UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 27, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to ________.
Commission file No. 0-14651
MILLER BUILDING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3228778
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
58120 County Road 3 South
Elkhart, Indiana 46517
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219) 295-1214
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 Per Share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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. (x) Yes ( ) 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 held by nonaffiliated of the registrant,
based on the closing price of the stock as reported by the National Association
of Securities Dealers' Automated Quotation Systems, on August 28, 1998:
$25,910,627.
As of August 28, 1998, the Registrant had 3,312,021 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference into this Annual Report on
Form 10-K:
Portions of Registrant's Proxy Statement for its 1998 Annual Meeting of
Stockholders (the "Proxy Statement"), which will be filed with the
Securities and Exchange Commission no later than 120 days after the end of
the Registrant's fiscal year, are incorporated into Part III.
This Report contains certain statements that are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, as amended. Those statements are
dependent on certain risks and uncertainties. Such factors, among others, are
the mix between products with varying profit margins, the belief that previous
growth rates in the telecommunication shelter market will return, the strength
of the economy in the various sections of the country served by the Company, the
impact of our competitors on the profitability of our products, the future
availability of raw materials, the anticipated adequacy of the Company's
operating cash flows and credit facilities to finance operations, capital
expenditures and other needs of its business and the ability of the Company to
become year 2000 compliant. Readers are cautioned that reliance on any forward-
looking statement involves risks and uncertainties. Although the Company
believes that the assumptions on which the forward-looking statements contained
herein are based are reasonable, any of those assumptions could prove to be
inaccurate given the inherent uncertainties as to the occurrence or
nonoccurrence of future events. There can be no assurance that the forward-
looking statements contained in this Report will prove to be accurate. The
inclusion of a forward-looking statement herein should not be regarded as a
representation by the Company that the Company's objectives will be achieved.
PART I
ITEM 1. BUSINESS
The Company
Miller Building Systems, Inc. ("Miller") is the parent of Miller Building
Systems of Indiana, Inc., Miller Building Systems of Pennsylvania, Inc., Miller
Building Systems of Kansas, Inc., United Structures, Inc.("United"), and Miller
Construction Services, Inc. ("Construction Services"). All operations of Miller
are conducted through its five wholly owned subsidiaries which design,
manufacture, market and service factory-built buildings. Miller has two product
lines, Structures and Telecom. The factory-built buildings produced by
Structures are modular and mobile buildings, which are generally movable and
relocatable, and designed to meet the specialized needs of a wide variety of
users. Structures products are sold to independent customers who, in turn, sell
or lease to the end users. The Structures division has manufacturing facilities
in Elkhart, Indiana; Burlington, Kansas; Leola, Pennsylvania; Sioux Falls, South
Dakota and Bennington, Vermont. The Telecom division manufactures specialized
buildings, which utilize modular construction techniques and pre-cast concrete
technology, and are designed principally for customers in the telecommunications
industry. Telecom's products are sold directly to the end user. Telecom has
manufacturing facilities in Elkhart, Indiana; Burlington, Kansas; Binghamton,
New York and Leola, Pennsylvania. Miller's Structures and Telecom products are
sold throughout the United States. Construction Services provides complete
turnkey services from site preparation through setting and installation.
Miller originally was organized as an Indiana corporation in November 1982
under the name of "Graylyon Corp." and then merged, effective April 1983, into
a Delaware corporation named "Gray Lyon Company". In November 1986, the Company
amended its Certificate of Incorporation to change its name to "Modular
Technology, Inc." In November 1988, the Company again amended its Certificate
of Incorporation to change its name to "Miller Building Systems, Inc." All
references to Miller herein refer to Miller Building Systems, Inc., a Delaware
corporation, and its predecessor Indiana corporation.
As discussed in Note B of Notes to Consolidated Financial Statements,
effective January 1, 1998, Miller acquired all of the issued and outstanding
shares of common stock of United.
Miller maintains its Executive Offices at 58120 County Road 3 South,
Elkhart, Indiana 46517; telephone number (219) 295-1214. The Executive Office
is Miller's principal operating office from which it manages and coordinates the
activities of their wholly owned subsidiaries.
<PAGE>
STRUCTURES PRODUCT LINE
Sales and engineering for the Structures product line are headquartered in
Elkhart, Indiana. The sales and engineering staff support the manufacturing
facilities in Elkhart, Indiana; Burlington, Kansas; Leola, Pennsylvania; Sioux
Falls, South Dakota and Bennington, Vermont.
Structures - Modular and Mobile Office Buildings
Products
The buildings sold by Structures are generally movable or relocatable and
are composed of either single or multiple units often referred to as modular
units. Individual units are either 8, 10, 12, or 14 feet in width and up to 80
feet in length. These individual units can be combined into buildings varying
in size from several hundred to several thousand square feet. Although most
buildings are one story, they can be built to be two or three stories high
depending on user requirements.
The factory-built buildings sold by Structures meet the specialized needs
of users, which include architectural and engineering firms, churches,
construction companies, correctional or prison authorities, educational and
financial institutions, libraries, medical and dental facilities, military
installations, post offices, real estate firms, restaurants and retail
businesses. The cost of the building varies depending on its application or its
specifications and may, in certain instances, be less expensive than a
comparable conventional site-built building. Structures' cost portion of a
completed building does not include transportation, site preparation, foundation
and other installation work which is the responsibility of the user and is often
provided and charged to the user by Structures' customer. In addition to all the
aforementioned costs, the price charged to the user by Structures' customer will
reflect a "mark-up" which is determined by Structures' customer and not by
Structures.
Buildings or units (modules) of buildings sold by Structures are usually
built on a steel frame. Attached to the frame, customarily, is a chassis with
wheels and axles. This chassis will either become a permanent portion of the
building, permitting it to be easily transported to another site, or be removed
at the building installation site. The chassis facilitates the transportation
of the individual units over the highways from Structures' factory to either its
customer's facilities or the user's installation site.
The floor, roof and walls of any building are constructed of conventional
building materials, primarily wood or comparable materials. The building or
module is fabricated in a process similar to conventional site-built
construction with appropriate variations. Structures also sells buildings
utilizing non-combustible materials. For these types of buildings, the floor is
made of concrete. The wall studs and roof frame are made of steel and other
components. The buildings utilize various other non-combustible materials.
Interiors and exteriors of the buildings are completed to customer
specifications. Finished buildings or modules include required electrical
wiring, plumbing, heating and air conditioning, and floor coverings. Exteriors
are constructed of wood, aluminum or other specified exterior materials such as
brick facing, etc.
Buildings sold by Structures are designed and engineered before production.
Detailed plans and other documentation prepared by Structures are submitted to
its customers and users as well as to various regulatory agencies for approval
prior to commencement of construction. Structures maintains its own engineering
and design staff which is capable of handling virtually all types of building
orders. On occasion, however, Structures may retain the services of outside
engineering and design firms.
Marketing
Structures does not sell its buildings directly to ultimate users of the
buildings. Structures' customers do not represent Structures on an exclusive
basis. Structures competes for customer orders based on price, quality, timely
delivery, engineering capability and general reputation for reliability.
Structures sells its products to approximately 75 customers. Customers may be
national, regional or local in nature. Customers will sell, rent or lease the
buildings purchased from Structures to the users. Structures believes a
significant portion of its product is either rented or leased by the users from
its customers.
Structures' sales staff calls on prospective customers in addition to
maintaining continuing contact with existing customers. The sales staff assists
its customers and their prospective customers in developing building
specifications in order to facilitate the preparation by Structures of a
quotation. The sales staff, in conjunction with the engineering staff,
maintains ongoing contact with the customer base.
Certain customers maintain rental fleets of standardized units such as
construction-site buildings or buildings for general office space requirements.
These buildings are generally rented or leased for a specific requirement, and
when the requirement has been satisfied, the buildings are returned to
Structures' customer for re-renting or leasing to other users. Other buildings
are sold to a specific user's requirements and Structures' customer will either
lease it to its customer or sell it outright. As a result of transportation
costs, the effective distribution range of buildings sold by Structures is
limited to an area within 400-600 miles from each manufacturing facility.
Structures believes that the various leasing plans offered to the users by
its customers are a significant benefit of factory-built buildings over similar
conventional site-built buildings. Other significant benefits to the customer
are the speed with which a factory-built building can be made available for use
compared to on-site construction and the ability to relocate the building to
another site if the customer's utilization requirements change.
Certain companies within the industry served by Structures, including some
who are customers of Structures, have their own manufacturing facilities to
provide all or a portion of their building requirements. Structures does not
believe there is any specific identifiable industry trend or direction of its
customers having their own captive manufacturing capabilities. Certain
customers have acquired or started their own manufacturing facilities and other
customers have closed or reduced their manufacturing capability. Structures
believes that its customers are best served by having the flexibility of outside
product sources and avoiding the possible inefficiencies of captive
manufacturing facilities.
Structures is highly dependent on a limited number of customers, the loss
of which could have a material adverse effect on the operations of Miller. For
the fiscal years ended June 27, 1998 and June 28, 1997, the following customers
represented 10% or more of net sales of Miller: Transport International Pool,
Inc., d/b/a GE Capital Modular Space, a division of General Electric Capital
Corporation ("GE Capital"), represented 13% of Miller's net sales for the fiscal
year ended June 27, 1998 and In-Roads, Inc. represented 15% for the fiscal year
ended June 28, 1997.
Competition
Competition in the factory-built building industry is intense and
Structures competes with a number of entities, some of which may have greater
financial resources than Miller and Structures. To the extent that factory-
built buildings become more widely accepted as an alternative to conventional
on-site construction, competition from local contractors and manufacturers of
other pre-engineered building systems may increase. In addition to competition
from firms designing and constructing on-site buildings, Structures competes
with numerous factory-built building manufacturers that operate in particular
geographical regions.
Structures competes for orders from its customers primarily on the basis
of price, quality, timely delivery, engineering capability and reliability.
Structures believes that the principal basis on which it competes with on-site
construction is the combination of the timeliness of factory versus on-site
construction, the cost of its products relative to on-site construction, the
quality and appearance of its buildings, its ability to design and engineer
buildings to meet unique customer requirements (including local and state
regulatory compliance), and reliability in terms of completion time. The
manufacturing efficiencies and generally lower wage rates of factory
construction, even with the added transportation expense, in many instances
result in the cost of factory-built buildings being equal to or lower than the
cost of on-site construction of comparable quality. Quality, reliability and
the ability to comply with regulatory requirements in a large number of states
and localities depend upon the engineering and manufacturing expertise of the
management and staff of Miller. The relative importance of these factors varies
from customer to customer. Most of Structures' orders are awarded by its
customers on the basis of competitive bidding.
TELECOM PRODUCT LINE
Sales and engineering for the Telecom product line are located in Elkhart,
Indiana. Telecom provides all administrative, sales and production services
from that location. The sales and engineering staff support manufacturing
facilities in Elkhart, Indiana; Burlington, Kansas; Binghamton, New York and
Leola, Pennsylvania.
Products
Telecom manufactures modular factory-built buildings using pre-cast
concrete, steel and concrete, wood or fiberglass construction. Each building is
custom-built to the end users' specifications and is typically finished to
include electrical, grounding, sensing alarm, mechanical and air conditioning
systems.
The pre-cast concrete technology available through Telecom allows for
vandal-proof and environmental protection necessary for the telecommunication
industry. Telecom produces single and multiple module buildings with modules
ranging in size from 8' x 10' to modules as large as 14' x 30'. Telecom has
provided buildings, when assembled, consisting of a single module of 80 square
feet to multiple module buildings ranging up to 1,440 square feet. Multiple
story technology is currently being developed by Telecom. Telecom can provide
building transportation and complete site installation of the building and
equipment, if required by the customer specifications. Opportunities in
pre-cast concrete also exist for the containment of hazardous material in
specialized shelters and in correctional facilities requiring pre-cast modular
cells. The latter product can be provided to existing customers of Structures.
Telecom has complemented the traditional pre-cast concrete technology with
a lightweight concrete/steel building which will reduce the overall building
weight by 40%. A Cam-Lock series of buildings has been developed which allows
speedy installation of interlocking steel and foam panels for difficult site
placement, such as rooftops, mountaintop, or inside an existing building. An
exportable Containerized Shelter, transforms a standard 20' and 40' steel
shipping container into a virtually indestructible completely outfitted
telecommunication shelter. Also, mobile shelters meet the challenge of light
weight, portable shelters for emergency communications, starter or test sites,
temporary facilities or for special events broadcasting.
Marketing
Telecom participates in an expanding market for telecommunication shelters
which service the cellular and personal communication industries. Telecom
expects the growth in these markets to continue. Telecom sells its product
directly to the end users of the buildings, which have been principally
telecommunication and utility companies, military bases and municipalities.
Telecom competes for orders by providing a quotation developed from
specifications received from the potential customer. While price is often a key
factor in the potential customer's purchase decision, other factors may also
apply, including delivery time, quality and prior experience with a certain
manufacturer. Several customers have designated Telecom as their nationwide
supplier. Telecom is prepared, if necessary, to provide a potential customer a
bid or performance bond to ensure Telecom's performance.
The potential shipping radius of these type of buildings is not as
restrictive as that of Modular and Mobile Office buildings; however, Telecom has
concentrated its marketing efforts in geographic areas where, Telecom believes,
it has a freight advantage over a significant portion of its competitors.
Competition
Telecom competes with a number of national and regional firms. Some of
these competitor companies may have greater financial strength or capabilities
than Miller and Telecom; however, Telecom believes Miller's financial strength,
engineering capabilities and experience in producing other types of factory-
built structures are key elements in providing a competitive advantage to
Telecom.
Construction Services
Construction Services is located in Elkhart, Indiana and operates all
administrative, sales and service activities from that location. This office
manages the service crews that support the Telecom facilities in Elkhart,
Indiana; Burlington, Kansas; Leola, Pennsylvania and to some extent Binghamton,
New York.
Services
Construction Services provides one contact point for complete turnkey
services for telecommunication site construction. These services include the
management and execution of the entire construction process, from site
preparation, equipment transportation, through building and tower setting and
installation, or any combination thereof.
The service crews are fully outfitted with service trucks and equipment to
handle any site construction, even in remote locations. The crews are highly
trained in all phases of construction and have experience with heavy equipment,
site civil work and permitting, steel fabrication, concrete and cam-lock
building installations, electrical and electronic hookups, tower erection,
antenna sets and fencing. Construction Services specializes in completing sites
in difficult remote locations or sites which must be completed in a short time
frame. The service crews can "quick turn" a building, principally cam-lock
buildings, in five days from the initiation of the field work. The traditional
concrete shelter can also be assembled and finished in remote locations where
the site is inaccessible to a building fully completed in the factory.
In addition, to site preparation and installation, Construction Services
is developing a full maintenance program, not only for buildings supplied by
Miller but any building, whether site built or modular. These maintenance
projects, which include roof and fencing repair, have also been completed for
businesses outside the customary telecommunication industry, such as buildings
utilized by pipelines and power companies. The major maintenance projects are
also complemented by a general maintenance program. These programs allow a
customer to have routine maintenance and general preventive maintenance on
equipment performed by Construction Services while they concentrate on building
new sites and servicing their own customers needs.
Marketing
Construction Services primarily markets its services to the cellular and
personal communications industry. They contract directly with the end user of
the construction services being supplied. Most of Construction Services sales
contacts come from existing telecommunications' customers and the group competes
for projects by providing a quotation developed from specifications supplied by
the potential customer. Quality and speed are most often the prime
considerations of their customers. This allows Construction Services to obtain
a better margin on their projects than is customarily obtainable in the general
marketplace. The group has developed several close relationships with Telecom's
customers to supply site construction services.
