UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________to__________________
Commission File number 1-9487
ATLANTIS PLASTICS, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 06-1088270
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1870 THE EXCHANGE, SUITE 200, ATLANTA, GEORGIA 30339
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including Area Code) (800) 497-7659
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]. No[ ].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS SHARES OUTSTANDING AT SEPTEMBER 30, 1997
------------ ---------------------------------
A, $.10 par value 4,329,527
B, $.10 par value 2,742,280
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ATLANTIS PLASTICS, INC.
TABLE OF CONTENTS
PAGE NO.
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PART I. FINANCIAL INFORMATION
Consolidated Income Statements (Unaudited) for the
three and nine months ended September 30, 1997 and 1996........................ 1
Consolidated Balance Sheets (Unaudited) as of
September 30, 1997 and December 31, 1996....................................... 2
Consolidated Statements of Cash Flows (Unaudited) for the
nine months ended September 30, 1997 and 1996.................................. 3
Notes to Consolidated Financial Statements (Unaudited)......................... 4
Management's Discussion and Analysis
of Financial Condition and Results of Operations............................... 7
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings.................................................... 11
Item 6 - Exhibits and Reports on Form 8-K..................................... 11
SIGNATURES.............................................................................. 12
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ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Unaudited - In thousands, except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------------------
1997 1996 1997 1996
---------------------------------------------------
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Net sales .......................................................... $ 63,895 $ 68,211 $ 193,748 $ 203,060
Cost of sales ...................................................... 53,861 56,689 165,484 167,266
--------- --------- --------- ---------
Gross profit ............................................... 10,034 11,522 28,264 35,794
Selling, general and administrative expenses ....................... 6,011 5,910 18,838 20,483
Impairment of long-lived assets and restructuring charges .......... (125) -- 835 --
--------- --------- --------- ---------
Operating income ........................................... 4,148 5,612 8,591 15,311
Net interest expense ............................................... (2,900) (3,202) (8,616) (9,707)
--------- --------- --------- ---------
Income (loss) from continuing operations before income taxes 1,248 2,410 (25) 5,604
Income tax (provision) benefit ..................................... (680) (1,088) (432) (2,603)
--------- --------- --------- ---------
Income (loss) from continuing operations .................. 568 1,322 (457) 3,001
Income (loss) from discontinued operations, net of income taxes .... -- 143 -- 96
--------- --------- --------- ---------
Income (loss) before extraordinary items .................. 568 1,465 (457) 3,097
Extraordinary loss on early extinguishment of debt, net ............ -- (73) -- (73)
--------- --------- --------- ---------
Net income (loss) ........................................ 568 1,392 (457) 3,024
Preferred stock dividends .......................................... -- (36) -- (109)
--------- --------- --------- ---------
Income (loss) applicable to
common shares and equivalents ................................... $ 568 $ 1,356 ($ 457) $ 2,915
========= ========= ========= =========
INCOME (LOSS) PER COMMON SHARE:
Continuing operations .............................................. $ 0.08 $ 0.17 ($ 0.06) $ 0.39
Discontinued operations ............................................ -- 0.02 -- 0.01
--------- --------- --------- ---------
Income (loss) before extraordinary items ................ 0.08 0.19 (0.06) 0.40
Extraordinary item ................................................ -- (0.01) -- (0.01)
Net income (loss) ....................................... $ 0.08 $ 0.18 ($ 0.06) $ 0.39
========= ========= ========= =========
Weighted average shares outstanding ................................ 7,435 7,433 7,068 7,447
========= ========= ========= =========
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
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ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited - In thousands)
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- -----------
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ASSETS
Cash and equivalents ..................................................... $ 6,804 $ 15,905
Accounts receivable, net ................................................. 28,705 28,364
Inventories .............................................................. 17,169 16,984
Other current assets ..................................................... 4,936 4,825
--------- ----------
Current assets ....................................................... 57,614 66,078
Property and equipment, net .............................................. 58,433 58,523
Goodwill, net of accumulated amortization ................................ 49,354 50,532
Other assets ............................................................. 2,265 2,768
--------- ----------
$ 167,666 $ 177,901
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses .................................... $ 22,224 $ 27,131
Current portion of long-term debt ........................................ 2,530 2,517
--------- ----------
Current liabilities .................................................. 24,754 29,648
Long-term debt, less current portion ..................................... 103,233 105,365
Deferred income taxes .................................................... 7,234 6,886
