SEVERABILITY. If any covenant, agreement or condition of
this Lease or the application thereof to any person, firm or corporation or to
any circumstances, shall to any extent be invalid or unenforceable, the
remainder of this Lease, or the application of such covenant, agreement or
condition to persons, firms or corportions or to circumstances other than those
as to which it is invalid or unenforceable, shall not be affected thereby. Each
covenant, agreement or condition of this Lease shall be valid and enforceable
to the fullest extent permitted by law.
SECTION 32.3. APPLICABLE LAW. This Lease shall be construed and
enforced in accordance with the laws of the state where the Premises are
located.
SECTION 32.4. AMENDMENTS IN WRITING. None of the covenants, terms or
conditions of this Lease, to be kept and performed by either party, shall in
any manner be altered, waived, modified, changed or abandoned, except by a
written instrument, duly signed, acknowledged and delivered by the other party.
SECTION 32.5. RELATIONSHIP OF PARTIES. Nothing contained herein shall
be deemed or construed by the parties hereto, nor by any third party, as
creating the relationship of principal and agent or of partnership, or of joint
venture by the parties hereto, it being understood and agreed that no provision
contained in this Lease nor
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<PAGE> 33
any acts of the parties hereto shall be deemed to create any relationship other
than the relationship of Landlord and Tenant.
SECTION 32.6. BROKERAGE. Landlord and Tenant each warrant that it has
no dealings with any real estate broker or agent in connection with this lease
other than Landlord's Broker and Tenant's Broker, and each covenants to pay,
hold harmless and indemnify the other from and against any and all cost,
expense or liability for any compensation, commissions and charges claimed by
any other broker or other agent with respect to this Lease or the negotiation
thereof arising out of any acts of such party.
SECTION 32.7. NO ACCORD AND SATISFACTION. No payment by Tenant or
receipt by Landlord of a lesser amount than the monthly rent herein stipulated
and additional rent shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice
to Landlord's right to recover the balance of such rent or pursue any other
remedy in this Lease provided.
SECTION 32.8. JOINT EFFORT. The preparation of this Lease has been a
joint effort of the parties hereto and the resulting documents shall not,
solely as a matter of judicial construction, be construed more severely against
one of the parties than the other.
SECTION 32.9. WAIVER OF JURY TRAIL. Tenant hereby waives a jury trial
in action brought by Landlord hereunder. If Landlord commences any proceeding
for nonpayment of rent or any other sum due to be paid by Tenant under this
Lease, Tenant hereby agrees that Tenant will not impose any counterclaim of any
nature or description in any such proceeding, provided however, such agreement
of Tenant shall not be construed as a waiver of the right of Tenant to assert
such claim in a separate action or actions brought by Tenant.
SECTION 32.10. TIME. Time is of the essence of this Lease, and all
provisions herein relating thereto shall be strictly construed.
SECTION 32.11. LANDLORD'S CONSENT. Landlord's granting of any consent
under this Lease, or Landlord's failure to object to any action taken by Tenant
without Landlord's consent required under this Lease, shall not be deemed a
waiver by Landlord of its rights to require such consent for any further
similar act by Tenant. No waiver by Landlord of any other breach of the
covenants of this Lease shall be construed, taken or held to be a waiver of any
other breach or to be a waiver, acquiescence in or consent to any further or
succeeding breach of the same covenant. None of the Tenant's covenants under
this Lease, and no breach thereof, shall be waived, altered or modified except
by a written instrument executed by Landlord.
SECTION 32.12. NO PARTNERSHIP. Landlord is not, and shall not be
deemed to be, in any way or for any purpose, the partner, employer, principal,
master or agent of or with Tenant.
SECTION 32.13. LANDLORD'S RIGHTS. This Lease does not grant any
rights to light or air over or about the Premises. Landlord specifically
excepts and reserves to itself the use of any roofs, the exterior and
structural components of the Building, all rights to the land and improvements
below the improved floor level of the Building, to the improvements and air
rights above the Building and to the improvements and air rights located
outside the demising walls of the Building and to such areas within the
Building required for installation of utility lines and other installations
and to such portions of the Premises necessary to access, maintain and repair
same, and no rights with respect thereto are conferred upon Tenant.
SECTION 32.14. LANDLORD'S LIABILITY. Notwithstanding anything to the
contrary herein contained, there shall be absolutely no personal liability
asserted or enforceable against Landlord or on any persons, firms or entities
who constitute Landlord with respect to any of the terms, covenants, conditions
and provisions of this Lease, and Tenant shall, subject to the rights of any
mortgagee, look solely to the interest of Landlord, its successors and
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<PAGE> 34
assigns in the Premises for the satisfaction of each and every remedy of Tenant
in the event of default by Landlord hereunder; such exculpation of personal
liability is absolute and without any exception whatsoever. If the entity
constituting Landlord is a partnership, Tenant agrees that the deficit capital
account of any such partner shall not be deemed an assset or property of said
partnership.
SECTION 32.15. GUARANTY. This Lease shall not be considered effective
unless and until such time as Meridian National Corporation has executed and
delivered to Landlord a Guaranty of Lease in the form of EXHIBIT "F" hereto.
ARTICLE XXXIII
RENEWAL OPTION
SECTION 33.1. RENEWAL OPTION. Tenant shall have the option
(hereinafter referred to as the "RENEWAL OPTION") to renew the Initial Term for
all of the Premises as of the expiration date of the Initial Term, for two (2)
additional periods of three (3) years (each of said renewals is a "RENEWAL
TERM") upon the following terms and conditions:
A. Tenant gives Landlord written notice of its exercise of
the applicable Renewal Option at least six (6) months prior to the
expiration of the Term.
B. Tenant is not in default under this Lease beyond the
expiration of any cure periods either on the date Tenant delivers the
notice required under 33.1(A) above or at any time thereafter prior to the
commencement of the Renewal Term so exercised.
C. All of the terms and provisions of this Lease (except
this Article XXXIII) shall be appllicable to the Renewal Term, except that
Base Rent for each Renewal Term shall be determined as follows:
1. Commencing on the first day of the first Renewal Term,
Base Rent shall equal the lesser of (i) the product of (a) the Base
Rent payable by Tenant for the previous Rent Year TIMES (b) 1.03, or
(ii)(a) the Base Rent payable by Tenant for the previous Rent Year
TIMES (b) the percentage that the CPI has increased from the month of
October, 1995 through the last month of the Rent Year immediately
preceding the first Renewal Term. In addition, the Base Rent during
each subsequent Rent Year of the first Renewal Term shall increase in
the same manner as set forth in Section 5.1.