Competition
Construction Services competes with national design-build firms which use
third-party subcontractors for the completion of turnkey service projects and
with various local contractors when bidding on specific portions of a site
project. The relationships and contacts that both the Structures and Telecom
divisions have developed with customers, while supplying buildings, has provided
Construction Services with key contacts and competitive advantages. In addition,
support from Miller's corporate engineering department also provides
Construction Services with in-house engineering specifications and state and
local code requirements.
General
(Applicable to all of Miller's principal markets)
Backlog
The backlog of orders by market at August 31, 1998 and 1997 was as follows:
1998 1997
Structures $5,877,000 $8,699,000
Telecom 9,794,000 2,456,000
Construction Services 232,000 249,000
During fiscal 1997, the Structures' backlog contained orders in excess of
production capacity, especially in the Elkhart, Indiana facility. This led to
delays for several customers projects. The backlog in fiscal 1998 was reduced
to more closely match production capacity and minimize these project delays. The
current backlog level should provide the basis to achieve forecasted production
levels through the second quarter of fiscal 1999; however, management believes
it is too early to determine whether this current business activity will extend
to the second half of fiscal 1999. The backlog at United, which was acquired
January 1, 1998, was $4,333,000 and accounted for a significant portion of the
increase in Telecom's backlog. The remainder of the increase in Telecom's
backlog is related to a resurgence in order activity as the build-out of the
telecommunication infrastructure resumes. Miller believes that the continued
build-out of the telecommunication infrastructure and the addition of United
should have a favorable impact on sales and production during Miller's 1999
fiscal year.
Regulation
Customers of Miller's factory-built buildings, or Miller's subsidiaries if
they complete the on-site work, are generally required to obtain building
installation permits from applicable governmental agencies. In certain cases,
however, conditional use permits may be obtained in lieu of building
installation permits. Conditional use permits usually are granted for a stated
period and may be renewable. Buildings completed by Miller's subsidiaries are
manufactured and installed in accordance with applicable building codes set
forth by the applicable state or local regulatory agencies.
State building code regulations applicable to factory-built buildings vary
from state to state. Many states have adopted codes that apply to the design and
manufacture of factory-built buildings, such as those manufactured by Miller's
subsidiaries, even if the units are manufactured outside the state and delivered
to a site within that state's boundaries. Generally, obtaining state approvals
is the responsibility of the manufacturer. Some states require certain customers
to be licensed in order to sell or lease factory-built buildings. Additionally,
certain states require a contractor's license from customers for the
construction of the foundation, building installation, and other on-site work
when this work is completed by the customer.
On occasion, Miller's subsidiaries have experienced regulatory delays in
obtaining the various required building plan approvals. In addition to some of
its customers, Miller's subsidiaries actively seek assistance from various
regulatory agencies in order to facilitate the approval process and reduce the
regulatory delays.
Raw Materials
Raw materials for products of Miller's subsidiaries are readily available
from multiple sources and the subsidiaries have not experienced any difficulty
in obtaining materials on a timely basis and in adequate quality and quantity.
Miller's subsidiaries, in certain instances, have entered into national purchase
arrangements with various suppliers. The benefit to Miller's subsidiaries of
these type of arrangements is often lower material costs and a higher level of
service and commitment.
Seasonality
Historically, Miller's subsidiaries have experienced greater sales during
the first and fourth fiscal quarters with lesser sales during the second and
third fiscal quarters. This reflects the seasonality of sales for products used
in various applications, including classrooms and other educational buildings,
and also the impact of weather on general construction related activities. See
unaudited interim financial information contained in Note J of Notes to
Consolidated Financial Statements.
Employees
As of August 31, 1998, Miller and its subsidiaries had approximately 520
employees of which approximately 400 were direct production employees.
Engineering and Design
Miller's subsidiaries engage in extensive engineering and design work to
meet customers' requirements, as well as to prepare bid proposals for new
projects. Engineering and design functions include structural, electrical, and
mechanical design and specifications work.
<PAGE>
ITEM 2. PROPERTIES
The principal office and production facilities of Miller and its
subsidiaries consist of the following:
Approximate Square Footage
Location Total Production Office Owned or Leased
Elkhart, IN 132,300 112,100 20,200 Owned (1)
Burlington, KS 155,000 150,000 5,000 Capitalized Lease
Binghamton, NY 55,900 52,400 3,500 Leased (3)
Leola, PA 113,100 103,400 9,700 Owned
Sioux Falls, SD 36,100 34,200 1,900 Leased (2)
Bennington, VT 28,900 27,000 1,900 Owned
________________ _______ _______ ______
Total approximate
square footage 521,300 479,100 42,200
(1) Structures and Telecom administrative, sales, engineering and
manufacturing facility. The Executive offices of Miller are also at
this location.
(2) Leased until April 15, 2000 with a three-year renewal option.
(3) Leased until December 31, 2002 with a five-year renewal option and an
option to purchase the facility after February 28, 2000.
ITEM 3. LEGAL PROCEEDINGS
Neither Miller or its operating subsidiaries are subject to any
material pending litigation other than ordinary routine litigation incidental to
the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS
Steven F. Graver (age 46) has been a Director of Miller since April
1991 and was elected Chairman of the Board of Directors on August 11, 1994.
Effective July 1, 1995, Graver, Bokhof & Goodwin ("GraverBokhof") became Graver,
Bokhof, Goodwin & Sullivan ("GBGS"). GBGS is a subsidiary of the Optimum Group
which has over $800 million in assets under management. Mr. Graver is President
and Chief Portfolio Manager of the Optimum Group. In July 1991, GraverReich &
Company ("GraverReich"), merged with GraverBokhof, an investment management
firm, and Mr. Graver became a General Partner of GraverBokhof. From December
1986 until July 1991, Mr. Graver was the President and Chief Executive Officer,
and Executive Vice President from February 1981 until November 1986, of
GraverReich.
Edward C. Craig (age 63) became the Chief Executive Officer of Miller
and Vice Chairman of the Board of Directors of Miller effective on July 3, 1994.
Mr. Craig was elected President of Miller on August 11, 1994. From July 1991
until April 1994, Mr. Craig was President and Chief Executive Officer of IBG, a
modular housing company. From April 1986 to July 1991, Mr. Craig was President
of Ryland Building Systems, a division of Ryland Homes, Inc. Mr. Craig is a
Director of Regional Building Systems.
Thomas J. Martini (age 50) became the Vice President of Finance of
Miller in July 1994. Mr. Martini was elected Secretary and Treasurer of Miller
on April 28, 1992 and has been the Chief Financial Officer of Miller since
February 1991.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Miller's Common Stock is quoted on the National Association of
Securities Dealers' Automated Quotation (NASDAQ) system under the ticker symbol
"MBSI." The following table sets forth the quarterly range of high and low
quotations for these securities as reported on the NASDAQ National Market System
for the two most recent fiscal years.
Fiscal 1998 Fiscal 1997
High Low High Low
1st Quarter 10 1/16 5 1/2 6 5/8 5 1/2
2nd Quarter 9 3/4 8 1/4 8 3/4 5 3/8
3rd Quarter 10 3/4 9 9 3/8 6 1/4
4th Quarter 10 3/4 9 5/8 8 6 1/4
As of August 28, 1998, Miller estimates there were approximately 1,300
stockholders of Miller's Common Stock. Of this total, approximately 130 were
stockholders of record and shares for approximately 1,170 stockholders were held
in street name. Harris Trust & Savings Bank, Chicago, is Miller's Transfer
Agent and Registrar.
Miller did not pay cash dividends on its Common Stock from fiscal 1994,
through fiscal 1998 as the Board of Directors ceased the payment of dividends in
the third fiscal quarter of 1993. Miller does not intend to pay cash dividends
in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and the notes thereto
included elsewhere herein.
Years Ended
June 27, June 28, June 29, July 1, July 2,
1998 1997 1996 1995 1994
(In thousands,
except per share data)
Net sales $54,700 $46,287 $37,858 $41,455 $38,569
Net income 2,140 1,574 486 320 312
Earnings per common share:
Basic .65 .50 .16 .10 .10
Diluted .62 .47 .16 .10 .10
Total assets 30,230 19,768 16,920 16,522 15,308
Long-term debt, less
current maturities 6,094 1,357 1,270 1,385 110
(A) Net sales (in thousands) for fiscal year 1998 include $7,523 for
United, which was acquired January 1, 1998 (see Note B of Notes to Consolidated
Financial Statements). Net sales (in thousands) for fiscal years ended
1997, 1996, 1995, and 1994 include $1,636; $5,787; $6,414 and $7,440,
respectively, of Miller's California subsidiary which was sold on October
21, 1996. Net sales (in thousands) for fiscal 1997 include $2,139 for the
new Kansas facility which commenced operations in January 1997.
(B) Miller's operating results for fiscal years 1996, 1995, and 1994 were
adversely impacted by nonrecurring items (in thousands) of $358, $361,
and $159, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Fiscal 1998 Compared to Fiscal 1997
Net sales increased $8.4 million or approximately 18% in fiscal 1998
from the corresponding period in fiscal 1997. Structures reported a $.3
million, or approximately a 1% decrease in net sales during fiscal 1998. The
decrease in net sales was primarily the result of lower sales in the Eastern
markets which were bolstered last year by several large contracts, and the
decline in sales related to the California plant which was closed after the
first quarter of fiscal 1997. The California operation had net sales of $1.6
million in fiscal 1997. Telecom's net sales increased $7.7 million, or nearly
57% during fiscal 1998. Nearly all of the net sales gain in Telecom related to
sales from United which was acquired January 1, 1998. Net sales for United for
the six months ended June 27, 1998 were $7.5 million. During fiscal 1998,
Telecom's business was soft as the telecommunications industry slowed their
shelter orders. The industry concentrated on generating revenue by placing
existing infrastructure in service. These factors led to the small increase in
Telecom sales, excluding United for fiscal 1998. Miller believes that this
trend has reversed and expects the previous growth rates in the
telecommunication shelter market to return.
Miller's gross profit during the 1998 fiscal year approximated 19% of
net sales and was virtually unchanged from fiscal 1997. During fiscal 1998,
improved margins from United's lightweight, rooftop telecommunications shelters,
offset a decline in Structures' gross profit related to the decline in higher
margin custom projects. The gross profit from Telecom's concrete shelter
business remained relatively unchanged from fiscal 1997.
Selling, general and administrative expenses increased $.3 million in
fiscal 1998. These expenses were 12% of net sales in fiscal 1998 compared to
14% of net sales in fiscal 1997. The increase in administrative expense was
primarily the result of the addition of administrative expense at United. The
increased administrative expenses at United were partially offset by lower
administrative expenses at the closed California operation and lower
performance-based compensation.
The increase in interest expense in fiscal 1998 compared to fiscal 1997
of $134,771 was primarily the result of higher interest rates and higher debt
outstanding on the revolving line of credit. The Company funded the
construction of the Pennsylvania plant and the acquisition of United through its
line of credit until permanent long-term financing was put in place.
During fiscal 1998, Miller recorded an income tax provision of
$1,306,000 or 38% of pre-tax profit compared to an income tax provision of
$1,006,000 or 39% of pre-tax profit in fiscal 1997. The effective tax rate
varies from year to year depending on the levels of income in states where
Miller is subject to state income tax.
Fiscal 1997 Compared to Fiscal 1996
Net sales increased $8.4 million or approximately 22% in fiscal 1997
from the corresponding period in fiscal 1996. Structures reported a $5.1
million, or approximately a 19% increase in net sales during fiscal 1997. The
increase in net sales was achieved despite the decline in sales related to the
California operation which was sold at the end of the first quarter of fiscal
1997. The Eastern and Midwest Structures' plants benefited from several large
contracts which kept the plants busy during the traditionally slow winter months
and at nearly full capacity during the fourth quarter. In addition, Structures
expanded its customer base to provide greater access to the construction
markets. The sold Structures' operation in California had net sales of $1.6
million in fiscal 1997 and $5.8 million in fiscal 1996. Telecom's net sales
increased $3.3 million, or nearly 30% during fiscal 1997. Telecom continued to
gain market share in fiscal 1997 and was a competitive force in the
telecommunications shelter industry. The Kansas facility, which began
operations in January 1997, produced both Structures and Telecom product lines.
Net sales for the Structures' products was $.4 million and was $1.7 million for
Telecom's products.
Miller's gross profit during the 1997 fiscal year approximated 19% of
net sales compared to approximately 18% of net sales in fiscal 1996. During
fiscal 1997, net sales from Telecom were nearly a third of Miller's total net
sales. The increased sales volume in the Structures' plants, which consisted
primarily of higher margin custom projects, accounted for the improved gross
profit.
Selling, general and administrative expenses increased $.7 million in
fiscal 1997. These expenses were 14% of net sales in fiscal 1997 compared to
15% of net sales in fiscal 1996. The increase in administrative expense was
primarily the result of additional headcount, performance based compensation and
start-up expenses at the Kansas plant.
The increase in interest expense in fiscal 1997 compared to fiscal 1996
of $23,140 was primarily the result of higher interest rates, higher debt
outstanding on the revolving line of credit, and the capital lease obligation
for the Kansas facility.
During fiscal 1997, Miller recorded an income tax provision of
$1,006,000 or 39% of pre-tax profit compared to an income tax provision of
$334,000 or 41% of pre-tax profit in fiscal 1996. The decrease in the effective
tax rate for fiscal 1997 was attributable to a lower effective tax rate for
state income taxes. The effective tax rate varies from year to year depending
on the levels of income in states where Miller is subject to state income tax.
Liquidity and Capital Resources
Miller's working capital as of June 27, 1998 was $8,610,205 compared to
$6,987,990 as of June 28, 1997. The working capital ratio as of June 27, 1998
and June 28, 1997 was 1.9 and 2.1 to 1, respectively.
For the fiscal year ended June 27, 1998, Miller's operating activities
provided net cash of $510,307. Increases in cash from operating activities
consisted primarily of net income, depreciation and amortization, the provision
for deferred income taxes and decreases in receivables. These increases were
offset by the $1.3 million increase in inventories, the $948,000 decrease in
accrued income taxes and the $1.49 million decrease in accrued expenses and
other. Miller's investing activities used net cash of $6,392,620. The
acquisition of United utilized $2.7 million and $3.0 million was used for
capital expenditures, principally the Pennsylvania plant addition. In addition,
$1.1 million in unexpended industrial revenue bond proceeds were partially
offset by $458,000 from the sale of property. Miller's financing activities
provided net cash of $5,904,816. Increases in financing cash flows of $5.5
million from long-term debt, the $580,000 net increase on the line of credit and
$501,000 in proceeds from the exercise of stock options were partially offset by
$301,000 of payments on long-term debt and $382,000 cash expended for the
purchase of treasury stock. The net increase in cash and cash equivalents for
the fiscal year ended June 27, 1998 was $22,503 which resulted in cash and cash
equivalents at the end of the year of $111,620.
An unsecured revolving credit agreement with a bank makes available
advances up to $5,000,000 through November 30, 1998. Miller expects to renew
this credit facility. There was $3,550,000 outstanding on the revolving credit
line at June 27, 1998 and $1,870,000 at June 27, 1998.
Miller believes it has adequate resources available to fund the
continuation of its internal growth during the coming fiscal year. The
unsecured revolving credit line assures that resources will be available for
future growth.