Other liabilities ........................................................ 869 1,093
--------- ----------
Total liabilities .................................................... 136,090 142,992
--------- ----------
Commitments and contingencies
Shareholders' equity:
Series A convertible preferred stock, $1.00 par value, 20,000 shares
authorized, issued and outstanding ................................. -- 2,000
Class A common stock, $.10 par value, 20,000,000 shares authorized,
4,329,527 and 4,225,823 shares issued and outstanding in 1997 and 1996 433 423
Class B common stock, $.10 par value, 7,000,000 shares authorized,
2,742,280 and 2,899,977 shares issued and outstanding in 1997 and 1996 274 290
Additional paid-in capital ............................................. 7,005 6,968
Retained earnings ...................................................... 23,864 25,228
--------- ----------
Total shareholders' equity ........................................... 31,576 34,909
--------- ----------
$ 167,666 $ 177,901
========= ==========
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - In thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ..................................................... ($ 457) $ 3,024
-------- --------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation ...................................................... 5,528 5,983
Amortization of goodwill .......................................... 1,193 1,212
Loan fee and other amortization ................................... 429 413
Changes in assets and liabilities:
Increase in accounts receivable ............................... (341) (2,511)
Increase in inventories ....................................... (185) (2,885)
(Increase) decrease in other current assets ................... (111) 712
Decrease in accounts payable and accrued expenses ............. (4,907) (1,378)
Increase in deferred income taxes ............................ 348 1,379
Decrease in other liabilities ................................. (224) (199)
Other, net .................................................... 54 449
-------- --------
Total adjustments ............................................. 1,784 3,175
-------- --------
Net cash provided by operating activities ................... 1,327 6,199
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................ (5,567) (3,639)
Proceeds from asset dispositions .................................... 129 800
-------- --------
Net cash used in investing activities ....................... (5,438) (2,839)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit agreements ........................ -- 25,888
Repayments under revolving credit agreements ........................ -- (22,209)
Payments on long-term debt .......................................... (2,118) (7,705)
Purchase of common stock ............................................ (2,994) --
Proceeds from exercise of stock options ............................. 122 115
-------- --------
Net cash used in financing activities ....................... (4,990) (3,911)
-------- --------
Net decrease in cash and equivalents .................................. (9,101) (551)
-------- --------
Cash and equivalents at beginning of period ........................... 15,905 1,255
-------- --------
Cash and equivalents at end of period ................................. $ 6,804 $ 704
======== ========
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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ATLANTIS PLASTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying unaudited consolidated financial statements
of Atlantis Plastics, Inc. ("Atlantis" or the "Company"), which are for
interim periods, do not include all disclosures provided in the annual
consolidated financial statements. These unaudited consolidated
financial statements should be read in conjunction with the
consolidated financial statements and the footnotes thereto contained
in the Company's Annual Report on Form 10-K for the year ended December
31, 1996 as filed with the Securities and Exchange Commission. The
December 31, 1996 balance sheet, included herein, was derived from
audited financial statements, but does not include all disclosures
required by generally accepted accounting principles.
Atlantis Plastic Films accounts for approximately
three-quarters of the Company's net sales and produces stretch films
(multilayer plastic films that are used principally to wrap pallets of
materials for shipping or storage) and custom film products which
include high-grade laminating films, embossed films, and specialty film
products targeted primarily to industrial and packaging markets.
Atlantis Molded Plastics accounts for approximately
one-quarter of the Company's net sales and employs two principal
technologies: (i) injection molded thermoplastic parts that are sold
primarily to original equipment manufacturers and used in major
household appliances, agricultural, and automotive products, and (ii) a
variety of extruded plastic parts for trim and functional applications
(profile extrusion) that are incorporated into a broad range of
consumer and commercial products such as recreational vehicles,
residential windows and doors, office furniture, and retail store
fixtures. Plastic Containers, Inc. ("PCI"), the Company's manufacturer
of blow molded milk, juice, water and industrial containers, was sold
in November 1996. See Note 4 of Notes to the Consolidated Financial
Statements for information regarding the fourth quarter 1996
disposition of PCI.
All material inter-company balances and transactions have been
eliminated. Certain amounts included in prior period financial
statements have been reclassified to conform with the current period
presentation.
2. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments, which are of
a normal recurring nature and necessary for a fair presentation of the
financial statements. The results of operations for the nine months
ended September 30, 1997 are not necessarily indicative of the results
to be expected for the full year.