2. Commencing on the first day of the second Renewal
Term, annual Base Rent shall be equal to Landlord's determination of
Fair Value (as hereinafter defined). In addition, the Base Rent for
each subsequent Rent Year of the second Renewal Term shall increase on
the first day of each subsequent Rent Year by an amount equal to one
hundred four percent (104%) of the Base Rent payable during the
immediately preceding Rent Year. For purposes of this Section, "FAIR
VALUE" shall lmean an amount determined as follows:
(i) the annual Base Rent (excluding, without limitation, any
payments for taxes, expenses, tenant improvements, or security
deposits) collected by Landlord from all tenants in the Building
during the previous Rent Year (the "Cumulative Base Rent");
divided by
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<PAGE> 35
(ii) the monthly average of the square footage of the
Building (where tenants are in occupancy and paying
rent) leased during the previous Rent Year (the
"Average Leased Space");
multiplied by
(ii) the number of square feet in the Premises.
By way of example:
If the Cumulative Base Rent is $4,000,000.00
and the Average Leased Space is 900,00 square
feet; then Tenant's Annual Base Rent for the first Rent
Year of the second Renewal Term is:
$4,000,000.00 X 56,940 = $253,066.67
----------------------
900,000
Annual Base Rent for the second Rent Year of
the second Renewal Term is:
$253,066.67 X 104% = $263,189.34
Annual Base Rent for the last Rent Year of
the second Renewal Term is:
$263,189.34 X 104% = $273,716.91
SECTION 33.2 "AS IS" CONDITION. Tenant agrees to accept the
Premises to be covered by this Lease during the Renewal Term in an "as is"
physical condition and Tenant shall not be entitled to receive any allowance,
credit, concession or payment from Landlord for the improvement thereof.
SECTION 33.3. AMENDMENT. In the event Tenant exercised the
Renewal Option, Landlord and Tenant shall mutually execute and deliver an
amendment to this Lease reflecting the renewal of the Term on the terms herein
provided, which amendment shall be executed and delivered promptly after the
determination of Rent to be applicable to the Renewal Term as hereinabove
provided.
SECTION 33.4. TERMINATION. The Renewal Options herein granted
shall automatically terminate upon the earliest to occur of (i) the expiration
or termination of this Lease, (ii) the termination of Tenant's right to
possession of the Premises (iii) any assignment or subletting by Tenant, or
(iv) the failure of Tenant to timely or properly exercise the Renewal Option.
SECTION 33.5. NO COMMISSIONS. Landlord and Tenant acknowledge
and agree that no real estate brokerage commission or finder's fee shall be
payable by Landlord in connection with any exercise with any exercise by Tenant
of the Renewal Option herein contained.
ARTICLE XXXIV
-------------
RIGHT OF FIRST REFUSAL
----------------------
SECTION 34.1. RIGHT OF FIRST REFUSAL. Landlord agrees that if,
at any time during the term of this Lease, Landlord receives an offer to lease
space in the Building contiguous to the Premises or the space
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<PAGE> 36
designated as____________________in the Building (collectively, the "Designated
Space"), Tenant shall have the first right and option to lease the Designated
Space on the following terms and conditions:
(a) If Landlord obtains a bona fide offer to lease the Designated
Space from any third party (exclluding other tenants in the Building acting
under a right of first refusal, option to lease, or other similar right or
option in place as of the date of this Lease), Landlord shall submit such
offer to Tenant and Tenant shall have the right, within three (3) business
days, after receipt of the offer, to lease the Designated Space on the same
terms and conditions as set forth in the offer. If Tenant does not give
Landlord notice in writing within said three (3) day period that Tenant
intends to exercise its rights hereunder, then Landlord shall be free to
lease the Designated Space on the terms and conditions set forth in the
offer submitted to Tenant.
(b) In the event Tenant exercises its right to lease the Designated
Space, a default under the lease for the Designated Space shall constitute
a default under this Lease and a default under this Lease shall constitute
a default under the lease for the Designated Space.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
set forth above.
LANDLORD: CENTERPOINT PROPERTIES CORPORATION, a Maryland
- -------- corporation
By: /s/ Robert L. Stovall
-------------------------------------------
Its: C.O.O.
By: /s/ Paul S. Fisher
-------------------------------------------
Its: C.F.O.
TENANT: OTTAWA RIVER STEEL CO., INC., an Ohio corporation
- ------
By: /s/ Joseph Klobuchar, Jr.
-------------------------------------------
Its: Vice President
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<PAGE> 1
Exhibit 10.19
LICENSE AGREEMENT
THIS AGREEMENT is made this 7th day of September, 1995, by and between
ASTER, INC., an Ohio corporation with its principal place of business at 160
Glaser Street, Fairborn, Ohio 45324 ("ASTER"), and ENVIRONMENTAL PURIFICATION
INDUSTRIES COMPANY, an Ohio general partnership, the partners of which are
wholly owned subsidiaries of Meridan National Corporation with its principal
place of business at 2111 Champlain Street, Toledo, Ohio 43611 ("EPI").
WITNESSETH:
WHEREAS, ASTER owns the rights to certain mechanical and chemical
processes, formulae, and technology represented by U.S. patents Nos. 5,160,628
and 5,254,263 on file with the U.S. Patent and Trademark Office and other
processes, formulae, and technology within the scope thereof for processing
paint sludge into putties, powder, filler, and other compounding ingredients
which can be utilized in the manufacture of cements, sealants, coatings, and
other related materials for uses such as automotive and industrial sealants,
adhesives, and coatings (collectively, the "ART"); and
WHEREAS, in addition to the ART, ASTER and/or its President, Michael J.
Gerace ("Gerace") have certain knowledge, skills and expertise in the
application of the ART; and
WHEREAS, EPI is in the business of processing paint sludge into powdered
products, primarily thorough the licensed use of technology under U.S. Patent
No. 4,980,030 for the processing of paint sludge into powdered products; and
WHEREAS, ASTER, and EPI desire that the ART be brought to full
commercialization in the business of converting paint waste into useful
materials for sale to the sealant and related industries; and
WHEREAS, ASTER, and EPI desire to enter into this Agreement to provide for
the licensing of the ART to EPI by Aster upon the terms and conditions
contained herein.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties do hereby agree as follows:
1
<PAGE> 2
ARTICLE I
LICENSE RIGHTS
1.1 GRANT OF LICENSE. ASTER hereby grants to EPI the exclusive right and
license to utilize the ART, and any reissue or extension thereof, in such a
manner and to the extent which EPI deems necessary for commercial manufacturing
of recycled paint polymer ("RPP") from raw paint sludges, both within and
without the United States, subject only to Article 1.2 hereof.
