SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD ___ TO ___.
COMMISSION FILE NUMBER 1-9843
MORGAN PRODUCTS LTD.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1095650
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
469 McLaws Circle, Williamsburg, Virginia 23185
(Address of principal executive offices) (Zip Code)
(757) 564-1700
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock $.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Aggregate market value of voting stock of the Registrant held by
non-affiliates as of February 19, 1999: $26,805,508.
Number of shares of Common Stock outstanding as of February 19, 1999:
10,360,830 shares; 2,386 shares are held in treasury.
Documents incorporated by reference - None.
<PAGE>
TABLE OF CONTENTS
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Page
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PART I
ITEM 1. Business..................................................................
ITEM 2. Properties................................................................
ITEM 3. Legal Proceedings.........................................................
ITEM 4. Submission of Matters to a Vote of Security Holders.......................
PART II ....................................................................................
ITEM 5. Market for Morgan's Common Equity and Related Stockholder Matters.........
ITEM 6. Selected Financial Data...................................................
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk................
ITEM 8. Financial Statements and Supplementary Data...............................
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure................................................................
PART III....................................................................................
ITEM 10. Directors and Executive Officers of Morgan................................
ITEM 11. Executive Compensation....................................................
ITEM 12. Security Ownership of Certain Beneficial Owners and Management............
ITEM 13. Certain Relationships and Related Transactions............................
PART IV ....................................................................................
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..........
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
THE COMPANY
Morgan Products Ltd. ("Morgan" or the "Company"), founded in 1855, is
one of the largest wholesale distributors of millwork and other specialty
building products in the United States, serving primarily the residential
construction market. Morgan offers its customers a full range of products that
are sold through 28 Company-operated distribution centers. Morgan sells its
distributed products primarily to lumber yards (which, in turn, supply the
end-user), directly to builders or other end-users and to home center chains and
other volume retailers. Morgan currently operates distribution centers in 19
states and primarily serves markets in the Northeast, Midwest and Southeast
regions of the United States.
After determining that Morgan had better opportunities for growth in
millwork distribution, Morgan sold its manufacturing operation ("Manufacturing")
on February 2, 1998. With the sale of Manufacturing, Morgan exited completely
from the wood stile and rail door manufacturing business. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Strategic Initiatives."
On February 19, 1999, Morgan purchased certain of the assets and assumed
certain of the liabilities of Adam Wholesalers, Inc. and certain of its
subsidiaries (collectively, "Adam") in their business of distributing windows,
doors and other millwork products, headquartered in Cincinnati, Ohio. Adam,
which had annual sales of approximately $345 million in 1998, operated 13
distribution centers in 11 states, primarily in the Midwest, Northeast and
Western regions of the United States. The purpose of the acquisition was to
create the critical mass necessary to enable Morgan to develop strategic
alliances with both its suppliers and its customers. Management believes that
the acquisition will enable Morgan to coordinate the actions required to take
costs out of the distribution channel and make it more efficient by combining
product and geographic synergies, best practices and technologies of Morgan and
Adam into one of the largest wholesale distributors of building products in the
United States. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Strategic Initiatives."
On March 10, 1999, Morgan entered into an Agreement of Merger with
Andersen Windows, Inc. ("Andersen Windows"), a subsidiary of Andersen
Corporation ("Andersen"), and its wholly-owned subsidiary, Andersen
Distribution, Inc. ("Andersen Sub"), pursuant to which Andersen Sub and Morgan
will be merged (the "Merger"), resulting in Morgan, as the surviving
corporation, becoming a wholly-owned subsidiary of Andersen Windows. The
consideration to be received by Morgan's stockholders in the Merger will be
$4.00 per share of Morgan common stock, subject to adjustment until the
effective date of closing, under certain limited circumstances. The Merger is
subject to, among other things, approval of the stockholders of Morgan and the
applicable regulatory agencies.
Morgan is headquartered in Williamsburg, Virginia. Management believes
that Morgan's business now and for all prior periods constitutes a single
industry segment.
<PAGE>
BUSINESS
Morgan sells specialty building products, including Andersen window
systems, through 28 Company-operated distribution centers.
The following is a list of Company-operated distribution centers as of
February 20, 1999:
Baton Rouge, Louisiana
Birch Run, Michigan
Carlisle, Pennsylvania
Charlotte, North Carolina
Chattanooga, Tennessee
Cincinnati, Ohio
Dayton, Ohio
Decatur, Illinois
Denver, Colorado (2 Centers)
Gainesville, Virginia
Greenville, South Carolina
Harrisburg (Mechanicsburg), Pennsylvania
Indianapolis, Indiana
Kansas City (Shawnee), Kansas
Louisville, Kentucky
Lynchburg, Virginia
Kirkwood, New York
Nashville, Tennessee (2 centers)
Nitro, West Virginia
Phoenix, Arizona
St. Louis, Missouri
Toledo, Ohio
West Chicago, Illinois
West Columbia (Cayce), South Carolina
Wilmington (Newark), Delaware
Woodbury Heights, New Jersey
Morgan's distribution centers warehouse, assemble, and ship products to
customers, provide sales, service and marketing functions and maintain vehicles
to deliver products to customers who are generally within a 150 mile radius of
each center. The distribution centers are operated as stand-alone profit
centers. Major supplier purchasing negotiations are controlled centrally in
order to obtain the best prices for total volume purchased and to minimize
inventory levels.
Many of the products distributed by Morgan, including Andersen products,
are modified and assembled at Morgan's distribution centers before shipping.
Such products include pre-hung doors and door systems; bay and bow window
systems; and half-round, octagon, and specialty-shaped windows. Morgan's
assembly operations allow the builder, contractor or consumer to install
pre-assembled units at a lower cost than modifying and assembling component
parts at the job site. Morgan has also developed the capability to provide
complete job site installation for repair and remodeling projects.
STRATEGIC INITIATIVES
Morgan believes that it is well-positioned in the millwork industry to
continue to establish a leading distribution network through its ability to add
value to its products and services. Morgan intends to capitalize on the
well-known brand names for the quality products it distributes, its outstanding
reputation for customer service, its multi-channel distribution capabilities and
access to financial resources, which Morgan believes are substantial competitive
advantages. In recent years, however, Morgan was hurt by operational and
financial difficulties at Manufacturing relating to the consolidation of
manufacturing operations and the late delivery of the high-speed door assembly
line, rising raw materials prices, Morgan's customer base shifting its
requirements to a less profitable product mix, and poor financial results.
<PAGE>
Since 1994, Morgan has adopted and continued to implement a
comprehensive strategic plan to respond aggressively to industry consolidation,
to restore profitability and to regain industry leadership. As part of this
plan, Morgan has initiated efforts designed to focus on its core business and
outperform the competition. Those efforts include reducing costs, expanding
focus on financial analysis, increasing market penetration through acquisitions
and so-called "greenfield distribution start-up operations," improving operating
performance at existing distribution centers and improving its information
management systems.
One major step in executing Morgan's strategic plan was the sale of
Manufacturing on February 2, 1998 to JELD-WEN, inc. ("JELD-WEN") Although
Manufacturing had made significant progress operationally by the middle of 1997,
the disappointing financial performance of the Manufacturing continued and
Morgan made the decision to divest. With the sale of Manufacturing, Morgan has
exited completely from the wood stile and rail door manufacturing business.
Morgan's management, who were devoting a significant amount of time and energy
to a business that was not a strategic fit with Morgan's long-term growth plans,
are now able to focus their efforts solely on Morgan's distribution operations.
An important part of Morgan's strategic plan is to expand its
distribution capabilities. Morgan believes that there is significant opportunity
for growth through acquisitions which capitalize on industry consolidation.
Morgan is focused on regions with high population growth. In addition, Morgan is
evaluating opportunities that may enable it to take costs out of the
distribution channel by consolidating acquisitions through Morgan's existing
facilities. Other opportunities for growth are in the further penetration of its
existing markets, the establishment of new Company-operated distributorships and
the addition of new product lines for distribution through Company-operated
distribution centers.
In implementing its plan to expand, in August 1996, Morgan acquired
substantially all of the business and assets of Tennessee Building Products,
Inc. ("TBP"), a regional millwork and specialty building products distributor
headquartered in Nashville, Tennessee. With the TBP acquisition, Morgan expanded
its operations to include Nashville and Chattanooga, Tennessee; Charlotte, North
Carolina; Greenville, South Carolina; and Huntsville, Alabama.
In April 1997, Morgan entered the Louisiana market in a joint effort
with Andersen to increase market share in the region. Morgan was awarded sole
distribution rights for Andersen's products in Louisiana, as well as in most
counties in Mississippi and some in Texas. This was a "greenfield" distribution
start-up operation, which allows Morgan to serve the Baton Rouge market on a
one-step basis (selling directly to the end-user) and serving the rest of the
region primarily through two-step operations (selling to lumberyard dealers who
in turn sell to the end-user).
In July 1997, Morgan acquired Wahlfeld Manufacturing Company
("Wahlfeld"), a distributor of millwork and other building products, located in
Peoria and Aurora, Illinois. Acquiring this two-step distributor enabled Morgan
to substantially reduce the basic cost structure of its business in this market
by consolidating inventories and operating functions into Morgan's existing
Illinois locations. The Wahlfeld acquisition also allowed Morgan to become the
sole distributor for the Andersen product lines in most of Illinois. In
addition, Morgan expanded its market area in the Carolinas by opening a sales
office and showroom in Pinehurst, North Carolina in October 1997. Although
Morgan had historically sold into this market, establishing a sales office and
showroom has enabled Morgan to better serve this growth area with high-end,
quality products.
<PAGE>
In February 1999, Morgan completed its purchase of Adam. With the Adam
acquisition, Morgan expanded its operations in the Northeast, Mid-Atlantic,
Midwest, Colorado and Arizona markets. The Adam acquisition will allow Morgan to
combine Morgan's and Adam's product and geographic synergies, best practices and
technologies to become one of the largest wholesale distributors of building
products in the United States.
As the final major element of its strategic initiatives, Morgan is
committed to improving its management information systems. A new Company-wide
integrated management information system had been selected and was in the
process of being implemented as of December 31, 1998. As of December 31, 1998
Morgan had incurred a cost of approximately $4.7 million in connection with such
system, including $2.5 million in software and $2.2 million in hardware. With
the purchase of Adam, completed on February 19, 1999, Morgan decided to
terminate its implementation of the new management information system and,
instead, to merge the majority of Morgan's current operations into Adam's
existing management information system (the "Adam System"). After reviewing both
the Adam System and the proposed new system, management determined that the Adam
System would be better suited for Morgan's business and be less expensive to
implement. By implementing the better technological and strategic Adam System,
Morgan should be able to realize future cost savings by the reduction of capital
needed to convert only the ten Morgan distribution centers existing at the time
of the Adam acquisition instead of having to convert a total of twenty-two
locations to the proposed new system. Accordingly, the Company will take a
charge of approximately $2.5 million during the first quarter of 1999 relating
to the write-off of the costs incurred for the implementation of the proposed
Morgan system.
Management believes that the steps taken by the Company since the
inception of its strategic plan have successfully built a foundation for an
improved future. Morgan's decision to focus on the distribution business,
including its acquisition of Adam, has made Morgan one of the largest
distributors of millwork products in the United States. This has created
critical mass for Morgan which will enable Morgan to develop strategic alliances
with both its suppliers and its customers and to coordinate the actions required
to take costs out of the distribution channel and make it more efficient. The
Company intends to aggressively continue pursuing completion of the plan with
initiatives to complement, expand and advance the steps previously taken.
PRODUCTS
Morgan distributes a full range of millwork and other specialty building
products, including window, door and entrance systems, wood, steel and composite
doors, moldings, stair parts, mantels, shutters and screens, which are
distributed to dealers, contractors and builders in the residential construction
industry. Morgan's major millwork lines include Andersen premium window systems,
JELD-WEN, Woodgrain and Simpson wood stile and rail doors, ThermaTru steel and
composite doors and Premdor and JELD-WEN flush and molded doors.
Andersen products, which are sold under the "Andersen" trademark,
accounted for approximately 53.4%, 41.6% and 40.6% of Morgan's total sales in
1998, 1997 and 1996 of $383.2 million, $412.2 million and $373.3 million,
respectively. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations." Andersen produces high-quality, premium-priced
windows and has been a technological leader in developing energy-efficient
window systems. Andersen has informed Morgan that it sells its products
exclusively through distributors such as Morgan. Morgan's agreement with
Andersen provides that Andersen can terminate Morgan's distributorship at any
time upon sixty (60) days notice. Morgan believes that such a termination
provision is Andersen's standard arrangement with its distributors.
<PAGE>
An important part of Morgan's distribution process is the assembly and
alteration work that is done at the distribution centers to prepare products for
delivery to the customer and for efficient installation at the building site. At
these centers, window and door systems are assembled and modified according to
customer specifications.
MARKETS
Virtually all of the products distributed by Morgan are part of the
millwork (fabricated wood products) industry, which includes wood (including
vinyl-clad wood) windows, wood doors, moldings, stairways and mantels. In 1996,
based on information published by the United States Department of Commerce, the
estimated manufacturers' sales volume of wood windows totaled $2.7 billion,
estimated sales volume of wood doors totaled $3.4 billion and other millwork
(including moldings, stairways and mantels) totaled $4.3 billion (to date, 1997
data is unavailable). These products are sold into the improvement, maintenance
and repair markets and the new construction markets.
According to Department of Commerce data, overall sales in the
residential improvement, maintenance and repair markets grew from $46 billion in
1980 to an estimated $125.6 billion in 1998, representing an increase of 173%.
New construction single- and multi-family housing starts were cyclical over the
same period, with a high of approximately 1.8 million units in 1986 and a low of
slightly over 1.0 million units in 1991. The 1991 level was the lowest level of
overall housing starts since 1945. According to the National Association of Home
Builders, single-family housing starts were 1.3 million in 1998 and
single-family housing starts are expected to be approximately 1.2 million in
1999.
Morgan has established a presence in a number of regions of the United
States, including its primary markets - the Northeast, Mid-Atlantic, Midwest and
Southeast, Colorado and Arizona. As a result, Morgan's financial condition is
not tied to a single geographic region's economy or other characteristics. The
risks to Morgan posed by the cyclical nature of the new residential construction
market are somewhat offset by the less cyclical nature of the residential
improvement, maintenance and repair market.
SALES AND MARKETING
Morgan is involved in new residential construction, residential
improvement, maintenance and repair markets. Certain of Morgan's suppliers
advertise both to the trade and directly to the consumer through nationwide
print and other media. Morgan's marketing programs emphasize the strengthening
of customer relationships and providing exceptional customer service. Marketing
activities include cooperative advertising programs with key vendors, assisting
customers in designing sales programs directed toward the customers' buyers, and
customer training for selling and merchandising products. In 1997 in a
continuing effort to reduce overhead and administrative expenses, Morgan
consolidated its national accounts operations into its distribution business.
Morgan's national accounts staff serves Morgan's national home center chain
clients by training in-store personnel, assisting the customer in improving the
mix of products sold and directing in-store product placement, packaging and
merchandising.
As of December 31, 1998, Morgan employed approximately 138 salespersons
who sold directly to independent distributors, building supply dealers, builders
and remodelers, home improvement centers and factory home manufacturers. As of
February 20, 1999, after the acquisition of Adam, such number increased to 252
salespersons. Morgan's sales organization consists of customer service
representatives located at each distribution center and outside field personnel
serving the customer on-site. Each outside field representative reports to his
or her regional center manager. The majority of outside sales representatives
are compensated through a commission system in which pay is directly related to
sales performance. Morgan conducts ongoing educational training seminars for all
sales representatives.
<PAGE>
BACKLOG
Morgan anticipates no appreciable backlog level in the future as
customer orders at Company-operated distribution centers are generally filled
within one to five days.
SEASONAL NATURE OF BUSINESS
The building products industry is seasonal, particularly in the
Northeast and Midwest regions of the United States, where inclement weather
during the winter months usually reduces the level of building activity in the
improvement, maintenance and repair markets and in the new construction markets.
Morgan's lowest sales traditionally occur during the first and fourth quarters.
Even though Morgan has no special working capital requirements, Morgan
traditionally maintains higher inventory levels during the second and third
quarters. The seasonal nature of Morgan's business does not appear to have been
affected by the sale of Manufacturing and management believes that the
acquisition of locations in the Western United States as part of the Adam
purchase will not affect the seasonality of Morgan's business in any material
respect. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Seasonal Nature of Business."
COMPETITION
Competition in the residential specialty building products market is
substantial, both from within the United States and from foreign manufacturers
and importers of building products. Morgan's distribution centers compete
principally with other distributors of window and door systems and other
manufacturers of specialty building products that sell directly to Morgan's
target customers. For example, Morgan may compete with up to three other
distributors of Andersen products in each territory in which Morgan distributes,
as well as manufacturers and distributors of premium wood window products that
compete with Andersen products. In some areas, the Company has sole distributor
rights to Andersen products. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Strategic Initiatives." Morgan
believes that it competes in the distribution industry primarily on the basis of
the breadth of its product lines, the quality and speed of its service and the
quality and design of the products it sells. Morgan is also committed to
accommodating the purchase requirements of its customers by providing
value-added services that are tailored to address each customer's unique needs.
The wood stile and rail doors, composite exterior doors and the Andersen
window systems that Morgan distributes are positioned primarily in the upper
price band of their respective markets. In addition, Morgan's agreement with
Andersen restricts Morgan's ability to offer for sale the window systems of
other manufacturers through Morgan's distribution locations that carry Andersen
products. Morgan believes, therefore, that producers and distributors of lower
priced or lower cost products may enjoy a competitive advantage where price is
the consumer's primary concern and that Morgan may be competitively
disadvantaged in being restricted from offering its customers a more varied
product mix. However, Morgan believes that it has a leading position in premium
interior and exterior doors and wood windows in the market area surrounding most
of its distribution centers.
TRADEMARKS AND NAME
Morgan's name and the Morgan Doorman logo are registered trademarks.
Morgan uses its stylized "M" and its trademarks and trade names "Tennessee
Building Products, Inc.," "Titan Building Products, Inc.," "Windows, Doors &
More, Inc.," "Tennessee Kitchen and Bath," "Tennessee Glass Company," "Tennessee
Kitchen Center, Inc." and "Adam Wholesalers" in connection with Morgan's
distribution operations. Morgan considers its trademarks, trade names and logos
to be valuable to the conduct of its business.
<PAGE>
Morgan has entered into a licensing arrangement in respect of its
trademarks in the Morgan name, the Morgan Doorman, its stylized "M" and the
logos related thereto with JELD-WEN for use in connection with the manufacture,
marketing, sale and distribution of wood stile and rail doors, patio and French
doors, door frames and related parts.
EMPLOYEES
As of December 31, 1998, Morgan employed 1,161 persons, of whom 1,145
were employed at Morgan's distribution centers, and 16 were employed at the
corporate headquarters. As of February 20, 1999, after the acquisition of Adam,
such number of total employees increased to approximately 2,041 employees. As of
February 20, 1999, approximately 608 of the total employees employed at Morgan's
distribution centers were covered by collective bargaining agreements with
various labor unions. Satisfactory relations have generally prevailed between
Morgan and its employees.
<PAGE>
ITEM 2. PROPERTIES
Morgan's principal executive offices are located at 469 McLaws Circle,
Williamsburg, Virginia 23185. Morgan does not own any real property. Morgan
leased the following facilities as of February 20, 1999:
<TABLE>
<CAPTION>
Approximate Lease
Square Feet Expiring
Leased --------
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Birch Run, Michigan........................................... 113,022 2005
Baton Rouge, Louisiana 22,600 2002(2)
Carlisle, Pennsylvania........................................ 200,000 2006(2)
Charlotte, North Carolina..................................... 115,010 2000
Chattanooga, Tennessee ....................................... 20,000 2006
Chesapeake, Virginia (showroom and sales office) ............. 30,000 1999
Cincinnati, Ohio (Adam's division office and warehouse) ...... 157,600 2002
Dayton, Ohio ................................................. 103,000 2003
Decatur, Illinois............................................. 93,000 2001(3)
Denver, Colorado.............................................. 45,000 2003
Denver, Colorado (Adam) ...................................... 103,000 2005
Greenville (Greer), South Carolina............................ 15,000 1999(3)
Harrisburg (Mechanicsburg), Pennsylvania (2 facilities):
Office.................................................... 15,569 1999(3)
Warehouse................................................. 134,906 2002(3)
Huntsville, Alabama (showroom)................................ 1,737 1999
Indianapolis, Indiana......................................... 126,000 2002
Kansas City, Kansas (2 facilities):...........................
Shawnee Warehouse......................................... 79,500 2000(3)
Renewal by Andersen Center................................ 2,860 1999
Kirkwood, New York............................................ 47,500 2010(1)(2)
Louisville, Kentucky.......................................... 86,400 2005
Lynchburg, Virginia .......................................... 60,000 2002
Nashville, Tennessee (2 facilities):
Glass facility and showroom............................... 26,000 2000
Warehouse and showroom.................................... 170,000 2011
Nitro, West Virginia.......................................... 84,000 1999
Oshkosh, Wisconsin (Former Manufacturing Division Office)..... 16,000 2000(4)
Pinehurst, North Carolina..................................... 25,000 2000(2)
Phoenix, Arizona.............................................. 37,000 2003
Scranton (Dunmore), Pennsylvania (showroom)................... 3,600 2001(2)
St. Louis, Missouri........................................... 103,000 2004
Toledo, Ohio.................................................. 132,000 2000
Washington, D.C. (Gainesville, Virginia)...................... 79,500 2006(3)
West Chicago, Illinois........................................ 100,925 2001(2)
West Columbia (Cayce), South Carolina......................... 89,480 2001(2)
Williamsburg, Virginia (Headquarters)......................... 6,909 2002
Wilmington (Newark), Delaware................................. 97,421 2000(2)
Woodbury Heights, New Jersey.................................. 221,000 2004
</TABLE>
(1) Of the 47,500 square feet leased, 6,250 square feet have been sublet to a
third party.
(2) Optional renewal term of five years or less.
(3) Optional renewal term in excess of five years.
(4) Morgan no longer occupies this leased space and is seeking a sublessor.
Distribution center leases generally provide for fixed monthly rental
payments, plus the payment, in most cases, of real estate taxes, utilities,
liability insurance and maintenance. In a few locations, the leases contain
escalation clauses requiring the payment of additional rent according to certain
indices or in specified amounts. The termination dates of these leases vary
widely. See Note 7 of Notes to Consolidated Financial Statements.
Morgan believes that its distribution facilities are sufficient to serve
its needs in its existing markets.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which Morgan is a
party or of which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders since the last
annual meeting held May 13, 1998.
<PAGE>
PART II
ITEM 5. MARKET FOR MORGAN'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The Common Stock of Morgan commenced trading on the New York Stock
Exchange on March 7, 1988 (NYSE symbol: MGN). As of February 19, 1999, there
were approximately 2,911 holders of record of such Common Stock. Morgan
currently does not pay cash dividends on its Common Stock. Any payment of future
dividends, and the amounts thereof, will be dependent upon Morgan's earnings,
financial instruments, cash flow, and other factors deemed relevant by the Board
of Directors. Morgan is restricted in its ability to pay dividends through
January 1, 2004 by its bank agreement.
The following table sets forth the high and low sale prices of Morgan's
Common Stock reported in the New York Stock Exchange Consolidated Transaction
Reporting System.
High Low
---- ----
1997:
First Quarter................... $9-5/8 $7
Second Quarter.................. 9 6-1/4
Third Quarter................... 8-11/16 6
Fourth Quarter.................. 6-15/16 6-7/8
1998:
First Quarter................... $5-7/8 $4-3/4
Second Quarter.................. 6-3/8 4-1/2
Third Quarter................... 4-7/8 2-1/16
Fourth Quarter.................. 3-1/2 2
On February 19, 1999, the closing price of the Common Stock was $2.625.
(b) Note: The number of shares of Morgan's Common Stock held by
non-affiliates shown on the cover of this Annual Report on Form 10-K was
calculated on the assumption that there were no affiliates other than officers
and directors of Morgan.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data for
Morgan for each of the five years ended December 31, 1994 through 1998. The
selected operating results and balance sheet data have been derived from
Morgan's audited financial statements. The information contained herein should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the audited consolidated financial
statement of Morgan for the three years ended December 31, 1998, and the notes
thereto included herein.
<TABLE>
<CAPTION>
OPERATING RESULTS YEAR ENDED DECEMBER 31,
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<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER 1998 1997 1996 1995 1994
SHARE DATA)
-------------------------------------------------------------
Net sales $383,151 $412,249 $373,345 $338,026 $ 358,357
-------------------------------------------------------------
Gross profit 54,582 58,340 55,428 47,463 52,398
Operating expenses(1)(2) 51,636 74,570 52,192 46,736 58,292
------------------------------------------------------------
Operating income (loss) 2,946 (16,230) 3,236 727 (5,894)
Other expense (2,049) (4,667) (3,265) (3,313) (3,307)
-------------------------------------------------------------
Income (loss) before 897 (20,897) (29) (2,586) (9,201)
income taxes
-------------------------------------------------------------
Net income (loss) $ 1,001 $(20,897) $ 298 $ (2,628) $ (9,401)
------------- ----------- ----------- ---------- --------
Basic earnings per common $ 0.10 $(2.03) $ 0.03 $ (0.30) $ (1.10)
share
-------------------------------------------------------------
Diluted earnings per $ 0.10 $(2.03) $ 0.03 $ (0.30) $ (1.10)
common share
-------------------------------------------------------------
Basic shares outstanding 10,359 10,280 8,830 8,644 8,549
Diluted shares outstanding 10,389 10,280 8,882 8,644 8,549
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA(3) At December 31,
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(IN THOUSANDS) 1998 1997 1996 1995 1994
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working capital $ 44,653 $ 77,324 $ 77,088 $ 58,674 $ 61,639
Total assets 92,463 128,776 142,116 109,515 113,308
Long-term debt, net of cash 19,982 53,156 47,413 30,439 27,050
Stockholders' equity 43,443 42,431 61,983 52,835 55,192
Long-term debt, net of cash to
total capitalization 31.5% 55.6% 43.3% 36.6 % 32.9 %
Return on stockholders' equity 2.3% (40.0)% 0.5% (4.9)% (15.7)%
</TABLE>
(1) The year 1997 includes $12.4 million provision for the sale of
manufacturing operations.
(2) The years 1997, 1996, 1995 and 1994 include restructuring and
reorganization expenses of $5.8, $4.7, $.1 and $11.3 million,
respectively.
(3) The decrease in working capital, total assets and long-term debt (net of
cash) at December 31, 1998 was the result of the sale of Morgan
Manufacturing on February 2, 1998.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
Various statements made within this Management's Discussion and Analysis
of Financial Condition and Results of Operations and elsewhere in this Annual
Report on Form 10-K constitute "forward looking statements" for purposes of the
Securities and Exchange Commission's "safe harbor" provisions under the Private
Securities Litigation Reform Act of 1995 and under the Securities Exchange Act
of 1934. Investors are cautioned that all forward looking statements involve
risks and uncertainties, including those detailed in Morgan's filings with the
Securities and Exchange Commission. There can be no assurance that actual
results will not differ from Morgan's expectations. Factors which could cause
materially different results include, among others, changes in relationships
with important suppliers and key customers; the pace of acquisitions and
competitive and general economic conditions, such as housing starts.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 VS. YEAR ENDED DECEMBER 31, 1997
Net sales for 1998 were $383.2 million, representing a 7.0% decrease
from 1997 sales of $412.2 million. The $29.0 million decrease in sales is
primarily attributable to a $65.3 million decrease in sales at Manufacturing as
a result of the sale of substantially all of the assets of Manufacturing at
February 2, 1998, offset by an increase in sales at Morgan's distribution
division ("Distribution") of $32.5 million and at TBP of $3.8 million.
Distribution's increases are primarily due to sales growth in the Mid-Atlantic
region, Decatur and Birch Run while sales gains at TBP are primarily due to a
contract awarded to Morgan with respect to providing glass and glass services
for the construction of the new Tennessee Titans Stadium in Nashville, Tennessee
(the "Stadium Project").
Gross profit decreased $3.8 million from 1997 to 1998. The decrease in
gross profit is primarily due to the sale of Manufacturing, competitive pricing
pressures in the Mid-Atlantic region and the consolidation of retailers and
wholesalers in the millwork industry, offset by gains at TBP which were
primarily due to the Stadium Project.
Operating expenses for 1998 were $51.6 million, or 13.5% of net sales,
compared to 1997 operating expenses (before the sale provision for Manufacturing
and restructuring and reorganization charges) of $56.3 million, or 13.7% of net
sales. The decrease is primarily due to the sale of Manufacturing.
Interest and other non-operating expenses in 1998 were $2.0 million, a
decrease of $2.6 million from 1997. The decrease in interest expense was
primarily due to the $29.4 million decrease in average long-term debt in 1998 as
compared to 1997, which was a result of the proceeds received from the sale of
Manufacturing.
The provision for income taxes in both 1997 and 1998 relates principally
to the recording of state taxes. The state tax provision in each of 1997 and
1998 was fully offset by the recognition of a tax benefit related to the
amendment of prior year federal returns. The provision for federal taxes in 1998
was further offset by the recognition of net operating loss carryback tax
benefits, which had not been previously recognized. There was no provision for
federal taxes in 1997 given Morgan's net operating loss position. See Note 10 to
Consolidated Financial Statements.
Morgan reported net income of $1.0 million or $0.10 per diluted share
for 1998 compared to net loss of $20.9 million or $2.03 per diluted share in
1997, on diluted shares outstanding of 10,389,112 and 10,280,484 respectively.
The $21.9 million increase is primarily due to the sale of Manufacturing, the
reduction of interest expense, and the elimination of reorganization charges.
<PAGE>
YEAR ENDED DECEMBER 31, 1997 VS. YEAR ENDED DECEMBER 31, 1996
Net sales for 1997 were $412.2 million, representing a 10.4% increase over
1996 sales of $373.3 million. The increase in sales is primarily attributable to
the acquisition of TBP in the third quarter of 1996 and a 5.6% improvement in
the sales of distributed products, which management believes is due to increased
marketing efforts with key suppliers and the acquisition of Wahlfeld in the
third quarter of 1997. External sales of manufactured products in 1997 decreased
14.3% from 1996. In 1997 sales of manufactured products continued to decline
from prior year periods due to the disruption caused by the consolidation of the
Lexington, North Carolina operations into the Oshkosh, Wisconsin facility and
the delay in the start-up of the high-speed door manufacturing line.
Gross profit increased $2.9 million from 1996 to 1997. The increase was
primarily the result of the aforementioned increase in sales and a volume
incentive reward from a supplier partnership program at Distribution.
Manufacturing experienced a $5.6 million decrease in gross profit due to the
aforementioned decline in sales volume and the increase in raw material costs
which were not passed on to the customer. The price for pine, which accounted
for 53% of the raw materials purchased by Manufacturing in 1997, increased an
average of 9.1% from 1996 while the price for fir, the second highest volume
specie, increased 3% on average over the prior year's prices.
Operating expenses for 1997, excluding $18.2 million in special charges
(see discussion that follows), were $56.3 million, or 13.7% of net sales,
compared to 1996 operating expenses, before special charges, of $47.5 million,
or 12.7% of net sales. The $8.8 million increase related primarily to the
acquisition of TBP. Additional increases were incurred at Distribution for sales
promotions related to the implementation of a new selling program to gain market
share, and relocation expenses for the hiring of qualified key personnel in
marketing, logistics and finance.
In the fourth quarter of 1997, Morgan recorded a non-recurring charge of
$12.4 million involving its sale of Manufacturing (the "Sale Provision"). The
Sale Provision included write-downs for the related assets to estimated fair
market value and costs of selling the business, including employee severance
costs, pension fees, lease obligations and legal costs (aggregating, $1.21 per
diluted share). In addition, in 1997 Morgan incurred restructuring charges of
$4.7 million to cover the incremental costs of consolidating the Lexington and
Oshkosh manufacturing facilities and a $1.1 million reorganization charge
related to changes in the executive management of Morgan (aggregating, $.57 per
diluted share). See "-Restructuring of Operations" below.
Interest and other non-operating expenses in 1997 were $4.7 million, an
increase of $1.4 million from 1996. As a result of an increase in average debt
of $19.8 million from 1996, interest expense increased $1.5 million in 1997. The
increase in average debt was primarily the result of the financing associated
with the acquisition of TBP and Wahlfeld.
The provision for income taxes in 1996 and 1997 relates principally to
the recording of state taxes. There was no provision for federal taxes in either
period given Morgan's net operating loss position. The state tax provisions for
both years were fully offset by the recognition of a tax benefit related to the
amendment of prior year federal returns. See Note 10 to Consolidated Financial
Statements.
Morgan reported a net loss of $20.9 million or $2.03 per diluted share
for 1997 compared to net income of $.3 million or $.03 per diluted share for
1996, on diluted shares outstanding of 10,280,484 and 8,881,648 respectively.
Excluding special charges, Morgan had a net loss of $2.7 million for 1997
compared to net income of $5.0 million for 1996. The $7.7 million decline in
income from 1996, before special charges, is primarily due to lower volume and
higher material costs at Manufacturing and a $1.5 million increase in interest
expense.
<PAGE>
SIGNIFICANT BUSINESS TRENDS/UNCERTAINTIES
Management believes that single family housing starts have a significant
influence on Morgan's level of business activity. Currently available industry
data suggest that housing starts for single family dwellings increased 12.0% in
1998 from 1997. According to the National Association of Home Builders, not only
did 1998 produce 1.6 million single- and multi-family housing starts, the
highest level of overall housing starts in more than a decade, but also the
greatest number of single-family starts. In addition, the National Association
of Home Builders has indicated that, while it expects that the housing market in
1999 may not be quite as good as in 1998, it may still result in the second best
year for single-family housing starts in the 1990s. No assurances can be given,
however, that single family housing start levels will remain steady or increase,
or that single family housing starts will not decline.
Management also believes that Morgan's ability to continue to penetrate
the residential repair and remodeling markets, including through sales to home
center chains may have a significant influence on Morgan's level of business
activity. Management believes this market will continue to grow in importance to
Morgan. Management further believes that in certain areas of the United States,
sales by one step distributors directly to the end-user will over time replace
the two step distribution method of selling to the retail dealer, who then sells
to the end-user. Morgan intends to respond aggressively to such changes in
distribution methods, including, where opportunities permit, through the
acquisition of distribution businesses that sell directly to the end-user.
STRATEGIC INITIATIVES
An important part of Morgan's strategic plan is to expand its
distribution capabilities, particularly in the Southeast and Southwest, or in
other areas, if attractive opportunities are presented. In August 1996, Morgan
acquired substantially all of the business and assets of TBP, a regional
millwork and specialty building products distributor and light manufacturer
headquartered in Nashville, Tennessee. With the TBP acquisition, Morgan expanded
its operations to include Nashville and Chattanooga, Tennessee; Charlotte, North
Carolina; Greenville, South Carolina; and Huntsville, Alabama. In July 1997,
Morgan acquired certain assets of Wahlfeld, a distributor of windows, doors, and
other millwork products headquartered in Peoria, Illinois. The Wahlfeld
acquisition allowed Morgan to become the sole distributor for the Andersen
Window product lines in most of Illinois. During 1997 and 1998, Morgan
consolidated Wahlfeld's operation into two of its existing facilities. In
February 1999, Morgan purchased Adam, a privately held two-step distributor of
windows, doors and other millwork products, headquartered in Cincinnati, Ohio.
With the Adam acquisition, Morgan has expanded its operations in the Northeast,
Mid-Atlantic, Midwest, Colorado and Arizona markets. These acquisitions have
allowed Morgan to combine product and geographic synergies, best practices and
technologies to become one of the largest wholesale distributors of building
products in the United States.
Morgan believes that its relationship with Andersen has improved in
recent years. In April 1997, Morgan entered the Louisiana market where it was
awarded sole distribution rights for Andersen's products. In 1997, Morgan was
also awarded sole distribution for Andersen's products in most counties in
Mississippi and some in Texas. See "--Recent Developments" below.
As the final major element of its strategic initiatives, Morgan is
committed to improving its management information systems. A new Company-wide
integrated management information system had been selected and was in the
process of being implemented as of December 31, 1998. As of December 31, 1998
Morgan had incurred a cost of approximately $4.7 million in connection with such
system, including $2.5 million in software and $2.2 million in hardware. With
the purchase of Adam, completed on February 19, 1999, Morgan decided to
terminate its implementation of the new management information system and,
instead, to merge the majority of Morgan's current operations into the Adam
System. After reviewing both the Adam System and the proposed new system,
management determined that the Adam System would be better suited for Morgan's
business and would be less expensive to implement. By implementing the better
technological and strategic Adam System, Morgan should be able to realize future
cost savings by the reduction of capital needed to convert only the ten Morgan
distribution centers existing at the time of the Adam acquisition instead of
having to convert a total of twenty-two locations to the proposed new system.
Accordingly, the Company will take a charge of approximately $2.5 million during
the first quarter of 1999 relating to the write-off of the costs incurred for
the implementation of the proposed new Morgan system.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Morgan's working capital requirements are related to its sales level,
which, because of its dependency on housing starts and the repair and remodeling
market, are seasonal and, to a degree, weather dependent. This seasonality
affects the need for working capital to the extent it is necessary to carry
larger inventories and receivables during certain months of the year.
Working capital at December 31, 1998 was $44.7 million, with a ratio of
current assets to current liabilities of 2.8 to 1.0, while at December 31, 1997
working capital was $77.3 million with a ratio of current assets to current
liabilities of 3.7 to 1.0. The decrease in working capital of $32.6 million is
primarily due to the sale of Manufacturing and the subsequent repayment of debt.
Additionally, inventories decreased $6.2 million, accounts receivable increased
$2.4 million, accounts payable increased $3.6 million and other liabilities
decreased $5.8 million. The decline in inventory is primarily a result of
Morgan's continuing plan to reduce working capital and interest on long-term
debt, while the increase in accounts receivable is primarily due to the $6.0
million increase in December sales at Distribution and TBP. Current liabilities
decreased $3.6 million primarily due to the decrease in the liabilities related
to the December 31, 1997 Sale Provision. The decrease in other liabilities was
offset by a $3.6 million increase in accounts payable which was primarily due to
improved cash management practices as of December 31, 1998.
Long-term debt, net of cash, decreased to $20.0 million at December 31,
1998, from $53.2 million at December 31, 1997. Morgan's ratio of long-term debt,
net of cash, to total capitalization decreased from 55.6% at December 31, 1997
to 31.5% at December 31, 1998. The decrease in long-term debt, net of cash, of
$33.2 million is primarily attributable to the fact that Morgan used the
proceeds from the Manufacturing sale to reduce its revolving credit facility and
to repay the acquisition term loan under Morgan's credit facility then in
effect, as well as its continuing working capital management efforts.
Cash generated by operating activities totaled $5.6 million in 1998 as
compared to $4.1 million generated in 1997. The improvement is primarily due to
the $6.4 million improvement in cash generated from profits in 1998 over 1997 as
well as the additional $8.0 million generated from accounts payable which is
primarily a result of improved cash management practices. These improvements
were partially offset by the increased usage in 1998 of other working capital.
The increase in accounts receivable usage of $4.0 million was primarily due to a
$6.0 million increase in December sales at Distribution and TBP. The decrease in
inventory of $6.9 million was primarily due to the Company's inventory
management practices. Investing activities in 1998 generated $27.6 million,
compared to the corresponding period in 1997, when investing activities used
$10.2 million. Activities in 1998 primarily included $31.0 million in proceeds
from the sale of Manufacturing and $3.6 million used for asset acquisitions,
while 1997 activities consisted of $3.2 million used for asset acquisitions and
the final payment to purchase TBP of $2.2 million and payments to purchase
Wahlfeld of $5.0 million. Financing activities used $33.7 million through
December 31, 1998, with $33.8 million used to reduce long-term debt. Of the
reduction of long-term debt, $26.6 million was used to reduce the Company's
revolving line of credit, $4.8 million was used to retire the acquisition term
loan under the Company's credit facility then in effect, and $1.3 million was
used to retire the debt owed with respect to the real property owned by Morgan
and used by Manufacturing, and $1.0 million was used for principal payments
under capital lease obligations.
<PAGE>
Prior to the Adam acquisition, the Company maintained a credit agreement
with a group of banks which provided for a revolving credit facility of up to
$65 million, including a sub-line of up to $30 million for permitted
acquisitions and a letter of credit facility of up to $5 million. As of December
31, 1998 Morgan had borrowings of $18.7 million under the revolving credit
facility and was in compliance with all covenants under the credit facility. On
February 19, 1999, in connection with the Adam acquisition, Morgan and its
banking group entered into an amendment to the credit facility. The amendment
provides for a revolving credit line of up to $100 million (including a letter
of credit facility of up to $5 million), a term loan of up to $10 million and a
bridge term loan of up to $10 million and extends the facility through January
1, 2004. The credit facility, as amended, continues to contain certain
covenants, including limitations on the acquisition and disposition of assets,
the payment of dividends and the prepayment of other indebtedness, and continues
to provide that applicable borrowings bear interest at either the bank's prime
rate plus a margin or LIBOR plus a margin based upon a pricing matrix. The
credit facility, as amended, also continues to require Morgan to maintain
certain earnings coverage, interest coverage and fixed coverage ratios; however,
the amendment of the credit facility altered such covenants. In addition, the
amendment added certain minimum earnings and minimum availability covenants.
RESTRUCTURING OF OPERATIONS
Beginning in 1994, Morgan adopted a comprehensive strategic plan to
restore profitability and regain leadership by providing customers with quality
products and optimum service at the best price/value relationship. Morgan has
taken a series of major initiatives to implement this plan and respond to
continuing challenges in the industry.
During the period of 1994 through 1997, Morgan incurred an aggregate of
$20.8 million in restructuring charges. Included in these restructuring charges
were the closing of the Springfield, Oregon; Lexington, North Carolina and Weed,
California plants; relocation of Morgan's corporate headquarters and the delayed
start-up of the new high-speed door manufacturing line. Additionally, Morgan
recorded a $1.1 million reorganization charge in 1997 in connection with the
termination of the employment of the Vice President and Chief Financial Officer
and Senior Vice President-Human Resources and Administration of Morgan. Such
provision covered severance and related payments to these former officers.
Although Manufacturing had made progress operationally, it was
determined in 1997 that Manufacturing was not a strategic fit with Morgan's
long-term growth plans. In December 1997, Morgan agreed to sell the operating
assets of Manufacturing to JELD-WEN, resulting in a charge to earnings in 1997
of $12.4 million with half the charge related to an asset write-down and half
related to the costs of selling the business including employee severance costs,
pension expenses, lease obligations and legal costs. The sale was completed in
February 1998.
YEAR 2000 ISSUES
The Year 2000 issue, common to most companies, concerns the inability of
information and noninformation systems to recognize and process date-sensitive
information after 1999 due to the use of only the last two digits to refer to a
year. This problem could affect both information systems (software and hardware)
and other equipment that relies on microprocessors.
<PAGE>
A new Company-wide integrated management information system had been
selected and was in the process of being implemented as of December 31, 1998.
With the purchase of Adam, completed on February 19, 1999, Morgan decided to
terminate its implementation of the new management information system and,
instead, to merge all operations into the Adam System. After reviewing both the
Adam System and the proposed new system, management determined that the Adam
System would be better suited for Morgan's business and would be less expensive
to implement. Prior to the Adam acquisition, Adam's management had conducted an
evaluation of Adam's Year 2000 readiness. Management of Morgan has since
completed a Company-wide evaluation of the Year 2000 impact on all of Morgan's
computer systems (including the Adam System), applications and other
date-sensitive equipment. Systems and equipment that are not Year 2000 compliant
have been identified and remediation efforts are in process. Management
estimates that as of March 15, 1999 nearly 50 percent of remediation efforts for
all of Morgan's information systems were completed. Management has also begun
remediation for noninformation systems. All remediation efforts and testing of
systems and equipment are expected to be completed by August 31, 1999.
Morgan is in the process of monitoring the progress of material third
parties (vendors and suppliers) in their efforts to become Year 2000 compliant.
Those third parties include, but are not limited to: material vendors and
customers, financial institutions and utilities. Morgan has requested
confirmation from these material third parties of their Year 2000 plans.
Through December 31, 1998, Morgan has spent approximately $5.0 million
to address Year 2000 issues. Management believes that approximately $1.5 million
in additional costs will be incurred before remediation efforts are complete.
Funds for these costs are expected to be provided by the operating cash flows of
the company. The majority of the remediation efforts that remain to be completed
relate to conversion of Morgan's distribution centers to the Adam System and
employee and staff training costs.
Morgan could be faced with severe consequences if Year 2000 issues are
not identified and resolved in a timely manner by the Company and material third
parties. A worst-case scenario would result in the short-term inability of the
Company to process customer orders and to ship products to its customers due to
unresolved Year 2000 issues. This would result in lost revenues; however, the
amount of losses would be dependent on the length and nature of the disruption,
which cannot be predicted or estimated. In light of the possible consequences,
Morgan is devoting the resources management believes are needed to address Year
2000 issues in a timely manner. While management expects a successful resolution
of these issues, there can be no guarantee that material third parties, on which
Morgan relies, will address all Year 2000 issues on a timely basis or that their
failure to successfully address all issues would not have an adverse effect on
Morgan. Morgan is in the process of developing contingency plans in case
business interruptions do occur. Management expects these plans to be completed
by August 31, 1999.
SEASONAL NATURE OF BUSINESS
The building products industry is seasonal, particularly in the
Northeast and Midwest regions of the United States, where inclement weather
during the winter months usually reduces the level of building activity in both
the improvement, maintenance and repair market and the new construction market.
Morgan's lowest sales levels generally occur during the first and fourth
quarters. Since a high percentage of Morgan's overhead and expenses are
relatively fixed throughout the year, profit margins tend to be lower in
quarters with lower sales. Morgan believes that the seasonal effect on
operations has not been changed as a result of the sale of Manufacturing and
that the acquisition of locations in the Western United States as part of the
Adam purchase will not affect the seasonality of Morgan's business in any
material respect.
<PAGE>
The table below sets forth Morgan's quarterly net sales for the years
ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------------ ------------------ ------------------ ------------------
Net Sales % of Total Net Sales % of Total
------------------ ------------------ ------------------ ------------------
(millions) (millions)
<S> <C> <C> <C> <C>
First Quarter $80.2 20.9% $95.8 23.2%
Second Quarter 98.2 25.6% 106.8 25.9%
Third Quarter 107.5 28.1% 111.6 27.1%
Fourth Quarter 97.3 25.4% 98.0 23.8%
------------------ ------------------ ------------------ ------------------
Total Year $383.2 100.0% $412.2 100.0%
------------------ ------------------ ------------------ ------------------
</TABLE>
See Note 14 of Notes to Consolidated Financial Statements for further
quarterly information.
RECENT DEVELOPMENTS
On March 10, 1999, Morgan entered into an Agreement of Merger with
Andersen Windows and its wholly-owned subsidiary, Andersen Sub, pursuant to
which Andersen Sub and Morgan will be merged, resulting in Morgan, as the
surviving corporation, becoming a wholly-owned subsidiary of Andersen Windows.
The consideration to be received by Morgan's stockholders in the Merger will be
$4.00 per share of Morgan common stock, subject to adjustment until the
effective date of closing, under certain limited circumstances. The Merger is
subject to, among other things, approval of the stockholders of Morgan and the
applicable regulatory agencies.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
The Company is exposed to changes in interest rates primarily as a
result of its long-term debt used to maintain liquidity and fund expansion
through acquisition. To mitigate the impact of fluctuations in variable interest
rates, the Company could, at its option, convert to fixed interest rates by
either refinancing variable rate debt with fixed rate debt or entering into
interest rate swaps.
The following table provides information about the Company's interest
rate risk at December 31, 1998 and February 28, 1999, which incorporates the
second amendment to its loan and security agreement with its lenders entered
into February 19, 1999.