3. Net income (loss) per common share was computed by dividing
net income (loss), after deducting dividends applicable to preferred
stock for 1996, by the weighted average number of shares and dilutive
share equivalents outstanding during the period. Fully diluted net
income (loss) per common share is substantially equivalent to primary
net income (loss) per common share.
4. As previously disclosed, during the fourth quarter of 1996 the
Company completed the following transactions, generating a total pretax
gain of $6.7 million: (i) in November, the Company sold PCI for
approximately $8.3 million, generating a pretax gain of approximately
$1.4 million, and an after tax gain of approximately $1.9 million, (ii)
in December, the Company sold its Tulsa custom manufacturing facility
for $1.5 million, generating a pretax gain of approximately $350,000,
and an after tax gain of
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approximately $210,000, and (iii) also during December, the Company
sold its investment in WinsLoew Furniture, Inc. stock to WinsLoew for
approximately $9.3 million, generating a pretax gain of approximately
$4.9 million, and an after tax gain of approximately $2.9 million.
5. During the first quarter of 1997, the Company recorded
impairment of long-lived assets and other restructuring charges of
$960,000, or $586,000 after taxes, related to: (i) the closing of the
Company's Nashville, Tennessee injection molding facility, including
approximately $250,000 in non-cash charges for the write-down of fixed
assets and leasehold improvements associated with that facility, and
(ii) restructuring expenses associated with recently announced
management changes in the Company's stretch film unit. Anticipated
costs (primarily severance and moving costs) associated with the
closing of the Nashville facility were reduced by $125,000 in the third
quarter.
6. Covenants relating to the Company's 11% Senior Notes
indebtedness restrict the Company from taking certain actions unless
specified interest coverage ratios and other tests are met. The
Company's 1997 decline in operating profitability caused it to fall
below the interest coverage ratio requirement for the trailing four
quarters ended September 30, 1997. Accordingly, the Company cannot pay
dividends or repurchase stock, and its ability to incur new debt or
take certain other actions is restricted in certain respects until it
is again able to meet the interest coverage ratio requirement on a
trailing four quarters basis. Two of the Company's lenders also agreed
to amend certain financial covenants in order to maintain compliance as
of September 30, 1997.
7. In November 1996, the Board of Directors authorized the
repurchase of up to 1,000,000 shares of Atlantis Class A common stock,
or 14% of the 7.1 million Class A and Class B common stock then
outstanding. In January 1997, the Company issued a mandatory conversion
notice to the holder of the 20,000 outstanding shares of the Company's
Series A Convertible Preferred Stock ("Preferred Stock"). The Preferred
Stock was convertible into 210,244 shares of Class A common stock.
After issuing the mandatory conversion notice, the Company reached an
agreement with the Preferred Stock holder to repurchase all of the
common shares resulting from the conversion notice for $2 million (the
original price paid for the Preferred Stock by the holder), and
completed the repurchase in late March, 1997.
Through March 1997, the Company had repurchased 320,344 shares
(including the 210,244 common shares issued in connection with the
conversion of Preferred Stock, as described above), and options for
55,125 shares, for total consideration of approximately $3.3 million.
The Company has suspended its share buyback program for the reasons
discussed above in Note 6.
8. In February 1997, SFAS No. 128, "Earnings Per Share" and
SFAS No. 129, "Disclosure of Information About Capital Structure" were
issued. SFAS No. 128 specifies the computation, presentation, and
disclosure requirements for Earnings Per Share ("EPS"), and is designed
to improve the EPS information provided in financial statements by
simplifying the existing computational guidelines, revising the
disclosure requirements, and increasing the comparability of EPS data
on an international basis. The Company has not yet determined the
effect on operating results of implementing SFAS 128, however, the
adoption of this statement is not expected to have a materially adverse
effect on consolidated financial position. SFAS No. 129 consolidates
the existing requirements to disclose certain information about an
entity's capital structure, and is not expected to change the Company's
current capital structure disclosures. SFAS 128 and 129 must be
implemented no later than fiscal year 1997.
