<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1996.
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission file number:
METAL MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-2835068
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
500 N. DEARBORN STREET, SUITE 405
CHICAGO, IL 60610
(Address of principal executive office including zip code)
Registrant's telephone number, including area code: (312) 645-0700
101 W. GRAND AVENUE, SUITE 200
CHICAGO, IL 60610
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods as the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days
YES X NO
---- ----
Number of Shares of Common Stock outstanding as of November 11, 1996: 8,938,000
<PAGE> 2
INDEX
PART I
FINANCIAL INFORMATION
ITEM 1: Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets
September 30, 1996 and March 31, 1996
Consolidated Condensed Statements of Operations For the three
months ended September 30, 1996 and October 31, 1995; for the
three months ended September 30, 1995 for EMCO Recycling Corp.
and combined pro forma for the three months ended October 31, 1995
Consolidated Condensed Statements of Operations For the six
months ended September 30, 1996 and October 31, 1995; for the
six months ended September 30, 1995 for EMCO Recycling Corp.
and combined pro forma for the six months ended October 31, 1995
Consolidated Condensed Statements of Cash Flows For the six
months ended September 30, 1996 and October 31, 1995; for the
six months ended September 30, 1995 for EMCO Recycling Corp.
Notes to Consolidated Condensed Financial Statements
ITEM 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II
OTHER INFORMATION
ITEM 1: Legal Proceedings
ITEM 6: Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE> 3
METAL MANAGEMENT, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
PART I
FINANCIAL INFORMATION
ITEM 1:
<TABLE>
<CAPTION>
September 30, March 31,
1996 1996
----------- -----------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 4,758,000 $ 3,093,000
Marketable securities (Note 7) 415,000 2,644,000
Accounts receivable, net 5,750,000 1,488,000
Loan to EMCO Recycling Corp. -- 1,000,000
Inventories (Note 6) 1,887,000 1,359,000
Prepaid expenses 1,187,000 58,000
Refundable income taxes -- 70,000
Net assets held for sale (Note 3) -- --
----------- -----------
Total current assets 13,997,000 9,712,000
Marketable securities (Note 7) -- 115,000
Property and equipment, net 9,350,000 478,000
Goodwill and other intangibles, net
(Note 2) 10,973,000 44,000
----------- -----------
Total Assets $34,320,000 $10,349,000
=========== ===========
LIABILITIES AND SHAREHOLDERS EQUITY:
Current Liabilities:
Operating line of credit $ 3,725,000 --
Accounts payable 3,848,000 282,000
Other accrued liabilities 1,610,000 459,000
Current portion of long term debt 1,133,000 --
----------- -----------
Total current liabilities 10,316,000 741,000
Long term debt, less current portion 3,735,000 --
Other liabilities 1,553,000 --
----------- -----------
Total Liabilities 15,604,000 741,000
Stockholders' equity
Common stock 98,000 53,000
Additional paid-in-capital 12,637,000 3,325,000
Retained earnings 5,981,000 6,230,000
----------- -----------
Total equity 18,716,000 9,608,000
----------- -----------
Total Liabilities and equity $34,320,000 $10,349,000
=========== ===========
</TABLE>
<PAGE> 4
METAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Metal Management, Inc.
For the three months ended
--------------------------------- EMCO Recycling Corp. Pro Forma Combined
For the three months For the three months
September 30, October 31, ended September 30, ended October 31,
1996 1995 1995 1995
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 13,963,000 $ 0 $ 16,692,000 $ 16,692,000
Cost of sales 12,772,000 $ 0 14,162,000 14,162,000
------------ ----------- ------------ ------------
Gross profit 1,191,000 0 2,530,000 2,530,000
Operating expenses
Marketing and sales 151,000 0 113,000 113,000
General & Administrative 1,695,000 457,000 1,020,000 1,581,000
------------ ----------- ------------ ------------
Total operating expenses 1,846,000 457,000 1,133,000 1,694,000
Income (loss) from continued
operations (655,000) (457,000) 1,397,000 836,000
Interest expense 216,000 0 423,000 423,000
Other (income) expense (70,000) (73,000) (5,000) (78,000)
------------ ----------- ------------ ------------
Income (loss) from continuing
operations before income tax and
discontinued operations (801,000) (384,000) 979,000 491,000
Provision (benefit) for income tax (254,000) (296,000) 345,000 19,000
------------ ----------- ------------ ------------
Income (loss) from continuing
operations (547,000) (88,000) 634,000 472,000
Discontinued Operations (Note 3)
Income (loss) from operations of
discontinued Spectra*Star Products
Division, net of income taxes
(benefit) of $0 in 1996 and ($381)
in 1995 147,000 (2,097,000) 0 (2,097,000)
------------ ----------- ------------ ------------
Net income (loss) $ (400,000) $(2,185,000) $ 634,000 $ (1,625,000)
============ =========== ============ ============
Net income (loss) per share for:
Continuing operations (.061) (0.017) n/a 0.053
Discontinued operations .016 (0.402) n/a (0.235)
Weighted average number of shares
outstanding 8,925,000 5,214,000 n/a 8,925,000
</TABLE>
-4-
<PAGE> 5
METAL MANAGEMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Metal Management, Inc. EMCO Recycling Corp. Pro Forma Combined
For the six months ended For the six months For the six months
September 30, October 31, ended September 30, ended October 31,
1996 1995 1995 1995
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 29,942,000 $ 0 $ 34,191,000 $ 34,191,000
Cost of sales 26,750,000 $ 0 29,872,000 29,872,000
------------ ----------- ------------ ------------
Gross profit 3,192,000 0 4,319,000 4,319,000
Operating expenses
Marketing and sales 293,000 0 216,000 216,000
General & Administrative 3,355,000 714,000 1,811,000 2,836,000
------------ ----------- ------------ ------------
Total operating expenses 3,648,000 714,000 2,027,000 3,052,000
Income (loss) from continued
operations (456,000) (714,000) 2,292,000 1,267,000
Interest expense 450,000 0 782,000 782,000
Other (income) expense (109,000) (162,000) (18,000) (180,000)
------------ ----------- ------------ ------------
Income (loss) from continuing
operations before income tax and
discontinued operations (797,000) (552,000) 1,528,000 665,000
Provision (benefit) for income tax (254,000) (381,000) 615,000 152,000
------------ ----------- ------------ ------------
Income (loss) from continuing
operations (543,000) (171,000) 913,000 513,000
Discontinued Operations (Note 3)
Income (loss) from operations of
discontinued Spectra*Star Products
Division, net of income taxes
(benefit) of $0 in 1996 and $(381)
in 1995 294,000 (2,269,000) 0 (2,269,000)
------------ ----------- ------------ ------------
Net income (loss) $ (249,000) $(2,440,000) $ 913,000 $ (1,756,000)
============ =========== ============ ============
Net income (loss) per share for:
Continuing operations (0.061) (0.033) n/a 0.057
Discontinued operations 0.033 (0.435) n/a (0.254)
Weighted average number of shares
outstanding 8,925,000 5,215,000 n/a 8,925,000
</TABLE>
-5-
<PAGE> 6
METAL MANAGEMENT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Metal Management, Inc. EMCO Recycling
----------------------- ------------------------
For the six months ended For the six months ended
September 30, 1996 October 31, 1995 September 30, 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash provided (used) by operating activities:
Net income (loss) ($ 249,000) ($2,440,000) $ 913,000
Adjustments to reconcile net income to cash
provided by (used in) operating
activities
Depreciation, amortization and
deferred income taxes 912,000 170,000 492,000
Restructuring costs 0 1,437,000 0
Other 0 716,000 0
Changes in assets and liabilities net of effects
of purchase of EMCO Recycling
Corp.:
Accounts receivable 1,447,000 521,000 (1,468,000)
Inventory 1,303,000 978,000 523,000
Accounts payable (106,000) (65,000) 615,000
Accrued liabilities 1,035,000 1,000 (882,000)
Other, net (94,000) (245,000) 0
----------- ----------- -----------
Net cash provided (used) by operations 4,248,000 1,073,000 193,000
Cash flows provided (used) by investing activities:
Marketable securities 2,229,000 1,202,000 0
Purchase of property and equipment (1,502,000) (8,000) (697,000)
Capitalized software development cost 0 (147,000) 0
Payment for purchase of EMCO, net of cash
acquired of $660,000 (909,000) 0 0
----------- ----------- -----------
Net cash provided (used) by investing activities (182,000) 1,047,000 (697,000)
Cash flows provided (used) by financing activities:
Common stock issued under employees stock
purchase, employee stock option plan 224,000 256,000 0
Payment of cash dividends 0 (307,000) 0
Borrowings on line of credit, net (790,000) 0 2,038,000
Repayment of borrowings, net (1,835,000) 0 (1,873,000)
----------- ----------- -----------
Net cash provided (used) by financing activities (2,401,000) (51,000) 165,000
Net increase (decrease) in cash and equivalents 1,665,000 2,069,000 (339,000)
Cash and equivalents, beginning of period 3,093,000 963,000 566,000
----------- ----------- -----------
Cash and equivalents, end of period $ 4,758,000 $ 3,032,000 $ 227,000
</TABLE>
-6-
<PAGE> 7
METAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
In accordance with its previously announced business strategy, the
business of Metal Management, Inc. (hereinafter referred to as "Metal
Management" or the "Company") has changed significantly during the past year.
The Company completed its first of many planned acquisitions in the scrap metal
recycling industry with the purchase of EMCO Recycling Corp. ("EMCO") in April
1996 (see below); it discontinued its Spectra*Star and consumables business
during the first quarter of fiscal 1997 and its VideoShow product and related
product lines in the fourth quarter of fiscal 1995, and changed its fiscal year
end from October 31 to March 31, effective April 1, 1996. As a result of the
above changes, no prior year quarterly information is truly comparable to the
Company's current operating activities. In an effort to provide meaningful
comparable information for the prior year's quarter, without incurring
unreasonable expense, the Company has included three- and six-month information
for the periods ended October 31, 1995, because it is the most comparable
quarter in terms of timing. In addition, such quarterly information is
supplemented by unaudited financial information for EMCO for the three months
and six months ended September 30, 1995, which is presented for informational
purposes. The pro forma income statement information for the quarter ended
October 31, 1995 assumes the acquisition of EMCO was consummated as of April 1,
1995 and includes amortization of goodwill and other intangibles ($104,000 for
the three months ended October 31, 1995 and $311,000 for the six months ended
October 31, 1995) arising from the acquisition.
NOTE 2 - ACQUISITION OF EMCO RECYCLING CORP.
On April 11, 1996, the Company completed the acquisition of EMCO, a
scrap metal recycling company based in Phoenix, AZ, for a purchase price of
approximately $12.8 million ($2.0 million in cash, 3.5 million shares of common
stock valued at $8.8 million, 600,000 warrants at $4.48 per share, 400,000
warrants at $6.48 per share valued at $0.3 million and $1.7 million in other
long term liabilities which bear interest at 7%). In connection with the
acquisition the Company also acquired land used in the scrap metal business
which was indirectly owned by one of the principal former owners of EMCO for
$1.1 million ($150,000 in cash and $900,000 in notes payable in three years
which bear interest at 9%). The acquisition of EMCO was accounted for using the
purchase method of accounting and accordingly its results are included in the
consolidated financial statements from the date of purchase. The excess of the
purchase price over the fair value of the net tangible assets acquired has been
allocated to covenants-not-to-compete ($1.7 million which is amortized over 10
years) with the remainder to goodwill ($9.6 million which is amortized over 40
years). Effective as of July 1, 1996 the Company changed its estimated life for
goodwill increasing the amortization period from 15 years to 40 years. The
change in amortization period more appropriately reflects the anticipated
benefit period for acquisitions of scrap metal recycling companies. A summary of
the tangible assets acquired and liabilities assumed is as follows:
<TABLE>
<S> <C>
Current assets $ 8,877,000
Noncurrent assets 7,767,000
Current liabilities (9,348,000)
Non current liabilities (5,785,000)
-----------
1,511,000
Intangible assets, including goodwill of $9.6 million
and covenants not to compete of $1.7 million 11,261,000
-----------
$12,772,000
===========
</TABLE>
-7-
<PAGE> 8
NOTE 3 - DISCONTINUED OPERATIONS: SALE OF SPECTRA*STAR PRODUCTS
DIVISION/VIDEOSHOW PRODUCT LINE
During the first quarter of fiscal 1997, management made the decision
to exit the Spectra*Star printer and consumables business. On July 16, 1996
Mannesmann Tally ("Tally") acquired the inventory and related production
equipment for approximately $1.3 million in cash and other contingent
consideration in the form of royalties on future revenues from the sale of
Spectra*Star printers and related consumables by Tally. Consequently, the
printer and consumables business is reported as a discontinued operation for all
periods presented. The operating results of the division have been netted and
reported as a single line item in the income statement entitled "Income (loss)
from discontinued operations, net of income taxes." The Company recognized a net
gain in the second quarter of fiscal 1997 (after transaction related expenses
and placing no value on the other contingent consideration) of $46,000 from the
sale of the division. Royalty income of $101,000 was recognized in the second
quarter of fiscal 1997. Additional consideration will be recorded when it
becomes known and will be reported as additional gain on sale of the printer and
consumables business. Also reported as discontinued operations are the VideoShow
and related product lines ("VideoShow") which were discontinued in the fourth
quarter of fiscal 1995. VideoShow together with the Spectra*Star printer and
consumables business formed the Company's presentation products business
segment. Consequently, with the sale of the printer and consumables business,
and the discontinuance of VideoShow, both are included in discontinued
operations in the accompanying financial statements.
NOTE 4 - FINANCIAL STATEMENTS
The accompanying Consolidated Condensed Balance Sheets of Metal
Management, Inc. at September 30 and March 31, 1996 and the Consolidated
Condensed Statements of Operations for the three months and six months ended
September 30, 1996 and October 31, 1995, respectively, and the Consolidated
Condensed Statements of Cash Flows for the six months ended September 30, 1996
and October 31, 1995, respectively, have not been audited by independent
accountants. However, in the opinion of management, all adjustments, consisting
only of normal, recurring adjustments necessary for a fair statement of the
results of operations for the interim periods, have been made.
The Consolidated Condensed Financial Statements included in this Form
10-Q should be read in conjunction with the audited Consolidated Financial
Statements and Notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1995, with the Company's Definitive
Joint Proxy Statement dated March 8, 1996, the Transitional 10-Q for the five
months ended March 31, 1996, the Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996, the Forms 8-K and 8-K/A dated April 11, 1996, and the Forms
8-K dated July 16, 1996, and August 7, 1996, filed with the Commission.
-8-
<PAGE> 9
NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION
During the first quarter of fiscal 1997, in connection with the
acquisition of EMCO, the Company issued 3,500,000 shares of common stock,
600,000 warrants at $4.48 and 400,000 warrants at $6.48 to acquire the Company's
common stock in connection with the acquisition. In conjunction with the
acquisition, liabilities were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired $27,905,000
Cash paid of $1.9 million, loan of $1 million and other consideration 13,772,000
-----------
Liabilities assumed $14,133,000
===========
</TABLE>
In a related transaction, the Company also issued $950,000 of three-year notes
which bear interest at 9% to acquire land used in EMCO's scrap metal recycling
business.
In the three-month periods ended September 30, 1996 and October 31,
1995, the Company paid interest expense and paid income taxes (collected income
tax refunds) in amounts as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
EMCO
-------------
SEPTEMBER 30, OCTOBER 31, SEPTEMBER 30,
1996 1995 1995
------------- ----------- -------------
<S> <C> <C> <C>
Interest Paid $ 216,000 $0 $ 423,000
Income taxes paid (refunds received) $(458,000) $0 $ 253,000
</TABLE>
NOTE 6 - INVENTORIES
Inventories consisted of:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 MARCH 31, 1996
------------------ --------------
<S> <C> <C>
Ferrous $ 463,000 $ 363,000
Non Ferrous - Processed 535,000 148,000
Unprocessed 889,000 848,000
---------- ----------
$1,887,000 $1,359,000
========== ==========
</TABLE>
NOTE 7 - MARKETABLE SECURITIES
Marketable securities are stated at cost, which approximates market
value. Marketable securities maturing within one year are classified as current
assets. The Company's marketable securities are classified in accordance with
Financial Accounting Standards Board Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under SFAS No. 115, management is
required to
-9-
<PAGE> 10
determine the appropriate classification of its securities at the time of
purchase and reevaluate such designation as of each balance sheet.
Held-to-maturity securities are reported at amortized cost. Available-for-sale
securities are carried at fair value, with unrealized gains and losses, net
reported in a separate component of shareholders' equity until disposition.
Realized gains and losses and declines in value judged to be other than
temporary are included in other (income) expense.
All marketable securities are classified as available-for-sale
securities as of September 30, 1996. Gross unrealized losses were not material
to the financial statements taken as a whole as of September 30, 1996.
NOTE 8 - PENDING ACQUISITIONS
On August 7, 1996, the Company announced that it had signed a Letter of
Intent to acquire a group of scrap metal recycling companies in southern
California for a combination of cash of $6.5 million, 725,000 shares of common
stock and other consideration. Closing of the acquisition is contingent upon
execution of definitive agreements, completion of due diligence, meeting certain
regulatory filing requirements and raising of capital to fund the cash portion
of the purchase price.
The Company is also negotiating to acquire several other scrap metal
recycling companies and has retained legal, accounting, and environmental
consulting firms to perform due diligence activities. Disbursements to firms
performing due diligence for the Company have been capitalized as prepaid
expenses. As of September 30, 1996 approximately $540,000 has been recorded as
prepaid expenses in connection with due diligence performed for the Company.
Closing of these other acquisitions is contingent upon execution of definitive
agreements, completion of due diligence, approvals by regulatory agencies and
raising of capital to fund the cash portions of the purchase prices.
-10-
<PAGE> 11
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain matters discussed throughout this Form 10-Q filing are
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those projected. Such risks
and uncertainties include, but are not limited to, the following: the risk that
announced mergers are not consummated, the risk of challenges from the Company's
competition, and the risk that the Company will face difficulties in
consolidating and controlling operations of diverse geographic locations, as
well as other risk factors discussed in "Factors Affecting Future Results"
below.
On April 11, 1996, the Company acquired EMCO, an Arizona corporation,
pursuant to a Merger Agreement dated as of December 1, 1995, and as amended
through March 7, 1996. The Consolidated Condensed Financial Statements included
in this Form 10-Q should be read in conjunction with the audited Consolidated
Financial Statements and Notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended October 31, 1995, the Company's
Definitive Joint Proxy Statement dated March 8, 1996, the Transitional 10-Q for
the five months ended March 31, 1996, the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, the Forms 8-K and 8-K/A dated April 11, 1996, and
the Forms 8-K dated July 16, 1996, and August 7, 1996, filed with the
Commission.
-11-
<PAGE> 12
RESULTS OF OPERATIONS
With the acquisition of EMCO on April 11, 1996 and the sale on July 16,
1996 of the Spectra*Star Division, the operating results for the quarter combine
a closing out of the previous technology-related business operations in the same
quarter with the commencement of the new direction of the Company into the
metals recycling industry. Management believes that comparisons of financial
data associated with discontinued operations would not be meaningful or relevant
and, accordingly, the following information and comparisons are, to the extent
possible, related primarily to EMCO's operations.
Sales for the quarter ended September 30, 1996 and 1995 are shown in
the following comparative table:
<TABLE>
<CAPTION>
1996 1995
-------------------------------------- -----------------------------------
(Tons) % Total (Tons) % Total
Commodity Weight Amount Sales Weight Amount Sales
------ ----------- ------- ------ ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Ferrous 44,000 $ 4,706,000 33.7% 29,900 $3,167,000 19.0%
Nonferrous 10,800 9,000,000 64.5% 10,300 13,368,000 80.0%
Other 257,000 1.8% 157,000 1.0%
------ ----------- ---- ------ ---------- -----
Totals 54,800 $13,963,000 100% 40,200 $16,692,000 100.0%
====== =========== ==== ====== ========== =====
</TABLE>
Total sales in the quarter ended September 30, 1996 declined by
$2,729,000, or 16.4%, from the comparable period in 1995 as a consequence of
unfavorable market conditions. The major cause of the decrease was attributable
to commodity prices which have generally declined for nonferrous commodity
products for the past four quarters. Spot copper prices moved down from $1.30/lb
at September 30, 1995 to $0.88/lb at September 30, 1996, a 32.3% drop.
Similarly, aluminum spot prices declined from $0.79/lb at September 30, 1995 to
$0.63/lb at September 30, 1996, down 20.3%. In addition, the markets have
reacted negatively to the much publicized speculative trading losses sustained
by a major copper trader.
During the current quarter and for the two previous quarters EMCO has
kept inventories at minimum working levels ($1,887,000 at September 30, 1996 and
$1,359,000 as of March 31, 1996).
Gross margins for the quarter were $1,191,000, down from $2,530,000 for
the comparable period in 1995, primarily as a result of reduced sales and
unfavorable market conditions, as discussed above. Gross margins for the six
months ended September 30, 1996 declined from $4,319,000 in the comparable
period for 1995 to $3,192,000 in 1996.
Selling expenses increased $38,000 as compared to the same quarter in
1995. This increase is due to additional purchasing/marketing staff added to
build overall volumes. It is anticipated that further increases will be
reflected in future operations as increased emphasis is being placed on business
development. Selling expenses increased from $216,000 in 1995 to $293,000 for
the six months ended September 30, 1996 for the reasons described above.*
- ------------------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Stockholders are strongly encouraged to
review the section entitled "Factors Affecting Future Results" commencing on
Page 15 for a discussion of factors that could affect future performance.
-12-
<PAGE> 13
General and administrative expenses rose from $1,581,000 in the second
quarter of 1995 to $1,695,000 in 1996. The majority of that increase was
attributable to changes in the corporate structure, legal expenses, and
development costs related to the change in business activity and direction of
the Company during the past year. General and administrative expenses for the
six months ended September 30, 1996 were $3,355,000 as compared to $2,836,000
for the comparable six-month period in 1995. The increase was due to changes in
the corporate structure and development costs discussed above.
Pretax income (loss) from continuing operations declined from $491,000
in 1995 to $(801,000) for the quarter ended September 30, 1996 due to
unfavorable market conditions and increased selling and administrative expenses
described above. Pretax income (loss) from continuing operations declined to
$(797,000) in the six months ended September 30, 1996 from $665,000 in the
comparable period in 1995 due to unfavorable market conditions and increased
selling and administrative expenses.