1.2 EXCEPTIONS. EPI's rights obtained from the license granted in Article
1.1 above is subject to the following exceptions:
(a.) Other party rights:
(i.) in Mexico subject to the license previously granted to
Insudtrias Resistol dated July 13, 1992, for the remaining
term of that license, a true and correct copy of which,
consisting of 9 pages is attached hereto as Exhibit A, and
(ii.) such rights, if any, as may be agreed to between ASTER and Texo
Corp. which agreement is subject to EPI's prior approval as
described in Article 15.2 below
(b.) ASTER shall retain rights to the ART for the following:
(i.) the processing by ASTER at the Pilot Plant referred to in
Article 7.1 hereof, of paint sludges provided only by EPI to
ASTER; and
(ii.) the testing of formulations and proving out of potential paint
sludge materials in connection with experimental and
developmental programs. The results of such testing and
proving out will be deemed to be part of the "New
Technologies" referred to in Article 3.1 hereof.
1.3. MINIMUM VOLUMES. EPI agrees to process raw paint sludge using the
ASTER ART at a volume rate shown in Schedule 1 attached. This minimum volume
requirement is subject to the following assumptions:
a) the ART is capable of processing this volume in a commercially
acceptable manner.
b) EPI has the manufacturing capability to process the scheduled volumes
as set forth on Schedule 1, or in the alternative, will use its
reasonable efforts to complete the financing and construction of an
"ASTER system" at its Toledo facility, in a timely fashion.
2
<PAGE> 3
C) The use of the ART by EPI, EPI's sublicensees, or other third party
permitted to use the ART under this agreement does not place them
in a position where they are operating in violation of any
governmental regulations or laws. In the unlikely event the use of
the ART is suspended for any reason relative to government
regulations or laws, then all minimum payments and volume
requirements are suspended until such time as EPI, et al. is
permitted to reestablish an active use of the ART. If and when
such a suspension is invoked, then ASTER and EPI will meet at the
earliest possible date to determine a method and action plan to
resolve the reason for the suspension of operations.
1.4. REMOVAL OF TEXO'S RIGHTS. On an annual basis, EPI will reimburse
ASTER up to $20,000 per year for a five year period to be applied to the
settlement to be made between ASTER and Texo to remove Texo from having any
rights or potential rights to the use of ASTER technology (see Article 15.2 of
this agreement). If the total settlement is less than $100,000, then the
amount agreed upon between ASTER and Texo will be evenly divided by the five
year period.
The first payment of $20,000 under this Article 1.4 will be due and payable on
the date which is ten days after the date on which a payment of up to $20,000
annually is due Texo as defined in a settlement agreement which has been
approved by ASTER and EPI under Article 15.2 and is executed by ASTER and Texo.
In the event ASTER should default in its obligations under this ASTER/EPI
agreement, then the amount of money already paid by EPI under Article 1.4 to
ASTER will be immediately refunded to EPI by ASTER and any further obligation to
ASTER by EPI in this Article 1.4 will be cancelled.
1.5. FOREIGN OPERATIONS. When sub-licensed foreign operations are
established, by EPI or by ASTER with EPI's approval, both ASTER and EPI will
share on an equal (50/50) basis all up front cash, Licensing fees, royalties
and any other similar fee income generated by the foreign business
relationship(s).
In the event EPI incurs extraordinary expenses in establishing the foreign
licensee operation, then such expenses will be offset, after mutual agreement
between ASTER/EPI, through the suspension of payable royalties and/or fee
revenue from the foreign licensee until the amount of such extraordinary
expenses is recovered. Normal expenses incurred by both ASTER and EPI to
establish the licensee shall be the responsibility of each party incurring such
normal expenses.
3
<PAGE> 4
ARTICLE 2
PAYMENTS & ROYALTIES
2.1 PAYMENTS. In consideration for ongoing work performed by ASTER to
commercialize and to continue to refine and market the ART, EPI agrees to pay
ASTER a monthly payment for technical and manufacturing services cited in
Article 6, Article 7, and Appendix A of this agreement. The monthly payment
shall be the greater of $20,000 ("minimum monthly payment"), or the amount
generated by the aggregate sum of:
a. The royalties generated by article 2.2.
b. The technical service fees cited in article 6.
C. The processing fees cited in article 7.
The only portion of the minimum monthly payment that will be deemed to
constitute a royalty shall be the amount of royalties for such month under (a)
above. To the extent that the monthly payment exceeds the aggregate sum of
(a), (b) and (c) above for a given month, the excess to the extent not utilized
per Article 2.3, shall be deemed to be a payment in consideration of ASTER's
having maintained the capability to perform services during such month.
2.2 ROYALTIES. In consideration for the exclusive license granted
in Article I above, EPI shall pay ASTER the following monthly royalties:
(i) for each pound of raw sludge processed by EPI, and/or any
sublicensee of EPI, by the ART, ASTER shall receive:
2 cents ($0.02) up to 7,500,000 pounds processed annually
1 cent ($0.01) from 7,500,001 pounds to 15,000,000 pounds
processed annually
.75 cents ($0.0075) from 15,000,001 pounds to 20,000,000
pounds processed annually
.50 cents ($0.0050) for anything over 20,000,001 pounds
processed annually
(ii) and a royalty of 4.0 cents ($0.04) for each pound of RPP
sold by EPI and/or any sublicensee of EPI using the ART.
(iii) Subject to the assumptions of Article 1.3, the minimum
royalties due ASTER for any given year shall be equal to the
amount generated by applying the rates shown in Article
2.1a and 2.2 (i) (ii) to the volumes cited in Schedule 1.
(iv) If for any given year EPI and ASTER do not process raw
sludge with the ART to the minimum volume shown in Schedule
1, then notwithstanding the requirements of Article 1.3, the
exclusive license will be maintained by EPI paying the full
royalty due by applying Article 2.1a and 2.2 (i) (ii)
against the full volume figure
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shown in Schedule I for that given year.
(v) The royalty rates cited above will remain fixed for a period
of 36 months from the completion of start-up of the
commercial unit installed in an EPI facility. After this
period, the royalty rates shall be subject to annual
adjustments based on the "Consumer Price Index - All Urban
Consumers, All items" (1982-84 = 100) ("CPI"), published
by the Bureau of Labor Statistics of the United States
Department of Labor, for the "All Cities" Average.
Adjustment fractions developed from the CPI will be applied
to the royalty rates listed in Article 2.2 (i) and Article
2.2 (ii) to determine the royalty rates in effect after the
36 month period specified above. For the first adjustment
fraction, the index number of the CPI for the 25th month
after successful start-up shall be the denominator and the
index number for the 36th month after start-up shall be the
numerator. The royalty rates in effect for the next twelve
months after the 36th month of successful start-up shall be
the rates listed in Article 2.2 (i) and Article 2.2 (ii)
multiplied by this fraction. The royalty rate will be
adjusted each year thereafter based on the percentage
changes in such index between the first and twelfth month of
the prior year. No adjustment pursuant to this Article 2.2
(v) shall reduce the royalty rates below those listed in
Article 2.2 (i) and 2.2 (ii).