<TABLE>
<CAPTION>
Expected Maturity Date
1999 2000 2001 2002 2003 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------
(thousands of dollars)
------------------------------------------------------------------------- ----------
Liabilities
December 31, 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Debt:
Variable Rate $ - $ - $18,686 $ - $ - $ - $18,686 $18,686
Average Interest Rate -% -% 7.63% -% -% -% 7.63%
February 28, 1999
Long-Term Debt:
Variable Rate $ - $ 4,000 $ 4,000 $ 4,000 $ 4,000 $69,000 $85,000 $85,000
Average Interest Rate 7.95% 8.69% 8.47% 8.23% 7.96% 7.66% 8.18%
</TABLE>
<PAGE>
COMMODITY PRICE RISK
The Company is subject to exposure with respect to commodities because
its ability to recover increased costs through higher pricing may be limited by
the competitive environment in which Morgan operates.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14 below for a listing of financial statements and the
financial statement schedule included therein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF MORGAN
DIRECTORS OF MORGAN
Certain information regarding each director of Morgan as of December 31,
1998 is set forth below, including such individual's age and principal
occupation, a brief account of business experience during at least the last five
years, other directorships currently held and the year in which the individual
was first elected as a director of Morgan. The directors hold office until their
successors are elected and qualified or until their earlier removal or
resignation. Mr. Patrick J. McDonough, Jr., director of Morgan since November
1994, resigned his position as director in September 1998 for personal reasons.
FRANK J. HAWLEY, JR. age 71, has been Chairman of the Board of the
Company since December 1983. Since September 1986, he has been the managing
partner of Bedford Partners, the general partner of Saugatuck Capital Company
Limited Partnership II ("Saugatuck II"), a venture capital partnership. Since
October 1992, he has been the managing partner of Greyrock Partners Limited
Partnership, the general partner of Saugatuck Capital Company Limited
Partnership III ("Saugatuck III"), a venture capital partnership. Since
September 1982, he has been the President and principal stockholder of Saugatuck
Associates, Inc. and Saugatuck Associates II, Inc., each a risk capital
management firm which provides investment advice and assistance to Saugatuck II
and Saugatuck III. During the period from 1982 to 1996, Mr. Hawley was the
managing partner of the general partner of Saugatuck Capital Company Limited
Partnership, a venture capital partnership which was terminated in 1996.
JOHN S. CROWLEY, age 75, has served as a member of the Company's Board
of Directors since November 1986. Mr. Crowley has been a private investor since
1994. Previously he was a managing director of Saugatuck Associates from 1985 to
1994. From 1983 to 1987 he was the organizer and general partner of Round Hill
Associates, a private investment fund engaged in management buyouts, and the
President of Round Hill Associates Management Company. Mr. Crowley is also a
director of General Housewares Corp., a consumer goods company.
HOWARD G. HAAS, age 74, has served as a member of the Company's Board of
Directors since September 1987. Mr. Haas has been the Chairman of Howard G. Haas
& Associates, a consulting firm, since 1987. From 1967 to 1986 Mr. Haas was the
President and Chief Executive Officer of Sealy Incorporated; Mr. Haas is also a
member of the faculty of the Graduate School of Business at the University of
Chicago.
J. MICHAEL MARKS, age 50, has served as a member of the Company's Board
of Directors since May 1998. In April 1987, Mr. Marks founded Indian River
Consulting Group, a wholesale distribution business consulting company based in
Melbourne, Florida. From November 1981 to December 1986, Mr. Marks was the
Executive Vice President of Lex Electronics, a Stamford, Connecticut based
electronics distributor. Prior to November 1981, Mr. Marks served as Director of
Corporate Training and Development for Ducommon Inc., a Los Angeles, California
based industrial distribution company.
LARRY R. ROBINETTE, age 55, has served as a member of the Company's
Board of Directors since November 1994 and as the President and Chief Executive
Officer of the Company since September 1994. Mr. Robinette is the former
President and CEO of Anchor Hocking Packaging of Cincinnati, Ohio, a subsidiary
of CarnaudMetalbox. From 1980 to 1993, he held a series of executive assignments
at Newell Company, including operations vice presidencies in the EZ Painter
Division, Newell Window Furnishings and the Mirro Foley Division and the
presidency of Anchor Industrial Glass. Prior to that, he was employed at General
Motors.
<PAGE>
EDWARD T. TOKAR, age 51, has served as a member of the Board of
Directors of the Company since November 1994. Since 1985, Mr. Tokar has served
as Vice President-Investments, AlliedSignal Inc., responsible for the overall
investment management of employee benefit asset funds worldwide. Mr. Tokar has
been employed at AlliedSignal since 1977 in various management positions. Mr.
Tokar has also been the Chief Executive Officer of Allied Capital Management LLC
since 1998, is a trustee of the Morgan Grenfell Investment Funds, an advisor to
various investment partnerships and a trustee of the College of William and
Mary.
FAMILY RELATIONSHIPS. To the best of the Company's knowledge and belief,
there is no family relationship between any of the Company's directors and
executive officers.
EXECUTIVE OFFICERS OF MORGAN
Certain information regarding each executive officer of Morgan as of
December 31, 1998 is set forth below, except that information concerning Mr.
Hawley and Mr. Robinette is set forth above under "Directors of Morgan." The
Board of Directors appoints Company officers and such appointments are effective
until resignation or earlier removal by the Board of Directors.
Mr. Mitchell J. Lahr, age 40, was appointed Vice President, Chief
Financial Officer and Secretary of Morgan in April 1997. From September 1994
until he joined Morgan, Mr. Lahr was Vice President and Chief Financial Officer
of Stella Foods Corp., a subsidiary of Specialty Foods Corporation. From
September 1992 to August 1994, Mr. Lahr was Vice President and Chief Financial
Officer of Anchor Hocking Packaging Company, a subsidiary of Carnaud Metalbox,
Inc. From 1980 to 1992 he served in various positions with General Electric
Company.
Mr. Darrell J. Olson, age 52, was appointed Vice President, Human
Resources of Morgan in April 1997. From September 1995 until he joined Morgan,
Mr. Olson was Vice President, Human Resources of Twin Disc Inc., a manufacturer
of highly engineered power transmission equipment. From February 1994 through
December 1994, Mr. Olson was the Vice President of Operations of the Intercraft
Division of Newell Company. From October 1983 through February 1994, Mr. Olson
served as Vice President, Human Resources of the Mirro Division of Newell
Company.
Mr. David A. Braun, age 41, was appointed Vice President of Morgan and
President of Morgan's Distribution unit on May 15, 1996. Mr. Braun had
previously been named General Manager of Morgan Distribution on February 5,
1996. From August of 1995 to February 4, 1996, Mr. Braun served as Vice
President and Controller of Morgan Distribution. Prior to that, Mr. Braun served
as Division Controller of RobertShaw Controls from 1994 to August of 1995. Mr.
Braun served as Senior Vice President of Lisa Frank, Inc. from 1993 to 1994 and
served as Vice President and Chief Financial Officer of HGP Industries, Inc.
from 1991 to 1993. From 1987 to 1991, Mr. Braun served as Vice President and
Controller of EZ Paintr, a division of Newell Company. From 1986 to 1987 he
served in various managerial positions at EZ Paintr.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons holding more than 10% of a registered class of
the Company's equity securities to file with the Securities and Exchange
Commission and the New York Stock Exchange initial reports of ownership, reports
of changes in ownership and annual reports of ownership of Common Stock and
other equity securities of the Company. Such directors, officers, and 10%
stockholders are also required to furnish the Company with copies of all such
filed reports.
<PAGE>
Based solely upon a review of the copies of such reports furnished to
the Company, or representations that no reports were required, the Company
believes that all of its directors, executive officers and 10% shareholders
complied with all filing requirements under Section 16(a) in 1998, except that
Messrs. Robinette, Lahr, Braun and Olson did not file Annual Statements of
Beneficial Ownership of Securities on Form 5 ("Form 5") with respect to the
repricing of their options in November 1998 until March 30, 1999.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information with respect to all cash and
non-cash compensation of (i) Mr. Robinette, the Chief Executive Officer of the
Company, (ii) the other most highly compensated executive officers of the
Company who were serving as such as of December 31, 1998 , and (iii) Mr. Duane
A. Greenly, who served as Vice President of the Company and President-Morgan
Manufacturing from December 1996 through March 1998 (collectively, the "Named
Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation (1) Long-Term Compensation
------------------------------------- ----------------------
Awards
Name & Principal Other Annual of Stock Long-Term All Other
Position Year Salary Bonus Compensation(2) Options Payouts Compensation (3)
- -------- ---- ------ ----- --------------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Larry R. Robinette 1998 $400,010 - $ 31,989 (8) 295,000 - $ 12,000
President, Chief Executive 1997 $400,010 - $ 21,980 (9) - $1,098,942 (21) $ 19,192
Officer, and Director 1996 $365,580 $239,724 $ 15,192 (10) - - $ 16,451
Mitchell J. Lahr 1998 $225,000 - $ 17,132 (11) 100,000 - $ 10,125
Vice President - Finance 1997 $164,423 $112,500 (4) $199,277 (12) - - $ 4,932
and Administration, 1996 - - - - - -
Chief Financial Officer,
and Secretary
- -
Darrell J. Olson 1998 $140,000 - $ 11,517 (13) 75,000 - $ 5,732
Vice President - 1997 $ 99,615 $ 50,000 (5) $175,444 (14) - - $ 2,988
Human Resources 1996 - - - - - -
David A. Braun 1998 $200,000 - $148,449 (15) 100,000 - $ 6,661
Vice President and 1997 $200,000 $ 22,027 $ 5,853 (16) - - $ 13,989
President
- Morgan 1996 $170,382 $330,677 $ 2,914 (17) - - $ 9,073
Distribution
Duane A. Greenly 1998 $ 42,308 - $ 51,253 (18) - - $623,996
Vice President and 1997 $200,000 $100,000 (6) $ 15,328 (19) - - $ 5,820
President - Morgan 1996 $ 7,780 $ 77,411 (7) $ 44 (20) 90,000 - -
Manufacturing
</TABLE>
(1) This includes amounts earned in the respective fiscal year, whether or not
deferred.
(2) This represents payments by the Company for moving expenses, excess group
life insurance, leased automobiles, tax gross-up on amounts included in
taxable compensation (other than salary and bonuses) and certain other
reimbursable fees and expenses to the extent required to be reported.
(3) This amount includes contributions by the Company under Section 401(k) of
the Code pursuant to the Profit Sharing Savings and Retirement Plan for
each of the named Executive Officers as follows: Mr. Robinette, $4,800,
$4,750 and $9,984 for 1998, 1997 and 1996, respectively; Mr. Lahr, $4,800
and $3,703 for 1998 and 1997 respectively; Mr. Olson $4,800 and $2,988 for
1998 and 1997, respectively; Mr. Braun, $4,800, $4,750 and $7,524 for 1998,
1997 and 1996, respectively; and Mr. Greenly, $3,928 and $4,750 for 1998
and 1997, respectively. This amount also includes amounts the Company
contributed to the Deferred Compensation Plan for each of the Named
Executive Officers as follows: Mr. Robinette, $7,200, $14,442 and $6,467
for 1998, 1997 and 1996, respectively; Mr. Lahr, $5,325 and $1,229 for 1998
and 1997, respectively; Mr. Olson, $4,932 and $-0- for 1998 and 1997,
respectively; Mr. Braun, $1,861, $9,239 and $1,549 for 1998, 1997 and 1996,
respectively and Mr. Greenly, $342 and $2,320 for 1998 and 1997,
respectively. In the case of Mr. Greenly, this amount for 1998 also
includes $619,726 paid to Mr. Greenly pursuant to the Executive Severance
Plan.
(4) This represents a deferred signing bonus paid to Mr. Lahr pursuant to his
employment agreement entered into on March 11, 1997.
(5) This represents a deferred signing bonus paid to Mr. Olson pursuant to his
employment agreement entered into on March 21, 1997.
(6) This represents a bonus paid to Mr. Greenly to partially compensate him for
the loss of bonuses which he was eligible to earn under his previous
employment arrangement with a former employer.
(7) This includes a $20,000 bonus paid to Mr. Greenly pursuant to his
employment agreement and a performance bonus which was earned in 1996 but
paid in 1997.
(8) Other Annual Compensation includes $31,989 of tax gross-up.
(9) Other Annual Compensation includes $21,980 of tax gross-up.
(10) Other Annual Compensation includes $15,192 of tax gross-up.
(11) Other Annual Compensation includes $17,132 of tax gross-up.
(12) Other Annual Compensation includes $119,712 of moving expenses paid on Mr.
Lahr's behalf and $58,328 of tax gross-up.
(13) Other Annual Compensation includes $11,517 of tax gross-up.
(14) Other Annual Compensation includes $128,629 of moving expenses paid on Mr.
Olson's behalf and $23,815 of tax gross-up.
(15) Other Annual Compensation includes $100,743 of moving expenses paid on Mr.
Braun's behalf and $36,613 of tax gross-up.
(16) Other Annual Compensation includes $5,853 of tax gross-up.
(17) Other Annual Compensation includes $2,914 of tax gross-up.
(18) Other Annual compensation includes $17,452 for moving expenses paid on Mr.
Greenly's behalf, and $17,387 of tax gross-up.
(19) Other Annual Compensation includes $15,328 of tax gross-up.
(20) Other Annual Compensation includes $44 of tax gross-up.
(21) Pursuant to Mr. Robinette's employment agreement entered into in 1994, the
Company granted 140,000 restricted shares of Common Stock with a 1994 fair
market value of $5.00 per share to a trust for the benefit of Mr.
Robinette. Such trust was created to partially compensate Mr. Robinette for
the loss of certain future retirement benefits that occurred when Mr.
Robinette joined the Company. The trust sold all such shares during the
time period February 14, 1997 to July 29, 1997 for an average price per
share of approximately $7.85, for an aggregate cash value of $1,098,942.
OPTION GRANTS IN FISCAL 1998
The following table sets forth certain information concerning individual
grants of options to purchase Common Stock made by the Company during Fiscal
1998 to each of the Named Executive Officers.
<TABLE>
<CAPTION>
% of Total
Number of Options/SARs Alternative to
Shares Granted to 5% and 10%
Underlying Employees Appreciation
Options/SARs in Fiscal Year Exercise Price Grant Date
Name Granted (1) $/Share (2) Expiration Date Present Value (3)
---- ------- --- ----------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Larry Robinette 30,000 (4) 4.6% $3.00 11/02/08 $ 75,600
20,000 (4) 3.1% 3.00 11/02/08 50,400
25,000 (4) 3.8% 3.00 11/02/08 63,000
100,000 (5) 15.3% 3.00 11/02/08 252,000
120,000 (5) 18.4% 3.00 11/02/08 302,400
Mitchell J. Lahr 100,000 (6) 15.3% 3.00 11/02/08 252,000
David A. Braun 40,000 (4) 6.1% 3.00 11/02/08 100,800
35,000 (4) 5.4% 3.00 11/02/08 88,200
25,000 (5) 3.8% 3.00 11/02/08 63,000
Darrel J. Olson 25,000 (4) 3.8% 3.00 11/02/08 63,000
50,000 (6) 7.7% 3.00 11/02/08 126,000
Duane A. Greenly 0 N/A N/A N/A N/A
</TABLE>
(1) The total number of options granted to employees in 1998 was 652,000.
Options to purchase 5,000 shares were granted on May 13, 1998; options to
purchase 647,000 were granted on November 2, 1998 in connection with a plan
implemented on November 2, 1998 to grant new options with a lower exercise
price in exchange for the voluntary surrender of previously granted
options.
<PAGE>
(2) All exercise prices of options granted on November 2, 1998 were at 120% of
fair market value on the date of grant. The exercise price of the options
granted on May 13, 1998 were at fair market value on the date of grant. All
such options granted on May 13, 1998 were subsequently voluntarily
surrendered for new options granted on November 2, 1998.
(3) The estimated grant date present values reflected in the above table are
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the
values of the options reflected in the above table include:
* Exercise prices on the options are greater than or equal to the fair
market value of the underlying stock on the dates of the grant.
* The option term of ten years.
* Interest rates that represent the interest rate on a U.S. Treasury
security on the dates of grant with maturity dates corresponding to
those of the option terms.
* Volatilities calculated using daily stock prices for the one-year period
prior to the grant dates.
* Dividends at the rate of $0.00 per share representing the annualized
dividends paid with respect to a share of Common Stock at the dates of
grant. The Company does not pay a dividend with respect to Common Stock.
* Reductions to reflect the probability of forfeiture due to termination
prior to vesting and the probability of a shortened option term due to
termination of employment prior to the option expiration date.
(4) These options represent the grant of new options under the Company's
Incentive Stock Option Plan on November 2, 1998 with a lower exercise price
in exchange for the voluntary surrender of previously granted options. All
repriced options were granted subject to the same terms and conditions as
the previously granted options to which they correspond, except that the
term and vesting schedule of the repriced options begin anew at November 2,
1998 (but are for the same period and vest at the same rate as the
previously granted options) and that no newly granted option shall be
exercisable until November 2, 2000 (except under limited circumstances,
including a change in control of the Company) (as defined in the
applicable plan or agreement).
(5) These options represent the grant of new options under the Company's
Incentive Compensation Plan on November 2, 1998 with a lower exercise price
in exchange for the voluntary surrender of previously granted options. All
repriced options were granted subject to the same terms and conditions as
the previously granted options to which they correspond, except that the
term and vesting schedule of the repriced options begin anew at November 2,
1998 (but are for the same period and vest at the same rate as the
previously granted options) and that no newly granted option shall be
exercisable until November 2, 2000 (except under limited circumstances,
including a change in control of the Company) (as defined in the
applicable plan or agreement).
(6) These options represent the grant of new options under an option agreement
between the Named Executive Officer and the Company on November 2, 1998,
with a lower exercise price in exchange for the voluntary surrender of
previously granted options. All repriced options were granted subject to
the same terms and conditions as the previously granted options to which
they correspond, except that the term and vesting schedule of the repriced
options begin anew at November 2, 1998 (but are for the same period and
vest at the same rate as the previously granted options) and that no newly
granted option shall be exercisable until November 2, 2000 (except under
limited circumstances, including a change in control of the Company)
(as defined in the applicable plan or agreement).
The following table summarizes the aggregated option exercises by the
Named Executive Officers in Fiscal 1998 and the year-end values of unexercised
options.
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND FISCAL 1998 YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
Total Number of Shares
Underlying Unexercised Value of Unexercised in
Options Held at the Money Options Held at
Fiscal Year-End Fiscal Year-End (1) (2)
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Larry R. Robinette 0 295,000 $0 $1,032,500
Mitchell J. Lahr 0 100,000 $0 $ 350,000
David A. Braun 0 100,000 $0 $ 350,000
Darrell J. Olson 0 75,000 $0 $ 262,500
Duane A. Greenly 81,771 0 $0 $ 0
</TABLE>
(1) Total value of options based on the Common Stock's closing price on the New
York Stock Exchange of $3.50 as of December 31, 1998.
(2) Options to become exercisable upon a change in control (as defined in the
applicable governing documents).
COMPENSATION OF DIRECTORS
All directors receive reimbursement for all expenses incurred in
connection with attendance at board meetings and all directors, other than
Messrs. Hawley and Robinette, receive a fee of $1,500 per meeting of the board,
$1,500 per committee meeting and a retainer of $3,000 per quarter.
<PAGE>
In addition, each individual serving on the Board of Directors who is
not an employee of the Company or a beneficial owner (within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of more than 20% of the issued and outstanding Common Stock (a
"Non-employee Director") is automatically granted an option to purchase 1,000
shares of Common Stock upon such person's election and each re-election to the
Board of Directors. During 1998, five incumbent Non-employee Directors (Messrs.
Crowley, Haas, Marks, McDonough and Tokar) each received a grant of options for
the purchase of 1,000 shares of Common Stock pursuant to the Morgan Products
Ltd. 1992 Non-employee Director Stock Option Plan (the "Director Plan"). Such
options granted to Mr. McDonough were cancelled upon his resignation from the
Board in September 1998.
Each grant under the Director Plan permits the holder to purchase from
the Company 1,000 shares of Common Stock at the fair market value of such shares
on the date the option was granted. Such options vest beginning one year from
the date of grant in equal amounts over the next three years. In the event that
a person granted options under the Director Plan ceases to be a director for any
reason other than death or disability or in connection with a Change of Control
(as defined in the Director Plan), each option not vested as of the effective
date of termination as a director shall, to the extent not so vested, be
forfeited and revert back to the Company.
EMPLOYMENT AGREEMENTS
Effective as of January 1, 1998, the Company and Mr. Robinette entered
into an employment agreement that superceded the employment agreement between
the Company and Mr. Robinette dated September 6, 1994. Pursuant to such
agreement, Mr. Robinette continues to be employed as President and Chief
Executive Officer of the Company and receives a salary of $400,000 per year.
Under the terms of the agreement, Mr. Robinette is furnished with the use of a
Company automobile, participation in group health, term life insurance and other
employee benefit plans available to other executive personnel. He is eligible
for four weeks paid vacation in each calendar year. Mr. Robinette will also be
entitled to receive a bonus at the end of each calendar year of equal to 70% of
his annual base salary if the Company meets its annual budget for such year
under the Company's bonus plan; however, if the Company exceeds its annual
budget and meets certain other targets under the bonus plan, Mr. Robinette will
be entitled to receive a bonus of up to a maximum of 105% of his base salary.
Mr. Robinette is also able to participate in the Company's Profit Sharing and
Savings Retirement Plan, Long Term Incentive Plan and the Deferred Compensation
Plan.
On March 11, 1997, the Company and Mr. Lahr entered into an employment
agreement. Pursuant to the agreement, Mr. Lahr receives an annual base salary of
$225,000 and a deferred signing bonus of $112,500 for 1997 which was paid in
1998. Under the terms of the agreement, Mr. Lahr is furnished with the use of a
Company automobile and is eligible to participate in group health, term life
insurance and other employee benefit plans available to other executive
personnel. He is eligible for four weeks paid vacation in each calendar year. He
is also eligible to participate in the Company's bonus plan. Pursuant to his
employment agreement, Mr. Lahr was awarded an option to purchase 100,000 shares
of Common Stock at an exercise price of $6.625 that was equal to the fair market
value on the date of grant.
On March 21, 1997, the Company and Mr. Olson entered into an employment
agreement. Pursuant to the agreement, Mr. Olson receives an annual base salary
of $140,000 and a deferred signing bonus of $50,000 for 1997 which was paid in
1998. Under the terms of the agreement, Mr. Olson is furnished with the use of a
Company automobile and is eligible to participate in group health, term life
insurance and other employee benefit plans available to other executive
personnel. He is eligible for four weeks paid vacation in each calendar year. He
is also eligible to participate in the Company's bonus plan. Pursuant to his
employment agreement, Mr. Olson was awarded stock options representing the right
to purchase 50,000 shares of Common Stock at an exercise price of $6.625 that
was equal to the fair market value on the date of grant.
<PAGE>
On November 23, 1996, the Company and Mr. Greenly entered into an
employment agreement. Pursuant to the agreement, Mr. Greenly received an annual
base salary of $200,000. Under the terms of the agreement, Mr. Greenly was
furnished with the use of a Company automobile and permitted to participate in
group health, term life insurance and other employee benefit plans available to
other executive personnel. He was eligible for four weeks paid vacation in each
calendar year. He was also eligible to participate in the Company's bonus plan.
In addition, Mr. Greenly received a signing bonus of $20,000 in 1996. Pursuant
to his employment agreement, Mr. Greenly was awarded stock options representing
the right to purchase 90,000 shares of Common Stock at an exercise price of
$7.00 that was equal to the fair market value on the date of grant. In
connection with the sale of substantially all of the assets of the manufacturing
business of the Company, Mr. Greenly's employment with the Company terminated
effective March 13, 1998. In connection with such sale Mr. Greenly received
certain cash payments and the continuation of certain benefits for a limited
period of time after termination of employment. See "Summary Compensation Table"
above. Also in connection with such sale, the Company and Mr. Greenly entered
into an amendment to Mr. Greenly's option agreement whereby his options that
were vested as of the date of termination did not expire upon termination, but
continued in effect until March 2, 1999. All of such options expired on March 2,
1999 without having been exercised.
SEVERANCE PLANS
The Company has adopted a Chief Executive Officer Severance Plan (the
"CEO Plan") for Mr. Robinette and an Executive Severance Plan (the "Executive
Plan") for Messrs. Lahr, Braun and Olson. The CEO Plan provides for severance
benefits in the event a participant's employment is involuntarily terminated for
any reason other than cause, or where a participant voluntarily terminates for
certain prescribed reasons outlined in the CEO Plan. Under the CEO Plan, if the
participant's employment is terminated, the participant will receive severance
pay equal to two times (a) the sum of the participant's base salary and (b) the
greater of (i) the average annual bonus earned in the three fiscal years prior
to the date of the termination and (ii) the target annual bonus established for
the year in which the effective date of termination occurs. Upon a qualifying
termination of employment, the participant will also receive a pro rata targeted
annual bonus for the year of termination. Under the CEO Plan, a participant
whose employment is terminated under the CEO Plan's provisions is also eligible
to receive certain of those fringe benefits he had received prior to his
termination until the participant and his spouse reach the age of 70 or become
eligible for Medicare, whichever is earlier. If, during the six months prior to
or within a year following a Change in Control (as defined in the CEO Plan), the
participant's employment is terminated under certain circumstances, he will be
paid a severance benefit equal to three times the sum of (a) his annual base
salary and (b) the greater of (i) the average annual bonus earned in the three
fiscal years prior to the date of the termination and (ii) the target annual
bonus established for the year in which the participant's effective date of
termination occurs. Also, upon such a termination of employment in connection
with a Change in Control, the participant will receive a pro rata targeted
annual bonus for the year of termination. Further, the participant would be
entitled to receive any unused or accrued vacation pay, and would be eligible to
receive certain of those fringe benefits he had received prior to his
termination until the participant and his spouse attain age 70 or become
entitled to Medicare, whichever is earlier. In the event that the severance
benefits under the CEO Plan exceed the "golden parachute" excise tax limit set
forth in Section 280G of the Internal Revenue Code, the participant is entitled
to receive an additional cash gross-up payment so that the net amount retained
by the participant after the imposition of such excise tax is equal to the
amount of severance benefits due him under the CEO Plan.
<PAGE>
The Executive Plan provides for severance benefits in the event a
participant's employment is involuntarily terminated for any reason other than
cause, or where a participant voluntarily terminates for certain prescribed
reasons outlined in the Executive Plan. If the participant's employment is
terminated, the participant will receive severance pay equal to one times the
sum of (a) the participant's base salary and (b) the greater of (i) the average
annual bonus earned in the three fiscal years prior to the date of the
termination and (ii) the target annual bonus established for the year in which
the participant's effective date of termination occurs. Upon a qualifying
termination of employment the participant will also receive a pro rata targeted
annual bonus for the annual year of termination. A participant whose employment
is terminated in accordance with the terms of the Executive Plan is also
eligible to receive those fringe benefits he had received prior to his
termination for one full year. If, during the six months prior to or within a
year following a Change in Control (as defined in the Executive Plan), the
participant's employment is terminated, under certain circumstances, the
participant would be paid a severance benefit equal to two times the sum of (a)
his annual base salary and (b) the greater of (i) the average annual bonus
earned in the three fiscal years prior to the date of the termination and (ii)
the target annual bonus established for the year in which the effective date of
termination occurs. Also, upon such a termination of employment in connection
with a Change in Control, the participant will receive a pro rata targeted
annual bonus for the year of termination. Further, the participant would receive
any unused or accrued vacation pay, and would be eligible to receive certain of
those fringe benefits he had received prior to his termination for a period of
twenty-four months. In order to avoid the imposition of excise taxes,
participants' benefits are capped at the "golden parachute" excise tax limit set
forth in Section 280G of the Internal Revenue Code (unless removing the cap
results in a greater after-tax benefit to the participant).
In exchange for the severance benefit provided under the CEO Plan and
the Executive Plan, as the case may be, the covered executive, for a period of
twenty-four calendar months after termination is subject to non-disclosure,
non-competition and no-raid agreements. The CEO Plan and the Executive Plan
supersede any previous severance agreements between the Company and its
executive officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Messrs. Hawley, Marks
and Haas. Mr. Hawley is an officer of the Company and may be considered an
employee of the Company. In 1998, the Company paid Mr. Hawley a chairman's fee
of $100,000 which he is entitled to receive annually. No other executive officer
of the Company served as: (i) a member of the compensation committee (or other
board committee performing equivalent functions or, in the absence of any such
committee, the entire board of directors) of another entity, one of whose
executive officers served on the compensation committee of the Board of
Directors of the Company; (ii) a director of another entity, one of whose
executive officers served on the Board of Directors of the Company; or (iii) a
member of the compensation committee (or other board committee performing
equivalent functions or, in the absence of any such committee, the entire board
of directors) of another entity, one of whose executive officers served as a
director of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 19, 1999 the number of shares
of Common Stock owned beneficially, to the knowledge of the Company, by each
beneficial owner of more than 5% of the Common Stock, by each director, by each
Named Executive Officer, and by all executive officers and directors of the
Company as a group. Unless otherwise indicated in a footnote, each person listed
in the table possesses sole voting and investment power with respect to the
shares indicated.
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER PERCENTAGE OF
BENEFICIAL OWNER OF SHARES COMMON STOCK
-------------------- --------- -------------
<S> <C> <C>
Heartland Advisors, Inc. 2,059,900 (1) 19.9
790 North Milwaukee Street
Milwaukee, WI 53202
The Parnassus Fund 1,000,000 9.7
One Market
Steuart Tower - Suite #1600
San Francisco, CA 94105
Franklin Resources, Inc. 749,800 (2) 7.2
Franklin Advisory Services, Inc.
901 Mariners Island Blvd, 6th Floor
San Mateo, CA 94404
James J. Cramer 725,500 (3) 7.0
J.J. Cramer & Co.
100 Wall Street
New York, NY 10005
Dimensional Fund Advisors Inc. 719,900 (4) 7.0
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Frank J. Hawley, Jr. 125,122 1.2
Howard G. Haas 9,500 (5) *
Larry R. Robinette 8,800 *
John S. Crowley 5,000 (6) *
Edward T. Tokar 4,000 (7) *
Darrell J. Olson 5,000 *
Mitchell J. Lahr 2,000 *
All Directors and Executive Officers 159,822 (8) 1.5
as a group
(9 persons)
</TABLE>
* Number equals less than one percent (1%) of outstanding shares of Common
Stock.
(1) Based on information filed with the Securities and Exchange Commission,
Heartland Advisors, Inc. has sole voting power with respect to 1,167,900
shares and dispositive power with respect to 2,059,000 shares.
(2) Based on information filed with the Securities and Exchange Commission,
Franklin Advisory Services, Inc. has sole voting power with respect to
220,000 shares and sole dispositive power with respect to 749,800 shares
(3) Based on information filed with the Securities and Exchange Commission,
J.J. Cramer & Co. has sole voting power with respect to 725,500 shares
and sole dispositive power with respect to 725,500 shares.
<PAGE>
(4) Based on information filed with the Securities and Exchange Commission,
Dimensional Fund Advisors Inc. has sole voting power with respect to
719,900 shares and sole dispositive power with respect to 719,900
shares.
(5) This amount includes 5,000 shares of Common Stock as to which Mr. Haas
has options to purchase which were granted pursuant to the Director Plan
and which are currently exercisable or exercisable within 60 days, as
well as 4,500 shares owned individually.
(6) This amount consists of 5,000 shares of Common Stock as to which Mr.
Crowley has options to purchase which were granted pursuant to the
Director Plan and which are currently exercisable or exercisable within
60 days.
(7) This amount represents 2,000 shares of Common Stock as to which Mr. Tokar
has options to purchase which were granted pursuant to the Director Plan
and which are currently exercisable or exercisable within 60 days, as well
as 2,000 shares owned individually.
(8) This amount represents the aggregate amount of 159,822 shares of Common
Stock as to which all executive officers and directors as a group have
options to purchase and which are currently exercisable or exercisable
within 60 days, as well as shares owned or beneficially owned
individually.
On March 10, 1999, Morgan entered into an Agreement of Merger with
Andersen Windows and its wholly-owned subsidiary, Andersen Sub, pursuant to
which Andersen Sub and Morgan will be merged, resulting in Morgan, as the
surviving corporation, becoming a wholly-owned subsidiary of Andersen Windows.
The consideration to be received by Morgan's stockholders in the Merger will be
$4.00 per share of Morgan common stock, subject to adjustment until the
effective date of closing, under certain limited circumstances. The Merger is
subject to, among other things, approval of the stockholders of Morgan and the
applicable regulatory agencies.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the third quarter of 1998, the Company engaged Indian River
Consulting Corporation ("Indian River") to assist the Company in evaluating the
Adam acquisition, including the development of strategies to be used in
integrating the Company's and Adam's systems and employee forces. Mr. J. Michael
Marks, a member of the Company's board of directors, is the sole owner of Indian
River. There is no agreement governing the engagement of Indian River by the
Company, which is done on a purchase order basis. In 1998, the Company paid
Indian River approximately $36,000 for its services and, in 1999, as of March
15, 1999, the Company has paid approximately $82,000 in charges for such
services rendered by Indian River. The Company believes that all such
transactions with Indian River have been conducted on an arm's-length basis. See
also "Executive Compensation--Compensation Committee Interlocks and Insider
Participation."
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following financial statements and financial statement schedule
of Morgan are included in this Report:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
1. FINANCIAL STATEMENTS:
Report of Independent Accountants..........................................
Consolidated Income Statements for the years ended December 31, 1998, 1997
and 1996...................................................................
Consolidated Balance Sheets at December 31, 1998 and 1997..................
Consolidated Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996..............................................................
Consolidated Statements of Stockholders' Equity for the years ended December
31, 1998, 1997 and 1996....................................................
Notes to Consolidated Financial Statements.................................
2. FINANCIAL STATEMENT SCHEDULE:
Schedule II - Valuation and Qualifying Accounts for the years ended December
31, 1998, 1997 and 1996....................................................
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 Morgan's Restated Certificate of Incorporation, as amended
(incorporated by reference to Exhibit 3.1 to Morgan's Annual
Report on Form 10-K for the Fiscal Year ended December 31, 1987
(Commission File No. 0-13911)).
3.2 By-laws of Morgan, as amended (incorporated by reference to
Exhibit 3.2 to Morgan's Annual Report on Form 10-K for the Fiscal
Year ended December 31, 1987 (Commission File No. 0-13911)).
10.1 Amended and Restated Loan and Security Agreement among Morgan,
the lender parties thereto and Fleet Capital Corporation as agent
for the lenders, dated as of February 3, 1998 (incorporated by
reference to Exhibit 99 to Morgan's Current on Form 8-K filed
February 17, 1998 (Commission File No. 1-9843)).
<PAGE>
10.2 First Amendment to Amended and Restated Loan and Security
Agreement, dated April 20, 1998, among Morgan, the lender parties
thereto and Fleet Capital Corporation as agent for the lenders,
dated as of February 3, 1998. (incorporated by reference to
Exhibit 10.1 to Morgan's Quarterly Report on Form 10-Q for the
First Quarter of the Fiscal Year ended December 31, 1998
(Commission File No.1-9843)).
10.3 Second Amendment to the Amended and Restated Loan and Security
Agreement dated as of February 22, 1999 by and among Morgan
Products Ltd., the Lenders party thereto and Fleet Capital
Corporation, as agent for the Lenders. (incorporated by reference
to Exhibit 99 to Morgan's Current Report on Form 8-K dated
February 19, 1999 (Commission File No. 1-9843)).
+ 10.4 Mortgage and Security Agreement with Assignment of Rents, dated
as of December 1, 1991, from Morgan to Harris Trust and Savings
Bank (incorporated by reference to Exhibit 10.18 to Morgan's
Annual Report on Form 10-K for the Fiscal Year ended December 31,
1991 (Commission File No. 1-9843)).
+ 10.5 Employment Agreement between Morgan and Larry R. Robinette dated
as of January 1, 1998 (incorporated by reference to Exhibit 10.5
to Morgan's Annual Report on Form 10-K for the Fiscal Year ended
December 31, 1997 (Commission File No. 1-9843)).
+ 10.6 Morgan Products Ltd. Executive Severance Plan dated October 1997
(incorporated by reference to Exhibit 10.6 to Morgan's Annual
Report on Form 10-K for the Fiscal Year ended December 31, 1997
(Commission File No. 1-9843)).
+ 10.7 Amended 1994 Executive Performance Incentive Plan (incorporated
by reference to Exhibit 10.14 of Morgan's Annual Report on Form
10-K for the Fiscal Year ended December 31, 1994 (Commission File
No. 1-9843)).
+ 10.8 Morgan Products Ltd. 1992 Non-employee Director Stock Option Plan
(incorporated by reference to Exhibit 10.19 of Morgan's Annual
Report on Form 10-K for the Fiscal Year ended December 31, 1992
(Commission File No. 1-9843)).
+ 10.9 Morgan's 1985 Incentive Stock Option Plan (incorporated by
reference to Exhibit 10.19 of Morgan's Annual Report on Form 10-K
for the Fiscal Year ended December 31, 1994 (Commission File No.
1-9843)).
10.10 Morgan's 1988 Stock Purchase Plan (incorporated by reference to
the Appendix to the Prospectus contained in Post-Effective
Amendment No. 1 to Morgan's Registration Statement on Form S-8
(Registration No. 33-23882)).
+ 10.11 Morgan Products Ltd. Chief Executive Officer Severance Plan dated
October 1997 (incorporated by reference to Exhibit 10.11 to
Morgan's Annual Report on Form 10-K for the Fiscal Year ended
December 31, 1997 (Commission File No. 1-9843)).
+ 10.12 Amendments dated May 17, 1995 to Morgan's 1985 Incentive Stock
Option Plan (incorporated by reference to Exhibit 10.18 of
Morgan's Annual Report on Form 10-K for the Fiscal Year ended
December 31, 1995 (Commission File No. 1-9843)).
+ 10.13 Amendments dated December 20, 1995 to the Morgan Products Ltd.
Deferred Compensation Plan (incorporated by reference to Exhibit
10.19 of Morgan's Annual Report on Form 10-K for the Fiscal Year
ended December 31, 1995 (Commission File No. 1-9843)).
10.14 Agreement between Morgan Distribution, Mechanicsburg,
Pennsylvania and the United Steelworkers of America, AFL-CIO-CLC,
Local 7415, dated February 18, 1995 (incorporated by reference to
Exhibit 10.20 of Morgan's Annual Report on Form 10-K for the
Fiscal Year ended December 31, 1995 (Commission File No.
1-9843)).
<PAGE>
10.15 Agreement between Morgan Distribution, Shawnee, Kansas, and
Building Material, Excavating, Heavy Haulers, Drivers, Helpers
and Warehousemen, Local No. 541, Kansas City, Missouri,
affiliated with the International Brotherhood of Teamsters, dated
April 1, 1995 (incorporated by reference to Exhibit 10.21 of
Morgan's Annual Report on Form 10-K for the Fiscal Year ended
December 31, 1995 (Commission File No. 1-9843)).
10.16 Agreement between Morgan Products Ltd., Decatur, Illinois, and
the International Brotherhood of Teamsters, AFL-CIO, Local 279,
dated July 15, 1995 (incorporated by reference to Exhibit 10.24
of Morgan's Annual Report on Form 10-K for the Fiscal Year ended
December 31, 1995 (Commission File No. 1-9843)).
10.17 Agreement between Morgan Distribution, Birch Run, Michigan, and
the International Brotherhood of Teamsters, Local 486, dated
November 4, 1995 (incorporated by reference to Exhibit 10.25 of
Morgan's Annual Report on Form 10-K for the Fiscal Year ended
December 31, 1995 (Commission File No. 1-9843)).
+ 10.18 Form of Indemnification Agreement, dated November 3, 1994,
between Morgan and e Larry R. Robinette and Edward T. Tokar
(incorporated by reference to Exhibit 10.26 of Morgan's Annual
Report on Form 10-K for the Fiscal Year ended December 31, 1995
(Commission File No. 1-9843))
10.19 Lease for office space in Williamsburg, Virginia, between Morgan
and Jim Griffith Builder, Inc. dated March 2, 1995 and amended
October 3, 1995 (incorporated by reference to Exhibit 10.28 of
Morgan's Annual Report on Form 10-K for the Fiscal Year ended
December 31, 1995 (Commission File No. 1-9843)).
10.20 Office lease for Morgan Manufacturing Division Office in Oshkosh,
Wisconsin, dated October 13, 1995 (incorporated by reference to
Exhibit 10.30 of Morgan's Annual Report on Form 10-K for the
Fiscal Year ended December 31, 1995 (Commission File No.
1-9843)).
10.21 Letter Agreement, dated December 1994, between each of Morgan's
eleven distribution centers and Andersen Windows, Inc.
(incorporated by reference to Exhibit 10.31 of Morgan's Annual
Report on Form 10-K for the Fiscal Year ended December 31, 1995
(Commission File No. 1-9843)).
10.22 Purchase agreement with JELD-WEN, inc. for the Lexington, North
Carolina door manufacturing facility (incorporated by reference
to Exhibit 10.1 of Morgan's Quarterly Report on Form 10-Q for the
Second Quarter of the Fiscal Year ended December 31, 1996
(Commission File No. 1-9843)).
10.23 Agreement between Local 705, International Brotherhood of
Teamsters, Chauffeurs, Warehousemen and Helpers of America,
AFL-CIO, and Morgan Distribution at West Chicago, Illinois, dated
January 13, 1996 (incorporated by reference to Exhibit 10.2 of
Morgan's Quarterly Report on Form 10-Q for the Second Quarter of
the Fiscal Year ended December 31, 1996 (Commission File No.
1-9843)).
10.24 Asset Purchase Agreement dated as of July 22, 1996 by and among
Morgan Products Ltd.; Tennessee Building Products, Inc.; Titan
Building Products, Inc.; James Fishel; and James Schulman
(incorporated by reference to Exhibit 10.3 of Morgan's Quarterly
Report on Form 10-Q/A-1 for the Second Quarter of the Fiscal Year
ended December 31, 1996 (Commission File No. 1-9843)).
<PAGE>
10.25 Agreement between United Paperworkers International Union, Region
IX, AFL-CIO, Local No. 7828, Decatur, Illinois dated January 2,
1996 (incorporated by reference to Exhibit 6 of Exhibit 6 of
Morgan's Current Report on Current Report on Form 8-K filed
September 26 1996 (Commission File No. 1-9843)).
+ 10.26 Non-Competition Agreement by and among Morgan; Tennessee Building
Products, Inc.; Titan Building Products, Inc.; James Fishel;
James Schulman and John Whipple dated August 30, 1996
(incorporated by reference to Exhibit 7 of Morgan's Current
Report on Form 8-K filed September 26 1996 (Commission File No.
1-9843)).
10.27 Lease Agreement by and between Titan Building Products, Inc. and
Sunbelt Properties for property located at 37-A Freedom Court,
Greer, South Carolina, dated February 15, 1995 (incorporated by
reference to Exhibit 8 of Morgan's Current Report on Form 8-K
filed September 26, 1996 (Commission File No.
1-9843)).
10.28 Lease Agreement by and between Titan Building Products, Inc. and
SCI NC Limited Partnership for property located at 1407-A
Westinghouse Blvd., Charlotte, North Carolina, dated February 15,
1995 (incorporated by reference to Exhibit 9 of Morgan's Current
Report on Form 8-K filed September 26 1996 (Commission File No.
1-9843)).
10.29 Lease Agreement by and between Morgan and F&S Properties for
property located at Foster and Glenrose Avenue, Nashville,
Tennessee, dated August 30, 1996 (incorporated by reference to
Exhibit 10 of Morgan's Current Report on Form 8-K filed September
26 1996 (Commission File No. 1-9843)).
10.30 Lease Agreement by and between Morgan and F&S Properties for
property located at 651 Thompson Lane, Nashville, Tennessee,
dated August 30, 1996 (incorporated by reference to Exhibit 11 of
Morgan's Current Report on Form 8-K filed September 26 1996
(Commission File No. 1-9843)).
10.31 Lease Agreement by and between Morgan and F&S Properties for
property located at 2131 Polymer Drive, Chattanooga, Tennessee,
dated August 30, 1996 (incorporated by reference to Exhibit 12 of
Morgan's Current Report on Form 8-K filed September 26 1996
(Commission File No. 1-9843)).
10.32 Agreement between Morgan Distribution, Scranton, Pennsylvania and
Teamsters Local Union 229, affiliated with the International
Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of
America, dated January 27, 1996 (incorporated by reference to
Exhibit 10.49 to Morgan's Annual Report on Form 10-K for the
Fiscal Year ended December 31, 1996 (Commission File No.
1-9843)).
+ 10.33 Amendment to Morgan's 1985 Incentive Stock Option Plan approved
by the Board of Directors on September 30, 1996 (incorporated by
reference to Exhibit 10.50 to Morgan's Annual Report on Form 10-K
for the Fiscal Year ended December 31, 1996 (Commission File No.
1-9843)).
10.34 Amendment #3, dated April 26, 1996, to exercise Morgan's option
to extend through 2001, its lease of office and warehouse in West
Chicago, Illinois (incorporated by reference to Exhibit 10.52 to
Morgan's Annual Report on Form 10-K for the Fiscal Year ended
December 31, 1996 (Commission File No. 1-9843)).
10.35 Amendment #2, dated August 12, 1996, to exercise Morgan's option
to extend through 2001, its lease of warehousing in West
Columbia, South Carolina (incorporated by reference to Exhibit
10.53 to Morgan's Annual Report on Form 10-K for the Fiscal Year
ended December 31, 1996 (Commission File No. 1-9843)).
<PAGE>
+ 10.36 Employment agreement between Morgan and Mitchell J. Lahr dated
March 11, 1997 (incorporated by reference to Exhibit 10.1 to
Morgan's Quarterly Report on Form 10-Q for the Second Quarter of
the Fiscal Year ended December 31, 1997 (Commission File No.
1-9843)).
+ 10.37 Employment agreement between Morgan and Darrell J. Olson dated
March 21, 1997 (incorporated by reference to Exhibit 10.2 to
Morgan's Quarterly Report on Form 10-Q for the Second Quarter of
the Fiscal Year ended December 31, 1997 (Commission File No.
1-9843)).
+ 10.38 Form of Indemnification Agreement, dated April 7, 1997, between
Morgan and Mitchell J. Lahr (incorporated by reference to Exhibit
10.3 to Morgan's Quarterly Report on Form 10-Q for the Second
Quarter of the Fiscal Year ended December 31, 1997 (Commission
File No. 1-9843)).
+ 10.39 Form of Indemnification Agreement, dated April 14, 1997, between
Morgan and Darrell J. Olson (incorporated by reference to Exhibit
10.4 to Morgan's Quarterly Report on Form 10-Q for the Second
Quarter of the Fiscal Year ended December 31, 1997 (Commission
File No. 1-9843)).
10.40 Lease, dated March 7, 1997, between Morgan and BR/NO LA.
Properties, LLC for warehousing for a five year term in Baton
Rouge, Louisiana (incorporated by reference to Exhibit 10.7 to
Morgan's Quarterly Report on Form 10-Q for the Second Quarter of
the Fiscal Year ended December 31, 1997 (Commission File No.
1-9843)).
10.41 Asset Purchase Agreement dated as of July 15, 1997 by and among
Morgan Products Ltd., Wahlfeld Manufacturing Company and Ted
Wahlfeld and John Wahlfeld, as amended on July 18, 1997 and July
25, 1997 (incorporated by reference to Exhibit 1 to Morgan's
Current Report on Form 8-K dated August 8, 1997 (Commission File
No. 1-9843)).
10.42 Asset Purchase Agreement dated as of February 2, 1998 by
JELD-WEN, inc. and Morgan Products Ltd. (incorporated by
reference to Exhibit 2 to Morgan's Current Report on Form 8-K
dated February 17, 1998 (Commission File No. 1-9843)).
10.43 Supply Agreement, dated February 2, 1998, between JELD-WEN, inc.
and Morgan (incorporated by reference to Exhibit 10.4 to Morgan's
Quarterly Report on Form 10-Q for the First Quarter of the Fiscal
Year ended December 31, 1998 (Commission File No. 1-9843)).
10.44 Lease Agreement between Morgan and Security Capital Industrial
Trust for property located at Denver Business Center #1, 11101-A
East 53rd Avenue, Denver, Colorado, dated April 15, 1997
(incorporated by reference to Exhibit 10.53 to Morgan's Annual
Report on Form 10-K for the Fiscal Year ended December 31, 1997
(Commission File No. 1-9843)).