Interest expense declined as well, from $423,000 in 1995 to $216,000 in
the current quarter and from $782,000 to $450,000 in the six months ended
September 30, 1996. The reduction in interest expense is attributable to
elimination of fees on a discontinued $2,000,000 stand-by line of credit to EMCO
and lesser borrowings in 1996.
Other income declined from $78,000 in the first quarter of 1995 to
$70,000 for the comparable period in 1996 and declined to $109,000 in the six
months ended September 30, 1996 from $180,000 in the comparable period in 1995
due to lower invested cash balances.
A benefit of $254,000 for income taxes has been recorded for the
current quarter and six months ended September 30, 1996 as compared to a
provision of $19,000 and $152,000 in the three- and six-month pro forma periods
ended October 31, 1995.
The income from discontinued operations recorded for the Spectra*Star Products
Division for the quarter ended September 30, 1996 was $147,000 ($0.02 per
share), compared to a loss for the same quarter in 1995 of $2,097,000 ($0.23
per share). Income from discontinued operations was $294,000 ($0.03 per share)
in the six months ended September 30, 1996 as compared to a loss of $2,269,000
($0.25 per share) in 1995. The substantial loss from discontinued operations in
1995 was a result of significant charges recorded upon the Company's decision
to terminate its electronic presentation products and a one-time charge to
restructuring costs and special charges totaling $2,153,000 ($0.24 per share).
The Company recognized a net gain of $46,000 on the sale of the assets of the
Spectra*Star Division and recognized royalty income of approximately $101,000
in the second quarter of fiscal 1997.
Net loss for the quarter ended September 30, 1996, including
discontinued operations, amounted to $400,000 ($0.04 per share) compared to
$1,625,000 ($0.18 per share) for the same period in 1995. Net loss for the six
months ended September 30, 1996 was $249,000 ($.03 per share) as compared to a
net loss of $1,756,000 ($0.20 per share) in the comparable period of 1995.
-13-
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of cash are its existing cash and
marketable securities balances, collection of outstanding accounts receivable
remaining from its discontinued Spectra*Star division and royalties expected to
be earned in future periods. At September 30, 1996, the Company had $5.2 million
in cash, cash equivalents and marketable securities compared to $5.7 million at
March 31, 1996. The reduction is primarily attributable to the proceeds realized
from the sale of the assets of the Spectra*Star Products Division net of loans
made to EMCO. Excluding any mergers, the cash, cash equivalents and marketable
securities available for operations appear to be adequate to meet the Company's
operating needs for the remainder of the fiscal year ending March 31, 1997.* In
the event the Company undertakes any mergers with a cash component, it will be
required to seek financing earlier than such time.
Accounts receivable balances increased from $1.5 million as of March
31, 1996 to $5.8 million as of September 30, 1996. The increase in accounts
receivable as of September 30, 1996 is attributable to the acquisition of EMCO
net of reductions in accounts receivable attributable to the sale of the
Spectra*Star Products Division and the subsequent collection of the accounts
receivable from that business. As of September 30, 1996 the balance of accounts
receivable remaining to be collected from the Spectra*Star Product Line was
approximately $500,000. Accounts payable increased from $0.3 million as of March
31, 1996 to $3.8 million as of September 30, 1996. The increase in accounts
payable is attributable to the acquisition of EMCO.
The Company has an operating line of credit of up to $8 million that is
based on qualifying accounts receivable and inventories of EMCO. As of September
30, 1996, EMCO had substantially utilized the available capacity under the line.
The Company's Board of Directors intends to continue to cause the
Company to actively pursue acquisitions and mergers in various fields,
including, but not limited to, scrap metal recycling and/or telecommunications.
Depending on the nature and size of potential acquisitions, mergers and other
transactions, if any, the Company's cash flows from operating and investing
activities, together with its cash, cash equivalents and marketable securities
will not be sufficient in the future. Therefore the Company will have to
supplement these sources of liquidity with additional sources of funds such as
borrowings or stock offerings. Refer also to the section below titled "Factors
Affecting Future Results."
The Company has a deferred tax asset valuation allowance that is
primarily attributable to U.S. federal and state deferred tax assets.
Realization of the deferred tax assets is dependent on generating sufficient
income to utilize future deductions and credits. Management believes sufficient
uncertainty exists regarding realization of deferred tax assets.
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* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will meet
the Company's current expectations. Stockholders are strongly encouraged to
review the section entitled "Factors Affecting Future Results" commencing on
Page 15 for a discussion of factors that could affect future performance.
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<PAGE> 15
FACTORS AFFECTING FUTURE RESULTS
The following factors should be considered carefully in evaluating the
Company and its business. The risk factors described below contain
forward-looking statements that involve risks and uncertainties. The Company's
and EMCO's actual results may differ materially from the results discussed in
the forward-looking statements.
RECENT MERGER, SALE AND SIGNIFICANT CHANGE IN STRATEGIC DIRECTION
In the past year, the Company has undergone a significant change in
strategic direction and emphasis. Immediately prior to April 11, 1996, the
Company's business had consisted of designing, manufacturing and marketing color
printers and related consumables, including ribbons, transparencies and paper.
Then, on April 11, 1996, the Company acquired EMCO, an Arizona corporation
engaged in scrap metal recycling (the "Merger"). In addition, the Company
purchased two parcels of land owned directly or beneficially by Harold M.
Rubenstein, the former principal beneficial shareholder and former Chairman of
the Board of EMCO. On July 16, 1996, the Company sold to Mannesmann Tally the
inventory and related production equipment of its Spectra*Star printer and
consumables business. And on August 7, 1996, the Company announced the signing
of a Letter of Intent to acquire a group of scrap metal recycling companies in
Southern California. The Company anticipates future acquisitions of other
companies in the scrap metal recycling industry and potentially also in other
industries. Reflective of the Company's overall change in emphasis is its
corporate name change on April 12, 1996, from General Parametrics Corporation
("GPC") to Metal Management, Inc. The ramifications of the changes in the
Company's business are discussed in greater detail below.
Given the substantial changes in the Company's business in the past
year, past financial performance should not be considered a reliable indicator
of future performance. Potential purchasers should not use historical trends to
anticipate results or trends in future periods.
CYCLICALITY OF OPERATING RESULTS
The operating results of the scrap metal recycling processing industry
in general and the Company's EMCO subsidiary in particular are highly cyclical
in nature as they tend to reflect and amplify the general national economic
condition. In periods of national recession or periods of minimal economic
growth, the operations of scrap metal recycling companies have been materially
adversely affected. During recessions or periods of minimal economic growth, the
automobile and the construction industries typically experience major cutbacks
in production, resulting in decreased demand for steel, copper and aluminum
supplies. For example, from approximately 1988 to 1993, the scrap metal
recycling industry was adversely affected for a period of five years. Due in
part to this effect, the predecessors of EMCO, Empire Metals, Inc. ("Empire")
and Copperstate Metals, Inc. ("Copperstate"), entered bankruptcy proceedings in
1990 and 1991, respectively. Future economic downturns may be expected to
materially and adversely affect the operating results of the Company. The
ability of the Company and EMCO to withstand significant economic downturns in
the future will depend in part on the amount of available cash held by the
Company. Recently, EMCO has required cash infusions from the Company due to what
it believes to be short-term liquidity requirements. The Company believes that
EMCO will require additional cash infusions for at least the remainder of the
fiscal year ending March 31, 1997. There can be no assurance, however, that
liquidity constraints will not continue or worsen.
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<PAGE> 16
PRICE FLUCTUATIONS
EMCO's results of operations have been in the past, and the results of
operations of the overall Company are expected to be, subject to price
fluctuations that occur in the metals commodities markets. For example, prices
of non-ferrous metals have generally declined during the past four quarters,
which adversely affected revenues and net income in the quarter ended September
30, 1996. A further decline in commodity prices could further reduce revenues
and net income prospectively. Such losses could have a material adverse effect
on the Company's results of operations and liquidity of the Company.
RISK OF EXPANSION STRATEGY
The Company currently plans to continue to pursue additional
acquisitions in the scrap metal recycling area and, potentially, in other
related or unrelated fields, including but not limited to telecommunications.
There can be no assurance that any future mergers will be consummated or that,
if they are, the Company will be able to effectively manage disparate business
enterprises. The ability of the Company to achieve its expansion objectives and
to manage its growth effectively depends on a variety of factors, including the
ability to identify appropriate acquisition targets and to negotiate acceptable
terms for their acquisition, the integration of new businesses into the
Company's operations and the availability of capital. These difficulties will be
exacerbated in the event that the Company expands in states outside of Arizona
and California. The inability to control or manage growth effectively or to
successfully integrate future new business into the Company's operations would
have a material adverse effect on the Company's financial condition and results
of operations. There can be no assurance that the Company will be able to
successfully expand or that growth and expansion will result in profitability.
There can be no assurance that the Company will be able to realize any of the
other anticipated benefits of the Merger or any future acquisitions that it may
undertake.
EXISTING AND FUTURE DEBT OF THE COMPANY
As a result of the Merger, the Company has approximately $9 million in
consolidated debt. In order to pursue expansion and acquisition opportunities,
the Company expects to incur additional debt, either through bank or credit
lines or the sale of debt securities in registered or unregistered transactions,
in addition to any additional equity financing it may do. The servicing of such
present and future debt of the Company will utilize cash either in the form of
cash on hand or cash generated by operating activities.
RISK OF DILUTION TO EXISTING STOCKHOLDERS
The Company's strategy of expansion and additional acquisitions will
require it to issue additional shares of Common Stock or securities convertible
into Common Stock as consideration for additional acquisitions. Issuance of a
material amount of Common Stock or such securities would result in significant
dilution to the then-existing stockholders of the Company. The Company expects
to be required to seek equity financing to meet future capital requirements,
which would also result in additional dilution. See "Immediate and Future
Capital Requirements."
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<PAGE> 17
COMPETITION IN THE SCRAP METAL INDUSTRY
The scrap metal recycling industry is highly competitive, with the
principal competitive factors being price and availability of scrap metal
supplied. Competition in the industry is intense in part because the barriers to
entry into the scrap metal collection business are relatively low. Additionally,
EMCO faces competition from producers of finished steel products, many of whom
have substantially greater financial resources than EMCO and the Company, who
may vertically integrate by entering the scrap metal recycling business. The
inability of EMCO to compete in this environment would have a material adverse
effect on the Company's financial condition and results of operations.
IMMEDIATE AND FUTURE CAPITAL REQUIREMENTS
Scrap metal recycling companies such as EMCO have substantial ongoing
working capital and capital equipment requirements in order to continue to
operate and grow. During March 1996, the Company loaned EMCO $1,000,000 for
short-term working capital requirements. Upon closing of the Merger, the Company
advanced EMCO $950,000, and EMCO paid its demand note of $950,000 to Donald F.
Moorehead, a director of the Company and EMCO. Also, subsequent to March 31,
1996, the Company loaned EMCO an additional $1,500,000 for additional working
capital purposes. The Company expects that EMCO will require additional cash
infusions for at least the remainder of the fiscal year ending March 31, 1997.
In order to remain competitive, EMCO must continue to make significant
investments in capital equipment. As a result, the Company will likely seek
equity or debt financing to fund future improvements and expansion of its scrap
metal recycling business as well as to make other acquisitions of scrap metal
recycling facilities. There can be no assurance that such financing will be
available when needed, or that, if available, it will be on satisfactory terms.
The failure to obtain financing would hinder the Company's and EMCO's ability to
make continued investments in capital equipment and pursue expansions, which
could materially adversely affect results of operations. Any such equity
financing would result in dilution to the then-existing stockholders of the
Company.
OPERATIONAL RESTRUCTURING OF EMCO
In October 1996, the Company initiated efforts to restructure the
operations of its EMCO subsidiary. The restructuring is expected to reduce
operating expenses by eliminating the utilization of certain leased equipment,
eliminating 25 jobs representing approximately 12% of the workforce, reducing
the cost of outside processing from certain vendors, and renegotiating contracts
for purchased services some of which are expiring. In addition, as a part of the
restructuring program, the Company has initiated a review of the buying and
selling departments of EMCO and is continuing to evaluate EMCO's operations in
recognition of the difficult commodity markets in which scrap metal recycling
companies have been and are continuing to operate.
COMPANY MANAGEMENT FACTORS
While management team members who came from EMCO have experience with
scrap metal recycling operations, both they and the pre-Merger officers of Metal
Management may be outside their areas of experience in the event that the
Company pursues acquisition opportunities outside of scrap metal recycling.
Additionally, while T. Benjamin Jennings, the current Chairman of the Board and
Chief Development Officer, is currently devoting substantially all of his time
to such position, Gerard M.
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<PAGE> 18
Jacobs, the current President and Chief Executive Officer, has certain other
business interests and will be unable for some time to dedicate his full time to
the Company's operations. As a result, the success of the Company will depend,
in large part, upon the involvement of EMCO management. There can be no
assurance that the Company will be able to retain key management personnel.
Additionally, certain members of EMCO management have been involved in
bankruptcy proceedings in the past as a result of the bankruptcy proceedings of
EMCO's predecessor companies, Copperstate and Empire.
CONTROL OF COMPANY BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
As a result of the Merger, Messrs. Jacobs and Jennings, together with
George O. Moorehead and Donald F. Moorehead, with whom Messrs. Jacobs and
Jennings have had substantial past business relationships, collectively own an
aggregate of approximately 28% of the outstanding Common Stock of the Company.
In addition, Harold Rubenstein, formerly the Chairman of the Board of EMCO,
beneficially owns approximately 26% of the outstanding Common Stock of the
Company, while Gerald Zack, Raymond F. Zack and David M. Zack, who are brothers,
collectively beneficially own through their ownership of Copperstate an
aggregate of approximately 13% of the outstanding Common Stock of the Company.
Pursuant to demand registration rights of Copperstate, the Company registered on
Form S-3 (the "S-3 Registration Statement") 300,000 shares held by Copperstate.
The S-3 Registration Statement became effective on August 27, 1996. Inclusive of
shares registered by the S-3 Registration Statement, the Zacks collectively
beneficially hold 10% of the Company's outstanding shares. Accordingly, Messrs.
Jennings and Jacobs, together with the Mooreheads, Harold Rubenstein and the
Zacks, will collectively have sufficient voting power (approximately 58%) after
the sale of shares being registered to control the outcome of all matters
(including the election of a majority of the directors and any future merger,
consolidation or sale of assets of the Company) submitted to Company
stockholders for approval and may be deemed to have effective control over the
affairs and management of the Company. This assumes that the shares being
offered by Copperstate will not be purchased by any of the individuals in the
aforementioned group. The sale of some or all of the shares to such individuals
would increase commensurately the control of such individuals and the group over
the Company. This controlling interest in the Company may also have the effect
of making certain transactions more difficult or impossible, absent the support
of Messrs. Jennings and Jacobs and such other persons. Such transactions could
include proxy contests, mergers involving the Company, tender offers and open
market purchase programs that could give stockholders of the Company the
opportunity to realize a premium over the then-prevailing market price of their
shares of Common Stock.
CONCENTRATION OF CUSTOMERS AND CREDIT RISK
The Company's three largest customers for the three-month period ended
September 30, 1996, represented in the aggregate approximately 16.9% of the
Company's revenues for that period. The Company's results of operations are
substantially dependent upon continuing orders from such customers, and any
cancellation of or reduction in orders from such customers could have a material
adverse effect on the Company's results of operations. This risk is exacerbated
by the fact that most of the Company's customers are not bound by long-term
purchase contracts but instead do business with the Company on the basis of
short-term contracts.
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<PAGE> 19
One customer accounted for $435,000, or approximately 10%, of the
Company's total accounts receivable as of September 30, 1996.
SUPPLY RELATIONSHIP WITH ELLIS METALS, INC.
Ellis Metals, Inc. is principally owned by Harold Rubenstein and is a
significant supplier to EMCO. Harold Rubenstein is the Company's largest
stockholder. EMCO and Ellis Metals have a supply relationship that is defined in
a contract that requires Ellis Metals to either provide all of its inventory to
EMCO or directly to customers of EMCO through a direct ship arrangement. In the
latter arrangement EMCO realizes a brokerage fee, which can be less than the
amount of gross profit the Company realizes when inventory is shipped to EMCO,
processed and resold. From and after September 25, 1996, Ellis Metals has
elected to ship certain materials directly to customers of EMCO and has
indicated that it will continue to do so for the foreseeable future. As a
result, the Company's gross margin could be adversely affected.
DEPENDENCE ON SCRAP SUPPLIERS
EMCO's scrap recycling operations are dependent upon the supply of
scrap materials from its suppliers. Few of such suppliers are bound by long-term
supply agreements, and therefore they have no obligation to continue to supply
scrap materials to EMCO. In the event that substantial numbers of scrap
suppliers cease supplying scrap materials to EMCO, the Company's financial
condition and results of operations would be materially and adversely affected.
ENVIRONMENTAL MATTERS
Like many other companies in the scrap metal recycling business, EMCO
is subject to comprehensive local, state and international regulatory and
statutory requirements relating to the acceptance, storage, handling and
disposal of solid waste and waste water, air emissions, soil contamination and
employee health, among others. Environmental legislation and regulations have
changed rapidly in recent years, and it is likely that EMCO, and any other scrap
metal recycling subsidiaries the Company may acquire in the future, will be
subject to even more stringent environmental standards in the future.
The Company is currently aware of two ongoing environmental matters in
connection with EMCO's business. The first matter concerns certain operating
permits for an auto shredder and a furnace used in removing insulation from
copper wire. The Environmental Protection Agency concluded that Copperstate had
operated those two pieces of equipment while possessing only a temporary permit
from the Arizona Department of Environmental Quality ("ADEQ") when a permanent
permit should have been obtained. The EPA assessed a fine against Copperstate
and EMCO for failure to obtain a permit. EMCO has paid its fine totaling $9,000
and is awaiting formal dismissal by the EPA, which it expects to receive in the
near future. In the second matter, environmental consultants to the Company
reported that an underground storage tank located at one of EMCO's yards had not
been reported to the Arizona environmental authorities as required by law. EMCO
as lessee reported the matter to the owner of the property, and believes that
such report is the extent of its obligations with respect to this matter.
However, there can be no assurance that any failure of the owner to report will
not result in liability of or the assessment of penalties against the Company
and/or EMCO.
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<PAGE> 20
EMCO has a policy of not knowingly accepting, handling or discharging
hazardous waste products, and the Company and EMCO are not aware of any material
concentrations of hazardous waste located on any of EMCO's properties. However,
as part of a pre-Merger review, the Company hired an environmental consulting
firm to conduct Phase I or Phase II site assessments or transaction screen
reviews (the "Pre-Merger Site Assessments") of nearly all of the sites owned or
leased by EMCO in Arizona and the sites that were purchased from Harold
Rubenstein or his affiliates in Tucson. The environmental consultants completed
certain investigations of reviewed sites and delivered all final transaction
screen assessments, Phase I and/or Phase II reports, as appropriate, that they
were requested to deliver. Certain of these reports revealed that some soil or
groundwater contamination is likely at some sites and recommended that certain
additional investigations and remediation be conducted. Based upon its review of
the reports, the Company believes that it is likely that contamination exists at
certain of the sites and that it is likely that remediation will be required at
some of the sites. Also based upon its review of these reports, the Company
believes that such contamination is likely to include, but not be limited to:
polychlorinated biphenyls (PCBs); total petroleum hydrocarbons; volatile organic
compounds (VOCs), including perchloroethylene, trichlorofluoromethane,
trichloroethylene, trichloroethane and dichloroethylene; antimony; arsenic,
cadmium; copper; lead; mercury; silver; zinc; waste oil; toluene; meta- and
para-xylenes; baghouse dust; and aluminum dross. The ultimate extent of
contamination cannot be stated with any certainty at this point, and there can
be no assurance that the cost of remediation will be immaterial.
The Company has supplied the Pre-Merger Site Assessments to EMCO, and
EMCO has retained a qualified environmental and chemical consulting firm in
Arizona to review them, to examine EMCO's ongoing operations, and to recommend
to EMCO's management and Board of Directors any steps EMCO should take to
achieve and/or maintain compliance, including but not limited to any necessary
remedial measures or operational changes. During the second quarter of the
current fiscal year, EMCO commenced action on certain of the recommendations of
the consulting firm, and subsequently EMCO established an environmental safety
fund of $15,000. The Company believes that the environmental safety fund will
have to be increased from time to time as additional recommendations from the
consultant become available. EMCO has also adopted the recommended procedural
program set forth by the consulting firm with respect to environmental
characteristics of any new sites to be purchased or leased.
Due to the nature of the scrap metal recycling business, it is possible
that inquiries or claims based upon environmental laws may be made in the future
by governmental bodies or individuals against the Company, EMCO and any other
scrap metal recycling entities that the Company may acquire. The location of
EMCO's facilities in large urban areas may increase the risk of scrutiny and
claims. The Company is unable to predict whether any such future inquiries or
claims will in fact arise or the outcome of such matters. Additionally, it is
not possible to predict the total size of all capital expenditures or the amount
of any increases in operating costs or other expenses that may be incurred to
comply with any environmental requirements, or whether all such cost increases
can be passed on to customers through product price increases. Moreover,
environmental legislation has been enacted, and may in the future be enacted, to
create liability for past actions that were lawful at the time taken but that
have been found to affect the environment and to create public rights of action
for environmental conditions and activities. As is the case with scrap recyclers
in general, if damage to persons or the environment has been caused, or is in
the future caused, by hazardous materials activities of EMCO or other Company
subsidiaries or by hazardous substances now or hereafter located at any
subsidiaries' facilities, the Company and such subsidiaries
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<PAGE> 21
may be fined and held liable for such damage. In addition, the Company and such
subsidiaries may be required to remedy such conditions or change procedures.
While the Company believes EMCO is in material compliance with currently
applicable environmental regulations and does not anticipate any substantial
capital expenditures for new environmental control facilities during fiscal
1996, there can be no assurance that potential liabilities, expenditures, fines
and penalties associated with environmental laws and regulations will not have a
material adverse effect on the Company.
VOLATILITY OF STOCK PRICE
The Company's stock price has been, and in the future is expected to
be, volatile and to experience market fluctuation as a result of a number of
factors, including, but not limited to, current and anticipated results of
operations, future product offerings by the Company or its competitors and
factors unrelated to the operating performance of the Company. This volatility
may be increased as a result of the fact that by consummating the recent Merger,
the Company has entered into a new business market. The trading price of the
Company's Common Stock may also vary as a result of changes in the business,
operations, or financial results of the Company, prospects of general market and
economic conditions, additional future proposed acquisitions by the Company and
other factors. In addition, failure of revenues or earnings in any quarter to
meet the investment community's expectations, if any, could have an adverse
impact on the Company's stock price, as could sales of large amounts of stock by
existing stockholders.