2.3 "LOOK-BACK ADJUSTMENT". In the event the monthly payment
requirement cited in a, b, and c of Article 2.1 is less than the minimum
monthly payment, then the amount paid in excess of the monthly payment will be
carried forward for two months, and will be applied to any aggregate sum that
exceeds the minimum monthly payment requirements for either of the two months.
In no event shall the excess of any month be carried forward beyond two
additional months.
2.4 MARKETING OF RPP. After the conclusion and signing of the
agreement between ASTER/EPI, both parties will enter into discussions with H.M.
Royal to transfer the current ASTER/H.M. Royal marketing agreement (dated July
27, 1994) to EPI. ASTER will also assist EPI to negotiate a more favorable
sales commission than the current agreement calls for. Any sales of RPP made
by ASTER/Gerace will be considered part of the service for which payments and
royalties are required in Article 2 of the ASTER/EPI agreement. Under Article
2, Royalties, the $0.04 per pound royalties payable to ASTER for each pound of
RPP sold is based on a RPP sale price of $0.30 per pound. Any sale of RPP
below the $0.30 per pound estimate will be subject to EPI approval and a
possible RPP royalty adjustment with ASTER's consent.
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2.5 REPORTS, RECORDS, AND REMITTANCE. Within thirty (30) days after
the end of each month during the term hereof, reports shall be made by EPI to
ASTER setting forth the number of pounds of raw sludge processed and of RPP
sold under the license herein granted, during the preceding month. EPI's
remittance for the full amount of royalties due, less the minimum paid, for
such month shall accompany such reports. EPI agrees to keep books and records
of the number of pounds of raw sludge processed and RPP sold under the license
herein granted; and ASTER and EPI shall have the right to examine each others
books and records at all reasonable times to the extent and insofar as is
necessary to verify the accuracy of the above-mentioned reports. Should
either party be found in error, the error shall be corrected and appropriate
action taken within 30 days. Minimum monthly royalties are due on the last day
of each month. For the purpose of royalty remittance to ASTER for RPP sold,
the royalty is payable within ten (10) days after collection of the receivable
from the RPP customer.
2.6 TERM OF ROYALTIES. The term for the payment of royalties shall be
in accordance with Article 5 of this agreement.
ARTlCLE 3
IMPROVEMENTS TO THE ART
3.1 USE OF IMPROVEMENTS; NEW TECHNOLOGIES. ASTER, Gerace, and EPI
agree that in the event either or any of them, or any affiliate of either or
any of them, should make any Improvements upon the ART, or any part thereof, or
develop any New Technologies, whether patented or not, they shall promptly
communicate the same to the other party who shall have the automatic right to
use the Improvements and/or New Technologies as though they were licensed under
this Agreement. Such Improvements and/or New Technologies then becoming part
of the ART licensed hereunder. Improvements and/or New Technologies shall mean
any processes, formulae, and technology which come within the scope of (i.e.
infringe on) the ART, or any part thereof, or which are similar to and/or an
extension thereof, including variations or logical extensions or improvements
upon the ART, or any part thereof, including without limitation, cases where new
features are added, deleted, or where technology is changed to produce
alternative technologies with properties and characteristics that are, or have
the potentials of being similar in function to the current ART. ASTER shall
patent all such Improvements and/or New Technologies to the extent they
constitute patentable technology. If ASTER does not intend to promptly apply
for a patent for any Improvements and/or New Technologies, EPI shall be notified
in writing within 30 days after said communication referred to above and, if
requested by EPI, ASTER and Gerace shall assign the rights to such Improvements
and/or New Technologies to EPI. EPI shall then have the option to patent the
Improvements and/or New Technologies. In the event that EPI makes any
Improvements on the ART, if requested by ASTER, EPI will assign the rights to
such Improvements to ASTER, who shall then patent them to the extent they
constitute
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patentable technology. Such Improvements will then become part of the ART
which is licensed to EPI hereunder. No additional royalties shall be due for
the use of any Improvements and/or New Technologies.
3.2. PATENT APPLICATIONS. ASTER agrees to diligently prosecute patent
applications for any part of the ART which are currently not issued and to pay
the final fees when said applications shall be allowed in order that patents
may issue thereon.
3.3. TERM. The term of this Article 3 shall be in accordance with
article 5 of this agreement.
ARTICLE 4
VALIDITY OF THE ART
4.1 VALIDITY. Assuming satisfaction of the condition in Section 15.2,
ASTER and Gerace jointly and severally hereby represent and warrant to EPI as
follows:
(a.) that ASTER is the owner of the entire right, title, and interest
in and to the ART, including but not limited to U.S. Patents Nos.
5,160,028 and 5,254,263 on file with the U.S. Patent and Trademark
Office, together with any reissues or extensions thereof;
(b.) that ASTER owns the ART and that ASTER has the sole right to grant
license rights to the ART; and has not granted rights to the ART
to any other party except as noted in Article 1.2 (a) of this
agreement
(c.) that no part of the ART has infringed, or will infringe, in any
way, upon any patents or other intellectual property rights of any
third person(s).
4.2 INDEMNIFICATION BY ASTER AND GERACE. ASTER and Gerace agree to
indemnify and hold EPI harmless against and in respect of:
(a.) Any and all claims, demands, expenses, losses, damages or
deficiencies of any nature resulting from, arising out of or
attributable to (i) any material misrepresentation by ASTER, (ii)
any material breach of or untruth of any warranty or
representation made by ASTER, and/or (iii) nonfulfillment of any
material agreement on the part of ASTER.
(b.) Any and all actions, demands, judgments, costs, interests and
legal expenses, including without limitation attorney fees, cost
of investigation and other expenses incident to any of the
foregoing.
4.3. INDEMNIFICATION BY EPI. EPI hereby agrees to indemnify and hold
ASTER harmless against and in respect of:
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(a.) Any and all claims, demands, expenses, losses, damages or
deficiencies of any nature resulting from, arising out of or
attributable to (i) any material misrepresentation by EPI, (ii)
any material breach of or untruth of any warranty or
representation made by EPI, and/or (iii) nonfulfillment of any
material agreement on the part of EPI.
(b.) Any and all actions, demands, judgments, costs, interests and
legal expenses, including without limitation attorney fees, cost
of investigation and other expenses incident to any of the
foregoing.
4.4. DEFENSE. ASTER shall defend at its own expense any suit for
patent infringement brought against it, and/or EPI arising out of the use of
the ART or any part thereof. In the event of any such suit, threatened or
actual, ASTER shall immediately notify EPI thereof and afford EPI the right of
consultation in connection therewith and keep EPI fully advised from tme to
time of the progress and status of any such suit threatened or actual.
EPI shall have the option of joining with ASTER in the defense and conduct
of any such suit and in the event of so joining, EPI will assume its own
expenses in connection therewith.