10.45 Asset Purchase Agreement dated December 22, 1998 by and among
Morgan Products Ltd., Adam Wholesalers, Inc. and certain
subsidiaries of Adam Wholesalers, Inc. (incorporated by reference
to Exhibit 2 to Morgan's Current Report on Form 8-K dated
February 19, 1999 (Commission File No. 1-9843)).
* 10.46 Lease by and between Adam Wholesalers, Inc. and Adam Wholesalers,
Inc. a/k/a Adam Wholesalers Corporate dated September 1, 1992 as
modified by that Assignment and Assumption and Modification of
Lease Agreement by and among Morgan, Adam Wholesalers, Inc. and
Adam Wholesalers, Corporate dated February 19, 1999.
<PAGE>
* 10.47 Lease by and between Thurner Hatfield & Thurner and Adam
Wholesalers of Toledo, Inc. a/k/a/ Adam Wholesalers, Toledo dated
January 1, 1990 as modified by that Assignment and Assumption and
Modification of Lease Agreement by and among Morgan, Thurner
Hatfield & Thurner and Adam Wholesalers of Toledo, Inc. dated
February 19, 1999.
* 10.48 Lease by and between Adam Wholesalers, Inc. and Adam Wholesalers
of Dayton, Inc. a/k/a Adam Wholesalers, Dayton dated April 1,
1993 as modified by that Assignment and Assumption and
Modification of Lease Agreement by and among Morgan, Adam
Wholesalers, Inc. and Adam Wholesalers of Dayton, Inc. dated
February 19, 1999.
* 10.49 Lease by and between Adam Wholesalers, Inc. and Adam Wholesalers
of Cincinnati, Inc. a/k/a Adam Wholesalers, Cincinnati dated
September 1, 1992 as modified by that Assignment and Assumption
and Modification of Lease Agreement by and among Morgan, Adam
Wholesalers, Inc. and Adam Wholesalers of Cincinnati, Inc. dated
February 19, 1999.
* 10.50 Lease by and between Adam Wholesalers, Inc. and Adam Wholesalers
of Woodbury Heights, Inc. a/k/a Adam Wholesalers, Woodbury dated
October 1, 1994 as modified by that Assignment and Assumption and
Modification of Lease Agreement by and among Morgan, Adam
Wholesalers, Inc. and Adam Wholesalers of Woodbury Heights, Inc.
dated February 19, 1999.
* 10.51 Lease by and between Adam Wholesalers, Inc. and Adam Wholesalers
of Denver, Inc. a/k/a Adam Wholesalers, Denver dated January 1,
1995 as modified by that Assignment and Assumption and
Modification of Lease Agreement by and among Morgan, Adam
Wholesalers, Inc. and Adam Wholesalers of Denver, Inc. dated
February 19, 1999.
* 10.52 Lease by and between Adam Wholesalers, Inc. and Adam Wholesalers
of Indianapolis, Inc. dated May 13, 1992 as modified by that
Assignment and Assumption and Modification of Lease Agreement by
and among Morgan, Adam Wholesalers, Inc. and Adam Wholesalers of
Indianapolis, Inc. dated February 19, 1999.
* 10.53 Lease by and between Adam Wholesalers, Inc. and Adam Wholesalers
of Virginia, Inc. a/k/a Adam Wholesalers, Virginia dated August
1, 1992 as modified by that Assignment and Assumption and
Modification of Lease Agreement by and among Morgan, Adam
Wholesalers, Inc. and Adam Wholesalers of Virginia, Inc. dated
February 19, 1999.
* 10.54 Lease by and between Adam Wholesalers, Inc. and Adam Wholesalers
of St. Louis, Inc. dated May 1, 1994 as modified by that
Assignment and Assumption and Modification of Lease Agreement by
and among Morgan, Adam Wholesalers, Inc. and Adam Wholesalers of
St. Louis, Inc. dated February 19, 1999.
* 10.55 Lease by and between Adam Wholesalers, Inc. and Adam Wholesalers
of Phoenix, Inc. a/k/a Adam Wholesalers, Phoenix dated January 1,
1993 as modified by that Assignment and Assumption and
Modification of Lease Agreement by and among Morgan, Adam
Wholesalers, Inc. and Adam Wholesalers of Phoenix, Inc. dated
February 19, 1999.
* 10.56 Lease by and between Adam Wholesalers, Inc. and Adam Wholesalers
of Nitro, Inc. dated January 1, 1995 as modified by that
Assignment and Assumption and Modification of Lease Agreement by
and among Morgan, Adam Wholesalers, Inc. and Adam Wholesalers of
Nitro, Inc. dated February 19, 1999.
* 10.57 Lease by and between Pine Acre Investments, Inc. and Adam
Wholesalers of Carlisle, Inc. dated August 1, 1991.
<PAGE>
* 10.58 Lease by and between C-S-K Louisville and Allied Sash and Door,
Inc., as amended, dated April 1, 1990.
* 10.59 Lease by and between Mamco Millworks of New York, Inc. a/k/a/
Adam Wholesalers of Kirkwood, Inc., as modified, dated September
9, 1985.
* 10.60 Amendment to Supply Agreement dated October 5, 1998 between
Morgan and JELD-WEN, inc.
* 23.1 Financial Data Schedule
* 27.1 Consent of PricewaterhouseCoopers LLP.
--------------------------------
* Filed herewith.
+ Management contract or compensatory plan or arrangement.
(b) REPORTS ON FORM 8-K:
The Company filed no current reports on Form 8-K with the
Securities Exchange Commission during the last quarter of the period covered by
this Annual Report on Form 10-K for the year ended December 31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Morgan has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MORGAN PRODUCTS LTD.
By /s/ Mitchell J. Lahr
--------------------------------
Mitchell J. Lahr
Vice President, Chief Financial
Officer and Secretary
MARCH 30, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of Morgan
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
/s/ Frank J. Hawley, Jr. Chairman of the Board March 30, 1999
- ----------------------------------------- and Director
Frank J. Hawley, Jr.
/s/ Larry R. Robinette President, Chief Executive March 30, 1999
- ----------------------------------------- Officer and Director
Larry R. Robinette (Principal Executive Officer)
/s/ Mitchell J. Lahr Vice President, Chief March 30, 1999
- ----------------------------------------- Financial Officer and
Mitchell J. Lahr Secretary
(Principal Financial Officer
and Principal Accounting
Officer)
/s/ John S. Crowley Director March 30, 1999
- -----------------------------------------
John S. Crowley
/s/ Howard G. Haas Director March 30, 1999
- -----------------------------------------
Howard G. Haas
/s/ J. Michael Marks Director March 30, 1999
- -----------------------------------------
J. Michael Marks
/s/ Edward T. Tokar Director March 30, 1999
- -----------------------------------------
Edward T. Tokar
</TABLE>
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
MORGAN PRODUCTS LTD.
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants..........................................
Consolidated Income Statements for the years ended December 31, 1998, 1997
and 1996................................................................
Consolidated Balance Sheets at December 31, 1998 and 1997..................
Consolidated Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996..............................................................
Consolidated Statements of Stockholders' Equity for the years ended December
31, 1998, 1997 and 1996....................................................
Notes to Consolidated Financial Statements.................................
Schedule II - Valuation and Qualifying Accounts for the years ended December
31, 1998, 1997 and 1996 ...................................................
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Morgan Products Ltd.
In our opinion, the consolidated financial statements listed in the index
appearing under 14(a)(1) present fairly, in all material respects, the financial
position of Morgan Products Ltd. at December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles. In addition, in our opinion the financial statement schedule listed
in the index appearing under 14(a)(2) presents fairly, in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 2, 1999, except for Note 6, as to which the date is February 19, 1999
and Note 13, as to which the date is March 10, 1999
<PAGE>
MORGAN PRODUCTS LTD.
CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1998 1997 1996
-----------------------------------------
<S> <C> <C> <C>
Net sales................................................... $383,151 $412,249 $373,345
Cost of goods sold.......................................... 328,569 353,909 317,917
---------------------------------------
Gross profit............................................ 54,582 58,340 55,428
---------------------------------------
Operating expenses:
Sales and marketing..................................... 38,843 41,377 35,687
General and administrative.............................. 12,793 14,947 11,793
Loss on sale of manufacturing ..........................
operations (Note 2).................................. - 12,416 -
Restructuring and reorganization (Note 3) .............. - 5,830 4,712
---------------------------------------
51,636 74,570 52,192
---------------------------------------
Operating income (loss)..................................... 2,946 (16,230) 3,236
---------------------------------------
Other income (expense):
Interest, net........................................... (2,427) (4,999) (3,485)
Other................................................... 378 332 220
---------------------------------------
(2,049) (4,667) (3,265)
---------------------------------------
Income (loss) before income taxes........................... 897 (20,897) (29)
Benefit for income taxes.................................... (104) - (327)
---------------------------------------
Net income (loss)........................................... $ 1,001 $(20,897) $ 298
---------------------------------------
Basic earnings per common share............................. $ 0.10 $ (2.03) $ 0.03
---------------------------------------
Diluted earnings per common share........................... $ 0.10 $ (2.03) $ 0.03
---------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
MORGAN PRODUCTS LTD.
CONSOLIDATED BALANCE SHEETS
(in thousands, except shares outstanding)
<TABLE>
<CAPTION>
December 31,
------------------------
ASSETS 1998 1997
------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents .......................... $ 3,650 $ 4,197
Accounts receivable (less allowances of $750 in 1998
and $921 in 1997) ............................... 31,594 28,743
Inventories (Note 4) ............................... 34,290 40,533
Assets held for sale (Note 2) ...................... -- 32,285
Other current assets ............................... 507 558
------------------------
Total current assets ........................... 70,041 106,316
------------------------
PROPERTY, PLANT AND EQUIPMENT, net (Note 5) ............ 8,274 9,354
GOODWILL, NET (Note 1) ................................. 6,222 6,562
OTHER ASSETS (Note 1) .................................. 7,926 6,544
------------------------
TOTAL ASSETS ....................................... $ 92,463 $ 128,776
------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 6) ...... $ 1,196 $ 1,213
Accounts payable ................................... 16,725 13,151
Accrued compensation and employee benefits ......... 3,299 8,729
Accrued customer rebates ........................... 2,361 707
Other current liabilities .......................... 1,807 5,192
------------------------
Total current liabilities ...................... 25,388 28,992
------------------------
LONG-TERM DEBT (Note 6) ................................ 23,632 57,353
------------------------
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' EQUITY (Note 8):
Common stock, $.10 par value, 10,360,540 and
10,357,808 shares outstanding, respectively ..... 1,036 1,036
Paid-in capital .................................... 43,424 43,413
Accumulated deficit ................................ (969) (1,970)
------------------------
43,491 42,479
Treasury stock, 2,386 shares, at cost .............. (48) (48)
------------------------
Total stockholders' equity ..................... 43,443 42,431
------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......... $ 92,463 $ 128,776
------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
MORGAN PRODUCTS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1998 1997 1996
-------------------------------------
<S> <C> <C> <C>
CASH GENERATED (USED) BY OPERATING ACTIVITIES:
Net income (loss) ................................. $ 1,001 $(20,897) $ 298
Add (deduct) noncash items included in income:
Depreciation and amortization ................. 2,157 4,170 3,571
Provision for doubtful accounts ............... 10 248 139
Loss on sale of manufacturing operations ...... -- 12,416 --
Provision for restructuring and reorganization -- 732 881
(Gain) loss on sale of property, plant
and equipment ................................. (55) (125) 58
Other ......................................... -- 148 234
Cash generated (used) by changes in components of
working capital, net of effects of acquisition
of businesses:
Accounts receivable ........................... (2,436) 1,605 (5,081)
Inventories ................................... 6,243 13,097 (12,747)
Accounts payable .............................. 3,574 (4,394) 6,450
Other working capital ......................... (4,914) (2,886) (1,706)
-------------------------------------
NET CASH GENERATED (USED) BY OPERATING ACTIVITIES ..... 5,580 4,114 (7,903)
-------------------------------------
CASH GENERATED (USED) BY INVESTING ACTIVITIES:
Acquisition of property, plant and equipment ...... (957) (2,319) (3,912)
Acquisition of Tennessee Building Products, Inc. .. -- (2,197) (15,680)
Acquisition of Wahlfeld Manufacturing Company ..... -- (4,959) --
Proceeds from disposal of property, plant
and equipment .................................... 230 184 4,654
Proceeds from sale of manufacturing operations .... 30,957 -- --
Proceeds from surrender of life insurance policies -- -- 925
Acquisition of other assets, net .................. (2,630) (876) (1,598)
-------------------------------------
NET CASH GENERATED (USED) BY INVESTING ACTIVITIES ..... 27,600 (10,167) (15,611)
-------------------------------------
CASH GENERATED (USED) BY FINANCING ACTIVITIES:
Proceeds from long-term debt ...................... -- 9,131 13,018
Repayments of long-term debt ...................... (33,738) (1,545) (1,788)
Common stock issued for cash ...................... 11 1,197 8,616
-------------------------------------
NET CASH GENERATED (USED) BY FINANCING ACTIVITIES ..... (33,727) 8,783 19,846
-------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .. (547) 2,730 (3,668)
CASH AND CASH EQUIVALENTS:
Beginning of period ............................... 4,197 1,467 5,135
-------------------------------------
End of period ..................................... $ 3,650 $ 4,197 $ 1,467
-------------------------------------
CASH PAID (RECEIVED) DURING THE YEAR FOR:
Interest .......................................... $ 2,791 $ 5,245 $ 3,789
Income taxes ...................................... (147) (16) (192)
NON-CASH INVESTING ACTIVITIES:
Assets acquired under capital lease ............... $ -- $ 967 $ 1,505
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
MORGAN PRODUCTS LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
RETAINED UNEARNED
EARNINGS COMPENSATION-
COMMON PAID-IN (ACCUMULATED TREASURY RESTRICTED
STOCK CAPITAL DEFICIT) STOCK STOCK
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 ... $ 865 $ 33,771 $ 18,629 $ (48) $ (382)
Net income ..................... -- -- 298 -- --
Public offering of stock ....... 150 8,452 -- -- --
Amortization of unearned
compensation .................. -- -- -- -- 234
Exercise of options ............ -- 14 -- -- --
----------------------------------------------------------------------
Balance at December 31, 1996 ... 1,015 42,237 18,927 (48) (148)
Net loss ....................... -- -- (20,897) -- --
Amortization of unearned
compensation .................. -- -- -- -- 148
Exercise of options ............ 21 1,176 -- -- --
----------------------------------------------------------------------
Balance at December 31, 1997.... 1,036 43,413 (1,970) (48) --
NET INCOME ..................... -- -- 1,001 -- --
EXERCISE OF OPTIONS ............ -- 11 -- -- --
----------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 ... $ 1,036 $ 43,424 $ (969) $ (48) $ --
----------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
MORGAN PRODUCTS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - Morgan Products Ltd. ("Morgan" or the
"Company") distributes products (virtually all considered to be millwork) to the
residential and light commercial building materials industry for new
construction and improvements, maintenance and repairs. As further discussed in
Note 2 to Consolidated Financial Statements, Morgan sold substantially all of
the operating assets of Morgan Manufacturing ("Manufacturing") on February 2,
1998.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of all business units of Morgan Products Ltd. All
intercompany transactions, profits and balances are eliminated.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts and related disclosures.
Actual amounts could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Cash and cash equivalents,
accounts receivable, accounts payable, and accrued expenses are reflected in the
financial statements at fair value because of the short-term maturity of those
instruments. The fair value of the Company's long-term debt is discussed in Note
6 to Consolidated Financial Statements.
INVENTORIES - Inventories are valued at the lower of cost or market.
Cost is determined on the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is stated
at cost and depreciated on a straight line basis over the estimated useful lives
of the assets, which generally range from 35 years for buildings, 10 to 20 years
for building and improvements, and 5 to 10 years for machinery and equipment.
Expenditures which substantially increase value or extend useful life are
capitalized. Expenditures for maintenance and repairs are charged against income
as incurred.
INTANGIBLES - Goodwill, which represents the excess of the fair market
value over the net tangible and identified intangible assets acquired, is being
amortized on a straight-line basis over 25 years. Accumulated amortization of
goodwill at December 31, 1998 and 1997 was $.5 million and $.3 million,
respectively. Other intangible assets included in other assets include computer
software, covenants not to compete, and deferred debt issue costs. Intangible
assets are being amortized over their respective estimated useful lives from 3
to 5 years. Accumulated amortization of other intangibles at December 31, 1998
and 1997 was $.6 million and $.5 million, respectively.
LONG-LIVED ASSETS - Long-lived assets to be held and used are reviewed
for impairment whenever events or changes in circumstances indicate that the
related carrying amount may not be recoverable. Recoverability of these assets
is determined by comparing the forecasted undiscounted net cash flows of the
asset to the carrying amount, including associated intangible assets.
Measurement of any impairment loss would be based on discounted operating cash
flows.
REVENUE RECOGNITION - The Company recognizes revenue at the time
products are shipped to customers or as services are performed.
<PAGE>
ADVERTISING AND PROMOTIONS - All costs associated with advertising and
promoting products are expensed as incurred. Advertising and promotions expense,
including expense of customer rebates, was $2.6 million in 1998, $2.9 million in
1997, and $2.5 million in 1996.
EARNINGS PER SHARE - Basic earnings per share is computed by dividing
net income available to common shareholders by the weighted average number of
common shares outstanding during the period. Diluted earnings per common share
amounts are based upon the weighted average number of common and common
equivalent shares outstanding during the year. Common equivalent shares are
excluded from the computation in periods in which they have an anti-dilutive
effect. A reconciliation of the income and shares used in the computations of
basic and diluted earnings per common share follows (in thousands, except per
share data):
<TABLE>
<CAPTION>
Income Per Share
(loss) Shares Amount
<S> <C> <C> <C>
1998
Basic earnings per share of common stock..... $ 1,001 10,359 $ 0.10
Effect of dilutive stock options............. - 30 -
----------------------------------------------
Diluted earnings per share of common stock... $ 1,001 10,389 $ 0.10
----------------------------------------------
1997
Basic earnings per share of common stock..... $(20,897) 10,280 $ (2.03)
Effect of dilutive stock options............. - - -
----------------------------------------------
Diluted earnings per share of common stock... $(20,897) 10,280 $ (2.03)
----------------------------------------------
1996
Basic earnings per share of common stock..... $ 298 8,830 $ 0.03
Effect of dilutive stock options............. - 52 -
----------------------------------------------
Diluted earnings per share of common stock... $ 298 8,882 $ 0.03
----------------------------------------------
</TABLE>
Options to purchase 725,000 and 831,000 shares of common stock were
outstanding during 1998 and 1996, but were not included in the computation of
diluted shares because the options' exercise price was greater than the average
market price of the common shares.
Options to purchase 875,000 shares of common stock were outstanding
during 1997, but were not included in the computation of diluted shares because
the effect of including such options would have been anti-dilutive to the net
loss.
STATEMENT OF CASH FLOWS - The Company considers all investments with a
maturity of 91 days or less at the time of purchase to be cash equivalents.
RECLASSIFICATIONS - Certain reclassifications have been made within the
financial statements for the year ended December 31, 1997 to conform to
classifications adopted for the year ended December 31, 1998.
<PAGE>
NOTE 2 - ACQUISITIONS AND DISPOSITION
In August 1996, Morgan purchased certain assets and assumed certain
liabilities of Tennessee Building Products, Inc. and its subsidiary
(collectively, "TBP"), a distributor of windows, doors, kitchen cabinets, and
other millwork and glass products for residential buildings for $17.9 million,
including $.4 million in acquisition costs. This acquisition has been accounted
for as a purchase and the results of the operations of TBP have been included in
Morgan's consolidated financial statements since the date of acquisition. The
excess of the aggregate purchase price over the fair value of net assets
acquired was recognized as goodwill and is being amortized over 25 years.
In the third quarter of 1997, Morgan acquired substantially all of the
assets of Wahlfeld Manufacturing Company ("Wahlfeld") for $5.0 million. Morgan
consolidated Wahlfeld's operations into two existing facilities. Pro forma
results would not materially change the results of operations as presented in
the financial statements.
In the third quarter of 1997, Morgan recorded a loss of $12.4 million
relating to the sale of the operating assets of Morgan Manufacturing in Oshkosh,
Wisconsin to JELD-WEN, inc. In 1998, Morgan completed that sale for $31.0
million in cash proceeds. Morgan used the proceeds from the sale to reduce its
debt.
The unaudited pro forma information below presents results of operations
as if the acquisition of TBP and the sale of Morgan Manufacturing had occurred
at January 1, 1996 (in thousands, except per share amounts):
Year Ended December 31,
-----------------------
1997 1996
---- ----
Net sales $346,963 $331,115
Net income 1,413 4,718
Basic earning per common share 0.14 0.53
Diluted earnings per common share 0.14 0.53
The unaudited pro forma information is not necessarily indicative of the
results of operations of the combined company had these events occurred at the
beginning of the years presented, nor is it necessarily indicative of future
operating results.
<PAGE>
NOTE 3 - RESTRUCTURING AND REORGANIZATION
Beginning in 1994, Morgan adopted a comprehensive strategic plan to
restore profitability and regain leadership by providing customers with quality
products and optimum service at the best price/value relationship. Morgan has
taken a series of major initiatives to implement this plan and respond to
continuing challenges in the industry.
During the period of 1994 through 1997, Morgan incurred an aggregate of
$20.8 million in restructuring charges. Included in these restructuring charges
were the closing of the Springfield, Oregon, Lexington, North Carolina and Weed,
California plants and the consolidation of its door manufacturing operations.
Additionally, Morgan recorded a $1.1 million reorganization charge in 1997 in
connection with the termination of the employment of the Vice President and
Chief Financial Officer and Senior Vice President-Human Resources and
Administration of Morgan. Such provision covered severance and related payments
to these former officers.
Although Manufacturing had made progress operationally, it was
determined in 1997 that Manufacturing was not a strategic fit with Morgan's
long-term growth plans. In December 1997, Morgan reached an agreement to sell
the operating assets of Manufacturing to JELD-WEN, inc. The sale resulted in a
charge to earnings in 1997 of $12.4 million with half the charge related to an
asset write-down and half related to the costs of selling the business,
including employee severance costs, pension expenses, lease obligations and
legal costs.
The following summarizes the activity related to the restructuring and
reorganization reserves (in millions):
<TABLE>
<CAPTION>
Reserve at Reserve at
December 31, Utilized Provision/ December 31,
1995 Cash Noncash Reallocation 1996
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employee benefits (1)........ $ 1.4 $ (1.3) $ - $ .5 $ .6
Inventory (2)................ 1.8 (.3) (1.5) .1 .1
Fixed assets................. .4 - (.4) .3 .3
Holding and other costs (3).. .2 - (.1) - .1
Total reserve................ $ 3.8 $ (1.6) $ (2.0) $ .9 $ 1.1
</TABLE>
<TABLE>
<CAPTION>
Reserve at Reserve at
December 31, Utilized Provision/ December 31,
1996 Cash Noncash Reallocation 1997
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employee benefits (1)........ $ .6 $ (.9) $ - $ 1.1 $ .8
Inventory (2)................ .1 - - - .1
Fixed assets................. .3 - - - .3
Holding and other costs (3).. .1 - - - .1
Total reserve................ $ 1.1 $ (.9) $ - $ 1.1 $ 1.3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Reserve at Reserve at
December 31, Utilized Provision/ December 31,
1997 Cash Noncash Reallocation 1998
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employee benefits (1)........ $ .8 $ (.9) $ - $ .1 $ -
Inventory (2)................ .1 - (.1) - -
Fixed assets................. .3 - (.3) - -
Holding and other costs (3).. .1 - (.1) - -
Total reserve................ $ 1.3 $ (.9) $ (.5) $ .1 $ -
</TABLE>
(1)Costs associated with severance, outplacement and future workers
compensation claims due to the closing of the Springfield and Lexington
facilities, downsizing at Manufacturing and Distribution division offices,
and the restructuring of the Corporate Headquarters.
(2)Primarily costs associated with inventory that could not be utilized or
costs of reworking inventory for use in other facilities due to the closing
of the Springfield, Weed veneer and Lexington facilities.
(3)Costs associated with continuing utility and property taxes due to the
closing of the Springfield, Weed veneer, and other facilities.
NOTE 4 - INVENTORIES
Inventories consisted of the following (in thousands):
December 31,
-----------------------------
1998 1997
-----------------------------
Raw materials............................. $ 1,490 $ 2,016
Finished goods............................ 32,800 38,517
-----------------------------
Total inventories..................... $ 34,290 $ 40,533
-----------------------------
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
December 31,
-------------------------
1998 1997
-------------------------
Land and improvements ....................... $ 903 $ 903
Buildings and improvements .................. 5,231 4,898
Machinery and equipment ..................... 10,930 10,851
Capitalized building and equipment leases ... 6,512 6,513
Less accumulated depreciation ............... (15,346) (13,905)
Construction in progress .................... 44 94
-------------------------
Total property, plant and equipment ..... $ 8,274 $ 9,354
-------------------------
At December 31, 1998 and 1997, accumulated amortization relating to
capitalized building and equipment leases was approximately $5.2 million and
$4.3 million, respectively.
<PAGE>
NOTE 6 - LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------- -------------
1998 1997
----------------------------
<S> <C> <C>
Revolving credit facilities.......................... $18,686 $45,309
Acquisition term loan................................ - 4,767
Industrial revenue bonds............................. - 1,300
Obligations under capital leases (Note 7) ........... 4,036 4,566
Obligations under financing leases (Note 7) ......... 1,557 2,016
Other................................................ 549 608
-------------- -------------
24,828 58,566
Less current maturities.............................. (1,196) (1,213)
-------------- -------------
Total long-term debt............................ $23,632 $57,353
-------------- -------------
</TABLE>
On February 3, 1998, in connection with the sale of Manufacturing,
Morgan and their bank group entered into an amended and restated loan and
security credit agreement, which provided for a revolving credit facility of up
to $65 million, including a sub-line of up to $30 million for permitted
acquisitions, and a letter of credit facility of up to $5 million. The amendment
also modified certain definitions and restrictive covenants and extended the
agreement to February 1, 2001. This credit agreement is collateralized by
certain accounts receivable, inventories, equipment, real estate, and general
intangibles of the Company. Available borrowings under the facility bear
interest at either the bank's prime rate plus a margin or LIBOR plus a margin
based upon a pricing matrix. Interest on outstanding borrowings currently
accrues at the bank's prime rate of interest (7.75% at December 31, 1998) or
LIBOR plus one and one-half percent (6.75% at December 31, 1998). The Company
also pays an annual commitment fee of .5% on the average unused portion of the
revolving credit facility. At December 31, 1998, the weighted average interest
rate on the outstanding revolving credit facilities was 7.63%. Morgan had
utilized $.3 million of its $5 million letter of credit facility as of December
31, 1998.
The facility contains certain covenants, including limitations on the
acquisition and disposition of assets, the payment of dividends, and the
prepayment of other indebtedness. In addition, Morgan is required to maintain
earnings coverage, interest coverage and fixed charge coverage ratios. Morgan
was in compliance with all covenants of the amended credit agreement at December
31, 1998.
<PAGE>
On February 19, 1999, in connection with the Adam acquisition (see Note
13 to Consolidated Financial Statements), Morgan and its banking group entered
into an amendment of the credit agreement. The amendment, which expires on
January 1, 2004, provides for a revolving credit line of up to $100 million
(including a letter of credit facility of up to $5 million), a term loan of up
to $10 million and a bridge term loan of up to $10 million. This credit
agreement is collateralized by certain accounts receivable, inventories,
equipment, real estate, and general intangibles of the Company. Borrowings under
the revolving credit line and term loan bear interest at either the bank's prime
rate plus a margin or LIBOR plus a margin based upon a pricing matrix. Interest
on outstanding borrowings under the revolving credit line currently accrues at
the bank's prime rate of interest plus three quarters percent (8.50% at December
31, 1998) or LIBOR plus two and one-half percent (7.75% at December 31, 1998) at
the Company's option. Interest on outstanding borrowings under the term loan
currently accrues at the bank's prime rate of interest plus one and one-quarter
percent (9.00% at December 31, 1998) or LIBOR plus three percent (8.25% at
December 31, 1998) at the Company's option. Borrowings under the bridge term
loan bear interest in increasing quarterly increments from LIBOR plus four
percent (9.25% at December 31, 1998) in the first quarter of 1999 to eighteen
percent at January 1, 2000. The credit facility contains certain covenants,
including limitations on the acquisition and disposition of assets, the payment
of dividends and the prepayment of other indebtedness. The credit facility also
requires Morgan to maintain certain earnings coverage, interest coverage and
fixed coverage ratios. In addition, the amendment added certain minimum earnings
and minimum availability covenants.
During 1991, the Company entered into a sale-leaseback transaction
which, based upon the applicable terms, is accounted for as a financing lease.
The term of the agreement is 15 years beginning on December 30, 1991 and
expiring on December 29, 2006 with an interest rate of 9.73% annually.
Future annual maturities of the Company's long-term debt as of December
31, 1998, which reflect the terms of the amended and restated credit agreement,
are presented below (in thousands):
1999................................................................ $ 1,196
2000................................................................ 1,194
2001................................................................ 1,497
2002................................................................ 584
2003................................................................ 547
Later years......................................................... 19,810
--------
Future annual maturities of long-term debt...................... $24,828
--------
The Company estimates that the fair value of the revolving credit
facilities approximates their carrying value since interest rates vary with
market conditions. The carrying value of other long-term debt approximates their
fair value as the rates approximate current rates offered to the Company for
debt with similar maturities.
<PAGE>
NOTE 7 - LEASE OBLIGATIONS
Certain leased equipment and distribution facilities have been
capitalized by Morgan. Morgan also leases facilities, equipment and vehicles
under noncancelable agreements which are operating leases.
Future minimum lease payments required under long-term leases in effect
at December 31, 1998 are as follows (in thousands):
Capital Operating Total
--------------------------------------
1999.................................... $ 1,664 $ 3,596 $ 5,260
2000.................................... 1,664 3,078 4,742
2001.................................... 1,412 2,133 3,545
2002.................................... 858 1,435 2,293
2003.................................... 782 664 1,446
Later years............................. 1,320 3,492 4,812
--------------------------------------
Total minimum lease payments............ 7,700 $14,398 $22,098
-----------------------
Less imputed interest............... (2,107)
---------
Present value of net minimum
lease payments................... $ 5,593
---------
For 1998, 1997, and 1996, rental expense, including usage charges on the
long-haul fleet, was $6.8 million, $7.4 million, and $6.7 million respectively.
NOTE 8 - STOCKHOLDERS' EQUITY
COMMON STOCK - The number of authorized shares of Common Stock is
20,000,000 shares.
PREFERRED STOCK - The number of authorized shares of Preferred Stock is
5,000,000 shares.
STOCK OFFERING - In November 1996, the Company and a significant
shareholder completed an underwritten primary and secondary public offering of
1.5 million shares and 1.9 million shares, respectively, of its Common Stock at
a public offering price of $6.50 per share. The Company's net proceeds of
approximately $8.6 million were used to reduce amounts outstanding under the
Company's revolving credit facilities.
STOCK OPTION PLANS - In June 1985, the Company adopted an Incentive
Stock Option Plan (the "Stock Option Plan") which, as amended, provides for (I)
the issuance of incentive stock options at a purchase price approximating the
fair market value at the date of grant and (II) the issuance of non-qualified
options at a price determined by the Compensation Committee, a committee of the
Board of Directors, which cannot be less than 85% of the market price at the
date of grant. The stockholders have ratified amendments to Morgan's Stock
Option Plan that increase from 500,000 to 900,000 the number of shares of Common
Stock reserved for issuance under the plan. The options become exercisable
immediately or in two, three, four, or five installments from the date of grant,
and all of the options granted expire no more than ten years from the date of
grant.
In October 1998, the Board of Directors approved an option repricing
program (the "Repricing Program") under which all employees of the Company who
held options to purchase Common Stock under the Stock Option Plan were granted
the opportunity to exchange such options for Repriced Stock Option Plan options.
Under the Repricing Program, which was implemented on November 2, 1998, the
options outstanding under the old Stock Option Plan were cancelled and new
options were issued at a price equal to or greater than the greater of 110% of
the closing price of the Common Stock of the Company on the New York Stock
Exchange on November 2, 1998 or $3.00 per share regardless of whether such
options were vested or unvested. The Repriced Stock Option Plan options are
subject to all other terms and conditions to which the old stock options were
subject, except that the terms and vesting schedule of the Repriced Plan options
began on November 2, 1998 and will be for the same period and vest at the same
rate as the corresponding old stock options. In addition, no Repriced Option
will be exercisable prior to November 2, 2000 (the "Blackout Period"), provided,
however, the Blackout Period will not apply to employees who terminate
employment during the Blackout Period in accordance with the Company's
retirement policies, upon a change in control or if the Company meets certain
financial targets as outlined in the individual option agreements.
<PAGE>
Following is a summary of activity in the Stock Option Plan for 1996,
1997, and 1998:
<TABLE>
<CAPTION>
Shares Weighted
Subject Average
to Option Option Price
------------------------------
<S> <C> <C>
Outstanding, January 1, 1996................. 688,500 $ 5.476
Granted.................................. 92,500 6.375
Canceled................................. (45,000) 5.861
------------------------------
Outstanding, December 31, 1996............... 736,000 $ 5.566
Granted.................................. 60,000 6.875
Exercised................................ (205,667) 5.747
Canceled................................. (24,333) 5.876
------------------------------
Outstanding, December 31, 1997............... 566,000 $ 5.626
Granted.................................. 247,000 3.000
Canceled................................. (551,000) 5.623
------------------------------
OUTSTANDING, DECEMBER 31, 1998............... 262,000 $ 3.157
------------------------------
EXERCISABLE, DECEMBER 31, 1998............... 15,000 $ 5.750
------------------------------
</TABLE>
The exercise price for options outstanding at December 31, 1998 ranges
from $3.00 to $5.75 per share. The weighted-average remaining contractual life
of these options approximates 9.62 years.
In May 1992, the stockholders approved the adoption of a Non-employee
Director Stock Option Plan (the "Director Plan"). The Director Plan provides for
the automatic grant of non-qualified stock options to purchase 1,000 shares of
Common Stock at a purchase price equal to the fair market value at the date of
grant upon a non-employee Director's election or re-election to the Board of
Directors. An aggregate of 50,000 shares of Common Stock is available for grant
under the Director Plan. The options granted become exercisable in three annual
installments from the date of grant, and all of the options granted expire ten
years from the date of grant.
<PAGE>
Following is a summary of activity in the Non-employee Director Stock
Option Plan for 1996, 1997, and 1998:
<TABLE>
<CAPTION>
Shares Weighted
Subject Average
to Option Option Price
------------------------------
<S> <C> <C>
Outstanding, January 1, 1996................... 16,000 $ 7.195
Granted.................................... 7,000 6.000
Canceled................................... (3,334) 6.300
------------------------------
Outstanding, December 31, 1996................. 19,666 $ 6.922
Granted.................................... 5,000 8.250
Canceled................................... (666) 7.938
------------------------------
Outstanding, December 31, 1997................. 24,000 $ 7.203
Granted.................................... 5,000 5.750
Canceled................................... (8,000) 7.203
------------------------------
OUTSTANDING, DECEMBER 31, 1998................. 21,000 $ 6.893
------------------------------
EXERCISABLE, DECEMBER 31, 1998................. 14,000 $ 7.089
------------------------------
</TABLE>
The exercise prices for options outstanding at December 31, 1998 range
from $5.75 to $9.125 per share. The weighted-average remaining contractual life
of these options approximates 6.87 years.
On August 19, 1994, Morgan issued 140,000 restricted shares of Common
Stock to the Chief Executive Officer. These shares were awarded to a trust of
which the Chief Executive Officer is the beneficiary, subject to certain
restrictions, vesting and forfeiture provisions. The restrictions limit the sale
or transfer of shares during the restricted period. The trust will immediately
vest in the shares of Common Stock upon death, disability, or termination of the
Chief Executive Officer as described in the plan. The value of the Common Stock
totaling $700,000 was recorded at the date of award as a separate component of
stockholders' equity and was amortized to expense over the three-year vesting
period.
<PAGE>
In May 1997, the Company adopted the 1997 Incentive Compensation Plan,
which authorized an additional 250,000 shares of Common Stock to be issued
through the Incentive Compensation Plan. In conjunction with the Repricing
Program, certain executives of the Company were granted options under the
Incentive Compensation Plan. Following is a summary of activity for the
Incentive Compensation Plan for 1998:
Weighted
Shares Subject Average Option
to Option Price
----------------- ----------------
Outstanding, January 1, 1997........... - $ -
Granted............................ 245,000 3.00
Canceled........................... - -
----------------- ----------------
Outstanding, December 31, 1998......... 245,000 $ 3.00
----------------- ----------------
Exercisable, December 31, 1998......... - $ -
----------------- ----------------
The exercise price for options outstanding at December 31, 1998 is $3.00
per share. The weighted average contractual life of these options approximates
9.84 years.
In addition, Morgan grants options, outside of the Stock Option Plan, to
certain employees as part of their employment agreements. The options granted
generally become exercisable in three annual installments from the date of
grant, and all of the options granted expire ten years from the date of grant.
Following is a summary of activity for options granted outside the Stock
Option Plan for 1996, 1997 and 1998:
Shares Weighted
Subject Average
to Option Option Price
------------------------------
Outstanding, January 1, 1996 .................. - $ -
Granted.................................... 195,000 7.231
Canceled................................... (67,500) 7.500
------------------------------
Outstanding, December 31, 1996................. 127,500 $ 7.088
Granted.................................... 180,000 6.733
Canceled................................... (22,500) 7.500
------------------------------
Outstanding, December 31, 1997................. 285,000 $ 6.831
Granted.................................... 160,000 3.086
Canceled................................... (178,229) 6.628
------------------------------
Outstanding, December 31, 1998................. 266,771 $ 4.720
------------------------------
Exercisable, December 31, 1998................. 111,771 $ 7.106
------------------------------
The exercise price for options outstanding at December 31, 1998 range
from $3.000 to $8.375 per share. The weighted average contractual life of these
options approximates 9.06 years.
<PAGE>
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). Accordingly, no compensation cost has been
recognized for the stock option plans or out-of-plan grants. Had the Company
determined compensation cost based on the fair value at the grant date for its
stock options under SFAS No. 123, net earnings would have been reduced to the
pro forma amounts indicated below (in thousands, except per share data):
Year Ended December 31,
-----------------------------------
1998 1997 1996
-----------------------------------
Net earnings - as reported................ $ 1,001 $ (20,897) $298
Net earnings - pro forma.................. 616 (21,844) (141)
Basic earnings per share - as reported.... .10 (2.03) .03
Diluted earnings per share - as reported.. .10 (2.03) .03
Basic earnings per share - pro forma...... .06 (2.12) (.02)
Diluted earnings per share - pro forma.... .06 (2.12) (.02)
The effects of applying SFAS No. 123 in this pro forma disclosure are
not necessarily indicative of future amounts because transition rules require
pro forma disclosure only for awards granted after January 1, 1995.
The fair value of each option grant is estimated on the date of the
grant using the Black-Scholes model with the following weighted-average
assumptions used for grants in 1998, 1997, and 1996:
Year Ended December 31,
---------------------------------------
1998 1997 1996
---------------------------------------
Expected stock price volatility...... 39.14% 40.50% 43.70%
Risk-free interest rate.............. 4.79% 6.65% 6.35%
Expected life of options............. 6.96 Years 6.69 years 6.78 years
NOTE 9 - EMPLOYEE BENEFIT PLANS
The Company has a profit sharing and 401(k) savings plan for all
salaried employees who have met the plans eligibility requirements. Morgan
matches 50% of participant contributions to the savings plan, with Company
contributions limited to 3% of the participant's compensation. At the discretion
of the Board of Directors, Morgan may make an additional contribution, which has
been targeted at 3% of each participant's compensation.
A separate 401(k) savings plan is in place for employees of the
Tennessee Building Products Division who have met the plan's eligibility
requirements. Morgan matches 50% of participant contributions to the savings
plan, with Company contributions limited to 3% of the participant's
compensation.
<PAGE>
Profit sharing costs and the Company's matching contributions to the
401(k) savings plans charged to operations were $.6 million, $.1 million, and
$.9 million for 1998, 1997, and 1996, respectively.
Morgan has a pension plan which covers certain of its hourly employees.
This plan generally provides a stated benefit amount for each year of service.
The components of net periodic pension expense are as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1998 1997 1996
-------------------------------------
<S> <C> <C> <C>
Service cost................................... $ 47 $ 201 $ 183
Interest cost on projected benefit obligation.. 1,151 1,109 1,077
Actual return on assets........................ (1,708) (2,235) (926)
Net amortization and deferral.................. 537 1,168 (96)
-------------------------------------
Net periodic pension expense................... $ 27 $ 243 $ 238
-------------------------------------
</TABLE>
The following provides a reconciliation of benefit obligations, plan
assets and funded status of the plans (in thousands):
<TABLE>
<CAPTION>
December 31,
------------- -------------
1998 1997
------------- -------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligations at the beginning of year................ $16,141 $14,571
Service cost................................................ 47 201
Interest cost............................................... 1,151 1,109
Actuarial valuation......................................... 1,032 1,366
Benefits paid............................................... (1,300) (1,106)
------------- -------------
Benefit obligation at end of year........................... $17,171 $16,183
------------- -------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year.............. $16,183 $14,614
Actual return on pan assets................................. 1,708 2,235
Employer contribution....................................... 580 440
Benefits paid............................................... (1,300) (1,106)
------------- -------------
Fair value of plan assets at end of year.................... $17,171 $16,183
------------- -------------
Funded status................................................... $ 100 $ 42
Unrecognized actuarial loss..................................... 3,436 3,037
Unrecognized transition obligation.............................. (259) (326)
Unrecognized prior service cost................................. 37 1,001
------------- -------------
Prepaid benefit cost............................................ $ 3,314 $ 3,754
------------- -------------
</TABLE>
<PAGE>
The projected benefit obligations were determined using assumed discount
rates of 6.75% at December 31, 1998 and 7.10% at December 31, 1997. The expected
long-term rate of return on plan assets was 7.60% and 8.25% at December 31, 1998
and 1997, respectively. Prepaid benefit cost is included in other assets in the
accompanying balance sheets.
Plan assets consist of equity and fixed income securities and insurance
annuity contracts. It is the policy of Morgan to fund at least the minimum
required amount in accordance with the requirements of the Employee Retirement
Income Security Act of 1974.
For the hourly employees not covered by company pension or profit
sharing plans, Morgan makes contributions to multi-employer pension plans based
on compensable hours worked in accordance with union contracts. Pension expense
related to these contributions was $.1 million for each of 1998, 1997, and 1996.
Under certain conditions, principally withdrawal from such plans, Morgan may
have further obligations for pensions with respect to such employees, but the
amount thereof, if any, cannot be determined at the present time.
NOTE 10 - INCOME TAXES
The components of the income tax provision (benefit) consisted of the
following (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1998 1997 1996
------------------------------------
<S> <C> <C> <C>
Current:
Federal................................. $(224) $(100) $ (444)
State................................... 120 100 117
------------------------------------
Income tax benefit.......................... $(104) $ - $ (327)
------------------------------------
</TABLE>
The income tax provision (benefit) differed from the amounts computed by
applying the U.S. Federal income tax rate of 34% to pre-tax income (loss) as a
result of the following (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1998 1997 1996
------------------------------------
<S> <C> <C> <C>
Provision (benefit ) for income taxes at
U.S. Federal income tax rate............ $ 305 $(7,105) $ (10)
Non-utilization (utilization) of
operating loss carryforward................. (616) 7,041 (483)
State income taxes, net of Federal benefit.. 60 66 77
Non-deductible items........................ 88 (36) 91
Other....................................... 59 34 (2)
------------------------------------
Income tax benefit...................... $ (104) $ - $ (327)
------------------------------------
</TABLE>
<PAGE>
The tax effects of temporary differences and carryforwards which give
rise to deferred tax assets and liabilities consisted of the following (in
thousands):
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1997
------------------------
<S> <C> <C>
Gross deferred tax assets:
Operating loss carryforwards.......................... $12,951 $ 8,967
Accrued expenses and reserves......................... 1,256 5,911
Post-retirement benefits.............................. 160 140
Other................................................. 36 46
------------------------
14,403 15,064
Valuation allowance................................... (12,964) (13,580)
------------------------
1,439 1,484
------------------------
Gross deferred tax liabilities:
Depreciation and amortization......................... (558) (501)
Pensions.............................................. (881) (983)
------------------------
(1,439) (1,484)
------------------------
Net deferred tax asset ................................... $ - $ -
------------------------
</TABLE>
The valuation allowance primarily reflects operating loss carryforwards
for which utilization is uncertain.
As of December 31, 1998, Morgan has unused operating loss carryforwards
for tax purposes of approximately $38.1 million, which expire in years 2002
through 2018. No benefit for the remaining operating loss carryforwards has been
recognized in the consolidated financial statements. Should an ownership change
occur, as defined under Section 382 of the Internal Revenue Code, Morgan's
ability to utilize the operating loss carryforwards would be restricted.
NOTE 11 - RELATED PARTIES
As of December 31, 1995, Saugatuck Capital Company Limited Partnership
("Saugatuck") in the aggregate, beneficially owned approximately 24% of Morgan's
Common Stock. During 1996, Morgan paid Saugatuck $115,000 for services rendered,
pursuant to a consulting and management assistance agreement. Saugatuck sold 1.9
million of its 2.0 million shares concurrently with the November 13, 1996
primary stock issued by Morgan. The remaining 100,000 were distributed by
Saugatuck to its partners in 1996. Morgan's consulting and management assistance
agreement with Saugatuck was terminated upon the sale of the shares.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Andersen Corporation ("Andersen"), whose products accounted for 53% of
1998 net sales, distributes its products only through independent distributors
such as Morgan. Morgan and its predecessors have distributed Andersen products
for over 40 years; however, Morgan's agreement with Andersen provides that
Andersen can terminate any of Morgan's distributorships at any time upon a
60-day notice. A termination or significant modification of the distribution
relationship with Andersen could have a material adverse effect on revenues and
earnings.
<PAGE>
The Company has employment agreements and arrangements with its
executive officers and certain management personnel. The agreements provide for
severance payments under certain circumstances and provide the employees with
certain additional rights after a change of control of the Company occurs. As of
December 31, 1998, if all of the employees under contract were to be terminated
by the Company without good cause, the Company's liability would be
approximately $2.4 million ($3.8 million following a change of control).
NOTE 13 - SUBSEQUENT EVENTS
On February 19, 1999, Morgan acquired certain assets and assumed certain
liabilities of Adam Wholesalers, Inc. and certain of its subsidiaries ("Adam"),
for approximately $55.2 million in cash. Adam is a privately-held distributor of
windows, doors and other millwork products, headquartered in Cincinnati, Ohio,
with 13 distribution facilities in 11 states primarily in the Midwest, Northeast
and Western regions of the United States. The acquisition was funded by an
amendment to the Amended and Restated Loan and Security Agreement as further
discussed in Note 6 to Consolidated Financial Statements. The acquisition will
be accounted for under the purchase method of accounting with the purchase price
allocated to the assets acquired and liabilities assumed based upon their
estimated fair market values, with any excess purchase price assigned to
goodwill and other intangible assets amortized over 25 years.
As a result of the acquisition of Adam on February 19, 1999, the Company
determined that the Adam's management information system was a better strategic
fit for the combined businesses. Accordingly, the Company will take a charge of
approximately $2.5 million during the first quarter of 1999 relating to the
write-off of the costs incurred for the implementation of the proposed new
Morgan system. The pro forma disclosure does not include this charge due to its
non-recurring nature.