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In June 1997, SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information" were issued. SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components in
a full set of general-purpose financial statements. The purpose of
reporting comprehensive income is to present a measure of all changes
in equity that result from recognized transactions and other economic
events of the period other than transactions with owners in their
capacity as owners. The FASB believes that SFAS No. 130 should help
investors, creditors, and others in assessing an enterprise's
activities and the timing and magnitude of its future cash flows. SFAS
No. 131 establishes standards for the way that public businesses report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. The Company has
not yet determined the effect on operating results of implementing SFAS
130, however, the adoption of this statement is not expected to have a
materially adverse effect on consolidated financial position. The
Company has not yet determined the impact of SFAS 131 on its future
disclosures. SFAS 130 and 131 must be implemented no later than fiscal
year 1998.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Atlantis is a leading U.S. manufacturer of polyethylene stretch and
custom films used in a variety of industrial and consumer applications and
molded plastic products for the appliance, agricultural, automotive,
recreational vehicle, and residential window industries.
Selected income statement data for the quarterly periods ended March
31, 1996 through September 30, 1997 are as follows:
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($ IN MILLIONS)
1997 1996
---------------------------------- ----------------------------------------------
Q3 Q2 Q1 Q4 Q3 Q2 Q1
-- -- -- -- -- -- --
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NET SALES
Plastic Films $47.6 $48.1 $45.7 $44.0 $45.3 $46.8 $41.7
Molded Plastics 16.3 17.4 18.6 20.1 22.9 23.8 22.5
--------------------------------- ----------------------------------------------
TOTAL $63.9 $65.5 $64.3 $64.1 $68.2 $70.6 $64.2
================================= ==============================================
PERCENTAGE OF NET SALES
GROSS PROFIT
Plastic Films 17% 13% 13% 15% 17% 17% 18%
Molded Plastics 13% 17% 18% 18% 17% 20% 18%
--------------------------------- ---------------------------------------------
TOTAL 16% 14% 14% 16% 17% 18% 18%
================================= =============================================
OPERATING INCOME
Plastic Films 8% 3% 3%(a) 4% 7% 6% 6%
Molded Plastics 2%(a) 6% 8%(a) 7% 10% 12% 8%
--------------------------------- --------------------------------------------
TOTAL 6%(a) 4% 4%(a) 5% 8% 8% 6%
================================= ============================================
NET INTEREST EXPENSE $2.9 $2.9 $2.8 $2.9 $3.2 $3.2 $3.3
-------------------- ================================= =============================================
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(a) Amounts exclude the effects of the 1997 impairment of long-lived assets and
restructuring charges totaling $835,000 and more fully described in Note 5 of
Notes to the Consolidated Financial Statements.
RESULTS OF OPERATIONS
The Company's third quarter and year-to-date 1997 sales of $63.9
million and $193.7 million, respectively, were below last year's sales for the
same periods. The two principal reasons were: (1) the sale of PCI, the Company's
blow molding unit, in November, 1996 (see Note 4 of Notes to the Consolidated
Financial Statements for additional information on the sale of PCI); and (2)
lower sales in the Company's injection molding unit due to reduced sales of
appliance components and consumer products, as well as a temporary reduction due
to the previously announced closing of the Company's Nashville, TN facility.
Excluding PCI's sales from 1996, the Company's net sales for the third quarter
declined by $0.7 million in 1997, while
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increasing by $0.8 million for the first nine months of 1997. In the Molded
Plastics segment (excluding PCI), net sales decreased by $3.0 million for the
1997 third quarter and $6.8 million year-to-date compared to the same periods in
1996.
Atlantis Plastic Films third quarter and year-to-date 1997 net sales
totaled $47.6 million and $141.5 million increasing 5% and 6%, respectively,
compared to 1996 sales for the same periods. Volume (measured in pounds)
increased by 5% and 3% for the third quarter and year-to-date periods compared
to 1996.
The Company's third quarter and year-to-date gross profit margins
decreased from 17% and 18% in 1996 to 16% and 15%, respectively, in 1997. The
previously described decrease in injection molding sales was the principal cause
of the drop in third quarter gross margins and contributed to the drop in
year-to-date margins. During the first two quarters of 1997, margins were
negatively impacted by pricing and margin pressures in the Company's stretch
film business. These pressures abated somewhat during the third quarter, but
margins in the stretch film unit remain below historical levels due to continued
overcapacity in the stretch film market.
Atlantis Plastic Films reported 1997 third quarter and year-to-date
gross profit margins of 17% and 14%, compared to 17% for both periods in 1996.
Intense price competition dominated the stretch film markets in the first half
of 1997. Third quarter gross margin improved compared to the first half of 1997
due to: (1) the unit's continued cost reduction efforts; and (2) less intense
price competition compared to the first half of 1997. However, the industry
remains overcapacitized and highly competitive.