FLUCTUATIONS IN OPERATING RESULTS
The Company's future operating results could be subject to significant
volatility, particularly on a quarterly basis. The Company's revenues and
operating results have fluctuated in the past and are likely to do so in the
future. The Company's quarterly operating results may continue to fluctuate due
to numerous factors, including but not limited to the demand for scrap metal,
the health of the national economy and competition.
RECENT CHANGES IN MANAGEMENT OF THE COMPANY
The Company has undergone multiple changes in its management in the
past year. Most recently, certain EMCO representatives were appointed Company
directors and/or officers in conjunction with the Merger. On April 9, 1996,
Donald F. Moorehead, then a director of EMCO, was elected to the Company's Board
of Directors. Immediately following the Merger, George O. Moorehead, Harold
Rubenstein and Raymond F. Zack, all officers and/or directors of EMCO, were
appointed to the Board of the Company. Also in conjunction with the Merger,
George O. Moorehead was appointed Executive Vice President of the Company.
EFFECT OF ANTITAKEOVER PROVISIONS OF DELAWARE LAW, THE COMPANY'S CHARTER
DOCUMENTS AND EMPLOYMENT AGREEMENTS
The Company is a corporation governed by the laws of Delaware. Certain
provisions of Delaware law and the charter documents of the Company may have the
effect of delaying, deferring or preventing changes in control or management of
the Company. Specifically, the Company's Board of Directors may issue shares of
Preferred Stock without stockholder approval on such terms as the Board may
determine. The rights of the holders of Common Stock of the Company are subject
to, and may be adversely affected by, the rights of any Preferred Stock that may
be issued in the future. The Company is subject to the
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<PAGE> 22
provisions of Section 203 of the Delaware General Corporation Law, which has the
effect of making changes in control of a company more difficult. In connection
with the Merger, the Company entered into employment agreements with George O.
Moorehead, Gerard M. Jacobs and T. Benjamin Jennings. Such agreements provide
for certain payments to be made to such persons in the event of a change of
control of the Company. The effects of the antitakeover protections of Delaware
law, the Company charter documents and these employment agreements could be to
make it more difficult for a third party to acquire, or could discourage a third
party from acquiring, a majority of the outstanding stock of Company.
Stockholders should not use historical trends to anticipate results or trends in
future periods. Further, the Company's stock price is subject to volatility. Any
of these factors discussed above could have an adverse impact on the Company's
stock price. In addition, failure of revenues or earnings in any quarter to meet
the investment community's expectations, if any, as well as broader market
trends unrelated to the Company's performance could have an adverse impact on
the Company's stock price.
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<PAGE> 23
RECENT ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and For
Long-Lived Assets to be Disposed Of." The statement must be adopted for its
fiscal year beginning April 1, 1996. Based upon its preliminary review,
management believes that there will be no material impact on the results of
operations or financial condition upon adoption.
In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation." The Company intends to adopt the disclosure
requirements for its fiscal year beginning April 1, 1996. Based upon its
preliminary review, management believes that there will be no material impact on
the results of operations or financial condition upon adoption.
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<PAGE> 24
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See disclosure contained in corresponding item of Form 10-Q Transitional Report
for the five months ended March 31, 1996, filed by the Registrant.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Restated Certificate of Incorporation, as amended through
April 12, 1996.
3.2 Amended and Restated Bylaws, as amended through April 9, 1996.
10.1 Office Lease between Friedman Properties, Ltd., and Metal
Management, Inc.
27.1 Financial Data Schedule
(b) The following reports on Form 8-K were filed during the quarter ended June
30, 1996:
1. On July 31, 1996, the Company filed a Form 8-K dated July 16,
1996, reporting the sale of substantially all of the assets
related to its Spectra*Star Division to Mannesmann Tally
Corporation pursuant to an Asset Purchase and Sale Agreement
dated as of July 16, 1996 (Item 5). The Company filed
unaudited pro forma financial statements giving effect to the
sale for the year ended October 31, 1995, and the five months
ended March 31, 1996 (Item 7). The Form 8-K provided the Form
of Asset Purchase and Sale Agreement, and related press
release dated July 11, 1996 (Item 7).
2. On August 9, 1996, the Company filed a Form 8-K dated August
7, 1996, reporting the execution by the Company of a Letter of
Intent dated August 6, 1996, to acquire the MacLeod Group of
Companies, and the issuance of a press release regarding the
Letter of Intent on August 7, 1996 (Item 5). The Form 8-K
provided a copy of the press release (Item 7).
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<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
METAL MANAGEMENT, INC.
Dated: November 13, 1996 By /s/ Robert C. Larry
-------------------------------------------
Vice President, Finance and Chief Financial
Officer (Principal Financial and Accounting
Officer)
By /s/ Gerard M. Jacobs
-------------------------------------------
President and CEO
By /s/ T. Benjamin Jennings
-------------------------------------------
Chairman of the Board and Chief Development
Officer
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<PAGE> 26
EXHIBIT INDEX
3.1 Restated Certificate of Incorporation, as amended through April 12,
1996.
3.2 Amended and Restated Bylaws, as amended through April 9, 1996.
10.1 Office Lease between Friedman Properties, Ltd., and Metal Management,
Inc.
27.1 Financial Data Schedule
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
METAL MANAGEMENT, INC.
(COMPOSITE RESTATED CERTIFICATE OF INCORPORATION PREPARED FOR PURPOSES OF FILING
WITH THE SECURITIES AND EXCHANGE COMMISSION AND NOT FILED WITH THE DELAWARE
SECRETARY OF STATE.)
Metal Management, Inc., a corporation organized and existing under the
laws of the State of Delaware, does hereby certify:
1. The name of the corporation is Metal Management, Inc. Metal
Management, Inc. was originally incorporated under the name of General
Parametrics Corporation, and the original Certificate of Incorporation was filed
with the Secretary of State of the State of Delaware on June 5, 1986. A
Certificate of Amendment of Certificate of Incorporation was filed on April 11,
1996, and another Certificate of Amendment was filed on April 12, 1996.
2. Pursuant to Section 245 of the General Corporation Law of the State
of Delaware, this Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the Certificate of
Incorporation of this corporation, and was adopted by the Board of Directors
without a vote of the stockholders.
3. The text of the corporation's Restated Certificate of Incorporation,
as amended, is hereby restated to read in its entirety as follows:
1. The name of the Corporation is Metal Management, Inc. (the
"Corporation").
2. The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange
Street, in the City of Wilmington, County of New Castle, zip
code 19801. The name of its registered agent at such address
is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the
General Corporation Law of Delaware.
4. (a) The Corporation is authorized to issue two classes of
shares to be designated, respectively, "Preferred Stock"
and "Common Stock." The number of shares of Preferred
Stock authorized to be issued is Two Million (2,000,000)
and the number of shares of Common Stock authorized to
be issued is Forty Million (40,000,000). The Preferred
Stock and the Common Stock shall each have a par value
of $.01 per share.
1
<PAGE> 2
(b) The shares of Preferred Stock may be issued from time to time
in one or more series. The Board of Directors of the
Corporation is authorized, by filing a certificate pursuant to
the applicable law of the State of Delaware, to: (i) establish
from time to time the number of shares to be included in each
such series; (ii) fix the voting powers, designations, powers,
preferences and relative, participating, optional or other
rights of the shares of each such series and the
qualifications, limitations or restrictions thereof, including
but not limited to the fixing or alteration of the dividend
rights, dividend rate, conversion rights, conversion rate,
voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or prices, and
the liquidation preferences of any wholly unissued series of
shares of Preferred Stock; and (iii) increase or decrease the
number of shares of any series subsequent to the issue of
shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of
any series shall be so decreased, the number of shares
constituting such decrease shall resume the status which they
had prior to the adoption of the resolution originally fixing
the number of shares of such series.
5. The Corporation is to have perpetual existence.
6. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make,
alter, amend or repeal the Bylaws of the Corporation.
7. The number of directors which will constitute the whole Board
of Directors of the Corporation shall be as specified in the Bylaws
of the Corporation.
8. The election of directors need not be written ballot unless the
Bylaws of the Corporation shall so provide.
9. At all elections of directors of the corporation, each holder of
stock or of any class or classes or of a series or series thereof
shall be entitled to as many votes as shall equal the number of
votes which (except for such provision as to cumulative voting) he
would be entitled to cast for the election of directors with
respect to his shares of stock multiplied by the number of
directors to be elected by him, and he may cast all of such votes
for a single director or may distribute them among the number to be
voted for, or for any two or more of them as he may see fit.
10. Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation
may be kept (subject to any provision contained in the statutes)
outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the
Bylaws of the Corporation.
11. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its
2
<PAGE> 3
stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
12. (a) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether
civil, criminal, administrative, or investigative (other than
an action by or in the right of the corporation) by reason of
the fact that he is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best
interest of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation and
except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only
to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem
proper.
(c) To the extent that a director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in
subparagraphs (a) and (b), or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred
by him in connection therewith.
3
<PAGE> 4
(d) Any indemnification under subparagraphs (a) and (b) (unless
ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable
standard of conduct set forth in subparagraphs (a) and (b).
Such determination shall be made (1) by the Board of Directors
by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses incurred in defending a civil or criminal action,
suit or proceeding shall be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding as
authorized by the Board of Directors upon receipt of an
undertaking by or on behalf of the director, officer, employee
or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article 12.
(f) The indemnification and advancement of expenses provided by,
or granted pursuant to, the other subparagraphs of this
Article shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses
may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another
capacity while holding such office.
(g) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether
or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article
12.
(h) For purposes of this Article 12, references to "the
Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is
or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request
of such constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article 12 with respect
to the resulting or surviving corporation as he would have
with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if
its separate existence had continued.
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<PAGE> 5
(i) For purposes of this Article 12, references to "other
enterprises" shall include employee benefit plans; references
to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and references to
"serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an
employee benefit plan, its participants or beneficiaries; and
a person who acted in good faith and in a manner he reasonably
believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this Article 12.
(j) The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article 12 shall, unless
otherwise provided when authorized or ratified, continue as to
a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
13. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
THE UNDERSIGNED, being the President, does make this certificate,
hereby declaring and certifying that this is his act and deed and the facts
herein stated are true, and accordingly, has hereunto set his hand this ___ day
of _____________________, 1996.
METAL MANAGEMENT, INC.
----------------------------------
Gerard M. Jacobs, President and
Chief Executive Officer
Attest:
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Xavier Hermosillo, Secretary
5
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
OF
METAL MANAGEMENT, INC.
(FORMERLY GENERAL PARAMETRICS CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
ARTICLE I: CORPORATE OFFICES........................................... 1
1.1 REGISTERED OFFICE...................................... 1
1.2 OTHER OFFICES.......................................... 1
ARTICLE II: MEETINGS OF STOCKHOLDERS................................... 1
2.1 PLACE OF MEETINGS...................................... 1
2.2 ANNUAL MEETING......................................... 1
2.3 SPECIAL MEETING........................................ 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS....................... 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.......... 2
2.6 QUORUM................................................. 2
2.7 ADJOURNED MEETING; NOTICE............................. 3
2.8 VOTING................................................. 3
2.9 WAIVER OF NOTICE....................................... 3
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING................................................ 4
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING
CONSENTS............................................... 4
2.12 PROXIES................................................ 5
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE.................. 5
2.14 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND CUMULATIVE
VOTING................................................. 5
2.15 ADVANCE NOTICE OF STOCKHOLDER BUSINESS................. 6
ARTICLE III: DIRECTORS................................................. 7
3.1 POWERS................................................. 7
3.2 NUMBER OF DIRECTORS.................................... 7
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF
DIRECTORS.............................................. 7
3.4 RESIGNATION AND VACANCIES.............................. 7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.............. 8
3.6 FIRST MEETINGS......................................... 8
3.7 REGULAR MEETINGS....................................... 9
3.8 SPECIAL MEETINGS; NOTICE.............................. 9
3.9 QUORUM................................................. 9
3.10 WAIVER OF NOTICE....................................... 10
3.11 ADJOURNED MEETING; NOTICE............................. 10
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING...... 10
3.13 FEES AND COMPENSATION OF DIRECTORS..................... 10
3.14 APPROVAL OF LOANS TO OFFICERS.......................... 10
3.15 REMOVAL OF DIRECTORS................................... 11
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<PAGE> 3
ARTICLE IV: COMMITTEES................................................. 11
4.1 COMMITTEES OF DIRECTORS................................ 11
4.2 COMMITTEE MINUSES...................................... 12
4.3 MEETINGS AND ACTION OF COMMITTEES...................... 12
ARTICLE V: OFFICERS.................................................... 12
5.1 OFFICERS............................................... 12
5.2 ELECTION OF OFFICERS................................... 12
5.3 SUBORDINATE APPOINTED OFFICERS......................... 13
5.4 REMOVAL AND RESIGNATION OF OFFICERS.................... 13
5.5 VACANCIES IN OFFICES................................... 13
5.6 CHAIRMAN OF THE BOARD.................................. 13
5.7 PRESIDENT.............................................. 14
5.8 VICE PRESIDENTS........................................ 14
5.9 SECRETARY.............................................. 14
5.10 CHIEF FINANCIAL OFFICER................................ 15
5.11 AUTHORITY AND DUTIES OF OFFICERS....................... 15
ARTICLE VI: INDEMNITY.................................................. 15
6.1 THIRD PARTY ACTIONS.................................... 15
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.......... 16
6.3 SUCCESSFUL DEFENSE..................................... 16
6.4 DETERMINATION OF CONDUCT............................... 16
6.5 PAYMENT OF EXPENSES IN ADVANCE......................... 16
6.6 INDEMNITY NOT EXCLUSIVE................................ 17
6.7 INSURANCE INDEMNIFICATION.............................. 17
6.8 THE CORPORATION........................................ 17
6.9 EMPLOYEE BENEFIT PLANS................................. 17
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES............................................... 18
ARTICLE VII: RECORDS AND REPORTS....................................... 18
7.1 MAINTENANCE AND INSPECTION OF RECORDS.................. 18
7.2 INSPECTION BY DIRECTORS................................ 19
7.3 ANNUAL STATEMENT TO STOCKHOLDERS....................... 19
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS......... 19
ARTICLE VIII: GENERAL MATTERS.......................................... 19
8.1 CHECKS................................................. 19
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS....... 19
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES................ 20
8.4 SPECIAL DESIGNATION ON CERTIFICATES.................... 20
8.5 LOST CERTIFICATES...................................... 21
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<PAGE> 4
8.6 CONSTRUCTION; DEFINITIONS............................. 21
8.7 DIVIDENDS.............................................. 21
8.8 FISCAL YEAR............................................ 21
8.9 SEAL................................................... 21
8.10 TRANSFER OF STOCK...................................... 21
8.11 STOCK TRANSFER AGREEMENTS.............................. 22
8.12 REGISTERED STOCKHOLDERS................................ 22
ARTICLE IX: AMENDMENTS................................................. 22
ARTICLE X: CUSTODIAN................................................... 22
10.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES............ 22
10.2 DUTIES OF CUSTODIAN.................................... 23
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<PAGE> 5
AMENDED AND RESTATED BY-LAWS
OF
METAL MANAGEMENT, INC.
(FORMERLY GENERAL PARAMETRICS CORPORATION)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices,
including a principal executive office, at any place or places within or outside
of the State of Delaware.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors. At the meeting, directors
shall be elected and any other proper business may be transacted.
<PAGE> 6
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president or
chief executive officer, or by one or more stockholders holding shares in the
aggregate entitled to cast not less than ten percent of the votes at that
meeting.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president, the
chief executive officer, or the secretary of the corporation. Any of such
officers receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Sections 2.4
and 2.5 of this Article II, that a meeting will be held at the time requested by
the person or persons who called the meeting, not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is not
given within twenty (20) days after the receipt of the request, the person or
persons requesting the meeting may give the notice. Nothing contained in this
paragraph of this Section 2.3 shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the board
of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall
be sent or otherwise given in accordance with Section 2.5 of these by-laws not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notice shall specify
the place, date, and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present or represented. At such adjourned meeting at
which a quorum is present or
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<PAGE> 7
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these
by-laws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.8 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these
by-laws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.8, or as may
be otherwise provided in the certificate of incorporation, each stockholder
shall be entitled to one vote for each share of capital stock held by such
stockholder.
At a stockholders' meeting at which directors are to be elected, or at
elections held under special circumstances, a stockholder shall be entitled to
cumulate votes (i.e., cast for any candidate a number of votes greater than the
number of votes which such stockholder normally is entitled to cast). Each
holder of stock, or of any class or classes or of a series or series thereof,
who elects to cumulate votes shall be entitled to as many votes as equals the
number of votes which (absent this provision as to cumulative voting) he or she
would be entitled to cast for the election of directors with respect to his
shares of stock multiplied by the number of directors to be elected by him, and
he or she may cast all of such votes for a single director or may distribute
them among the number to be voted for, or for any two or more of them, as he or
she may see fit.
2.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these by-laws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice unless so required by the certificate of incorporation or these
by-laws.
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<PAGE> 8
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation or the
General Corporation Law of Delaware, any action required to be taken at any
annual or special meeting of stockholders of a corporation, or any action that
may be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice, and without a vote if a consent in
writing, setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(ii) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed.
(iii) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
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<PAGE> 9
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.12 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
2.14 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND CUMULATIVE
VOTING
Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this Section 2.14. Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation. Timely notice
shall also be given of any stockholder's intention to cumulate votes in the
election of directors at a meeting. In either case, to be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the corporation not less than twenty (20) days
nor more than sixty (60) days prior to the meeting; provided, however, that in
the event less than thirty (30) days notice or prior public disclosure of the
date of the meeting is given or made to stock holders, notice by the stockholder
to be timely must be so received not later than the close of business on the
tenth day following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made. Such stockholder's notice shall set
forth (a) as to each person, if any, whom the stockholder proposes to nominate
for election or re-election as a director: (i) the name, age, business
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<PAGE> 10
address and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the
corporation that are beneficially owned by such person, and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including without limitation such person's written consent to being
named in the proxy statement, if any, as a nominee and to serving as a director
if elected); and (b) as to the stockholder giving the notice: (i) the name and
address, as they appear on the corporation's books, of such stockholder, (ii)
the class and number of shares of the corporation that are beneficially owned by
such stockholder, and (iii) whether such stockholder intends to request
cumulative voting in the election of directors at the meeting. At the request of
the Board of Directors, any person nominated by the Board for election as a
director shall furnish to the Secretary of the corporation the information
required to be set forth in the stockholder's notice of nomination that pertains
to the nominee. No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth in this
Section 2.14. The chairman of the meeting shall, if the facts warrant, determine
and declare at the meeting that a nomination was not made in accordance with the
procedures prescribed by these Bylaws, and if he or she should so determine, he
or she shall so declare at the meeting and the defective nomination shall be
disregarded.
2.15 ADVANCE NOTICE OF STOCKHOLDER BUSINESS
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be: (a) as specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than sixty (60) days nor
more than ninety (90) days prior to the meeting; provided, however, that in the
event that less than fifty (50) days notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on the
tenth day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made. A stockholder's notice to
the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual meeting: (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the corporation that are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business, and
(v) any other information that is required to be provided by the stockholder
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended, in his or her capacity as a proponent of a stock holder proposal.
Notwithstanding the foregoing, in order to include information with respect to a
stockholder proposal in the proxy statement and form of proxy for a
stockholders' meeting, stockholders must provide notice as required by the
regulations promulgated under the Securities Exchange Act of 1934, as amended,
and must meet the technical and substantive requirements of Rule 14a-8
thereunder.
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Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this Section 2.15. The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this Section 2.15, and, if he or she should so determine, he or she shall so
declare at the meeting that any such business not properly brought before the
meeting shall not be transacted.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these by-laws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.
3.2 NUMBER OF DIRECTORS
The Board of Directors shall consist of seven (7) persons. This number
may be changed by a duly adopted amendment to the Certificate of Incorporation
or by an amendment to this Section 3.2 that is duly adopted by the Board of
Directors or approved by the vote or written consent of a majority of the votes
entitled to be cast by the holders of all outstanding shares of stock.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these by-laws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these by-laws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his successor is elected and qualified or
until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
corporation. When one or more directors so resigns and the resignation is
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective, and each director so chosen shall hold office as
provided in this section in the filling of other vacancies.
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Unless otherwise provided in the certificate of incorporation or these
by-laws:
(i) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these by-laws, or may
apply to the Court of Chancery for a decree summarily ordering an election as
provided in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these by-laws, members of the board of directors, or any committee designated by
the board of directors, may participate in a meeting of the board of directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders at
the annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
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shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, the chief
executive officer, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone or telecopy to each director or sent by electronic
mail, first-class mail or telegram, charges prepaid, addressed to each director
at that director's address as it is shown on the records of the corporation. If
the notice is mailed, it shall be deposited in the United States mail at least
four (4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, telecopy, electronic mail or telegram, it
shall be delivered personally or by telephone or transmitted via telecopy or
electronic mail or delivered to the telegraph company, as the case may be, at
least forty-eight (48) hours before the time of the holding of the meeting. Any
oral notice given personally or by telephone may be communicated (i) to the
director or (ii) to a person at the office of the director who the person giving
the notice has reason to believe will promptly communicate it to the director or
(iii) to the director's voice message box. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
3.9 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjournment the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum is present.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these by-laws, a written waiver thereof, signed by the
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person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the certificate of incorporation or these by-laws.
3.11 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors,
then the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or
these by-laws, any action required or permitted to be taken at any meeting of
the board of directors, or of any committee thereof, may be taken without a
meeting if all members of the board or committee, as the case may be, consent
thereto in writing and the writing or writings are filed with the minutes of
proceedings of the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or
these by-laws, the board of directors shall have the authority to fix the
compensation of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these by-laws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.