The following unaudited pro forma consolidated results of operations for
the year ended December 31, 1998 is presented as if the acquisition occurred as
of January 1, 1998. These results do not purport to be indicative of what would
have occurred had the acquisition actually been made as of such dates or of
results which may occur in the future. (All amounts are in thousands, except per
share data):
Year Ended December 31,
----------------------
1998
----
Net sales $740,107
Net income 1,318
Earnings per basic share 0.13
Earnings per diluted share 0.13
On March 10, 1999, Morgan entered into an Agreement of Merger with
Andersen Windows and its wholly-owned subsidiary, Andersen Sub, pursuant to
which Andersen Sub and Morgan will be merged, resulting in Morgan, as the
surviving corporation, becoming a wholly-owned subsidiary of Andersen Windows.
The consideration to be received by Morgan's stockholders in the Merger will be
$4.00 per share of Morgan common stock, subject to adjustment until the
effective date of closing, under certain limited circumstances. The Merger is
subject to, among other things, approval of the stockholders of Morgan and the
applicable regulatory agencies.
<PAGE>
NOTE 14 - INTERIM FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial data for 1998 and 1997 is presented below
(in thousands, except per share data):
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter
--------------------------------------------------------
1998 1997 1998 1997
--------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales ....................... $ 80,154 $ 95,805 $ 98,238 $ 106,801
Gross profit .................... 11,527 17,424 14,272 15,042
Net income (loss) ............... (1,578) (1,932) 1,251 (1,929)
Diluted earnings (loss) per share $ (.15) $ (.19) $ .12 $ (.19)
</TABLE>
<TABLE>
<CAPTION>
3rd Quarter 4th Quarter
--------------------------------------------------------
1998 1997 1998 1997
--------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales ....................... $ 107,508 $ 111,656 $ 97,251 $ 97,987
Gross profit .................... 15,274 13,752 13,509 12,122
Net income (loss) ............... 2,002 (1,083) (674) (15,953)
Diluted earnings (loss) per share $ .19 $ (.10) $ (.06) $ (1.55)
</TABLE>
<PAGE>
MORGAN PRODUCTS LTD.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Accounts Receivable
Allowance for doubtful accounts consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $921 $ 1,622 $722
Provision charged to expense 10 248 139
Write-offs (227) (530) (254)
Addition related to Tennessee Building Products - - 901
Acquisition
Recoveries/Other 46 (419) 114
---- ----- -----
Balance at end of period $750 $921 $1,622
===== ===== =====
</TABLE>
Deferred Tax Asset
Valuation reserve consisted of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $13,580 $ 6,850 $ 6,779
Additions to (utilization of) valuation reserve (616) 6,730 71
------- ------ ------
Balance at end of period $12,964 $13,580 $ 6,850
======= ====== =======
</TABLE>
<PAGE>
EXHIBIT INDEX
(including exhibits not incorporated by reference - see Item 14
for incorporated exhibits)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NO.
------- ------------ --------
<S> <C> <C>
* 10.46 Lease by and between Adam Wholesalers, Inc. and Adam
Wholesalers, Inc. a/k/a Adam Wholesalers, Corporate dated
September 1, 1992 as modified by that Assignment and
Assumption and Modification of Lease Agreement by and among
Morgan, Adam Wholesalers, Inc. and Adam Wholesalers, Corporate
dated February 19, 1999.
* 10.47 Lease by and between Thurner Hatfield & Thurner and Adam
Wholesalers of Toledo, Inc. a/k/a/ Adam Wholesalers, Toledo dated
January 1, 1990 as modified by that Assignment and Assumption and
Modification of Lease Agreement by and among Morgan, Thurner
Hatfield & Thurner and Adam Wholesalers of Toledo, Inc. dated
February 19, 1999.
* 10.48 Lease by and between Adam Wholesalers, Inc. and Adam
Wholesalers of Dayton, Inc. a/k/a Adam Wholesalers, Dayton
dated April 1, 1993 as modified by that Assignment and
Assumption and Modification of Lease Agreement by and among
Morgan, Adam Wholesalers, Inc. and Adam Wholesalers of Dayton,
Inc. dated February 19, 1999.
* 10.49 Lease by and between Adam Wholesalers, Inc. and Adam
Wholesalers of Cincinnati, Inc. a/k/a Adam Wholesalers,
Cincinnati dated September 1, 1992 as modified by that
Assignment and Assumption and Modification of Lease Agreement
by and among Morgan, Adam Wholesalers, Inc. and Adam
Wholesalers of Cincinnati, Inc. dated February 19, 1999.
* 10.50 Lease by and between Adam Wholesalers, Inc. and Adam
Wholesalers of Woodbury Heights, Inc. a/k/a Adam Wholesalers,
Woodbury dated October 1, 1994 as modified by that Assignment
and Assumption and Modification of Lease Agreement by and
among Morgan, Adam Wholesalers, Inc. and Adam Wholesalers of
Woodbury Heights, Inc. dated February 19, 1999.
<PAGE>
<CAPTION>
* 10.51 Lease by and between Adam Wholesalers, Inc. and Adam
Wholesalers of Denver, Inc. a/k/a Adam Wholesalers, Denver
dated January 1, 1995 as modified by that Assignment and
Assumption and Modification of Lease Agreement by and among
Morgan, Adam Wholesalers, Inc. and Adam Wholesalers of Denver,
Inc. dated February 19, 1999.
* 10.52 Lease by and between Adam Wholesalers, Inc. and Adam
Wholesalers of Indianapolis, Inc. dated May 13, 1992 as
modified by that Assignment and Assumption and Modification of
Lease Agreement by and among Morgan, Adam Wholesalers, Inc.
and Adam Wholesalers of Indianapolis, Inc. dated February 19,
1999.
* 10.53 Lease by and between Adam Wholesalers, Inc. and Adam
Wholesalers of Virginia, Inc. a/k/a Adam Wholesalers, Virginia
dated August 1, 1992 as modified by that Assignment and
Assumption and Modification of Lease Agreement by and among
Morgan, Adam Wholesalers, Inc. and Adam Wholesalers of
Virginia, Inc. dated February 19, 1999.
* 10.54 Lease by and between Adam Wholesalers, Inc. and Adam
Wholesalers of St. Louis, Inc. dated May 1, 1994 as modified
by that Assignment and Assumption and Modification of Lease
Agreement by and among Morgan, Adam Wholesalers, Inc. and Adam
Wholesalers of St. Louis, Inc. dated February 19, 1999.
* 10.55 Lease by and between Adam Wholesalers, Inc. and Adam
Wholesalers of Phoenix, Inc. a/k/a Adam Wholesalers, Phoenix
dated January 1, 1993 as modified by that Assignment and
Assumption and Modification of Lease Agreement by and among
Morgan, Adam Wholesalers, Inc. and Adam Wholesalers of
Phoenix, Inc. dated February 19, 1999.
* 10.56 Lease by and between Adam Wholesalers, Inc. and Adam
Wholesalers of Nitro, Inc. dated January 1, 1995 as modified
by that Assignment and Assumption and Modification of Lease
Agreement by and among Morgan, Adam Wholesalers, Inc. and Adam
Wholesalers of Nitro, Inc. dated February 19, 1999.
* 10.57 Lease by and between Pine Acre Investments, Inc. and Adam
Wholesalers of Carlisle, Inc. dated August 1, 1991.
* 10.58 Lease by and between C-S-K Louisville and Allied Sash and Door,
Inc., as amended, dated April 1, 1990.
<PAGE>
<CAPTION>
* 10.59 Lease by and between Mamco Millworks of New York, Inc. a/k/a/
Adam Wholesalers of Kirkwood, Inc., as modified, dated
September 9, 1985.
* 10.60 Amendment to Supply Agreement dated October 5, 1998 between
Morgan and JELD-WEN, inc.
* 23.1 Consent of PricewaterhouseCoopers LLP.
* 27.1 Financial Data Schedule
--------------------------------
* Filed herewith.
+ Management contract or compensatory plan or arrangement.
</TABLE>
Exhibit 10.46
ADAM WHOLESALERS, CORPORATE
This agreement of Lease made this 1ST DAY OF SEPTEMBER by and between ADAM
WHOLESALERS, INC. (Hereinafter collectively called "Lessors") and ADAM
WHOLESALERS, CORPORATE (Hereinafter called "Lessee").
WITNESSETH:
1. Lessor hereby agrees to lease to Lessee, and Lessee hereby agrees to
lease from Lessor the real estate described in Exhibit A attached hereto
together with all improvements located thereon.
2. The term of Lease shall be ten (10) years commencing with the 1ST DAY OF
SEPTEMBER, 1992 and ending with the 31ST DAY OF AUGUST, 2002.
3. Lessee shall pay to lessor as rent for the lease premises the sum of ONE
HUNDRED THIRTY FIVE THOUSAND SIX HUNDRED DOLLARS ($135,600) a year, payable in
advance on the first day of every month during the term hereof in installments
of ELEVEN THOUSAND THREE HUNDRED DOLLARS ($11,300).
4. In addition to said rental as provided above:
a. The lessee covenants and agrees to pay promptly when due, all taxes
and assessments of every kind and nature levied, assessed or payable upon the
real estate and improvements thereon, which are the subject of this Lease,
together with all business taxes, assessments, levies, license fees, water
rents, sewer rents, excises, franchises, penalty and charges, of whatever nature
of kind which are now or may hereafter be levied, assessed, charged or imposed
or become payable during the term of this Lease by any government of political
body, corporation or unit, or which may become alien upon the property, or upon
the leasehold interest, or which are, or may hereafter be levied, assessed or
charged by reason of the use or occupancy of the premises under this lease.
b. Lessee covenants and agrees that during the term of this Lease it
will, at Lessee's own cost and expense, carry "all risk" insurance on the
demised premises in an amount not less than the full replacement value of all
structures erected on said premises, insuring said structures against loss,
destruction or damage by fire or other casualty. The proceeds of such insurance
shall be payable to Lessors. In addition, Lessee shall carry public liability
insurance indemnifying Lessors in an amount satisfactory to Lessors.
c. Lessee covenants that it will, during the term of this Lease, at its
own expense, keep and maintain the demised premises and all structures erected
thereon and all appurtenances thereto in good and substantial repair, both
exterior and interior and including any parking area or driveways, and that it
will indemnify and save harmless the Lessor from and against all liens, claims
or damages by reason of any repairs or improvements which may be made by the
Lessee on said premises, and Lessee further covenants to surrender the premises
at the end of the term in as good condition as they are at the date of the
commencement of the term or may be put thereafter, ordinary wear and tear
excepted.
<PAGE>
5. It is the intention and purpose of the parties thereto to create by
this instrument a Lease of the kind commonly known as "Carefree" to the Lessor.
Accordingly, the Lessee agrees to bear, pay for and discharge not only such
items as it has specifically agreed by the prior provisions of this Lease to
bear, pay and discharge, but also all other costs, charges and expenses of every
kind and nature whatsoever which must be borne, paid and discharged in order to
accomplish the purpose and objects of this Lease, namely:
a. That the Lessor shall receive from the Lessee, without diminution on
account of any matter or thing whatsoever except such as shall arise from breach
by the Lessor of any covenant or covenants of the Lessor contained herein, the
rentals agreed to be paid by the Lessee;
b. That the Lessor shall be subjected to no expense whatsoever on
account of any matter or thing connected with or arising from the leased
premises or this Lease during the term hereof, except matters connected with or
arising from the covenants of the Lessor contained herein; and
c. That the Lessor at the expiration of or sooner termination of this
Lease, shall receive possession of the leased premises and the improvements
thereon in accordance with the covenants of the Lessee contained herein and free
and clear of all claims, liens, charges and encumbrances expect those to which
the lease premises are now subject, or which may be placed thereon by the
Lessor, or which shall arise because of breach by the Lessor of any covenant or
covenants of the Lessor contained herein.
6. The terms and provisions of this Lease shall inure to and be binding
upon the respective successors and assigns of the Lessee and the Lessor. This
Lease contains the entire agreement of the parties, and no representations,
inducements, promises or agreements, oral or otherwise not embodied herein shall
be of any force or effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on the day
and year aforesaid.
SIGNED AND ACKNOWLEDGED LESSOR:
IN THE PRESENCE OF:
/s/ George E. Thurner Jr.
-----------------------------
George E. Thurner Jr., President
ADAM WHOLESALERS, INC.
/s/ Robin F. Hughes
-------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
LESSEE:
ADAM WHOLESALERS, CORPORATE
--------------------------------
/s/ George E. Thurner Jr.
--------------------------------
George E. Thurner, Jr. President
ADAM WHOLESALERS, INC.
/s/ Robin F. Hughes
--------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF SEPTEMBER, 1992 before me, the
subscriber, a Notary Public in and for said County and State, personally came
George E. Thurner, Jr.; Robin F. Hughes as Lessors in the foregoing Lease, and
acknowledge the signing of said instrument to be their voluntary act and deed
for the uses and purposes herein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial seal
on the day and year last above written.
Catherine Knose-Keller
------------------------------
NOTARY PUBLIC
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF JANUARY, 1990, before me, the
subscriber, a Notary Public in and for said County and State, personally came
the above named Lessee, ADAM WHOLESALERS, CORPORATE by George E. Thurner, Jr.
its President and Robin F. Hughes its Vice President who acknowledged the
signing of the foregoing Lease to be the voluntary act and deed of said
corporation as such Lessee, and of themselves as the duly authorized officers
thereof, for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have here unto set my hand and affixed my
notarial seal on the day and year last above written.
Catherine Knose-Keller
------------------------------
NOTARY PUBLIC
<PAGE>
ASSIGNMENT AND ASSUMPTION AND MODIFICATION OF LEASE AGREEMENT
This Assignment and Assumption of Lease Agreement (the "Agreement") made
this 19th day of February, 1999 by and among Adam Wholesalers, Inc. (the
"Lessor") (which may be known in the future as MAE Holding Company), Adam
Wholesalers, Inc. a/k/a Adam Wholesalers, Corporate (the "Assignor") and Morgan
Products Ltd. (the "Assignee") (which may in the future do business under the
name of Adam Wholesalers, Inc.).
WHEREAS, Assignor is the Lessee under that certain lease dated September
1, 1992 (the "Lease") by and between the Lessor and Assignor for premises
located at 3005 East Kemper Road, Cincinnati, Ohio and as more particularly
described in the Lease;
WHEREAS, the Lessor and Assignee have entered into that certain asset
purchase agreement (the "Purchase Agreement") dated as of December 22, 1998; and
WHEREAS, pursuant to the Purchase Agreement and this Agreement, Assignee
is assuming Assignor's interest as Lessee in the Lease; and
WHEREAS, Lessor, Assignor and Assignee desire to modify certain terms of
the Lease; and
WHEREAS, Assignor desires to assign its interest under the Lease to
Assignee, and Assignee desires to accept such assignment on the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereby amend and modify the terms of the
Lease as follows below; and
NOW, THEREFORE, in consideration of their mutual covenants hereafter set
forth and other good and valuable consideration paid by Assignee to Assignor,
the receipt of which is hereby acknowledged by Assignor, Assignor assigns,
grants, transfers and sets over all of its right, title, claim and interest in
and under the Lease to Assignee and its successors and assigns.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns,
from the date hereof, subject to the terms and conditions contained in the
Lease.
1. Assignor hereby assigns all of its right, title and interest in the
Lease to Assignee, and Assignee hereby assumes the performance and observance of
all the terms, covenants and conditions of the Lease to be performed or observed
by Assignor from and after the date hereof.
2 . Paragraph 4 b. is deleted in its entirety and the following substituted
therefor:
<PAGE>
"Lessee covenants and agrees that during the term of this Lease
it will, at Lessee's own cost and expense, carry extended coverage "all risk"
insurance on the demised premises in an amount not less than the full
replacement value of all structures erected on said premises, insuring said
structures against loss, destruction or damage by fire or other casualty. Lessee
shall also carry comprehensive general liability insurance for bodily or
personal injury to, illness of, or death of persons and damage to property
occurring in on, or about the demised premises with limits which are
commercially reasonable. All of Lessee's insurance policies shall name Lessor as
an additional insured. If demised premises shall be damaged or destroyed by fire
or other casualty, then Lessee, at its sole cost and expense shall repair and
restore the same to such condition as approximately existed immediately prior to
such loss, damage or destruction. Lessee's repair and restoration shall be
subject to then applicable legal requirements.
If an event of casualty occurs within two (2) years of the expiration of the
term of this Lease, the Lessee may elect not to repair and restore the demised
premises and to cancel and terminate the Lease. Such election shall be made
within thirty (30) days from the date of casualty. In the event Lessee elects to
terminate the Lease, Lessee shall assign its insurance proceeds to the Lessor
provided that the insurance proceeds are sufficient to repair and restore the
demised premises.
3. Paragraph 4 c. of the Lease is hereby amended by adding the following
thereto:
"Lessor shall make necessary repairs and replacements to the roof
and to the structural portions of the foundation and exterior walls of the
demised, provided that the repairs are not made necessary by the act or omission
of Lessee, its employees, agents or invitees, nor by reason of Lessee's making
repairs, alterations and improvements to the Building. In addition, Lessor's
obligation shall be limited to all such costs in excess of $10,000.00 during any
calendar year. For example, if the roof is in need of repair or replacement and
the costs therefor is $30,000.00, Lessee shall be responsible for $10,000.00 of
the cost, and Lessor shall be responsible for $20,000.00 of the cost. After the
completion of any such repair, Lessee shall pay its share of such costs within
ten (10) days after receipt of invoice from Lessor."
4. Lessor, Assignor and Assignee further agree to the addition of the
following provisions to the Lease:
7. That at any time and from time to time, Lessee's interest
under this Lease may be assigned and re-assigned upon notice to the Lessor but
without requiring the Lessor's consent thereto provided that the Assignee
remains liable under the Lease.
8. In addition to any other covenants or obligations of Lessor
under this Lease, Lessor covenants and agrees as follows: That Assignee, upon
payment of the rent above reserved, and upon the due performance of the
covenants and agreements herein contained, shall and may at all times peaceably
and quietly have, hold and enjoy the demised premises for the remaining Term of
this Lease without any manner or hindrance or molestation from Lessor or anyone
claiming under Landlord.
9. Notwithstanding the foregoing, this Assignment shall not apply
to Adam's corporate ownership interest and Adam reserves all ownership rights.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day, month and year first above written.
ASSIGNOR:
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
-------------------------------
Name: George E. Thurner, Jr.
Title: President
ASSIGNEE:
MORGAN PRODUCTS LTD.
By: /s/ Larry R. Robinette
-------------------------------
Name: Larry R. Robinette
Title: President & CEO
CONSENTED TO:
LESSOR
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
----------------------------
Name: George E. Thurner, Jr.
Title: President
Exhibit 10.47
ADAM WHOLESALERS, TOLEDO
This agreement of Lease made this 1ST DAY OF SEPTEMBER by and between ADAM
WHOLESALERS, INC. (Hereinafter collectively called "Lessors") and ADAM
WHOLESALERS, TOLEDO (Hereinafter called "Lessee").
WITNESSETH:
1. Lessor hereby agrees to lease to Lessee, and Lessee hereby agrees to
lease from Lessor the real estate described in Exhibit A attached hereto
together with all improvements located thereon.
2. The term of Lease shall be ten (10) years commencing with the 1ST DAY OF
SEPTEMBER, 1992 and ending with the 31ST DAY OF AUGUST, 2002.
3. Lessee shall pay to lessor as rent for the lease premises the sum of ONE
HUNDRED ONE THOUSAND TWO HUNDRED FIFTY DOLLARS ($101,250) a year, payable in
advance on the first day of every month during the term hereof in installments
of EIGHT THOUSAND FOUR HUNDRED THIRTY SEVEN DOLLARS AND FIFTY CENTS ($8,437.50).
4. In addition to said rental as provided above:
a. The lessee covenants and agrees to pay promptly when due, all taxes
and assessments of every kind and nature levied, assessed or payable upon the
real estate and improvements thereon, which are the subject of this Lease,
together with all business taxes, assessments, levies, license fees, water
rents, sewer rents, excises, franchises, penalty and charges, of whatever nature
of kind which are now or may hereafter be levied, assessed, charged or imposed
or become payable during the term of this Lease by any government of political
body, corporation or unit, or which may become alien upon the property, or upon
the leasehold interest, or which are, or may hereafter be levied, assessed or
charged by reason of the use or occupancy of the premises under this lease.
b. Lessee covenants and agrees that during the term of this Lease it
will, at Lessee's own cost and expense, carry "all risk" insurance on the
demised premises in an amount not less than the full replacement value of all
structures erected on said premises, insuring said structures against loss,
destruction or damage by fire or other casualty. The proceeds of such insurance
shall be payable to Lessors. In addition, Lessee shall carry public liability
insurance indemnifying Lessors in an amount satisfactory to Lessors.
c. Lessee covenants that it will, during the term of this Lease, at its
own expense, keep and maintain the demised premises and all structures erected
thereon and all appurtenances thereto in good and substantial repair, both
exterior and interior and including any parking area or driveways, and that it
will indemnify and save harmless the Lessor from and against all liens, claims
or damages by reason of any repairs or improvements which may be made by the
Lessee on said premises, and Lessee further covenants to surrender the premises
at the end of the term in as good condition as they are at the date of the
commencement of the term or may be put thereafter, ordinary wear and tear
excepted.
<PAGE>
5. It is the intention and purpose of the parties thereto to create by
this instrument aLease of the kind commonly known as "Carefree" to the Lessor.
Accordingly, the Lessee agrees to bear, pay for and discharge not only such
items as it has specifically agreed by the prior provisions of this Lease to
bear, pay and discharge, but also all other costs, charges and expenses of every
kind and nature whatsoever which must be borne, paid and discharged in order to
accomplish the purpose and objects of this Lease, namely:
a. That the Lessor shall receive from the Lessee, without diminution on
account of any matter or thing whatsoever except such as shall arise from breach
by the Lessor of any covenant or covenants of the Lessor contained herein, the
rentals agreed to be paid by the Lessee;
b. That the Lessor shall be subjected to no expense whatsoever on
account of any matter or thing connected with or arising from the leased
premises or this Lease during the term hereof, except matters connected with or
arising from the covenants of the Lessor contained herein; and
c. That the Lessor at the expiration of or sooner termination of this
Lease, shall receive possession of the leased premises and the improvements
thereon in accordance with the covenants of the Lessee contained herein and free
and clear of all claims, liens, charges and encumbrances expect those to which
the lease premises are now subject, or which may be placed thereon by the
Lessor, or which shall arise because of breach by the Lessor of any covenant or
covenants of the Lessor contained herein.
6. The terms and provisions of this Lease shall inure to and be binding
upon the respective successors and assigns of the Lessee and the Lessor. This
Lease contains the entire agreement of the parties, and no representations,
inducements, promises or agreements, oral or otherwise not embodied herein shall
be of any force or effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on the day
and year aforesaid.
SIGNED AND ACKNOWLEDGED LESSOR:
IN THE PRESENCE OF:
/s/ George E. Thurner Jr.
--------------------------------
George E. Thurner Jr.
THURNER HATFIELD THURNER
William A. Thurner
-------------------------------
William A. Thurner
THURNER HATFIELD THURNER
LESSEE:
ADAM WHOLESALERS, TOLEDO
-------------------------------
/s/ George E. Thurner Jr.
-------------------------------
George E. Thurner, Jr. President
ADAM WHOLESALERS, INC.
/s/ Robin F. Hughes
-------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF SEPTEMBER, 1992 before me, the
subscriber, a Notary Public in and for said County and State, personally came
George E. Thurner, Jr.; Robin F. Hughes as Lessors in the foregoing Lease, and
acknowledge the signing of said instrument to be their voluntary act and deed
for the uses and purposes herein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial seal
on the day and year last above written.
Catherine Knose-Keller
------------------------------
NOTARY PUBLIC
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF JANUARY, 1990, before me, the
subscriber, a Notary Public in and for said County and State, personally came
the above named Lessee, ADAM WHOLESALERS, TOLEDO by George E. Thurner, Jr. its
President and Robin F. Hughes its Vice President who acknowledged the signing of
the foregoing Lease to be the voluntary act and deed of said corporation as such
Lessee, and of themselves as the duly authorized officers thereof, for the uses
and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have here unto set my hand and affixed my
notarial seal on the day and year last above written.
Catherine Knose-Keller
------------------------------
NOTARY PUBLIC
<PAGE>
ASSIGNMENT AND ASSUMPTION AND MODIFICATION OF LEASE AGREEMENT
This Assignment and Assumption of Lease Agreement (the "Agreement") made
this 19th day of February, 1999 by and among Thurner Hatfield & Thurner (the
"Lessor"), Adam Wholesalers of Toledo, Inc. a/k/a Adam Wholesalers, Toledo (the
"Assignor") and Morgan Products Ltd. (the "Assignee") (which may in the future
do business under the name of Adam Wholesalers, Inc.).
WHEREAS, Assignor is the Lessee under that certain lease dated January
1, 1990 (the "Lease") by and between the Lessor and Assignor for premises
located at 830 N. Westwood Avenue, Toledo, Ohio and as more particularly
described in the Lease;
WHEREAS, the Lessor and Assignee have entered into that certain asset
purchase agreement (the "Purchase Agreement") dated as of December 22, 1998; and
WHEREAS, pursuant to the Purchase Agreement and this Agreement, Assignee
is assuming Assignor's interest as Lessee in the Lease; and
WHEREAS, Lessor, Assignor and Assignee desire to modify certain terms of
the Lease; and
WHEREAS, Assignor desires to assign its interest under the Lease to
Assignee, and Assignee desires to accept such assignment on the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereby amend and modify the terms of the
Lease as follows below; and
NOW, THEREFORE, in consideration of their mutual covenants hereafter set
forth and other good and valuable consideration paid by Assignee to Assignor,
the receipt of which is hereby acknowledged by Assignor, Assignor assigns,
grants, transfers and sets over all of its right, title, claim and interest in
and under the Lease to Assignee and its successors and assigns.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns,
from the date hereof, subject to the terms and conditions contained in the
Lease.
1. Assignor hereby assigns all of its right, title and interest in the Lease
to Assignee, and Assignee hereby assumes the performance and observance of all
the terms, covenants and conditions of the Lease to be performed or observed by
Assignor from and after the date hereof.
2. Paragraph 4 b. is deleted in its entirety and the following substituted
therefor:
<PAGE>
"Lessee covenants and agrees that during the term of this Lease
it will, at Lessee's own cost and expense, carry extended coverage "all risk"
insurance on the demised premises in an amount not less than the full
replacement value of all structures erected on said premises, insuring said
structures against loss, destruction or damage by fire or other casualty. Lessee
shall also carry comprehensive general liability insurance for bodily or
personal injury to, illness of, or death of persons and damage to property
occurring in on, or about the demised premises with limits which are
commercially reasonable. All of Lessee's insurance policies shall name Lessor as
an additional insured. If demised premises shall be damaged or destroyed by fire
or other casualty, then Lessee, at its sole cost and expense shall repair and
restore the same to such condition as approximately existed immediately prior to
such loss, damage or destruction. Lessee's repair and restoration shall be
subject to then applicable legal requirements.
If an event of casualty occurs within two (2) years of the expiration of the
term of this Lease, the Lessee may elect not to repair and restore the demised
premises and to cancel and terminate the Lease. Such election shall be made
within thirty (30) days from the date of casualty. In the event Lessee elects to
terminate the Lease, Lessee shall assign its insurance proceeds to the Lessor
provided that the insurance proceeds are sufficient to repair and restore the
demised premises.
3. Paragraph 4 c. of the Lease is hereby amended by adding the following
thereto:
"Lessor shall make necessary repairs and replacements to the roof
and to the structural portions of the foundation and exterior walls of the
demised, provided that the repairs are not made necessary by the act or omission
of Lessee, its employees, agents or invitees, nor by reason of Lessee's making
repairs, alterations and improvements to the Building. In addition, Lessor's
obligation shall be limited to all such costs in excess of $10,000.00 during any
calendar year. For example, if the roof is in need of repair or replacement and
the costs therefor is $30,000.00, Lessee shall be responsible for $10,000.00 of
the cost, and Lessor shall be responsible for $20,000.00 of the cost. After the
completion of any such repair, Lessee shall pay its share of such costs within
ten (10) days after receipt of invoice from Lessor."
4. Lessor, Assignor and Assignee further agree to the addition of the
following provisions to the Lease:
7. That at any time and from time to time, Lessee's interest
under this Lease may be assigned and re-assigned upon notice to the Lessor but
without requiring the Lessor's consent thereto provided that the Assignee
remains liable under the Lease.
8. In addition to any other covenants or obligations of Lessor
under this Lease, Lessor covenants and agrees as follows: That Assignee, upon
payment of the rent above reserved, and upon the due performance of the
covenants and agreements herein contained, shall and may at all times peaceably
and quietly have, hold and enjoy the demised premises for the remaining Term of
this Lease without any manner or hindrance or molestation from Lessor or anyone
claiming under Landlord.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day, month and year first above written.
ASSIGNOR:
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
-----------------------------
Name: George E. Thurner, Jr.
Title: President
ASSIGNEE:
MORGAN PRODUCTS LTD.
By: /s/ Larry R. Robinette
-----------------------------
Name: Larry R. Robinette
Title: President & CEO
CONSENTED TO:
LESSOR
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
----------------------------
Name: George E. Thurner, Jr.
Title: President
Exhibit 10.48
ADAM WHOLESALERS, DAYTON
This agreement of Lease made this 1ST DAY OF APRIL by and between ADAM
WHOLESALERS, INC. (Hereinafter collectively called "Lessors") and ADAM
WHOLESALERS, DAYTON (Hereinafter called "Lessee").
WITNESSETH:
1. Lessor hereby agrees to lease to Lessee, and Lessee hereby agrees to
lease from Lessor the real estate described in Exhibit A attached hereto
together with all improvements located thereon.
2. The term of Lease shall be ten (10) years commencing with the 1ST DAY OF
APRIL, 1993 and ending with the 31ST DAY OF MAY, 2003.
3. Lessee shall pay to lessor as rent for the lease premises the sum of TWO
HUNDRED TWENTY EIGHT THOUSAND DOLLARS ($228,000) a year, payable in advance on
the first day of every month during the term hereof in installments of NINETEEN
THOUSAND DOLLARS ($19,000).
4. In addition to said rental as provided above:
a. The lessee covenants and agrees to pay promptly when due, all taxes
and assessments of every kind and nature levied, assessed or payable upon the
real estate and improvements thereon, which are the subject of this Lease,
together with all business taxes, assessments, levies, license fees, water
rents, sewer rents, excises, franchises, penalty and charges, of whatever nature
of kind which are now or may hereafter be levied, assessed, charged or imposed
or become payable during the term of this Lease by any government of political
body, corporation or unit, or which may become alien upon the property, or upon
the leasehold interest, or which are, or may hereafter be levied, assessed or
charged by reason of the use or occupancy of the premises under this lease.
b. Lessee covenants and agrees that during the term of this Lease it
will, at Lessee's own cost and expense, carry "all risk" insurance on the
demised premises in an amount not less than the full replacement value of all
structures erected on said premises, insuring said structures against loss,
destruction or damage by fire or other casualty. The proceeds of such insurance
shall be payable to Lessors. In addition, Lessee shall carry public liability
insurance indemnifying Lessors in an amount satisfactory to Lessors.
c. Lessee covenants that it will, during the term of this Lease, at its
own expense, keep and maintain the demised premises and all structures erected
thereon and all appurtenances thereto in good and substantial repair, both
exterior and interior and including any parking area or driveways, and that it
will indemnify and save harmless the Lessor from and against all liens, claims
or damages by reason of any repairs or improvements which may be made by the
Lessee on said premises, and Lessee further covenants to surrender the premises
at the end of the term in as good condition as they are at the date of the
commencement of the term or may be put thereafter, ordinary wear and tear
excepted.
<PAGE>
5. It is the intention and purpose of the parties thereto to create by this
instrument a Lease of the kind commonly known as "Carefree" to the Lessor.
Accordingly, the Lessee agrees to bear, pay for and discharge not only such
items as it has specifically agreed by the prior provisions of this Lease to
bear, pay and discharge, but also all other costs, charges and expenses of every
kind and nature whatsoever which must be borne, paid and discharged in order to
accomplish the purpose and objects of this Lease, namely:
a. That the Lessor shall receive from the Lessee, without diminution on
account of any matter or thing whatsoever except such as shall arise from breach
by the Lessor of any covenant or covenants of the Lessor contained herein, the
rentals agreed to be paid by the Lessee;
b. That the Lessor shall be subjected to no expense whatsoever on
account of any matter or thing connected with or arising from the leased
premises or this Lease during the term hereof, except matters connected with or
arising from the covenants of the Lessor contained herein; and
c. That the Lessor at the expiration of or sooner termination of this
Lease, shall receive possession of the leased premises and the improvements
thereon in accordance with the covenants of the Lessee contained herein and free
and clear of all claims, liens, charges and encumbrances expect those to which
the lease premises are now subject, or which may be placed thereon by the
Lessor, or which shall arise because of breach by the Lessor of any covenant or
covenants of the Lessor contained herein.
6. The terms and provisions of this Lease shall inure to and be binding
upon the respective successors and assigns of the Lessee and the Lessor. This
Lease contains the entire agreement of the parties, and no representations,
inducements, promises or agreements, oral or otherwise not embodied herein shall
be of any force or effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on the day
and year aforesaid.
SIGNED AND ACKNOWLEDGED LESSOR:
IN THE PRESENCE OF:
/s/ George E. Thurner Jr.
--------------------------------
George E. Thurner Jr., President
ADAM WHOLESALERS, INC.
/s/ Robin F. Hughes
--------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
LESSEE:
ADAM WHOLESALERS, DAYTON
-------------------------------
/s/ George E. Thurner Jr.
--------------------------------
George E. Thurner, Jr. President
ADAM WHOLESALERS, INC.
/s/ Robin F. Hughes
-------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF APRIL, 1993 before me, the subscriber,
a Notary Public in and for said County and State, personally came George E.
Thurner, Jr.; Robin F. Hughes as Lessors in the foregoing Lease, and acknowledge
the signing of said instrument to be their voluntary act and deed for the uses
and purposes herein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial seal
on the day and year last above written.
Catherine Knose-Keller
------------------------------
NOTARY PUBLIC
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF APRIL, 1993, before me, the
subscriber, a Notary Public in and for said County and State, personally came
the above named Lessee, ADAM WHOLESALERS, DAYTON by George E. Thurner, Jr. its
President and Robin F. Hughes its Vice President who acknowledged the signing of
the foregoing Lease to be the voluntary act and deed of said corporation as such
Lessee, and of themselves as the duly authorized officers thereof, for the uses
and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have here unto set my hand and affixed my
notarial seal on the day and year last above written.
Catherine Knose-Keller
------------------------------
NOTARY PUBLIC
<PAGE>
ASSIGNMENT AND ASSUMPTION AND MODIFICATION OF LEASE AGREEMENT
This Assignment and Assumption of Lease Agreement (the "Agreement") made
this 19th day of February, 1999 by and among Adam Wholesalers, Inc. (the
"Lessor") (which may be known in the future as MAE Holding Company), Adam
Wholesalers of Dayton, Inc. a/k/a Adam Wholesalers, Dayton (the "Assignor") and
Morgan Products Ltd. (the "Assignee") (which may in the future do business under
the name of Adam Wholesalers, Inc.).
WHEREAS, Assignor is the Lessee under that certain lease dated April 1,
1993 (the "Lease") by and between the Lessor and Assignor for premises located
at 875 Center Drive, Vandalia, Ohio and as more particularly described in the
Lease;
WHEREAS, the Lessor and Assignee have entered into that certain asset
purchase agreement (the "Purchase Agreement") dated as of December 22, 1998; and
WHEREAS, pursuant to the Purchase Agreement and this Agreement, Assignee
is assuming Assignor's interest as Lessee in the Lease; and
WHEREAS, Lessor, Assignor and Assignee desire to modify certain terms of
the Lease; and
WHEREAS, Assignor desires to assign its interest under the Lease to
Assignee, and Assignee desires to accept such assignment on the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereby amend and modify the terms of the
Lease as follows below; and
NOW, THEREFORE, in consideration of their mutual covenants hereafter set
forth and other good and valuable consideration paid by Assignee to Assignor,
the receipt of which is hereby acknowledged by Assignor, Assignor assigns,
grants, transfers and sets over all of its right, title, claim and interest in
and under the Lease to Assignee and its successors and assigns.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns,
from the date hereof, subject to the terms and conditions contained in the
Lease.
1. Assignor hereby assigns all of its right, title and interest in the Lease
to Assignee, and Assignee hereby assumes the performance and observance of all
the terms, covenants and conditions of the Lease to be performed or observed by
Assignor from and after the date hereof.
2. Paragraph 4 b. is deleted in its entirety and the following substituted
therefor:
<PAGE>
"Lessee covenants and agrees that during the term of this Lease
it will, at Lessee's own cost and expense, carry extended coverage "all risk"
insurance on the demised premises in an amount not less than the full
replacement value of all structures erected on said premises, insuring said
structures against loss, destruction or damage by fire or other casualty. Lessee
shall also carry comprehensive general liability insurance for bodily or
personal injury to, illness of, or death of persons and damage to property
occurring in on, or about the demised premises with limits which are
commercially reasonable. All of Lessee's insurance policies shall name Lessor as
an additional insured. If demised premises shall be damaged or destroyed by fire
or other casualty, then Lessee, at its sole cost and expense shall repair and
restore the same to such condition as approximately existed immediately prior to
such loss, damage or destruction. Lessee's repair and restoration shall be
subject to then applicable legal requirements.
If an event of casualty occurs within two (2) years of the expiration of the
term of this Lease, the Lessee may elect not to repair and restore the demised
premises and to cancel and terminate the Lease. Such election shall be made
within thirty (30) days from the date of casualty. In the event Lessee elects to
terminate the Lease, Lessee shall assign its insurance proceeds to the Lessor
provided that the insurance proceeds are sufficient to repair and restore the
demised premises.
3. Paragraph 4 c. of the Lease is hereby amended by adding the following
thereto:
"Lessor shall make necessary repairs and replacements to the roof
and to the structural portions of the foundation and exterior walls of the
demised, provided that the repairs are not made necessary by the act or omission
of Lessee, its employees, agents or invitees, nor by reason of Lessee's making
repairs, alterations and improvements to the Building. In addition, Lessor's
obligation shall be limited to all such costs in excess of $10,000.00 during any
calendar year. For example, if the roof is in need of repair or replacement and
the costs therefor is $30,000.00, Lessee shall be responsible for $10,000.00 of
the cost, and Lessor shall be responsible for $20,000.00 of the cost. After the
completion of any such repair, Lessee shall pay its share of such costs within
ten (10) days after receipt of invoice from Lessor."
4. Lessor, Assignor and Assignee further agree to the addition of the
following provisions to the Lease:
7. That at any time and from time to time, Lessee's interest
under this Lease may be assigned and re-assigned upon notice to the Lessor but
without requiring the Lessor's consent thereto provided that the Assignee
remains liable under the Lease.
8. In addition to any other covenants or obligations of Lessor
under this Lease, Lessor covenants and agrees as follows: That Assignee, upon
payment of the rent above reserved, and upon the due performance of the
covenants and agreements herein contained, shall and may at all times peaceably
and quietly have, hold and enjoy the demised premises for the remaining Term of
this Lease without any manner or hindrance or molestation from Lessor or anyone
claiming under Landlord.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day, month and year first above written.
ASSIGNOR:
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
----------------------------
Name: George E. Thurner, Jr.
Title: President
ASSIGNEE:
MORGAN PRODUCTS LTD.
By: /s/ Larry R. Robinette
---------------------------
Name: Larry R. Robinette
Title: President & CEO
CONSENTED TO:
LESSOR
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
----------------------------
Name: George E. Thurner, Jr.
Title: President
Exhibit 10.49
ADAM WHOLESALERS, CINCINNATI
This agreement of Lease made this 1ST DAY OF SEPTEMBER by and between ADAM
WHOLESALERS, INC. (Hereinafter collectively called "Lessors") and ADAM
WHOLESALERS, CINCINNATI (Hereinafter called "Lessee").
WITNESSETH:
1. Lessor hereby agrees to lease to Lessee, and Lessee hereby agrees to
lease from Lessor the real estate described in Exhibit A attached hereto
together with all improvements located thereon.
2. The term of Lease shall be ten (10) years commencing with the 1ST DAY OF
SEPTEMBER, 1992 and ending with the 31ST DAY OF AUGUST, 2002.
3. Lessee shall pay to lessor as rent for the lease premises the sum of TWO
HUNDRED SIXTY THOUSAND - FOUR HUNDRED DOLLARS ($260,400) a year, payable in
advance on the first day of every month during the term hereof in installments
of TWENTY-ONE THOUSAND DOLLARS SEVEN HUNDRED DOLLARS ($21,700).
4. In addition to said rental as provided above:
a. The lessee covenants and agrees to pay promptly when due, all taxes
and assessments of every kind and nature levied, assessed or payable upon the
real estate and improvements thereon, which are the subject of this Lease,
together with all business taxes, assessments, levies, license fees, water
rents, sewer rents, excises, franchises, penalty and charges, of whatever nature
of kind which are now or may hereafter be levied, assessed, charged or imposed
or become payable during the term of this Lease by any government of political
body, corporation or unit, or which may become alien upon the property, or upon
the leasehold interest, or which are, or may hereafter be levied, assessed or
charged by reason of the use or occupancy of the premises under this lease.
b. Lessee covenants and agrees that during the term of this Lease it
will, at Lessee's own cost and expense, carry "all risk" insurance on the
demised premises in an amount not less than the full replacement value of all
structures erected on said premises, insuring said structures against loss,
destruction or damage by fire or other casualty. The proceeds of such insurance
shall be payable to Lessors. In addition, Lessee shall carry public liability
insurance indemnifying Lessors in an amount satisfactory to Lessors.
c. Lessee covenants that it will, during the term of this Lease, at its
own expense, keep and maintain the demised premises and all structures erected
thereon and all appurtenances thereto in good and substantial repair, both
exterior and interior and including any parking area or driveways, and that it
will indemnify and save harmless the Lessor from and against all liens, claims
or damages by reason of any repairs or improvements which may be made by the
Lessee on said premises, and Lessee further covenants to surrender the premises
at the end of the term in as good condition as they are at the date of the
commencement of the term or may be put thereafter, ordinary wear and tear
excepted.
<PAGE>
5. It is the intention and purpose of the parties thereto to create by
this instrument a Lease of the kind commonly known as "Carefree" to the Lessor.
Accordingly, the Lessee agrees to bear, pay for and discharge not only such
items as it has specifically agreed by the prior provisions of this Lease to
bear, pay and discharge, but also all other costs, charges and expenses of every
kind and nature whatsoever which must be borne, paid and discharged in order to
accomplish the purpose and objects of this Lease, namely:
a. That the Lessor shall receive from the Lessee, without diminution on
account of any matter or thing whatsoever except such as shall arise from breach
by the Lessor of any covenant or covenants of the Lessor contained herein, the
rentals agreed to be paid by the Lessee;
b. That the Lessor shall be subjected to no expense whatsoever on
account of any matter or thing connected with or arising from the leased
premises or this Lease during the term hereof, except matters connected with or
arising from the covenants of the Lessor contained herein; and
c. That the Lessor at the expiration of or sooner termination of this
Lease, shall receive possession of the leased premises and the improvements
thereon in accordance with the covenants of the Lessee contained herein and free
and clear of all claims, liens, charges and encumbrances expect those to which
the lease premises are now subject, or which may be placed thereon by the
Lessor, or which shall arise because of breach by the Lessor of any covenant or
covenants of the Lessor contained herein.
6. The terms and provisions of this Lease shall inure to and be binding
upon the respective successors and assigns of the Lessee and the Lessor. This
Lease contains the entire agreement of the parties, and no representations,
inducements, promises or agreements, oral or otherwise not embodied herein shall
be of any force or effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on the day
and year aforesaid.
SIGNED AND ACKNOWLEDGED LESSOR:
IN THE PRESENCE OF:
/s/ George E. Thurner Jr.
-------------------------------
George E. Thurner Jr., President
ADAM WHOLESALERS, INC.
/s/ Robin F. Hughes
-------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
LESSEE:
ADAM WHOLESALERS, CINCINNATI
-------------------------------
/s/ George E. Thurner Jr.
-------------------------------
George E. Thurner, Jr. President
ADAM WHOLESALERS, INC.
/s/ Robin F. Hughes
-------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF SEPTEMBER, 1992 before me, the
subscriber, a Notary Public in and for said County and State, personally came
George E. Thurner, Jr.; Robin F. Hughes as Lessors in the foregoing Lease, and
acknowledge the signing of said instrument to be their voluntary act and deed
for the uses and purposes herein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial seal
on the day and year last above written.
Catherine Knose-Keller
--------------------------
NOTARY PUBLIC
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF SEPTEMBER, 1992, before me, the
subscriber, a Notary Public in and for said County and State, personally came
the above named Lessee, ADAM WHOLESALERS, LYNCHBURG by George E. Thurner, Jr.
its President and Robin F. Hughes its Vice President who acknowledged the
signing of the foregoing Lease to be the voluntary act and deed of said
corporation as such Lessee, and of themselves as the duly authorized officers
thereof, for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have here unto set my hand and affixed my
notarial seal on the day and year last above written.
Catherine Knose-Keller
-----------------------------
NOTARY PUBLIC
<PAGE>
ASSIGNMENT AND ASSUMPTION AND MODIFICATION OF LEASE AGREEMENT
This Assignment and Assumption of Lease Agreement (the "Agreement") made
this 19th day of February, 1999 by and among Adam Wholesalers, Inc. (the
"Lessor") (which may be known in the future as MAE Holding Company), Adam
Wholesalers of Cincinnati, Inc. a/k/a Adam Wholesalers, Cincinnati (the
"Assignor") and Morgan Products Ltd. (the "Assignee") (which may in the future
do business under the name of Adam Wholesalers, Inc.).
WHEREAS, Assignor is the Lessee under that certain lease dated September
1, 1992 (the "Lease") by and between the Lessor and Assignor for premises
located at 3001 East Kemper Road, Cincinnati, Ohio and as more particularly
described in the Lease;
WHEREAS, the Lessor and Assignee have entered into that certain asset
purchase agreement (the "Purchase Agreement") dated as of December 22, 1998; and
WHEREAS, pursuant to the Purchase Agreement and this Agreement, Assignee
is assuming Assignor's interest as Lessee in the Lease; and
WHEREAS, Lessor, Assignor and Assignee desire to modify certain terms of
the Lease; and
WHEREAS, Assignor desires to assign its interest under the Lease to
Assignee, and Assignee desires to accept such assignment on the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereby amend and modify the terms of the
Lease as follows below; and
NOW, THEREFORE, in consideration of their mutual covenants hereafter set
forth and other good and valuable consideration paid by Assignee to Assignor,
the receipt of which is hereby acknowledged by Assignor, Assignor assigns,
grants, transfers and sets over all of its right, title, claim and interest in
and under the Lease to Assignee and its successors and assigns.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns,
from the date hereof, subject to the terms and conditions contained in the
Lease.
1. Assignor hereby assigns all of its right, title and interest in the Lease
to Assignee, and Assignee hereby assumes the performance and observance of all
the terms, covenants and conditions of the Lease to be performed or observed by
Assignor from and after the date hereof.
2. Paragraph 4 b. is deleted in its entirety and the following substituted
therefor:
<PAGE>
"Lessee covenants and agrees that during the term of this Lease
it will, at Lessee's own cost and expense, carry extended coverage "all risk"
insurance on the demised premises in an amount not less than the full
replacement value of all structures erected on said premises, insuring said
structures against loss, destruction or damage by fire or other casualty. Lessee
shall also carry comprehensive general liability insurance for bodily or
personal injury to, illness of, or death of persons and damage to property
occurring in on, or about the demised premises with limits which are
commercially reasonable. All of Lessee's insurance policies shall name Lessor as
an additional insured. If demised premises shall be damaged or destroyed by fire
or other casualty, then Lessee, at its sole cost and expense shall repair and
restore the same to such condition as approximately existed immediately prior to
such loss, damage or destruction. Lessee's repair and restoration shall be
subject to then applicable legal requirements.
If an event of casualty occurs within two (2) years of the expiration of the
term of this Lease, the Lessee may elect not to repair and restore the demised
premises and to cancel and terminate the Lease. Such election shall be made
within thirty (30) days from the date of casualty. In the event Lessee elects to
terminate the Lease, Lessee shall assign its insurance proceeds to the Lessor
provided that the insurance proceeds are sufficient to repair and restore the
demised premises.