Third quarter and year-to-date gross profit margins in the Molded
Plastics segment declined from 17% and 18% in 1996 to 13% and 16% in 1997
primarily due to the reasons described above and start-up expenses associated
with the previously announced $6.2 million in new business from Whirlpool
Corporation, a major, long-term customer.
Selling, general, and administrative ("SG&A") expenses were $6.0
million and $18.8 million for the third quarter and first nine months of 1997
compared to $5.9 million and $20.5 million for these periods last year. These
1997 expenses exclude restructuring charges taken in 1997 as described further
below. It should be noted that 1996 SG&A expenses include those associated with
PCI. Adjusting to exclude PCI, 1996 SG&A expenses were $5.7 million and $19.8
million for the third quarter and year-to-date periods. The Company has reduced
SG&A expenses by approximately 20% since the beginning of 1995 through a series
of cost reduction and restructuring programs. Management does not anticipate
further substantial reductions in SG&A in the immediate future.
In the first quarter of 1997, the Company incurred a $960,000
restructuring charge related to estimated costs associated with the above
mentioned closing of its Nashville injection molding facility and management
changes implemented in May, 1997 in the Company's stretch film unit. Anticipated
costs (primarily severance and moving costs) associated with the closing of the
Nashville facility were reduced by $125,000 in the third quarter.
Third quarter and year-to-date net interest expense equaled $2.9
million and $8.6 million, reflecting reductions of $0.3 million and $1.1 million
from 1996 levels as a result of reduced debt levels in 1997 compared to 1996.
Effective tax rates differed from applicable statutory rates in both 1997 and
1996, primarily due to nondeductible goodwill amortization.
8
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LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at September 30, 1997 totaled
approximately $32.9 million (including cash and equivalents of $6.8 million),
compared to $36.4 million (including cash and equivalents of $15.9 million) at
December 31, 1996. On September 30, 1997, there were no borrowings on the
Company's revolving credit facility. Unused availability, net of outstanding
letters of credit of approximately $1.5 million, equaled $26.0 million.
Covenants relating to the Company's 11% Senior Notes restrict the
Company from taking certain actions unless specified interest coverage ratios
and other tests are met. As more fully described in Note 6 of Notes to the
Consolidated Financial Statements, the Company did not meet the interest
coverage ratio requirements for the trailing four quarters ended September 30,
1997, and two of the Company's lenders agreed to amend certain financial
covenants in order to maintain compliance as of September 30, 1997. Also, see
Note 7 of the Notes to the Consolidated Financial Statements for information
regarding the Company's common stock repurchase program.
The Company's primary needs for liquidity, on both a short- and
long-term basis, relate to working capital (principally accounts receivable and
inventories), debt service, and capital expenditures. The Company presently does
not have any material commitments for future capital expenditures, and expects
to meet its short- and long-term liquidity needs with cash on hand, funds
generated from operations, and funds available under its revolving credit
facility.
CASH FLOWS FROM OPERATING ACTIVITIES
In the first nine months of 1997, net cash provided by operating
activities was approximately $1.3 million, compared to cash provided by
operations of $6.2 million for the same period last year. Accounts payable and
accrued expenses decreased by $4.9 million during the first nine months of 1997
compared to a decline of $1.4 million during 1996, due to reduced accruals for
incentive compensation in 1997 and timing of interest due dates for the
Company's 11% Senior Notes.
Accounts receivable increased during the first nine months of 1997 by
only $0.3 million, compared to an increase of $2.5 million in 1996 primarily due
to the decline in sales in injection molding. Inventories increased by $0.2
million during this period of 1997 versus an increase of $2.9 million in 1996.
The 1996 increase in inventories was caused in part by a rapid increase in resin
prices during the first nine months of 1996.
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities during the first nine months of
1997, consisting of capital expenditures net of asset dispositions equaled $5.4
million, compared to $2.8 million for the same period last year. All of this
increase has been incurred in the Company's injection molding unit. These
expenditures include funds related to expansions in two plants in order to
accommodate the above-described increase in new business from Whirlpool
Corporation.
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CASH FLOWS FROM FINANCING ACTIVITIES
Net cash used in financing activities for the first nine months of 1997
was $5.0 million, compared to $3.9 million during the first nine months of 1996.
Cash was used during 1997 to repurchase approximately $3.0 million of common
stock (see Note 7 of Notes to the Consolidated Financial Statements), with the
balance used for principal payments on debt.