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No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he, she
or they constitute a quorum, may unanimously appoint another member of the board
of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors or in the by-laws of the corporation, shall
have and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers that may require it; but
no such committee shall have the power or authority to (i) amend the certificate
of incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the corporation or a revocation
of a dissolution, or (v) amend the by-laws of the corporation; and, unless the
board resolution establishing the committee, the by-laws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUSES
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
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4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these by-laws,
Section 3.5 (place of meetings and meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum),
Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of
adjournment), and Section 3.12 (action without a meeting), with such changes in
the context of those by-laws as are necessary to substitute the committee and
its members for the board of directors and its members; provided, however, that
the time of regular meetings of committees may also be called by resolution of
the board of directors and that notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
by-laws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and
a chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, a chief executive officer, one
or more elected vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and any such other officers (including appointed vice
presidents) as may be appointed in accordance with the provisions of Section 5.3
of these by-laws. Any number of offices may be held by the same person. Two
persons may hold the same office as co-officers if so specified by the board of
directors.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
by-laws, shall be chosen by the board of directors, subject to the rights, if
any, of an officer under any contract of employment. An officer of the
corporation elected pursuant to this Section 5.2 may also serve as an appointed
officer pursuant to Section 5.3 hereof.
5.3 SUBORDINATE APPOINTED OFFICERS
The board of directors may appoint, or empower the president to
appoint, such other officers and agents as the business of the corporation may
require. Each of such appointed officers shall hold office for such period, have
such authority, and perform such duties as are provided in these by-laws (if
any) or as the board of directors or the president, as the case may be, may from
time to time determine. Such appointed officers may have titles such as vice
president of the corporation or a division of the corporation or president of a
division of the corporation, or similar such titles, subject to such limits in
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appointment power as the board may determine. An appointed officer, absent
specific election by the board of directors as an elected corporate officer: (a)
shall not be considered an officer elected by the board of directors pursuant to
Section 5.2 of these bylaws and shall not have the executive powers or
policy-making authority of officers elected by the board of directors pursuant
to Section 5.2 hereof; (b) shall not be considered an "officer" within the
meaning of Rule 3b-2 or Rule 16a-1(f) promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or an "executive officer" of the
corporation within the meaning of Rule 3b-7 promulgated under the Exchange Act,
and such a person shall not be given the access to inside information of the
corporation enjoyed by elected officers of the corporation; (c) shall not be
considered a "corporate officer" within the meaning of Section 312 of the
California Corporations Code, except in any such case as is otherwise required
by law; and (d) shall be empowered to represent himself or herself to third
parties as an appointed officer only, and shall only be empowered to execute
documents, bind the corporation or otherwise act on behalf of the corporation as
authorized by the president of the corporation or by resolution of the board of
directors.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any office may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer elected by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled
by the board of directors.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these by-laws. The chairman of the
board shall also be the chief executive officer of the corporation, unless board
of directors appoints another person to such office, and shall have general
supervision, direction, and control of the business and the officers of the
corporation. He or she shall preside at all meetings of the stockholders and at
all meetings of the board of directors.
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5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the president shall be the chief operating officer of the corporation and shall,
subject to the control of the board of directors, have the general powers and
duties of management usually vested in the off ice of president of a corporation
and shall have such other powers and duties as may be prescribed by the board of
directors or these by-laws. If the chairman of the board is not appointed as
chief executive officer, then the president shall be the chief executive officer
and shall have the powers and duties prescribed in Section 5.6 of these by-laws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, elected pursuant to this Section 5.8 and not those appointed pursuant to
Section 5.3, in order of their rank as fixed by the board of directors or, if
not ranked, a vice president designated by the board of directors, shall perform
all the duties of the president and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the president. Such vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these
by-laws, the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these by-laws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these by-laws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation,
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including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, retained earnings, and shares. The books of account shall at
all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board of directors. He or she shall
disburse the funds of the corporation as may be ordered by the board of
directors, shall render to the president and directors, whenever they request
it, an account of all his transactions as chief financial officer and of the
financial condition of the corporation, and shall have other powers and perform
such other duties as may be prescribed by the board of directors or the by-laws.
5.11 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors.
ARTICLE VI
INDEMNITY
6.1 THIRD PARTY ACTIONS
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he or she is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he or she reasonable believed to be in
or not opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to
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procure a judgment in its favor by reason of the fact that he or she is or was a
director, officer, employee or agent of corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he or she
acted in good faith and in manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
6.3 SUCCESSFUL DEFENSE
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of
any claim, issue or matter therein, he or she shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a
court) shall be made by only as authorized in the specific case upon a
determination that the indemnification of the director, officer, employee or
agent is proper in the circumstances because he or she has met the applicable
standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall
be made (1) by the Board of Directors or the Executive Committee by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding or (2) or if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he or she is not entitled to be indemnified
by the corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided or granted
pursuant to the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of
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stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
6.7 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation, as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under and subject to the provisions of this Article VI (including,
without limitation the provisions of Section 6.4) with respect to the resulting
or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
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ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these by-laws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, a least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
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7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these by-laws,
may authorize any officer or officers, or agent or agents to enter into any
contract or execute any instrument in the name of' and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer,- agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or
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in the name of the corporation by the chairman or vice-chairman of the board of
directors, or the president or vice-president, and by the chief financial
officer or an assistant treasurer, or the secretary or an assistant secretary of
such corporation representing the number of shares registered n certificate
form. Any or all of the signatures on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if he or she were such officer,
transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
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8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these by-laws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained
in the certificate of incorporation, may declare and pay dividends upon the
shares of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
The corporation shall adopt a corporate seal, which may be altered at
pleasure, and use the same by causing it or a facsimile thereof, to be impressed
or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
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8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The original or other by-laws of the corporation may be adopted,
amended or repealed by the stockholders entitled to vote; provided, however,
that the corporation may, in its certificate of incorporation, confer the power
to adopt, amend or repeal by-laws upon the directors. The fact that such power
has been so conferred upon the directors shall not divest the stockholders of
the power, nor the limit their power to adopt, amend or repeal by-laws.
ARTICLE X
CUSTODIAN
10.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint
one or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is
threatened with irreparable injury because the directors are so divided
respecting the management of the affairs of the corporation that the required
vote for action by the board of directors cannot be obtained and the
stockholders are unable to terminate this division; or
(iii) the corporation has abandoned its business and has
failed within a reasonable time to take steps to dissolve, liquidate or
distribute its assets.
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10.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware but the
authority of the custodian shall be to continue the business of the corporation
and not to liquidate its affairs and distribute its assets, except when the
Court of Chancery otherwise orders and except in cases arising under Sections
226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.
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CERTIFICATE OF ADOPTION OF AMENDED AND RESTATED BYLAWS
OF
METAL MANAGEMENT, INC.
(FORMERLY GENERAL PARAMETRICS CORPORATION)
Certificate by Secretary of Adoption by Stockholders' Vote
The undersigned hereby certifies that he is the duly elected,
qualified, and acting Secretary of Metal Management, Inc., and that the
foregoing Amended and Restated Bylaws, comprising twenty-three (23) pages, were
submitted to the stockholders at their Annual Meeting held on April 9, 1996, and
to the Board of Directors on April 9, 1996, and recorded in the minutes thereof
and were adopted by the Board and ratified by the vote of stockholders entitled
to exercise the majority of the voting power of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
affixed the corporate seal this 11th day of April, 1996.
/s/ Xavier Hermosillo
-----------------------------
Xavier Hermosillo,
Secretary
<PAGE> 1
EXHIBIT 10.1
OFFICE LEASE
for
METAL MANAGEMENT, INC.
----------------------
a Delaware corporation duly qualified to transact business in Illinois
----------------------------------------------------------------------
at
THE BOYCE BUILDING
500 North Dearborn Street, Chicago, Illinois
<PAGE> 2
TABLE OF CONTENTS
1. Basic Lease Provisions & Identification of Exhibits 1
2. Premises & Term 2
3. Base Rent 5
4. Adjustments to Base Rent 6
5. Security Deposit 10
6. Delivery of Possession 10
7. Condition and Care of Premises 12
8. Services 14
9. Assignment and Subletting 19
10. Waiver of Subrogation 21
11. Indemnification 21
12. Insurance 22
13. Fire or Casualty 23
14. Alterations and Improvements 25
15. Eminent Domain 27
16. Lessor's Remedies 27
17. Surrender 29
18. Holding Over 30
19. Rules and Regulations 30
20. Lessors Rights 31
21. Estoppel Certificate 32
22. Subordination 33
23. Notices 33
24. Miscellaneous 34
Exhibit A Premises Base Plan
Exhibit B Building Rules and Regulations
Exhibit C Workletter
Exhibit D Rider
Guaranty
Real Estate Broker Disclosure
Certificate of Authority (Corporation or Partnership)
<PAGE> 3
BOYCE BUILDING OFFICE LEASE
1. BASIC LEASE PROVISIONS AND IDENTIFICATION OF EXHIBITS
1.01 BASIC LEASE PROVISIONS
A. BUILDING IDENTIFICATION
BOYCE BUILDING
500 North Dearborn Street
Chicago, Illinois 60610
B. LESSOR AND ADDRESS:
FRIEDMAN PROPERTIES, LTD., an Illinois corporation, 54 West Hubbard
Street, Chicago, Illinois 60610, As Agents of the beneficiaries of
HARRIS BANK GLENCOE-NORTHBROOK, N.A., not personally but as Trustee of
Land Trust No. L-582 (the "Trust").
C. LESSEE AND LEASED PREMISES:
LESSEE NAME: METAL MANAGEMENT, INC., A DELAWARE CORPORATION DULY
QUALIFIED TO TRANSACT BUSINESS IN ILLINOIS, currently located at: c/o
T. Benjamin Jennings, 12 Country Lane, Northfield, IL 60093.
LEASED PREMISES: 500 NORTH DEARBORN STREET - SUITE #405, Chicago,
Illinois 60610, consisting of approximately 4,514 square feet of
rentable area, as defined in Section 24.27, on the 4TH floor of the
Building, as depicted on Exhibit "A" attached hereto and made a part
hereof.
D. DATE OF LEASE: JUNE 20, 1996
E. COMMENCEMENT DATE: SEPTEMBER 1, 1996
F. EXPIRATION DATE: AUGUST 31, 2001
G. LEASE TERM: FIVE (-5-) Years & NO (-0-) Months.
H. MONTHLY BASE RENT, due and payable monthly in advance throughout the
Term, pursuant to Section 3. as adjusted pursuant to Section 4., as
follows:
<PAGE> 4
SEPTEMBER, 1996 THROUGH/INCLUDING AUGUST, 1997 $6,115.00;
SEPTEMBER, 1997 THROUGH/INCLUDING AUGUST, 1998 $6,295.00;
SEPTEMBER, 1998 THROUGH/INCLUDING AUGUST, 1999 $6,485.00;
SEPTEMBER, 1999 THROUGH/INCLUDING AUGUST, 2000 $6,680.00;
SEPTEMBER, 2000 THROUGH/INCLUDING AUGUST, 2001 $6,880,00;
I. SECURITY DEPOSIT: $6,115.00 DOLLARS, deposited, held, adjusted and
administered pursuant to Section 5.
J. INTENDED USE: Lessee shall use and occupy the Premises for the following
uses and purposes ONLY and for NO other use or purpose without the express
prior written consent of Lessor: GENERAL BUSINESS AND PROFESSIONAL
OFFICES.
1.02 ENUMERATION OF EXHIBITS
The exhibits checked off below and attached to this Lease are incorporated in
this Lease by this reference:
[X] EXHIBIT A PREMISES BASE PLAN
[X] EXHIBIT B RULES AND REGULATIONS
[X] EXHIBIT C WORK LETTER
[X] EXHIBIT D. RIDER
R-1 GENERAL
R-2 TEMPORARY OFFICES
R-3 BICYCLE STORAGE
R-4 PARKING
[ ] GUARANTY
[X] REAL ESTATE BROKER DISCLOSURE
[X] CERTIFIED RESOLUTION OF AUTHORITY
[X] OTHER: EXPANSION OPTION SPACE EXHIBIT
2. DEMISE & TERM
2.01 DEMISE OF PREMISES
A. BASE DEMISE: In consideration of the mutual covenants and agreements herein
stated, Lessor hereby leases to Lessee and Lessee hereby accepts the leased
premises specified in Subsection 1.01 C. and depicted on Exhibit A (the
"Premises") which are contained in the commercial building specified in
Subsection 1.01 A. commonly known as 500 NORTH DEARBORN STREET, ILLINOIS 60610
("Building", the underlying real estate of which may be referred to herein as
the "Land") for the term and upon the terms, covenants and conditions provided
in this Lease ("Lease").
2
<PAGE> 5
B. EXPANSION OPTIONS: So long as this Lease is in full force and effect without
uncured Lessee default after applicable notice and grace period, if any, Lessor
grants Lessee the following option to enlarge the rentable area of the Premises:
1. Attached to this Lease is a sheet entitled EXPANSION OPTION SPACE
Exhibit incorporated by this reference (the "Sheet"). The Sheet shows the
Premises and identifies the existing tenant spaces on the 4th floor of the
Building (each of space "A" and "B" an "Option Space" and collectively the
"Option Spaces"), which Option Spaces have the following availability/lease term
expiration dates:
I.D. / Suite # S.F. of Rentable Area Availability Date
- --------------------------------------------------------------------------
"A" (Pt. Suite 400) 1,484 "NOW"
"B" (Bal. Suite 400) 5,202 One (1) Year following
Commencement Date
2. Lessee may give written notice to Lessor from time to time, that
Lessee desires to expand the Premises with Option Space "A", "B", or both,
subject to availability as stated above, (an "Expansion Notice"), identifying
the Option Space or Spaces desired. Lessee shall be required to choose Option
Space "A" and "B" in that order, however. Subject to agreement upon mutually
acceptable space plans as provided in Subsection 2.01 B. 3. below, Lessor shall
be obligated to deliver the identified Option Space or Spaces within 90 days
after the Expansion Notice, subject to availability as stated above.
3. Within 30 days after each Expansion Notice, Lessor and Lessee shall
agree upon a space plan for each Option Space identified, comparable on a per
square foot of rentable area basis in terms of quantity and quality of
improvements to the quantity of improvements in the Premises (and which
agreement shall not be unreasonably withheld or delayed so long as the plans
call for such a comparable finished build-out), and Lessee shall make a deposit
with Lessor equal to the Security Deposit for each Option Space, as provided in
Section 2.01 B. 4. below. Lessor's Work and Lessee's Work, as defined in Exhibit
C Workletter, shall apply to each Option Space.
4. The terms, covenants and conditions of this Lease shall apply to
each Option Space, with the following adjustments and/or modifications:
a. The Term of this Lease shall be extended without further
action of the parties being required, by a period of THIRTY (30) full
rent-paying months, from the date of substantial completion and delivery of the
Option Space(s) identified in the given Expansion Notice;
b. Monthly Base Rent for each Option Space shall be figured on
a per square foot of rentable area amount equal to the Monthly Base Rent of the
Premises to and including the Expiration Date of the Term and, if the Term is
extended as a consequence of the operation of Section 2.01B.4.a., Monthly Base
Rent shall be adjusted for each year (or part thereof) of the extension
resulting therefrom by TWO AND ONE-HALF PERCENT (2.5%) compounded annually;
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<PAGE> 6
c. Lessee's Proportionate Share of Taxes and Operating
Expenses, as defined and provided for in Section 4.01 F., shall be increased by
the Proportionate Share for each Option Area;
d. The Security Deposit required for each Option Space shall
be deposited at the time Lessor and Lessee agree on a space plan as provided in
Section 2.01 B. 3. above and shall equal one full installment of Monthly Base
Rent first payable therefor; and if Lessee fails or refuses to do so, then the
Expansion Notice shall be deemed void and of no force or effect and Lessor shall
not be bound to accept a late deposit of Security Deposit but shall be free to
lease the space as Lessor in its sole discretion may determine; and
Lessor and Lessee shall execute a new lease or modification to this
Lease to memorialize the terms and conditions of each expansion hereunder prior
to the delivery date of the given Option space(s). Section R-2 of Exhibit D
Rider shall not apply to any expansion hereunder, however.
2.02 TERM
A. Subject to Section 6. ("Delivery of Possession"), the term of this Lease
("Term") shall commence on the date ("Commencement Date") which is the earlier
to occur of. (i) the date specified in Subsection 1.01 E. or (ii) the date
Lessee first occupies all or part of the Premises; and the Term shall expire,
unless sooner terminated, on the date (the "Expiration Date") specified in
Subsection 1.01 F., subject to extension in accordance with Sections 2.01B.4.a.
and 6.
B. EXTENSION OPTION: So long as this Lease is in full force and effect without
uncured Lessee default after applicable notice and grace period, if any, Lessor
grants Lessee the option to extend the Term of this Lease, once, for a period of
five (-5-) years, to begin, if at all, immediately upon expiration of the Term
(as extended, if at all, pursuant to the operation of Sections 2.01B. and 6.)
and to end, unless sooner terminated, five(-5-) years thereafter, on all of the
terms, covenants and conditions of this Lease except as provided in this Section
2.02 B (the "Extension"). In the event Lessee has not exercised its Option Space
options or has exercised its option as to Option Space "A" only (as provided in
Section 2.01B.) Lessee must deliver written notice of intent to renew and extend
hereunder to Lessor not later than six (-6-) months prior to the Expiration Date
of the Term in order to exercise this Extension, but in the event Lessee has
exercised its options as to both Option Spaces "A" and "B" (as so provided)
Lessee must deliver written notice of intent to renew and extend hereunder to
Lessor not later than nine (-9-) months prior to the Expiration Date as extended
pursuant to operation of Section 2.01B, and, in either case, if so elected, (a)
the Monthly Base Rent rate for the first year of the Extension will be the
average rental for comparable space at the Building under at least two (2)
comparable renewal leases made within six (6) months of the notice of intent
delivered hereunder (within nine (9) months in the event both Option Spaces "A"
and "B" have been undertaken pursuant to operation of Section 2.01B) as Lessor
and Lessee mutually and reasonably determine, and such Monthly Base Rent shall
be increased annually at the beginning of each subsequent year of the Extension
by two and one-half percent (2.5%) rounded to the next highest $5.00 increment,
(b) there will be no
4
<PAGE> 7
Workletter for the Extension and Lessee shall take the Premises "AS IS"
therefor. Section R-2. of Exhibit D Rider shall NOT apply to the Extension,
either.
C. CANCELLATION OPTION: So long as this Lease is in full force and effect
without uncured Lessee default after applicable notice and grace period, if any,
Lessor grants Lessee the option to cancel and terminate the Term of this Lease,
ONCE, effective at the end of the THIRTIETH (30th) full rent paying month of the
Term, upon delivery of written notice to Lessor not later than NINE (9) MONTHS
prior thereto ("Cancellation Notice") together with the Cancellation Fee of
$103,942.17 ______; provided, however, that if Lessee shall have exercised an
option for an Option Space prior delivery of the Cancellation Notice, then the
effective cancellation date shall I extended to the date which is the THIRTIETH
(30th) full rent paying month of occupancy of the applicable Option Space and
the Cancellation Fee shall be increased by the amount of all "deal costs" of the
Option Space, being the unamortized amount of (a) all of Lessor's construction
costs therefor (including then customary general conditions, overhead and profit
so long as Lessor's pricing otherwise is competitive for like work, and if not
then limited to 5% of the costs of a competitive bid for like work procured by
Lessee); and (b) all leasing commissions paid or incurred by Lessor as a
consequence thereof, such sum of (a) and (b) amortized on a straight line basis
with interest at Lessor's cost of funds based upon the then current first
mortgage loan secured by the Building, over the intended period of occupancy of
the Option Space including any extension of the Term resulting therefrom, taken
together with Lessor's out-of-pocket administrative costs not to exceed
$1,000.00; and provided further, however, that once Lessee has delivered the
Cancellation Notice, any unexercised Option Space option shall be deemed
revoked, void and unavailable for exercise.
3. BASE RENT
Lessee agrees to pay to Lessor at its office as specified in Subsection 1.01 B.
or to such other person or at such other place as designated by Lessor, without
any prior demand therefor and without any deduction whatsoever, base rent in
installments for the convenience of Lessee, as specified in Subsection 1.01 H.
("Monthly Base Rent") as adjusted, if at all, pursuant to the terms of Section
4. ("Adjustments to Monthly Base Rent"), and as adjusted shall be known as
Monthly Base Rent. It is understood that base rent due for the Term is the
aggregate of the installments of Monthly Base Rent payable over the Tenn. Except
as provided elsewhere in this Lease, all installments of base rent shall be paid
monthly in advance on the first day of each month of the Term, except that the
first installment shall be paid by Lessee to Lessor upon execution of this Lease
by Lessee. Base rent shall be prorated for partial months within the Term. All
charges, costs and sums required to be paid by Lessee or reserved to Lessor
under this Lease in addition to base rent shall be deemed additional rent
("Additional Rent"), and base rent and Additional Rent shall hereinafter be
collectively called "Rent." Lessee's covenant to pay Rent shall be independent
of every other covenant in this Lease. Lessee shall pay a late charge for
delinquent Rent in accordance with the provisions of Subsection 24.01. After
default in payment of Rent resulting from any NSF, Account Closed or other
dishonor, or as to any Rent account more than 30 days in arrears; or as to any
Rent account where Rent is paid more than five (5) days after its due date
(taken together with any written extensions thereof granted by Lessor and grace
periods applicable thereto) more than twice per year of the Term, then Lessor,
in addition to and
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<PAGE> 8
exclusive of any other remedy provided in this Lease, at law or in equity, shall
have the right to demand, by delivering notice to Lessee, that all Rent payable
to Lessor, including without limitation Rent payments in default from the
foregoing occurrences, to be transmitted or paid to Lessor by wire transfer,
certified or cashier's check, or money order, until further notice to the
contrary.
4. ADJUSTMENTS TO MONTHLY BASE RENT
4.01 DEFINITIONS. For the purposes of this Section 4. the following words and
phrases shall have the following meanings:
A. "Adjustment Date" shall mean the Commencement Date and each January
1st thereafter falling within the Term.
B. "Initial Year" shall mean the calendar year during which the
Commencement Date falls.
C. Adjustment Year" shall mean the Initial Year and each subsequent
calendar year during which an Adjustment Date falls.