Impact of Inflation
Inflation has not had an identifiable effect on Miller's operating
margins during the last three fiscal years. Product selling prices are quoted
reflecting current material prices and other related costs and expenses.
Accordingly, any impact of inflation is reflected in the product selling prices.
Accounting and Regulatory Developments
In June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which Miller will be required to adopt
in its fiscal 1999 year-end financial statements. SFAS No. 131 specifies
revised guidelines for determining operating segments and the type and level of
information to be disclosed. Miller has not yet determined what changes in its
disclosures, if any, will be required by SFAS No. 131.
Year 2000 Compliance
Miller is currently in the process of identifying, evaluating, and
implementing changes to computer programs necessary to address the year 2000
issue. This issue affects computer systems that have date-sensitive programs
that may not properly recognize the year 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail, resulting in business interruption. Miller does not believe the cost of
converting all internal systems to be year 2000 compliant will be material to
its consolidated financial condition or results of operations. Costs related to
the year 2000 issue are being expensed as incurred. The year 2000 issue is
expected to affect the systems of various entities with which Miller interacts,
including customers and vendors. There can be no assurance that the systems of
other companies on which Miller's systems rely will be timely converted, or that
a failure by another company's systems to be year 2000 compliant would not have
a material adverse effect on Miller. Based on information currently available,
management believes its systems will be year 2000 compliant.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 of Part II is incorporated herein by
reference to the Consolidated Financial Statements filed with this report; see
Item 14 of Part IV.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
Information with respect to the Directors of Miller is set forth in the
Election of Directors section of the Proxy Statement to be filed pursuant to
Regulation 14A and is incorporated herein by reference.
(b) Executive Officers
Information regarding the Executive Officers of Miller is set forth in
Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth in the Compensation
of Executive Officers section of the Proxy Statement to be filed pursuant to
Regulation 14A and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth in the Ownership of
Miller Building Systems, Inc. Common Stock section of the Proxy Statement to be
filed pursuant to Regulation 14A and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is set forth in the Certain
Relationships and Related Transactions section of the Proxy Statement to be
filed pursuant to Regulation 14A and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) Consolidated Financial Statements of Miller Building Systems,
Inc. and Subsidiaries
Report of Independent Accountants . . . . . . . . . . . . . . . . .F-1
Consolidated Balance Sheets as of June 27, 1998 and June 28, 1997 .F-2
Consolidated Statements of Income for the years ended
June 27, 1998, June 28, 1997 and June 29, 1996 . . . . . . . . . .F-3
Consolidated Statements of Stockholders' Equity for the years
ended June 27, 1998, June 28, 1997 and June 29, 1996 . . . . . . .F-4
Consolidated Statements of Cash Flows for the years ended
June 27, 1998, June 28, 1997 and June 29, 1996 . . . . . . . . . .F-5
Notes to Consolidated Financial Statements . . . . . . . . . . . .F-6
(2) Financial Statement Schedule
II - Valuation and Qualifying Accounts . . . . . . . . . . . . . .F-17
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
(3) See Index to Exhibits
(b) Reports on Form 8-K filed:
The following reports on Form 8-K were filed during the three
months ended June 27, 1998:
April 14, 1998, amendment to Item 7, Financial Statements and
Exhibits of its Current Report on Form 8-K/A-1,
dated February 27, 1998.
May 28, 1998, amendment to Item 7, Financial Statements and
Exhibits of its Current Report on Form 8-K/A-1, dated
February 27,1998 and as last amended by Form 8-K/A-2, dated
April 14, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MILLER BUILDING SYSTEMS, INC.
September 16, 1998 \Edward C. Craig
Edward C. Craig
President and Chief
Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
\Edward C. Craig President, Chief September 16, 1998
Edward C. Craig Executive Officer
and Director
(Principal Executive
Officer)
\Thomas J. Martini Secretary and September 16, 1998
Thomas J. Martini Treasurer (Principal
Financial and
Accounting Officer)
\David E. Downen Director September 16, 1998
David E. Downen
\Steven F. Graver Director September 16, 1998
Steven F. Graver
\William P. Hall Director September 16, 1998
William P. Hall
\Kenneth H. Granat Director September 16, 1998
Kenneth H. Granat
Director September 16, 1998
Myron C. Noble
\David H. Padden Director September 16, 1998
David H. Padden
\Jeffrey C. Rubenstein Director September 16, 1998
Jeffrey C. Rubenstein
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Miller Building Systems, Inc.:
In our opinion, the consolidated financial statements listed in the accompanying
index appearing under Item 14(a)(1) of Form 10-K present fairly, in all material
respects, the financial position of Miller Building Systems, Inc. and its
subsidiaries at June 27, 1998 and June 28, 1997, and the results of their
operations and their cash flows for each of the three fiscal years in the period
ended June 27, 1998, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
listed in the accompanying index appearing under Item 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
South Bend, Indiana
July 31, 1998
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 27, June 28,
1998 1997
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 111,620 $ 89,117
Receivables, less allowance for doubtful
receivables of $50,000 in 1998 and
$48,000 in 1997 11,126,444 8,450,479
Refundable income taxes 20,000 -
Inventories 6,140,647 3,712,664
Deferred income taxes 230,000 341,000
Property held for sale - 412,106
Other current assets 204,107 66,713
TOTAL CURRENT ASSETS 17,832,818 13,072,079
PROPERTY, PLANT AND EQUIPMENT
Land 1,106,156 598,237
Buildings and leasehold improvements 7,962,454 5,918,922
Machinery and equipment 5,084,595 4,382,960
14,153,205 10,900,119
Less, Accumulated depreciation
and amortization 5,141,452 4,308,543
PROPERTY, PLANT AND EQUIPMENT, NET 9,011,753 6,591,576
Unexpended industrial revenue bond proceeds 1,115,854 -
Excess acquisition costs over fair value of acquired
net assets, net of accumulated amortization of
$63,446 in 1998 and $26,870 in 1997 2,058,409 17,055
Other assets 210,754 87,507
TOTAL ASSETS $30,229,588 $19,768,217
The accompanying notes are a part of the consolidated financial statements.
June 27, June 28,
1998 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 3,550,000 $ 1,870,000
Current maturities of long-term debt 762,900 207,971
Accounts payable 3,246,373 1,478,675
Accrued income taxes 17,469 965,464
Accrued expenses and other 1,645,871 1,561,979
TOTAL CURRENT LIABILITIES 9,222,613 6,084,089
Long-term debt, less current maturities 6,094,389 1,357,374
Deferred income taxes 316,000 133,000
Other 15,276 16,601
TOTAL LIABILITIES 15,648,278 7,591,064
COMMITMENTS AND CONTINGENCIES - Note I
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value
50,000 shares authorized, none issued - -
Common stock, $.01 par value, 7,500,000 shares
authorized, 4,023,548 shares issued 40,235 40,235
Additional paid-in capital 11,600,191 11,454,903
Retained earnings 5,770,243 3,596,049
17,410,669 15,091,187
Less, Treasury stock, at cost 2,829,359 2,914,034
TOTAL STOCKHOLDERS' EQUITY 14,581,310 12,177,153
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $30,229,588 $19,768,217
(This page intentionally left blank.)
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended
June 27, June 28, June 29,
1998 1997 1996
NET SALES $54,699,660 $46,286,770 $37,857,968
Costs and expenses:
Cost of products sold 44,434,537 37,323,073 31,002,433
Selling, general and
administrative 6,568,481 6,286,184 5,558,322
Provision for doubtful receivables 54,881 51,293 1,287
Gain on sale of property
and equipment (63,628) (3,667) (12,323)
Interest expense 290,056 155,285 132,145
Interest income (30,719) (105,226) (1,699)
Nonrecurring items - - 358,180
INCOME BEFORE
INCOME TAXES 3,446,052 2,579,828 819,623
Income taxes 1,306,000 1,006,000 334,000
NET INCOME $ 2,140,052 $ 1,573,828 $ 485,623
Earnings per share of common stock:
Basic $ .65 $ .50 $ .16
Diluted $ .62 $ .47 $ .16
Shares used in the computation of
earnings per share:
Basic 3,268,344 3,157,706 3,100,963
Diluted 3,474,706 3,316,132 3,121,205
The accompanying notes are a part of the consolidated financial statements.
F-3
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-In Retained Treasury Stock Stockholders'
Shares Amount Capital Earnings Shares Amount Equity
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 2, 1995 4,023,548 $40,235 $11,454,903 $1,563,201 922,585 $(3,139,374) $ 9,918,965
Net income - - - 485,623 - - 485,623
BALANCE, JUNE 29, 1996 4,023,548 40,235 11,454,903 2,048,824 922,585 (3,139,374) 10,404,588
Treasury stock acquired - - - - 45,730 (351,063) (351,063)
Exercise of stock options using
treasury stock - - - (26,603) (162,200) 576,403 549,800
Net income - - - 1,573,828 - - 1,573,828
BALANCE, JUNE 28, 1997 4,023,548 40,235 11,454,903 3,596,049 806,115 (2,914,034) 12,177,153
Treasury stock acquired - - - - 39,312 (381,967) (381,967)
Exercise of stock options using
treasury stock - - - 34,142 (125,100) 466,642 500,784
Tax benefit arising from exercise
of stock options - - 145,288 - - - 145,288
Net income - - - 2,140,052 - - 2,140,052
BALANCE, JUNE 27, 1998 4,023,548 $40,235 $11,600,191 $5,770,243 720,327 $(2,829,359) $14,581,310
</TABLE>
The accompanying notes are a part of the consolidated financial statements.
F-4
<PAGE>
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended
June 27, June 28, June 29,
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,140,052 $ 1,573,828 $ 485,623
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization of
plant and equipment 769,186 636,287 632,277
Amortization of intangible assets
and deferred bond issuance costs 51,983 10,293 10,582
Deferred income taxes 294,000 (92,000) 70,000
Nonrecurring items - - 358,180
Other (24,040) (6,612) (12,323)
Changes in certain assets and
liabilities, net of effect of
acquisition and disposition of
businesses:
Receivables 831,920 (2,591,757) (789,120)
Refundable income taxes (20,000) 241,158 (241,158)
Inventories (1,258,521) (991,266) (7,381)
Other current assets (137,394) 11,550 43,665
Accounts payable 299,813 (431,901) 216,938
Accrued income taxes (947,995) 886,026 (10,389)
Accrued expenses and other (1,488,697) 507,784 (378,701)
Net cash provided by (used in)
operating activities 510,307 (246,610) 378,193
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property
and equipment 457,700 7,250 28,998
Purchase of property, plant
and equipment (3,023,732) (1,123,324) (395,526)
Acquisition of business, net
of $294,576 cash acquired (2,710,734) - -
Proceeds from sale of subsidiary - 1,516,390 -
Unexpended industrial revenue
bond proceeds (1,115,854) - 76,729
Net cash provided by (used in)
investing activities (6,392,620) 400,316 (289,799)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 26,860,000 14,695,000 10,440,000
Reduction of short-term borrowings (26,280,000) (14,325,000) (10,490,000)
Proceeds from long-term debt 5,500,000 - -
Payments of long-term debt (300,635) (798,655) (224,925)
Bond issuance costs (138,654) - -
Purchase of treasury stock (381,967) (351,063) -
Proceeds from exercise of stock
options 500,784 549,800 -
Tax benefit from stock options
exercised 145,288 - -
Net cash provided by (used in)
financing activities 5,904,816 (229,918) (274,925)
Increase (decrease) in cash and
cash equivalents 22,503 (76,212) (186,531)
CASH AND CASH EQUIVALENTS
Beginning of year 89,117 165,329 351,860
End of year $ 111,620 $ 89,117 $ 165,329
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest, net of capitalized
interest in 1998 $ 198,435 $ 151,783 $ 127,246
Income taxes (net of refunds) 1,839,254 (29,184) 515,547
NONCASH INVESTING AND FINANCING
ACTIVITIES:
Acquisition of United
Structures, Inc.:
Liabilities assumed 4,108,000 - -
Unpaid cash portion of
purchase price 125,000 - -
Building capitalized under capital
lease and related capital
lease obligation - 979,000 -
The accompanying notes are a part of the consolidated financial statements.
F-5
Note A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Miller Building Systems, Inc. ("Miller") is the parent of Miller Building
Systems of Indiana, Inc., Miller Building Systems of Pennsylvania, Inc.,
Miller Building Systems of Kansas, Inc., United Structures, Inc., and
Miller Construction Services, Inc. All operations of Miller are
conducted through its five wholly owned subsidiaries which design,
manufacture, market and service factory-built buildings. Miller has two
product lines, Structures and Telecom. The factory-built buildings
produced by Structures are modular and mobile buildings, which are
generally movable and relocatable, and designed to meet the specialized
needs of a wide variety of users. Structures' products are sold to
independent customers who, in turn, sell or lease to the end users. The
Structures division has manufacturing facilities in Elkhart, Indiana;
Burlington, Kansas; Leola, Pennsylvania; Sioux Falls, South Dakota and
Bennington, Vermont. The Telecom division manufactures specialized
buildings, which utilize modular construction techniques and pre-cast
concrete technology, and are designed principally for customers in the
telecommunications industry. Telecom's products are sold directly to the
end user. Telecom has manufacturing facilities in Elkhart, Indiana;
Burlington, Kansas; Leola, Pennsylvania and Binghamton, New York.
Miller's Structures and Telecom products are sold throughout the United
States. Miller Construction Services, Inc. provides complete turnkey
services from site preparation through setting and installation.
The following is a summary of the significant accounting policies used
in the preparation of the accompanying consolidated financial statements.
Fiscal Year - Miller's fiscal year is a 52 or 53 week period ending on
the Saturday closest to June 30.
Principles of Consolidation - The consolidated financial statements
include the accounts of Miller Building Systems, Inc. and its wholly
owned subsidiaries.
Use of Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Revenue Recognition and Concentration of Credit Risk - Miller recognizes
revenues from the sales of its products upon the completion of
manufacturing and the transfer of title. One customer individually
accounted for 13% of net sales in fiscal 1998 and fiscal 1996, a
different customer accounted for 15% of net sales in fiscal 1997. At
June 27, 1998, 20% of receivables is concentrated with Miller's largest
customer and at June 28, 1997, 41% of receivables was concentrated with
Miller's largest customer.
F-6
Note A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued.
Cash and Cash Equivalents - Miller considers all highly liquid
investments purchased with an original maturity of three months or less
to be cash equivalents.
Inventories - Inventories are stated at the lower of cost or market, with
cost determined under the first-in, first-out method.
Property, Plant and Equipment - Property, plant and equipment are carried
at cost less accumulated depreciation and amortization. Depreciation and
amortization of plant and equipment are computed using the straight-line
method over the estimated useful lives of the assets. Costs of purchased
software and, under certain conditions, internal software development
costs are capitalized and are amortized using the straight-line method
over sixty months. As of June 27, 1998 and June 28, 1997, capitalized
software costs, included with machinery and equipment, (and the related
accumulated amortization) aggregated $265,587 ($148,766), and $256,953
($93,644), respectively. Interest is capitalized in connection with the
construction of major facilities. The capitalized interest is recorded
as part of the asset to which it relates and is amortized over the
asset's estimated useful life. Capitalized interest costs were $63,933
during the year ended June 27, 1998. No interest was capitalized in
fiscal years 1997 and 1996.
Excess Acquisition Costs over Fair Value of Acquired Net Assets - Excess
acquisition costs over fair value of acquired net assets (goodwill) are
amortized using the straight-line method over periods ranging from 20 to
30 years. The carrying value of goodwill is periodically reviewed by
Miller based on the expected future undiscounted operating cash flows of
the related business unit.