4.5 RIGHT TO SUE. ASTER is hereby given the first right during the
term of this Agreement to sue infringers of the ART, or any part thereof, and
EPI will be given an opportunity to participate in the suit. If the recovery
or recoveries from such suit(s) exceeds the expenses of such suit(s), the
expenses of both ASTER and EPI shall be paid out of the recovery or recoveries
with the excess recovery or recoveries being shared equally by EPI and ASTER.
If such recovery or recoveries do not exceed such expenses, ASTER shall retain
the recovery or recoveries to apply to the expenses and pay its share of the
remaining expenses out of its own account. Should ASTER fail to take the
necessary steps by litigation or otherwise to stop infringement of the ART,
then EPI may conduct at its own expense, and with the right to all recoveries,
such litigation as it may deem necessary, provided that EPI has first given a
written thirty (30) day notice to ASTER of its intention to initiate such
litigation, and provided further, that ASTER fails during said thirty (30) day
period to indicate its willingness to initiate and actively pursue said
suggested ligation or fails to initiate said suggested litigation within two
(2) months after said notice.
ARTICLE 5
TERM
The term of this Agreement, unless sooner terminated as hereinafter
provided, shall be perpetual in nature.
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ARTICLE 6
TECHNICAL SERVICES
6.1 TECHNICAL SERVICES PROVIDED. During the continued development
and implementation of the Art towards full commercialization and further
business expansion, certain work will be required and performed by ASTER and
Gerace. This work includes but is not limited to:
(a) completing the pilot plant at 160 Glaser Street, Fairborn, Ohio
45324 ("Pilot Plant") at ASTER by refining the manufacturing
equipment;
(b) defining and optimizing the Pilot process to achieve maximum
efficiency;
(c) evaluating and developing paint sludge waste streams provided by
EPI into commercially acceptable materials for use in existing and
new RPP products;
(d) sample preparations, testing and other technical support including
marketing the RPP products and assisting the EPI sales effort with
customer presentations;
(e) assisting in the scale-up of the current process into a full scale
commercially economical system of production.
Details for contemplated initial technical services required for the completion
and final development of a commercial ASTER system are found in Appendix A
"ASTER/EPI Program Goals 1995/96".
6.2. TECHNICAL ASSISTANCE BEYOND COMMERCIALIZATION. EPI and ASTER will
continually and jointly develop on-going technical support requirements
after the start-up of a commercially operational "ASTER System" at an EPI
facility. Both ASTER and EPI expect there will be a service fee charged to
EPI for these services. The rates to be used are as follows and will be
adjusted using the same calculation formula as outline in Article 7.3 of this
agreement. EPI will be billed monthly for such pre-agreed upon technical
services provided by ASTER.
Rate/hr.
M.J. Gerace 75.00
-----
Laboratory 35.00
-----
Producton engineering 35.00
-----
Administrative time 15.00
-----
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In addition EPI will be billed by ASTER for reasonable out of pocket expenses.
Examples of these charges will include: laboratory materials costs, shipping,
Travel expenses (if necessary), special outside testing, etc. If any of these
included expenses exceed $300.00, or in the aggregate, EPI will be contacted
for pre-approval.
6.3. PRE-PRODUCTION EVALUATIONS. ASTER shall evaluate new streams of
raw sludge in its laboratory facility for $350/per test. A five gallon sample
of raw sludge will be required for the evaluation. ASTER shall furnish EPI with
written reports containing results of said evaluation within five (5) working
days from receipt of the physical sample and required paperwork.
ARTICLE 7
MANUFACTURING
7.1. PILOT PLANT. The Pilot Plant will be used solely by ASTER for
the purpose of producing RPP specialty products for sale to end users from
paint sludge provided by EPI and at the request of EPI as well as for the
development, testing and approval process of additional RPP family of products.
The parties shall agree on a mutually satisfactory budget of material produced.
The initial goals appear in Appendix A hereto. All proceeds from the sale of
RPP products produced by the pilot plant will go directly to EPI.
7.2. DRUMS TO ASTER. EPI will commit to providing drums of paint waste
sludge materials to ASTER for the purpose of continuing development. The number
of drums supplied per month will be offset against the $20,000 per month minimum
payment at the rate of $150.00 per drum, inclusive of all cost incurred by ASTER
to recycle the waste into saleable RPP.
When the amount of paint waste sludge is less than 133 drums per month, ASTER
personnel will utilize their time to work on the continuing development work to
establish the process and procedures to commercialize the ASTER system as
outlined in the government grant application of ASTER dated May 4, 1995 a
true and correct copy which was provided by ASTER to EPI and Appendix A. A
detail accounting of the time and progress will be reported at the end of
each month to EPI using the following fee schedule:
Rate/hr.
Laboratory 35.00
-----
Production engineering 35.00
-----
Administrative time 15.00
-----
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In addition EPI will be billed by ASTER for reasonable out of pocket expenses.
Examples of these charges will include: laboratory material costs, shipping,
travel expenses (if necessary), special outside testing, etc. If any of these
included expenses exceed $300.00, individually or in the aggregate, EPI will be
contacted for pre-approval.
7.3. CPI ADJUSTMENTS. The technical services rates stated in Article
6.2 and 7.2 will remain fixed for a period of 24 months from the signing of this
agreement. Thereafter, the rates shall be subject to adjustment based on the
published Consumer Price Index as defined in Article 2.2 (v). The adjustment
will be based on the difference in the published rate for the 25th month and
36th month after contract signing and will be in effect for the next 12 month
period. The royalty rate will be adjusted each year thereafter based on the
difference between the first and 12th month of the prior year.
7.4. PAYMENT TIMING. All payments made by EPI to ASTER under
Articles 2, 6 and 7 are to be paid within thirty (30) days of invoice.
ARTICLE 8
FINANCIAL MATTERS
8.1. FINANCIAL REPORTS. ASTER and EPI shall maintain monthly profit and
loss statements that meet with generally accepted accounting practices which at
a minimum, account for all expenses for their respective RPP operations. Such
statements shall be made available to each other within a reasonable period not
to exceed thirty (30) days after the end of each month.
8.2. COMPENSATION FOR PAST SERVICES RENDERED. EPI shall pay to ASTER
the sum of Twenty Thousand Dollars ($20,000.00) at time of signing of this
agreement to be used to compensate Gerace for services rendered to ASTER between
January 1, 1994 and July 31, 1994.
8.3. PRIOR COMPENSATION TO ASTER. The prepaid processing funding
provided by EPI in 1994 under the agreement dated June 21, 1994 will be repaid
to EPI through a working arrangement cited in Article 8.4 below.