D. "Taxes" shall mean all federal, state and local government taxes,
assessments and charges(including transit or transit district taxes or
assessments) of every kind or nature, whether general, special, ordinary or
extraordinary, which Lessor shall pay or become obligated to pay or remit
because of or in connection with the ownership, leasing, managing, control or
operation of the Building and the Land, or of the personal property, fixtures,
machinery, equipment, systems and apparatus located therein or used in
connection therewith including any rental or similar taxes levied in lieu of or
in addition to general real estate and/or personal property taxes to the extent
the same legislatively are not prohibited from imposition upon the tenant/lessee
or affirmatively are imposed on the tenant/lessee regardless whether the
landlord/lessor is obligated for collection thereof). For the purposes hereof,
Taxes for any Adjustment Year shall be Taxes which are assessed or become a lien
during such year, even though not due or payable until a subsequent year. There
shall be included in Taxes for any year the amount of all reasonable fees
(including reasonable attorneys' fees) paid or incurred by Lessor during such
year in seeking or obtaining any refund or deduction of Taxes or the assessments
underlying same. Taxes in any year shall be reduced by the net amount of any tax
refund received by Lessor (or its principals or its agents) during such year. If
a special assessment payable in installments is levied against the Land or
improvements, Taxes for any such year shall include only the installment of such
assessment and any interest payable or paid during such year. Taxes shall not
include any federal, state or local, franchise, capital stock, inheritance,
general income, gift or estate taxes, except that if a change occurs in the
method of taxation resulting in whole or in part the substitution of any such
taxes, or any other assessment, for any Taxes as above defined, such substituted
taxes or assessments shall be included in the Taxes, to the extent not
prohibited from imposition on tenants/lessees no matter whether legislatively
imposed on landlords/lessor or tenants/lessees. Also excluded from Taxes are
penalties and interest resulting from late payment of Taxes.
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E. "Operating Expenses" shall mean and include all those reasonable
costs, expenses and disbursements of every kind and nature (determined for the
applicable calendar year on an accrual basis) which Lessor (or its principals or
its agents) shall pay or become obligated to pay in direct connection with the
management (including management fees not to exceed 5 % of gross rents during
the Term), ownership, operation, maintenance, replacement and repair of the
Building and the Land and of the personal property, fixtures, machinery,
equipment, systems and apparatus located in or used in connection with the
Building or Land, including without limitation, Taxes (as defined herein),
common area utility expenses and current amortization, including interest, of
capital operation and maintenance of the Building. Operating Expenses shall not
include the following, however: costs of capital improvements which increase the
size of the Building; costs of legal, accounting, space planner or broker
services for leasing of or alterations to premises of any lessees of the
Building including without limitation the Premises); charges for depreciation of
the Building; interest and principal payments on mortgages, ground leases (if
any) or similar debt service except for the financing of capital expenditures as
provided hereinabove); real estate brokerage and leasing commissions; damage and
repairs attributable to condemnation, fire or other casualty; damage and repairs
covered under any insurance policy carried by Lessor (excepting any deductible);
damage and repairs necessitated by the negligence or willful misconduct of
Lessor or Lessor's employees, contractors or agents; executive salaries or
salaries of service personnel to the extent that such executives or personnel
perform services not allocable to the operation, management, repair or
maintenance of the Building; Lessor's general overhead expenses not related to
the Building; legal fees, accountants fees and other expenses incurred in
connection with disputes with tenants or other occupants of the Building or
associated with the enforcement of any lease or defense of Lessor's title to or
interest in the Building or any part thereof (excepting that if Lessor should
prevail against any one or more tenant or occupant of the Building -- including
but not necessarily limited to Lessee individually or as representative or
member of a class of Building lessees -- in any action involving a dispute over
Operating Expenses wherein Lessee would have benefited had Lessor not prevailed,
then Lessor may recoup its attorneys', accountants' and other professional fees
as well as court costs as Operating Expenses); costs incurred due to violations
by Lessor or any other lessee of the Building of the terms and conditions of any
other lease, or fines imposed upon Lessor and not caused by Lessee, for
violation of any governmental rule or authority; costs in excess of those for
comparable services, labor and materials in comparable buildings (excepting in
any event costs under $1,000.00); services, installations or benefits furnished
to other lessees in excess of Building standard or not available to Lessee; and
any other expenses which, under generally accepted accounting principles and
practice would not be considered a normal maintenance and operating expense.
F. "Proportionate Share" shall mean 2.6 % (being the rentable area of
the Premises divided by the rentable area of the Building), subject to
provisions of Section 4.02.
G. "Base Year" shall mean Taxes which become payable during 1996 and
Operating Expenses which accrue during 1996.
4.02 ADJUSTMENTS TO MONTHLY BASE RENT
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A. "STEP" ADJUSTMENT.
For each year of the Term subsequent to the first year, Monthly Base Rent shall
be as follows, which represents annually compounding N/A% increases: See
Subsection 1.01 H.
B. "TAXES AND OPERATING EXPENSES"
In addition to and exclusive of Monthly Base Rent as adjusted pursuant to
Section 4.02 A. above, on each Adjustment Date, there shall be assessed an
amount, payable together with Monthly Base Rent for each month of the Adjustment
Year which includes the particular Adjustment Date until the next adjustment
hereunder, which equals one-twelfth (1/12th) of the product of (1) the positive
difference only, if any, between the Premises' Proportionate Share of Taxes and
Operating Expenses for the applicable Adjustment Year and the Premises'
Proportionate Share of Base Year Taxes and Operating Expenses. The result of the
foregoing calculation, if not an even dollar figure, shall be rounded to the
next highest dollar figure (for example $87.65 to $88.00) as the additional rent
due and payable under this Lease.
i. Notwithstanding the foregoing, in the event Operating Expenses for
any Adjustment Year shall exceed one hundred & ten percent (110%) of the prior
Adjustment Year's adjusted Operating Expenses, Lessor shall not, for the
purposes of calculating Operating Expenses subject to assessment for the
Premises Proportionate Share thereof for the Adjustment Year and each subsequent
Adjustment Year, the amount of any such excess. In other words, Operating
Expenses increase adjustments shall be limited, in any given Adjustment Year, to
a maximum of 10% in excess of the immediately preceding Adjustment Year.
a. Solely by way of example and not by way of limitation, assume that
adjusted Base Year Operating Expenses are $100,000.00, and adjusted Operating
Expenses for this example's first Adjustment Year are $120,000.00. In this
example, the monthly amount attributable to Operating Expenses and calculable
under Section 4.02 B. from the Adjustment Date for this example's Adjustment
Year until the next Adjustment Date would be as follows: (a) Is $120,000.00
MORE than 10% more than the Base Year amount? (b) Yes. (c) Then Lessor is
limited to calculating the amount due, as follows: $110,000.00 - $100,000.00 =
$10,000.00 x 2.6% = $260.00 divided by 12 = $21.66, rounded to $22.00. As to the
next Adjustment Year, the monthly amount attributable to Operating Expenses can
not exceed $24.00 (actually $23.83 rounded), being 10% in excess of the first
Adjustment Year's monthly amount, regardless of actual adjusted Operating
Expenses for that next Adjustment Year.
4.03 PROJECTIONS
For purposes of calculating Taxes and Operating Expenses additional rent for any
Adjustment Year, Lessor may make reasonable estimates, forecasts or projections
of Taxes and Operating Expenses increases collectively the "Projections") for
such Adjustment Year. Lessor shall deliver to Lessee a written statement i)
setting forth the Projections for the Adjustment Year in which
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such Adjustment Date falls, and (ii) providing a calculation of the additional
rent, if any, resulting from and based on the Projections, to become effective
as of said Adjustment Date; provided, however, that the failure of Lessor to
provide any such statement shall not relieve Lessee from its obligation to
continue to pay base rent at the monthly rate then in effect under this Lease.
If and when Lessee receives such statement from Lessor, Lessee shall pay the
additional rent reflected thereby effective retroactively to the applicable
Adjustment Date. If any unexpected increase in Taxes occurs after preparation of
the Projections which results in a projected increase of five percent (5%) or
more, based upon action by the Assessor of Cook County which Lessor, after
Assessor level objection proceeding, has been unsuccessful in preventing, Lessor
may revise the Projections and the estimated Taxes and Operating Expenses
additional rent may be recalculated based on the revised Projections.
4.04 READJUSTMENTS
On or about April 1st following the end of each Adjustment Year, or at such
later time as Lessor shall be able to determine me actual amounts of Taxes and
Operating Expenses for the Adjustment Year last ended, Lessor shall notify
Lessee in writing of such actual amounts. If the total Taxes and Operating
Expenses additional rent paid by Lessee for such Adjustment Year exceeds the
amount thereof payable for such year based upon actual Taxes and Operating
Expenses as determined by Lessor, Lessor shall credit such excess to
installments of Monthly Base Rent payable after the date of Lessor's notice
until such excess has been exhausted unless the excess is greater than one such
monthly installment, in which case the excess beyond the amount equal to one
such monthly installment shall be refunded to lessee within 30 days, or if this
Lease shall expire prior to full application of such excess, Lessor shall pay to
Lessee the balance thereof not theretofore applied against Rent. If the actual
amounts exceed the Taxes and Operating Expenses additional rent for such
Adjustment Year, then and no later than thirty 30) days after the date of
Lessor's written notice, Lessee shall pay to Lessor the stated deficiency. The
obligation to make such payments shall survive the expiration of the Term or
earlier termination of this Lease. No interest or penalties shall accrue on any
amounts which Lessor is obligated to credit or pay to Lessee by reason of this
Section 4.04. The obligation for readjustments for the final year of the Term
shall survive expiration of the Term of this Lease.
4.05 PARTIAL OCCUPANCY AND PARTIAL SERVICES
There shall be no "grossing up" of Operating Expenses.
4.06 BOOKS AND RECORDS
Lessor shall maintain books and records showing Taxes and Operating Expenses in
accordance with sound accounting and management practices, which records shall
be available to Lessee for inspection at the offices of the Building upon
reasonable prior notice; provided, however, that Lessee must exercise its right
hereunder within sixty (60) days after receipt from Lessor of notice of
increased rentals or sums due hereunder.
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4.07 NO DECREASES IN MONTHLY BASE RENT
Notwithstanding anything to the contrary contained in this Lease, and except for
Lessee's rights to negotiate rental rates for specific events (such as but not
necessarily limited to Option Space and Extension rentals), Monthly Base Rent
never shall be adjusted so as to produce a monthly sum less than the Monthly
Base Rent as adjusted from time to time in accordance with Section 4.02 A.
4.08 PRORATION
For any Adjustment Year which constitutes less than a full calendar year, Taxes
and Operating Expenses additional rent for the partial Adjustment Year shall be
prorated based on the number of the days of the Term falling within such
calendar year.
4.09 CHANGE IN AREA
In the event that the rentable area of either the Premises or the Building
changes during any particular Year during the Term, appropriate adjustment shall
be made hereunder for such Year or Years.
5. SECURITY DEPOSIT
As security for the performance of its obligations under this Lease, Lessee upon
its execution of this Lease has deposited with Lessor a fund (the "Security
Deposit") in the amount specified in Subsection 1.01 1. Lessor may, but shall
not be obligated, to apply the Security Deposit to cure any default of Lessee
under this Lease, and upon notice by Lessor of such application, Lessee shall
replenish the Security Deposit in full by promptly paying to Lessor the amount
so applied. Within forty-five (45) days after the Expiration Date and Lessee has
vacated the Premises in the condition required by this Lease, Lessor shall
return to Lessee the balance, if any, of the Security Deposit. In no event shall
the Security Deposit be deemed an advance payment of Rent or the last
installment of Monthly Base Rent or the measure of damages for any default by
Lessee under this Lease, or a bar of defense to any action which Lessor may at
any time commence against Lessee. The Security Deposit must at all times remain
equal to ONE monthly installments of INITIALLY PAYABLE Monthly Base Rent FOR THE
PREMISES AND EACH OPTION SPACE UNDERTAKEN BY LESSEE PURSUANT TO THE TERMS AND
CONDITIONS OF THIS LEASE, BUT IN NO EVENT LESS THAN $6,115,00 AT ANY TIME, and
Lessee agrees to remit to Lessor any deficiency with the first installment of
adjusted Monthly Base Rent next payable. Lessor shall not be liable for the
payment of any interest on Security Deposit funds.
6. DELIVERY OF POSSESSION
A. Lessor shall deliver possession of the Premises on the Commencement Date,
prepared with Lessor's Work under the terms of Exhibit C ("Workletter"), if any,
attached hereto and made a part hereof, to a state of substantial completion (as
defined in Section 6.B. below) or, if no
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Workletter is attached, then "AS-IS" as of the date of this Lease. A Workletter
IS part of this lease.
B. For the purposes of this Lease, the term "substantial completion" shall mean
functional completion of the construction to be undertaken, if any, by Lessor
pursuant to the Workletter but for minor and insubstantial details of
construction or decoration, and/or balancing of mechanical systems serving the
Premises. In the event of a dispute as to whether or not substantial completion
has been achieved, the reasonable opinion of Lessor's architect (in the event
Lessor has paid for or performed the work) or Lessee's architect (in the event
Lessee has paid for or performed the work, provided that Rent shall not be
deemed payment for work) shall be conclusive and binding upon the parties.
C. Within thirty (30) days after delivery of possession where substantial
completion is required, Lessor and Lessee shall execute Lessor's standard form
of "punch list", outlining uncompleted details of construction required to be
performed by Lessor, which items Lessor shall remain obligated to complete
within 30 days after creation of the punch list.. Lessor shall have no
obligation to repair damages to the Premises caused by Lessee prior to the
execution of the punch list.
D. If for any reason Lessor shall be unable to deliver possession as required
under Section 6. A. above, Lessor shall be subject to no liability therefor,
except as provided in this Subsection 6. D., as follows. Except to the extent
that any delay (including without limitation any delay in performance of
Lessee's obligations under the Workletter) in delivery is due to, caused by or
attributable to any act or omission on the part of Lessee or any person acting
on behalf of Lessee (including without limitation any architect or space planner
selected or designated by Lessee), Lessee's sole and exclusive right and remedy
shall be that the Term and Rent shall commence only when possession of the
Premises is delivered as required under Section 6.A. above and the Expiration
Date of the Term shall be extended by a like amount of time (plus just so many
days as are necessary to have the Term expire at the end of a calendar month and
still provide Lessee the benefit of the "full" Term intended in Section 1.01G);
provided, however, that (i) to the extent that any such delay is due to, caused
by or attributable to Lessee, then and to that extent neither the Commencement
Date or Expiration Date of the Term nor the date upon which Rent commences shall
be so extended, and (ii) in no way shall the foregoing prevent Lessor and Lessee
from agreeing upon any other or different dates for occupancy of the Premises or
commencement of Rent. In no other way shall the validity of this Lease or the
obligations of Lessee be deemed altered, modified or impaired, however.
i. Notwithstanding the foregoing, if for any reason other than a delay
caused by Lessee (including delays in executing this Lease and depositing
Lessee's funds due and payable upon Lease execution as of the date of this Lease
set forth in Section 1.01 D.), Lessor fails to deliver the Premises as required
under this Section 6. on the Commencement Date projected under Subsection 1.01
E., Lessee shall have the right to one (1) day of abatement of Monthly Base Rent
(only) for each day of delay, abatement to commence coincident with the
Commencement Date of the Term, together with continued occupancy of temporary
space, if any, managed by Friedman Properties, Ltd. at the same arrangements
therefor.
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ii. In addition and not withstanding the foregoing, if for any reason
other than a delay caused by Lessee (as aforesaid), Lessor fails to deliver the
Premises as required under this Lease by or before OCTOBER 1, 1996, then and in
such case Lessee shall have the right to (a) cancel and terminate this Lease
effective as of that date by delivery to Lessor of written notice of such
election within 5 days thereafter (but if Lessor delivers possession prior to
expiration of such 5 days' period then Lessee's notice of cancellation hereunder
shall be deemed null and void but Lessee shall have the benefit of the
continuation of the arrangement under the foregoing subparagraph i. through the
date of delivery aforesaid) and (b) if cancellation and termination hereunder
becomes effective to continued occupancy of its then temporary space but free of
base monthly rent charges therefor (but not free of standard additional charges
for additional services at that location) for a period not to exceed 60 days
after the effective cancellation and termination date.
iii. In any event, and except as provided in the foregoing provisions
of this Section 6., Rent under this Lease shall not commence to accrue and
become payable except and until delivery of possession of the Premises.
E. Within thirty (30) days after delivery of possession on any date other than
the Commencement Date set forth in Subsection 1.01 E., Lessor and Lessee shall
execute a letter certifying the date of substantial completion, if applicable;
(ii) the Term Commencement and Expiration Dates; (iii) the Rent commencement
date: (iv) such other information as Lessor reasonably may request (including
information a mortgagee of the Building or Land requires to confirm this Lease
in full force and effect with Term and Rent commenced) and (v) attaching a copy
of the "punch list", if applicable..
7. CONDITION AND CARE OF PREMISES
A. Subject to the provisions of Section 6. above, Lessee's taking possession of
the Premises or any portion thereof shall be rebuttable evidence against Lessee
that the Premises were in good order and satisfactory condition. No promises of
Lessor to alter, remodel, improve, repair, decorate or clean the Premises or any
part thereof have been made, and no representation respecting the condition of
the Premises, the Building, the Common Areas (hereinafter defined) or the Land
has been made to Lessee by or on behalf of Lessor, except to the extent
expressly set forth herein or in Exhibit C Workletter, if any, attached to and
made a part of this Lease. Lessee shall notify Lessor of any damage to the
Premises after taking possession, regardless of the cause of damage.
i. Notwithstanding the foregoing, coincident with the Commencement Date
of the Term Lessor also shall have substantially completed the following
renovations to the Common Areas of the Building:
a. cornice restoration;
b. Dearborn Street lobby upgrades;
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c. refinishing of passenger elevator cab interiors;
d. 4th floor passenger elevator lobby upgrades.
ii. Subject to exceptions for certified historic structures, Lessor's
Common Areas renovations and upgrades which serve or access the Premises shall
comply with the Americans with Disabilities Act of 1990 (as amended).
B. LESSEE'S BASIC REPAIR & MAINTENANCE OBLIGATIONS. Except for damage resulting
from the negligence or willful and wanton conduct of Lessor or Lessor's agents,
employees or servants, and subject to the provisions of Section 13., Lessee at
its own expense (i) shall keep the Premises decorated, in good repair and
leaseable condition complying at all times with all governmental requirements
and undertaking in good faith all of Lessee's obligations under this Lease, and
(ii) except where Lessor elects to make repairs at Lessee's expense as provided
hereinbelow, shall promptly and adequately repair all damage to the Premises
caused by Lessee, it agents, officers, employees, servants, invitees, licensees
or contractors, including but not limited to the replacement of all broken
glass, fixtures and appurtenances resulting from any such damage, under the
supervision and with the approval of Lessor and within any reasonable period of
time specified by Lessor. Upon not less than ten (10) days' prior written notice
(excepting only emergency situations, which shall require no prior notice but
whatever notice may thereafter be reasonable) Lessor may, but shall have no
obligation to, elect to make any or all repairs required of Lessee hereunder, on
Lessee's behalf at Lessee' sole cost, or, upon Lessee's request, perform any
such repairs at Lessee's sole cost; or should Lessee fail to make required
repairs either promptly or adequately, Lessor may, but need not, make such
repairs and replacements at Lessee's sole cost. In any case where Lessor
undertakes or supervises Lessee's obligations under this Section B., Lessee
shall pay Lessor on demand the cost thereof together with an amount equal to 5%
of such cost as an overhead and supervision fee.
C. UTILITIES,
1. SEPARATELY METERED SERVICES. Lessee shall place its name on all
accounts for separately metered utilities serving the Premises, for billing
purposes, and Lessee shall pay directly to the applicable utility company its
utility charges per its tariffs from time to time in effect. In case the bills
and charges are not paid when due, Lessor shall have the right to pay the same,
which amounts so paid are declared to be so much additional rent and payable
with the very next installment of Monthly Base Rent The following utilities are
separately metered for die Premises: ELECTRICAL FOR LIGHTS, OUTLETS AND GENERAL
CONDITIONS (INCLUDING ELECTRICAL FOR ELECTRIC HOT WATER HEATER).
2. OTHER UTILITIES. All other utilities requested by Lessee or
necessary for the particular uses of the Premises (beyond its Intended Use) in
excess of those required to provide Building Standard services (as provided in
Section 8. below) shall be paid for at rates and tariffs as provided for the
respective utility under Section 8. The costs of providing Building Standard
services not billable or rebillable directly to Lessee under either Section 8.
or this Section 7. shall
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be deemed included in the Rent, except as follows: AIR CONDITIONING, DUCTED
VENTILATING AND "MORNING WARM-UP" ENERGY COSTS PER SECTION 8.A.
D. TELEPHONE SERVICE. Lessee shall make arrangements directly with the telephone
company providing line service to the Building, and the telephone equipment
vendor of Lessee's choice, for telephone service to the Premises. Lessee shall
pay all telephone line, wire and equipment installation, rental and maintenance
fees and charges for telephone service to the Premises, and if wire maintenance
or similar charges are not directly billable to Lessee by the telephone company
providing line service to the Building but are charged to Lessor, the same shall
be an item of Operating Expenses.
i. Notwithstanding the foregoing, Lessee shall be entitled to existing
Building feeds for such services.
E. ELECTRICAL FIXTURES. Lessee shall pay for the repair, maintenance and
replacement of all light fixtures, electrical switches, electrical outlets and
lamps located in the Premises and all bulbs, tubes, ballasts and starters
utilized in the Premises. Lessee at its sole cost and expense shall have the
right to change light bulbs and tubes in die Premises, however, but in such case
Lessee shall be solely responsible for all damages caused by improper changing
and incorrect type or capacity bulb or tube installed.
F. This Lease grants no rights to light or air over or about the Premises.
Lessor specifically excepts and reserves to itself the use of any and all
portions of the Building exterior to the Premises, as well as all rights to the
Land and improvements and air rights above and about the Premises, and to such
areas within the Premises required for installation of utility lines and other
installations required to serve any occupants of the Building and to maintain
and repair same, and no rights with respect thereto are conferred upon Lessee,
unless otherwise specifically provided herein, provided that Lessor's exercise
of its reserved rights hereunder shall not materially interfere with Lessee's
use and possession of the Premises.