Bond Issuance Costs - Bond issuance costs aggregating $259,090, which
related to issuance of the industrial revenue bonds, are being amortized
using the straight-line method over the terms of the bonds.
Income Taxes - Deferred income taxes are determined using the liability
method.
Employee Benefit Plan - Miller maintains a simplified 401(k) savings plan
(the "Plan") for eligible participating employees of Miller. The Plan
is a defined contribution plan under which employees may voluntarily
contribute a percentage of their compensation. The Plan allows Miller
to make discretionary matching contributions before the end of the Plan's
calendar year-end. During the years ended June 27, 1998, June 28, 1997
and June 29, 1996, Miller expensed $68,908, $77,546 and $22,560
respectively, under this Plan.
Earnings Per Share - Miller has adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share." Under SFAS No. 128,
"primary" earnings per share was replaced by "basic" earnings per share.
Basic earnings per share is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the
Note A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued.
period. Diluted earnings per share is computed by dividing net income
by the weighted average number of shares of common stock outstanding plus
the effect of potential dilutive common shares outstanding during the
reporting period. Earnings per share amounts for prior periods have been
restated to conform with the provisions of SFAS No. 128. Shares used in
the computation of basic and diluted earnings per share ("EPS") are as
follows:
1998 1997 1996
Weighted average number of common
shares (used for basic EPS) 3,268,344 3,157,706 3,100,963
Effect of dilutive securities:
Stock options 138,022 158,426 20,242
Contingently issuable
shares (see Note B) 68,340 - -
Shares used for diluted EPS 3,474,706 3,316,132 3,121,205
Fair Value of Financial Instruments - The carrying amounts of cash and
cash equivalents, receivables, short-term borrowings and accounts payable
approximated their fair value as of June 27, 1998 and June 28, 1997
because of the relatively short maturities of these instruments. The
carrying amount of long-term debt, including current maturities,
approximated fair value as of June 27, 1998 and June 28, 1997 based upon
terms and conditions currently available to Miller in comparison to the
terms and conditions of the outstanding long-term debt.
Note B: ACQUISITION OF NEW YORK OPERATION
Effective January 1, 1998, Miller acquired all of the issued and
outstanding shares of common stock of United Structures, Inc. ("United"),
a New York corporation. United is engaged in the business of designing,
manufacturing and marketing factory-built structures primarily for the
telecommunications industry. The purchase price (the "minimum purchase
price"), including direct acquisition costs, consisted of cash of $3.1
million and assumed liabilities of $4.1 million. The excess of the
minimum purchase price over the fair value of acquired tangible assets
aggregated $2.1 million and was allocated to goodwill to be amortized on
a straight-line basis over 30 years. In addition to the minimum purchase
price, Miller agreed to pay the seller a contingent purchase price
("contingent purchase price"), which is payable in shares of Miller's
common stock, based on United's earnings for the six-month period ended
June 27, 1998. United's earnings for the six-month period ended June 27,
1998 exceeded the targeted amount and, accordingly, Miller will pay the
maximum additional contingent purchase price of $2,250,000 (227,082
shares of Miller's common stock). The contingent purchase price is
payable September 1, 1998 at which time such contingent purchase price
will be recorded as goodwill. The acquisition of United was accounted
for using the purchase method and United's operating results have been
included in Miller's consolidated financial statements since the
Note B: ACQUISITION OF NEW YORK OPERATION, Continued.
acquisition date of January 1, 1998. The following unaudited pro forma
financial information for the years ended June 27, 1998 and June 28, 1997
were developed assuming United had been acquired at the beginning of each
of the respective fiscal years. The unaudited pro forma earnings per
share (basic and diluted) reflect the issuance of 227,082 additional
shares which are issuable as contingent purchase price, as though these
shares were issued and outstanding during each of the periods presented.
Years Ended
June 27, 1998 June 28, 1997
Net sales $61,547,000 $52,882,000
Net income 2,493,000 1,733,000
Earnings per share:
Basic .71 .51
Diluted .69 .49
The unaudited pro forma financial information is not necessarily
indicative of what actually would have occurred if the acquisition had
been completed as of the beginning of each of the respective fiscal
periods presented, nor is it indicative of future operating results.
Note C: INVENTORIES.
Inventories consist of the following:
June 27, June 28,
1998 1997
Raw materials $4,604,615 $3,133,958
Work in process 1,215,552 578,706
Finished goods 320,480 -
Total $6,140,647 $3,712,664
Note D: DEBT.
Short-term borrowings
Miller maintains an unsecured revolving line of credit with a bank. The
loan agreement makes available up to $5 million through November 30, 1998.
As of June 27, 1998 and June 28, 1997, outstanding borrowings under the
loan agreement aggregated $3,550,000 and $1,870,000, respectively.
Interest is payable monthly at prime or a margin over the London Interbank
Offering Rate ("LIBOR"), depending on the pricing option selected by
Miller. At June 27, 1998 and June 28, 1997, the weighted average interest
rate on outstanding borrowings was 7.47% and 8.34%, respectively. The
loan agreement contains, among other provisions, certain covenants
including: maintenance of a required current ratio, tangible net worth
and liabilities to tangible net worth ratio.
Note D: DEBT, Continued.
Long-term debt
Long-term debt consists of the following: June 27, June 28,
1998 1997
Bank term note, payable in monthly installments $2,500,000 $ -
of $50,000 including interest at a variable
rate, as determined by prime or a margin over
the LIBOR offering rate (6.94% at June 27,
1998), final maturity in June 2003, unsecured
Industrial revenue bond, variable rate (3.70%
at June 27, 1998), principal payable in annual
installments of $200,000 through June 2004
and $300,000 thereafter until final maturity
in June 2010 3,000,000 -
Industrial revenue bond, variable rate
(3.70% at June 27, 1998), principal
payable in annual installments of
$115,000 with an installment of $120,000
at final maturity in November 2007 1,155,000 1,270,000
Capitalized lease, interest imputed at
5.63%, payable monthly through
December 2006 202,289 295,345
Total 6,857,289 1,565,345
Less, Current maturities 762,900 207,971
Long-term debt $6,094,389 $1,357,374
On August 12, 1996, Miller entered into a ten-year lease agreement with
the Board of County Commissioners of Coffey County, Kansas to lease a
155,000 square foot manufacturing facility. The lease agreement provides
for payments of $2,500 per month with an option to purchase the building
at the end of the lease for a balloon payment of $250,000. The balloon
payment is reduced if certain full-time employee levels are attained
during the term of the lease. In connection with the lease agreement,
Miller also entered into an agreement with the then current tenant of the
property, whereby Miller agreed to pay the tenant $750,000. Miller has
accounted for this transaction as a capital lease whereby Miller recorded
the leased property under the capital lease and the related obligation on
its balance sheet. As of June 27, 1998, and June 28, 1997, the cost of
the capitalized lease property was $979,000 and the accumulated
amortization was $32,633 in 1998 and $13,597 in 1997.
As of June 27, 1998, the annual maturities of long-term debt, excluding
payments under the capitalized lease, for each of the next five fiscal
years are as follows: 1999 - $743,889; 2000 - $776,818; 2001 - $812,275;
2002 - $850,454 and 2003 - $891,564.
Note D: DEBT, Continued.
As of June 27, 1998, the future minimum lease payments under the
capitalized lease obligation are as follows:
Fiscal Years Capitalized
Ending Lease
1999 $ 30,000
2000 30,000
2001 30,000
2002 30,000
2003 30,000
Thereafter 105,000
255,000
Less: Amount representing interest 52,711
$202,289
In connection with the industrial revenue bond obligations, Miller
obtained, as a credit enhancement for the bondholders, irrevocable letters
of credit in favor of the bond trustees. Miller, at its discretion, can
convert the industrial revenue bonds from a variable rate, as determined
by the current market rate for this type of debt instrument, to a fixed
rate. The fixed rate would be determined contemporaneously with the
decision to convert. Miller may redeem the bonds at any time in
increments of $100,000. In the event the bonds have been converted to a
fixed rate, such redemption is at a premium determined by the number of
years from conversion to original maturity.
Note E: STOCK COMPENSATION PLANS.
Stock Option Plans
On November 5, 1997, Miller's stockholders approved the Miller Building
Systems, Inc. 1997 Stock Option Plan under which 500,000 shares of common
stock were reserved for future grant. The 1997 Plan expires February 20,
2007. On June 30, 1994, the Board of Directors adopted the Miller
Building Systems, Inc. 1994 Stock Option Plan under which 300,000 shares
of common stock were reserved for future grant. The 1994 Plan expires
June 30, 2004. On August 26, 1991, the Board of Directors adopted the
Miller Building Systems, Inc. 1991 Stock Option Plan under which 250,000
shares of common stock were reserved for future grant. The 1991 Plan
expires August 26, 2001.
Miller's stock option plans provide that options can be granted by Miller
at a price not less than 100% of fair market value (or 110% of fair market
value if the optionee owns 10% or more of Miller's common stock). The
term of an option granted under the stock option plans cannot exceed ten
years, and options are either exercisable upon grant or contain a specific
vesting schedule, except in the event of a change of control, as defined,
at which time all outstanding options become fully exercisable by the
optionee.
Note E: STOCK COMPENSATION PLANS, Continued.
The following table summarizes stock option activity:
Number Weighted Average
of Shares Exercise Price
Outstanding at July 2, 1995 394,000 $3.83
Granted 215,000 4.64
Canceled (126,000) 5.04
Outstanding at June 29, 1996 483,000 3.87
Granted 58,000 6.29
Exercised (162,200) 3.39
Outstanding at June 28, 1997 378,800 4.45
Granted 291,500 9.95
Canceled (15,200) 5.00
Exercised (125,100) 4.01
Outstanding at June 27, 1998 530,000 7.56
Exercisable at June 27, 1998 150,100 4.85
Options outstanding at June 27, 1998 are exercisable at prices ranging
from $2.50 to $11.25 per share and have a weighted average remaining
contractual life of 6.86 years. The following table summarizes
information about stock options outstanding at June 27, 1998.
Outstanding Exercisable
Number Weighted Number
Outstanding Average Weighted Exercisable Weighted
Range of at Remaining Average at Average
Exercise June 27, Contractual Exercise June 27, Exercise
Price 1998 Life Price 1998 Price
$ 2.50 -$4.00 131,300 5.67 $ 3.41 85,700 $3.23
4.01 - 5.50 5,000 4.28 5.38 1,000 5.38
5.51 - 7.00 104,200 4.95 6.24 45,400 6.26
7.01 - 8.50 25,500 5.47 8.25 - -
8.51 -10.00 139,000 7.54 9.48 18,000 9.00
10.01 -11.25 125,000 9.33 10.85 - -
530,000 150,100
At June 28, 1997 and June 29, 1996, there were exercisable options to
purchase 180,600 and 241,200 shares at weighted average exercise prices
of $4.00 and $3.31 per share, respectively. The weighted average grant
date fair value of options granted during the years ended June 27, 1998,
June 28, 1997 and June 29, 1996 were $3.53, $2.89 and $1.94 respectively.
As of June 27, 1998, 225,700 shares were reserved for the granting of
future stock options, compared with 2,000 shares at June 28, 1997.
Note E: STOCK COMPENSATION PLANS, Continued.
Had Miller adopted the provisions of SFAS No. 123, "Accounting for Stock-
Based Compensation," Miller's net income and earnings per share would have
been:
June 27, June 28, June 29,
1998 1997 1996
Pro forma net income $1,881,853 $1,458,654 $394,177
Pro forma diluted earnings
per share .56 .44 .13
The pro forma amounts shown above and the weighted-average grant-date fair
value of options granted are estimated using the Black-Scholes option-
pricing model with the following assumptions:
Risk free interest rate 5.64% 6.30% 5.77%
Expected life 3.4 years 3.3 years 2.6 years
Expected volatility 50% 50% 50%
Stock Purchase Plan
The Company has an employee stock purchase plan under which a total of
500,000 shares of the Company's common stock are reserved for purchase by
full-time employees through payroll deductions at a price equal to 85% of
the fair market value on the purchase date. Certain restrictions in the
plan limit the amount of payroll deductions and the amount of ownership
in the Company an employee may acquire under the plan. As of June 27,
1998, the Company has not implemented the employee stock purchase plan.
Note F: INCOME TAXES
The provision for income taxes is summarized as follows:
Years Ended
June 27, June 28, June 29,
1998 1997 1996
Current:
Federal $ 833,000 $ 934,000 $185,000
State 179,000 164,000 79,000
1,012,000 1,098,000 264,000
Deferred tax (credit) 294,000 (92,000) 70,000
Total $1,306,000 $1,006,000 $334,000
Although not affecting the total provision, the amounts previously
reported for the allocation of federal and state income taxes between
current and deferred for 1997 have been revised based upon determinations
made when the related tax returns were filed.
Note F: INCOME TAXES, Continued.
The provision for income taxes included in the consolidated statements of
income differs from that computed by applying the federal statutory tax
rate (34%) to income before income taxes as follows:
Years Ended
June 27, June 28, June 29,
1998 1997 1995
Computed federal income
tax $1,172,000 $ 877,000 $279,000
Increase (decrease)
resulting from:
State income taxes, net
of federal income tax
benefit 170,000 94,000 59,000
Other, net (36,000) 35,000 ( 4,000)
Total $1,306,000 $1,006,000 $334,000
Deferred income taxes reflect the estimated future net tax effects of
temporary differences between the carrying amounts of assets and liabili-
ties for financial reporting purposes and the amounts used for income tax
purposes. The components of the net deferred tax asset and liability at
June 27, 1998 and June 28, 1997 are as follows:
June 27, June 28,
1998 1997
Current deferred tax asset (liability):
Receivables $ (20,000) $ (87,000)
Inventories 110,000 154,000
Property held for sale - 62,000
Accrued warranty 42,000 70,000
Other accrued liabilities 98,000 142,000
Total $ 230,000 $ 341,000
Long-term deferred tax asset (liability):
Receivables $(168,000) -
Property, plant and equipment (150,000) (140,000)
Other 2,000 7,000
Total $(316,000) $(133,000)
Note G: SALE OF CALIFORNIA OPERATION.
On October 21, 1996, Miller sold all of the issued and outstanding stock
of its wholly owned California subsidiary, to MODTECH, Inc. ("Buyer").
The California subsidiary manufactured modular and mobile buildings in
Patterson, California. The consideration paid by the Buyer to Miller
consisted of a cash purchase price of $1,516,390, which approximated the
carrying value of the underlying net assets and, accordingly, there was
no gain or loss on the sale. Miller and the Buyer also entered into a
three-year lease obligation for certain real property (the "Patterson
Property") which lease agreement requires the Buyer, as lessee, to pay
Note G: SALE OF CALIFORNIA OPERATION, Continued.
Miller rental payments of $4,500 per month. On January 16, 1998, with the
issuance of an acceptable expanded environmental report on the Patterson
Property, Miller and Buyer mutually agreed to cancel the lease agreement,
and the Buyer acquired the Patterson Property from Miller for a cash
purchase price of $450,000, which resulted in a $37,894 gain on sale of
property held for sale.
In connection with this sale transaction, Miller entered into a non-
competition agreement with the Buyer which provides that Miller will not,
at any time within a five-year period following closing, engage in any
business that manufactures and markets the products which were previously
manufactured by Miller's former California subsidiary in the states of
California, Nevada and Arizona.