3. Paragraph 4 c. of the Lease is hereby amended by adding the following
thereto:
"Lessor shall make necessary repairs and replacements to the roof
and to the structural portions of the foundation and exterior walls of the
demised, provided that the repairs are not made necessary by the act or omission
of Lessee, its employees, agents or invitees, nor by reason of Lessee's making
repairs, alterations and improvements to the Building. In addition, Lessor's
obligation shall be limited to all such costs in excess of $10,000.00 during any
calendar year. For example, if the roof is in need of repair or replacement and
the costs therefor is $30,000.00, Lessee shall be responsible for $10,000.00 of
the cost, and Lessor shall be responsible for $20,000.00 of the cost. After the
completion of any such repair, Lessee shall pay its share of such costs within
ten (10) days after receipt of invoice from Lessor."
4. Lessor, Assignor and Assignee further agree to the addition of the
following provisions to the Lease:
7. That at any time and from time to time, Lessee's interest
under this Lease may be assigned and re-assigned upon notice to the Lessor but
without requiring the Lessor's consent thereto provided that the Assignee
remains liable under the Lease.
8. In addition to any other covenants or obligations of Lessor
under this Lease, Lessor covenants and agrees as follows: That Assignee, upon
payment of the rent above reserved, and upon the due performance of the
covenants and agreements herein contained, shall and may at all times peaceably
and quietly have, hold and enjoy the demised premises for the remaining Term of
this Lease without any manner or hindrance or molestation from Lessor or anyone
claiming under Landlord.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day, month and year first above written.
ASSIGNOR:
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
----------------------------
Name: George E. Thurner, Jr.
Title: President
ASSIGNEE:
MORGAN PRODUCTS LTD.
By: /s/ Larry R. Robinette
----------------------------
Name: Larry R. Robinette
Title: President & CEO
CONSENTED TO:
LESSOR
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
------------------------------
Name: George E. Thurner, Jr.
Title: President
Exhibit 10.50
ADAM WHOLESALERS, WOODBURY
This agreement of Lease made this 1ST DAY OF OCTOBER by and between ADAM
WHOLESALERS, INC. (Hereinafter collectively called "Lessors") and ADAM
WHOLESALERS, WOODBURY (Hereinafter called "Lessee").
WITNESSETH:
1. Lessor hereby agrees to lease to Lessee, and Lessee hereby agrees to
lease from Lessor the real estate described in Exhibit A attached hereto
together with all improvements located thereon.
2. The term of Lease shall be ten (10) years commencing with the 1ST DAY OF
OCTOBER, 1994 and ending with the 30TH DAY OF DECEMBER, 2004.
3. Lessee shall pay to lessor as rent for the lease premises the sum of TWO
HUNDRED-SIXTEEN THOUSAND DOLLARS ($216,000) a year, payable in advance on the
first day of every month during the term hereof in installments of EIGHTEEN
THOUSAND DOLLARS ($18,000).
4. In addition to said rental as provided above:
a. The lessee covenants and agrees to pay promptly when due, all taxes
and assessments of every kind and nature levied, assessed or payable upon the
real estate and improvements thereon, which are the subject of this Lease,
together with all business taxes, assessments, levies, license fees, water
rents, sewer rents, excises, franchises, penalty and charges, of whatever nature
of kind which are now or may hereafter be levied, assessed, charged or imposed
or become payable during the term of this Lease by any government of political
body, corporation or unit, or which may become alien upon the property, or upon
the leasehold interest, or which are, or may hereafter be levied, assessed or
charged by reason of the use or occupancy of the premises under this lease.
b. Lessee covenants and agrees that during the term of this Lease it
will, at Lessee's own cost and expense, carry "all risk" insurance on the
demised premises in an amount not less than the full replacement value of all
structures erected on said premises, insuring said structures against loss,
destruction or damage by fire or other casualty. The proceeds of such insurance
shall be payable to Lessors. In addition, Lessee shall carry public liability
insurance indemnifying Lessors in an amount satisfactory to Lessors.
c. Lessee covenants that it will, during the term of this Lease, at its
own expense, keep and maintain the demised premises and all structures erected
thereon and all appurtenances thereto in good and substantial repair, both
exterior and interior and including any parking area or driveways, and that it
will indemnify and save harmless the Lessor from and against all liens, claims
or damages by reason of any repairs or improvements which may be made by the
Lessee on said premises, and Lessee further covenants to surrender the premises
at the end of the term in as good condition as they are at the date of the
commencement of the term or may be put thereafter, ordinary wear and tear
excepted.
<PAGE>
5. It is the intention and purpose of the parties thereto to create by
this instrument a Lease of the kind commonly known as "Carefree" to the Lessor.
Accordingly, the Lessee agrees to bear, pay for and discharge not only such
items as it has specifically agreed by the prior provisions of this Lease to
bear, pay and discharge, but also all other costs, charges and expenses of every
kind and nature whatsoever which must be borne, paid and discharged in order to
accomplish the purpose and objects of this Lease, namely:
a. That the Lessor shall receive from the Lessee, without diminution on
account of any matter or thing whatsoever except such as shall arise from breach
by the Lessor of any covenant or covenants of the Lessor contained herein, the
rentals agreed to be paid by the Lessee;
b. That the Lessor shall be subjected to no expense whatsoever on
account of any matter or thing connected with or arising from the leased
premises or this Lease during the term hereof, except matters connected with or
arising from the covenants of the Lessor contained herein; and
c. That the Lessor at the expiration of or sooner termination of this
Lease, shall receive possession of the leased premises and the improvements
thereon in accordance with the covenants of the Lessee contained herein and free
and clear of all claims, liens, charges and encumbrances expect those to which
the lease premises are now subject, or which may be placed thereon by the
Lessor, or which shall arise because of breach by the Lessor of any covenant or
covenants of the Lessor contained herein.
6. The terms and provisions of this Lease shall inure to and be binding
upon the respective successors and assigns of the Lessee and the Lessor. This
Lease contains the entire agreement of the parties, and no representations,
inducements, promises or agreements, oral or otherwise not embodied herein shall
be of any force or effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on the day
and year aforesaid.
SIGNED AND ACKNOWLEDGED LESSOR:
IN THE PRESENCE OF:
/s/ George E. Thurner Jr.
--------------------------------
George E. Thurner Jr., President
ADAM WHOLESALERS, INC.
/s/ Robin F. Hughes
--------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
LESSEE:
ADAM WHOLESALERS, WOODBURY
--------------------------------
/s/ George E. Thurner Jr.
--------------------------------
George E. Thurner, Jr. President
ADAM WHOLESALERS, INC.
/s/ Robin F. Hughes
--------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF OCTOBER, 1994 before me, the
subscriber, a Notary Public in and for said County and State, personally came
George E. Thurner, Jr.; Robin F. Hughes as Lessors in the foregoing Lease, and
acknowledge the signing of said instrument to be their voluntary act and deed
for the uses and purposes herein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial seal
on the day and year last above written.
Catherine Knose-Keller
-----------------------------
NOTARY PUBLIC
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF OCTOBER, 1994, before me, the
subscriber, a Notary Public in and for said County and State, personally came
the above named Lessee, ADAM WHOLESALERS, WOODBURY by George E. Thurner, Jr. its
President and Robin F. Hughes its Vice President who acknowledged the signing of
the foregoing Lease to be the voluntary act and deed of said corporation as such
Lessee, and of themselves as the duly authorized officers thereof, for the uses
and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have here unto set my hand and affixed my
notarial seal on the day and year last above written.
Catherine Knose-Keller
-----------------------------
NOTARY PUBLIC
<PAGE>
ASSIGNMENT AND ASSUMPTION AND MODIFICATION OF LEASE AGREEMENT
This Assignment and Assumption of Lease Agreement (the "Agreement") made
this 19th day of February, 1999 by and among Adam Wholesalers, Inc. (the
"Lessor") (which may be known in the future as MAE Holding Company), Adam
Wholesalers of Woodbury Heights, Inc. a/k/a Adam Wholesalers, Woodbury (the
"Assignor") and Morgan Products Ltd. (the "Assignee") (which may in the future
do business under the name of Adam Wholesalers, Inc.).
WHEREAS, Assignor is the Lessee under that certain lease dated October
1, 1994 (the "Lease") by and between the Lessor and Assignor for premises
located at Chestnut & Academy Avenues, Woodbury Heights, New Jersey and as more
particularly described in the Lease;
WHEREAS, the Lessor and Assignee have entered into that certain asset
purchase agreement (the "Purchase Agreement") dated as of December 22, 1998; and
WHEREAS, pursuant to the Purchase Agreement and this Agreement, Assignee
is assuming Assignor's interest as Lessee in the Lease; and
WHEREAS, Lessor, Assignor and Assignee desire to modify certain terms of
the Lease; and
WHEREAS, Assignor desires to assign its interest under the Lease to
Assignee, and Assignee desires to accept such assignment on the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereby amend and modify the terms of the
Lease as follows below; and
NOW, THEREFORE, in consideration of their mutual covenants hereafter set
forth and other good and valuable consideration paid by Assignee to Assignor,
the receipt of which is hereby acknowledged by Assignor, Assignor assigns,
grants, transfers and sets over all of its right, title, claim and interest in
and under the Lease to Assignee and its successors and assigns.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns,
from the date hereof, subject to the terms and conditions contained in the
Lease.
1. Assignor hereby assigns all of its right, title and interest in the Lease
to Assignee, and Assignee hereby assumes the performance and observance of all
the terms, covenants and conditions of the Lease to be performed or observed by
Assignor from and after the date hereof.
2. Paragraph 4 b. is deleted in its entirety and the following substituted
therefor:
"Lessee covenants and agrees that during the term of this Lease
it will, at Lessee's own cost and expense, carry extended coverage "all risk"
insurance on the demised premises in an amount not less than the full
replacement value of all structures erected on said premises, insuring said
structures against loss, destruction or damage by fire or other casualty. Lessee
shall also carry comprehensive general liability insurance for bodily or
personal injury to, illness of, or death of persons and damage to property
occurring in on, or about the demised premises with limits which are
commercially reasonable. All of Lessee's insurance policies shall name Lessor as
an additional insured. If demised premises shall be damaged or destroyed by fire
or other casualty, then Lessee, at its sole cost and expense shall repair and
restore the same to such condition as approximately existed immediately prior to
such loss, damage or destruction. Lessee's repair and restoration shall be
subject to then applicable legal requirements.
If an event of casualty occurs within two (2) years of the expiration of the
term of this Lease, the Lessee may elect not to repair and restore the demised
premises and to cancel and terminate the Lease. Such election shall be made
within thirty (30) days from the date of casualty. In the event Lessee elects to
terminate the Lease, Lessee shall assign its insurance proceeds to the Lessor
provided that the insurance proceeds are sufficient to repair and restore the
demised premises.
3. Paragraph 4 c. of the Lease is hereby amended by adding the following
thereto:
"Lessor shall make necessary repairs and replacements to the roof
and to the structural portions of the foundation and exterior walls of the
demised, provided that the repairs are not made necessary by the act or omission
of Lessee, its employees, agents or invitees, nor by reason of Lessee's making
repairs, alterations and improvements to the Building. In addition, Lessor's
obligation shall be limited to all such costs in excess of $10,000.00 during any
calendar year. For example, if the roof is in need of repair or replacement and
the costs therefor is $30,000.00, Lessee shall be responsible for $10,000.00 of
the cost, and Lessor shall be responsible for $20,000.00 of the cost. After the
completion of any such repair, Lessee shall pay its share of such costs within
ten (10) days after receipt of invoice from Lessor."
4. Lessor, Assignor and Assignee further agree to the addition of the
following provisions to the Lease:
7. That at any time and from time to time, Lessee's interest
under this Lease may be assigned and re-assigned upon notice to the Lessor but
without requiring the Lessor's consent thereto provided that the Assignee
remains liable under the Lease.
8. In addition to any other covenants or obligations of Lessor
under this Lease, Lessor covenants and agrees as follows: That Assignee, upon
payment of the rent above reserved, and upon the due performance of the
covenants and agreements herein contained, shall and may at all times peaceably
and quietly have, hold and enjoy the demised premises for the remaining Term of
this Lease without any manner or hindrance or molestation from Lessor or anyone
claiming under Landlord.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed all as of the day, month and year first above written.
ASSIGNOR:
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
----------------------------
Name: George E. Thurner, Jr.
Title: President
ASSIGNEE:
MORGAN PRODUCTS LTD.
By: /s/ Larry R. Robinette
----------------------------
Name: Larry R. Robinette
Title: President & CEO
CONSENTED TO:
LESSOR
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
-----------------------------
Name: George E. Thurner, Jr.
Title: President
Exhibit 10.51
ADAM WHOLESALERS, DENVER
This agreement of Lease made this 1ST DAY OF JANUARY by and between ADAM
WHOLESALERS, INC. (Hereinafter collectively called "Lessors") and ADAM
WHOLESALERS, DENVER (Hereinafter called "Lessee").
WITNESSETH:
1. Lessor hereby agrees to lease to Lessee, and Lessee hereby agrees to
lease from Lessor the real estate described in Exhibit A attached hereto
together with all improvements located thereon.
2. The term of Lease shall be ten (10) years commencing with the 1ST DAY OF
JANUARY, 1995 and ending with the 31ST DAY OF DECEMBER, 2005.
3. Lessee shall pay to lessor as rent for the lease premises the sum of
THREE HUNDRED FORTY EIGHT THOUSAND DOLLARS ($348,000) a year, payable in advance
on the first day of every month during the term hereof in installments of
TWENTY NINE THOUSAND DOLLARS ($29,000).
4. In addition to said rental as provided above:
a. The lessee covenants and agrees to pay promptly when due, all taxes
and assessments of every kind and nature levied, assessed or payable upon the
real estate and improvements thereon, which are the subject of this Lease,
together with all business taxes, assessments, levies, license fees, water
rents, sewer rents, excises, franchises, penalty and charges, of whatever nature
of kind which are now or may hereafter be levied, assessed, charged or imposed
or become payable during the term of this Lease by any government of political
body, corporation or unit, or which may become alien upon the property, or upon
the leasehold interest, or which are, or may hereafter be levied, assessed or
charged by reason of the use or occupancy of the premises under this lease.
b. Lessee covenants and agrees that during the term of this Lease it
will, at Lessee's own cost and expense, carry "all risk" insurance on the
demised premises in an amount not less than the full replacement value of all
structures erected on said premises, insuring said structures against loss,
destruction or damage by fire or other casualty. The proceeds of such insurance
shall be payable to Lessors. In addition, Lessee shall carry public liability
insurance indemnifying Lessors in an amount satisfactory to Lessors.
c. Lessee covenants that it will, during the term of this Lease, at its
own expense, keep and maintain the demised premises and all structures erected
thereon and all appurtenances thereto in good and substantial repair, both
exterior and interior and including any parking area or driveways, and that it
will indemnify and save harmless the Lessor from and against all liens, claims
or damages by reason of any repairs or improvements which may be made by the
Lessee on said premises, and Lessee further covenants to surrender the premises
at the end of the term in as good condition as they are at the date of the
commencement of the term or may be put thereafter, ordinary wear and tear
excepted.
<PAGE>
5. It is the intention and purpose of the parties thereto to create by this
instrument a Lease of the kind commonly known as "Carefree" to the Lessor.
Accordingly, the Lessee agrees to bear, pay for and discharge not only such
items as it has specifically agreed by the prior provisions of this Lease to
bear, pay and discharge, but also all other costs, charges and expenses of every
kind and nature whatsoever which must be borne, paid and discharged in order to
accomplish the purpose and objects of this Lease, namely:
a. That the Lessor shall receive from the Lessee, without diminution on
account of any matter or thing whatsoever except such as shall arise from breach
by the Lessor of any covenant or covenants of the Lessor contained herein, the
rentals agreed to be paid by the Lessee;
b. That the Lessor shall be subjected to no expense whatsoever on
account of any matter or thing connected with or arising from the leased
premises or this Lease during the term hereof, except matters connected with or
arising from the covenants of the Lessor contained herein; and
c. That the Lessor at the expiration of or sooner termination of this
Lease, shall receive possession of the leased premises and the improvements
thereon in accordance with the covenants of the Lessee contained herein and free
and clear of all claims, liens, charges and encumbrances expect those to which
the lease premises are now subject, or which may be placed thereon by the
Lessor, or which shall arise because of breach by the Lessor of any covenant or
covenants of the Lessor contained herein.
6. The terms and provisions of this Lease shall inure to and be binding
upon the respective successors and assigns of the Lessee and the Lessor. This
Lease contains the entire agreement of the parties, and no representations,
inducements, promises or agreements, oral or otherwise not embodied herein shall
be of any force or effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on the day
and year aforesaid.
SIGNED AND ACKNOWLEDGED LESSOR:
IN THE PRESENCE OF:
/s/ George E. Thurner Jr.
---------------------------------
George E. Thurner Jr., President
ADAM WHOLESALERS, INC.
/s/ Robin F. Hughes
--------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
LESSEE:
ADAM WHOLESALERS, DENVER
-------------------------------
/s/ George E. Thurner Jr.
--------------------------------
George E. Thurner, Jr. President
ADAM WHOLESALERS, INC.
/s/ Robin F. Hughes
--------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF JANUARY, 1995 before me, the
subscriber, a Notary Public in and for said County and State, personally came
George E. Thurner, Jr.; Robin F. Hughes as Lessors in the foregoing Lease, and
acknowledge the signing of said instrument to be their voluntary act and deed
for the uses and purposes herein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial seal
on the day and year last above written.
Catherine Knose-Keller
-----------------------------
NOTARY PUBLIC
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF JANUARY, 1995, before me, the
subscriber, a Notary Public in and for said County and State, personally came
the above named Lessee, ADAM WHOLESALERS, DENVER by George E. Thurner, Jr. its
President and Robin F. Hughes its Vice President who acknowledged the signing of
the foregoing Lease to be the voluntary act and deed of said corporation as such
Lessee, and of themselves as the duly authorized officers thereof, for the uses
and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have here unto set my hand and affixed my
notarial seal on the day and year last above written.
Catherine Knose-Keller
------------------------------
NOTARY PUBLIC
<PAGE>
3
90113735.01
90113735.01
ASSIGNMENT AND ASSUMPTION AND MODIFICATION OF LEASE AGREEMENT
This Assignment and Assumption of Lease Agreement (the "Agreement") made
this 19th day of February, 1999 by and among Adam Wholesalers, Inc. (the
"Lessor") (which may be known in the future as MAE Holding Company), Adam
Wholesalers of Denver, Inc. a/k/a Adam Wholesalers, Denver (the "Assignor") and
Morgan Products Ltd. (the "Assignee") (which may in the future do business under
the name of Adam Wholesalers, Inc.).
WHEREAS, Assignor is the Lessee under that certain lease dated January
1, 1995 (the "Lease") by and between the Lessor and Assignor for premises
located at 5555 Joliet Street, Denver, Colorado and as more particularly
described in the Lease;
WHEREAS, the Lessor and Assignee have entered into that certain asset
purchase agreement (the "Purchase Agreement") dated as of December 22, 1998; and
WHEREAS, pursuant to the Purchase Agreement and this Agreement, Assignee
is assuming Assignor's interest as Lessee in the Lease; and
WHEREAS, Lessor, Assignor and Assignee desire to modify certain terms of
the Lease; and
WHEREAS, Assignor desires to assign its interest under the Lease to
Assignee, and Assignee desires to accept such assignment on the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereby amend and modify the terms of the
Lease as follows below; and
NOW, THEREFORE, in consideration of their mutual covenants hereafter set
forth and other good and valuable consideration paid by Assignee to Assignor,
the receipt of which is hereby acknowledged by Assignor, Assignor assigns,
grants, transfers and sets over all of its right, title, claim and interest in
and under the Lease to Assignee and its successors and assigns.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns,
from the date hereof, subject to the terms and conditions contained in the
Lease.
1. Assignor hereby assigns all of its right, title and interest in the Lease
to Assignee, and Assignee hereby assumes the performance and observance of all
the terms, covenants and conditions of the Lease to be performed or observed by
Assignor from and after the date hereof.
2. Paragraph 4 b. is deleted in its entirety and the following substituted
therefor:
"Lessee covenants and agrees that during the term of this Lease
it will, at Lessee's own cost and expense, carry extended coverage "all risk"
insurance on the demised premises in an amount not less than the full
replacement value of all structures erected on said premises, insuring said
structures against loss, destruction or damage by fire or other casualty. Lessee
shall also carry comprehensive general liability insurance for bodily or
personal injury to, illness of, or death of persons and damage to property
occurring in on, or about the demised premises with limits which are
commercially reasonable. All of Lessee's insurance policies shall name Lessor as
an additional insured. If demised premises shall be damaged or destroyed by fire
or other casualty, then Lessee, at its sole cost and expense shall repair and
restore the same to such condition as approximately existed immediately prior to
such loss, damage or destruction. Lessee's repair and restoration shall be
subject to then applicable legal requirements.
If an event of casualty occurs within two (2) years of the expiration of the
term of this Lease, the Lessee may elect not to repair and restore the demised
premises and to cancel and terminate the Lease. Such election shall be made
within thirty (30) days from the date of casualty. In the event Lessee elects to
terminate the Lease, Lessee shall assign its insurance proceeds to the Lessor
provided that the insurance proceeds are sufficient to repair and restore the
demised premises.
3. Paragraph 4 c. of the Lease is hereby amended by adding the following
thereto:
"Lessor shall make necessary repairs and replacements to the roof
and to the structural portions of the foundation and exterior walls of the
demised, provided that the repairs are not made necessary by the act or omission
of Lessee, its employees, agents or invitees, nor by reason of Lessee's making
repairs, alterations and improvements to the Building. In addition, Lessor's
obligation shall be limited to all such costs in excess of $10,000.00 during any
calendar year. For example, if the roof is in need of repair or replacement and
the costs therefor is $30,000.00, Lessee shall be responsible for $10,000.00 of
the cost, and Lessor shall be responsible for $20,000.00 of the cost. After the
completion of any such repair, Lessee shall pay its share of such costs within
ten (10) days after receipt of invoice from Lessor."
4. Lessor, Assignor and Assignee further agree to the addition of the
following provisions to the Lease:
7. That at any time and from time to time, Lessee's interest
under this Lease may be assigned and re-assigned upon notice to the Lessor but
without requiring the Lessor's consent thereto provided that the Assignee
remains liable under the Lease.
8. In addition to any other covenants or obligations of Lessor
under this Lease, Lessor covenants and agrees as follows: That Assignee, upon
payment of the rent above reserved, and upon the due performance of the
covenants and agreements herein contained, shall and may at all times peaceably
and quietly have, hold and enjoy the demised premises for the remaining Term of
this Lease without any manner or hindrance or molestation from Lessor or anyone
claiming under Landlord.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day, month and year first above written.
ASSIGNOR:
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
-----------------------------
Name: George E. Thurner, Jr.
Title: President
ASSIGNEE:
MORGAN PRODUCTS LTD.
By: /s/ Larry R. Robinette
-----------------------------
Name: Larry R. Robinette
Title: President & CEO
CONSENTED TO:
LESSOR
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
-----------------------------
Name: George E. Thurner, Jr.
Title: President
Exhibit 10.52
ADAM WHOLESALERS OF INDIANAPOLIS INC.
LEASE
This agreement of Lease made the 13th day of May, 1992 by and between
Adam Wholesalers, Inc. (hereinafter collectively called "Lessors") and Adam
Wholesalers of Indianapolis, Inc.(hereinafter called "Lessee").
W I T N E S S E T H:
1) Lessor hereby agrees to lease to Lessee, and Lessee hereby agrees to lease
from Lessor the real estate described in Exhibit A attached hereto together with
all improvements located thereon.
2) The term of Lease shall be ten (10) years commencing with the 1st day of
July, 1992 and ending with the 30th day of June, 2002.
3) Lessee shall pay to the Lessor as rent for the lease premises the sum of Two
Hundred Forty Thousand Dollars a year, payable in advance on the first day of
every month during the term hereof in installments of Twenty Thousand Dollars
($20,000).
4) In addition to said rental as provided above:
A) The Lessee covenants and agrees to pay promptly when due, all taxes
and assessments of every kind and nature levied, assessed or payable upon the
real estate and improvements thereon, which are the subject of this Lease,
together with all business taxes , assessments, levies, license fees, water
rents, sewer rents, excises, franchises, penalties and charges, of whatever
nature or kind which are now or may hereafter be levied, assessed, charged or
imposed or become payable during the term of the Lease by any government or
political body, corporation or unit, or which may become alien upon the
property, or upon the leasehold interest, or which are, or may hereafter be
levied, assessed or charged by reason of the use or occupancy of the premises
under this Lease.
<PAGE>
B) Lessee covenants and agrees that during the term of this Lease it
will, at Lessee's own cost and expense, carry "all risk" insurance on the
demised premises in an amount not less than the full replacement value of all
structures erected on said premises, insuring said structures against loss,
destruction or damage or fire or other casualty. The proceeds of such insurance
shall be payable to Lessors. In addition, Lessee shall carry public liability
insurance indemnifying Lessors in an amount satisfactory of Lessors.
C) Lessee covenants that it will, during the term of the Lease, at its
own expense, keep and maintain the demised premises and all structures erected
thereon and all appurtenances thereto in good and substantial repair, both
exterior and interior and including any parking area or driveways, and that it
will indemnify and save harmless the Lessor from and against all liens, claims
or damages by reason of any repairs or improvements which may be made by the
Lessee on said premised, and Lessee further covenants to surrender the premises
at the end of the term in as good condition as exist at the date of commencement
of the term or may be put thereafter, ordinary wear and tear excepted.
5) It is the intention and purpose of the parties thereto to create by this
instrument a Lease of the kind commonly known as "Carefree" to the Lessor.
Accordingly, the Lessee agrees to bear, pay for and discharge not only such
items as it has specifically agreed by the prior provisions of this Lease to
bear, pay and discharge, but also all other cost, charges and expenses of every
kind and nature whatsoever which must be borne, paid and discharges in order to
accomplish the purpose and objects of this Lease, namely:
A) That the Lessor shall receive from the Lessee, without diminution on
account of any matter or thing whatsoever except such as shall arise from breach
by the Lessor of any covenant or covenants of the Lessor contained herein, the
rentals agreed to be paid by the Lessee.
B) That the Lessor shall be subjected to no expense whatsoever on
account of any matter or thing connected with or arising from the leased
premises or this Lease during the term hereof, except matters connected with or
arising from the covenants of the Lessor contained herein: and
C) That the Lessor at the expiration of or sooner termination of this
lease, shall receive possession of the leased premises and the improvements
thereon in accordance with the covenants of the Lessee contained herein and free
and clear of all claims, liens, charges and encumbrances except those to which
the leased premises, are now subject , or which may be placed thereon by the
Lessor, or which shall arise because of breach by the Lessor of any covenants or
covenants of the Lessor contained herein
6) The terms and provisions of this Lease shall inure to and be binding upon the
respective successors and assigns of the Lessee and the Lessor. This Lease
contains the entire agreement of the parties, and no representations,
inducements, promises or agreements, oral or otherwise not embodied herein shall
be of any force or effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
the day and year aforesaid.
SIGNED AND ACKNOWLEDGED IN THE LESSOR:
PRESENCE OF:
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
--------------------------------
George E. Thurner, Jr., President
By: /s/ Robin F. Hughes
---------------------------------
Robin F. Hughes, Asst. Secretary
LESSEE:
ADAM WHOLESALERS OF INDIANAPOLIS
By: /s/ George E. Thurner, Jr.
--------------------------------
George E. Thurner, Jr., President
By: /s/ Robin Hughes
--------------------------------
Robin F. Hughes, Asst. Secretary
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 13th day of July, 1992, before me, the
subscriber, a Notary Public in and for said County and State, personally came
by, George E. Thurner Jr., President and Robin F. Hughes, Assistant Secretary of
Adam Wholesalers of Indianapolis, Lessee in the foregoing Lease, who
acknowledged the signing of the foregoing Lease to be its and their voluntary
act and deed on behalf of the corporation for the uses and purposes therein
mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial seal
on the day and year last above written.
/s/ Catherine Knose-Keller
--------------------------
NOTARY PUBLIC
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 13th day of July, 1992, before me, the
subscriber, a Notary Public in and for said County and State, personally came
by, George E. Thurner Jr., President and Robin F. Hughes, Assistant Secretary of
Adam Wholesalers Inc., Lessee in the foregoing Lease, who acknowledged the
signing of the foregoing Lease to be its and their voluntary act and deed on
behalf of the corporation for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial seal
on the day and year last above written.
/s/ Catherine Knose-Keller
----------------------------
NOTARY PUBLIC
<PAGE>
ASSIGNMENT AND ASSUMPTION AND MODIFICATION OF LEASE AGREEMENT
This Assignment and Assumption of Lease Agreement (the "Agreement") made
this 19th day of February, 1999 by and among Adam Wholesalers, Inc. (the
"Lessor") (which may be known in the future as MAE Holding Company), Adam
Wholesalers of Indianapolis, Inc. (the "Assignor") and Morgan Products Ltd. (the
"Assignee") (which may in the future do business under the name of Adam
Wholesalers, Inc.).
WHEREAS, Assignor is the Lessee under that certain lease dated May 13,
1992 (the "Lease") by and between the Lessor and Assignor for premises located
at 3333 Mesilla Court, Indianapolis, Indiana and as more particularly described
in the Lease;
WHEREAS, the Lessor and Assignee have entered into that certain asset
purchase agreement (the "Purchase Agreement") dated as of December 22, 1998; and
WHEREAS, pursuant to the Purchase Agreement and this Agreement, Assignee
is assuming Assignor's interest as Lessee in the Lease; and
WHEREAS, Lessor, Assignor and Assignee desire to modify certain terms of
the Lease; and
WHEREAS, Assignor desires to assign its interest under the Lease to
Assignee, and Assignee desires to accept such assignment on the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereby amend and modify the terms of the
Lease as follows below; and
NOW, THEREFORE, in consideration of their mutual covenants hereafter set
forth and other good and valuable consideration paid by Assignee to Assignor,
the receipt of which is hereby acknowledged by Assignor, Assignor assigns,
grants, transfers and sets over all of its right, title, claim and interest in
and under the Lease to Assignee and its successors and assigns.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns,
from the date hereof, subject to the terms and conditions contained in the
Lease.
1. Assignor hereby assigns all of its right, title and interest in the Lease
to Assignee, and Assignee hereby assumes the performance and observance of all
the terms, covenants and conditions of the Lease to be performed or observed by
Assignor from and after the date hereof.
2. Paragraph 4 b. is deleted in its entirety and the following substituted
therefor:
<PAGE>
"Lessee covenants and agrees that during the term of this Lease
it will, at Lessee's own cost and expense, carry extended coverage "all risk"
insurance on the demised premises in an amount not less than the full
replacement value of all structures erected on said premises, insuring said
structures against loss, destruction or damage by fire or other casualty. Lessee
shall also carry comprehensive general liability insurance for bodily or
personal injury to, illness of, or death of persons and damage to property
occurring in on, or about the demised premises with limits which are
commercially reasonable. All of Lessee's insurance policies shall name Lessor as
an additional insured. If demised premises shall be damaged or destroyed by fire
or other casualty, then Lessee, at its sole cost and expense shall repair and
restore the same to such condition as approximately existed immediately prior to
such loss, damage or destruction. Lessee's repair and restoration shall be
subject to then applicable legal requirements.
If an event of casualty occurs within two (2) years of the expiration of the
term of this Lease, the Lessee may elect not to repair and restore the demised
premises and to cancel and terminate the Lease. Such election shall be made
within thirty (30) days from the date of casualty. In the event Lessee elects to
terminate the Lease, Lessee shall assign its insurance proceeds to the Lessor
provided that the insurance proceeds are sufficient to repair and restore the
demised premises.
3. Paragraph 4 c. of the Lease is hereby amended by adding the following
thereto:
"Lessor shall make necessary repairs and replacements to the roof
and to the structural portions of the foundation and exterior walls of the
demised, provided that the repairs are not made necessary by the act or omission
of Lessee, its employees, agents or invitees, nor by reason of Lessee's making
repairs, alterations and improvements to the Building. In addition, Lessor's
obligation shall be limited to all such costs in excess of $10,000.00 during any
calendar year. For example, if the roof is in need of repair or replacement and
the costs therefor is $30,000.00, Lessee shall be responsible for $10,000.00 of
the cost, and Lessor shall be responsible for $20,000.00 of the cost. After the
completion of any such repair, Lessee shall pay its share of such costs within
ten (10) days after receipt of invoice from Lessor."
4. Lessor, Assignor and Assignee further agree to the addition of the
following provisions to the Lease:
7. That at any time and from time to time, Lessee's interest
under this Lease may be assigned and re-assigned upon notice to the Lessor but
without requiring the Lessor's consent thereto provided that the Assignee
remains liable under the Lease.
8. In addition to any other covenants or obligations of Lessor
under this Lease, Lessor covenants and agrees as follows: That Assignee, upon
payment of the rent above reserved, and upon the due performance of the
covenants and agreements herein contained, shall and may at all times peaceably
and quietly have, hold and enjoy the demised premises for the remaining Term of
this Lease without any manner or hindrance or molestation from Lessor or anyone
claiming under Landlord.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day, month and year first above written.
ASSIGNOR:
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
-----------------------------
Name: George E. Thurner, Jr.
Title: President
ASSIGNEE:
MORGAN PRODUCTS LTD.
By: /s/ Larry R. Robinette
-----------------------------
Name: Larry R. Robinette
Title: President & CEO
CONSENTED TO:
LESSOR
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
---------------------------
Name: George E. Thurner, Jr.
Title: President
Exhibit 10.53
ADAM WHOLESALERS, LYNCHBURG
This agreement of Lease made this 1ST DAY OF AUGUST by and between ADAM
WHOLESALERS, INC. (Hereinafter collectively called "Lessors") and ADAM
WHOLESALERS, LYNCHBURG (Hereinafter called "Lessee").
WITNESSETH:
1. Lessor hereby agrees to lease to Lessee, and Lessee hereby agrees to
lease from Lessor the real estate described in Exhibit A attached hereto
together with all improvements located thereon.
2. The term of Lease shall be ten (10) years commencing with the 1ST DAY OF
AUGUST, 1992 and ending with the 31ST DAY OF JULY, 2002.
3. Lessee shall pay to lessor as rent for the lease premises the sum of ONE
HUNDRED TWENTY THOUSAND DOLLARS ($120,000) a year, payable in advance on the
first day of every month during the term hereof in installments of TEN
THOUSAND DOLLARS ($10,000).
4. In addition to said rental as provided above:
a. The lessee covenants and agrees to pay promptly when due, all taxes
and assessments of every kind and nature levied, assessed or payable upon the
real estate and improvements thereon, which are the subject of this Lease,
together with all business taxes, assessments, levies, license fees, water
rents, sewer rents, excises, franchises, penalty and charges, of whatever nature
of kind which are now or may hereafter be levied, assessed, charged or imposed
or become payable during the term of this Lease by any government of political
body, corporation or unit, or which may become alien upon the property, or upon
the leasehold interest, or which are, or may hereafter be levied, assessed or
charged by reason of the use or occupancy of the premises under this lease.
b. Lessee covenants and agrees that during the term of this Lease it
will, at Lessee's own cost and expense, carry "all risk" insurance on the
demised premises in an amount not less than the full replacement value of all
structures erected on said premises, insuring said structures against loss,
destruction or damage by fire or other casualty. The proceeds of such insurance
shall be payable to Lessors. In addition, Lessee shall carry public liability
insurance indemnifying Lessors in an amount satisfactory to Lessors.
c. Lessee covenants that it will, during the term of this Lease, at its
own expense, keep and maintain the demised premises and all structures erected
thereon and all appurtenances thereto in good and substantial repair, both
exterior and interior and including any parking area or driveways, and that it
will indemnify and save harmless the Lessor from and against all liens, claims
or damages by reason of any repairs or improvements which may be made by the
Lessee on said premises, and Lessee further covenants to surrender the premises
at the end of the term in as good condition as they are at the date of the
commencement of the term or may be put thereafter, ordinary wear and tear
excepted.
<PAGE>
5. It is the intention and purpose of the parties thereto to create by
this instrument a Lease of the kind commonly known as "Carefree" to the Lessor.
Accordingly, the Lessee agrees to bear, pay for and discharge not only such
items as it has specifically agreed by the prior provisions of this Lease to
bear, pay and discharge, but also all other costs, charges and expenses of every
kind and nature whatsoever which must be borne, paid and discharged in order to
accomplish the purpose and objects of this Lease, namely:
a. That the Lessor shall receive from the Lessee, without diminution on
account of any matter or thing whatsoever except such as shall arise from breach
by the Lessor of any covenant or covenants of the Lessor contained herein, the
rentals agreed to be paid by the Lessee;
b. That the Lessor shall be subjected to no expense whatsoever on
account of any matter or thing connected with or arising from the leased
premises or this Lease during the term hereof, except matters connected with or
arising from the covenants of the Lessor contained herein; and
c. That the Lessor at the expiration of or sooner termination of this
Lease, shall receive possession of the leased premises and the improvements
thereon in accordance with the covenants of the Lessee contained herein and free
and clear of all claims, liens, charges and encumbrances expect those to which
the lease premises are now subject, or which may be placed thereon by the
Lessor, or which shall arise because of breach by the Lessor of any covenant or
covenants of the Lessor contained herein.
6. The terms and provisions of this Lease shall inure to and be binding
upon the respective successors and assigns of the Lessee and the Lessor. This
Lease contains the entire agreement of the parties, and no representations,
inducements, promises or agreements, oral or otherwise not embodied herein shall
be of any force or effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on the day
and year aforesaid.
SIGNED AND ACKNOWLEDGED LESSOR:
IN THE PRESENCE OF:
/s/ George E. Thurner Jr.
-------------------------------
George E. Thurner Jr., President
ADAM WHOLESALERS, INC.
/s/ Robin F. Hughes
--------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
LESSEE:
ADAM WHOLESALERS, LYNCHBURG
--------------------------------
/s/ George E. Thurner Jr.
--------------------------------
George E. Thurner, Jr. President
ADAM WHOLESALERS, INC.
/s/ Robin F. Hughes
--------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF AUGUST, 1992 before me, the
subscriber, a Notary Public in and for said County and State, personally came
George E. Thurner, Jr.; Robin F. Hughes as Lessors in the foregoing Lease, and
acknowledge the signing of said instrument to be their voluntary act and deed
for the uses and purposes herein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial seal
on the day and year last above written.
Catherine Knose-Keller
-------------------------
NOTARY PUBLIC
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF AUGUST, 1992, before me, the
subscriber, a Notary Public in and for said County and State, personally came
the above named Lessee, ADAM WHOLESALERS, LYNCHBURG by George E. Thurner, Jr.
its President and Robin F. Hughes its Vice President who acknowledged the
signing of the foregoing Lease to be the voluntary act and deed of said
corporation as such Lessee, and of themselves as the duly authorized officers
thereof, for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have here unto set my hand and affixed my
notarial seal on the day and year last above written.
Catherine Knose-Keller
------------------------------
NOTARY PUBLIC
<PAGE>
ASSIGNMENT AND ASSUMPTION AND MODIFICATION OF LEASE AGREEMENT
This Assignment and Assumption of Lease Agreement (the "Agreement") made
this 19th day of February, 1999 by and among Adam Wholesalers, Inc. (the
"Lessor") (which may be known in the future as MAE Holding Company), Adam
Wholesalers of Virginia, Inc. a/k/a Adam Wholesalers of Virginia, Inc. (the
"Assignor") and Morgan Products Ltd. (the "Assignee") (which may in the future
do business under the name of Adam Wholesalers, Inc.).
WHEREAS, Assignor is the Lessee under that certain lease dated August 1,
1992 (the "Lease") by and between the Lessor and Assignor for premises located
at 25 Millrace Drive, Lynchburg, Virginia and as more particularly described in
the Lease;
WHEREAS, the Lessor and Assignee have entered into that certain asset
purchase agreement (the "Purchase Agreement") dated as of December 22, 1998; and
WHEREAS, pursuant to the Purchase Agreement and this Agreement, Assignee
is assuming Assignor's interest as Lessee in the Lease; and
WHEREAS, Lessor, Assignor and Assignee desire to modify certain terms of
the Lease; and
WHEREAS, Assignor desires to assign its interest under the Lease to
Assignee, and Assignee desires to accept such assignment on the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereby amend and modify the terms of the
Lease as follows below; and
NOW, THEREFORE, in consideration of their mutual covenants hereafter set
forth and other good and valuable consideration paid by Assignee to Assignor,
the receipt of which is hereby acknowledged by Assignor, Assignor assigns,
grants, transfers and sets over all of its right, title, claim and interest in
and under the Lease to Assignee and its successors and assigns.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns,
from the date hereof, subject to the terms and conditions contained in the
Lease.
1. Assignor hereby assigns all of its right, title and interest in the Lease
to Assignee, and Assignee hereby assumes the performance and observance of all
the terms, covenants and conditions of the Lease to be performed or observed by
Assignor from and after the date hereof.
2. Paragraph 4 b. is deleted in its entirety and the following substituted
therefor:
<PAGE>
"Lessee covenants and agrees that during the term of this Lease
it will, at Lessee's own cost and expense, carry extended coverage "all risk"
insurance on the demised premises in an amount not less than the full
replacement value of all structures erected on said premises, insuring said
structures against loss, destruction or damage by fire or other casualty. Lessee
shall also carry comprehensive general liability insurance for bodily or
personal injury to, illness of, or death of persons and damage to property
occurring in on, or about the demised premises with limits which are
commercially reasonable. All of Lessee's insurance policies shall name Lessor as
an additional insured. If demised premises shall be damaged or destroyed by fire
or other casualty, then Lessee, at its sole cost and expense shall repair and
restore the same to such condition as approximately existed immediately prior to
such loss, damage or destruction. Lessee's repair and restoration shall be
subject to then applicable legal requirements.
If an event of casualty occurs within two (2) years of the expiration of the
term of this Lease, the Lessee may elect not to repair and restore the demised
premises and to cancel and terminate the Lease. Such election shall be made
within thirty (30) days from the date of casualty. In the event Lessee elects to
terminate the Lease, Lessee shall assign its insurance proceeds to the Lessor
provided that the insurance proceeds are sufficient to repair and restore the
demised premises.
3. Paragraph 4 c. of the Lease is hereby amended by adding the following
thereto:
"Lessor shall make necessary repairs and replacements to the roof
and to the structural portions of the foundation and exterior walls of the
demised, provided that the repairs are not made necessary by the act or omission
of Lessee, its employees, agents or invitees, nor by reason of Lessee's making
repairs, alterations and improvements to the Building. In addition, Lessor's
obligation shall be limited to all such costs in excess of $10,000.00 during any
calendar year. For example, if the roof is in need of repair or replacement and
the costs therefor is $30,000.00, Lessee shall be responsible for $10,000.00 of
the cost, and Lessor shall be responsible for $20,000.00 of the cost. After the
completion of any such repair, Lessee shall pay its share of such costs within
ten (10) days after receipt of invoice from Lessor."
4. Lessor, Assignor and Assignee further agree to the addition of the
following provisions to the Lease:
7. That at any time and from time to time, Lessee's interest
under this Lease may be assigned and re-assigned upon notice to the Lessor but
without requiring the Lessor's consent thereto provided that the Assignee
remains liable under the Lease.
8. In addition to any other covenants or obligations of Lessor
under this Lease, Lessor covenants and agrees as follows: That Assignee, upon
payment of the rent above reserved, and upon the due performance of the
covenants and agreements herein contained, shall and may at all times peaceably
and quietly have, hold and enjoy the demised premises for the remaining Term of
this Lease without any manner or hindrance or molestation from Lessor or anyone
claiming under Landlord.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day, month and year first above written.
ASSIGNOR:
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
----------------------------
Name: George E. Thurner, Jr.
Title: President
ASSIGNEE:
MORGAN PRODUCTS LTD.
By: /s/ Larry R. Robinette
-----------------------------
Name: Larry R. Robinette
Title: President & CEO
CONSENTED TO:
LESSOR
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
--------------------------------
Name: George E. Thurner, Jr.
Title: President
Exhibit 10.54
ADAM WHOLESALERS OF ST. LOUIS, INC.
This agreement of Lease made this 1ST DAY OF MAY 1994 by and between
ADAM WHOLESALERS INC. (hereinafter collectively called "Lessors") and ADAM
WHOLESALERS OF ST. LOUIS, INC. (hereinafter called "Lessee").
W I T N E S S E T H:
1. Lessor hereby agrees to lease to Lessee, and Lessee hereby agrees to lease
from Lessor the real estate described in Exhibit A attached hereto together
with all improvements located thereon.
2. The term of the Lease shall be five (5) years commencing with the 1ST DAY OF
MAY, 1994 and ending with the 30TH DAY OF APRIL, 2004.
3. Lessee shall pay to Lessor as rent for the lease premises the sum of THREE
HUNDRED THOUSAND DOLLARS ($300,000) a year, payable in advance on the first
day of every month during the term hereof in installments of TWENTY-FIVE
THOUSAND DOLLARS ($25,000).
4. In addition to said rental as provided above:
(a) The lessee covenants and agrees to pay promptly when due, all taxes and
assessments of every kind and nature levied, assessed or payable upon the real
estate and improvements thereon, which are the subject of this Lease, together
with all business taxes, assessments, levies, license fees, water rents, sewer
rents, excises, franchises, penalties and charges, of whatever nature of kind
which are now or may hereafter be levied, assessed, charged or imposed or become
payable during the term of this Lease by any government of political body,
corporation or unit, or which may become alien upon the property, or upon the
leasehold interest, or which are, or may hereafter be levied, assessed or
charged by reason of the use or occupancy of the premises under this lease.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on the day
and year aforesaid.
SIGNED AND ACKNOWLEDGED
IN THE PRESENCE OF: LESSOR:
/s/ George E. Thurner, Jr.
----------------------------------------
George E. Thurner, Jr, President
ADAM WHOLESALERS, INC.
/s/ George E. Thurner III
------------------------------------------
George E. Thurner III, Assistant Secretary
ADAM WHOLESALERS, INC.
LESSEE:
Adam Wholesalers of St. Louis, Inc.
------------------------------------------
By: /s/ George E. Thurner, Jr.
-----------------------------------
George E. Thurner, Jr. President
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, III
-----------------------------------
George E. Thurner, III, Assistant
Secretary
ADAM WHOLESALERS, INC.
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that, on this 1st day of May, 1994, before me, the
subscriber, a Notary Public in and for said county and State, personally came
George E. Thurner, Jr.; George E. Thurner III as Lessors in the foregoing Lease,
and acknowledge the signing of said instrument to be their voluntary act and
deed for the uses and purposes herein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
notarial seal on the day and year last above written.
Catherine Knose-Keller
-----------------------------
Notary Public
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that, on this 1ST DAY OF MAY, 1994, before me, the
subscriber, a Notary Public in and for said County and State, personally came
the above-named Lessee, ADAM WHOLESALERS OF ST. LOUIS, INC., by GEORGE E.
THURNER, JR its PRESIDENT and GEORGE E. THURNER III its ASSISTANT SECRETARY who
acknowledged the signing of the foregoing Lease to be the voluntary act and deed
of said corporation as such Lessee, and of themselves as the duly authorized
officers thereof, for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
notarial seal on the day and year last above written.
Catherine Knose-Keller
-----------------------------
Notary Public
<PAGE>
ASSIGNMENT AND ASSUMPTION AND MODIFICATION OF LEASE AGREEMENT
This Assignment and Assumption of Lease Agreement (the "Agreement") made
this 19th day of February, 1999 by and among Adam Wholesalers, Inc. (the
"Lessor") (which may be known in the future as MAE Holding Company), Adam
Wholesalers of St. Louis, Inc. (the "Assignor") and Morgan Products Ltd. (the
"Assignee") (which may in the future do business under the name of Adam
Wholesalers, Inc.).