8. SERVICES
SO LONG AS THIS LEASE IS IN FULL FORCE AND EFFECT WITHOUT UNCURED LESSEE DEFAULT
AFTER THE APPLICABLE NOTICE AND GRACE PERIOD, IF ANY, LESSOR SHALL PROVIDE THE
FOLLOWING SERVICES:
A. HVAC SYSTEMS. (I) HEATING. The Premises shall be served for seasonal heating
from September 16 through April 15, or such other dates annually as Lessor
reasonably determines, by the Building's central heating system, through
radiators located in the Premises, to provide levels of seasonal comfort
consistent with generic Class "B" office building standards in Chicago,
Illinois. (ii) COOLING. The Premises shall be served for seasonal cooling from
April 16 through September 15, or such other dates annually as Lessor reasonably
determines, by the air conditioning unit(s) located on the same floor as the
Premises, to provide levels of seasonal comfort consistent with generic Class
"B" office building standards in Chicago, Illinois. (iii) "MORNING WARM UP" AND
RELATED FEATURES. The cooling system serving the Premises also may include other
features, including ducted electric "morning warm up" coils, economizers and
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setback controls. (iv) CONTROLS. Lessee may adjust only such thermostatic,
economizer and setback controls as may be physically located in the Premises,
but shall NOT tamper with supply or return registers or grills in the Premises
or any controls beyond the Premises; provided that during heating season Lessee
shall keep Premises' thermostats set at no less than 55 DEGREES F and during
cooling season Lessee shall keep the Premises' thermostats at no more than 85
DEGREES F. Lessor shall maintain the system seasonally as required, subject to
misuse, abuse or waste by Lessee, which is prohibited. The Premises also may be
equipped with operable sash windows, Building Standard window blinds, and one or
more ceiling fans; to the extent the Premises are equipped with these additional
features, Lessee acknowledges that all of these features have cause and effect
relationships upon the interior environment of the Premises, and Lessee shall
use its own efforts first to control and balance the system for its own comfort
using these features. Lessor makes NO guaranty that the system will fulfill any
particular uses and purposes to which Lessee may put the Premises, but shall be
adequate for the Intended Uses, and heating, ventilating or cooling shall be
available at all times. There shall be no smoking unless the Premises are
equipped for separate handling of return air, and then only in those areas of
the Premises so equipped [The "bullpen" area between the two principals' offices
shall be so equipped, at Lessee's sole cost and expense, and as such smoking of
cigars only shall be allowed in that area only so long as the doors to the area
are closed off from other areas of the Premises not so equipped]. In addition,
Lessor shall provide Lessee with a schedule of the set-back hours of the
Building's central steam heating system, to allow Lessee to determine when it
may desire to activate supplemental heating coils in the ducted ventilating
system.
PAYMENT FOR HVAC SERVICES:
(i.) Heating. The costs of operating and maintaining the central
heating system is included in Rent subject to Operating Expenses adjustments as
provided in Section 4.
(ii) Cooling and ducted ventilating and "morning warm up" heating. The
air conditioning system, which includes ducted supplemental heating coils, is
not separately metered to the Premises, and serves the entire 4th floor of the
Building. Lessee will pay Lessor for cooling and "morning warm up" heating
services, based upon the Premises' proportionate share of the costs and expenses
for operating this system, not less often than quarter annually and not more
often than monthly, within 10 days after receipt of Lessor's statement to Lessee
therefor. For the purposes of this Subsection 8.A., "proportionate share" shall
mean the ratio of the Premises' rentable area to the total rentable area served
by this system from time to time as Lessor and Lessee mutually and reasonably
determine, and "costs and expenses" shall mean the applicable utility bills for
the applicable utility meters through which energy for this system is drawn.
(iii) There are NO surcharges for extended use of heating or air
conditioning services, as such, but Lessee's obligations under this Payment
provision shall SURVIVE expiration or sooner termination of this Lease.
B. WATER. Domestic cold water in common with other lessees from City of Chicago
mains for drinking, lavatory and toilet purposes drawn through fixtures
installed by Lessor (or by Lessee with Lessor's written consent), which shall be
one of the Building Operating Expenses. Hot
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water heating for premises' hot water service for private washrooms and kitchen
facilities shall be provided by an hot water heater located in the Premises and
electrified via the Premises' separate general services' electrical meter.
C. ELEVATOR. Passenger and freight elevator service in common with Lessor and
other persons, at all times.
D. ELECTRICITY. Electricity shall not be furnished by Lessor, but shall be
furnished by the authorized public utility company from time to time serving the
Building, provided Lessor shall have the sole right to choose between such
companies should more than one provide comparable service. Lessor is an
authorized reseller of electrical energy for the Building. Lessor shall permit
Lessee to receive such service from such utility company through one or more
electric meters or submeters serving the Premises and, unless stated to the
contrary in Exhibit C Workletter installed at Lessor's expense; provided,
however, that any and all electric company start-up charges, security deposit,
periodic usage charges and all related rates and tariffs, for electrical service
used or consumed in the Premises or its appurtenances, shall be paid by Lessee
at its sole expense. Lessee shall install no electrical fixtures or equipment
not shown and specified on the final plans (and specifications, if any) approved
for the Premises and to be installed in the Premises as of the Commencement Date
of the Term of this Lease, without first securing Lessor's prior written
approval as to power loads; Lessee shall bear all costs of increasing electric
service to the level Lessor deems appropriate to supply any approved power load
in excess of existing Building capacities allocable to the Premises, based upon
general mercantile levels of usage. Lessee shall make all necessary arrangements
with the utility company for metering and paying for electric current furnished
by it to Lessee. Electricity used during the performance of janitorial service,
or for the making of alterations or repairs in the Premises, or for the
operation of any heating, ventilating or air-conditioning systems (supplemental
to the Buildings central heating system, if any) and which may be required for
computer or data processing equipment or for other special equipment or
machinery installed by or on behalf of Lessee, shall be paid for by Lessee.
Lessee shall make no alterations or additions to the electric equipment or
appliances in the Premises or the Building without the prior written consent of
Lessor in each instance. Lessee covenants and agrees that at all times its use
of electric current shall never exceed the capacity of the feeders to the
Building or risers or wiring installed thereon.
PAYMENT FOR PREMISES ELECTRICAL SERVICES:
The Premises are separately metered or submetered for premises general
electrical service; if separately metered Lessee shall place As name on the
electric metered account therefor, for billing purposes, and Lessee shall pay
directly to the applicable utility company its utility charges per its tariffs
from time to time in effect. In case the bills and charges are not paid when
due, Lessor shall have the right to pay the same, which amounts so paid mm
declared to be so much additional rent and payable with the very next
installment of Monthly Base Rent. If the premises general electrical service is
submetered, Lessee shall pay Lessor for premises general electrical services
based upon application, without mark-up, of the applicable public electrical
utility company's rates
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and tariffs regulating authorized resellers of electrical service to independent
submeter readings, within 10 days after Lessor's invoice to Lessee therefor,
which shall be not less often than quarterly and not more often than monthly.
Nominal costs of meter reading and bill preparation services shall be an item of
Operating Expenses; Lessor shall use its best efforts to keep such charges
minimal. The obligation for these payments shall survive termination of this
Lease.
E. WINDOWS. Window washing of exterior surfaces OTHER THAN retail storefronts,
weather permitting, at such times as shall be required in Lessor's sole
judgment, but at a minimum twice annually.
F. JANITORIAL / TRASH REMOVAL SERVICE. Lessor shall provide nightly (nonholiday,
weekdays) trash removal of a reasonable amount of pre-contained typical and
ordinary (i.e. not requiring special disposal treatment as mandated by
applicable law, which shall remain Lessee's sole responsibility) office trash,
and weekly vacuuming of open carpeted areas and dry dusting of clear open
horizontal surfaces. Kitchen clean-up is available at Lessor's janitorial
contractor's standard rates (from time to time) but otherwise is not a Building
Standard service. Lessee shall be responsible for placing trash to be removed
outside locked office doors, and for leaving office doors unlocked for weekly
services. Lessor shall use its best efforts to keep Lessee apprised of changes
in cleaning schedules, if any.
G. STRUCTURAL, COMMON AREAS, EXCEPTIONS. Lessor shall maintain and make
reasonable and necessary repairs to the structural elements of the Building, the
exterior windows of the Building, the main electrical, plumbing, water and sewer
services of the Building, central heating, ventilation and air conditioning
systems and major components of self-contained systems of the Building, and the
public corridors, washrooms and lobby of the Building, except that: (i) Lessor
shall not be responsible for the maintenance or repair of any such systems which
are located within the Premises and are supplemental or special to the
Building's standard systems (including but not limited to NON-standard HVAC
systems such as but not limited to computer room air conditioners, provided that
the special system allowing cigar smoking in the "bullpen" area as described in
section 8.a. shall be repaired and maintained by lessor at its sole cost and
expense, and as to failure of the system lessor shall assign any warranties
therefor to lessee to enforce), or floor or wall coverings or any decorations,
furnishings, trade fixtures or office and related equipment in the Premises; and
(ii) the cost of performing any of the said maintenance or repairs caused either
by the negligence of Lessee, its employees, agents, servants, licensees,
subtenants, contractors or invitees or by the failure or default of Lessee to
perform its obligations under this Lease shall be paid by Lessee, or Lessor may
perform said maintenance or repairs and Lessee shall pay to Lessor all amounts
incurred on demand, except to the extent of insurance proceeds, if any, actually
collected by Lessor with regard to the damage necessitating such repairs. Lessor
shall have the right to make repairs under this Section 8.G. at all times
subject to notice provisions for access and entry provided elsewhere under this
Lease, provided that Lessor shall not unreasonably interfere with Lessee's use
and possession of the Premises while making such repairs.
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i. To the extent that boiler and machinery insurance remains
commercially reasonably available as Lessor reasonably determines and Lessor
carries same, Lessor shall file for insurance claims thereunder in appropriate
cases and only the uncovered costs of repairs shall be included in Operating
Expenses.
H. ADDITIONAL SERVICES. Services provided in Subparagraphs 8.A. through 8.G.
above shall be deemed "Building Standard Services." Lessor may, but shall have
no obligation to, provide such extra or additional services as it is reasonably
possible for Lessor to provide, and as Lessee may from time to time request in
writing, within a reasonable period after the time such extra or additional
services are requested. Lessee shall pay for such extra or additional services
at Lessor's scheduled rate therefor from time to time, or if there be no
scheduled rate, then at the rate of 120% of Lessor's cost in providing them (but
only 105% of Lessor's cost in providing them if Lessee is required under the
terms and conditions of this Lease to utilize the services of Lessor or any of
Lessor's contractors or affiliates to do so), such amount to be considered to be
additional rent hereunder.
I. PAYMENT FOR SERVICES. Charges for services provided by Lessor for which
Lessee is required to pay Lessor and which are not payable pursuant to any other
provisions of this Lease shall be deemed additional rent, and shall be due and
payable at the same time as the installment of base rent with which they are
billed, or if billed separately, shall be due and payable within ten (10) days
after Lessee receives Lessor's bill therefor. Any such billings for extra or
additional services shall include an itemization of the extra or additional
service rendered and the charge for each such service.
J. Lessee agrees that Lessor, its principals, the Trust, and their respective
agents, employees and servants, shall not be liable in damages, by abatement of
Rent or otherwise, for failure to furnish or for delay in furnishing any service
when such failure or delay is occasioned, in whole or in part, by the act or
default of Lessee or by any cause beyond the reasonable control of Lessor; and
such failures or delays shall never be deemed to constitute an eviction or
disturbance of Lessee's use and possession of the Premises or relieve Lessee
from paying Rent or performing any of its obligations under this Lease.
i. Notwithstanding the foregoing, in the event of a failure to furnish
or delay in furnishing Building Standard heating, ventilating or air
conditioning, electrical, or elevator services which failure or delay renders
the Premises untenantable for their Intended Uses and Lessee A unable to use and
occupy the Premises for said Uses as Lessee reasonably determines, then and in
such case if the failure or delay continues unabated for five (5) calendar days,
Lessee shall be entitled to an abatement of Rent for each day such failure to
furnish or delay in furnishing continues beyond such five (5) days' period. From
and after the end of a period of thirty days of unabated continuance of such
failure or delay, either Lessor or Lessee shall have the right, from that time
forward, to treat the failure or delay as a casualty loss or damage under
Section 13. by giving written notice to the other at any time.
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K. Lessee agrees to cooperate fully with Lessor, at all times, in abiding by all
regulations and requirements which Lessor reasonably may prescribe for the
proper functioning and protection of all utilities and services reasonably
necessary for the operation of the Premises and the Building. Lessor shall have
free access to any and all mechanical installations, and Lessee agrees that
there shall be no construction or partitions or other obstructions which might
interfere with the moving of the servicing equipment of Lessor to or from the
enclosures containing said installations. Except to the extent that Lessee is in
performance of its leasehold obligations, Lessee further agrees that neither
Lessee nor its employees, agents, licensees, invitees or contractors shall at
any time tamper with, adjust or otherwise in any manner affect Lessor's
mechanical installations after the Commencement Date of the Term.
9. ASSIGNMENT AND SUBLETTING
9.01 GENERAL PROVISIONS
A. General. Lessee shall neither assign nor mortgage this Lease, nor sublet all
or any portion of the Premises, nor permit the use of all or part of the
Premises by any party other than Lessee, without Lessor's prior written consent
in each instance; provided, however, that Lessee is strictly prohibited from
assigning this Lease and any interest in it and from subletting or subletting
all or part of the Premises to any other tenant or occupant of the Building.
Lessor shall have the right to withhold its consent, provided the same is not
done unreasonably. Where Lessee proposes to assign, mortgage or sublet, Lessee
first shall supply Lessor with: (i) a certified copy of the proposed assigning,
mortgage or sublease together with all documentation reasonably related thereto
and upon which Lessor may rely in forming its decision not only as to whether
consent is required but also as to whether consent is to be withheld or granted
under the totality of the circumstances, including without limitation a
reasonable amount of financial and background information as to the proposed
assignee, sublessee or mortgagee and a reasonable amount of information as to
not only any change in use but also as to any alterations proposed in connection
with the transaction or contemplated upon or after the intended time of
consummation of the transaction, and (ii) as to the second and each subsequent
assignment, mortgage or sublease hereunder, a non-refundable processing fee
equal to one monthly installment of then current Monthly Base Rent. This Lease
shall not be assignable by operation of law. Except as provided in this Section
9.01, no assignment, mortgaging, subletting, or use shall relieve Lessee of its
liability under this Lease. Consent by Lessor to any one assignment or
subletting shall NOT be deemed consent to any subsequent assignment, mortgaging,
subletting or use. The terms of Lessor's consent shall be binding upon the
assignee, mortgagee or sublessee. Assignees or sublessees shall become directly
liable to Lessor for all obligations of Lessee under this Lease. If Lessor
subleases or releases Premises at the request of Lessee, Lessee shall pay Lessor
die then customary and standard real estate brokerage commission for such
services at market brokerage commission rates at the time as Lessor and Lessee
mutually agree plus all other reasonable customary costs incurred in connection
therewith (e.g. advertising, decoration, etc.).
B. Exception for Publicly Traded Companies. Lessee represents that as a business
entity Lessee is a stock company whose corporate stock is publicly traded on a
recognized national stock exchange. So long as there is no change in Intended
Uses and no alterations of the Premises in
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connection with any proposed assignment of this Lease resulting from a sale,
acquisition, merger, consolidation or similar business transaction involving
Lessee, Lessor's right to withhold consent under the foregoing Section 9.01
shall be limited to the following condition(s): prior to consummating any such
transaction, Lessee or its purchaser, assignee or successor, shall submit
financial data which is reasonably satisfactory to Lessor, and Lessor shall have
the right to withhold its consent only if the financial condition of the
purchaser, assignee or successor is not at least as acceptable as was Lessee's
at the time of execution of this Lease based upon financial data submitted to
Lessor immediately prior to the time of execution of this Lease. Execution of
this Lease shall be deemed evidence conclusive against Lessor that Lessor has
received, reviewed and accepted Lessee's financial condition as such.
9.02 RECAPTURE OF PREMISES
Excepting transactions covered under Section 9.01 B., any proposal by Lessee
either to (a) assign this Lease or any interest in it or (b) sublet any more
than 33% of the floor area of the Premises, shall constitute, without further
action being required, Lessee's implied offer to Lessor to recapture either this
Lease (in the case of any assignment or mortgaging) or the portion of Premises
proposed to be sublet (in the case of any subletting). Within fourteen (14) days
following receipt by Lessor of all of the documentation, information and funds
required to be submitted by Lessee under Section 9.01, Lessor shall notify
Lessee whether Lessor will recapture. In the case of recapture based upon a
proposed assignment or mortgaging, this Lease shall terminate and Lessee shall
be released from liability under this Lease accruing after the effective
recapture date. In the case of a recapture based upon a proposed subletting,
then and as of the effective recapture date, that portion of the Premises being
recaptured and Lessee's obligations therefor accruing thereafter shall be deemed
excluded from and no longer an obligation of Lessee under the Lease, and Rent
for the Premises remaining after the recapture shall be reduced proportionately
to a sum equal to the said Rent immediately prior to recapture multiplied by a
fraction, the numerator of which is the rentable area of the Premises
immediately prior to recapture minus the rentable area of that portion
recaptured, and the denominator of which is the rentable area of the Premises
immediately prior to recapture. Lessee agrees to execute promptly any
modifications to this Lease resulting therefrom. If Lessor does not exercise its
option to recapture within the fourteen (14) day period, Lessee may, provided
Lessor consents thereto in writing pursuant to Section 9.01, consummate the
assignment or subletting but ONLY as submitted to Lessor, and within ninety (90)
days from the date of Lessee's submittal.
9.03 TRANSFER, ASSIGNMENT, AND CONVEYANCE
Lessor shall have the right, freely as Lessor in its sole discretion may
determine, to assign, transfer, or convey, in whole or in part, Lessor's
interest in this Lease, the Premises, the Building and/or the Land. If Lessor
shall so assign, transfer or convey (other than for security purposes only),
such assignee, transferee, or grantee shall thereafter be deemed to be the
Lessor hereunder, Lessee shall attorn to Lessor's assignee, transferee or
grantee, and Lessor, its principals, the Trust, and their respective agents,
employees and servants, all shall be relieved of any obligation accruing
hereunder after such assignment, transfer or conveyance.
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10. WAIVER OF SUBROGATION
Whether the loss or damage is due to the negligence of either Lessor or Lessee
or their respective agents or employees, or any other cause, Lessor or Lessee do
each herewith and hereby release and relieve the other, their principals (as
well as the Trust in the case of Lessor), and their respective agents, employees
and servants, all from responsibility for, and waive their entire claim of
recovery for:
(i) any loss or damage to real or personal property of either located anywhere
in the Building, including the Building itself, arising out of or incident to
the occurrence of any of the perils which may be covered by their respective
fire insurance policies, with extended coverage endorsements, or
(ii) loss resulting from business interruption at the Premises or loss of rental
income horn the Building, arising out of or incident to the occurrence of any of
the perils which may be covered by the business interruption insurance policy
and by the loss of rental income insurance policy held by Lessor or Lessee.
Lessor and Lessee each shall cause its respective insurance carriers to consent
to such waiver of all rights of subrogation against the other. Notwithstanding
the foregoing, no such release shall be effective unless the aforesaid insurance
policy or policies shall expressly permit such a release or contain a waiver of
the carrier's right to be subrogated and to the extent of the proceeds collected
under such insurance.
11. INDEMNIFICATION
A. Lessee's Indemnification of Lessor. Lessee shall defend and indemnify Lessor,
its principals, the Trust, and their respective agents, employees and servants
(the foregoing being "Lessor's indemnified parties") and save Lessor's
indemnified parties all harmless from and against any and all liability,
damages, costs, or expenses, including attorneys fees, arising from any act,
omission, or negligence of Lessee, its assignees, sublessees, or their
respective officers, contractors, licensees, agents, servants, employees,
guests, invitees, or visitors in or about the Building or Premises (the
foregoing being "Lessee's parties") or arising from any accident, injury, or
damage to any person or property, occurring in or about the Building or Premises
as a result of any act, omission or negligence of any of Lessee or Lessee's
parties, or arising from breach or default under this Lease by Lessee or any of
Lessee's parties. The foregoing provisions shall not be construed to make Lessee
responsible for loss, damage, liability or expense resulting from injuries to
third parties caused by the negligence of Lessor or any of its indemnified
parties. In no event, however, shall Lessor be liable to Lessee or any of its
parties: for any loss of property; for defects in the Building or in the
Premises; or for any accidental damages to the person or property or property of
the Lessee or Lessee's parties in or about the Building or the Premises, from
water, rain or snow which may leak into, or flow from any part of the Building
or the Premises, or from the pipes or plumbing works of the same; and Lessee
hereby covenants and agrees (a) to make no claim for any such loss or damage at
any time, unless caused by the
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negligence of Lessor or any of Lessor's indemnified parties, and (b) to insure
its property against such perils. Notwithstanding the foregoing, Lessor shall
have no liability to Lessee or Lessee's parties for any loss or damage to person
or property sustained by Lessee or Lessee's parties caused by any other lessee
or other persons or occupants of the Building. Finally it is agreed and notice
is hereby given that Lessee is not and shall not be deemed to be an agent of
Lessor for the construction, alteration, repair or maintenance of any portion of
the Premises, the remainder of the Building, or the Land, or any improvements,
fixtures or personalty located therein or thereon. For the purposes hereof, and
notwithstanding anything to the contrary stated elsewhere in this Lease, the
term "defect" shall include (without limiting its generality) the nature or
composition of a,, Building construction materials, natural conditions,
construction methods, or the capacity of the Building, the Premises or any
system serving either to compensate for air quality or other environmental
conditions.
B. Lessor's Indemnification of Lessee. Lessor shall defend and indemnify Lessee,
its principals, and their respective agents, employees and servants (be
foregoing being "Lessee's indemnified parties") and save Lessee's indemnified
parties all harmless from and against any and all liability, damages, costs, or
expenses, including attorneys fees, arising from any act, omission, or
negligence of Lessor, the Trust, their respective principals, and their
respective principals' officers, contractors, licensees, agents, servants,
employees, guests, invitees, or visitors in or about the Building or Premises
(the foregoing being "Lessor's parties") or arising from any accident, injury,
or damage to any person or property, occurring in or about the Building or
Premises as a result of any act, omission or negligence of any of Lessor or
Lessor's parties, or arising from breach or default under this Lease by Lessor
or any of Lessor's parties. The foregoing provisions shall not be construed to
make Lessor responsible for loss, damage, liability or expense resulting from
injuries to third parties caused by the negligence of Lessee or any of its
indemnified parties.
12. INSURANCE
12.01 COVERAGE
Lessee shall carry, at its own expense, insurance during the Term insuring
Lessee and Lessor as their interests may appear, upon such terms, with such
coverages and limits, and in such companies, all as may be satisfactory to
Lessor, and with such changes in coverages and such increases in limits as
Lessor from time to time may request, and shall maintain the following minimum
coverages in the following minimum amounts until such request
(i) a policy of comprehensive public liability insurance insuring Lessee's
activities with respect to the Premises, with $500,000.00 single limits
as to death or bodily injury in any one occurrence and with $50,000.00
single limits as to loss to property in any one occurrence. For retail
stores, product liability coverage is required.