Note H: NONRECURRING ITEMS.
During the fiscal year ended June 29, 1996, nonrecurring items consisted
of: a pre-tax charge of $256,792 related to costs associated with the
terminated acquisition of Whitley Manufacturing Company, Inc.; $76,613 of
additional exit costs associated with the closing of Miller's residential
division, which manufactured factory-built modular residential housing;
and $24,775 of other nonrecurring charges.
Note I: COMMITMENTS AND CONTINGENCIES.
Lease Commitments
Miller leases two of its manufacturing facilities under noncancellable
operating leases expiring through December 2002. The lease for the Sioux
Falls, South Dakota facility may be extended at Miller's option. The
lease for the Kirkwood, New York facility has an option to renew for an
additional five-year term and contains an option to purchase the facility
after February 28, 2000. Miller generally is responsible for utilities,
taxes and insurance on the leased facilities. Future minimum lease
payments under these noncancellable leases aggregate $1,084,383 and are
payable as follows: 1999 - $270,489, 2000 - $263,322, 2001 - $220,085,
2002 - $220,085, and 2003 - $110,402.
Rental expense under all operating leases aggregated $196,277, $97,654 and
$70,691 for the years ended June 27, 1998, June 28, 1997 and June 29,
1996, respectively.
Self-Insurance
Miller is self-insured for the portion of its employee health care costs
not covered by insurance. Miller is liable for medical claims up to
$40,000 per eligible employee annually, and aggregate annual claims up to
approximately $861,000. The aggregate annual deductible is determined by
the number of eligible covered employees during the year and the coverage
they elect. Miller accrues for the estimated losses occurring from both
asserted and unasserted claims. The estimate of the liability for
unasserted claims arising from incurred, but not reported, claims is based
on an analysis of historical claims data.
Note J: UNAUDITED INTERIM FINANCIAL INFORMATION.
Presented below is certain selected unaudited quarterly financial
information for the years ended June 27, 1998 and June 28, 1997:
Net Gross Net Earnings Per Share
Sales Profit Income Basic Diluted
1998:
Fourth $16,528,679 $3,312,056 $919,497 $.28 $.25
Third 14,449,832 2,368,307 278,980 .08 .08
Second 10,405,750 1,956,890 315,351 .10 .09
First 13,315,399 2,627,870 626,224 .19 .18
1997:
Fourth $13,007,704 $2,900,872 $629,292 $.20 $.19
Third 10,235,248 1,786,365 159,691 .05 .05
Second 10,007,430 1,957,654 280,076 .09 .09
First 13,036,388 2,318,806 504,769 .16 .16
The sum of quarterly diluted earnings per share for the four quarters of
fiscal 1998 and fiscal 1997 may not equal annual diluted earnings per
share due to the effect of dilutive securities.
MILLER BUILDING SYSTEMS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Col. A Col. B Col. C Col. D Col. E
Additions Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts Deductions of Period
Year ended June 27, 1998:
Allowance for
doubtful receivables $ 48,239 $ 54,881 $ - $ 52,726(A) $ 50,394
Year ended June 28, 1997:
Allowance for
doubtful receivables $ 53,605 $ 51,293 $ - $ 56,659(A) $ 48,239
Year ended June 29, 1996:
Allowance for
doubtful receivables $ 59,024 $ 1,287 $ - $ 6,706(A) $ 53,605
(A) Uncollectible accounts written off.
MILLER BUILDING SYSTEMS, INC., AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
10.66 Third Amendment to Lease Agreement between Toboll Properties Limited
Partnership and Sioux Fall Structures, Inc. (now known as Miller
Building Systems of South Dakota, Inc.) dated August 20, 1997, with
respect to the leased property at Sioux Falls, South Dakota.
10.67 First Amendment to Employment Agreement between Registrant and Edward
C. Craig, dated October 22, 1997.
10.68 Lease agreement between United Kirkwood, L.L.C. and United Structures,
Inc., with respect to the leased property at Kirkwood, New York.
21 Subsidiaries of the Registrant
23 Consent of Independent Accountants
27 Financial Data Schedule
The exhibits listed below are filed as part of this report and incorporated by
reference as indicated.
3.1 Certificate of Incorporation, as amended (a)
3.2 By-Laws, as amended (a) (c) (e) (g) (I) (j) (l)
4.1 Specimen Common Stock Certificate (d)
4.2 Certificate of Incorporation, Articles Fourth, Eighth, and Tenth;
By-Laws, Articles II, VII, and IX (a)
10.11 Lease Agreement between Sioux Falls Structures, Inc. (now known as
Miller Structures, Inc.), a South Dakota corporation, and Toboll
Corporation dated April 15, 1985 with respect to property located in
Sioux Falls, South Dakota (a) and Amendments thereto dated February 3,
1988 and December 31, 1989 (f)
10.47 Agreement between Registrant and Frederick H. Goldberger, dated May 6,
1991, which replaces an employment agreement dated April 26, 1988 and
amendments thereto which was to expire on June 30, 1995 (h)
10.48 1991 Stock Option Plan adopted by the Registrant's stockholders on
October 30, 1991 and Form of Option Agreement (k)
10.49 Miller Building Systems, Inc. 401(k) Plan (m)
10.53 1994 Stock Option Plan adopted by the Registrant's stockholders on
October 25, 1994 and Form of Option Agreement (n)
10.57 Employment agreement between Registrant and Edward C. Craig, dated
February 29, 1996 (p) (I)
10.58 Lease agreement between the Board of County Commissioners of Coffey
County, Kansas dated August 12, 1996 with respect to property located
in Burlington, Kansas (p)
10.59 Agreement between Registrant and American Quality Manufacturing, Inc.
dated July 25, 1996, to vacate the leased property located in
Burlington, Kansas (p)
10.60 Lease agreement between Toboll Property Limited Partnership and Miller
Structures, Inc. dated May 21, 1996, with respect to the lease of land
in Sioux Falls, South Dakota (p)
10.61 Agreement for Purchase and Sale of all of the outstanding Capital
Stock of Miller Structures, Inc., a California Corporation, dated
September 30, 1996, between Miller Structures, Inc., an Indiana
Corporation, and MODTECH, Inc. (q)
10.62 Non-Competition Agreement, dated October 1, 1996, between Miller
Structures, Inc., an Indiana Corporation, and MODTECH, Inc. with
respect to sale of the Capital Stock of Miller Structures, Inc., a
California Corporation (q)
10.63 Supplemental Closing Agreement, dated October 21, 1996, between Miller
Structures, Inc., an Indiana Corporation, and MODTECH, Inc. with
respect to the sale of the Capital Stock of Miller Structures, Inc., a
California Corporation (q)
10.64 Stock Purchase Agreement, dated February 27, 1998, between Registrant
and David Newman and Marc Newman to purchase all of the issued and
outstanding shares of capital stock of United Structures, Inc., a New
York Corporation (r)
10.65 1997 Stock Option Plan adopted by the Registrant's stockholders on
November 5, 1997 (s)
10.66 Registration Statement to register 227,082 shares of the Registrants
common stock owned by David and Marc Newman (t)
(a) Registration Statement on Form S-1, as amended (File No. 0-14651)
(b) Form S-8, Date of Report - October 28, 1987
(c) Form 8-K, Date of Report - July 20, 1989
(d) Form 10-K for year ended June 30, 1989
(e) Form 8-K, Date of Report - January 31, 1990
(f) Form 10-K for year ended June 30, 1990
(g) Form 8-K, Date of Report - April 23, 1991
(h) Form 8-K, Date of Report - May 6, 1991
(I) Form 8-K, Date of Report - July 25, 1991
(j) Form 8-K, Date of Report - August 26, 1991
(k) Form S-8, Date of Report - July 31,1992
(l) Form 8-K, Date of Report - April 22, 1993
(m) Form 10-K for year ended June 30, 1993
(n) Form S-8, Date of Report - Dated December 30, 1994
(o) Form 10-K, for year ended July 1, 1995
(p) Form 10-K, for year ended June 29, 1996
(q) Form 8-K, Date of Report - October 21, 1996
(r) Form 8-K/A-1, Date of Report - February 27, 1998
(s) Form S-8, Date of Report - March 20, 1998
(t) Form S-3, Date of Report - August 5, 1998
(I) Indicates a management contract or compensation plan or arrangement.
THIRD AMENDMENT
TO LEASE AGREEMENT EXHIBIT 10.66
THIS THIRD AMENDMENT made and entered into as of the 20th day of August,
1997 by and between Toboll Properties Limited Partnership, whose address for
purposes of this Agreement is 2001 Crestwood Road, Sioux Falls, South Dakota
57105 ("Lessor") and Sioux Falls Structures, Inc. (formerly Modular Structures
of South Dakota, Inc.), whose address is Rural Route 4, Box 40, Sioux Falls,
South Dakota 57107 ("Lessee");
WITNESSETH:
1. Background.
1.1 Toboll Corporation (formerly Sioux Falls Structures, Inc.) and
Lessee have entered into a Lease dated April 15, 1985 (the "Lease") covering the
following described real property and improvements thereon, located in Minnehaha
County, South Dakota, to-wit (the "Leased Premises"):
Lots 8 and 10, except the North 916.5 feet of the East 27 feet of Lot 10,
of Northwestern Industrial Park in the West Half of the North Half of the
Northwest Quarter (W1/2N1/2NW1/4) of Section 18, Township 102 North, Range
49 West, according to the recorded plat thereof.
1.2 Toboll Properties, a South Dakota general partnership, was the
successor to Toboll Corporation and Lessor is the successor of Toboll
Properties.
1.3 The Lease has been amended by an agreement dated February 3, 1988
(the "First Amendment"), and by a second agreement dated December 31, 1989 (the
"Second Amendment").
1.4 Under the Second Amendment, the term of the Lease was extended to
April 15, 1994 and Lessee was granted the option to further extend the Lease for
three successive periods of two years each on terms and conditions described in
the Second Amendment. Lessee has thus far exercised two of those options.
1.5 Lessor and Lessee now deem it in their mutual best interests to
amend the Lease a third time by this Agreement (the "Third Amendment").
2. Grant of Additional Option. Lessor hereby grants to Lessee the
option to extend the term of the Lease for a three-year term in addition to all
other options previously granted by the First Amendment or Second Amendment,
commencing on the day following expiration of the last extension period granted
under the Second Amendment.
3. Method of Exercise. The extension option granted by this Third
Amendment must be exercised by written notice from the Lessee to Lessor at least
90 days prior to the expiration of the then extended term explicitly stating
that Lessee exercises its right to extend the term of this Lease under the Third
Amendment.
4. Effect of Exercise.
4.1 Lessee's attempted exercise of the extension option granted by
this Third Amendment shall not be effective to extend the term of this Lease
unless:
(a) Lessee is not in default of the Lease or the terms of the
First Amendment, Second Amendment or this Third Amendment at the time of the
exercise; and
(b) No further event of default occurs after the notice of
exercise; and
(c) Lessee's notice of exercise complies with the requirements
of P 3; and
(d) Lessee shall have exercised all extension options granted
under the Second Amendment.
4.2 Except as described in P4.1, on Lessee's notice of exercise, this
Lease, subject to the terms of this Third Amendment, shall be deemed to be
extended and the term thereof extended for a period of three years from the date
of the expiration of the last extended term during which such notice is given,
without execution of any further lease, document or instrument.
5. Terms Applicable to Extension Period.
5.1 The annual rent applicable to each year of the Lease term
extension provided in this Agreement shall be $68,000.00 per year, payable in
equal consecutive monthly installments of $5,666.67 payable as and at the times
described in the Lease.
5.2 Lessee shall have no option to extend the Lease beyond the
expiration of the extension term covered by this Third Amendment.
5.3 The terms and conditions described in the Lease shall be fully
applicable during the extended term covered by this Third Amendment.
6. Rent Adjustment Applicable to Second Amendment. Unless Lessee
improves the Leased Premises by constructing a warehouse and accomplishing
office remodeling at a total minimum cost of $30,000.00 according to plans and
specifications approved by Lessor, the base rental applicable to the last
extension term granted under the Second Amendment shall increase to $68,048.00
per year. Lessee's exercise of the remaining extension option granted by the
Second Amendment shall constitute Lessee's agreement to be subject to the
conditional rent adjustment as described in this paragraph.
7. Binding Effect. Except as modified hereby, the Lease and the
Second Amendment shall remain in full force and effect according to their
original terms. The parties acknowledge that the First Amendment was superseded
in its entirety by the Second Amendment.
TOBOLL PROPERTIES LIMITED
PARTNERSHIP
Dated: 8/27, 1997 By \J F Toboll
Its: General Partner
SIOUX FALLS STRUCTURES, INC.
Dated: 8/20, 1997 By \Edward C. Craig
Its: Pres
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT EXHIBIT 10.67
This First Amendment to Employment Agreement (this "First Amendment") is
made as of October 22, 1997 (the "Amendment Date"), by and between Miller
Building Systems, Inc., a Delaware corporation (the "Company") and Edward C.
Craig (the "Employee").
RECITALS
A. Pursuant to that certain Employment Agreement dated February 29, 1996 (the
"Agreement"), the Company hired the Employee to serve as its Chief Executive
Officer and President.
B. Since the date of the execution of the Agreement, certain changes have
occurred in the market and the performance of the Company.
C. The Company, on behalf of its shareholders, employees and the Board of
Directors, desires to recognize the Employee's excellent work, importance to the
Company and continued contribution to the Company.
D. The Company and the Employee desire to amend certain provisions of the
Agreement to account for such changes, in accordance with the terms and
provisions of this First Amendment.
CLAUSES
In consideration of the preceding, and the obligations, covenants and
duties identified below, the parties amend the Agreement as follows:
1. Delete existing Sections 1.1 and 1.2 of Article 1 of the Agreement in their
entirety, and substitute the following in their place:
1.1 Duties and Term. Subject to the terms and conditions of this
Agreement, the Company employs the Employee and the Employee accepts such
employment with the Company as follows:
(a) For a period of two (2) years, commencing on July 1, 1997, and
continuing through June 30, 1999, the Employee shall serve as the Company's
Chief Executive Officer and President and perform the usual duties of such
offices as described in the Company's by-laws. In addition to the
foregoing, prior to July 1, 1998, at the direction of the Board of
Directors of the Company, the Employee shall assist the Company with
identifying and securing an individual to succeed the Employee as President
and to serve as the Company's Chief Operating Officer.
(b) For a period of two (2) years, commencing not later than July 1,
1999, and continuing through June 30, 2001, the Employee shall serve as the
Company's Chairman of the Board and Chief Executive Officer and perform the
usual duties of such offices as described in the Company's by-laws;
provided however, the Employee shall only serve as the Company's Chief
Executive Officer until such time when Employee's successor is named by the
Employee to the position of Chief Executive Officer.
(c) For a period of two (2) years, commencing not later than July 1,
2001, and continuing through June 30, 2003, the Employee shall serve as an
independent consultant to the Company and perform such duties to be
determined by the Board of Directors.
(d) The Employee shall devote his exclusive and full-time attention
and best efforts to the Company's business, at its location in Elkhart,
Indiana during the four-year period commencing on July 1, 1997, and
continuing through June 30, 2001 (the "Term").
1.2 Termination for Cause. Notwithstanding the provisions set forth in
Section 1.1 above, the Company shall have the right, at any time during the Term
of this Agreement, to terminate the Employee's employment under this Agreement
without prior notice, if such termination is for "Cause". For purposes of this
Agreement, "Cause" shall mean dishonesty, fraud, conviction of a felony or any
crime involving moral turpitude, willful refusal to perform the material duties
under this Agreement, gross dereliction or gross neglect of duty, or material
breach of the restrictive covenants set forth in Section 6 of this Agreement.