8.4. OFFSET AGAINST FOREIGN RIGHTS. EPI is willing not to make demands
on ASTER for repayment of the $106,000 (approximately) debt ASTER owes to EPI
and will further agree to apply $26,500 against the debt for each foreign
business relationship that is established and successfully finalized with a
signed bona fide
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contact until all $106,000 is offset. When the total debt is offset,
there shall be no further offset of funds in regards to foreign rights and any
additional foreign country business relationships will be available to EPI
whether they are EPI or ASTER instigated. The loan shall not be an interest
bearing receivable from ASTER. In the event ASTER should be in default of
this Agreement the outstanding balance would be due and payable immediately.
ARTICLE 9
TERMINATION
9.1. TERMINATION BY EPI. If after twenty six (26) months after
June 21, 1994, EPI in its judgement is not making sufficient profits and on an
ongoing basis thereafter, EPI shall have the right to terminate this Agreement
by tendering written notice to ASTER. In this case EPI surrenders all rights to
the ART and technology including without limitation patent rights.
9.2 TERMINATION BY ASTER Should EPI fail to meet its financial
obligations to ASTER, as set forth in this Agreement then ASTER has the right to
terminate this agreement by tendering written notice to EPI. Under this
condition, EPI will have 30 days in which to remedy the deficiency. Should
EPI fail to correct the deficiency, then, EPI agrees to surrender all rights
to the ART and the technology including without limitation patent rights.
9.3 TERMINATION BY EITHER PARTY. Other than provided in 9.1 and 9.2, if
one party shall at any time commit any breach of any covenant, warranty, or
agreement herein contained, and shall fail to remedy any such breach within
thirty (30) days after written notice thereof by the other party, such other
party may at its option, and in addition to any other remedies that it may be
entitled to, cancel this agreement by notice in writing to such effect. In the
event this Agreement is terminated by EPI for any reason discussed in this
Article 9.3, then EPI's rights shall remain exclusive subject to the provisions
of Articles 1 and 2. except for the minimum payment cited in Article 2.1. In the
event this agreement is terminated by ASTER for any reason discussed in this
Article 9.3, then EPI's rights shall become non-exclusive subject to the
provisions of Article 2.
ARTICLE 10
RIGHTS OF FIRST REFUSAL
During the term of this Agreement EPI shall have the right of first
refusal to match the terms of any written offer received by ASTER or Gerace for
the corporation, or the ART, upon the same terms and conditions as set forth in
the third party offer. In this event, ASTER or Gerace will forward a complete
copy of the offer, and EPI must render a decision within sixty (60) days of its
receipt.
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ARTICLE 11
PERSONAL NATURE OF SERVICES
It is understood and agreed by the parties hereto that the personal
services of Gerace are an integral part of this Agreement. In the event that
Gerace is no longer affiliated with ASTER or is unable to provide the technical
services specified herein, Gerace agrees not to compete with EPI directly or
indirectly as an officer, employee, inventor, investor, owner or otherwise or
the ART for a period of three (3) years after the separation from service in any
market in which EPI does business. Additionally, in the event that Gerace is no
longer affiliated with ASTER or is unable to perform the technical services
specified herein, EPI shall have the right to decrease the royalties payable to
ASTER as follows:
(a) in the event that Gerace cannot perform due to death or
disability during the first four (4) years of this Agreement, EPI
shall only be required to pay ASTER fifty percent (50%) of the
Monthly Royalties referred to in Article 2 hereof, for the
remainder of this agreement.
(b) in the event that Gerace cannot perform due to death or
disability during any time after the first four (4) years of the
Agreement EPI shall only be required to pay ASTER seventy five
percent (75%) of the Monthly Royalties referred to in Article 2
hereof, for the remainder of this agreement.
(c) after the first ten (10) years of the Agreement, EPI shall be
required to pay full royalties to ASTER, regardless of whether
Gerace performs personal services or not.
(d) in the event that Gerace cannot perform due to any reason other
than death or disability during the first two (2) years of this
Agreement, EPI shall only be required to pay ASTER twenty five
percent (25%) of the royalties, referred to in Article 2 hereof,
for the remainder of this agreement.
(e) in the event Gerace cannot perform due to any reason other than
death or disability during any time after the first two (2) years
but before the first four (4) years of this Agreement, EPI shall
only be required to pay ASTER fifty percent (50%) of the
royalties referred to in Article 2 hereof, for the remainder of
this agreement.
(f) in the event Gerace cannot perform due to any reason other than
death or disability during any time after the first four (4)
years but before the first ten (10) years of this Agreement, EPI
shall only be required to pay ASTER seventy-five percent (75%) of
the Royalties referred to in Article 2
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hereof, for the remainder of this agreement
Further, the royalty in effect at the time immediately after the end of the
life of the last of the patents will be reduced by one-half. In no event shall
Gerace's failure to perform affect EPI's license rights under this Agreement.
ARTICLE 12
MINIMUM PAYMENTS AND ROYALTIES TO ASTER
It is understood by the parties that since ASTER is granting EPI an exclusive
license for the ART, the payments made from EPI to ASTER for services and
royalties (as set forth in Articles 1 and 2), are critical to ASTER's survival
and growth. In the event that EPI desires to reduce the minimum monthly payment
below $20,000 (as cited in Article 2.1 then:
(a) EPI shall notify ASTER 6 months in advance, in writing, that the
minimum monthly payments paid ASTER will fall below the amount set forth in
Article 2.1 (a).
(b) the license for the ART set forth in Article 1.1 shall become
non-exclusive at the end of the 6 months notice period.
(c) ASTER shall receive a minimum monthly royalty that shall be the
greater of:
i. The amount generated by the royalties defined
by Article 2.2 i and 2.2 ii or,
ii. The amount generated by the royalties cited by
article 2.2 i and 2.2 ii applied against
1,850,000/lbs. of raw paint sludge processed
annually and resulting RPP sold annually.
(d) Article 11, in its entirety, will be void.
(e) ASTER and EPI will meet during the 6 month notice period for the
purposes of concluding a renegotiation of Article 6 and 7 to
facilitate a nonexclusive relationship.
(f) Article 2.1 will be void.
(g) EPI shall maintain the exclusive right to all customer
relationships currently in existence involving the ART in effect
at the time this agreement becomes non-exclusive. Customers
shall be defined on a plant-by-plant basis for multiple plant
companies.
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ARTICLE 13
ASSIGNMENT
This Agreement and the rights and obligations of the parties hereunder
shall not be assigned without the prior written consent of the other party,
which consent shall not be unreasonably withheld, except as otherwise
specifically permitted hereunder. ASTER shall not sell any of its assets other
than in the ordinary course of business and ASTER or Gerace or Janet Gerace will
not sell or issue stock of ASTER, without first obtaining the written consent of
EPI.
13.1 SUBLICENSE. EPI is authorized to grant sublicenses of the ART
provided that ASTER has granted its prior written consent not to be unreasonably
withheld.