(ii) in case of fire, sprinkler leakage, malicious mischief, vandalism, and
other extended coverage perils, for the full insurable replacement
value of all additions, improvements and alterations to the Premises
(beyond Workletter improvements provided by Lessor)
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and of all office furniture, trade fixtures, office equipment, work
product, and all other items of Lessee's property on the Premises.
Lessor will not carry insurance of any kind on any of the stated perils
and items covered by this Subsection 12.01 (ii), and will not be
obligated to repair thereto.
(iii) in case of fire, sprinkler leakage, malicious mischief, vandalism and
other extended coverage perils, for (a) the full insurable replacement
value of all inventory, work in progress and property of others, and
(b) such other and further risks as are typically covered in the
operations of a professional business office.
Prior to the date that Lessee occupies the Premises or any portion thereof,
Lessee shall furnish to and maintain with Lessor either the policies or
certificates thereof evidencing the foregoing coverages and limits from time to
time required hereunder, naming Lessor, its principals, the Trust, as well as
their respective agents, employees and servants, all as additional insureds as
their respective interests may appear, and which policies or certificates shall
state no insurance coverage thereunder may be altered or canceled without at
least ten (10) days prior written notice to Lessor and Lessee.
Without impairing or diminishing Lessor's rights or remedies, and until Lessee
supplies the appropriate certificate(s) or, alternatively, should Lessee fail to
carry and maintain the foregoing insurance, Lessee will be deemed a
self-insurer.
12.02 AVOID ACTION INCREASING RATES
Lessee shall comply with all applicable laws and ordinances, all orders and
decrees of court and all requirements of other governmental authorities and
shall not, directly or indirectly, make any use of die Premises which may
thereby be prohibited or be dangerous to person or property or which may
jeopardize any insurance coverage, or may increase the cost of insurance or
require additional insurance coverage. If by reason of the failure of Lessee to
comply with the provisions of this Section 12.02, any insurance coverage is
jeopardized or insurance premiums are increased, Lessor shall have the option
either to terminate this Lease or to require Lessee to make immediate payment of
the increased insurance premium.
13. FIRE OR CASUALTY
A. GENERAL. Notwithstanding Section 7. of this Lease, if the Premises or the
Building (including machinery or equipment used in its operation) shall be
damaged by fire or other casualty (except fires or other casualties resulting
from Lessee's gross negligence or intentional misconduct) and if such damage
does not render all or a substantial portion of the Premises or the Building
unleaseable, then Lessor shall repair and restore the same and Lessee shall
repair and replace its furniture, fixtures and equipment and re-open for
business, all with reasonable promptness, subject to reasonable delays for
insurance adjustment and delays caused by matters beyond Lessor's or Lessee's
reasonable control.
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B. RIGHT TO TERMINATE UNDER CERTAIN CONDITIONS. If any such damage renders all
or a substantial portion of the Premises or the Building unleaseable, Lessor
shall have the right to terminate this Lease as of the date of such damage (with
appropriate prorations of Rent being made for Lessee's possession subsequent to
the date of such damage of those leaseable portions of the Premises) upon giving
written notice to the Lessee at any time within sixty (60) days after the date
of such damage. If any such damage renders all or more than fifty percent (50%)
of the Premises unleaseable and if such damage does not result from Lessee's
gross negligence or intentional misconduct, Lessee also shall have the right to
terminate this Lease as of the date of such damage upon giving written notice to
Lessor at any time within thirty (30) days after the date of such damage. Unless
this Lease is terminated as provided as aforesaid, and so long as such damage
does not result from Lessee's gross negligence or intentional misconduct, Lessor
shall proceed to repair and restore the Premises and Lessee shall repair and
replace its furnitures, fixtures and equipment and re-open for business, all
with reasonable promptness subject to reasonable delays for insurance
adjustments and delays caused by matters beyond Lessor's or Lessee's reasonable
control. Lessee shall have the right to cancel and terminate this Lease in the
event the Lessor's repairs and restorations are not substantially completed
within 150 days after the date of damage be delivery of written notice to Lessor
within five (5) days after the end of such 1 5 0 days' period. If any such
damage renders all or more than fifty percent (50%) of the Premises unleaseable
and if such damage does not result from Lessee's gross negligence or intentional
misconduct, Lessor shall use its best efforts to provide temporary space for
Lessee in any other tenantable space managed by Lessor in the Courthouse
District at reasonable rates and upon reasonable terms and conditions, pending
the sooner of restoration of the Premises and Lessor's or Lessee's cancellation
or termination of this Lease under this Section 13.
C. LIMITATIONS ON LESSOR'S OBLIGATION TO REPAIR AND RESTORE, In the event the
Building is damaged by fire or other casualty resulting from Lessee's gross
negligence or intentional misconduct, Lessor shall have no obligation to repair
or restore the Building or any part thereof and Lessee shall not be released
from any of its obligations hereunder (including, without limitation, its duty
to repair the Premises and its liability to Lessor for damages caused by such
fire or other casualty). Lessee hereby acknowledges that Lessor is under no
obligation to insure Lessee's interest in the Premises or the Building, and
Lessor shall have no duty to repair or restore any of the alterations,
additions, or improvements in the Premises or the decorations thereto except to
the extent that such alterations, additions, improvements and decoration were
provided by Lessor at Lessor's cost at the beginning of the Term. If Lessee
wants any other or additional repairs or restoration and if Lessor consents
thereto, the same shall be done at Lessee's expense subject to all of the
provisions of Section 7. and 14. of this Lease.
D. STATUS OF OCCUPANCY AND RENT PENDING OPERATION OF SECTION 13. If the damage
renders the Premises unleaseable and so long as the damage is not caused by the
fault of Lessee, Lessor shall use its best efforts to locate temporary space for
Lessee elsewhere in any building managed by Friedman Properties, Ltd., its
successors or assigns in the "Courthouse District" at reasonable rental rates
for comparable temporary uses, for the period of the dislocation only, and in no
event beyond the effective cancellation date of this Lease if Lessee cancels
this Lease pursuant to the terms and conditions of this Section 13.; and Rent
shall abate
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on those portions of the Premises as are, from time to time, unleaseable as a
result of such damage and which Lessee in fact does not use for the purposes of
conducting any material ongoing business.
E. INSURANCE CLAIMS. Lessor shall file claims for insurance proceeds of Lessor's
insurance coverage for all repairs and restorations required of Lessor under
this Section 13.
14. ALTERATIONS AND IMPROVEMENTS
14.01 LESSEE'S ALTERATIONS
After the Commencement Date of the Term, Lessee, without the prior written
consent of Lessor which shall not be unreasonably withheld or delayed, shall do
no painting or decorating, erect no partitions, make no alterations or repairs
(other than minor, inconsequential repairs which require no expertise) in or
additions to the Premises, make no change to the locks, do no nailing, boring,
or screwing in the ceiling, walls (except for hanging of typical framed artwork,
plaques and similar items for which no prior consent shall be required) or
floors, and disturb or change no HVAC, electrical or plumbing systems or
facilities; provided, however, that as to the two offices and 'bullpen'
designated for the principals of Lessee on the final initial plans for the
Premises, Lessor may deny consent to any reconfiguration thereof in Lessor's
sole discretion. If the Building is or becomes certified or designated as a
national or local landmark, or is placed on any national or local register of
historic districts or places, Lessor's decision to refuse to consent based upon
the requirements and restrictions of such status, shall be conclusive. If Lessor
so consents, then and before commencement of any such work or delivery of any
materials into the Premises or the Building Lessee shall furnish to Lessor for
approval architectural plans and specifications, names and addresses of all
contractors, contracts, necessary permits and licenses, certificates of
insurance and instruments of indemnification against any and all claims, costs,
expenses, damages and liabilities which may arise in connection with such work,
all in such form and amount as may be satisfactory, to Lessor. In addition,
prior to commencement of any such work or delivery of any materials into the
Premises, Lessee shall provide for payment for such work and materials in full,
and, if requested by Lessor, shall deposit with Lessor at such time such
security for the payment of said work and materials as Lessor may require.
Whether or not Lessee furnishes the foregoing, Lessee agrees to indemnify and
save Lessor, its principals, the Trust, and their respective agents, employees
and servants all forever harmless against all claims and liabilities of every
kind, nature and description which may arise out of or in any way be connected
with such work. All such work shall be in accordance with all applicable legal,
governmental and quasi-governmental requirements, ordinances and rules
(including the Board of Fire Underwriters) and all requirements of applicable
insurance companies, and Lessee shall be responsible for securing all necessary
pen-nits and approvals prior to commencement of any such work. All such work
shall be done in a good and workmanlike manner and with the use of good grades
of materials and free and clear of all liens for labor and materials therefor.
Unless Lessor requests their removal, all alterations, improvements, additions
and installations to or on the Premises shall become part of the Premises at the
time of their installation and shall remain in and with the Premises at the
expiration or sooner termination of this Lease (or of Lessee's rights of
possession of the Premises), without compensation or credit to Lessee; and if
Lessor so
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requests and Lessee does not remove as requested, Lessor may remove the same and
Lessee shall pay the cost of such removal to Lessor upon demand. In no event
shall Lessor's consent hereunder ever be deemed to operate as consent to any
mortgage, pledge, hypothecation or lien (including mechanic's lien) of this
Lease or the Premises; and should Lessee desire to encumber its leasehold
interests only for the purposes of securing an obligation to pay for any work
otherwise consented to by Lessor hereunder, the provisions and procedures set
forth in Section 9. of this Lease shall control.
14.02 LESSOR'S ALTERATIONS
Lessor reserves the right at all times to make changes in the Building, the
Common Areas and the Premises, all at any time and from time to time, as Lessor
deems legally requisite, necessary or appropriate in its sole discretion (and
otherwise improve the Common Areas and Premises as part of a renovation) at
Lessor's sole cost, all so long as the rentable area of the Premises and access
thereto are not materially impaired.
14.03 LIENS
Lessee shall permit no lien or claim for lien of any mechanic, laborer or
supplier or any other lien to be filed against the Building, the Land, the
Premises, or any part thereof arising out of work performed, or alleged to have
been performed by, or at the direction of, or on behalf of Lessee. If any such
lien or claim for lien is filed, Lessee immediately either shall have such lien
or claim for lien released of record or shall deliver to Lessor a bond in form,
content, amount, and issued by a surety satisfactory to Lessor indemnifying
Lessor and others designated by Lessor against all cost and liabilities
resulting from such lien or claim for lien and the foreclosure or attempted
foreclosure thereof, or escrow, with Lessor's designated title insurer, an
amount determined by such insurer, as necessary to endorse over such lien with
the power in Lessor to settle and pay same within the limits of the principal,
and accrued interest, held in such escrow (provided investment fees and risk of
loss shall be upon Lessee). If Lessee fails to have such lien or claim for lien
so released or to deliver such bond to Lessor or establish such escrow, Lessor,
without investigating the validity of such lien, may (but as between Lessor and
Lessee shall have no obligation to) pay or discharge the same as claimed, and
Lessee shall reimburse Lessor upon demand for the amount so paid by Lessor,
together with Lessor's expenses and attorneys' fees; and the failure of Lessor
to compromise or settle the lien for any amount other than as claimed shall be
no defense to Lessees reimbursement obligations hereunder.
14.04 ACCESS
Except during emergencies and during performance of Building Standard Services
ordinarily performed after normal business hours, if the Lessee shall not be
present personally to permit an entry into the Premises, when for any other
reason an entry therein shall be necessary or desirable, the Lessor or Lessor's
agents may enter the same, without rendering the Lessor or such agents liable
therefor (if during such entry Lessor or Lessor's agents shall accord reasonable
care to Lessee's property), and without in any manner affecting the obligations
and covenants of this Lease, upon reasonable prior notice to Lessee. Nothing
herein contained, however, shall be
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deemed or construed to impose upon the Lessor any obligations, responsibility or
liability whatsoever, for the care, supervision or repair of the Building or any
part thereof, other than as herein provided.
15. EMINENT DOMAIN
15.01 TAKING OF WHOLE
In the event the whole or any substantial part of the Building or the Premises
is taken through condemnation (including a deed given in lieu of condemnation),
this Lease shall terminate as of the date possession and beneficial enjoyment
vests in the condemning authority, and Rent shall be apportioned as of that
date.
15.02 TAKING OF PART
In the event a part of the Building or the Premises is taken or condemned by any
competent authority for any public use or purpose (including a deed given in
lieu of condemnation) and this Lease is not terminated pursuant to Section
15.01, Rent shall be reduced to an amount which equals the Rent applicable to
the entire Premises multiplied by a fraction, the numerator of which is the full
rentable area of the Premises immediately prior to the taking minus the rentable
area taken and the denominator of which is the full rentable area of the
Premises immediately prior to the taking. Promptly upon receipt and to the
extent of the award in condemnation (or proceeds of sale in lieu thereof),
Lessor shall make necessary repairs and restoration (exclusive of Lessee's
leasehold improvements and personal property paid for or installed by Lessee) to
restore the Premises remaining to as close to Is former condition as
circumstances will permit, and to the Building to the extent necessary to
constitute the portion of the Building not taken or condemned as a complete
architectural unit.
15.03 COMPENSATION
Lessor shall be entitled to its award; and Lessee shall be entitled to its
award; provided that neither award shall diminish the other.
16. LESSOR'S REMEDIES
ALL RIGHTS AND REMEDIES OF THE LESSOR ENUMERATED IN THIS LEASE (INCLUDING
WITHOUT LIMITATION THIS SECTION 16.) ARE AND SHALL BE DEEMED CUMULATIVE, AND
NONE SHALL EXCLUDE ANY OTHER RIGHT OR REMEDY ALLOWED BY LAW.
A. GENERAL. IF:
1. Lessee defaults in any payment of Rent and does not cure the default
within five (5) days after written demand for payment of such Rent, or
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2. Lessee defaults in the prompt and full performance of any other
provisions of this Lease and does not cure the default within fifteen
(15) days after written demand by the Lessor that the default be cured
(unless the default involves a hazardous condition, which shall be
cured forthwith), or
3. the leasehold interest of Lessee is levied upon under execution or is
attached by process of law, or
4. Lessee makes an assignment for the benefit of creditors or admits its
inability to pay its debts generally, or
5. a receiver is appointed for any property of Lessee, or
6. Lessee abandons the Premises,
THEN, and in any of these events or any other event which at law or in equity
allows Lessor to terminate this Lease or any of Lessee's rights or interests in
it, Lessor may, if the Lessor so elects but not otherwise, and with or without
further notice of such election, and with or without any further demand
whatsoever, either forthwith terminate this Lease and the Lessee's right to
possession of the Premises or, without terminating this Lease, forthwith
terminate the Lessee's right to possession of the Premises.
B. PARTIES' OBLIGATIONS ON EXERCISE OF LESSOR'S REMEDIES. Upon termination of
this Lease, whether by lapse of time or otherwise, or upon any termination of
the Lessee's right to possession without termination of the Lease, the Lessee
shall surrender possession and vacate the Premises immediately and deliver
possession of them to Lessor, and hereby grants to the Lessor full and free
license to enter into and upon the Premises in such event with or without
process of law and to repossess the Lessor of the Premises as of the Lessor's
former estate and to expel or remove the Lessee and any others who may be
occupying or be within the Premises and to remove any and all property
therefrom, using such force as reasonably may be necessary, without being deemed
in any manner guilty of trespass, eviction or forcible entry or detainer, and
without relinquishing the Lessor's rights to Rent or any other right given to
the Lessor hereunder or by operation of law.
C. LESSOR'S RIGHT TO REPAIR/REDECORATE. Upon and after entry into possession,
Lessor may make repairs, and alterations to only the two principals' offices and
'bullpen' designated on the final initial plans for the Premises, in or to the
Premises and redecorate the same to the extent deemed by Lessor in its
reasonable discretion as being reasonably necessary to relet them, and the
Lessee shall, upon demand, pay the reasonable cost of repairs only, together
with the Lessor's reasonable expenses of the reletting. Lessee's obligations
under this Subsection C. also shall survive termination of the Lease.
D. RENT NOT EXTINGUISHED. Exercise of Lessor's remedies shall have NO effect
Lessee's Rent obligations, which shall survive termination of this Lease or
Lessee's right of possession of the Premises. Notwithstanding the foregoing,
Lessor and Lessee each shall be
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obligated to mitigate damages to Lessor flowing from the termination, including
without limitation using all best efforts to secure a successor lessee or
occupant of the Premises. Additionally, on demand Lessee shall pay Lessor, (i)
Rent as it becomes due and payable in monthly installments, until the sooner of
the Expiration Date of the Term or Lessor's agreement to accept a successor
lessee as the Lessee of the Premises, and (ii) if no successor shall be found
acceptable within six (6) months from the date of termination, then at that time
an amount equal to the positive difference, if at all, between (a) the net
present value of the entire ascertainable amount of Rent for the balance of the
Term reduced by (b) the net present value of the fair rental value of the
Premises for the balance of the Term.
E. BANKRUPTCY & RELATED PROCEEDINGS. Lessor shall have all of its rights under
the U.S. Bankruptcy Code (as amended from time to time); and Lessor's leasehold
interests shall be deemed secured, retroactive to the 91st day prior to any
voluntary or involuntary filing. If as a result of such proceeding Lessee shall
be entitled to assign its interests under this Lease, the Lessee's trustee in
bankruptcy shall be obligated to use is best efforts to secure only tenants
whose businesses are primarily the same as the Intended Use of the Premises as
then-built, if legally permissible, or, if Lessor shall have given Lessee notice
of a default prior to the filing that Lessee is in default of this Lease because
of an unapproved change in the Intended Use or unapproved alterations of the
Premises, then and among the defaults which the Lessee, its trustee or the
assignee in bankruptcy must cure shall be such defaults, and Lessor shall be
entitled to reasonable security for such cure prior to the effectiveness of the
assignment, if legally permissible. As to insolvency proceeding or assignment
for the benefit of creditors, or like proceeding brought under state law and not
federal bankruptcy laws, Lessor shall have all of its rights under this Lease,
including the right hereby conferred to deem this Lease or Lessee's right to
possess the Premises as canceled and terminated ipso facto upon commencement of
such proceedings. In any case, Rent pending the final outcome of any such
proceeding as it relates to Lessee's interests under this Lease shall be deemed
a priority claim and cost of administration. In no event shall Lessor have any
rights hereunder which exceed rights granted to parties in the position of
Lessor under the U.S. Bankruptcy Code (as amended from time to time).
F. RESERVED.
G. COSTS OF ENFORCEMENT. As between Lessor and Lessee, in any legal action
between them to enforce this Lease, or involving one of them and resulting,
without the other's fault, in the other's joining or being joined in such
action, the non-prevailing party shall pay the prevailing party, on demand after
entry of the final, non-appealable order (or settlement in any other case), the
prevailing party's costs, charges and expenses in action or proceeding,
including the reasonable fees of counsel, agents and others retained by the
prevailing party in connection with such matter or proceeding.
H. RESERVED
17. SURRENDER
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Upon expiration or sooner termination of this Lease, or termination of Lessee's
right of possession of the Premises or any part thereof, Lessee voluntarily
shall surrender and vacate the Premises immediately and deliver possession to
Lessor in good and leaseable condition, broom clean, ordinary wear and tear
excepted. Unless the termination flows from Lessee's default, Lessee shall be
entitled to remove from the Premises all of Lessee's moveable personal property
which can be removed (a) without damaging the Premises or (b), with minor damage
beyond ordinary wear and tear (nail-holes and similar holes caused by hanging of
artwork, shelving and similar fixtures SHALL be considered ordinary wear and
tear, but anchor bolts and similar devices for securing heavier attachments
SHALL NOT be considered ordinary wear and tear) so long as Lessee at its sole
cost and expense repairs same at the time of removal, and in either case which
do not inure to Lessor's benefit by operation of Section 14. of this Lease; or,
if Lessor elects within 30 days after Lessee otherwise physically surrenders
possession to Lessor, Lessor may, but shall have no obligation to, allow Lessee
to remove other items of Lessee's property, but ONLY if Lessee at its sole cost
and expense restores the Premises to the condition as delivered to Lessee on
execution of this Lease (ordinary, wear and tear excepted), for which work
Section 14. also shall control. If Lessee fails or refuses to act in accord with
the foregoing, Lessor in addition to any other rights conferred by this Lease,
shall have the right to deem any of Lessee's property then remaining on the
Premises as conclusively abandoned by Lessee with title thereto passing to
Lessor without further compensation required and without credit to Lessee
whatsoever, or Lessor may, at its option and at Lessee's expense, store and/or
dispose of such property and Lessee shall remain responsible for any costs
related to the restoration of the Premises once such property has been removed.
18. HOLDING OVER
Unless agreed otherwise in writing, Lessee shall pay Lessor double the Monthly
Base Rent payable for the last month of the Term, for each month or portion
thereof Lessee retains possession of the Premises, or any portion thereof, after
the expiration or termination of this Lease, and also shall pay all damages
sustained by Lessor by reason of such retention of possession. The provisions of
this Article shall not constitute a waiver by Lessor of any re-entry rights of
Lessor herein before or by law provided. The provisions of this Section 18 shall
not be deemed to limit or constitute a waiver of any other rights or remedies of
Lessor provided herein or at law. If Lessee retains possession of the Premises,
or any part thereof, for ten (10) days after the expiration or termination of
this Lease, then at the sole option of Lessor expressed by written notice to
Lessee, but not otherwise, such holding over shall constitute a renewal of this
Lease for a period of one year (or less if specified by Lessor at Lessor's
option) on the same terms and conditions, except that the base rent shall be
increased to equal 125% of the product of twelve (12) multiplied by the most
recent monthly installment of base rent theretofore payable, subject to all
further adjustments.
19. RULES AND REGULATIONS,
Lessee agrees for itself and for its assignees, sublessees, successor,
employees, agents, and invitees, to comply with the Rules and Regulations stated
on Exhibit B and with all reasonable modifications, amendments, and additions to
them which Lessor from time to time may make.
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While Lessor shall not be responsible for any violation of the Rules and
Regulations by other Lessees of the Building Lessor-shall enforce them, to the
extent that they apply to each tenancy at the Building, against all other
Lessees uniformly.