FORWARD LOOKING STATEMENTS
This Form 10-Q document contains certain forward-looking statements
which are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements involve risks
and uncertainties that could cause actual results to differ materially from
these forward-looking statements. These risks include, but are not limited to,
raw material costs and the ability to pass price increases on to customers in a
timely fashion, industry overcapacity, product acceptance, technological changes
which could alter the demand for product or adversely impact the competitive
cost of production, etc. All forward-looking statements should be considered in
light of these risks and uncertainties.
ACCOUNTING PRONOUNCEMENTS
In February 1997, SFAS No. 128, "Earnings Per Share" and SFAS No. 129,
"Disclosure of Information About Capital Structure" were issued. SFAS No. 128
specifies the computation, presentation, and disclosure requirements for
Earnings Per Share ("EPS"), and is designed to improve the EPS information
provided in financial statements by simplifying the existing computational
guidelines, revising the disclosure requirements, and increasing the
comparability of EPS data on an international basis. The Company has not yet
determined the effect on operating results of implementing SFAS 128, however,
the adoption of this statement is not expected to have a materially adverse
effect on consolidated financial position. SFAS No. 129 consolidates the
existing requirements to disclose certain information about an entity's capital
structure and is not expected to change the Company's current capital structure
disclosures. SFAS 128 and 129 must be implemented no later than fiscal year
1997.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" and SFAS
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
were issued. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. The purpose of reporting comprehensive income is to
present a measure of all changes in equity that result from recognized
transactions and other economic events of the period other than transactions
with owners in their capacity as owners. The FASB believes that SFAS No. 130
should help investors, creditors, and others in assessing an enterprise's
activities and the timing and magnitude of its future cash flows. SFAS No. 131
establishes standards for the way that public businesses report information
about operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. The Company has not yet determined the effect on operating results of
implementing SFAS 130, however, the adoption of this statement is not expected
to have a materially adverse effect on consolidated financial position. The
Company has not yet determined the impact of SFAS 131 on its future disclosures.
SFAS 130 and 131 must be implemented no later than fiscal year 1998.
10
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Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any legal proceeding other than
routine litigation incidental to its business, none of which
is material.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 Amendment dated February 14, 1997 to Employment Agreement dated
February 1, 1995 between Registrant and Anthony F. Bova.
10.2 Amendment dated February 14, 1997 to Employment Agreement dated
February 1, 1995 between Registrant and Paul Rudovsky.
10.3 Sublease dated September 15, 1997 between Registrant and II Eagles
Plastics, Inc.
10.4 Agreement dated September 15, 1997 between Registrant and II Eagles
Plastics, Inc.
10.5 Equipment lease dated September 1, 1997 between Registrant and II
Eagles Plastics, Inc.
10.6 Eleventh Amendment to Heller Credit Agreement, dated as of November 3,
1997.
10.7 Third Amendment to National City Bank, Northeast Credit Agreement,
dated as of October 31, 1997.
27.1 Financial Data Schedule
- ---------------------
(b) Reports on Form 8-K:
During the quarter for which this Quarterly Report on Form 10-Q is
filed, no reports on Form 8-K were filed by the Registrant.
11
<PAGE>
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.
ATLANTIS PLASTICS, INC.
Date: November 4, 1997 /s/ ANTHONY F. BOVA
-------------------
ANTHONY F. BOVA
President and Chief Executive Officer
Date: November 4, 1997 /s/ PAUL RUDOVSKY
-----------------
PAUL RUDOVSKY
Executive Vice President, Finance and
Administration
12
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
10.1 Amendment dated February 14, 1997 to Employment Agreement dated
February 1, 1995 between Registrant and Anthony F. Bova.
10.2 Amendment dated February 14, 1997 to Employment Agreement dated
February 1, 1995 between Registrant and Paul Rudovsky.
10.3 Sublease dated September 15, 1997 between Registrant and II
Eagles Plastics, Inc.
10.4 Agreement dated September 15, 1997 between Registrant and II
Eagles Plastics, Inc.
10.5 Equipment lease dated September 1, 1997 between Registrant and II
Eagles Plastics, Inc.
10.6 Eleventh Amendment to Heller Credit Agreement, dated as of
November 3, 1997.
10.7 Third Amendment to National City Bank, Northeast Credit
Agreement, dated as of October 31, 1997.