2. Delete existing Section 2.1 of Article 2 of the Agreement in its entirety,
and substitute the following in its place:
2.1 Base Salary. In consideration for the services to be rendered by the
Employee to the Company under this Agreement, the Company shall pay
the Employee an annual base salary ("Base Salary") as follows, subject
to adjustment pursuant to Section 2.6 below:
(a) Effective July 1, 1997, and continuing through June 30, 1998, an
amount equal to Two Hundred Thousand and 00/100 Dollars ($200,000.00). The
Employee's Base Salary in this Section 2.1(a) shall be effective
retroactive to July 1, 1997, and the Company shall pay to the Employee, any
amounts which may have be due prior to the Amendment Date but not yet paid
to Employee;
(b) During the period commencing on July 1, 1998, and continuing
through June 30, 1999, an amount equal to Two Hundred Thousand and 00/100
Dollars ($200,000.00);
(c) During the period commencing on July 1, 1999 and continuing
through June 30, 2000, an amount equal to Two Hundred Thousand Dollars and
00/100 Dollars ($200,000.00);
(d) During the period commencing on July 1, 2000, and continuing
through June 30, 2001, an amount equal to Two Hundred Thousand and 00/100
Dollars ($200,000.00); and
(e) During each of the following (I) the period commencing on July 1,
2001, and continuing through June 30, 2002, and (ii) the period commencing
July 1, 2002, and continuing through June 30, 2003, an amount equal to One
Hundred Fifteen Thousand and 00/100 Dollars ($115,000.00).
3. Insert Sections 3.2 and 3.3 following the existing Section 3.1 of
Article 3:
3.2 Additional Stock Options. The Company shall issue to the Employee
stock options to purchase an additional 175,000 shares of the Company's
stock pursuant to the Company's 1997 Stock Option Plan (the "1997 Stock
Option Plan"). The Employee shall have the right to purchase shares
pursuant to the 1997 Stock Option Plan as follows:
(a) 50,000 shares at an exercise price equal to the closing price of
the Company's common stock on the Amendment Date, which shares shall vest
as of June 30, 1998;
(b) 50,000 shares at an exercise price of $10.25, which shares shall
vest as of June 30, 1999; and
(c) 75,000 shares at an exercise price of $11.25, which shares shall
vest as of June 30, 2000.
3.3 Sales of Employee's Shares. If the Employee desires to sell shares
of the Company's stock acquired by him pursuant to Section 3.1 and 3.2 above,
the Company will assist the Employee in placing the Employee's stock with a
purchaser, at no charge to the Employee for any services provided by the Company
or the Company's Attorneys in connection with the sale of the Employee's stock.
4. The terms and provisions of this First Amendment shall prevail if there is
any conflict between the terms of this First Amendment and the terms of the
Agreement. However, except as this First Amendment specifically provides, all
terms and provisions of the Agreement shall remain in full force and effect
without change, modification or deletion.
5. The laws of the State of Indiana shall govern the terms and provisions of
this First Amendment.
The parties have executed this First Amendment as of the Amendment Date.
EMPLOYEE: THE COMPANY:
Miller Building Services, a Delaware
Corporation
\Edward C. Craig By: \Steven F. Graver
Edward C. Craig, individually
Its: Chairman of the Board
LEASE EXHIBIT 10.68
THIS LEASE is made and entered into this 27th day of
February, 1998, by and between UNITED KIRKWOOD, L.L.C., having an
address of P.O. Box 678, Vestal, New York 13851, ("Landlord"),
and UNITED STRUCTURES, INC., having an address of 5 Pine Camp
Drive, Kirkwood, New York ("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord desires to lease to Tenant and Tenant
desires to lease from Landlord the Premises described below upon
the terms and conditions provided in this Lease.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements herein set forth, Landlord and Tenant
agree as follows:
1. GRANT OF LEASE AND DESCRIPTION OF PREMISES
Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord, those certain premises located at 5 Pine
Camp Drive, Town of Kirkwood, Broome County, New York, more
particularly described in Exhibit "A" appended hereto, together
with all buildings and improvements located thereon comprising
approximately 55,900 square feet (the "Improvements") and all
easements, rights-of-way appurtenant to the Premises. The
premises covered by this Lease, including the Improvements and
easements, and rights-of-way appurtenant to the premises, shall
hereinafter be referred to as the "Premises".
2. TERM
(a) The term of this Lease (the "Term") shall
commence on February 27, 1998 (the "Commencement Date") and shall
terminate on December 31, 2002 (the "Expiration Date"), unless
sooner terminated or extended in accordance with the provisions
of this Lease.
(b) Tenant may, at its option, renew this Lease
for an additional term of five (5) years ("Option Term"). The
Option Term shall commence immediately upon the conclusion of the
original Term. This option to renew shall be exercised only by
written notice in accordance with Section 20 hereof given no
later than nine (9) months prior to the Expiration Date. Except
for the increase in rent hereinafter provided, the Option Term
shall be on the same terms and conditions as are to be in effect
during the original Term, except that Tenant shall have no
further option to renew this Lease beyond the expiration of the
Option Term. If Tenant fails to exercise this renewal option
during the period in which it is available and in the manner
required hereby, the Lease is no longer in full force and effect
for any reason, or Tenant is in default in the payment of Fixed
Annual Rent or Additional Rent or any other charges or sums due
under this Lease beyond any applicable cure period or in any
other material respect under this Lease at the time of such
exercise, this renewal option shall terminate, become void and be
of no further force and effect. Unless otherwise hereinafter
expressly provided, any reference to "Term" shall mean the
original term hereof and any Option Term.
(c) Tenant shall have the right to cancel this
Lease upon six (6) months prior written notice to the Landlord,
which notice may be given at any time after July 1, 1999. Such
cancellation right may not be exercised from January 1, 2002
through the end of the original term. As a condition of the
exercise of this right of cancellation, Tenant shall pay the
Landlord one year's rent if the cancellation occurs between
January 1, 2000 and June 30, 2000, or one-half year's rent if the
cancellation occurs between July 1, 2000 and December 31, 2001.
In addition to the payment of one year's or one-half year's rent,
as the case may be, Tenant shall pay the Landlord real estate
taxes attributable to any portion of the one-year or one-half
year period, as the case may be, that the Premises remain vacant.
Tenant shall also have the right to cancel this Lease during the
Option Term upon six (6) months prior written notice which may be
given after July 1, 2004 but not after July 1, 2006. Such
cancellation right may not be exercised from January 1, 2007
through the end of the Option Term. As a condition of the
exercise of the right of cancellation during the Option Term,
Tenant shall pay the Landlord one year's rent if the cancellation
occurs between January 1, 2005 and June 30, 2005, or one-half
year's rent if the cancellation occurs between July 1, 2005 and
December 31, 2006. In addition to the payment of one year's or
one-half year's rent, as the case may be, in the event of
cancellation during the Option Term, Tenant shall pay the
Landlord real estate taxes attributable to any portion of the
one-year or one-half year period, as the case may be, that the
Premises remain vacant.
<PAGE>
3. RENT
(a) For the use of the Premises during the Term,
Tenant agrees and promises to pay to Landlord fixed annual rent
(the "Fixed Annual Rent" or "Rent") in the amount of $220,805.00
during the Term and in the amount of $240,370.00 during the
Option Term. Tenant shall pay the Fixed Annual Rent to Landlord
in equal monthly installments equal to one-twelfth (1/12) of the
applicable Fixed Annual Rent in advance on the first day of each
month, at the office of Landlord or at such other place as may be
designated in writing by Landlord, and except as otherwise
specifically provided herein, without notice, demand, deduction
or offset. Tenant's obligation to pay Fixed Annual Rent shall
commence on the Commencement Date.
(b) Any and all amounts other than Fixed Annual
Rent payable by Tenant according to this Lease will be payable as
"Additional Rent". If Tenant fails to pay any such amounts when
due and such failure is not cured within ten (10) days after
written notice thereof from Landlord to Tenant, Landlord will
have all the rights and remedies available to it on account of
Tenant's failure to pay Fixed Annual Rent. Fixed Annual Rent and
Additional Rent are sometimes collectively referred to herein as
"Rent".
4. PURPOSE AND USE OF PREMISES
Tenant shall use and occupy the Premises for the
operation of its business as of the date hereof ("Permitted Use")
and for no other purpose. Tenant covenants and agrees that
Tenant will not use or permit any person to use the Premises or
any part thereof for any use or purpose in violation of the laws
of the United States of America, the State of New York, or any
ordinances or other regulations of any municipality in which the
Premises are situated.
5. TAXES
As Additional Rent, Tenant shall pay all real property
and school taxes and assessments or governmental impositions in
lieu thereof, water, and sewer rents, rates and charges which
apply to the Premises (collectively the "Taxes"), provided that
Tenant shall only be required to pay its proportionate share of
such taxes, assessments and charges applicable to the Term from
and after the Commencement Date. Any claim for real property
taxes made by the Landlord upon Tenant as provided for herein
shall be in writing, for the property of which the Premises are a
part, for the tax year for which a claim is made. Such
Additional Rent shall be paid within ten (10) days of Landlord's
billing Tenant, which billing shall include a copy of the tax
bill. Thirty (30) days prior to the termination of this Lease,
Tenant shall pay to Landlord its proportionate share of the Taxes
which have yet to be billed to Landlord but which apply to the
Term of this Lease. Such tax payment shall be based upon the
prior years Taxes and shall be adjusted when the actual bill is
issued. Upon payment from Tenant, if applicable, Landlord shall
pay all Taxes prior to the due date and provide evidence of
payment upon request by Tenant. At Tenant's request, Taxes shall
be paid under protest. In the event Landlord fails to timely pay
Taxes, Tenant shall have the right to pay such amounts and to
offset the amounts so paid against the Fixed Annual Rent. Tenant
shall also have the right to protest any change in assessed value
and to pay Taxes under protest. Upon the commencement of this
Lease, Tenant shall pay its pro-rata share of taxes which have
been prepaid by Landlord and attributable to the term of the
Lease.
6. COMPLIANCE WITH LAWS
Tenant agrees to comply in all material respects with
all laws, ordinances, rules and regulations of the federal,
state, county and municipal authorities applicable to the
Premises and to the business to be conducted in the Premises;
provided, however, that Tenant shall not be required to make any
capital expenditures which are required for reasons which are not
unique to Tenant's use of the Premises.
7. UTILITIES
Tenant shall promptly pay for all utilities consumed by
it in the Premises, including, without limitation, gas, water,
sewer charges, electricity, and telephone. Landlord shall pay
all utilities consumed by Landlord in the Premises prior to the
commencement of the Term.
8. REPAIRS AND MAINTENANCE
(a) The Landlord shall be responsible to maintain
and keep in good order and repair the structural portions of the
Premises consisting of the roof, foundation and structural
portions of the walls and ceiling and the repair and replacement
of all operating systems in the Premises including mechanical,
electrical, plumbing, HVAC system.
(b) Tenant shall be responsible to maintain and
keep in good order and repair (including replacements, if
required) all other portions of the Premises at its own cost and
expense, including, but not limited to, interior and exterior of
the building, the parking lot, driveways, lighting, snow removal
and cleaning.
(c) Landlord shall have the right, with
reasonable prior notice to Tenant, to enter the Premises at all
reasonable hours without disrupting or interfering with Tenant's
business operations in the Premises for the purpose of inspecting
or of making repairs to the same, and Landlord shall also have
the right with reasonable prior notice to Tenant to make access
available to prospective or existing mortgagees or purchasers of
any part of the Premises without disrupting or interfering with
Tenant's business operations in the Premises. If repairs are
required to be made by Tenant pursuant to the terms hereof,
Landlord may by thirty (30) days written notice demand that
Tenant make the same forthwith, and if Tenant refuses or neglects
to commence such repairs and complete the same with reasonable
dispatch, after such demand, Landlord may (but shall not be
required to do so) make or cause such repairs to be made (at such
times and in such manner as to minimize any interference with
Tenant's business operations in the Premises), and the Landlord
shall not be responsible for any loss or damage to Tenant's
business by reason thereof. If Landlord makes or causes such
repairs to be made, Tenant agrees that it will forthwith, on
demand, pay to Landlord the reasonable cost thereof, and if it
shall default in such payment, Landlord shall have the remedies
provided for the non-payment of Fixed Annual Rent or other
charges payable hereunder.
9. ALTERATIONS AND IMPROVEMENTS
Tenant shall make no structural changes in or to the
Premises without Landlord's prior written consent, which consent
shall not be unreasonably withheld, conditioned or delayed.
Without Landlord's consent, Tenant may make alterations,
installations, additions or improvements which are non-structural
and which do not affect the mechanical systems serving the
Premises, or the utility services or electrical lines in or to
the interior of the Premises. Any and all costs and payments
incurred in connection with such work shall be the sole
responsibility of Tenant. All alterations, additions or
improvements (other than Tenant's Equipment and fixtures) shall
become property of Landlord and shall remain upon and be
surrendered with the Premises upon the termination of this Lease.
10. SIGNS
Subject to any applicable local, state or federal law,
Tenant may install at its sole cost and expense such signs in, on
or about the Premises as it deems desirable for the conduct of
its business.
11. INSURANCE
(a) Landlord shall cause to be maintained in full
force and effect throughout the Term "all risk" fire and extended
coverage insurance (replacement cost) written by a reputable
insurer licensed to do business in the State of New York to
adequately repair and restore the Premises, rental interruption
and general liability insurance with $5,000,000.00 combined
single limits for bodily injury and property damage. Landlord
shall have no obligation to insure any alterations or
improvements made to the Premises by Tenant or any of Tenant's
trade fixtures, equipment or other personal property located
within the Premises. Tenant agrees to pay Landlord as Additional
Rent the cost of such insurance within twenty (20) days after
demand from Landlord accompanied by a copy of the invoice for
such insurance. At the commencement of this Lease Tenant shall
pay to Landlord its proportionate share of any pre-paid insurance
attributable to a portion of the term of this Lease.
(b) Tenant shall cause to be maintained in full
force and effect throughout the Term general liability insurance
with $2,000,000.00 combined single limits for bodily injury and
property damage (such coverage may be maintained through both
primary and umbrella coverage) naming Landlord as an additional
named insured, written by a reputable insurer licensed to do
business in the State of New York. Tenant shall furnish Landlord
with a certificate of insurance evidencing such coverage.
(c) Tenant agrees not to do or permit anything to
be done in, on or about the Premises, or to keep anything
therein, which will increase the rate of fire insurance premiums
on the Improvements, or any part thereof, or on property kept
therein, or which will conflict with the regulations of any
pertinent authority or public or quasi-public department or with
any insurance policy upon the Improvements or any part thereof.
(d) Landlord and Tenant each waive any and all
rights to recover against the other or against anyone claiming
through them by way of subrogation or otherwise for the loss or
damage to property of such waiving party arising from any cause
which would be covered by any insurance required to be carried by
such party pursuant to this Section 11. Landlord and Tenant,
from time to time, will cause their respective insurers to issue
appropriate waiver of subrogation rights endorsements to all
policies of insurance carried in connection with the Premises or
the contents of the Premises.