WHEREAS, Assignor is the Lessee under that certain lease dated May 1,
1994 (the "Lease") by and between the Lessor and Assignor for premises located
at 13679 Rider Trail North, Earth City, Missouri and as more particularly
described in the Lease;
WHEREAS, the Lessor and Assignee have entered into that certain asset
purchase agreement (the "Purchase Agreement") dated as of December 22, 1998; and
WHEREAS, pursuant to the Purchase Agreement and this Agreement, Assignee
is assuming Assignor's interest as Lessee in the Lease; and
WHEREAS, Lessor, Assignor and Assignee desire to modify certain terms of
the Lease; and
WHEREAS, Assignor desires to assign its interest under the Lease to
Assignee, and Assignee desires to accept such assignment on the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereby amend and modify the terms of the
Lease as follows below; and
NOW, THEREFORE, in consideration of their mutual covenants hereafter set
forth and other good and valuable consideration paid by Assignee to Assignor,
the receipt of which is hereby acknowledged by Assignor, Assignor assigns,
grants, transfers and sets over all of its right, title, claim and interest in
and under the Lease to Assignee and its successors and assigns.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns,
from the date hereof, subject to the terms and conditions contained in the
Lease.
1. Assignor hereby assigns all of its right, title and interest in the Lease
to Assignee, and Assignee hereby assumes the performance and observance of all
the terms, covenants and conditions of the Lease to be performed or observed by
Assignor from and after the date hereof.
2. Paragraph 4 b. is deleted in its entirety and the following substituted
therefor:
<PAGE>
"Lessee covenants and agrees that during the term of this Lease
it will, at Lessee's own cost and expense, carry extended coverage "all risk"
insurance on the demised premises in an amount not less than the full
replacement value of all structures erected on said premises, insuring said
structures against loss, destruction or damage by fire or other casualty. Lessee
shall also carry comprehensive general liability insurance for bodily or
personal injury to, illness of, or death of persons and damage to property
occurring in on, or about the demised premises with limits which are
commercially reasonable. All of Lessee's insurance policies shall name Lessor as
an additional insured. If demised premises shall be damaged or destroyed by fire
or other casualty, then Lessee, at its sole cost and expense shall repair and
restore the same to such condition as approximately existed immediately prior to
such loss, damage or destruction. Lessee's repair and restoration shall be
subject to then applicable legal requirements.
If an event of casualty occurs within two (2) years of the expiration of the
term of this Lease, the Lessee may elect not to repair and restore the demised
premises and to cancel and terminate the Lease. Such election shall be made
within thirty (30) days from the date of casualty. In the event Lessee elects to
terminate the Lease, Lessee shall assign its insurance proceeds to the Lessor
provided that the insurance proceeds are sufficient to repair and restore the
demised premises.
3. Paragraph 4 c. of the Lease is hereby amended by adding the following
thereto:
"Lessor shall make necessary repairs and replacements to the roof
and to the structural portions of the foundation and exterior walls of the
demised, provided that the repairs are not made necessary by the act or omission
of Lessee, its employees, agents or invitees, nor by reason of Lessee's making
repairs, alterations and improvements to the Building. In addition, Lessor's
obligation shall be limited to all such costs in excess of $10,000.00 during any
calendar year. For example, if the roof is in need of repair or replacement and
the costs therefor is $30,000.00, Lessee shall be responsible for $10,000.00 of
the cost, and Lessor shall be responsible for $20,000.00 of the cost. After the
completion of any such repair, Lessee shall pay its share of such costs within
ten (10) days after receipt of invoice from Lessor."
4. Lessor, Assignor and Assignee further agree to the addition of the
following provisions to the Lease:
7. That at any time and from time to time, Lessee's interest
under this Lease may be assigned and re-assigned upon notice to the Lessor but
without requiring the Lessor's consent thereto provided that the Assignee
remains liable under the Lease.
8. In addition to any other covenants or obligations of Lessor
under this Lease, Lessor covenants and agrees as follows: That Assignee, upon
payment of the rent above reserved, and upon the due performance of the
covenants and agreements herein contained, shall and may at all times peaceably
and quietly have, hold and enjoy the demised premises for the remaining Term of
this Lease without any manner or hindrance or molestation from Lessor or anyone
claiming under Landlord.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day, month and year first above written.
ASSIGNOR:
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
-----------------------------
Name: George E. Thurner, Jr.
Title: President
ASSIGNEE:
MORGAN PRODUCTS LTD.
By: /s/ Larry R. Robinette
-----------------------------
Name: Larry R. Robinette
Title: President & CEO
CONSENTED TO:
LESSOR
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
------------------------------
Name: George E. Thurner, Jr.
Title: President
Exhibit 10.55
ADAM WHOLESALERS, PHOENIX
This agreement of Lease made this 1ST DAY OF JANUARY by and between ADAM
WHOLESALERS, INC. (Hereinafter collectively called "Lessors") and ADAM
WHOLESALERS, PHOENIX (Hereinafter called "Lessee").
WITNESSETH:
1. Lessor hereby agrees to lease to Lessee, and Lessee hereby agrees to lease
from Lessor the real estate described in Exhibit A attached hereto together
with all improvements located thereon.
2. The term of Lease shall be ten (10) years commencing with the 1ST DAY OF
JANUARY, 1993 and ending with the 31ST DAY OF DECEMBER, 2003.
3. Lessee shall pay to lessor as rent for the lease premises the sum of ONE
HUNDRED-FIVE THOUSAND SEVEN HUNDRED NINETY-TWO DOLLARS ($105,792) a year,
payable in advance on the first day of every month during the term hereof in
installments of EIGHT THOUSAND EIGHT HUNDRED SIXTEEN DOLLARS ($8,816).
4. In addition to said rental as provided above:
a. The lessee covenants and agrees to pay promptly when due, all taxes and
assessments of every kind and nature levied, assessed or payable upon the real
estate and improvements thereon, which are the subject of this Lease, together
with all business taxes, assessments, levies, license fees, water rents, sewer
rents, excises, franchises, penalty and charged, of whatever nature of kind
which are now or may hereafter be levied, assessed, charged or imposed or become
payable during the term of this Lease by any government of political body,
corporation or unit, or which may become alien upon the property, or upon the
leasehold interest, or which are, or may hereafter be levied, assessed or
charged by reason of the use or occupancy of the premises under this lease.
b. Lessee covenants and agrees that during the term of this Lease it will,
at Lessee's own cost and expense, carry "all risk" insurance on the demised
premises in an amount not less than the full replacement value of all structures
erected on said premises, insuring said structures against loss, destruction or
damage by fire or other casualty. The proceeds of such insurance shall be
payable to Lessors. In addition, Lessee shall carry public liability insurance
indemnifying Lessors in an amount satisfactory to Lessors.
c. Lessee covenants that it will, during the term of this Lease, at its
own expense, keep and maintain the demised premises and all structures erected
thereon and all appurtenances thereto in good and substantial repair, both
exterior and interior and including any parking area or driveways, and that it
will indemnify and save harmless the Lessor from and against all liens, claims
or damages by reason of any repairs or improvements which may be made by the
Lessee on said premises, and Lessee further covenants to surrender the premises
at the end of the term in as good condition as they are at the date of the
commencement of the term or may be put thereafter, ordinary wear and tear
excepted.
5. It is the intention and purpose of the parties thereto to create by this
instrument a Lease of the kind commonly known as "Carefree" to the Lessor.
Accordingly, the Lessee agrees to bear, pay for and discharge not only such
items as it has specifically agreed by the prior provisions of this Lease to
bear, pay and discharge, but also all other costs, charges and expenses of every
kind and nature whatsoever which must be borne, paid and discharged in order to
accomplish the purpose and objects of this Lease, namely:
a. That the Lessor shall receive from the Lessee, without diminution on
account of any matter or thing whatsoever except such as shall arise from breach
by the Lessor of any covenant or covenants of the Lessor contained herein, the
rentals agreed to be paid by the Lessee;
b. That the Lessor shall be subjected to no expense whatsoever on account
of any matter or thing connected with or arising from the leased premises or
this Lease during the term hereof, except matters connected with or arising from
the covenants of the Lessor contained herein; and
c. That the Lessor at the expiration of or sooner termination of this
Lease, shall receive possession of the leased premises and the improvements
thereon in accordance with the covenants of the Lessee contained herein and free
and clear of all claims, liens, charges and encumbrances expect those to which
the lease premises are now subject, or which may be placed thereon by the
Lessor, or which shall arise because of breach by the Lessor of any covenant or
covenants of the Lessor contained herein.
6. The terms and provisions of this Lease shall inure to and be binding upon
the respective successors and assigns of the Lessee and the Lessor. This Lease
contains the entire agreement of the parties, and no representations,
inducements, promises or agreements, oral or otherwise not embodied herein shall
be of any force or effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on the day
and year aforesaid.
SIGNED AND ACKNOWLEDGED LESSOR:
IN THE PRESENCE OF:
/s/ George E. Thurner Jr.
----------------------------------
George E. Thurner Jr., President
ADAM WHOLESALERS, INC.
/s/ Robin F. Hughes
----------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
LESSEE:
ADAM WHOLESALERS, PHOENIX
/s/ George E. Thurner Jr.
--------------------------------
George E. Thurner, Jr. President
ADAM WHOLESALERS, INC.
/s/ Robin F. Hughes
---------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF JANUARY, 1993 before me, the
subscriber, a Notary Public in and for said County and State, personally came
George E. Thurner, Jr.; Robin F. Hughes as Lessors in the foregoing Lease, and
acknowledge the signing of said instrument to be their voluntary act and deed
for the uses and purposes herein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial seal
on the day and year last above written.
Catherine Knose-Keller
-------------------------
NOTARY PUBLIC
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that on this 1ST DAY OF JANUARY, 1993, before me, the
subscriber, a Notary Public in and for said County and State, personally came
the above named Lessee, ADAM WHOLESALERS, PHOENIX by George E. Thurner, Jr. its
President and Robin F. Hughes its Vice President who acknowledged the signing of
the foregoing Lease to be the voluntary act and deed of said corporation as such
Lessee, and of themselves as the duly authorized officers thereof, for the uses
and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have here unto set my hand and affixed my notarial
seal on the day and year last above written.
Catherine Knose-Keller
-------------------------
NOTARY PUBLIC
<PAGE>
ASSIGNMENT AND ASSUMPTION AND MODIFICATION OF LEASE AGREEMENT
This Assignment and Assumption of Lease Agreement (the "Agreement") made
this 19th day of February, 1999 by and among Adam Wholesalers, Inc. (the
"Lessor") (which may be known in the future as MAE Holding Company), Adam
Wholesalers of Phoenix, Inc. a/k/a Adam Wholesalers, Phoenix (the "Assignor")
and Morgan Products Ltd. (the "Assignee") (which may in the future do business
under the name of Adam Wholesalers, Inc.).
WHEREAS, Assignor is the Lessee under that certain lease dated January 1,
1993 (the "Lease") by and between the Lessor and Assignor for premises located
at 302 E. Watkins, Phoenix, Arizona and as more particularly described in the
Lease;
WHEREAS, the Lessor and Assignee have entered into that certain asset
purchase agreement (the "Purchase Agreement") dated as of December 22, 1998; and
WHEREAS, pursuant to the Purchase Agreement and this Agreement, Assignee
is assuming Assignor's interest as Lessee in the Lease; and
WHEREAS, Lessor, Assignor and Assignee desire to modify certain terms
of the Lease; and
WHEREAS, Assignor desires to assign its interest under the Lease to
Assignee, and Assignee desires to accept such assignment on the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereby amend and modify the terms of the
Lease as follows below; and
NOW, THEREFORE, in consideration of their mutual covenants hereafter set
forth and other good and valuable consideration paid by Assignee to Assignor,
the receipt of which is hereby acknowledged by Assignor, Assignor assigns,
grants, transfers and sets over all of its right, title, claim and interest in
and under the Lease to Assignee and its successors and assigns.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns,
from the date hereof, subject to the terms and conditions contained in the
Lease.
1. Assignor hereby assigns all of its right, title and interest in the Lease
to Assignee, and Assignee hereby assumes the performance and observance of all
the terms, covenants and conditions of the Lease to be performed or observed by
Assignor from and after the date hereof.
2. Paragraph 4 b. is deleted in its entirety and the following substituted
therefor:
"Lessee covenants and agrees that during the term of this Lease it
will, at Lessee's own cost and expense, carry extended coverage "all risk"
insurance on the demised premises in an amount not less than the full
replacement value of all structures erected on said premises, insuring said
structures against loss, destruction or damage by fire or other casualty. Lessee
shall also carry comprehensive general liability insurance for bodily or
personal injury to, illness of, or death of persons and damage to property
occurring in on, or about the demised premises with limits which are
commercially reasonable. All of Lessee's insurance policies shall name Lessor as
an additional insured. If demised premises shall be damaged or destroyed by fire
or other casualty, then Lessee, at its sole cost and expense shall repair and
restore the same to such condition as approximately existed immediately prior to
such loss, damage or destruction. Lessee's repair and restoration shall be
subject to then applicable legal requirements.
If an event of casualty occurs within two (2) years of the expiration of the
term of this Lease, the Lessee may elect not to repair and restore the demised
premises and to cancel and terminate the Lease. Such election shall be made
within thirty (30) days from the date of casualty. In the event Lessee elects to
terminate the Lease, Lessee shall assign its insurance proceeds to the Lessor
provided that the insurance proceeds are sufficient to repair and restore the
demised premises.
3. Paragraph 4 c. of the Lease is hereby amended by adding the following
thereto:
"Lessor shall make necessary repairs and replacements to the roof
and to the structural portions of the foundation and exterior walls of the
demised, provided that the repairs are not made necessary by the act or omission
of Lessee, its employees, agents or invitees, nor by reason of Lessee's making
repairs, alterations and improvements to the Building. In addition, Lessor's
obligation shall be limited to all such costs in excess of $10,000.00 during any
calendar year. For example, if the roof is in need of repair or replacement and
the costs therefor is $30,000.00, Lessee shall be responsible for $10,000.00 of
the cost, and Lessor shall be responsible for $20,000.00 of the cost. After the
completion of any such repair, Lessee shall pay its share of such costs within
ten (10) days after receipt of invoice from Lessor."
4. Lessor, Assignor and Assignee further agree to the addition of the
following provisions to the Lease:
7. That at any time and from time to time, Lessee's interest under
this Lease may be assigned and re-assigned upon notice to the Lessor but without
requiring the Lessor's consent thereto provided that the Assignee remains liable
under the Lease.
8. In addition to any other covenants or obligations of Lessor under
this Lease, Lessor covenants and agrees as follows: That Assignee, upon payment
of the rent above reserved, and upon the due performance of the covenants and
agreements herein contained, shall and may at all times peaceably and quietly
have, hold and enjoy the demised premises for the remaining Term of this Lease
without any manner or hindrance or molestation from Lessor or anyone claiming
under Landlord.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day, month and year first above written.
ASSIGNOR:
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
-----------------------------
Name: George E. Thurner, Jr.
Title: President
ASSIGNEE:
MORGAN PRODUCTS LTD.
By: /s/ Larry R. Robinette
--------------------------
Name: Larry R. Robinette
Title: President & CEO
CONSENTED TO:
LESSOR
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
------------------------------
Name: George E. Thurner, Jr.
Title: President
Exhibit 10.56
ADAM WHOLESALERS OF NITRO, INC.
This agreement of Lease made this 1st day of JANUARY by and between
GEORGE E. THURNER, JR., HELEN HATFIELD, WILLIAM A. THURNER (hereinafter
collectively called "Lessors") and ADAM WHOLESALERS OF NITRO, INC. AN OHIO
CORPORATION (Hereinafter called "Lessee").
W I T N E S S E T H:
1. Lessor hereby agrees to lease to Lessee, and Lessee hereby agrees to
lease from Lessor the real estate described in Exhibit A attached hereto
together with all improvements located thereon.
2. The term of the Lease shall be five (5) years commencing with the 1st day
of JANUARY, 1995 and ending with the 31st day of DECEMBER, 1999.
3. Lessee shall pay to Lessor as rent for the lease premises the sum of
sixty four thousand, nine hundred and ninety two ($64,992) a year, payable in
advance on the first day of every month during the term hereof in installments
of FIVE THOUSAND, FOUR HUNDRED SIXTEEN DOLLARS ($5,416).
4. In addition to said rental as provided above:
(a) The lessee covenants and agrees to pay promptly when due, all taxes and
assessments of every kind and nature levied, assessed or payable upon the real
estate and improvements thereon, which are the subject of this Lease, together
with all business taxes, assessments, levies, license fees, water rents, sewer
rents, excises, franchises, penalties and charges, of whatever nature of kind
which are now or may hereafter be levied, assessed, charged or imposed or become
payable during the term of this Lease by any government of political body,
corporation or unit, or which may become alien upon the property, or upon the
leasehold interest, or which are, or may hereafter be levied, assessed or
charged by reason of the use or occupancy of the premises under this lease.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on the day
and year aforesaid.
SIGNED AND ACKNOWLEDGED
IN THE PRESENCE OF: LESSOR:
/s/ George E. Thurner, Jr.
---------------------------------
George E. Thurner, Jr,
THURNER - HATFIELD - THURNER
/s/ William A. Thurner
---------------------------------
William A. Thurner
THURNER - HATFIELD - THURNER
LESSEE:
Adam Wholesalers of Nitro, Inc.
----------------------------------
By: /s/ George E. Thurner, Jr.
------------------------------
George E. Thurner, Jr.
President
ADAM WHOLESALERS, INC.
By: /s/ Robin F. Hughes
-------------------------------
Robin F. Hughes, Vice President
ADAM WHOLESALERS, INC.
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that, on this 1ST DAY OF JANUARY, 1995, before me, the
subscriber, a Notary Public in and for said county and State, personally came
George E. Thurner, Jr.; Helen Hatfield; William A. Thurner as Lessors in the
foregoing Lease, and acknowledge the signing of said instrument to be their
voluntary act and deed for the uses and purposes herein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial
seal on the day and year last above written.
Catherine Knose-Keller
-----------------------------
Notary Public
<PAGE>
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
BE IT REMEMBERED, that, on this 1st day of JANUARY, 1995, before me, the
subscriber, a Notary Public in and for said County and State, personally came
the above-named Lessee, Adam Wholesalers of NITRO, Inc., by George E. Thurner,
Jr its President and Robin F. Hughes its Vice President who acknowledged the
signing of the foregoing Lease to be the voluntary act and deed of said
corporation as such Lessee, and of themselves as the duly authorized officers
thereof, for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial
seal on the day and year last above written.
Catherine Knose-Keller
---------------------------
Notary Public
<PAGE>
Adam Wholesalers of Nitro, Inc.
Lease Exhibit A
WITNESSETH: That, in consideration of the rents, covenants and conditions
hereinafter set forth on the part of Lessee to be paid, performed and observed,
Lessor does hereby LET, LEASE and DEMISE unto Lessee all of that certain parcel
of land, together with the improvements thereon and the appurtenances thereunto
belonging, situate in Pocatalico District, Putnam County, West Virginia, being a
part of Plot 11 of Area "M" of the Nitro Reservation as shown on a map
designated as "Map of U.S. explosives Plant C, Showing Plots #1 to #25 Remaining
Unsold" prepared by C.R. Connor, C.E., dated September 11, 1929, recorded in the
office of the Clerk of the County Court of Putnam County, West Virginia, in Map
Book 2, at pages 30 to 37 inclusive, which tract is more particularly bounded
and described as follows:
Beginning at an old concrete monument located in the northwesterly
right of way line of a 40 foot roadway known as McJunkin Road, which
monument marks the easterly common corner of the parcel herein conveyed
with a 1.67 acre tract of land owned by F.M.C., Inc; thence running N.
68(0) 02' W. 525.00 feet to an iron pin; thence running N. 21(0) 48' E.
398.50 feet to an iron pin; thence running S. 68(0) 12' E. 525.00 feet to
an iron pin located in the northwesterly right of way line of McJunkin
Road; thence running with McJunkin Road, S. 21(0) 48' W. 400.00 feet to
the place of beginning, containing 4.812 acres, as laid out and shown on a
map entitled "Map Showing Part of 92,865 Acre Trace Located in Pocatalico
District, Putnam County, W. Va.", recorded in the office of the Clerk of
the County Court of Putnam County, West Virginia.
<PAGE>
ASSIGNMENT AND ASSUMPTION AND MODIFICATION OF LEASE AGREEMENT
This Assignment and Assumption of Lease Agreement (the "Agreement")
made this 19th day of February, 1999 by and among George E. Thurner, Jr.,
Helen Hatfield and William A. Thurner (the "Lessor"), Adam Wholesalers of
Nitro, Inc. (the "Assignor") and Morgan Products Ltd. (the "Assignee")
(which may in the future do business under the name of Adam Wholesalers,
Inc.).
WHEREAS, Assignor is the Lessee under that certain lease dated January 1,
1995 (the "Lease") by and between the Lessor and Assignor for premises located
at McJunkin Road, Nitro, West Virginia and as more particularly described in the
Lease;
WHEREAS, the Lessor and Assignee have entered into that certain asset
purchase agreement (the "Purchase Agreement") dated as of December 22, 1998; and
WHEREAS, pursuant to the Purchase Agreement and this Agreement, Assignee
is assuming Assignor's interest as Lessee in the Lease; and
WHEREAS, Lessor, Assignor and Assignee desire to modify certain terms
of the Lease; and
WHEREAS, Assignor desires to assign its interest under the Lease to
Assignee, and Assignee desires to accept such assignment on the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereby amend and modify the terms of the
Lease as follows below; and
NOW, THEREFORE, in consideration of their mutual covenants hereafter set
forth and other good and valuable consideration paid by Assignee to Assignor,
the receipt of which is hereby acknowledged by Assignor, Assignor assigns,
grants, transfers and sets over all of its right, title, claim and interest in
and under the Lease to Assignee and its successors and assigns.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns,
from the date hereof, subject to the terms and conditions contained in the
Lease.
1. Assignor hereby assigns all of its right, title and interest in the Lease
to Assignee, and Assignee hereby assumes the performance and observance of all
the terms, covenants and conditions of the Lease to be performed or observed by
Assignor from and after the date hereof.
2. Paragraph 4 b. is deleted in its entirety and the following substituted
therefor:
<PAGE>
"Lessee covenants and agrees that during the term of this Lease it
will, at Lessee's own cost and expense, carry extended coverage "all risk"
insurance on the demised premises in an amount not less than the full
replacement value of all structures erected on said premises, insuring said
structures against loss, destruction or damage by fire or other casualty. Lessee
shall also carry comprehensive general liability insurance for bodily or
personal injury to, illness of, or death of persons and damage to property
occurring in on, or about the demised premises with limits which are
commercially reasonable. All of Lessee's insurance policies shall name Lessor as
an additional insured. If demised premises shall be damaged or destroyed by fire
or other casualty, then Lessee, at its sole cost and expense shall repair and
restore the same to such condition as approximately existed immediately prior to
such loss, damage or destruction. Lessee's repair and restoration shall be
subject to then applicable legal requirements.
If an event of casualty occurs within two (2) years of the expiration of the
term of this Lease, the Lessee may elect not to repair and restore the demised
premises and to cancel and terminate the Lease. Such election shall be made
within thirty (30) days from the date of casualty. In the event Lessee elects to
terminate the Lease, Lessee shall assign its insurance proceeds to the Lessor
provided that the insurance proceeds are sufficient to repair and restore the
demised premises.
3. Paragraph 4 c. of the Lease is hereby amended by adding the following
thereto:
"Lessor shall make necessary repairs and replacements to the roof
and to the structural portions of the foundation and exterior walls of the
demised, provided that the repairs are not made necessary by the act or omission
of Lessee, its employees, agents or invitees, nor by reason of Lessee's making
repairs, alterations and improvements to the Building. In addition, Lessor's
obligation shall be limited to all such costs in excess of $10,000.00 during any
calendar year. For example, if the roof is in need of repair or replacement and
the costs therefor is $30,000.00, Lessee shall be responsible for $10,000.00 of
the cost, and Lessor shall be responsible for $20,000.00 of the cost. After the
completion of any such repair, Lessee shall pay its share of such costs within
ten (10) days after receipt of invoice from Lessor."
4. Lessor, Assignor and Assignee further agree to the addition of the
following provisions to the Lease:
7. That at any time and from time to time, Lessee's interest under
this Lease may be assigned and re-assigned upon notice to the Lessor but without
requiring the Lessor's consent thereto provided that the Assignee remains liable
under the Lease.
8. In addition to any other covenants or obligations of Lessor under
this Lease, Lessor covenants and agrees as follows: That Assignee, upon payment
of the rent above reserved, and upon the due performance of the covenants and
agreements herein contained, shall and may at all times peaceably and quietly
have, hold and enjoy the demised premises for the remaining Term of this Lease
without any manner or hindrance or molestation from Lessor or anyone claiming
under Landlord.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day, month and year first above written.
ASSIGNOR:
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
----------------------------
Name: George E. Thurner, Jr.
Title: President
ASSIGNEE:
MORGAN PRODUCTS LTD.
By: /s/ Larry R. Robinette
----------------------------
Name: Larry R. Robinette
Title: President & CEO
CONSENTED TO:
LESSOR
ADAM WHOLESALERS, INC.
By: /s/ George E. Thurner, Jr.
----------------------------
Name: George E. Thurner, Jr.
Title: President
Exhibit 10.57
PINE ACRES INVESTMENTS, INC.
and
ADAM WHOLESALERS, Lessee
OF CARLISLE, INC.
<PAGE>
TABLE OF CONTENTS
Articles
1 DEMISE AND TERM.............................................Page 4
2 RENTAL......................................................Page 4
3 UTILITIES...................................................Page 5
4 REPAIRS, SURRENDER OF PREMISES, ALTERATIONS.................Page 5
5 FIRE AND CASUALTY...........................................Page 6
6 INSURANCE...................................................Page 6
7 INDEMNITY AND RIGHT OF ENTRY................................Page 8
8 PROVISION FOR NOTICE........................................Page 8
9 TITLE AND CONDITION.........................................Page 9
10 ASSIGNMENT OR SALE..........................................Page 9
11 QUIET ENJOYMENT.............................................Page 9
12 DEFAULT.....................................................Page 9
13 WAIVER......................................................Page 11
14 MORTGAGES...................................................Page 11
15 CONDEMNATION................................................Page 12
16 CAREFREE LEASE..............................................Page 12
17 LIENS.......................................................Page 13
18 COMPLIANCE WITH LAWS, INSURANCE POLICIES, ETC. .............Page 13
19 ARTICLE HEADINGS............................................Page 14
20 MEMORANDUM OF LEASE.........................................Page 14
21 ESTOPPEL CERTIFICATE........................................Page 14
22 SECURITY DEPOSIT............................................Page 14
23 OPTION TO RENEW.............................................Page 14
24 GUARANTEE OF ADAM WHOLESALERS...............................Page 15
25 MISCELLANEOUS...............................................Page 15
<PAGE>
This Indenture of Lease, executed in duplicate this date of August 1,
1991, by and between Pine Acres Investments, Inc. (hereinafter referred to as
"Lessor"), and Adam Wholesalers, Inc., a Ohio corporation (hereinafter referred
to as "Lessee").
W I T N E S S E T H:
ARTICLE 1
DEMISE AND TERM
Lessor, for an in consideration of the rents herein reserved and the
covenants and agreements herein contained and expressed on the part of Lessee to
be kept, performed and fulfilled, hereby demises and lets unto Lessee, and
Lessee hereby leases from Lessor the real estate located in the Borough of
Carlisle, Cumberland County, Pennsylvania, more fully described in Exhibit A,
attached hereto (hereinafter sometimes referred to as the "demised premises").
TO HAVE AND TO HOLD the demised premises, together with all privileges,
rights and easements thereunto appertaining and belonging, unto the Lessee, for
and during the term of fifteen (15) years commencing upon August 1, 1991, and
ending July 31, 2006.
ARTICLE 2
RENTAL
(a) Lessee shall pay Lessor as Base Rent for the demised premises
without prior notice or demand monthly rental of Fifty Three Thousand Dollars
($53,000.00) per month in advance, on the 1st day of each and every month during
said term.
(b) the Lessee covenants and agrees to pay promptly when due all
taxes and assessments levied, assessed or due or payable upon the real estate
and improvements thereon which are the subject of this lease, together with all
business taxes, assessments, levies, license fees, water rents, sewer rents,
excises, franchises, penalties and charges, of whatever nature or kind which are
now or may hereafter be levied, assessed, charged or imposed or become payable
or due during the term of this lease by any governmental or political body,
corporation or unit or which may become a lien upon the property or upon the
leasehold interest or which are or may hereafter be levied, assessed or charged
by reason of the use or occupancy of the demised premises under this Lease.
Lessee agrees to furnish to Lessor within ten (10) days after written demand
therefor, proof of the payment of all such taxes, levees, assessments, fees,
rents and charges. Provided, however, that the Lessee upon written notice to the
Lessor, may elect to contest (after having first paid in full) the validity of
or defend against in its own name or in the name of the Lessor any tax,
assessment, levy, license fee, water, rent, sewer rent, excise, franchise,
penalty or charge which by the terms of this lease the Lessee is bound to pay or
discharge. Provided, further, that the Lessor may, at its option, pay or
discharge any tax, debt, liability or lien which by the terms of this lease is
to be paid or discharged by the Lessee in the event of failure of the Lessee to
pay or discharge the same when the same becomes due or payable, and any payments
made by the Lessor hereunder shall constitute a lien against the estate or
interest of the Lessee under this lease and shall be recoverable by the Lessor
from the Lessee with interest at the maximum legal rate of interest from the
date of payment as though such sum constituted additional rental under the terms
of this Lease.
<PAGE>
(c) Lessee also covenants to pay, from time to time as provided in
this lease or on demand from Lessor, as additional rent, all other amounts,
liabilities and obligations which Lessee herein assumes or agrees to pay, and
interest at the maximum legal rate on such of the foregoing amounts, liabilities
and obligations which Lessee herein assumes or agrees to pay, and interest at
the maximum legal rate on such of the foregoing amounts, liabilities and
obligation as are not paid within five (5) days of the date when due or of such
demand, as the case may be, until payment thereof. In the event of any failure
on the part of Lessee to pay any additional rent (and the expiration of the
applicable grace period herein), Lessor shall have all the rights, powers and
remedies provided for in this Lease or at law or in equity or otherwise in the
case of nonpayment of base rent.
ARTICLE 3
UTILITIES
Lessee shall pay or cause to be paid all charges, costs and/or taxes for
water, gas, heat, electricity, light, telephone service, waste disposal or any
other similar communication or utility services of any kind or nature used in or
rendered to the demised premises or any part thereof.
ARTICLE 4
REPAIRS, SURRENDER OF PREMISES, ALTERATIONS
(a) Except as provided in paragraph (b), Lessor shall maintain the
structure of the demised premises.
(b) Lessee covenants and agrees that it will, during the term of
this lease, at its own expense, keep and maintain the demised premises including
but not limited to the roof, interior and exterior of any buildings and parking
lots and all building systems including, but not limited to mechanical,
electrical, plumbing, heating, ventilating and air conditioning in good and
substantial condition and repair, and in clean and sanitary condition and that
it will indemnify and save harmless Lessor from and against all liens, claims or
damages by reason of any repairs or improvements which may be made by Lessee
thereon.
Lessee will, at the termination of this lease, in whatever manner such
termination may be brought about, promptly and peaceably surrender and deliver
the demised premises and appurtenances to Lessor in as good and clean condition
as they may be put hereafter, damage from ordinary wear and tear and acts of
God, fire, the elements or other casualty excepted, and remove all goods and
effects not belonging to Lessor.
Lessee will make any changes to the demised premises required by any law,
ordinance, judgment, decree or any official action by any governmental or
quasi-governmental agency or authority under any police, health, safety,
environmental, fire or other regulation.
<PAGE>
Lessee covenants and agrees that it will neither do nor permit to be done
any act or thing on the demised premises or elsewhere, which will invalidate any
insurance on the demised premises or increase the premiums for insurance
thereon.
Lessee may, at its own cost and expense, from time to time during the term
of this lease, make such alterations, addition, and changes, structural and
otherwise, in and to the demised premises as it finds necessary or covenant for
its purposes; provided, however, (1) that Lessee shall indemnify and save
harmless Lessor from all expenses, liens, claims or damages to any person or
property arising out of or resulting from the undertaking or making of such
alterations, additions and/or changes, (2) that such alterations, additions
and/or changes shall increase the value of the demised premises, and in not
manner adversely affect Lessor's adjacent property or the use thereof, such
adverse affect to be determined in Lessor's sole opinion, and (3) that written
consent shall be first obtained from the Lessor before undertaking the same,
which consent shall not be unreasonably withheld. Such consent may at the option
of Lessor, be either on the basis that Lessee shall restore the demised premises
to substantially their original condition at the termination of this lease or
that no restoration will be required. All trade fixtures, trade apparatus, trade
machinery and trade equipment placed on the demised premises at the expense of
Lessee shall remain the property of Lessee an may be removed by Lessee at any
time prior to and upon termination of this lease. Copies of all plans and
specifications, including as-built plans, shall be provided to Lessor by Lessee.
ARTICLE 5
FIRE AND CASUALTY
In the event the demised premises be so damaged by fire or other casualty
as to be partially or wholly unfit for occupancy, this lease shall not be
affected and rent shall not abate and Lessee with due diligence shall enter,
repair and restore the demised premises, and this lease shall remain in full
force and effect. In no even shall the rent be abated.
ARTICLE 6
INSURANCE
(a) Lessee shall at all time maintain at its expense the following
insurance in respect of the demised premises:
(1) All risk fire and extended coverage insurance, in amounts
sufficient to prevent Lessor, Lessee or Lessor's mortgagee from becoming a
co-insurer of any loss under the applicable policies but in any event in
amounts not less than one hundred percent (100%) of the full insurable
value of the demised premises. The term "full insurable value", as used
herein, means full actual above-ground replacement cost of the buildings
and improvements.
<PAGE>
(2) General public liability insurance against claims for bodily
injury, death or property damage occurring on, in or about the demised
premises and the adjoining streets, sidewalks and passageways, with limits
of not less than Five Million Dollars ($5,000,000.00) with respect to
bodily injury or death to any one person, not less than Five Million
Dollars ($5,000,000.00) with respect to any one accident, and not less
than One Million Dollars ($1,000,000.00) with respect to property damage.
(3) Workers' compensation insurance or comparable insurance under
applicable laws covering all persons employed in connection with any work
done on or about the premises for which claims for death or bodily injury
could be asserted against Lessor, Lessee or the premises.
(4) Such other insurance upon or in respect of the demised premises
or the operation thereof in such amounts and against such other insurance
hazards as Lessor may from time to time reasonably require. Further, the
policy limits set forth above are subject to increase by Lessor at any
time, from time to time, if Lessor in the exercise of reasonable judgment
deems the same necessary for adequate protection.
All such insurance shall be written by companies acceptable to Lessor, and
all such insurance shall name as the insured parties Lessor, Lessee and/or
Lessor's mortgagee (as their respective interests may appear).
(b) Insurance claims by reason of damage to or destruction of any
portion of the demised premises shall be payable to Lessor and/or Lessor's
mortgagee, or an insurance trustee, if so required by Lessor and/or Lessor's
mortgagee, to assure that Lessee completes the work required under Article 5
hereof.
(c) Every policy required by this Lease shall contain an agreement
by the insurer that it will not cancel or modify such policy except after thirty
(30) days' prior written notice to Lessor and/or Lessor's mortgagee and that any
loss otherwise payable thereunder shall be payable notwithstanding any act or
negligence of the insured, and notwithstanding: (1) the occupation or use of the
demised premises for purposes more hazardous than permitted by the terms of such
policy, (2) any foreclosure or other action or proceeding taken by any mortgagee
or notice of sale relating to the premises, or (3) any change in title to or
ownership of the demised premises.
(d) Lessee shall deliver to Lessor simultaneously with the execution
and delivery of this lease, certificates of the insurers satisfactory to Lessor
and Lessor's mortgagee, evidencing all the insurance which is required to be
maintained by Lessee hereunder and Lessee shall maintain such insurance
continuously throughout the term hereof. Lessee shall, as soon as practicable,
but in all events within thirty (30) days of the renewal date of any such
insurance, deliver additional certificates of the insurers satisfactory to
Lessor, evidencing the renewal of such insurance. Should Lessee fail to effect,
maintain or renew any insurance provided for in this section or to pay the
premium therefor, or to deliver to Lessor any of such certificates as required
herein, then and in any of said events Lessor, at its option, but without
obligation so to do, may procure such insurance, and any sums expended by it to
procure such insurance shall be additional rent hereunder and shall be repaid by
Lessee within fifteen (15) business days following the date on which such
expenditure shall be made by Lessor.
<PAGE>
(e) Lessee agrees to carry adequate fire and extended coverage on
all improvements and inventory and other property installed or placed on the
demised premises by Lessee.
ARTICLE 7
INDEMNITY AND RIGHT OF ENTRY
Lessee will indemnify and hold harmless Lessor from all claims, demands
and damages for injuries to persons or property arising from or in any manner
connected with the occupancy or use of the demised premises by Lessee and from
any and all other claims, demands, liens, damages, fines or penalties of
whatever name, nature, or kind, in any way or manner chargeable to, or payable
for, or in respect of the use or occupancy of the demised premises by Lessee, or
from any act or omission of Lessee, its servants, its agents, representatives,
tenants, guests, invitees, licensees or any other person, firm or corporation
in, about or adjacent to the demised premises. Lessee will pay all costs,
expenses and attorney's fees incurred by or imposed on Lessor in prosecution or
defense of any suit, action or proceeding predicated upon an alleged breach of
undertaking by Lessee under the terms of this Lease or for or on account of
which Lessee has covenanted to indemnify Lessor under the terms of this lease or
would be bound by law to so indemnify Lessor.
The Lessee covenants and agrees that the Lessor, or the Lessor's agents or
representatives, shall have the right, during normal business hours to enter
upon the demised premises for the purpose of examining the same and to observe
the compliance or noncompliance by the Lessee with the terms of this lease, and
for the purpose of exhibiting the same to prospective lessees during the last
six (6) months of this lease.
ARTICLE 8
PROVISION FOR NOTICE
All notices which may be proper or necessary for the parties to serve upon
each other shall be served by registered or certified mail, postage prepaid or
by overnight delivery service as follows:
To Lessor: Mr. William Thurner
Pine Acres Investments, Inc.
2350 Victory Parkway
Cincinnati, Ohio 45206
To Lessee: Mr. George Thurner, Jr.
Adam Wholesalers, Inc.
3005 East Kemper Road
Cincinnati, Ohio 45241
or such other address as either party may direct in writing from time to time.
Service of any such notice or demand shall be deemed completed twenty-four hours
after deposit thereof in the U.S. mail, or the day after delivery to the
overnight delivery service.
<PAGE>
ARTICLE 9
TITLE AND CONDITION
The demised premises are leased subject to: (1) the rights of any parties
in possession thereof, (2) the existing state of the title thereof as of the
commencement of the term of this lease, (3) any state of facts which an accurate
survey or physical inspection thereof might show, and (4) all zoning regulations
and other laws and regulations now in effect or hereafter adopted by any
governmental authority having jurisdiction. THE LAND, BUILDINGS, STRUCTURES AND
OTHER IMPROVEMENTS COMPRISING A PART OF THE DEMISED PREMISES ARE LEASED SUBJECT
TO THEIR CONDITION AS OF THE COMMENCEMENT OF THE TERM OF THIS LEASE AND WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND BY LESSOR.
ARTICLE 10
ASSIGNMENT OR SALE
(a) Lessee may assign this lease or sublet the demised premises or
any portion thereof to any subsidiary of Adam Wholesalers, Inc. without first
obtaining the prior written consent of Lessor. Any other lease or sublet shall
require the written consent of Lessor which shall not be unreasonably withheld.
(b) Lessor may assign this lease or any partial interest herein and
may also sell, convey and mortgage the demised premises subject to the term of
this lease.
ARTICLE 11
QUIET ENJOYMENT
Lessor covenants and agrees that, subject to any mortgages now of record
or hereafter placed of record it is the owner of the demised premises and the
Lessee, if the covenants of this lease to be paid and performed by the Lessee
are paid and performed, shall have peaceable possession and quiet enjoyment of
the demised premises throughout the term of this lease without any hindrance or
molestation of Lessor, or any person claiming lawfully under Lessor.
ARTICLE 12
DEFAULT
(a) The occurrence of any one or more of the following events shall
be a default and breach of this lease by Lessee:
(1) Lessee shall fail to pay any monthly installment of rent
within five (5) days after the same shall be due and payable.
<PAGE>
(2) Lessee shall fail to perform or observe any term,
condition, covenant or obligation, other than the payment of rent,
required to be performed or observed by it under this Lease for a period
of thirty (30) days after notice thereof from Lessor; provided, however,
that if the term, condition, covenant or obligation to be performed by
Lessor is of such nature that the same cannot reasonably be performed
within such thirty (30) day period, such default shall be deemed to have
been cured if day period, such default shall be deemed to have been cured
if Lessee commences such performance within said thirty (30) day period
and thereafter diligently undertakes to complete the same.
(3) A trustee or receiver shall be appointed to take possession
of substantially all of Lessee's assets in, on or about the demised
premises or of Lessee's interest in this Lease (and Lessee does not regain
possession within sixty (60) days after such appointment); Lessee makes an
assignment for the benefit of creditors; or substantially all of Lessee's
assets in, on or about the demised premises or Lessee's interest in this
Lease are attached or levied upon under execution (and Lessee does not
discharge the same within sixty (60) days thereafter).
(4) A petition in bankruptcy, insolvency, or for reorganization
or arrangement is filed by or against Lessee pursuant to any federal or
state statute (and, with respect to any such petition filed against it,
Lessee fails to secure a stay or discharge thereof within sixty (60) days
after the filing of the same).
(b) Upon the occurrence of any event of default as set forth above,
Lessor shall have the following rights and remedies, in addition to those
allowed by law or equity, any one or more of which may be exercised without
further notice to or demand upon Lessee:
(1) Lessor may re-enter the demised premises and cure any
default of Lessee, in which event Lessee shall reimburse Lessor as
additional rent for any cost and expenses which Lessor may incur to cure
such default.
(2) Lessor may terminate this Lease as of the date of such
default, in which event: (1) neither Lessee nor any person claiming under
or through Lessee shall thereafter be entitled to possession of the
premises, and Lessee shall immediately thereafter surrender the premises
to Lessor; (2) Lessor may re-enter the premises and dispossess Lessee or
any other occupants of the premises by force, summary proceedings,
ejectment or otherwise, and may remove their effects, without prejudice to
any other remedy which Lessor may have for possession or arrearages in
rent; and (3) notwithstanding the termination of this Lease, (a) Lessor
may declare all rent which would have been due under this Lease for the
balance of the term to be immediately due and payable, whereupon Lessee
shall be obligated to pay the same to Lessor, together with all loss or
damage which Lessor may sustain by reason of such termination and
re-entry, or (b) Lessor may re-let all or any part of the demised premises
for a term different from that which would otherwise have constituted the
balance of the term of this Lease and for rent and on terms and conditions
different from those contained herein, whereupon Lessee shall be obligated
to pay to Lessor as liquidated damages the difference between the rent
provided for herein and that provided for in any lease covering a
subsequent re-letting of the premises, for a period which would otherwise
have constituted the balance of the term of this Lease, together with all
of Lessor's costs and expenses for preparing the premises for re-letting,
including all repairs, tenant finish improvements, broker's and attorneys'
fees, and all loss or damage which Lessor may sustain by reason of such
termination, re-entry and re-letting, it being expressly understood and
agreed that the liabilities and remedies specified in clauses (a) and (b)
above shall survive the termination of this Lease.
<PAGE>
(3) Lessor may sue for injunctive relief or to recover damages
for any loss resulting from the breach.
ARTICLE 13
WAIVER
It is further mutually covenanted and agreed between the parties hereto
that no waiver of any covenant, agreement, stipulation or condition of this
Lease shall be construed to be a waiver of any succeeding breach of the same
covenant, agreement, stipulation or condition; that the payment by Lessee, or
the receipt by Lessor, of rent with knowledge of the breach by the other party
of any covenant hereof shall not be deemed a waiver of such breach; and further,
that all covenants, stipulations, conditions, and agreements herein contained
shall run with the land and bind and inure to the benefit of, as the case may
require, the heirs, executors, administrators, successors and assigns of the
parties hereto and to grantees of Lessor, as fully as if such words were written
whenever reference to Lessor and Lessee occur in this Lease, except that no
assignment by Lessee in violation of the provisions of this Lease shall vest any
right in the assignee.
Nothing contained in this Lease shall authorize Lessee to do any act or
make any contract which will or may in any manner adversely affect the estate or
interest of Lessor in the demised premises or of the building(s) including the
demised premises, or of Lessor's adjacent property or the use thereof.
ARTICLE 14
MORTGAGES
Lessor shall have the right to transfer, assign, mortgage and convey in
whole or in part the demised premises and any and all rights of Lessor under
this Lease, and nothing herein shall be construed as a restriction upon Lessor
so doing. This Lease shall be subject and subordinate to any mortgage or other
financing arrangement and to any renewal modification, consolidation,
replacement and extension thereof now or hereafter placed upon or affecting the
demised premises, or any part thereof, provided that so long as Lessee is not in
default of any of the terms and conditions hereof, Lessee's rights, privileges
and possession hereunder shall not be disturbed. Although no instrument or act
on the part of Lessee shall be necessary to effectuate such subordination,
Lessee will, upon request, execute and deliver such further instruments
subordinating this Lease to the lien of any such mortgages or other financing
arrangements as may be desired by the mortgagee or other lender. Lessee hereby
appoints Lessor its attorney-in-fact, irrevocably, to execute and deliver any
such instrument for the Lessee, should Lessee fail to execute and deliver same
within five (5) days of any request therefor. In the event of any sale or
exchange of the demised premises by Lessor and assignment by Lessor hereof,
Lessor shall be and is hereby entirely freed and relieved of all liability under
any and all of its covenants and obligations contained in or derived from this
Lease occurring after the consummation of such sale or exchange and assignment.
<PAGE>
ARTICLE 15
CONDEMNATION
(a) If, during the term of this Lease, all of the demised premises,
or such a substantial part of the premises so as to render the remaining as the
same may be restored, unusable for the purposes for which the premises were
leased, shall be taken by appropriation for public, or quasi-public use, under
the right of eminent domain, the proceeds of such appropriation shall be paid to
the Lessor, and the Lessee shall have no claim to any part thereof, except as
set out below, and this Lease shall be cancelled as of the date of such taking;
provided, however, Lessee may claim such damages it suffered with respect to its
trade fixtures, personal property and its improvements to the real property from
the condemning authority.
(b) If, during the term of this Lease, a part but not all of the
demised premises shall be taken by appropriation for public, or quasi-public
use, under the right of eminent domain and this Lease shall not terminate or be
terminated under the provisions of subparagraph 15(a) hereof, then this Lease
shall not be cancelled and shall apply to that part of the premises not so
taken. In such event all of the proceeds shall be paid to the Lessor and Lessee
shall not be entitled to any part thereof (except for a reasonable amount for
the depreciated value of its improvements), but the rental for the remaining
term shall be equitably adjusted.
ARTICLE 16
CAREFREE LEASE
It is the intention and purpose of the parties hereto to create by this
instrument a lease of the kind commonly known as "Carefree" to the Lessor.
Accordingly, the Lessee agrees to bear, pay for and discharge not only such
items as its has specifically agreed by the prior provisions of this Lease to
bear, pay and discharge, but also all other costs, charges, and expenses of
every kind and nature whatsoever which must be borne, paid and discharged in
order to accomplish the purposes and objects of this Lease, namely, (a) that the
Lessor shall receive from the Lessee, without diminution on account of any
matter or thing whatsoever except such as shall arise from breach by the Lessor
of any covenant or covenants of the Lessor contained herein, the rentals agreed
to be paid by the Lessee; (b) that the Lessor shall be subjected to no expense
whatsoever on account of any matter or thing connected with or arising from the
leased premises or this Lease during the term hereof, except matters connected
with or arising from the covenants of the Lessor contained herein; and (c) that
the Lessor, at the expiration of or sooner termination of this Lease, shall
receive possession of the demised premises and the improvements thereon in
accordance with the covenants of the Lessee contained herein and free and clear
of all claims, liens, charges and encumbrances except those to which the demised
premises now are subject, or which may be placed thereon by the Lessor, or which
shall arise because of breach by the Lessor of any covenant or covenants of the
Lessor contained herein.