27.1 Financial Data Schedule
EXHIBIT 10.1
ATLANTIS PLASTICS
[LETTERHEAD]
February 14, 1997
Mr. Anthony F. Bova
President and Chief Executive Officer
Atlantis Plastics, Inc.
1870 The Exchange Suite 200
Atlanta, Georgia 30339
RE: AMENDMENT TO EMPLOYMENT AGREEMENT
Dear Tony:
Reference is made to the Employment Agreement, dated as of February 1,
1995, between Atlantis Plastics, Inc. (the "COMPANY") and yourself, as amended
(the "EMPLOYMENT AGREEMENT.") Except as set forth herein, capitalized terms used
in this letter agreement have the meanings ascribed to them in the Employment
Agreement. The Compensation Committee of the Board of Directors has approved the
following modification to the provisions of the Employment Agreement for the
Company's fiscal year ending December 31, 1997 ("FY 97.")
The Company's Adjusted Earnings Per Share for its fiscal year ended
December 31, 1996 ("FY 96") shall be deemed to be $.50. Accordingly,
for purposes of the calculation of FY 97 Incentive Compensation set
forth on EXHIBIT A to the Employment Agreement, $.50 shall be used as
the base point for measuring the amount (if at all) by which the
Company's Adjusted Earnings Per Share for FY 97 exceeds Adjusted
Earnings Per Share for FY 96.
If the foregoing accurately reflects our agreement with respect to the
foregoing modification to the Employment Agreement, kindly sign the duplicate
copy of this letter agreement enclosed herewith and return it to Peter Klein.
Sincerely,
Earl W. Powell
Chairman of the Board
ACCEPTED AND AGREED:
/s/ ANTHONY F. BOVA
-----------------------------
Anthony F. Bova
EXHIBIT 10.2
ATLANTIS PLASTICS
[LETTERHEAD]
February 14, 1997
Mr. Paul Rudovsky
Executive Vice President - Finance and Planning
Atlantis Plastics, Inc.
1870 The Exchange Suite 200
Atlanta, Georgia 30339
RE: AMENDMENT TO EMPLOYMENT AGREEMENT
Dear Paul:
Reference is made to the Employment Agreement, dated as of March 6, 1995,
between Atlantis Plastics, Inc. (the "COMPANY") and yourself, as amended (the
"EMPLOYMENT AGREEMENT.") Except as set forth herein, capitalized terms used in
this letter agreement have the meanings ascribed to them in the Employment
Agreement. The Compensation Committee of the Board of Directors has approved the
following modification to the provisions of the Employment Agreement for the
Company's fiscal year ending December 31, 1997 ("FY 97.")
The Company's Adjusted Earnings Per Share for its fiscal year ended
December 31, 1996 ("FY 96") shall be deemed to be $.50. Accordingly,
for purposes of the calculation of FY 97 Incentive Compensation set
forth on EXHIBIT A to the Employment Agreement, $.50 shall be used as
the base point for measuring the amount (if at all) by which the
Company's Adjusted Earnings Per Share for FY 97 exceeds Adjusted
Earnings Per Share for FY 96.
If the foregoing accurately reflects our agreement with respect to the
foregoing modification to the Employment Agreement, kindly sign the duplicate
copy of this letter agreement enclosed herewith and return it to Peter Klein.
Sincerely,
Earl W. Powell
Chairman of the Board
ACCEPTED AND AGREED:
/s/ PAUL RUDOVSKY
------------------------------
Paul Rudovsky
EXHIBIT 10.3
SUBLEASE
THIS SUBLEASE ("SUBLEASE") is made and entered into as of the ____ day
of August, 1997, by and between ATLANTIS PLASTICS, INC. successor to Cyanede
Plastics, Inc., a Florida corporation ("SUBLESSOR"), and II EAGLES PLASTICS,
INC., a Tennessee corporation ("SUBLESSEE").
R E C I T A L S:
A. Sublessor is the "Tenant", and JANE H. RALLS, is the "Landlord"
("LANDLORD"), under that certain Lease dated July 5, 1992, as amended from time
to time (the "MASTER LEASE"), with respect to that certain land and improvements
more particularly shown on EXHIBIT "A" attached hereto and made a part hereof
(hereinafter referred to as the "PREMISES").