12. INDEMNIFICATION
Tenant agrees to defend, indemnify and save Landlord
harmless from legal action, damages, loss, liability and expense
(including reasonable attorneys' fees) in connection with loss of
life, bodily or personal injury or property damage arising from
or out of the use or occupancy by Tenant of the Premises or if by
any negligent act or omission of Tenant, Tenant's agents,
contractors, employees, invitees, or persons claiming through
Tenant or as a result of the breach of this Lease.
13. DAMAGE OR DESTRUCTION
(a) If the Premises or the Building are damaged
by fire or other insured casualty, Landlord will give Tenant
notice of the time which will be needed to repair such damage, as
determined by Landlord in its reasonable discretion, and the
election (if any) which Landlord has made according to this
Section 13. Such notice will be given before the forty-fifth
(45th) day (the "Notice Date") after the fire or other insured
casualty.
(b) If the Premises or the Building are damaged
by fire or other insured casualty to an extent which may be
repaired within one hundred eighty (180) days after the
commencement of repair, as determined by Landlord, and provided
there shall be at least one year remaining on the Lease and
Tenant agrees not to give notice of termination before the
completion of such repair, and until the end of the then current
term of the Lease, if permitted to do so, Landlord will repair
the damage within one hundred eighty (180) days after the Notice
Date. In that event this Lease will continue in full force and
effect except that Rent will be abated on a pro rata basis from
the date of the fire or other insured casualty until the date of
the completion of such repairs (the ''Repair Period'') based on
the proportion of the Premises of whose use Tenant is deprived
during the Repair Period.
(c) If the Premises or the Building are damaged
by fire or other insured casualty to an extent which may not be
repaired within one hundred eighty (180) days after the
commencement of repair, as reasonably determined by Landlord,
then either (i) Landlord or Tenant may cancel this Lease as of
the date of such damage by written notice given to the other
party on or before the Notice Date, or (ii) Landlord may elect to
repair such damage. If Landlord elects to repair such damage,
Rent will be abated on a prorated basis during the Repair Period
based on the proportion of the Premises of whose use Tenant is
deprived during the Repair Period. If Tenant disagrees with
Landlord's determination that the Building cannot be repaired
within one hundred eighty (180) days, Landlord and Tenant shall
mutually select a general contractor to make such determination
which shall be binding on the parties.
(d) If any damage by fire or other casualty is
the result of the willful conduct or gross negligence of Tenant,
its agents, contractors, employees or invites, Tenant will have
no right to terminate this Lease on account of such damage to the
Premises or Building.
14. CONDEMNATION
(a) If the whole or any material part of the
Premises shall be acquired or condemned by right of eminent
domain for any public use or purpose or be acquired by deed in
lieu thereof, then either party may terminate this Lease by
giving thirty (30) days' written notice to the other of its
election to terminate this Lease. If the term of this Lease
shall continue in full force and effect, Landlord shall, to the
extent of its award, immediately after possession is physically
taken, repair or rebuild what may remain of the Premises for the
occupancy of Tenant (subject to delays due to shortage of labor,
materials, or equipment, labor difficulties, breakdown of
equipment, or governmental restrictions which cannot be
reasonably avoided), and a just proportion of all Rent shall be
abated according to the nature and extent of the injury to the
Premises until what may remain of the Premises shall be repaired
and rebuilt as aforesaid, and thereafter a just proportion of all
Fixed Annual Rent shall be abated according to the nature and
extent of the part of the Premises acquired or condemned for the
balance of the Term of this Lease.
(b) Landlord reserves to itself and Tenant
assigns to Landlord, all rights to any award accruing on account
of any such taking or condemnation, or by reason of any act of
any public or quasi-public authority for which an award is
payable, except as hereinafter provided. Tenant agrees to
execute such instruments or assignments as may be reasonably
required by Landlord, to join with Landlord in any claim for the
recovery of any award, if requested by Landlord, and to turn over
to Landlord any such award that may be recovered in any such
proceeding. It is understood and agreed, however, that Landlord
does not reserve to itself and Tenant does not assign to Landlord
any award payable for moving expenses, leasehold improvements,
and trade fixtures installed by Tenant at its own cost and
expense.
15. END OF TERM: TRADE FIXTURES
At the end of the Term, Tenant will promptly quit and
surrender the Premises broom-clean, in good order and repair,
ordinary wear and tear and casualty excepted. All of Tenant's
trade fixtures and personal property, apparatus, machinery and
equipment now or hereafter located upon the Premises and owned by
Tenant, whether or not the same is affixed thereto, shall be and
remain the personal property of Tenant and the same are herein
sometimes referred to as "Tenant's Equipment". Tenant's
Equipment may be removed from time to time by Tenant; provided,
however, that if such removal shall injure or damage the Premises
or the Building, Tenant shall repair the damage and place the
Premises or the Building in the same condition as it would have
been if such equipment had not been installed, ordinary wear and
tear excepted. Title to any trade fixtures or personal property
left in the Premises by Tenant upon the termination of this Lease
shall pass to Landlord.
16. ASSIGNMENT AND SUBLETTING
(a) Tenant shall not assign, transfer or mortgage
this Lease or any interest herein or sublet the Premises or any
part thereof or permit the Premises or any part thereof to be
used by others without the prior written consent of Landlord in
each instance, which Landlord agrees shall not be unreasonably
conditioned, withheld or delayed. In the event such consent to
assign, transfer, mortgage or sublet this Lease be given, the
same shall be deemed to relate solely to the particular
assignment, transfer, mortgage, sublease or permission referred
to in such consent. Notwithstanding the above, Tenant shall have
the right to assign or sublet the Premises to its parent or any
of its affiliates, by merger or acquisition, without Landlord's
consent provided the Guaranty executed simultaneously herewith
remains in full force and effect. A conveyance of all or a
controlling portion of the stock of the Tenant or a conveyance of
all or substantially all of its assets shall be deemed an
assignment of this Lease.
(b) Notwithstanding any consent to an assignment
or sublease or any permitted assignment or sublease, Tenant shall
remain liable for all obligations under this Lease for the entire
term, including any extensions.
(c) Any assignment or sublease in violation of
this Section 16 will be void. If this Lease is assigned, or if
the Premises or any part of the Premises are subleased or
occupied by anyone other than Tenant, Landlord may, after default
by Tenant, collect rent from the assignee, subtenant or occupant,
and apply the net amount collected to Tenant's Rent obligations
under this Lease.
17. ENTRY BY LANDLORD
Landlord, its agents, employees, and contractors may,
in accordance with the terms of this Lease, enter the Premises at
any time in response to an emergency and at reasonable hours in
other instances upon reasonable prior notice to Tenant to inspect
the same, exhibit the same to prospective purchasers, lenders or,
during the last three months of the Term, or to determine whether
Tenant is complying with all its obligations under this Lease, or
to supply any service to be provided by Landlord to Tenant
according to this Lease, or make repairs required of Landlord
under the terms of this Lease. Landlord agrees not to materially
interfere with Tenant's business unless in the case of emergency.
Landlord will have the right to use any and all means which
Landlord may deem proper to open doors in and to the Premises in
an emergency in order to obtain entry to the Premises. Any entry
to the Premises obtained by Landlord by any means permitted under
this Section 17 will not, under any circumstances, be construed
or deemed to be a forcible or unlawful entry into or a detainer
of the Premises or an eviction, actual or constructive, of Tenant
from the Premises, or any portion of the Premises, nor will any
such entry entitle Tenant to damages or an abatement of Rent or
other charges which this Lease requires Tenant to pay.
18. SUBORDINATION; ESTOPPEL CERTIFICATES
(a) This Lease shall be subject and subordinate
to the lien of any mortgage currently placed upon the fee title
to the Premises, and to any mortgage which may in the future be
placed upon the fee title to the Premises. Landlord shall cause
any such current or future mortgagee or holder of a deed of trust
to provide to Tenant a non-disturbance agreement reasonably
acceptable to Tenant and its counsel providing that the rights of
Tenant under this Lease shall not be cut off, diminished or
otherwise affected by foreclosure of any such mortgage or deed of
trust, so long as Tenant shall not be in default hereunder.
Tenant, upon request of any party in interest, shall execute
promptly all reasonable instruments necessary to carry out the
intent of this Section 18 as shall be reasonably requested by
Landlord provided such instrument(s) includes a non-disturbance
provision. The word "remortgage" as used in this Lease includes
mortgages, leasehold mortgages, deeds of trust or other similar
instruments and modifications, consolidations, extensions,
renewals and replacements thereof and substitutes therefor.
(b) At any time and from time to time but within
fifteen (15) days after written request, either Landlord or
Tenant will execute, acknowledge and deliver to the requesting
party a certificate certifying (1) that this Lease is unmodified
and in full force and effect (or if there have been
modifications, that this Lease is in full force and effect, as
modified, and stating the date and nature of each modification),
(2) the date, if any, to which Fixed Annual Rent and other sums
payable under this Lease have been paid, (3) that no notice has
been received by Landlord or Tenant of any default which has not
been cured, except as to defaults specified in the certificate,
and (4) such other matters as may reasonably be requested by the
requesting party.
19. EVENTS OF DEFAULT; LANDLORD'S REMEDIES
(a) The following events are referred to
collectively as "Events of Default", or individually as an "Event
of Default":
(i) Tenant defaults in the payment of Fixed
Annual Rent herein reserved, or any part thereof, for a period of
ten (10) days after the service of written notice thereof;
(ii) Tenant defaults in the performance of
any other covenant or condition of this Lease on the part of
Tenant to be performed and fails to commence to cure the default
within thirty (30) days after the service of written notice
thereof by Landlord and thereafter prosecute such cure with
continuity and due diligence, or if such default cannot be cured
within thirty (30) days, then such additional time as is
necessary to cure the default so long as Tenant is diligently
proceeding to cure the default; or
(iii) Tenant files a voluntary petition in
bankruptcy or is adjudicated as bankrupt or insolvent or seeks
any similar relief under any federal bankruptcy or insolvency
statute, or if Tenant is involuntarily placed in bankruptcy and
such petition is not dismissed within sixty (60) days of filing.
(b) If any one or more Events of Default occur,
then Landlord has the right, at its election:
(i) To give Tenant written notice of
Landlord's intention to terminate this Lease on the earliest date
permitted by law or on any later date specified in such notice,
in which case Tenant's right to possession of the Premises will
cease and this Lease will be terminated, except as to Tenant's
liability, as if the expiration of the term fixed in such notice
were the end of the Term; or
(ii) Upon notice to Tenant and through
summary proceedings or other legal process, to reenter and take
possession of the Premises or any part of the Premises, repossess
the same, expel Tenant and those claiming through or under
Tenant, and remove the effects of both or either, using such
force for such purposes as may be necessary, without being liable
for prosecution, without being deemed guilty of any manner of
trespass, and without prejudice to any remedies for arrears of
Rent or other amounts payable under this Lease or as a result of
any preceding breach of covenants or conditions; or
(iii) Without further demand or notice, to
cure any Event of Default and to charge Tenant for the cost of
effecting such cure, provided that Landlord will have no
obligation to cure any such Event of Default of Tenant.
(c) Should Landlord elect to reenter as provided
in subsection (b)(ii), or should Landlord take possession
pursuant to legal proceedings or pursuant to any notice provided
by law, from time to time, without terminating this Lease,
Landlord shall use reasonable efforts to the extent required by
New York with respect to mitigation of damages to relet the
Premises or any part of the Premises in Landlord's or Tenant's
name, but for the account of Tenant, for such term or terms
(which may be greater or less than the period which would
otherwise have constituted the balance of the Term) and on such
conditions and upon such other terms (which may include
concessions, free rent and alteration and repair of Premises) as
Landlord, in its reasonable judgment may determine, and Landlord
may collect and receive the rent. Landlord will in no way be
responsible or liable for any failure to relet the Premises or
any part of the Premises, or for any failure to collect any rent
due upon such reletting. No such reentry or taking possession of
the Premises by Landlord will be construed as an election on
Landlord's part to terminate this Lease unless a written notice
of such intention is given to Tenant. No notice from Landlord
under this Section 19 or under a forcible or unlawful entry and
detainer statute or similar law will constitute an election by
Landlord to terminate this Lease unless such notice specifically
so states. Landlord reserves the right following any such
reentry or reletting to exercise its right to terminate this
Lease by giving Tenant such written notice, in which event this
Lease will terminate as specified in such notice.
(d) In the event that Landlord elects to
terminate this Lease as permitted in subsection (b)(i) of this
Section 19 or elects to take possession as provided in subsection
(b)(ii), Tenant will pay to Landlord: (1) all Rent which would
become due and payable for the balance of the term of the Lease,
as if such repossession had not occurred, less (2) the net
proceeds, if any, of any reletting of the Premises after
deducting all Landlord's reasonable expenses in connection with
such reletting, including, without limitation, all repossession
costs, brokerage commissions, attorneys' fees, expenses of
employees, alteration and repair costs and expenses of
preparation for such reletting. In no event shall the amount
credited to Tenant against the Rent exceed the Rent due to
Landlord under this Lease.
(e) If this Lease is terminated on account of the
occurrence of an Event of Default, Tenant will remain liable to
Landlord for damages in an amount equal to Rent and other amounts
which would have been owing by Tenant for the balance of the
Term, had this Lease not been terminated, less the net proceeds
(but not in excess of Rent due to Landlord), if any, of any
reletting of the Premises by Landlord subsequent to such
termination, after deducting all of Landlord's reasonable
expenses in connection with such reletting. Landlord will be
entitled to collect such damages from Tenant monthly on the day
on which Fixed Annual Rent and other amounts would have been
payable under this Lease if this Lease had not been terminated,
and Landlord will be entitled to receive such Fixed Annual Rent
and other amounts from Tenant on each such day.
(f) Any suit or suits for the recovery of the
amounts and damages set forth in this Section may be brought by
Landlord, from time to time, at Landlord's election, and nothing
in this Lease will be deemed to require Landlord to await the
date upon which this Lease or the Term would have expired had
there occurred no Event of Default. Each right and remedy
provided for in this Lease is cumulative and is in addition to
every other right or remedy provided for in this Lease or now or
after the Commencement Date existing at law or in equity or by
statute or otherwise, and the exercise or beginning of the
exercise by Landlord of any one or more of the rights or remedies
provided for in this Lease or now or after the Commencement Date
existing at law or in equity or by statute or otherwise will not
preclude the simultaneous or later exercise by Landlord of any or
all other rights or remedies provided for in this Lease or now or
after the Commencement Date existing at law or in equity or by
statute or otherwise. All reasonable costs incurred by Landlord
in collecting any amounts and damages owing by Tenant pursuant to
the provisions of this Lease or to enforce any provision of this
Lease, including reasonable attorneys' fees from the date any
such matter is turned over to an attorney, whether or not one or
more actions are commenced by Landlord, will also be recoverable
by Landlord from Tenant, if Landlord is successful in such
litigation.
20. NOTICES
Unless otherwise specified, any notice, bill, statement
or communication which Landlord or Tenant may desire or be
required to give to the other shall be deemed sufficiently given
or rendered if in writing and personally delivered or sent by
certified mail, return receipt requested, or overnight carrier
addressed as follows:
Landlord: United Kirkwood, L.L.C.
P.O. Box 678
Vestal, New York 13851-0678
with a copy to
Howard M. Rittberg, Esq.
Levene, Gouldin & Thompson, LLP
450 Plaza Drive
Vestal, New York 13850
Tenant: United Structures, Inc.
5 Pine Camp Drive
Kirkwood, New York 13795
with a copy to
Jeffrey C. Rubenstein, Esq.
Much, Shelist, Freed, Denenberg,
Ament, Bell & Rubenstein, P.C.