<PAGE>
ARTICLE 17
LIENS
Lessor shall have a first and best lien, paramount to all others upon
every right and interest of Lessee to and in the demised premises and to and in
this Lease, and in and to all improvements which become part of the real estate
constituting the premises, as security for the payment of the entire amount of
rent payable under this Lease, and for the payment of all monies payable under
any obligation or engagement of Lessee contained in this Lease, and as security
for the performance and observance of all and singular the covenants,
agreements, conditions and obligations of this Lease to be performed and
observed by Lessee.
ARTICLE 18
COMPLIANCE WITH LAWS, INSURANCE POLICIES
ENVIRONMENTAL HAZARDS; USE
Lessee, at its expense, shall cause the demised premises to comply with
all federal, state county municipal and other governmental statutes, laws,
rules, orders, regulations and ordinances affecting the demised premises or any
part thereof, or the use thereof, including those which require the making of
any structural or extraordinary changes, whether or not any such statutes, laws,
rules, orders, regulations or ordinances which may have hereafter been enacted
involve a change of policy on the part of the governmental body enacting the
same. Lessee shall, at its expense, comply with the requirements of all policies
of insurance which at any time may be in force with respect to the demised
premises. Lessee shall not permit any hazardous substances, or toxic wastes on,
in or under the demised premises. Lessee shall not violate any federal, state or
local law, ordinance or regulation relating to industrial hygiene or to
environmental conditions in, on, under or about the demised premises, including
but not limited to, soil and groundwater conditions. Lessee shall not use for
the disposal of or to refine, generate, manufacture, produce, store, handle,
treat, transfer, release, process or transport any "hazardous waste" or
hazardous substance, petrochemical, asbestos, toxic substance, nuclear waste,
flammable explosives, material ("Hazardous Materials"); Hazardous Materials
shall include but not be limited to substances defined as "hazardous waste" or
"hazardous substance" as defined in the Resource Environmental Response
Compensation and Liability Act of 1980, as amended, 42 USC 9001 et. Seq.
("CERCLA"), or the Superfund Amendments and Reauthorization Act, Public Law
99-499, October 17, 1986 ("SARA"); or The Hazardous Materials Transportation
Act, 49 USC Section 1801 et. Seq. Respectively. Lessee shall not use the demised
premises or allow the use of the demised premises for the purpose of disposal
of, refining, generating, manufacturing, producing, storing, handling, treating,
transferring, releasing, processing, or transporting any hazardous or toxic
materials. There are no underground fuel storage tanks on, in or under the
demised premises, nor any asbestos or transformers containing PCB's.
<PAGE>
ARTICLE 19
ARTICLE HEADINGS
The article headings in this Lease are inserted only as a matter of
convenience for reference and in no way define, limit or describe the scope or
intent of this Lease or affect this Lease.
ARTICLE 20
MEMORANDUM OF LEASE
In the event either Lessor or Lessee determine to record this Lease, a
short-form memorandum of the lease shall be recorded in lieu of the original
lease. Such short-form memorandum shall be executed by both parties but shall
not in any way vary or revoke the terms of this lease.
ARTICLE 21
ESTOPPEL CERTIFICATE
Lessee shall from time to time, upon not less than five (5) days prior
written request by Lessor, execute, acknowledge and deliver to Lessor an
estoppel certificate, certifying that this Lease is in full force and effect;
the dates to which rents have been paid; and whether Lessor is in default, and
if so, specifying the nature of the default; and that the lease is in full force
and effect as modified and listing instruments of modification. It is intended
that such estoppel certificate may be relied on by a prospective purchaser of
Lessor's interest or mortgagee or assignee of any mortgage upon the demised
premises.
ARTICLE 22
OPTION TO RENEW
If this Lease shall be in full force and effect and the Lessee shall have
fully performed all of its terms and conditions, the Lessee shall have the
option to extend this Lease for one (1) renewal term of five (5) years. The
renewal term shall be on the same terms and conditions in effect during the
initial term except that the monthly rent shall be increased to Fifty Eight
Thousand Dollars ($58,000).
The Lessee shall notify Lessor in writing at least twelve (12) months
prior to the expiration of the current term, as to whether Lessee intends to
exercise the option. Lessee's failure to notify the Lessor as required here
shall cancel the option and this Lease shall terminate on the expiration of the
current term.
<PAGE>
ARTICLE 23
NO COUNTERCLAIM, ABATEMENT, ETC.
This is a net lease, and the Base Rent and all other sums payable by
Lessee under this Lease shall be paid without notice, demand, counterclaim
setoff, deduction or defense and without abatement, suspension, deferment,
diminution or reduction for any reason whatsoever. The obligations and
liabilities of Lessee hereunder shall in no way be released, discharged or
otherwise affected (except as expressly provided herein) by reason of: (1) any
defect in the condition, quality or fitness for use of, or any damage to or loss
or destruction of, the demised premises or any part thereof, whether or not the
fault of Lessee, (2) any restriction on or prevention or interference with any
use of the demised premises or any part thereof, including any alteration of any
zoning law, ordinance, regulations, classification or building restriction with
respect thereto, (3) any title defect in or encumbrance on or eviction from
possession of the Leased Premises or any part thereof by title paramount or
otherwise, (4) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to Lessor
or any of its successors or assigns, or by any court, in any such proceeding,
(5) any claim which Lessee has or might have against Lessor, (6) any failure by
Lessor to perform or comply with any of the terms hereof or of any other
agreement with Lessee, or (7) any other occurrence whatsoever, whether similar
or dissimilar to the foregoing; whether or not Lessee shall have notice of
knowledge of any of the foregoing. Except as expressly provided herein, Lessee,
to the full extent permitted by applicable law, waives all rights now or
thereafter conferred by statute or otherwise to quit, terminate or surrender
this Lease or the leased premises or any part thereof, or to any abatement,
suspension, deferment, diminution or reduction of Base Rent or any other sum
payable by Lessee hereunder.
ARTICLE 24
GUARANTEE OF PARENT
Lessee's parent corporation, Adam Wholesalers, Inc., an Ohio corporation,
guarantees all obligations of the Lessee hereunder.
ARTICLE 25
MISCELLANEOUS
(a) If Lessee shall fail to pay any installment of Base Rent, or any
other sum payable to Lessor, within five (5) days after the date the same
becomes due and payable, then Lessee shall also pay to Lessor a late payment
service charge of five percent (5%) of the payment so overdue, in addition to
and not in limitation of any other remedy or right of Lessor herein.
Anything to the contrary herein contained notwithstanding, there
shall be absolutely no personal liability on persons, firms or entities who
constitute Lessor with respect to any of the terms, covenants, conditions and
provisions of this Lease, and Lessee shall, subject to the rights of any first
mortgagee, look solely to the interest of Lessor, its successors and assigns, in
the demised premises for the satisfaction of each and every remedy of Lessee in
the event of default by Lessor hereunder; such exculpation of personal liability
is absolute and without any exception whatsoever.
If any provision of this Lease or the application thereof to any
person or circumstance shall to any extent be invalid or unenforceable, the
remainder of this Lease, or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby and each provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
The parties agree not to place this Lease of record but each party
shall, at the request of the other, execute and acknowledge for recording a
memorandum or short form lease; provided, however, that the failure to record
said short form lease or memorandum of lease shall not affect or impair the
validity and effectiveness of this Lease. Lessee shall pay all costs, taxes,
fees and other expenses in connection with or prerequisite to recording.
This Lease shall be construed and interpreted under the laws of the
State of Ohio.
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have hereunto set their hands the
day and year first above written.
In the presence of: LESSOR:
PINE ACRES INVESTMENT, INC.
___________________________ By: ______________________________
Name:
___________________________ Title:
In the presence of: LESSEE:
__________________________ By: _____________________________
Name:
__________________________ Title:
Adam Wholesalers, Inc. hereby joins in this Lese for the purpose of the
guarantee set forth in Article 24.
ADAM WHOLESALERS, INC.
__________________________ By: ______________________________
Name:
__________________________ Title:
STATE OF OHIO )
) SS.
County of Hamilton )
BE IT REMEMBERED, that on the ____ day of _____________, 19__, before me,
a Notary Public in and for said county, personally came ____________________, a
duly authorized officer of Pine Acres Investments, Inc., Lessor in the foregoing
Lease, and acknowledged the signing thereof to be his voluntary act and deed and
that of the Lessor.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my
official seal on the day and year aforesaid.
____________________________
Notary Public
<PAGE>
Exhibit A
All that certain piece or parcel of land Situated in Borough of Carlisle,
Cumberland County, Pennsylvania, conveyed as Parcel No. 11 on a certain Final
Subdivision Plan for Ritner Park, dated October 17, 1986, revised December 10,
1986 and recorded on December 19, 1986 in Cumberland County Plan Book 52 page
12, bounded and described in accordance with said Final Subdivision Plan, as
follows, to wit:
BEGINNING at a point on the northern right of way line of Governor Ritner
Highway (U.S. 11 - L.R. 890) (50 feet wide), said point being South 71 degrees
15 minutes 00 seconds West 660.00 feet From the western line of Industrial Drive
thence from said point of beginning and along the northern right of way line of
Governor Ritner Highway South 71 degrees 14 minutes 16 seconds West 422.96 feet
to a point; thence continuing along said right of way line South 71 degrees 11
minutes 46 seconds West 101.89 feet to a point on land now or formerly of
Arkansas Best Freight Incorporated: thence along land now or formerly of
Arkansas Best Freight Incorporated North 17 degrees 52 minutes 26 seconds West
855.00 feet to an iron pin at the southwest corner of Parcel No. 10 as shown on
the said Final Subdivision Plan, thence along the southern line of Parcel No. 10
North 71 degrees 15 minutes 00 seconds East 525.33 feet to an iron pin at the
northwest corner of Shearer Drive; thence along the western line of Shearer
Drive and Parcel Nos. 8 and 5 as shown on the said Final Subdivision Plan South
17 degrees 50 minutes 30 seconds East 854.82 feet to a point on the northern
right of way line of Governor Ritner Highway, the place of BEGINNING.
Containing 10.3037 acres
BEING the same premises which Ritner Park Associates (a Pennsylvania
Limited Partnership), by Indenture bearing date the 23rd day of December, 16,
1986, and recorded in the Office of the Recorder of Deeds & c., in and for the
County of Cumberland, aforesaid, in Deed Book K-32 page 119, granted and
conveyed unto Middle Atlantic Millwork Company (a Delaware Corporation), in fee.
<PAGE>
EXHIBIT A
ALL THAT CERTAIN tract of land situate in Borough of Carlisle, Cumberland
County, Pennsylvania, being known as Lot No. 3 on a Final Subdivision Plan
prepared by Stephen G. Fisher, Professional Land Surveyor, dated July 14, 1989,
as finally revised on September 8, 1989, recorded in the office of the Recorder
of Deeds of Cumberland County, Pennsylvania, in Plan Book 59, Page 34, bounded
and described as follows:
BEGINNING at an iron pin, said point being North 17(degree) 52 minutes 26
Seconds West 60.01 feet from the Northwest Corner of Lot No. 11 of the
Subdivision Plan for Ritner Park as recorded in the Office of the Recorder of
Deeds for Cumberland County in Plan Book 52, Page 12; thence from said point of
beginning and along the line of the aforementioned Lot No. 11 South 17(degree)
52 minutes 26 seconds East 820.00 feet to a point in the centerline of The
Governor Ritner Highway S.R. 0011 (formerly U.S. Rte 11 L.R. 890): thence by
said centerline South 71(degree) 11 minutes 47 seconds west 498. feet to a
point at the intersection of the aforementioned centerline and the centerline
of a Pennsylvania Power and Light Company right-of-way) thence leaving said
Ritner Highway and along the centerline of said Pennsylvania Power and Light
Company right-of-way; and by lands of the Grantor North 01(degree) 54 minutes
37 seconds West 896.68 feet to an iron pin; thence leaving said Pennsylvania
Power and Light Company right-of-way and along lands of the Grantor by a line
curving to the left having a radius of 780.0 feet and an arc length of 244.03
feet to an iron pin; thence along the same North 71(degree) 15 minutes 00
seconds East 11.51 feet to an iron pin, the place of BEGINNING.
CONTAINING 7.2450 acres.
BEING a part of the same premises which Farmers Trust Company,
Guardian of F. Albright Swarner, single man, an incompetent, by Deed dated
December 16, 1986, and recorded in Cumberland County in Deed Book J.
Volume 32, Page 445, conveyed to ABE Freight System, Inc., Grantor herein.
Exhibit 10.58
Trammell Crow Company
COMMERCIAL LEASE AGREEMENT
C-S-K LOUISVILLE,
A TEXAS LIMITED PARTNERSHIP
(LESSOR)
AND
ALLIED SASH AND DOOR, INC.,
A KENTUCKY OPERATION
(LESSEE)
<PAGE>
STANDARD INDUSTRIAL LEASE AGREEMENT Approximately 86,400 square feet
TRAMMELL CROW COMPANY LIC Building #6
COMMERCIAL 87 7803 National Turnpike
Louisville, Kentucky 40214
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between C-S-K
Louisville, a Texas limited partnership hereinafter referred to as "Lessor", and
Allied Sash and Door, Inc., a Kentucky corporation hereinafter referred to as
"Lessee";
W I T N E S S E T H:
1. PREMISES AND TERM. In consideration of the mutual obligations of Lessor
and Lessee set forth herein, Lessor leases to Lessee, and Lessee hereby takes
from Lessor the Premises situated within the County of Jefferson, State of
Kentucky, more particularly described on EXHIBIT "A" attached hereto and
incorporated herein by reference (the "Premises"), together with all rights,
privileges, easements, appurtenances, and amenities belonging to or in any way
pertaining to the Premises, to have and to hold, subject to the terms, covenants
and conditions in this Lease. The term of this Lease shall commence on the
commencement date hereinafter set forth and shall end on the last day of the
month that is One Hundred Twenty (120) months after the commencement date.
A. EXISTING BUILDING. If no improvements are to be constructed to the
Premises, the commencement date shall be 1 April 1990. Lessee acknowledges that
(i) it has inspected and accepts the Premises, (ii) the buildings and
improvements comprising the same are suitable for the purpose for which the
Premises are leased, (iii) the Premises are in good and satisfactory condition,
and (iv) no representations as to the repair of the Premises, nor promises to
alter, remodel or improve the Premises have been made by Lessor (unless
otherwise expressly set forth in this Lease).
B. BUILDING TO BE CONSTRUCTED OR SHELL SPACE. If the Premises or part
thereof are to be constructed, the commencement date shall be deemed to be the
date upon which the Premises and other improvements to be erected in accordance
with the plans and specifications described on EXHIBIT "B" attached hereto and
incorporated herein by reference (the "Plans") have been substantially
completed. As used herein, the term "substantially completed" shall mean that in
the opinion of the architect or space planner that prepared the Plans, such
improvements have been completed in accordance with the Plans and the Premises
are in good and satisfactory condition, subject only to completion of minor
punch list items. As soon as such improvements have been substantially
completed, Lessor shall notify Lessee in writing that the commencement date has
occurred. Within ten (10) days thereafter, Lessee shall submit to Lessor in
writing a punch list of items needing completing or correction. Lessor shall use
its best efforts to complete such items within thirty (30) days after the
receipt of such notice. In the event Lessee, its employees, agents or
contractors cause construction of such improvements to be delayed, the
commencement date shall be deemed to be the date that, in the opinion of the
architect or space planner that prepared the Plans, substantial completion would
have occurred if such delays had not taken place.
<PAGE>
2. BASE RENT, SECURITY DEPOSIT AND ESCROW PAYMENTS.
A. Lessee agrees to pay to Lessor rent for the Premises, in advance,
without demand, deduction or set off, at the rate of [See ADDENDUM 1.] Dollars
($__________) per month during the term hereof. One such monthly installment,
plus the other monthly charges set forth in Paragraph 2C below shall be due and
payable on the date hereof and a like monthly installment shall be due and
payable on or before the first day of each calendar month succeeding the
commencement date, except that all payments due hereunder for any fractional
calendar month shall be prorated.
B. Lessee agrees to pay its proportionate share (as defined in Paragraph
22B below) of (i) Taxes (hereinafter defined) payable by Lessor pursuant to
paragraph 3A below, (ii) the cost of utilities payable pursuant to paragraph 8
below, (iii) the cost of maintaining insurance pursuant to paragraph 9 below,
(iv) the cost of any common area charges payable by Lessee in accordance with
paragraph 4 below and (v) the cost of security provided to the Premises as set
forth in paragraph 23 below. During each month of the term of this Lease, on the
same day that rent is due hereunder, Lessee shall escrow with Lessor an amount
equal to 1/12 of the estimated annual cost of its proportionate share of such
items. Lessee authorizes Lessor to use the funds deposited with Lessor under
this Paragraph 2C to pay such costs. The initial monthly escrow payments are
based upon the estimated amounts for the year in question, and shall be
increased or decreased annually to reflect the projected actual cost of all such
items. If the Lessee's total escrow payments are less than Lessee's actual
proportionate share of all such items, Lessee shall pay the difference to Lessor
within ten (10) days after demand. If the total escrow payments of Lessee are
more than Lessee's actual proportionate share of all such items, Lessor shall
retain such excess and credit it against Lessee's next annual escrow payments.
The amount of the monthly rental and the initial monthly escrow payments are as
follows:
(1) Base Rent as set forth in Paragraph 2A... See ADDENDUM I.
(2) Tax Escrow Payment....................... $288.00
(3) Insurance Escrow Payment................. $144.00
(4) Utility Charge........................... -0-
(5) Common Area Charge....................... $576.00
(6) Security Services........................ -0-
(7) Other (drainage) ........................ $144.00
Monthly Payment Total............... Total of 1 through 7
<PAGE>
3. TAXES.
A. Lessor agrees to pay all taxes, assessments and governmental charges
of any kind and nature (collectively referred to herein as "Taxes") that accrue
against the Premises, and/or the land and/or improvements of which the Premises
are a part. If at any time during the term of this Lease, there shall be levied,
assessed or imposed on Lessor a capital levy or other tax directly on the rents
received therefrom and/or a franchise tax, assessment, levy or charge measured
by or based, in whole or in part, upon such rents from the Premises and/or the
land and improvements of which the Premises are a part, then all such taxes,
assessments, levies or charges, or the part thereof so measured or based, shall
be deemed to be included within the term "Taxes" for the purposes hereof. The
Lessor shall have the right to employ a tax consulting firm to attempt to assure
a fair tax burden on the building and grounds within the applicable taxing
jurisdiction. Lessee agrees to pay its proportionate share of the cost of such
consultant.
B. Lessee shall be liable for all taxes levied or assessed against any
personal property or fixtures placed in the Premises. If any such taxes are
levied or assessed against Lessor or Lessor's property and (i) Lessor pays the
same or (ii) the assessed value of Lessor's property is increased by inclusion
of such personal property and fixtures and Lessor pays the increased taxes,
then, upon demand, Lessee shall pay to Lessor such taxes.
4. LESSOR'S REPAIRS.
A. Lessor, at its own cost and expense, shall maintain the roof,
foundation and the structural soundness of the exterior walls of the building of
which the Premises are a part in good repair, reasonable wear and tear excluded.
The term "walls" as used herein shall not include windows, glass or plate glass,
doors, special store fronts or office entries. Lessee shall immediately give
Lessor written notice of defect or need for repairs, after which Lessor shall
have reasonable opportunity to repair same or cure such defect.
B. Lessor reserves the right to perform the paving, common area and
landscape replacement and maintenance, exterior paining, common sewage line
plumbing and any other items that are otherwise Lessee's obligations under
Paragraph 5A, in which event Lessee shall be liable for its proportionate share
of the cost and expense of such repair, replacement, maintenance and other such
items.
C. Lessee agrees to pay its proportionate share of the cost of (i)
maintenance and/or landscaping of any property that is a part of the building
and/or project of which the Premises are a part, (ii) maintenance and/or
landscaping of any property that is maintained or landscaped by any property
owner or community owner association that is named in the restrictive covenants
or deed restrictions to which the Premises are subject, and (iii) operating and
maintaining any property, facilities or services provided for the common use of
Lessee and other lessees of any project or building of which the Premises are a
part.
5. LESSEE'S REPAIRS.
A. Lessee, at its own cost and expense, shall (i) maintain all parts of
the premises, landscape and ground surrounding the Premises (except those for
which Lessor is expressly responsible hereunder) in good condition, (ii)
promptly make all necessary repairs and replacements, (iii) keep the parking
areas, driveways and alleys surrounding the Premises in a clean and sanitary
condition, and (iv) maintain any spur track servicing the Premises. Lessee
agrees to sign a joint maintenance agreement with the railroad company servicing
the Premises if requested by the railroad company. Lessor shall have the right
to coordinate all repairs and maintenance of any rail tracks serving or intended
to serve the Premises and, if Lessee uses such rail tracks, Lessee shall
reimburse Lessor from time to time, upon demand, for its proportionate share of
the costs of such repairs and maintenance and any other sums specified in any
agreement respecting such tracks to which Lessor is a party.
<PAGE>
B. Lessee and its employees, customers and licensees shall have the
exclusive rights to use any parking areas that have been designated for such use
by Lessor in writing, subject to (i) all rules and regulations promulgated by
Lessor and (ii) rights of ingress and egress of other lessees. Lessor shall not
be responsible for enforcing Lessee's parking rights against any third parties.
Lessee agrees not to use more spaces than so provided.
C. Lessee, at its own cost and expense, shall enter into a regularly
scheduled preventive maintenance/service contract with a maintenance contractor
approved by Lessor for servicing all hot water, heating and air conditioning
systems and equipment within the Premises. The service contract must include all
services suggested by the equipment manufacturer in its operations/maintenance
manual and must become effective within thirty (30) days of the date Lessee
takes possession of the Premises.
6. ALTERATIONS. Lessee shall not make any alterations, additions or
improvements to the Premises without the prior written consent of Lessor.
Lessee, at its own cost and expense, may erect such shelves, bins, machinery and
trade fixtures as it desires provided that (a) such items do not alter the basic
character of the Premises or the building and/or improvements of which the
Premises are a part; (b) such items do not overload or damage the same; (c) such
items may be removed without injury to the Premises; and (d) the construction,
erection or installation thereof complies with all applicable governmental laws,
ordinances, regulations and with Lessor's specifications and requirements. All
alterations, additions, improvements and partitions erected by Lessee shall be
and remain the property of Lessee during the term of this Lease. All shelves,
bins, machinery and trade fixtures installed by Lessee shall be removed on or
before the earlier to occur of the date of termination of this Lease or vacating
the Premises, at which time Lessee shall restore the Premises to their original
condition. All alterations, installations, removals and restoration shall be
performed in a good and workmanlike manner so as not to damage or alter the
primary structure or structural qualities of the buildings and other
improvements situated in the Premises or of which the Premises are a part.
7. SIGNS. Any signage Lessee desires for the Premises shall be subject to
Lessor's written approval and shall be submitted to Lessor prior to the
commencement date of this Lease. Lessee shall repair, paint, and/or replace the
building facia surface to which its signs are attached upon vacation of the
Premises, or the removal or alteration of its signage. Lessee shall not (i) make
any changes to the exterior of the Premises, (ii) install any exterior lights,
decorations, balloons, flags, pennants, banners or painting, or (iii) erect or
install any signs, windows or door lettering, placards, decorations or
advertising media of any type which can be viewed from the exterior of the
Premises, without Lessor's prior written consent. All signs, decorations,
advertising media, blinds, draperies and other window treatment or bars or other
security installations visible from outside the Premises shall conform in all
respects to the criteria established by Lessor.
<PAGE>
8. UTILITIES. Lessor agrees to provide normal water and electricity service
to the Premises. Lessee shall pay for all water, gas, heat, light, power,
telephone, sewer, sprinkler charges and other utilities and services used on or
at the Premises, together with any taxes, penalties, surcharges or the like
pertaining to the Lessee's use of the Premises, and any maintenance charges for
utilities. Lessor shall have the right to cause any of said services to be
separately metered to Lessee, at Lessee's expense. Lessee shall pay its pro rata
share, as reasonably determined by Lessor, of all charges for jointly metered
utilities. Lessor shall not be liable for any interruption or failure of utility
service on the Premises.
9.INSURANCE.
A. Lessor shall maintain insurance covering the buildings situated on
the Premises or of which the Premises are a part in an amount not less than
eighty percent (80%) of the "replacement cost" thereof insuring against the
_______ of Fire, Lightning, Extended Coverage, Vandalism and Malicious Mischief.
B. Lessee, at its own expense, shall maintain during the term of this
Lease a policy or policies of worker's compensation and comprehensive general
liability insurance, including personal injury and property damage, with
contractual liability endorsement, in the amount of Five Hundred Thousand
Dollars ($500,000.00) for property damage and One Million Dollars
($1,000,000.00) per occurrence for personal injuries or deaths of persons
occurring in or about the Premises. Lessee, at its own expense, also shall
maintain during the term of this Lease, fire and extended coverage insurance
covering the replacement cost of (i) all alterations, additions, partitions and
improvements installed or placed on the Premises by Lessee or by Lessor on
behalf of Lessee and (ii) all of Lessee's personal property contained within the
Premises. Said policies shall (i) name Lessor as an additional insured and
insure Lessor's contingent liability under this Lease (except for the worker's
compensation policy, which instead shall include waiver of subrogation
endorsement in favor of Lessor), (ii) be issued by an insurance company which is
acceptable to Lessor, and (iii) provide that said insurance shall not be
cancelled unless thirty (30) days prior written notice shall have been given to
Lessor. Said policy or policies or certificates thereof shall be delivered to
Lessor by Lessee upon commencement of the term of the Lease and upon each
renewal of said insurance.
C. Lessee will not permit the Premises to be used for any purpose or in
any manner that would (i) void the insurance thereon, (ii) increase the
insurance risk, or (iii) cause the disallowance of any sprinkler credits,
including, without limitation, use of the Premises for the receipt, storage or
handling of any product, material or merchandise that is explosive or highly
inflammable. If any increase in the cost of any insurance on the Premises or the
building of which the Premises are a part is caused by Lessee's use of the
Premises, or because Lessee vacates the Premises, then Lessee shall pay the
amount of such increase to Lessor.
10. FIRE AND CASUALTY DAMAGE.
A. If the Premises or the building of which the Premises are a part
should be damaged or destroyed by fire or other peril, Lessee immediately shall
give written notice to Lessor. If the buildings situated upon the Premises or of
which the Premises are a part should be totally destroyed by any peril covered
by the insurance to be provided by Lessor under Paragraph 9A above, or if they
should be so damaged thereby that, in Lessor's estimation, rebuilding or repairs
cannot be completed within one hundred eighty (180) days after the date of such
damage, this Lease shall terminate and the rent shall be abated during the
unexpired portion of this Lease, effective upon the date of the occurrence of
such damage.
<PAGE>
B. If the Buildings situated upon the Premises or of which the Premises
are a part, should be damaged by any peril covered by the insurance to be
provided by Lessor under Paragraph 9A above, and in Lessor's estimation,
rebuilding or repairs can be substantially completed within one hundred eighty
(180) days after the date of such damage, this Lease shall not terminate, and
Lessor shall restore the Premises to substantially its previous condition,
except that Lessor shall not be required to rebuild, repair or replace any part
of the partitions, fixtures, additions and other improvements that may have been
constructed, erected or installed in, or about the Premises or for the benefit
of, or by or for Lessee. If such repairs and rebuilding have not been
substantially completed within one hundred eighty (180) days after the date of
such damage, Lessee, as Lessee's exclusive remedy, may terminate this Lease by
delivering written notice of termination to Lessor in which event the rights and
obligations hereunder shall cease and terminate.
C. Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering the
Premises requires that the insurance proceeds be applied to such indebtedness,
then Lessor shall have the right to terminate this Lease by delivering written
notice of termination to Lessee within fifteen (15) days after such requirement
is made known by any such holder, whereupon all rights and obligations hereunder
shall cease and terminate.
D. Anything in this Lease to the contrary notwithstanding, Lessor and
Lessee hereby waive and release each other of and from any and all rights of
recovery, claim, action or cause of action, against each other, their agents,
officers and employees, for any loss or damage that may occur to the Premises,
improvements to the building of which the Premises are a part, or personal
property (building contents) within the building and/or Premises, for any reason
regardless of cause or origin. Each party to this Lease agrees immediately after
execution of this Lease to give each insurance company, which has issued to it
policies of fire and extended coverage insurance, written notice of the terms of
the mutual waivers contained in this subparagraph, and if necessary to have the
insurance policies properly endorsed.
11. LIABILITY AND INDEMNIFICATION. Except for any claims, rights of
recovery and causes of action that Lessee has released, Lessor shall hold Lessee
harmless and defend Lessee against any and all claims or liability for any
injury or damage to any person in, on or about the Premises or any part thereof
and/or the building of which the Premises are a part, when such injury or damage
shall be caused by the act, neglect, fault of, or omission of any duty with
respect to the same by Lessor, its agents, servants and employees. Except for
any claims, rights of recovery and causes of action that Lessor has released,
Lessee shall hold Lessor harmless from and defend Lessor against any and all
claims or liability for any injury or damage (i) to any person or property
whatsoever occurring in, on or about the Premises or any part thereof and/or of
the building of which the Premises are a part, including without limitation
elevators, stairways, passageways or hallways, the use of which Lessee may have
in accordance with this Lease, when such injury or damage shall be caused by the
act, neglect, fault of, or omission of any duty with respect to the same by
Lessee, its agents, servants, employees, or invitees, (ii) arising from the
conduct of management of any work done by the Lessee in or about the Premises,
(iii) arising from transactions of the Lessee, and (iv) all costs, counsel fees,
expenses and liabilities incurred in connection with any such claim or action or
proceeding brought thereon. The provisions of this Paragraph 11 shall survive
the expiration or termination of this Lease with respect to any claims or
liability occurring prior to such expiration or termination.
<PAGE>
12. USE. The Premises shall be used only for the purpose of receiving,
storing, shipping and selling (other than retail) products, materials and
merchandise made and/or distributed by Lessee and for such other lawful purposes
as may be incidental thereto. Outside storage, including without limitation,
storage of trucks and other vehicles, is prohibited without Lessor's prior
written consent. Lessee shall comply with all governmental laws, ordinances and
regulations applicable to the use of the Premises, and promptly shall comply
with all governmental orders and directives for the correction, prevention and
abatement of nuisances in or upon, or connected with, the Premises, all at
Lessee's sole expense. Lessee shall not permit any objectionable or unpleasant
odors, smoke, dust, gas, noise or vibrations to emanate from the Premises, nor
take any other action that would constitute a nuisance or would disturb,
unreasonably interfere with, or endanger Lessor or any other lessees of the
building in which the Premises are a part.
13. INSPECTION. Lessor and Lessor's agents and representatives shall have
the right to enter the Premises any reasonable time during business hours, to
inspect the Premises and to make such repairs as may be required or permitted
pursuant to this Lease. During the period that is six (6) months prior to the
end of the Lease term, upon telephonic notice to Lessee, Lessor and Lessor's
representatives may enter the Premises during business hours for the purpose of
showing the Premises. In addition, Lessor shall have the right to erect a
suitable sign on the Premises stating the Premises are available. Lessee shall
notify Lessor in writing at least thirty (30) days prior to vacating the
Premises and shall arrange to meet with Lessor for a joint inspection of the
Premises prior to vacating. If Lessee fails to give such notice or to arrange
for such inspection, then Lessor's inspection of the Premises shall be deemed
correct for the purpose of determining Lessee's responsibility for repairs and
restoration of the Premises.
14. ASSIGNMENT AND SUBLETTING.
A. Lessee shall not have the right to assign, sublet, transfer or
encumber this Lease, or any interest therein, without the prior written consent
of Lessor. Any attempted assignment, subletting, transfer or encumbrance by
Lessee in violation of the terms and covenants of this Paragraph shall be void.
Notwithstanding the foregoing, Lessee shall have the right to assign this Lease
to any affiliate (as such term is defined in the Securities Act of 1933)
provided that such assignment is in form satisfactory to Lessor. Any assignee,
sublessee or transferee of Lessee's interest in this Lease (all such assignees,
sublessees and transferees being hereinafter referred to as "Transferees"), by
assuming Lessee's obligations hereunder, shall assume liability to Lessor for
all amounts paid to persons other than Lessor by such Transferees in
contravention of this Paragraph. No assignment, subletting or other transfer,
whether consented to by Lessor or not or permitted hereunder shall relieve
Lessee of its liability hereunder. If an event of default occurs while the
Premises or any part thereof are assigned or sublet, then Lessor, in addition to
any other remedies herein provided, or provided by law, may collect directly
from such Transferee all rents payable to the Lessee and apply such rent against
any sums due Lessor hereunder. No such collection shall be construed to
constitute a novation or a release of Lessee from the further performance of
Lessee's obligations hereunder.
<PAGE>
B. If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, 11 U.S.C. ss. 101 et. seq. (the "Bankruptcy
Code"), any and all monies or other consideration payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Lessor, shall be and remain the exclusive property of Lessor and shall not
constitute property of Lessee or the estate of Lessee within the meaning of the
Bankruptcy Code. Any and all monies or other considerations constituting
Lessor's property under the preceding sentence not paid or delivered to Lessor
shall be held in trust for the benefit of Lessor and be promptly paid or
delivered to Lessor.
C. Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be 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 Lessor an instrument confirming such assumption.
15. CONDEMNATION. If more than eighty percent (80%) of the Premises are
taken for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof and the taking prevents or materially interferes with the use of the
Premises for the purpose for which they were leased to Lessee, this Lease shall
terminate and the rent shall be abated during the unexpired portion of this
Lease, effective on the date of such taking. If less than eighty percent (80%)
of the Premises are taken for any public or quasi-public use under any
governmental law, ordinance or regulation, or by right of eminent domain, or by
private purchase in lieu thereof, this Lease shall not terminate, but the rent
payable hereunder during the unexpired portion of this Lease shall be reduced to
such extent as may be fair and reasonable under all of the circumstances. All
compensation awarded in connection with or as a result of any of the foregoing
proceedings shall be the property of Lessor and Lessee hereby assigns any
interest in any such award to Lessor; provided, however, Lessor shall have no
interest in any award made to Lessee for lose of business or goodwill or for the
taking of Lessee's fixtures and improvements, if a separate award for such items
is made to Lessee.
16. HOLDING OVER. At the termination of this Lease by its expiration or
otherwise, Lessee immediately shall deliver possession to Lessor with all
repairs and maintenance required herein to be performed by Lessee completed. If,
for any reason, Lessee retains possession of the Premises after the expiration
or termination of this Lease, unless the parties hereto otherwise agree in
writing, such possession shall be subject to termination by either Lessor or
Lessee at any time upon not less than ten (10) days advance written notice, and
all of the other terms and provisions of this Lease shall be applicable during
such period, except that Lessee shall pay Lessor from time to time, upon demand,
as rental for the period of such possession, an amount equal to double the rent
in effect on the termination date, computed on a daily basis for each day of
such period. No holding over by Lessee, whether with or without consent of
Lessor, shall operate to extend this Lease except as otherwise expressly
provided. The preceding provisions of this Paragraph 16 shall not be construed
as consent for Lessee to retain possession of the Premises in the absence of
written consent thereto by Lessor.
<PAGE>
17. QUIET ENJOYMENT. Lessor covenants that on or before the commencement
date it will have good title to the Premises, free and clear of all liens and
encumbrances, excepting only the lien for current taxes not yet due, such
mortgage or mortgages as are permitted by the terms of this Lease, zoning
ordinances and other building and fire ordinances and governmental regulations
relating to the use of such property, and easements, restrictions and other
conditions of record. If this Lease is a sublease, then Lessee agrees to take
the Premises subject to the provisions of the prior Leases. Lessor represents
that it has the authority to enter into this Lease and that so long as Lessee
pays all amounts due hereunder and performs all other covenants and agreements
herein set forth, Lessee shall peaceably and quietly have, hold and enjoy the
Premises for the term hereof without hindrance or molestation from Lessor,
subject to the terms and provisions of this Lease.
18. EVENTS OF DEFAULT. The following events (herein individually referred
to as "event of default") each shall be deemed to be events of nonperformance by
Lessee under this Lease:
A. Lessee shall fail to pay any installment of the rent herein reserved
when due, or any other payment or reimbursement to Lessor required herein when
due, and such failure shall continue for a period of five (5) days from the date
such payment was due.
B. The Lessee or any guarantor of the Lessee's obligations hereunder
shall (i) become insolvent; (ii) admit in writing its inability to pay its
debts; (iii) make a general assignment for the benefit of creditors; (iv)
commence any case, proceeding or other action seeking to have an order for
relief entered on its behalf as a debtor or to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or of any substantial part of its property; or (v) take any action to
authorize or in contemplation of any of the actions set forth above in this
Paragraph.
C. Any case, proceeding or other action against the Lessee or any
guarantor of the Lessee's obligations hereunder shall be commenced seeking (i)
to have an order for relief entered against it as debtor or to adjudicate it a
bankrupt or insolvent; (ii) reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief debtors; (iii)
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property, and such case, proceeding or
other action (a) results in the entry of an order for relief against it which it
is not fully stayed within seven (7) business days after the entry thereof or
(b) shall remain undismissed for a period of forty-five (45) days.
D. Lessee shall (i) vacate all or a substantial portion of the Premises
or (ii) fail to continuously operate its business at the Premises for the
permitted use set forth herein, whether or not Lessee is in default of the
rental payments due under this Lease.
<PAGE>
E. Lessor shall fail to discharge any lien placed upon the Premises in
violation of Paragraph 21 hereof within twenty (20) days after any such lien or
encumbrance is filed against the Premises.
F. Lessor shall fail to comply with any term, provision or covenant of
this Lease (other than those listed in this Paragraph 118), and shall not cure
such failure within twenty (20) days after written notice thereof to Lessee.
19. REMEDIES.
A. Upon each occurrence of an event of default, Lessor shall have the
option to pursue any one or more of the following remedies without any notice or
demand:
(1) Terminate this Lease; and/or
(2) Enter upon and take possession of the Premises without terminating
this Lease; and/or
(3) Alter all locks and other security devices at the Premises with or
without terminating this Lease, and pursue, at Lessor's option, one
or more remedies pursuant to this Lease, Lessee hereby specifically
waiving any state or federal law to the contrary;
and in any such event Lessee immediately shall surrender the Premises to Lessor,
and if Lessee fails so to do, Lessor, without waiving any other remedy it may
have, may enter upon and take possession of the Premises and expel or remove
Lessee and any other person who may be occupying such Premises or any part
thereof, without being liable for prosecution of any claim of damages therefor.
B. If Lessor terminates this Lease, at Lessor's option, Lessee shall be
liable for and shall pay to Lessor, the sum of all rental and other payments
owed to Lessor hereunder accrued to the date of such termination, plus, as
liquidated damages, an amount equal to (1) the present value of the total rental
and other payments owed hereunder for the remaining portion of the Lease term,
calculated as if such term expired on the date set forth in Paragraph 1, less
(2) the then present fair market rental value of the Premises for such period,
which because of the difficulty of ascertaining such value Lessor and Lessee
stipulate and agree, shall in no event be deemed to exceed seventy-five percent
(75%) of the rental amount set forth in Paragraph 2 above.
C. If Lessor repossesses the Premises without terminating the Lease,
Lessee, at Lessor's option, shall be liable for and shall pay Lessor on demand
all rental and other payments owed to Lessor hereunder, accrued to the date of
such repossession, plus all amounts required to be paid by Lessee to Lessor
until the date of expiration of the term as stated in Paragraph 1, diminished by
all amounts received by Lessor through reletting the Premises during such
remaining term (but only to the extent of the rent herein reserved). Actions to
collect amounts due by Lessee to Lessor under this subparagraph may be brought
from time to time, on one or more occasions, without the necessity of Lessor's
waiting until expiration of the Lease term.
<PAGE>
D. Upon an event of default, in addition to any sum provided to be paid
herein, Lessee also shall be liable for and shall pay to Lessor (i) brokers'
fees incurred by Lessor in connection with reletting the whole or any part of
the Premises; (ii) the costs of removing and storing Lessee's or other
occupant's property; (iii) the costs of repairing, altering, remodeling or
otherwise putting the Premises into condition acceptable to a new Lessee or
Lessees; and (iv) all reasonable expenses incurred by Lessor in enforcing or
defending Lessor's rights and/or remedies. If either party hereto institute any
action or proceeding to enforce any provision hereof by reason of any alleged
breach of any provision of this Lease, the prevailing party shall be entitled to
receive from the losing party all reasonable attorneys' fees and all court costs
in connection with such proceeding.
E. In the event Lessee fails to make any payment due hereunder when
payment is due, to help defray the additional cost to Lessor for processing such
late payments, Lessee shall pay to Lessor on demand a late charge in an amount
equal to five percent (5%) of such installment; and the failure to pay such
amount within ten (10) days after demand therefor shall be an additional event
of default hereunder. The provision for such late charge shall be in addition to
all of Lessor's other rights and remedies hereunder or at law and shall not be
construed as liquidated damages or as limiting Lessor's remedies in any manner.
F. Exercise by Lessor of any one or more remedies hereunder granted or
otherwise available shall not be deemed to be an acceptance of surrender of the
Premises by Lessor, whether by agreement or by operation of Lessee and Lessor
further agree that forbearance by Lessor to enforce its rights pursuant to the
Lease at law or in equity, shall not be a waiver of Lessor's right to enforce
one or more of its rights in connection with any subsequent default.
G. In the event of termination and/or repossession of the Premises for
an event of default, Lessor shall use reasonable efforts to relet the Premises
and to collect rental after reletting; provided, that, Lessee shall not be
entitled to credit or reimbursement of any proceeds in excess of the rental owed
hereunder. Lessor may relet the whole or any portion of the Premises for any
period, to any Lessee and for any use and purpose.
H. If Lessor fails to perform any of its obligations hereunder within
thirty (30) days after written notice from Lessee specifying such failure,
Lessee's exclusive remedy shall be an action for damages. Unless and until
Lessor fails to so cure any default after such notice, Lessee shall not have any
remedy or cause of action by reason thereof. All obligations of Lessor hereunder
will be construed as covenants, not conditions; and all such obligations will be
binding upon Lessor only during the period of its possession of the Premises and
not thereafter. The term "Lessor" shall mean only the owner, for the time being
of the Premises, and in the event of the transfer by such owner of its interest
in the Premises, such owner shall thereupon be released and discharged from all
covenants and obligations of the Lessor thereafter accruing, but such covenants
and obligations shall be binding during the Lease term upon each new owner for
the duration of such owner's ownership. Notwithstanding any other provision
hereof, Lessor shall not have any personal liability hereunder. In the event of
any breach or default by Lessor in any term or provision of this Lease, Lessee
agrees to look solely to the equity or interest then owned by Lessor in the
Premises or of the building of which the Premises are a part; however, in no
event, shall any deficiency judgment or any money judgment of any kind be sought
or obtained against any Lessor.
<PAGE>
I. If Lessor repossesses the Premises pursuant to the authority herein
granted, then Lessor shall have the right to (i) keep in place and use or (ii)
remove and store all of the furniture, fixtures and equipment at the Premises,
including that which is owned by or leased to Lessee at all times prior to any
foreclosure thereon by Lessor or repossession thereof by any Lessor thereof or
third party having a lien thereon. Lessor also shall have the right to
relinquish possession of all or any portion of such furniture, fixtures,
equipment and other property to any person ("Claimant") who presents to Lessor a
copy of any instrument represented by Claimant to have been executed by Lessee
(or any predecessor of Lessee) granting Claimant the right under various
circumstances to take possession of such furniture, fixtures, equipment or other
property, without the necessity on the part of Lessor to inquire into the
authenticity or legality of said instrument. The rights of Lessor herein stated
shall be in addition to any and all other rights that Lessor has or may
hereafter have at law or in equity; and Lessee stipulates and agrees that the
rights herein granted Lessor are commercially reasonable.
J. Notwithstanding anything in this Lease to the contrary, all amounts
payable by Lessee to or on behalf of Lessor under this Lease, whether or not
expressly denominated as rent, shall constitute rent.
K. This is a contract under which applicable law excuses Lessor from
accepting performance from (or rendering performance to) any person or entity
other than Lessee.
20. MORTGAGES. Lessee accepts this Lease subject and subordinate to any
mortgages and/or deeds of trust now or at any time hereafter constituting a lien
or charge upon the Premises or the improvements situated hereon or the building
of which the Premises are a part; provided, however, that if the mortgagee,
trustee or holder of any such mortgage or deed of trust elects to have Lessee's
interest in this Lease superior to any such instrument, then by notice to Lessee
from such mortgagee, trustee or holder, this Lease shall be deemed superior to
such lien, whether this Lease was executed before or after said mortgage or deed
of trust. Lessee, at any time hereafter on demand, shall execute any
instruments, releases or other documents that may be required by any mortgagee
for the purpose of subjecting and subordinating this Lease to the lien of any
such mortgage.
21. MECHANIC'S LIENS. Lessee has no authority, express or implied, to
create or place any lien or encumbrance of any kind or nature whatsoever upon,
or in any manner to bind the interest of Lessor or Lessee in the Premises or to
charge the rentals payable hereunder for any claim in favor of any person
dealing with Lessee, including those who may furnish materials or perform labor
for any construction or repairs. Lessee covenants and agrees that it will pay or
cause to be paid all sums legally due and payable by it on account of any labor
performed or materials furnished in connection with any work performed on the
Premises and that it will save and hold Lessor harmless from any and all loss,
cost or expense based on or arising out of asserted claims or liens against the
leasehold estate or against the right, title and interest of the Lessor in the
Premises or under the terms of this Lease. Lessee agrees to give Lessor
immediate written notice of the placing of any lien or encumbrance against the
Premises.
<PAGE>
22. MISCELLANEOUS.
A. Words of any gender used in this Lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires. The captions inserted
in this Lease are for convenience only and in no way define, limit or otherwise
describe the scope or intent of this Lease, or any provision hereof, or in any
way affect the interpretation of this Lease.
B. In the event the Premises constitute a portion of a multiple
occupancy building, Lessee's "proportionate share," as used in this Lease, shall
mean a fraction, the numerator of which is the space contained in the Premises
and the denominator of which is the entire space contained in the building.
C. The terms, provisions and covenants and conditions contained in this
Lease shall run with the land and shall apply to, inure to the benefit of, and
be binding upon, the parties hereto and upon their respective heirs, executors,
personal representatives, legal representatives, successors and assigns, except
as otherwise herein expressly provided. Lessor shall have the right to transfer
and assign, in whole or in part, its rights and obligations in the building and
property that are the subject of this Lease. Each party agrees to furnish to the
other, promptly upon demand, a corporate resolution, proof of due authorization
by partners, or other appropriate documentation evidencing the due authorization
of such party to enter into this Lease.
D. Lessor shall not be held responsible for delays in the performance of
its obligations hereunder when caused by material shortages, acts of God or
labor disputes.
E. Lessee agrees, from time to time, within ten (10) days after request
of Lessor, to deliver to Lessor, or Lessor's designee, a Certificate of
Occupancy and an estoppel certificate stating that this Lease is in full force
and effect, the date to which rent has been paid, the unexpired term of this
Lease and such other factual matters pertaining to this Lease as may be
requested by Lessor. It is understood and agreed that Lessee's obligation to
furnish such estoppel certificates in a timely fashion is a material inducement
for Lessor's execution of this Lease.
F. This Lease constitutes the entire understanding and agreement of the
Lessor and Lessee with respect to the subject matter of this Lease, and contains
all of the covenants and agreements of Lessor and Lessee with respect thereto.
Lessor and Lessee each acknowledge that no representations, inducements,
promises or agreements, oral or written, have been made by Lessor or Lessee, or
anyone acting on behalf of Lessor or Lessee, which are not contained herein, and
any prior agreements, promises, negotiations, or representations not expressly
set forth in this Lease are of no force or effect. This Lease may not be
altered, changed or amended except by an instrument in writing signed by both
parties hereto.