13.2 RESTRUCTURE. Should ASTER or EPI as a financial and/or operating
entity be restructed or be incorporated into any other new business structures,
then the newly assigned entity shall bear full responsibilities for this
Agreement
ARTICLE 14
NONDISCLOSURE AND NONUSE
14.1. CONFIDENTIALITY AGREEMENT. EPI and ASTER's obligation in regard to
nondisclosure and nonuse will be governed by the terms of the Confidentiality
Agreements dated May 23, 1994 and June 21, 1994 between the parties.
14.2. AFFIRMATIVE OBLIGATION. EPI understands ASTER's concern regarding
the protection of secrecy of the ART and RPP technology and the exclusive use of
materials, components, chemical reactions, formulations, processes and other
proprietary information.
ARTICLE 15
MISCELLANEOUS
15.1 AUTHORIZATION OF AGREEMENT The signatories hereto represent and
warrant to the other party that they have been duly authorized to execute this
Agreement on behalf of the respective parties for which they have executed this
Agreement.
15.2. The effectiveness of the Agreement is subsequent to the condition
subsequent that ASTER will be able to negotiate and execute with Texo an
agreement regarding the termination or continuation of Texo's rights with
respect to the ART, which agreement to the extent that it provides for a
termination of Texo's rights, will almost certainly require a payment from ASTER
to Texo. In order for ASTER to be able to make any such required payment, ASTER
and EPI acknowledge that it will be
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necessary for EPI to provide funds to ASTER (see Article 1.4 of this agreement).
Execution of such an agreement between Texo and ASTER shall be subject to EPI
approval, and any related Agreement between ASTER and EPI as to EPI providing
funds to ASTER shall be subject to the mutual consent of ASTER and EPI. If
ASTER shall not have entered into or at least is expeditially negotiating in a
good faith effort towards such an agreement with Texo prior to August 31, 1995,
then EPI's obligation to supply funds under Article 1.4 and 1 5.2 of this
agreement are waived.
15.3. EPI AUTHORITY. EPI hereby warrants and represents the following:
(i) EPI has the requisite power and authority to execute the
Agreement;
(ii) EPI has taken all necessary requisite partnership action,
including the obtaining of any consent of Meridian National
required by law or its certificate of partnership to
authorize the execution, delivery and performance to the
Agreement;
(iii) that EPI is not in default under any mortgage, agreement or
other instruments to which it is a party or by which it or
any of its property may be bound;
(iv) execution By EPI of the Agreement will not conflict with,
or result in the breach of, any material agreement to which
it is a party;
(v) there are no actions, suits or proceedings, pending, or to
the best of its knowledge threatened, which would challenge
the validity of the propriety of the transactions
contemplated by the Agreement or which could reasonably be
expected to result in any material adverse change in the
business, operations or financial condition of EPI or
Meridian/National;
(vi) EPI possesses all material licenses, approvals and consents
of federal, state and Local governments and regulatory
authorities as required to conduct properly its business.
15.4 ASTER AUTHORITY. ASTER, and Gerace hereby jointly and severally
warrants and represents the following:
(i) ASTER and Gerace have the requisite power and authority to
execute this Agreement;
(ii) ASTER and Gerace have taken all necessary requisite
corporate action, including the obtaining of any consent of
ASTER required by law to authorize the execution, delivery
and performance of the Agreement;
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(iii) ASTER or Gerace are not in default under any mortgage,
agreement or other instruments to which it is a party or by
which it or any of its property may be bound;
(iv) execution by ASTER and Gerace of the Agreement will not
conflict with, or result in the breach of, any material
agreement to which it is a party;
(v) there are no actions, suits or proceedings, pending, or to
the best of its knowledge threatened, which would challenge
the validity of the propriety of the transactions
contemplated by the Agreement or which could reasonably be
expected to result in any material adverse change in the
business, operations or financial condition of ASTER or
Gerace.
(vi) ASTER possesses all material licenses, approvals and
consents of federal, state and local governments and
regulatory authorities as required to conduct properly its
business.
ARTICLE 16
NOTICES
16.1 NOTICES AND COMMUNICATIONS. All notices and communications
provided for in this agreement shall be made in writing either by actual
delivery into the hands of the parties entitled to such notice or
communication or by mailing of the notice or communication in the United
States mails to the addresses stated below of the party entitled thereto by
certified or registered mail, return receipt requested.
16.2 ADDRESSES. All notices and communications herein shall be in
writing and mailed or delivered at the following addresses or at such address
as may have been otherwise designated in writing:
If to ASTER: ASTER, Inc.
160 Glaser Street
Fairborn, Ohio 45324
Attn: Michael J. Gerace
If to EPI: Environmental Purification Industries
2111 Champlain Street
Toledo, Ohio 43611
Attn: Bruce Maison
If to Gerace: Mr. Michael J. Gerace
320 E. Peach Orchard Avenue
Dayton, Ohio 45419
17
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
<TABLE>
<S> <C>
WITNESS: ASTER, INC.
/s/ David A. Walsh
- ------------------
By: /s/ Michael J. Gerace, President
----------------------------------
Michael J. Gerace, President
Date: September 7, 1995
- -----------------------
ENVIRONMENTAL PURIFICATION INDUSTRIES
/s/ James Rosino
- -----------------------
By: /s/ Bruce F. Maison, President
----------------------------------
Bruce F. Maison, President
Date: September 8, 1995
- -----------------------
"I, Michael J. Gerace, in consideration of the above parties entering into
this Agreement hereby agree to be bound by the covenants, conditions and
promises contained in those articles of this Agreement and its Appendix A
referencing the obligations of Michael J. Gerace."
/s/ Michael J. Gerace
------------------------
Michael J. Gerace
Date: September 7, 1995
------------------------
"I, Janet M. Gerace, in consideration of the above parties entering into
this Agreement hereby agree to be bound by the covenants, conditions and
promises contained in those articles of this Agreement referencing the
obligations of Janet M. Gerace."