200 North LaSalle Street, Suite 2100
Chicago, Illinois 60601
or at such other address as either party shall designate by
written notice. Unless otherwise specified, the time of
rendering of such notice, bill or statement and/or the giving of
such notice or communication shall be deemed to be upon receipt
of such notice, bill or statement.
21. QUIET ENJOYMENT
So long as Tenant pays the Rent reserved by this Lease
and performs and observes all of the covenants and provisions
thereof, Tenant shall quietly and peacefully hold and enjoy the
Premises.
22. MECHANIC'S LIENS
Tenant shall defend, indemnify and save harmless
Landlord against all loss, liability, costs (including reasonable
attorneys' fees), damages or interest charges as a result of any
mechanic's lien or any other lien caused to be filed on account
of the Tenant's or its agent's acts or omissions, and Tenant
shall, within twenty (20) days of the filing of any such lien and
notice, remove, pay or cancel said lien or secure the payment of
any such lien or liens by bond or other acceptable security or
procedure including an endorsement to Landlord's title insurance
policy to insure over said lien or to deposit 100% of the amount
of the lien claim. If Tenant fails to pay any charge for which a
mechanics' lien has been filed and has not given Landlord
security as described above, Landlord may, at its option, pay
such charge and related costs and interest, and the amount so
paid, together with reasonable attorneys' fees incurred by
Landlord in connection with such lien, will be Additional Rent
immediately due from Tenant to Landlord. Landlord will have the
right to post notices of non-responsibility or similar notices on
the Premises in order to protect the Premises against any such
liens.
23. HOLDING OVER
In the event that Tenant shall remain in the Premises
after the expiration of the Term without having executed a new
lease in writing with Landlord, such holdover shall not in any
way constitute a renewal or extension of this Lease. Such
holdover shall be construed as a month-to-month tenancy subject
to all terms and conditions of this Lease, except that Fixed
Annual Rent shall be equal to the amount which would have been in
effect had Tenant exercised its option to extend the term of this
Lease. If no such extension was available, then Fixed Annual
Rent during such holdover period shall be the amount of Fixed
Annual Rent in effect at the expiration of the Term plus twenty
percent (20%).
24. TENANT'S OPTION TO PURCHASE THE PREMISES
Tenant is hereby given the option to purchase the
Premises at any time after two (2) years from the date hereof,
upon giving not less than thirty (30) days notice in writing to
the Landlord. The purchase price shall be $1,600,000.00 plus an
amount equal to the increase in the cost of living from the date
hereof to the date of exercise of the option multiplied by said
purchase price. Landlord and Tenant will, within the 30-day
notice period, execute and deliver a formal contract of sale
which shall provide that the sale shall be all cash above the
existing mortgage balances and that 10% of the purchase price
shall be paid upon the execution and delivery of the contract.
Adjustment and proration of taxes, water rates, and insurance
premiums are to be made as of the closing date. At closing
Landlord will deliver a warranty deed in recordable form or
similar form of deed conveying to the Tenant the Premises
together with all customary documents incidental thereto.
25. ENVIRONMENTAL
(a) Tenant shall, at all times and at its sole
cost and expense, comply in all material respects with all
Environmental Laws, including but not limited to, those
regulating any discharge by Tenant, its agents, employees,
contractors or invitees into the air, surface, water, sewers,
soil or groundwater of any Hazardous Material whether within or
outside the Premises. Landlord and its agents shall have the
right, but not the duty, upon reasonable notice (no more than
three (3) days) or without notice if in an emergency to inspect
the Premises at any time to determine whether Tenant is complying
with the terms of this Section. If Tenant is not in compliance
with this Section, Landlord shall have the right to immediately
enter upon the Premises and take whatever actions are reasonably
necessary to comply, including, but not limited to, the removal
from the Premises of any Hazardous Material and the restoration
of the Premises to a clean, neat, attractive, healthy and
sanitary condition in compliance with Environmental Laws. Tenant
shall pay all such costs incurred by Landlord ten (10) days after
receipt of a bill therefor.
(b) The Tenant shall be responsible for all
damages and clean-up costs caused by Tenant resulting from the
leaking, discharging or spilling of any gas, oil or petroleum
products or other contaminants or Hazardous Material on or into
the Premises and/or on and/or into any adjoining premises and/or
into the surrounding environment.
(c) The Tenant shall defend, indemnify and hold
harmless the Landlord of, from and against any and all suits,
claims and causes of action and any loss, costs, expenses, fines
or penalties (including reasonable attorney's fees), and clean-up
costs which the Landlord may incur or become liable to pay
arising out of the breach by the Tenant of any of its obligations
contained in Sections "25(a)" and "25(b)" above.
(d) The Tenant, at the request of the Landlord,
shall submit to the Landlord, or shall make available for
inspection and copying upon reasonable notice and at reasonable
times, any and all of the documents prepared by the Tenant
pursuant to any Environmental Laws or submitted to any
governmental regulatory agency.
(e) Tenant shall, within ten (10) days of its
receipt, provide Landlord with (I) copies of any notice of
alleged violations or other claims relating to Environmental
Laws, and (ii) all reports or analyses conducted by Tenant or its
contractors to determine the existence of or assess Hazardous
Materials at the Property.
(f) Tenant, on its own behalf and on behalf of
its successors and assigns, hereby releases and forever
discharges Landlord, its officers, directors, shareholders,
employees from any and all claims, actions or liabilities of any
manner whatsoever, whether in law or equity, whether now or
hereafter claimed or known, which Tenant now has or may have
against Landlord arising from or relating in any way to releases
or threatened releases of Hazardous Materials which may occur as
a result of Tenant's activities on the Property, or which arise
from Tenant's failure or alleged failure to comply with
Environmental Laws.
26. MISCELLANEOUS PROVISIONS
(a) This Lease shall be construed under the laws
of the State of New York, without regard to principles of
conflict of laws.
(b) The waiver by Landlord of any agreement,
condition or provision contained in this Lease will not be deemed
to be a waiver of any subsequent breach of the same or any other
agreement, condition or provision contained in this Lease, nor
will any custom or practice which may grow up between the parties
in the administration of the terms of this Lease be construed to
waive or to lessen the right of Landlord to insist upon the
performance by Tenant in strict accordance with the terms of this
Lease. The subsequent acceptance of Rent by Landlord will not be
deemed to be a waiver of any preceding breach by Tenant of any
agreement, condition or provision of this Lease, other than the
failure of Tenant to pay the particular Rent so accepted,
regardless of Landlord's knowledge of such preceding breach at
the time of acceptance of such Rent.
(c) This Lease contains all of the agreements
between the parties hereto. Any additions to or alterations or
changes or modifications hereof, to be binding upon the parties,
must be in writing signed by both of the parties hereto, and it
is agreed that this provision cannot be waived, except in writing
duly signed by the parties hereto.
(d) The terms, covenants and conditions contained
in this Lease shall bind and inure to the benefit of Landlord and
Tenant and their respective successors and assigns.
(e) This Lease shall not be filed for public
record by any party hereto. Either party may, however, prepare a
memorandum setting forth the parties, description of the
Premises, terms of this Lease, and any other provisions hereof,
which memorandum shall be executed by both parties and may be
filed of public record.
(f) This Lease is submitted to Tenant on the
understanding that it will not be considered an offer and will
not bind Landlord in any way until (I) Tenant has duly executed
and delivered duplicate originals to Landlord, and (ii) Landlord
has executed and delivered one of such originals to Tenant.
(g) The titles of the sections throughout this
Lease are for convenience and reference only, and shall not
explain, modify, amplify, or aid in the interpretation,
construction, or meaning of the provisions of this Lease.
(h) If any provision of this Lease proves to be
illegal, invalid or unenforceable, the remainder of this Lease
will not be affected by such finding, and in lieu of each
provision of this Lease that is illegal, invalid or
unenforceable, a provision will be added as a part of this Lease
as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid, and
enforceable.
(I) Any payment to be made pursuant to the
provisions of this Lease which is not paid within fifteen (15)
days after the date when due shall be subject to a 4% late fee
and shall also bear interest from the due date thereof until paid
at an annual rate of interest equal to the so-called prime rate
in effect from time to time during the applicable period at The
Chase Manhattan Bank, plus 3%.
(j) If any term or 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 term or provision to persons or
circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term and
provision of this Lease shall be valid and enforceable to the
fullest extent permitted by law.
(k) It is understood and agreed that Tenant shall
look solely to the estate and property of Landlord in the
Premises for the satisfaction of Tenant's remedies for the
collection of a judgment (or other judicial process) requiring
the payment of money by Landlord in the event of any default or
breach by Landlord with respect to any of the terms, covenants
and conditions of this Lease to be observed by Landlord and any
other obligation of Landlord created by or under this Lease, and
no other property or assets of Landlord shall be subject to levy,
execution or other enforcement procedures for the satisfaction of
Tenant's remedies. The preceding sentence will not limit any
right Tenant might otherwise have to pursue any suit or action in
connection with the enforcement or collection of amounts that may
become owing or payable under or on account of insurance
maintained by Landlord.
(l) FORCE MAJEURE. Neither Landlord nor Tenant
shall be held to be in default in the performance of their
obligations hereunder for such period of time as it is prevented
from performing the same by reason of acts of God, strikes, and
other causes beyond its reasonable control; provided, however,
that financial inability shall never be deemed to be a cause
beyond a party's reasonable control.
(m) NOTICE TO MORTGAGEE. If the Tenant is
notified by the Landlord or the Landlord's mortgagee that there
is a mortgage on the Premises, and is given the name and address
of the Landlord's mortgagee, the Tenant will give written notice
to the Landlord's mortgagee of any default at the time that the
Tenant gives notice of such default to the Landlord, and the
Landlord's mortgagee shall have the same concurrent time period
as provided to the Landlord under this Lease to cure such default
of the Landlord. Except in the case of an emergency, the Tenant
shall not have the right to terminate this Lease nor the right to
cure such default and deduct the cost of the same from Fixed
Annual Rent, if the Landlord's mortgagee commences or causes to
be commenced promptly after such notice the curing of such
default, and if the default is cured within such time period
after such notice.
(n) ASSIGNMENT OF THE LEASE TO MORTGAGEE. With
reference to any assignment by the Landlord of its interest in
this Lease, or the rents payable hereunder, conditional in nature
or otherwise, which assignment is made to or held by a bank,
trust company or insurance company holding a mortgage on the
Premises, the Tenant agrees:
(I) That the execution thereof by the
Landlord and the acceptance thereof by such mortgagee, shall
never be treated as an assumption by such mortgagee of any of the
obligations of the Landlord thereunder, unless such mortgagee
shall, by written notice sent to the Tenant, specifically
otherwise elect; and
(ii) That, except as aforesaid, such
mortgagee shall be treated as having assumed the Landlord's
obligations thereunder only upon foreclosure of such mortgagee's
mortgage or conveyance in lieu thereof and the taking of
possession of the Premises.
(o) Tenant waives its right to redeem under the
laws of the State of New York.
IN WITNESS WHEREOF, the parties have executed this
Lease as of the day and year first written above.
LANDLORD: UNITED KIRKWOOD, L.L.C.
By: \David Newman
Its: Member
TENANT: UNITED STRUCTURES, INC.
By: \Thomas J. Martini
Its: Treas
STATE OF NEW YORK )
) ss:
COUNTY OF BROOME )
On the 27th day of February in the year 1998, before
me, the undersigned, a notary public in and for said state,
personally appeared Marc Newman of UNITED KIRKWOOD, L.L.C.,
personally known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is
(are) subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the
instrument, the individual(s), or the person upon behalf of which
the individual(s) acted, executed the instrument.
\Howard M. Rittberg
Notary Public
STATE OF Indiana)
) ss:
COUNTY OF Elkhart)
On the 27th day of February in the year 1998, before
me, the undersigned, a notary public in and for said state,
personally appeared Marc Newman of UNITED STRUCTURES, INC.,
personally known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is
(are) subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the
instrument, the individual(s), or the person upon behalf of which
the individual(s) acted, executed the instrument.
\Rita A. Merrill
Notary Public
EXHIBIT "A"
ALL THAT TRACT OR PARCEL OF LAND situate in the Town of
Kirkwood, County of Broome, State of New York bounded and described
as follows:
Beginning at a point on the southwesterly boundary of the
Erie-Lackawanna Railway Company (reputed owner) at its intersection
with the southeasterly boundary of the Colesville Road Extension
(C.R. 538);
Thence along said railway boundary the following three (3)
course and distances: S 65 19' 07" E, 141.30 feet to a point;
Thence S 05 26' 07" E, 3.47 feet to a point;
Thence S 65 19' 07" E, 280.79 feet to a point;
Thence S 23 33' 29" W, through the property of Book Park
Realty Corporation (reputed owner) a distance of 1,176.62 feet to
a point on the division line between the property of Book Park
Realty Corporation (reputed owner) on the northeast and the
property of the Town of Kirkwood (reputed owner) on the southwest;
Thence along the last mentioned division line the following
three (3) courses and distances: N 64 08' 39" W, 337.08 feet to
a point;
Thence N 23 28' 01" E, 513.00 feet to a point;
Thence N 66 31' 59" W, 115.00 feet to a point on the
southeasterly boundary of said Colesville Road Extension (C.R.
538);
Thence along the last mentioned boundary the following two (2)
courses and distances: N 23 28' 01" E, 275.00 feet to a point;
Thence N 27 54' 13" E, 387.70 feet to the point of beginning.
MILLER BUILDING SYSTEMS, INC. EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
JUNE 27, 1998
The subsidiaries of the Registrant are as follows:
Percentage of Voting
Incorporated Securities Owned by
Name Under Law of: Immediate Parent
Miller Building Systems of Indiana, Inc. Indiana 100%
Miller Building Systems of Pennsylvania,Inc. Indiana 100%
Miller Building Systems of Kansas, Inc. Kansas 100%
Miller Building Systems of South Dakota,Inc. South Dakota 100% (1)
Miller Construction Services, Inc. Indiana 100%
United Structures, Inc. New York 100%
PME Pacific Systems, Inc. California 100% (2)
(1) Wholly-owned subsidiary of Miller Building Systems of Kansas, Inc.
(2) Inactive Corporation with no assets.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Miller Building Systems, Inc. on Form S-3 (File No.333-60747 and Form S-8 (File
No. 33-88158 and 33-50512), and in the related Prospectus, of our report dated
July 31, 1998, on our audits of the consolidated financial statements and
financial statement schedule of Miller Building Systems, Inc. and subsidiaries
as of June 27, 1998 and June 28, 1997, and for each of the three fiscal years
in the period ended June 27, 1998, which report is included in this Annual
Report on Form 10-K.
PricewaterhouseCoopers LLP
South Bend, Indiana
September 15, 1998
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-END> JUN-27-1998
<CASH> 111,620
<SECURITIES> 0
<RECEIVABLES> 11,176,444
<ALLOWANCES> (50,000)
<INVENTORY> 6,140,647
<CURRENT-ASSETS> 17,832,818
<PP&E> 14,153,205
<DEPRECIATION> 5,141,452
<TOTAL-ASSETS> 30,229,588
<CURRENT-LIABILITIES> 9,222,613
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0
0
<COMMON> 40,235
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<TOTAL-LIABILITY-AND-EQUITY> 30,229,588
<SALES> 54,699,660
<TOTAL-REVENUES> 54,699,660
<CGS> 44,434,537
<TOTAL-COSTS> 51,003,018
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<INTEREST-EXPENSE> 290,056
<INCOME-PRETAX> 3,446,052
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