20. LESSOR'S RIGHTS
LESSOR SHALL HAVE THE FOLLOWING RIGHTS WITHOUT LIABILITY TO LESSEE FOR DAMAGE OR
INJURY TO PERSONS, PROPERTY OR BUSINESS AND WITHOUT BEING DEEMED AN EVICTION OR
DISTURBANCE OF LESSEE'S USE OR POSSESSION OF THE PREMISES IN WHOLE OR IN PART OR
GIVING RISE TO ANY CLAIM FOR SET OFF OR ABATEMENT OF RENT (EXCEPT AS PROVIDED IN
SECTION 13):
(a) to change the Buildings name or street address upon thirty (30)
day's prior written notice to Lessee:
(b) to install, affix and maintain all signs on the exterior and/or
interior of the Building;
(c) to designate and/or approve prior to installation, all types of
signs, window shades, blinds, drapes, awnings or other similar
items, and all internal lighting that may be visible from the
exterior of the Premises or the public corridors or the Building;
(d) to display the Premises to prospective tenants at reasonable
hours during (i) the last six (6) months of the Term if no Option
Space has been undertaken or (ii) the last nine (9) months of the
Term if any Option Space has been undertaken, or at any time
after Lessee shall have given Cancellation Notice pursuant to
Section 2.02 C., and to display the Premises to prospective
purchasers and mortgagees on reasonable notice at reasonable
hours at any time during the Term;
(e) to close, change or rearrange the location of the entrances,
doors, corridors, elevators, stairs and toilets or other public
parts of the Building, provided that no such change shall
materially adversely affect access to the Premises;
(f) to grant to any party the exclusive right (to the extent
permitted by law) to conduct any business or render any service
in or to the Building, provided such exclusive right shall not
operate to prohibit Lessee from using the Premises for the
purposes permitted hereunder;
(g) to prohibit the placing of vending or dispensing machines of any
kind in or about the !Premises;
(h) to have access for Lessor and other tenants of the Building to
any mail chutes and boxes located in or on the Premises according
to the rules of the United States Post Office:
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(i) to close the Building after normal business hours, except that
Lessee and its employees and invitees shall be entitled to
admission subject to Lessor's reasonable rules and regulations
regarding Building security.
(j) to take any and all reasonable measures, including inspections
and repairs to the Premises or to the Building, as may be
necessary or desirable in the operation or protection thereof and
shall have the right to enter upon the Premises, to inspect the
same, and to make such decorations, repairs, alterations,
improvements or additions to the Premises or the Building as the
Lessor may deem necessary or desirable, and the Lessor shall be
allowed to take all material into and upon said Premises that may
be required therefor.
(k) to retain at all times master keys or pass keys to all doors in
and to the Premises, excepting doors which Lessor has agreed in
writing to allow Lessee to install separate locks (provided that
Lessor shall not be responsible for rendering of janitorial
services to areas of the Premises made so in accessible);
(l) to install operate and maintain a building security system which
monitors, by closed circuit television or otherwise, all entering
and leaving the Building and all public areas of the Building
including, but not limited to, elevators and staircases; and
(m) to install and maintain pipes, duct, conduits, wires and
structural elements located in the Premises which service other
parts of the Building, so long as such installations do not
materially interfere with Lessee's use and possession of the
Premises.
21. ESTOPPEL CERTIFICATE
FROM TIME TO TIME BUT UPON NOT LESS THAN 10 DAYS' PRIOR WRITTEN REQUEST BY
LESSOR OR ANY MORTGAGEE HOLDING A MORTGAGE ON THE LAND OR THE BUILDING, LESSEE
SHALL DELIVER TO LESSOR OR SUCH MORTGAGEE A STATEMENT IN WRITING CERTIFYING:
(a) that this Lease is unmodified an in full force and effect or, if
there have been modifications, that this Lease, as modified, is
in full force and effect;
(b) the amount of current Monthly Base Rent then payable hereunder
and the date through which Rent has been paid;
(c) that to Lessee's knowledge Lessor is not in default under this
Lease or, if in default, a detailed description of such
default(s), attaching a copy of any and all notices given to
Lessor with respect thereto;
(d) that Lessee is or is not in possession of the Premises, as the
case may be; and
(e) such other information or agreements as Lessor or the mortgagee
reasonably may request
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In the event that Lessee fails to deliver the statement within fifteen (15) days
after Lessor or the mortgagee requests it, Lessee irrevocably appoints Lessor as
Lessee's attorney-in-fact, in Lessee's name, to execute and accept such
instrument on behalf of Lessee. Such appointment shall not relieve Lessee from
its affirmative obligation to execute and deliver such instrument, however, at
any time thereafter immediately upon Lessor's written demand therefor.
22. SUBORDINATION.
A. GENERAL. This Lease is subject and subordinate to all present and future
ground or underlying leases of the Land and to the lien of any mortgages or
trust deeds, now and hereafter in force against the Land and Building, or
either, and to all renewals, extensions, modifications, consolidations and
replacements thereof, and to all advances made or hereafter to be made upon the
security of such mortgages or trust deeds, unless the holders of such mortgages
or trust deeds, or the lessors under such ground lease or underlying leases
require in writing that this Lease shall be superior thereto. At Lessor's
request Lessee shall execute such further instruments or assurances as Lessor
reasonably may deem necessary to evidence or confirm the subordination or
superiority of this Lease to any such mortgages, trust deeds, ground leases or
underlying leases. Lessee hereby irrevocably authorizes Lessor to execute and
deliver in the name of Lessee any such instrument or instruments if Lessee fails
to do so, provided that such shall in no way relieve Lessee from the obligation
of executing such instruments of subordination or superiority.
B. QUIET ENJOYMENT. It is expressly understood and agreed that while this Lease
and the rights of the Lessee hereunder shall be and remain subordinate to any
such mortgage, mortgages, trust deeds, or ground leases, so long as the Lessee
shall keep and perform each and all of the terms, covenants and conditions of
this Lease contained on the part of the Lessee provided to be kept and
performed, the right of the Lessee to continue to occupy the Premises and to
conduct business therein shall not be disturbed by any foreclosure or other
proceeding or by the holder or holders of any indebtedness secured by any such
mortgage, trust deed, or by the lessor of any such ground or underlying lease,
or by any trustee, receiver of any other person claiming by, through, or under
such holder of such trust deed, mortgage, or such ground or underlying lease
lessor.
23. NOTICES
All notices required or permitted to be given hereunder shall be in writing and
shall be deemed given and delivered, whether or not received, when and properly
addressed, certified mail, return receipt requested, at the following address:
if
(a) To Lessor:
Friedman Properties, Ltd., 54 West Hubbard Street Chicago, Illinois 60610
Attention: Albert M.Friedman, Pres., and to such other persons or entities as
Lessor may designate in writing; and if
(b) To Lessee:
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At the address specified in Subsection 1.01C prior to Lessee's occupancy of any
portion of the Premises, and upon occupancy at the Premises or at such other
address in Cook County, Illinois as Lessee shall designate by written notice to
Lessor, provided if Lessee shall occupy temporary space provided by Friedman
Properties, Ltd. pending the Commencement Date, then until occupancy of the
Premises Lessee's address for leasehold notices shall be the address of such
temporary space.
24. MISCELLANEOUS.
24.01 LATE CHARGES. All delinquent Rent and other payments due from Lessee to
Lessor shall bear interest from the 5th day after the due date until
paid in full at the greater of the following rates,: (a) the default
rate of interest in effect under the Building's first mortgage loan
promissory-note from time to time, or (b) 18% per annum. A minimum
charge of $50.00 will be made for any returned checks, NSF or
otherwise.
24.02 ACCORD AND SATISFACTION. No payment by Lessee or receipt by Lessor of a
lesser amount than any installment or payment of Rent due shall be
deemed to be other than on account of the amount due, and no
endorsement or statement on any check or any letter accompanying any
check or payment of Rent shall be deemed an accord and satisfaction.
Lessor may accept such check or payment without prejudice to Lessor's
right to recover the balance of such installment or payment of Rent or
pursue any other remedies available to Lessor. Lessor at its sole
discretion shall have the right to apply any payment by Lessee to
current or past due Rent under this Lease, without regard to any
notation or restriction Lessee may make upon the form of payment,
provided that upon Lessee's request, Lessor shall provide Lessee a
statement of Lessee's Rent account showing the extent of such
applications and the balance of Rent then due and payable. No receipt
of money by Lessor from Lessee after the termination of this Lease or
Lessee's right of possession of the Premises shall reinstate, continue
or extend the Term.
a. Notwithstanding the foregoing Section 24.02, Lessor shall
apply payments received from Lessee under this Lease, in the following
order, so long as Lessee is NOT in default under this Lease: to current
Monthly Base Rent, then to Taxes and Operating Expenses additional
rent, then to HVAC and electrical services additional rent, to charges
for non-Standard Building Services, then to other Rent, and finally to
outstanding late charges, if any.
24.03 FORCE MAJEURE. Except to the extent specifically provided to the
contrary elsewhere in this Lease, Lessor shall be deemed not in default
with respect to any of the terms, covenants and conditions of this
lease on Lessor's part to be performed, if Lessor fails to timely
perform same and such failure is due in whole co in part to any strike,
lockout labor trouble (whether legal or illegal), civil disorder,
inability to procedure materials, failure. of power, restrictive
governmental law or regulation, riot, insurrection, war, fuel shortage,
accident, casualty, act of God, act caused directly or indirectly by
Lessee (or
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Lessee's agents, employees or invitees), or any other cause beyond
Lessor's reasonable control.
24.04 CAPTION. The various Section and Subsection captions in the Lease are
inserted only as a matter of convenience and in no way define, limit,
construe, or describe the scope or intent of such Sections and
Subsections.
24.05 APPLICABLE LAW. This Lease shall be construed in accordance with the
laws of the State of Illinois as amended from time to time, including
that State's laws regarding conflict of laws..
24.06 TIME. Time is of the essence in this Lease and the performance of all
obligations hereunder.
24.07 LESSOR'S RIGHT TO PERFORM LESSEE'S DUTIES. If Lessee fails to perform
any of its duties under this Lease when required (or if not so
specified then within a reasonable time), Lessor shall have the right
(but not the obligation), after the expiration of any grace period or
notice period provided elsewhere under this Lease expressly granted to
Lessee for the performance of such duty, to perform such duty on behalf
and at the expense of Lessee without further prior notice to Lessee,
and all sums expended or incurred by Lessor (including court costs,
attorneys' fees and related litigation or settlement expenses) in
performing such duty shall be deemed to be additional Rent under this
Lease and shall be due and payable upon demand by Lessor.
24.08 LIMITATION OF LIABILITY. The term "Lessor" as used in this Lease shall
mean the beneficial owner of the Trust (or its successor) which holds
legal title to the Building, and any obligation or liability of Lessor
hereunder shall be limited to the beneficial owner's assets. In no way
shall Friedman Properties, Ltd., its affiliates or their respective
owners, agents, employees or servants be personally or individually
responsible or liable for any claim arising out of this Lease.
24.09 PARTIAL INVALIDITY. If any term, covenant, or condition of the Lease or
the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable as a matter of law, the remainder
of this Lease, or the application of such term, covenant or condition
to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby and each term,
covenant and condition of this Lease shall be valid and be enforced to
the fullest extent permitted by law.
24.10 INCORPORATION BY REFERENCE. All Exhibits, Riders, Schedules and related
documents intended to be part of his Lease are deemed as such, whether
or not actually attached, so long as the parties have identified them
as to be so incorporated.
24.11 BINDING EFFECT. All of the covenants, agreements, terms and conditions
contained in this Lease shall inure to and be binding upon Lessor and
Lessee and their respective heirs,
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executors, administrators, successors and/or its assigns; provided the
foregoing never shall be construed to be a consent by Lessor to any
proposed assignment, or subletting or related transaction by which
Lessee's status as Lessee may be altered.
24.12 Reserved
24.13 GRAMMAR. All grammatical changes reasonably required to make the
provisions hereof apply either to corporations, partnerships or
individuals, male or female, as the case may require, shall in all
cases be assumed as though in each case fully expressed.
24.14 LEASE CONTAINS ALL TERMS. All of the representations and obligations of
the parties are contained in this Lease, and no modification, waiver or
amendment of the Lease or of any of its conditions or provisions shall
be binding upon either party unless in writing signed by the party to
be charged or by its duly authorized agent empowered by a written
instrument signed by the party to be charged; and there are no other
agreements whether written or oral.
24.15 DELIVERY FOR EXAMINATION. Submission of this Lease for examination
shall not bind Lessor in any manner, and no Lease or obligations of the
Lessor shall arise until this instrument is signed by both Lessor and
Lessee, the initial funds due, if any, from Lessee to Lessor upon
execution of this Lease are paid to and/or deposited with Lessor, and
fully executed originals of this Lease are delivered to both Lessor and
Lessee.
24.16 MODIFICATION OF LEASE. If any lender requires, as a condition to its
lending funds the repayment of which is or is to be secured by a
mortgage or trust deed on the Land and Building or either, that certain
modifications be made to this Lease, which modifications will not
require Lessee to pay any additional amounts or otherwise change
materially the rights or obligations of Lessee hereunder, Lessee shall,
upon Lessor's request, execute appropriate instruments effecting such
modifications.
24.17 LESSOR'S TITLE. Lessor's title is and always shall be paramount to the
title of Lessee. Except as provided in Section 22. ("Subordination")
nothing in this Lease shall empower or be deemed to empower any act
which can, shall or may encumber the title of Lessor.
24.18 PROHIBITION AGAINST RECORDING. Neither this Lease, nor any memorandum,
affidavit or other writing with respect thereto, shall be recorded by
Lessee or by anyone acting through, under or on behalf of Lessee, and
the recording thereof in violation of this provision shall make this
Lease null and void at Lessor's election.
24.19 PUBLICITY. Lessor and Lessee covenant and agree that but for
disclosures required by applicable law, code, ordinance, rule and
regulation and but for typical trade publication announcements and
other typical and customary disclosures required by Lessor's and
Lessee's financial sources, all of the business terms of this Lease are
deemed confidential and shall not be publicized without the mutual
written approval of Lessor and Lessee.
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24.20 COVENANTS AND CONDITIONS. All of the covenants of Lessee hereunder
shall be deemed and construed to be "conditions", if Lessor so elects,
as well as "covenants" as though the words specifically expressing or
importing covenants and conditions were used in each separate instance.
24.21 ONLY LESSOR-LESSEE RELATIONSHIP. Nothing contained in this Lease shall
be deemed or construed by the parties hereto or by any third party to
create the relationship of principal and agent, partnership, joint
venturer or any association between Lessor and Lessee, it being
expressly understood and agreed that neither the method of computation
of Rent nor any act of the parties hereto shall be deemed to create any
relationship between Lessor and Lessee other than the relationship of
landlord and tenant.
24.22 Reserved.
24.23 PERFORMANCE OF TERMS. The failure of the Lessor to insist upon
performance of any of the conditions of this lease in any one or more
instances shall never be a waiver thereafter of the right of Lessor to
demand full performance of all of the agreements of Lessee herein set
forth, and of all conditions when any performance is due.
24.24 AGREEMENT TO EXECUTE OTHER DOCUMENTS. The parties to this Lease hereby
agree to execute such other of further documents as may be necessary to
effectuate the intents and purposes of this Lease.
24.25 COMMON AREAS. So long as Lessee is not in default under this Lease,
Lessor grants Lessee a non-exclusive license to use and occupy in
common with others entitled thereto the common areas, loading
facilities, sidewalks, and other facilities as may be designated from
time to time by Lessor as Common Areas, subject, however, to the terms
and conditions of this Lease and to reasonable rules and regulations
for the use thereof as prescribed from time to time by Lessor.
24.26 LESSEE AS CORPORATION OR PARTNERSHIP. In case the named Lessee is a
corporation, Lessee (i) represents and warrants that this Lease has
been duly authorized, executed and delivered by and on behalf of Lessee
and constitutes the valid and binding agreement of Lessee in accordance
with the terms hereof and (ii) shall deliver to Lessor, concurrently
with the delivery of this Lease executed by Lessee, certified
resolutions of the board of directors (and shareholders, if required)
authorizing Lessee's execution and delivery of this Lease and the
performance of Lessee's obligations hereunder, including a certificate
of incumbency for such authorizations. In the event this Lease is
modified or amended in writing, Lessor shall have the right, prior to
executing any such modification or amendment, to require Lessee, at the
time of execution of, and for, each such modification or amendment, to
provide Lessor with the documents and instruments set forth under
clause (ii) as may be correct at each such time.
24.27 DEFINITION OF PREMISES AREA. For the purposes of this Lease, the
"Rentable Area" of the Premises shall mean the area in and/or
attributable to the Premises as
37
<PAGE> 40
calculated herein. Rentable Area shall be that area calculated by
measuring first the "gross area" within (i) the exterior window glass
line of exterior Building walls of the Premises where said walls are
more than 50% windowed or, if not so windowed, from the interior
surface of said walls, (ii) the outside of demising partitions
separating the Premises from common hallways, corridors, lavatories,
stairwells and/or elevator shafts not otherwise constituting vertical
penetrations through the gross area, and/or (iii) the center of
demising partitions separating the Premises from other tenant space,
then deducting from the gross area the area within the Premises devoted
to utility risers, shafts and other vertical penetrations (measured
from the exterior of said penetrations but NOT deducting structural
support elements of the Building located within the gross area, thereby
resulting in the "net rentable area", then equalized and adjusted by
Premises' proportionate share, if any, of the corridors, hallways,
bathrooms, air conditioning and fan rooms, janitorial, electrical and
other utility closets, and other similar areas and facilities serving
the floor of the Building on which the Premises are located.
24.28 HAZARDOUS SUBSTANCES
A. Definition. For the purposes of this Lease, "hazardous substances"
shall mean all materials or substances, whether solid, liquid or
gaseous, which from time to time are declared by applicable federal,
state or local governmental law, ordinance, code, rule or regulation
from time to time in effect, to be subject to removal, abatement or
regulated use, by reason of toxicity or other public health, safety or
welfare consideration, whether per se or dependent upon level of
presence in composites or other mixtures, and shall include, by way of
example only and NOT by way of limitation: asbestos, asbestos
containing materials, PCBS, and dioxin.
B. Insofar as the construction materials of the Building, common areas
and permanent leasehold improvements are concerned:
C. If any Building Standard construction materials are declared to be
or contain hazardous substances, Lessor at its sole cost and expense
shall comply with the appropriate removal, abatement or regulation
requirements, and in such event Lessor at its sole cost and expense
shall replace those materials with others of similar quality excepting
they shall contain no hazardous substances. Lessee shall cooperate in
the removal, abatement or regulation program, including temporary
relocation pending removal or abatement (as the case may require), at
Lessor's sole cost and expense, with Rent adjusted on a proportionate
basis, but not fully abated, during such temporary relocation.
D. Any and all construction materials incorporated into the Premises by
Lessee at its sole cost and expense and declared to be or contain
hazardous substances shall be removed or abated at Lessee's sole cost
and expense.
E. Insofar as Lessee's moveable fixtures, office furniture, business
equipment and miscellaneous personalty is concerned, and except to the
limited extent (and solely in the
38
<PAGE> 41
manner) permitted by applicable governmental law, ordinance, code rule
or regulation from time to time in effect, Lessee shall neither bring
into, keep nor use any hazardous substances in or about the Premises or
the Building; and Lessee at its sole cost and expense shall comply with
all such laws, ordinances, codes, rules and regulations, including
without limitation removal of hazardous substances if banned. Likewise
and similarly Lessor at its sole cot and expense shall regulate use of
hazardous substances, if permitted, or enforce removal of same, if and
as legally required, from the balance of the Building. This obligation
shall survive expiration or sooner termination of this Lease.
F. For the purposes of this Lease, any loss, cost, damage or expense
arising from compliance with this Section 24.28 shall not be deemed a
casualty loss except to the extent insurance against such perils is
reasonably available to both Lessor and Lessees and if so available,
Lessee each shall procure and maintain same in connection with
insurance coverages otherwise required to be obtained and maintained by
it under this Lease.
24.29 FULLY INTEGRATED LEASE. This Lease represents a commercial lease made
at arm's length by Lessor and Lessee and fully negotiated with the
assistance of independent legal counsel and other professional
consultants. For the purposes hereof, any real estate broker engaged by
Lessee (other than J.A. Friedman & Associates or any of its
affiliates), even though to be paid by Lessor as provided elsewhere in
this lease, shall be deemed Lessee's "independent" consultant. As such
Lessor and Lessee acknowledge that, except where specifically indicated
to the contrary, there is no clear delineation between the "business"
and "legal" terms of this Lease. Also as a consequence thereof, in the
event this Lease or any provision of his Lease requires judicial or
similar interpretation because of an alleged or claimed ambiguity,
NEITHER Lessor nor Lessee shall be prejudiced by any rule, canon or
maxim of construction that any such provision is to be construed
(strictly or otherwise) against the "drafter; rather, all provisions of
his Lease shall be interpreted so as to be equitable to both Lessor and
Lessee under the totality of all provisions of this Lease, if any,
reasonably in pari materia to the provision alleged or claimed to be
ambiguous.
IN WITNESS WHEREOF, THIS LEASE HAS BEEN EXECUTED AS OF THE DATE SET FORTH IN
SUBSECTION 1.01 D.
LESSOR:
FRIEDMAN PROPERTIES, LTD., etc., as Agents, etc.
By: /s/ A.M.F.
Albert M. Friedman, President
LESSEE:
39
<PAGE> 42
METAL MANAGEMENT, INC., A DELAWARE CORPORATION DULY QUALIFIED TO TRANSACT
BUSINESS IN ILLINOIS
BY: /s/ GERARD M JACOBS
PRINT NAME: GERARD M. JACOBS
TITLE/OFFICE: PRESIDENT
40
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997<F1>
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,757,700
<SECURITIES> 415,000
<RECEIVABLES> 5,750,000
<ALLOWANCES> 0
<INVENTORY> 1,887,000
<CURRENT-ASSETS> 13,996,000
<PP&E> 9,350,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,320,000
<CURRENT-LIABILITIES> 10,316,000
<BONDS> 0
0
0
<COMMON> 98,000
<OTHER-SE> 18,618,000
<TOTAL-LIABILITY-AND-EQUITY> 34,320,000
<SALES> 13,963,000
<TOTAL-REVENUES> 13,963,000
<CGS> 12,772,000
<TOTAL-COSTS> 12,772,000
<OTHER-EXPENSES> 1,846,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 216,000
<INCOME-PRETAX> (801,000)
<INCOME-TAX> (254,000)
<INCOME-CONTINUING> (546,000)
<DISCONTINUED> 147,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (400,000)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
<FN>
<F1><Period Start> and <Period End> reflect only the quarter ended 9/30/96 since
comparable balance sheets are included for 9/30/96 and 6/30/96, while the
Statement of Operations compares disparate quarters for the current and prior
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</FN>
</TABLE>