/s/ Janet M. Gerace
------------------------
Janet M. Gerace
Date: September 7, 1995
------------------------
</TABLE>
18
<PAGE> 1
Exhibit 11
MERIDIAN NATIONAL CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year ended February 28 or 29
-----------------------------------
1996 1995 1994
PRIMARY EARNINGS PER SHARE ---- ---- ----
- --------------------------
Computation for Statements of Operations
- ----------------------------------------
<S> <C> <C> <C>
Earnings
Earnings (loss) before extraordinary gain ($1,498,814) ($1,352,642) $1,114,235
Deduct dividends on preferred stock 129,762 136,378 521,283
----------- ----------- ----------
Earnings (loss) applicable to common stock (1,628,576) (1,489,020) 592,952
before extraordinary gain
Extraordinary gain, net 149,206 226,276 --
----------- ----------- ----------
Earnings (loss) applicable to common stock ($1,479,370) ($1,262,744) $592,952
=========== =========== ==========
Shares
Weighted average common shares outstanding 2,638,126 2,423,864 1,366,613
Dilutive common stock equivalents -- -- 64,317
----------- ----------- ----------
Weighted average common shares and dilutive
common stock equivalents outstanding 2,638,126 2,423,864 1,430,930
=========== =========== ==========
Earnings (loss) per common share:
Earnings (loss) before extraordinary gain ($0.62) ($0.61) $0.41
Extraordinary gain, net 0.06 0.09 --
----------- ----------- ----------
Primary earnings (loss) per common share ($0.56) ($0.52) $0.41
=========== =========== ==========
Additional primary computation
------------------------------
Earnings (loss) as computed above:
Earnings (loss) applicable to common stock ($1,489,020)
before extraordinary gain
Extraordinary gain, net 226,276
===========
Earnings (loss) applicable to common stock ($1,262,744)
===========
Additional adjustment to weighted average
common shares outstanding:
Weighted average common shares and dilutive
common stock equivalents outstanding, as
calculated above 2,423,864
Add anti-dilutive common stock equivalents
outstanding (treasury stock method) 125,839
-----------
Weighted average common shares and common
stock equivalents outstanding, as adjusted 2,549,703
===========
Earnings (loss) per common share, as adjusted (a):
Earnings (loss) before extraordinary gain ($0.58)
Extraordinary gain, net 0.09
-----------
Primary earnings (loss) per common share ($0.49)
===========
</TABLE>
<PAGE> 2
MERIDIAN NATIONAL CORPORATION
COMPUTATION OF EARNINGS PER SHARE (Continued)
<TABLE>
<CAPTION>
Year ended February 28 or 29
-------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
FULLY DILUTED EARNINGS PER SHARE
--------------------------------
Computation for Statements of Operations
- ----------------------------------------
Earnings
Earnings (loss) before extraordinary gain ($1,498,814) ($1,352,642) $1,114,235
Deduct dividends on preferred stock 129,762 136,378 521,283
-------------------------------------
Earnings (loss) applicable to common stock (1,628,576) (1,489,020) 592,952
before extraordinary gain
Extraordinary gain, net 149,206 226,276 --
-------------------------------------
Earnings (loss) applicable to common stock ($1,479,370) ($1,262,744) $592,952
=====================================
Shares
Weighted average common shares outstanding 2,638,126 2,423,864 1,366,613
Dilutive common stock equivalents -- -- 65,796
-------------------------------------
Weighted average common shares and dilutive
common stock equivalents outstanding 2,638,126 2,423,864 1,432,409
=====================================
Earnings (loss) per common share:
Earnings (loss) before extraordinary gain ($0.62) ($0.61) $0.41
Extraordinary gain, net 0.06 0.09 --
-------------------------------------
Fully diluted earnings (loss) per common share ($0.56) ($0.52) $0.41
=====================================
Additional fully diluted computation
------------------------------------
Earnings
Earnings (loss) before extraordinary gain ($1,498,814) ($1,352,642)
Add interest on convertible note payable, net
of tax effect 54,000 42,000
-------------------------
Earnings (loss) before extraordinary gain, as adjusted (1,444,814) (1,310,642)
Deduct dividends on Series A preferred stock 36,000 25,202
-------------------------
Earnings (loss) applicable to common stock
before extraordinary gain (1,480,814) (1,335,844)
Extraordinary gain, net 149,206 226,276
-------------------------
Earnings (loss) applicable to common stock ($1,331,608) ($1,109,568)
=========================
Additional adjustment to weighted average
common shares outstanding:
Weighted average common shares and dilutive
common stock equivalents outstanding, as
calculated above 2,638,126 2,423,864
Add anti-dilutive common stock equivalents
outstanding (treasury stock method) -- 125,839
Add shares issued assuming conversion of Series B
preferred stock 51,688 51,688
Add shares issued assuming conversion of
convertible note payable 38,258 38,258
-------------------------
Weighted average common shares and common
stock equivalents outstanding, as adjusted 2,728,072 2,639,649
=========================
Earnings (loss) per common share, as adjusted (a):
Earnings (loss) before extraordinary gain ($0.54) ($0.51)
Extraordinary gain, net 0.05 0.09
-------------------------
Fully diluted earnings (loss) per common share ($0.49) ($0.42)
=========================
</TABLE>
<PAGE> 3
MERIDIAN NATIONAL CORPORATION
COMPUTATION OF EARNINGS PER SHARE (Continued)
(a) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an anti-dilutive result.
<PAGE> 1
Exhibit 21
MERIDIAN NATIONAL CORPORATION
LIST OF SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
State of Incorporation
Subsidiary or Organization
---------- ---------------------
<S> <C>
Ottawa River Steel Company Ohio
National Metal Processing, Inc. Michigan
Meridian Environmental Services, Inc. Michigan
National Purification, Inc. Ohio
MEPI Corp. Ohio
Environmental Purification Industries, Inc. Delaware
Environmental Purification Industries Company, Ohio
a general partnership 100% owned by
National Purification, Inc. and MEPI Corp.
</TABLE>
<PAGE> 1
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-3 No. 33-83590) of Meridian National Corporation and in the related
prospectus, and in the Registration Statements (Form S-8 Nos. 33-72256 and
333-961) pertaining to the 1990 Non-qualified and Incentive Stock Option Plan
and to the Amended and Restated 1987 Non-employee Directors' Stock Option Plan
of Meridian National Corporation of our report dated May 20, 1996, with respect
to the consolidated financial statements of Meridian National Corporation
included in this Annual Report (Form 10-K) for the year ended February 29, 1996.
ERNST & YOUNG LLP
Toledo, Ohio
June 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED BALANCE SHEETS OF MERIDIAN NATIONAL CORPORATION AS OF FEBRUARY 29,
1996 AND RELATED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED
FEBRUARY 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 176,667
<SECURITIES> 0
<RECEIVABLES> 8,221,356
<ALLOWANCES> 249,700
<INVENTORY> 8,860,574
<CURRENT-ASSETS> 17,416,437
<PP&E> 12,295,459
<DEPRECIATION> 5,403,083
<TOTAL-ASSETS> 25,253,266
<CURRENT-LIABILITIES> 18,859,550
<BONDS> 5,488,791
<COMMON> 27,551
0
1,175,320
<OTHER-SE> (297,946)
<TOTAL-LIABILITY-AND-EQUITY> 25,253,266
<SALES> 56,606,860
<TOTAL-REVENUES> 56,606,860
<CGS> 50,331,656
<TOTAL-COSTS> 56,815,470
<OTHER-EXPENSES> (179,639)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,469,843
<INCOME-PRETAX> (1,498,814)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,498,814)
<DISCONTINUED> 0
<EXTRAORDINARY> 149,206
<CHANGES> 0
<NET-INCOME> (1,349,608)
<EPS-PRIMARY> (0.56)
<EPS-DILUTED> (0.56)
</TABLE>