G. All obligations of Lessee hereunder not fully performed as of the
expiration or earlier termination of the term of this Lease shall survive the
expiration or earlier termination of the term hereof, including without
limitation, all payment obligations with respect to taxes and insurance and all
obligations concerning the condition and repair of the Premises. Upon the
expiration or earlier termination of the term hereof, and prior to Lessee
vacating the Premises, Lessee shall pay to Lessor any amount reasonably
estimated by Lessor as necessary to put the Premises, including without
limitation, all heating and air conditioning systems and equipment therein, in
good condition and repair, reasonable wear and tear excluded. Lessee shall also,
prior to vacating the Premises, pay to Lessor the amount, as estimated by
Lessor, of Lessee's obligation hereunder for real estate taxes and insurance
premiums for the year in which the Lease expires or terminates. All such amounts
shall be used and held by Lessor for payment of such obligations of Lessee
hereunder, with Lessee being liable for any additional costs therefor upon
demand by Lessor, or with any excess to be returned to Lessee after all such
obligations have been determined and satisfied as the case may be. Any security
deposit held by Lessor shall be credited against the amount due from Lessee
under this Paragraph 22C.
<PAGE>
H. If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
Lease, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and it is also the
intention of the parties to this Lease than in lieu of each clause or provision
of this Lease that is illegal, invalid or unenforceable, there be added, as a
part of this Lease, a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and be legal,
valid and enforceable.
I. All references in this Lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on which
all parties hereto have executed this Lease.
J. Lessee represents and warrants that it has dealt with no broker,
agent or other person in connection with this transaction or that no broker,
agent or other person brought about this transaction, other than as may be
referenced in a separate written agreement executed by Lessee, and delivered to
Lessor, and Lessee agrees to indemnify and hold Lessor harmless from and against
any claims by any other broker, agent or other person claiming a commission or
other form of compensation by virtue of having dealt with Lessee with regard to
this leasing transaction.
K. If and when included with the term "Lessor", as used in this
instrument, there is more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of a notice
specifying the individual at some specific address for the receipt of notices
and payments to Lessor. If and when included within the term "Lessee", as used
in this instrument, there is more than one person, firm or corporation, all
shall jointly arrange among themselves for their joint execution of a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Lessee. All parties
included within the terms "Lessor" and "Lessee", respectively, shall be bound by
notices given in accordance with the provisions of Paragraph 25 hereof to the
same effect as if each had received such notice.
23. SECURITY SERVICE. Lessee agrees to pay the proportionate share of the
cost of monitoring, repair and maintenance of the burglar alarm systems, water
flow detection systems and other protective security equipment installed on the
Premises and/or the building of which the Premises are a part, including the
cost of any license or permit or user charge required for such security systems.
Lessor has entered into an agreement with a third party for the monitoring,
maintenance and repair. Lessor shall not be liable to Lessee for any damages,
costs or expenses which occur for any reason in the event such security system
is not properly installed, monitored or maintained.
<PAGE>
24. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivering of notice or the making of any payment by
Lessor to Lessee or with reference to the sending, mailing or delivering of any
notice or the making of any payment by Lessee to Lessor shall be deemed to be
complied with when and if the following steps are taken:
(a) All rent and other payments required to be made by Lessee to Lessor
hereunder shall be payable to Lessor at the address for Lessor set forth
below or at such other address as Lessor may specify from time to time by
written notice delivered in accordance herewith. Lessee's obligation to
pay rent and any other amounts to Lessor under the terms of this Lease
shall not be deemed satisfied until such rent and other amounts have been
actually received by Lessor. In addition to base rental due hereunder, all
sums of money and all payments due Lessor hereunder shall be deemed to be
additional rental owed to Lessor.
(b) All payments required to be made by Lessor to Lessee hereunder
shall be payable to Lessee at the address set forth below, or at such
other address within the continental United States as Lessee may specify
from time to time by written notice delivered in accordance herewith.
(c) Any written notice or document required or permitted to be
delivered hereunder shall be deemed to be delivered whether actually
received or not when deposited in the United States Mail, postage prepaid,
Certified or Registered Mail, addressed to the parties hereto at the
respective addresses set out below, or at such other address as they have
theretofore specified by written notice delivered in accordance herewith.
25. ADDITIONAL PROVISIONS. See __________ attached hereto and incorporated
by reference herein.
26. LESSOR'S LIEN. In addition to any statutory lien for rent in Lessor's
favor, Lessor shall have and Lessee hereby grants to Lessor a continuing
security interest for all rentals and other sums of money become due hereunder
from Lessee, upon all goods, wares, equipment, fixtures, furniture, inventory,
and other personal property of Lessee now or hereafter situated at 7803 National
Turnpike, and such property shall not be removed therefrom without the consent
of Lessor until all arrearages in rent as well as any and all other sums of
money then due to Lessor hereunder shall first have been paid and discharged. In
the event any of the foregoing described property is removed from the Premises
in violation of the covenant in the preceding sentence, the security interest
shall continue in such property and all proceeds and products, regardless of
location. Upon a default hereunder by Lessee in addition to all other rights and
remedies, Lessor shall have all rights and remedies under the Uniform Commercial
Code, including without limitation, the right to sell the property described in
this Paragraph at public or private sale upon five (5) days notice by Lessor.
Lessee hereby agrees to execute such other instruments, necessary or desirable
under applicable law to perfect the security interest hereby created. Lessor and
Lessee agree that this Lease and security agreement serves as a financing
statement and that a copy, photographic or other reproduction of this portion of
this Lease may be filed of record by Lessor and have the same force and effect
as the original. This security agreement and financing statement also covers
fixtures located at the premises subject to this Lease and legally described in
Exhibit "A" attached hereto and incorporated herein by reference and is to be
filed for record in the real estate records. The record owner of this property
is
<PAGE>
EXECUTED BY LESSOR, this 29th day of March, 1990.
C-S-K LOUISVILLE,
a Texas limited partnership
Attest/Witness
/s/ Karen Brice By: /s/ Donald E. Dennis, Jr.
- ------------------------- ----------------------------
Name: Donald E. Dennis, Jr.
Title: Office Coordinator Title: Authorized Agent
- -------------------------
ADDRESS:
C-S-K Louisville, a Texas Limited
Partnership
c/o Trammell Crow Company
100 Mallard Creek Road, Suite 270
Louisville, Kentucky 40207
EXECUTED BY LESSEE, this 29th day of March, 1990.
ALLIED SASH AND DOOR, INC.
a Kentucky corporation
Attest/Witness
/s/ Jerry Higgins By: /s/ Larry E. Martin
- ------------------------- ----------------------------
Name: Larry E. Margin
Title: Operations Manager Title: General Manager
- -------------------------
ADDRESS:
Allied Sash and Door, Inc.
a Kentucky corporation
7803 National Turnpike
Louisville, Kentucky 40214
<PAGE>
ADDENDUM I.
Addendum to a Lease Agreement by and between
C-S-K Louisville, a Texas Limited Partnership ("Lessor"),
and
Allied Sash and Door, Inc., a Kentucky corporation ("Lessee"),
dated March 29, 1990 (the "Lease")
2A. Base Rent, Security Deposit and Escrow Payments:
Base Rent as set forth in Paragraph 2A shall be paid as follows:
Months 1 through 36 $1.23/r.s.f. per annum
Months 37 through 60 $1.28/r.s.f. per annum
Months 61 through 72 $1.32/r.s.f. per annum
Months 73 through 84 $1.36/r.s.f. per annum
Months 85 through 96 $1.40/r.s.f. per annum
Months 97 through 108 $1.44/r.s.f. per annum
Months 109 through 120 $1.48/r.s.f. per annum
End of Addendum
ADDENDUM II
Lessor agrees to rehabilitate roof in 1990.
End of Addendum II
Exhibit 10.59
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") made this 9th day of September, 1985,
between 5 Mile Point Industrial Park, Inc. with an address of c/o A. J.
CERASARO, INC., Box 237, Endicott, New York, 13760 ("Lessor") and MAMCO
MILLWORKS OF NEW YORK, INC., a New York corporation with an address c/o Middle
Atlantic Millwork Co., Chestnut & Academy Avenues, Box 65, Woodbury
Heights, New Jersey 08097 ("Lessee").
W I T N E S S E T H:
1. DEMISE OF PREMISES: CONSTRUCTION BY LESSOR. Lessor hereby leases to
Lessee and Lessee hereby leases from Lessor, for the rental term and upon the
covenants and conditions herein stated, the following premises, consisting of a
building (the "Building") to be designed and constructed by or on behalf of
Lessor in accordance with the final plans and specifications attached hereto as
Schedule A and made a part hereof (the "Plans and Specifications") on land in
the Town of Kirkwood, County of Broome, New York adjacent to Route 11 and more
particularly described in Schedule B attached hereto and made a part hereof,
together with the right to use the main access road and private road to the main
highway as depicted on the Site Plan as hereinafter defined, to be used in
common with other property (said land, building and appurtenances known as the
"Premises").
Lessor shall be responsible for and shall construct to completion all
elements of the Building and site improvements as set forth in the Plans and
Specifications and shall include, whether or not set forth on the Plans and
Specifications recycled asphalt access drive, truck loading and parking areas,
automobile parking sufficient for fifty (50) cars, curbing and bumpers, lot
striping, sidewalks to entrances, storm drainage facilities as required and a
rail siding (which siding may extend to serve and be used in common with other
property), all truck ramp doors shall be at least 18 feet wide and 16 feet high,
an indoor utility sink, garage doors allowing sufficient height clearance for
fork lift use to, on and under the door areas and curbing on each side of the
ramps from ground level to warehouse floor level, the two rail access doors
shall be evenly spaced across the Building and the first and second floor plans
shall be reversed. Lessee shall make available to Lessor, and shall deliver to
the Premises within forty-five (45) days of receipt of Lessor's written request,
the items set forth on Schedule B-1 attached hereto and made a part hereof;
provided, however, if Lessee is unable to make all or any part of such items
available within said forty-five (45) day period, due to circumstances beyond
Lessee's control, Lessee shall have an additional thirty (30) days to make such
items available, at which time, if such items are not available, Lessor shall
purchase such items at the lowest price reasonably available and submit an
invoice to Lessee for such items which Lessee shall pay within thirty (30) days
of receipt.
<PAGE>
All construction work shall be performed and completed in a good and
workmanlike manner, in accordance with all rules and regulations of insurance
carriers and governmental authorities having jurisdiction over the Premises.
Lessor at its expense shall obtain any building permits, occupancy permits or
certificates necessary for the lawful construction and occupancy of the Premises
by Lessee for the purposes set forth herein.
Lessor shall enforce for the benefit of Lessee any and all warranties
obtained from Lessor's general contractor, or any subcontractor or supplier,
including, without limitation, American Buildings Company. Further, Lessor shall
obtain, at Lessor's cost all warranties available for the structure supplied by
American Buildings Company except the "weatherproofing" warranty which shall be
obtained only at Lessee's cost and upon Lessee's written request.
2. Expansion of Building. Lessor represents that, as of the date hereof,
the construction of an addition to the Building, as described below, would be
consistent with existing zoning and other applicable building, planning and
environmental laws and regulations. Lessor agrees to obtain a building permit
(or written evidence reasonably satisfactory to Lessee to the effect that a
building permit could lawfully be issued) for an addition, described below, (the
"Addition") prior to commencement of construction of the Building (unless Lessee
shall have authorized commencement prior to receipt of such permit).
Lessor agrees to build the Addition to the Premises to be constructed
pursuant to this Agreement upon the following terms and conditions provided that
the Town of Kirkwood agrees to issue all necessary permits for the construction
and occupancy of said Addition. Lessor shall use its best efforts to obtain such
permits.
<PAGE>
If Lessee elects to expand the Building as shown on the site plan attached
hereto as Schedule C and made a part hereof (the "Site Plan"), then Lessor shall
prepare preliminary plans and specifications for the Addition, together with a
proposal for additional rent (and security) for said construction. Upon the
acceptance of the preliminary plans and specifications and proposed additional
rental and security by Lessee, the parties shall enter into an agreement
modifying the rent and security and Lessor shall prepare final plans and
specifications for the Addition and shall construct the Addition after Lessee's
approval of the final plans and specifications. The Addition shall be at the
same floor elevation as the Building and shall include an extension of the rail
siding to serve the Addition. Said Addition to the Building shall not exceed
fifty (50%) percent of the area (40,000 sq. ft.) of the Building originally to
be constructed on the Premises and shall be of the same pre-engineered metal
construction using the same basic design and materials as the Building. Such
Addition will be in conformance with then existing Zoning Laws of the Town of
Kirkwood. Lessor shall lease the Addition to Lessee under the same terms and
conditions as herein provided, commencing upon the completion of the Addition,
but with rent to be payable at a rate mutually agreed upon, such rate to be
determined prior to construction as set forth above. In the event Lessor and
Lessee are unable to agree upon final plans and specifications or a mutually
satisfactory rent or security, then Lessor shall not be obligated to construct
the addition and this Lease shall continue as otherwise provided. Lessor shall
not be obligated to construct the addition unless there are at least 6 years
remaining on the term of this Lease (including any Renewal Term hereof for which
Lessee agrees to exercise its option). In the event of construction of the
Addition to the Building, Lessor shall enforce for the benefit of Lessee any and
all warranties obtained from Lessor's general contractor, subcontractors or
suppliers, including, without limitation, the manufacturer of the Addition or
its components. The Addition, upon completion, shall be deemed a part of the
Premises as defined herein.
In the event Lessor is unable to construct the Addition as designated by
Lessee (except as set forth below), Lessee shall have an option to purchase the
Premises at the price of the greater of $2,000,000.00 or the Fair Market Value,
as established herein, under the following terms and conditions, provided, the
failure of the parties to agree upon a satisfactory lease rental and security or
upon plans and specifications for the proposed addition shall not constitute
grounds for the exercise of this option.
The Fair Market Value of the Premises shall be such value as determined by
an independent appraiser (with MAI designation) as shall be selected by the
concurrence of Lessor and Lessee. If Lessor and Lessee are unable to agree upon
an appraiser, both Lessor and Lessee shall each designate an MAI appraiser and
such designated appraisers shall select a third MAI appraiser who shall appraise
the Premises and determine its Fair Market Value. Lessor and Lessee shall
endeavor to agree upon an appraiser within thirty (30) days of Lessee's exercise
of its option. In the event no appraiser is agreed upon within such thirty (30)
day period, each party shall designate its appraiser within fifteen (15)
additional days and such appraiser shall designate the final appraiser within a
further fifteen (15) days. The appraiser or appraisers having the authority to
determine Fair Market Value in accordance with the terms of this Lease shall be
directed to render a determination within fifteen (15) days of the date on which
his or their authority to make such determination becomes final. The
determination of the appraiser or appraisers shall be final, binding and
non-appealable. In the event either party fails to designate an appraiser within
the referenced time, the selection made by the other party shall govern.
Lessee's option to purchase the Premises shall be exercisable in writing within
ninety (90) days of Lessor's written notification to Lessee that Lessor is
unable to construct the Addition.
<PAGE>
Closing under the sale of the Premises shall take place within forty-five
(45) days of determination of the Fair Market Value of the Premises at which
time Lessor shall deliver its Bargain and Sale Deed with Covenants against
grantor's acts for the Premises conveying good and marketable title, free and
clear of all liens and encumbrances, except those easements and restrictions set
forth in Schedule D, and subject to rights of others in the railroad siding and
to utility easements for the benefit of adjoining users, provided such easements
do not prevent use of the Premises as contemplated herein. Lessor shall
concurrently deliver an owner's title insurance commitment on the current ALTA
form insuring title as aforesaid. Seller shall pay all transfer fees and taxes.
Rent and other current charges shall be adjusted as of the date of closing and
closing expenses shall be allocated or paid as customarily provided in Broome
County, New York.
3. RENTAL TERM. The initial rental term is eight (8) years, commencing
July 1, 1986 or on such later date as the Premises are substantially completed
and ready for occupancy. Lessor shall complete the Premises as soon as
reasonably possible but subject to delays, if any, in construction occasioned by
labor dispute, material, equipment, transportation or labor shortages, delay or
back order in material shipment, inclement weather, casualties or acts of God or
other causes beyond Lessor's control (any of the foregoing events or
circumstances being referred to herein as a "Force Majeure") and the completion
time shall be extended from the period of all such delays. Notwithstanding the
foregoing, in the event the Premises are not substantially completed and ready
for occupancy by October 1, 1986, Lessee shall have the option to terminate this
Lease by written Notice to Lessor within 30 days of such date; provided,
however, that such date shall be extended by the number of days delay in
delivery of the items which Lessee is to deliver to Lessor pursuant to Section 1
of this Agreement.
The Premises shall be deemed substantially completed and ready for
occupancy upon the satisfaction of all of the following conditions: (1) the
Premises are fit for Lessee's Intended Use, defined below, being so physically
completed, except for items of minor adjustments, finishing work to be done by
Lessee and the like, that the Premises are in such physical condition that the
same reasonably may be lawfully and in fact used and occupied by Lessee as
provided in Paragraph 5; (2) a permanent or temporary Certificate of Occupancy
has been issued by the appropriate governmental official; (3) Lessee has
received a certification (at Lessee's cost) from a professional engineer
licensed in New York State reasonably acceptable to Lessor and Lessee and
identified on Schedule F attached or to be attached hereto and made a part
hereof (the "Approving Engineer") certifying that the Building has been
completed in accordance with the Plans and Specifications, this Lease and all
applicable governmental regulations and building codes (the "Completion
Certificate"); (4) Lessor has notified Lessee of substantial completion
tendering possession of the Premises to Lessee; and (5) five days have elapsed
since the date of such notice. Lessor and Lessee shall enter into a written
memorandum specifying the precise commencement date. In the event the Approving
Engineer ceases business operations or otherwise fails to perform the functions
ascribed to him hereunder, Lessor and Lessee shall agree on a new professional
engineer licensed in New York State to serve as the Approving Engineer, such
selection to be made within fifteen (15) days of written notice by either party
of such failure of performance, provided, however that the Approving Engineer's
failure to provide the Completion Certificate because he believes the criteria
for providing same have not been met, shall not be deemed justification for
asserting that the Approving Engineer has failed to perform. In the event Lessor
and Lessee fail to agree on a substitute Approving Engineer within the aforesaid
fifteen (15) day period, they shall, within five (5) days, each provide the
names of two (2) engineers meeting the criteria set forth herein and willing to
so serve and the substitute Approving Engineer shall be selected by lottery from
among the four (4) names, (or from the two (2) names if one of the parties has
failed to timely submit names) such selection to be made two (2) days following
the aforesaid five (5) day period.
Lessee shall have the option of renewing the term hereof, provided Lessee
is not then in default under any provision of this Lease, for an additional five
(5) years (the "First Renewal Term") and thereafter for an additional two (2)
years (the "Second Renewal Term) in each event upon giving Lessor written notice
one hundred eighty (180) days prior to the expiration of the then current term
of Lessee's exercise of its option to renew.
<PAGE>
Lessor shall provide to Lessee, at the same time it provides such items to
any lender financing the Premises, (i) a survey of the Premises prepared by a
surveyor licensed in the State of New York, and (ii) a current title report on
the Premises, which report shall include copies of all items shown of record
with respect to the Premises.
4. DEPOSIT; RENTAL AMOUNT; SECURITY. Lessee shall pay, upon execution
hereof, a deposit payment of $25,000.00 to be credited as herein provided and to
be refunded in the event Lessee is entitled to terminate this Lease by reason of
Lessor's material breach. The annual rental during the initial rental term and
for both the First Renewal Term and the Second Renewal Term is $165,000.00, per
year, payable (except as herein provided) in equal monthly installments in
advance, on the first day of each month of the term. Rent shall be prorated for
partial months and Lessee's deposit payment shall be credited against the first
five (5) months' installments of rent, at the rate of $5,000.00 per month. All
rental payments shall be made to Lessor at Lessor's address aforesaid or to such
other payee and/or such other place as Lessor, by ten days' prior written
notice, shall designate to Lessee.
In the event Lessee elects not to exercise its option for the First
Renewal Term, then Lessee shall pay to Lessor 150 days prior to the expiration
of the initial rental term, the sum of $165,000.00 plus an amount equal to one
year's rent for the Addition, if constructed pursuant to Paragraph 2, prior to
the end of the initial rental term.
5. USE OF PREMISES. Lessee shall have the right to use the Premises for
any lawful purpose, subject to (a) applicable zoning and other ordinances and
regulations, (b) all existing building restrictions of record, none of which
ordinances or restrictions shall limit or prohibit use of the Premises for
Lessee's Intended Use (herein defined) and (c) the restriction that the Premises
will not be used for any noxious or offensive purposes, shall not constitute a
nuisance and shall not be used in a manner which would be unreasonably
detrimental to Lessor's development of its adjoining properties for industrial
purposes. Lessor warrants that Lessee may use the Premises for office purposes
and for Lessee's business of warehousing, storing, fabricating, assembling,
shipping and receiving of building or other materials, millwork and related work
in progress ("Lessee's Intended Use").
<PAGE>
Lessor warrants that the Premises is not situated in the 100 year flood
hazard area as designated by the Department of Housing and Urban Development.
6. ADDITIONAL RENT. As additional rental, Lessee shall pay to Lessor,
within fifteen (15) days after Lessor certifies to Lessee the amount thereof,
but not prior to fifteen (15) days prior to the date such amounts are due to the
applicable governmental authority, all ad valorem real property taxes, school
taxes, special assessments or payments to governmental instrumentalities in lieu
of taxes assessed against the Premises, including any additional construction,
to the extent such payments exceed $18,000 per annum.
Nothing herein contained shall be construed to include as "taxes" any
inheritance, estate, succession, transfer, gift, franchise, corporation, net
income or profit tax or capital levy that is or may be imposed upon Lessor.
Lessee shall have the right to contest real estate taxes or other charges
assessed against the Premises.
7. UTILITIES. Lessor warrants and represents that at the commencement of
the initial rental term the following utilities will be available for the
Premises for use by Lessee: electricity, gas (if made available by the utility
to the industrial park of which the Premises is a part) potable water, sewer,
telephone service. All hook up and connection charges to bring these utilities
into the Premises shall be borne by Lessor. Following installation, Lessee shall
pay for all charges by public authority or private utility for any and all
water, sewer, electric, gas, telephone and other utility service supplied to the
Premises and used by Lessee during the rental term.
<PAGE>
8. MAINTENANCE OF PREMISES. Except as otherwise provided herein, Lessee,
at Lessee's sole expense, shall maintain the Premises in good order and
condition and make all repairs and replacements to the Building (except those
which are the responsibility of Lessor), parking areas adjacent to the Building,
the sidewalks, curbs and all areas used in connection with the operation of the
Premises.
Lessor shall, throughout the initial rental term and any renewal term,
have the obligation of maintaining the roof, foundation, structural supports and
exterior walls of the Building, excluding any casualty arising directly from any
negligent act or omission of the Lessee, and shall further undertake and
initiate all repairs or maintenance to the Premises covered by any warranties
given to Lessor. Lessor shall remain responsible for cleaning, maintenance,
repair and replacement of any common facilities which serve the Premises and any
other property, including the rail spur, and, as applicable, any common access
drive and any water, sewer, drainage or utility facilities, unless such access
drives have been dedicated by Lessor and accepted by the Town of Kirkwood or if
such utilities are provided by any municipality or by a regulated utility.
Lessee shall make no alterations or additions to the Premises without
Lessor's consent, which shall not be unreasonably withheld or delayed. All
alterations or additions made with such consent shall be part of the Premises
and the property of Lessor, subject to the terms of this Lease unless otherwise
provided by the instrument of consent. Lessee's trade fixtures, equipment or
other personal property placed on the Premises may be removed by Lessee at any
time during the rental term; but if installation of any of same in or on the
Premises or the removal therefrom of any thereof causes damage to the Premises,
all such damage shall be fully repaired promptly by Lessee at Lessee's expense.
Lessor agrees that Lessee may and shall be permitted to erect either a
free standing or facade sign on the Premises identifying the location of
Lessee's facility, provided the sign is acceptable to the Town of Kirkwood and
reasonably acceptable to Lessor.
<PAGE>
9. INSURANCE. Lessee shall provide and keep in effect upon the
commencement of the initial rental term of this Lease and throughout such term
and any renewal term, for the benefit of Lessee and Lessor:
(a) A policy of public liability insurance and property damage
insurance in an amount not less than $10,000,000.00 with respect to the Premises
covering both the Lessor and the Lessee. The Lessor shall be named as an
additional insured on such policy. Such policy shall not be required to be
obtained by Lessee until the commencement of the initial term of this Lease.
(b) A policy or policies of insurance against loss by hazards covered
by the standard fire and extended coverage endorsement and such additional
hazards as are required to be insured against by Lessor in an amount equal to
the full replacement cost of the Premises, plus all fixtures, equipment and
facilities therein. The Lessor shall be named as an additional insured on such
policy. The proceeds of such insurance shall be payable to the Lessor for use in
accordance with Section 10. Said policy shall also provide for rental
interruption insurance for the benefit of the Lessor in an amount equal to one
year's gross rental income.
(c) Lessee shall provide Certificates of Insurance evidencing the
insurance coverage required in Paragraphs 9(a), 9(b) and 9(c). Lessee shall also
provide a policy of standard "builders risk" insurance commencing upon execution
of this Lease.
10. DAMAGE BY FIRE, ETC. In the event of damage to the Premises by fire or
other casualty during the rental term, Lessee shall notify Lessor thereof
immediately.
Except during the last two years of the initial, rental term or of an
exercised renewal term, Lessor shall repair and restore the Premises to its
condition prior to the damage. Work shall commence promptly after the damage is
surveyed and insurance payment therefor is assured but, in any event, not more
than 30 days after the damage occurs or 10 days after insurance proceeds are
received, whichever is later; and the work shall be completed as soon as
reasonably practical, and in any event within 150 days after commencement, such
commencement and completion being subject to delays incident to a Force Majeure.
<PAGE>
If, such damage is not repaired and the Premises restored substantially to
their condition before the damage within one-hundred fifty (150) days after work
therefor is commenced (which one-hundred fifty (150) day period may be subject
to extension for a period not longer than an additional one-hundred twenty (120)
days by reason of a Force Majeure) Lessee shall have the option either to
terminate this Lease or to direct Lessor to continue to repair the damage and
restore the Premises.
If, at the time of a casualty (whose restoration would require more than
sixty (60) days time, in Lessor's reasonable estimation) two years or less
remain in the term (inclusive of exercised renewal terms), Lessor may terminate
this Lease unless Lessee shall agree to extend the then current term (or
exercise a renewal term, as applicable) in order that this Lease shall continue
for a minimum of four (4) years from such casualty at the same terms and
conditions as set forth herein. Notice of the manner of Lessor's exercise of the
option shall be given to Lessee within thirty (30) days after the damage occurs,
and Lessee shall have thirty (30) days after receipt of such notice to notify
Lessor whether it accepts such termination or elects to extend or renew the
term.
If the Premises are rendered wholly or partially untenantable by such
casualty or by action of public authority by reason thereof, the rental and
additional rental payable by Lessee hereunder shall be abated for the period
intervening between the date of the casualty and the date the casualty is
repaired and the Premises are restored so as to be substantially completed and
ready for occupancy as defined in Paragraph 3. Such abatement shall be
apportioned and applied only to that part of the Premises so rendered
untenantable, provided, however, that if such portion of the Premises is
rendered untentable as would make the entire Premises commercially impracticable
for Lessee's use, such abatement shall apply to the entire Premises.
11. EMINENT DOMAIN. Lessee hereby assigns to Lessor all rights to
compensation or damages, if any, with respect to the fee interest in the
Premises on condemnation of the Premises in whole or in part under power of
eminent domain. Lessee shall be entitled to any separate award or compensation
or damages related to its interest or property in the Premises, including
business dislocation and relocation payments, provided that no such award or
payment shall reduce or diminish the condemnation award otherwise payable to
Lessor as the owner of the Premises.
If any such condemnation of all or any substantial part of the Premises
renders the Premises unusable for the purposes for which it was being used prior
to the taking, Lessee, by 30 days' prior written notice to the Lessor, may
terminate this Lease; but if the Lease is not so terminated, Lessor shall make
such repairs, if any, as are reasonably necessary to restore the part thereof
not condemned to tenantable condition. Lessor, in so doing, shall not be
required to expend more than the net amount received by Lessor in the
condemnation proceedings for damage to such part of the Premises not condemned
unless Lessee pays the amount of the excess of the expenditure. Restoration
repairs, if made, shall begin within thirty (30) days after Lessee vacates the
part of the Premises condemned and shall be completed with reasonable diligence,
subject, however, to delays incident to governmental regulation, unavailability
of material or labor and other causes beyond Lessor's control; but, if such
restoration is not completed within one hundred fifty (150) days after such work
is commenced, Lessee shall have the option to terminate this Lease or to direct
Lessor to continue restoration.
<PAGE>
12. ASSIGNMENT AND SUBLETTING. Upon notice to Lessor, Lessee shall have
the right, at any time and from time to time, to assign this Lease and to sublet
all or any portions of the Premises, provided the Letter of Credit (as defined
herein) shall remain in full force and effect. Except for assignments made
pursuant to subpart (B) in the following paragraph, no assignment or subletting
shall release Lessee from Lessee's obligations and commitments.
Lessee may (A) assign this Lease or sublet all or part of the Premises to a
subsidiary corporation in which it has and, throughout the period of Lease if
assigned, or the period of subletting, continues to have a controlling stock
interest; or (B) assign this Lease to any corporation with which it consolidates
or merges provided that (a) the net assets of the surviving corporation
immediately following the consolidation or merger, determined in accordance with
generally accepted accounting principles, shall be not less than the net assets
of Lessee immediately preceding the consolidation or merger, determined in like
manner and (b) Lessee provides Lessor, immediately following the consolidation
or merger, with evidence satisfactory to Lessor of the fact of consolidation or
merger, the aforesaid net asset value of the surviving corporation and the
assumption by the surviving corporation of all of Lessee's obligations and
commitments hereunder. No assignment or subletting pursuant to this paragraph
shall affect the continued effectiveness of the Letter of Credit for its full
term.
Notwithstanding the foregoing, in the event a proposed assignment by
Lessee is incident other than to (i) a bona-fide sale or transfer of Lessee's or
Lessee's parent's business or (ii) a corporate reorganization or restructuring
by Lessee or Lessee's parent, Lessor shall have the right to terminate this
Lease, provided notice of termination is given by Lessor within thirty (30) days
of Lessee's notice of the proposed assignment, and upon such termination neither
party shall have further obligations under this Lease.
13. SUBORDINATION. At Lessor's request Lessee shall execute, acknowledge
and deliver to Lessor, in recordable form, from time to time, such instruments
as are necessary or appropriate to subordinate Lessee's estate and interest
hereunder to any mortgage, trust deed or similar encumbrance held by an
institutional lender, Industrial Development Agency or its institutional
mortgagee ("Mortgage") imposed upon the Premises or any property of which the
Premises are a part or upon Lessor's estate and interest therein, provided that
the holder of such Mortgage, simultaneously executes, acknowledges and delivers
to Lessee, in recordable form, an agreement not to disturb Lessee's right in or
possession of the Premises so long as Lessee is not in default hereunder. The
holder of any such Mortgage, now or hereafter having priority over this Lease
may subordinate same to this Lease by notice to Lessee and without Lessee's
consent and, upon such subordination, such holder shall have the same rights
with respect to this Lease as though this Lease had been executed and delivered
prior to execution and delivery of said Mortgage, and had been assigned by
Lessor to such holder.
14. INDEMNITY. Lessee shall save and keep Lessor harmless and indemnified
from all loss or damage to any person or property while on the Premises arising
from any violation or non-performance of the Lessee's obligations under this
Lease or negligence of the Lessee, its agents, servants, licensees, or invitees
(unless caused by the act, negligence or default of Lessor, its employees,
agents, licensees or contractors).
Lessor shall save and keep Lessee harmless and indemnified from all loss
or damage to any person or property while on the Premises arising from any
violation or non-performance of the Lessor's obligations under this Lease or the
negligence of the Lessor, its agents, servants, licensees, or invitees (unless
caused by the act, negligence or default of Lessee, its employees, agents,
licensees or contractors), provided that such indemnification shall not extend
to loss or damage covered by Lessee's hazard insurance coverage.
<PAGE>
15. LETTER OF CREDIT. At all times during the term of this Lease, Lessee
will maintain an Irrevocable Letter of Credit (the "Letter of Credit") in favor
of the Lessor, in substantially the form of Schedule E attached hereto and made
a part hereof, and in an amount not to exceed the amount as shown on Exhibit E.
Lessor and Lessee agree with respect to the Letter of Credit that:
(a) The Letter of Credit will be established and maintained with a Bank
reasonably acceptable to Lessor. Pittsburgh National Bank is deemed reasonably
acceptable to Lessor.
(b) Lessee shall have the right to substitute a new Letter of Credit for
an existing one so long as the provisions of this Section 15 of the Lease
Agreement are preserved. In the event the Letter of Credit is terminated or not
renewed by the issuer or in the event any substitute letter of credit is
terminated or not renewed by the issuer thereof, Millwork Industries, Inc. shall
have the right to obtain and deliver to the beneficiary a substitute letter of
credit in form and substance substantially equivalent to the Letter of Credit,
or provide other security acceptable to beneficiary. Such beneficiary agrees not
to exercise its right to draw upon the Letter of Creditor (or any substitute
Letter of Credit) as set forth in the Letter of Credit so long as the substitute
Letter of Credit or other acceptable security is received by the beneficiary
within the applicable time period under the Letter of Credit.
(c) The Beneficiary under the Letter of Credit (as defined therein) will
be entitled to draw sums in such manner prescribed by the Letter of Credit only
at or after such date as the Premises is substantially completed and ready for
occupancy as defined in Section 3 of this Lease Agreement and as evidenced by
delivery to the issuer of the Letter of Credit of the Completion Certificate and
then in such event and only in such event as Lessee fails to pay rental payments
or other money under the terms of this Lease Agreement. In the event the Letter
of Credit (or any substitute letter of credit) is drawn upon due to the
cancellation thereof by the issuer and Lessee's failure to provide a substitute
letter of credit or other collateral acceptable to Lessor within 25 days of
Lessor's receipt of notice of cancellation, all amounts received by Lessor by
virtue of such draw shall be credited against rent due hereunder, starting with
the next payment due and continuing to be credited against consecutive payments
thereafter, and Lessor shall not be entitled to enforce any remedies provided
under this Lease Agreement against Lessee for non-payment of rent so long as
such credit is available and thereafter so long as Lessee then commences to pay
rent due hereunder.
(d) The amount of any draft drawn under the Letter of Credit will not
exceed the amount which Lessee is required to pay in accordance with this Lease.
Any amounts realized by the Lessor upon reletting of the Premises or other
revenues that would constitute mitigation of damages under New York law shall be
credited against amounts deemed to be required to be paid by Lessee to Lessor
under the Lease in determining the amount which Lessor may draw under the Letter
of Credit.
(e) The beneficiary will be entitled to draw such amounts as Lessee
would be required to pay under the Lease whether or not the Lessee has entered
into bankruptcy proceedings.
(f) The Letter of Credit may be transferred to a permanent lender for
the Premises, provided however that such transferee as a condition of such
transfer shall be required to execute this Lease and become a party hereto with
regard to those provisions of the Lease pertaining to the Letter of Credit.
<PAGE>
16. LESSOR'S ACCESS TO PREMISES. At any reasonable time, in a reasonable
manner, and upon prior notice to Lessee, Lessor may inspect the Premises and
show same to prospective purchasers, lienholders and others having a legitimate
interest therein and it may enter the Premises for any purpose of this Lease.
Lessor may also place, in reasonable locations on the Premises, notices for sale
or lease thereof or part thereof at any time within nine months before
expiration of the initial term and any renewal terms.
17. SURRENDER OF POSSESSION. At the end of the initial rental term, any
renewal term or on earlier termination hereof, Lessee shall surrender the
Premises to Lessor in the condition in which Lessee is required to keep same
hereunder, reasonable wear and tear excepted, with all signs, office fixtures,
equipment and other property that the Lessee is entitled hereunder to retain
removed therefrom without damage thereto and repairing any damage to the
Premises resulting from such removal.
18. GOVERNMENTAL REGULATION. Lessee, throughout the rental term, shall
fully comply with all laws and governmental regulations applicable to the
Premises provided, however that compliance in the nature of capital expenditures
shall remain the responsibility of Lessor, unless such capital expenditures are
necessitated by reason of Lessee's use of the Premises, in which event such
expenditures shall be borne by Lessee. Lessee may legally contest the validity
or applicability of any such law or regulation, however, provided that such
contest does not jeopardize the Premises or Lessor's interest therein.
19. DEFAULTS AND REMEDIES. If, during the initial rental term or any
renewal term, (a) Lessee fails to comply with any of its commitments or
obligations hereunder and such failure continues for ten days following notice
in the event of failure to pay rent or other sums due hereunder, or for thirty
days following notice in the event of any other such failure, or (b) Lessee
makes an assignment for benefit of creditors, commits an act of bankruptcy or
files a petition in bankruptcy or under any insolvency law, or (c) such a
petition is filed against Lessee and not dismissed within sixty days thereafter,
or (d) Lessee commits an anticipatory breach of the Lease prior to the
commencement of the rental term, then Lessee shall be deemed to be in default
hereunder.
Upon any such default by Lessee, Lessor may take possession of the Premises
and all alterations, additions and improvements thereto in any lawful manner and
Lessee shall permanently surrender same forthwith. Upon so taking or otherwise
recovering or receiving possession of the Premises, Lessor shall endeavor to
relet same for Lessee's account or otherwise, collect all rentals therefor and
apply such rentals (a) to Lessor's expenses of recovering possession of the
Premises, including reasonable attorneys' fees in connection with recovering
possession of the Premises or collecting any sums due under the terms of this
Lease, or enforcing any obligations under this Lease, and (b) to fulfilling
Lessee's commitments and obligations for the entire rental term hereunder. In
any event, Lessee shall be liable for and pay to Lessor on demand, as and when
the amounts thereof are determined, all deficiencies in the avails of such
reletting to meet such expenses, costs, including reasonable attorney's fees as
set forth above and rent hereunder for the entire unexpired balance of the term,
and all other commitments and obligations. In the event of a default by Lessee
which is not cured within the applicable cure period prior to the commencement
of the First Renewal Term, Lessor's damages shall include the sum of $165,000.00
plus an amount equal to one year's rent for the Addition, if constructed, as
provided in Paragraph 4 of this Lease. The obligation to pay this sum shall not
be offset by any rentals which may be collected by Lessor at anytime after the
initial rental term.
Alternatively, upon any such default by Lessee, Lessor may terminate this
Lease or treat same as terminated by Lessee and/or proceed against Lessee in any
lawful manner for recovery of damages arising from Lessee's default.
<PAGE>
Lessor shall have no right (and hereby expressly waives any such right) to
distrain, levy upon or sell any property of Lessee in the Premises without prior
notice to, and entry of judgment against, Lessee.
Upon any default hereunder by Lessor, Lessee shall have the right, upon
thirty days notice to Lessor and to any mortgagee of which Lessee has been given
notice, set-off against rents due hereunder or pursue any remedy provided by
law.
20. NOTICES. All notices, certificates and requests hereunder by either
party hereto to the other shall be in writing hand delivered or sent by
registered or certified mail with return receipt to the addresses for each party
aforesaid. Either party, on ten days' prior written notice to the other, may
designate a different address to which notices, certifications or requests to
that party shall be delivered or addressed.
21.QUIET POSSESSION. Lessor, for itself and its successors and assigns,
hereby covenants and agrees so long as Lessee complies with all of the terms,
covenants and provisions of this Lease, that Lessee shall have the peaceful and
quiet use of the Premises without let or hindrance and Lessor shall warrant and
defend Lessee in such peaceful and quiet use and possession against the claims
of all persons.
22. RIGHT OF FIRST REFUSAL. Lessee shall have the right of first refusal to
purchase the Premises at the same price and pursuant to the same material terms
and conditions as set forth in any bona fide offer or agreement to purchase the
Premises or any interest therein, or any part thereof received by Lessor at any
time during the term of this Lease or any extension or renewal thereof
("Offer"). Upon the receipt by Lessor of an Offer, Lessor shall deliver a copy
thereof to Lessee. Lessee shall have thirty (30) days from receipt of a copy of
an Offer to notify Lessor of Lessee's intent to purchase the Premises, which
notification shall be deemed to bind Lessor and Lessee to the terms of the Offer
to the same extent as if each had executed an Agreement of Sale including such
terms. Notwithstanding anything to the contrary set forth in the Offer, the
closing date provided therein shall be amended to the later of (i) such date or
(ii) the date sixty (60) days after Lessee's receipt of a copy of the Offer. If
Lessee fails to deliver written notice of its intent to purchase the Premises
within thirty (30) days of receipt of a copy of an Offer, this right of first
refusal shall be deemed to have been waived by Lessee. This right of first
refusal shall not apply with respect to any offer to purchase the Premises by
(a) Anthony J. Cerasaro, Eugene F. Roma and Anthony F. Roma (the "Principals");
(b) a wholly-owned subsidiary, parent or corporation resulting from a bona fide
merger or consolidation of Lessor; (c) a corporation in which the Principals are
the majority stockholders; (d) a limited partnership in which any of the
Principals is a general partner or a controlling partner in or controlling
shareholder of the general partner; or (e) a general partnership in which any
Principal is a partner.
23. RECORDING; INFORMATION. Upon request by Lessee, Lessor agrees to
execute a memorandum of this lease in recordable form which memorandum may be
recorded by Lessee. Lessor further agrees to execute and deliver such further
affidavits, information or assurances reasonably necessary in order to permit
Lessee to obtain title insurance for its leasehold interest. Lessor shall
provide Lessee with copies of the most recently available title policy and
survey for the Premises.
<PAGE>
24. APPLICABLE LAW. This Lease and the rights and obligations of both
parties hereto hereunder shall be governed by the laws of the State of New York.
25. MODIFICATION OF LEASE. The terms, covenants and conditions hereof may
not be changed orally but only by an agreement in writing signed by the party
against whom enforcement of the change, modification or discharge is sought. The
failure of either party hereto to insist in any one or more cases upon the
strict performance of any term, covenant, or condition of this Lease to be
performed or observed by the other party hereto shall not constitute a waiver or
relinquishment for the future of any such term, covenant, or condition.
26. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties and all prior agreements either oral or written are merged into this
Agreement.
27. SUCCESSORS AND ASSIGNS. The terms, covenants, and conditions of this
Lease shall be binding upon and shall inure to the benefit of Lessor and Lessee
and their respective executors, administrators, heirs, distributees, legal
representatives, successors and assigns.
28. COOPERATION. Lessee hereby agrees to cooperate with Lessor in
connection with any application for financing of the construction of the
Premises through the issuance of industrial revenue bonds by the Broome County
Industrial Development Agency, and further agrees to execute such documents
reasonably necessary in furtherance of said application and the financing
contemplated thereunder; provided, however, that in no event shall Lessee be
obligated to take any action or execute any document which would impair Lessee's
rights or increase Lessee's obligations under this Lease, nor require Lessee to
incur any direct or indirect cost or expense (unless Lessor reimburses Lessee
for such cost or expense).
<PAGE>
WITNESS DUE EXECUTION hereof by the parties hereto the date first above
stated.
LESSOR:
5 MILE POINT INDUSTRIAL PARK, INC.
By: /s/ ANTHONY J. CERASARO
--------------------------------------
ANTHONY J. CERASARO, President
Attest:
--------------------------------------
Secretary
[Corporate Seal]
LESSEE:
MAMCO MILLWORKS OF NEW YORK, INC.
By: /s/ WM C.A. COSTELLO
--------------------------------------
WM C.A. COSTELLO, JR, President
Attest:
-------------------------------------
JOSEPH BERGER,
Assistant Secretary
[Corporate Seal]
ASSIGNEE OF BENEFICIARY OF LETTER OF
CREDIT:
Name:_____________________________________
By: ______________________________________
[Corporate Seal] Attest: __________________________________
<PAGE>
STATE OF NEW YORK :
: SS
COUNTY OF BROOME:
On this 9th day of September , 1985, before me duly sworn, Anthony J.
Cerasaro , did depose and say that he resides at 408 South Liberty, Endicott, NY
; that he is the President of 5 MILE POINT INDUSTRIAL PARK, INC. the corporation
described in, and which executed the above instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation and that he signed his name thereto by like order.
______________________________
Notary Public
STATE OF NEW JERSEY :
: SS
COUNTY OF GLOUCESTER:
On this 28th day of August, 1985, before me duly sworn, WM. C.A. Costello,
Jr., did depose and say that he resides at 139 Forest Road, Morristown N.J.
08053; that he is the President of MAMCO MILLWORKS OF NEW YORK, INC., the
corporation described in, and which executed the above instrument; that he knows
the seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation and that he signed his name thereto by like order.
_______________________________
Notary Public
Exhibit 10.60
AMENDMENT TO SUPPLY AGREEMENT
October 5, 1998
Larry R. Robinette
President
Morgan Products, Ltd.
469 McLaws Circle
Williamsburg, VA 23185
Dear Larry:
I want to thank you for your help in settling the audit and accounts receivable
issues yesterday. I know you are traveling so I thought I would try to draft the
follow-up letter that we have been discussing during the past month. If you
agree with the content of this letter, please sign where indicated below and
return a copy to my attention.
The following should clarify and/or outline both JELD-WEN and Morgan's
positions with respect to the related Morgan/JELD-WEN outstanding issues:
1. Morgan Products, Ltd. has not, from February 2, 1998 to the date of
this letter initiated any notice of default or breach under the Supply
Agreement dated February 2, 1998.
2. JELD-WEN has agreed to defer the obligation of Morgan to purchase flush,
molded and steel doors from JELD-WEN under the Supply Agreement for a period
of one year (until January 1, 2000). The parties agree that in late 1999 they
will meet to discuss the January 1, 2000 flush, molded and steel door program
as well as any obstacles or ramifications of making such conversions in 2000.
3. Morgan acknowledges that it will continue to work with JELD-WEN under the
current 1998 stile and rail door program that is in place between Morgan and
JELD-WEN and that Morgan will not attempt to negotiate lower prices with
JELD-WEN or shop parts of its 1998 stile and rail door requirements for the
rest of 1998.
4. Morgan and JELD-WEN will work together to develop a mutually agreeable stile
and rail door program for 1999. The goal for completing the 1999 stile and
rail door program should be November 15, 1998.
<PAGE>
This letter constitutes an amendment to the Supply Agreement and any reference
after the date of this letter to the Supply Agreement shall be a reference to
the Supply Agreement as amended hereby.
Also, we have a number of other acquisition related items that need to be worked
on and/or completed. I would recommend that Mitch Lahr and Mark Blanchat work
together to finalize these issues.
If you have any questions or additional thoughts on these matters, please let me
know. Thank you for your help.
Very truly yours,
JELD-WEN, Inc.
/s/ Douglas P. Kintzinger
-------------------------
Douglas P. Kintzinger
Senior Vice President
Agreed and Approved
Morgan Products, Ltd.
By: /s/ Larry R. Robinette
---------------------
Larry R. Robinette
President
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-32264 and No. 33-23882) and the Registration
Statements on Form S-8 (No. 33-62148 and 333-13025) of Morgan Products Ltd. of
our report dated February 2, 1999, except for Note 6, as to which the date is
February 19, 1999, and Note 13, as to which the date is March 10, 1999,
appearing in this Form 10-K.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
March 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Morgan
Products 1998 Form 10-K and is qualified in its entirety by reference to such
Form 10k filing.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,650
<SECURITIES> 0
<RECEIVABLES> 32,344
<ALLOWANCES> 750
<INVENTORY> 34,290
<CURRENT-ASSETS> 70,041
<PP&E> 23,620
<DEPRECIATION> 15,346
<TOTAL-ASSETS> 92,463
<CURRENT-LIABILITIES> 25,388
<BONDS> 23,632
0
0
<COMMON> 44,412
<OTHER-SE> (969)
<TOTAL-LIABILITY-AND-EQUITY> 92,463
<SALES> 383,151
<TOTAL-REVENUES> 383,151
<CGS> 328,569
<TOTAL-COSTS> 80,205
<OTHER-EXPENSES> (378)
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 2,427
<INCOME-PRETAX> 897
<INCOME-TAX> (104)
<INCOME-CONTINUING> 1,001
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,001
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