B. Sublessee desires to sublease a portion of the Premises from
Sublessor, and Sublessor desires to sublease a portion of the Premises to
Sublessee, subject to and upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the payment of rent and other
charges provided for in this Sublease, the covenants and conditions hereinafter
set forth, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Sublessor and Sublessee hereby
covenant and agree as follows:
1. RECITALS: The foregoing recitals are true and correct and are
incorporated herein by this reference.
2. SUBLEASE: Sublessor hereby subleases to Sublessee, and Sublessee
hereby subleases from Sublessor, upon the terms and conditions hereinafter set
forth, approximately 19,200 square feet (the "SUBLET PREMISES") located within
the Premises as more particularly shown as building A on the Sketch attached
hereto and made a part hereof as EXHIBIT "B".
3. TERM: The term ("TERM") of this Sublease shall commence on September
1, 1997 ("COMMENCEMENT DATE") and shall continue until and shall expire on April
30, 1998, unless sooner terminated as hereinafter provided ("EXPIRATION DATE").
4. RENT:
A. BASE RENT FOR SUBLET PREMISES. Commencing on the
Commencement Date, and thereafter, throughout the Term of this Sublease,
Sublessee hereby agrees to pay to Sublessor rent for the Sublet Premises ("BASE
RENT")in the net total amount of Forty Thousand and No/100 Dollars($40,000.00)
for the term, payable in equal monthly installments of Five Thousand and No/100
Dollars ($5,000.00), with the first such installment due on the Commencement
Date, and thereafter, on the 1st day of each month throughout the Term of the
Sublease. Each payment of rent under this Sublease is to be made without offset
or deduction whatsoever and to be accompanied by applicable sales tax, both in
lawful money of the United States of America, at Sublessor's address below
specified or elsewhere as designated from time to time by Sublessor's written
notice to Sublessee. The term "Rent" as used in this Sublease shall mean "Base
Rent" and all other charges and costs due by Sublessee to Sublessor under this
Sublease.
B. TAXES/INTEREST. In addition to Base Rent, Sublessee shall
and hereby agrees to pay to Sublessor each month a sum equal to any sales tax,
tax on rental, and any other charges, taxes and/or impositions now in existence
or hereafter imposed based upon the privilege of renting the Sublet Premises
hereunder or upon the amount of Rent and any other charges collected therefor.
Nothing herein shall, however, be taken to require Sublessee to pay any part of
any federal or state taxes on income imposed upon Sublessor.
<PAGE>
Failure to pay any installment of Rent or any other payment or charge
required hereunder for a period of ten (10 days after its due date shall
constitute a default under this Sublease.
5. SERVICES; UTILITIES: Sublessee shall be solely responsible for
payment, and shall promptly pay, all charges for telephone and other utilities
(including but not limited to heat, fuel, power, water, electric) furnished to
the Sublet Premises directly by the applicable utilities providers.
Additionally, Sublessee shall pay any and all other charges for utility use or
other services, or otherwise, required to be paid by Sublessor under the Master
Lease, including, without limitation, charges as a result of Sublessee's use of
additional utilities or other services, or otherwise, or as a result of any acts
of Sublessee or Sublessee's use or occupancy of the Sublet Premises, all to be
paid by Sublessee as and when due and payable by Sublessor under the Master
Lease or otherwise within five (5) business days of Sublessee's receipt of any
invoice thereof. Notwithstanding the foregoing, Sublessor agrees to pay all
charges for utilities (Electric, Gas) for the portions of the Premises not
included in this Sublease (i.e. buildings B, C, D and E as shown on Exhibit B).
6. ACCEPTANCE OF PREMISES; CONDITION DURING TERM: Sublessee
acknowledges and agrees that Sublessee has thoroughly investigated the Sublet
Premises, and all other physical aspects of this Sublease transaction, and in
electing to proceed with this Sublease, Sublessee shall have determined that all
of the same is satisfactory to Sublessee in all respects, and that Sublessee is
accepting and subleasing the same hereunder in "AS IS" condition, with all
faults including, those conditions detailed on Exhibit "C" attached hereto and
made a part hereof. Sublessee has and will rely solely on Sublessee's own
investigation and inspection, and has not relied and will not rely on any
representations of Sublessor, in entering into this Sublease.
7. REPAIRS; ALTERATIONS: At all times during the Term hereof, Sublessee
shall keep the Sublet Premises in good order and repair (ordinary wear and tear
excepted), and otherwise in accordance with the obligations imposed on the
"Tenant" under the Master Lease and this Sublease, all at Sublessee's sole cost
and expense. Sublessee shall make no alterations, improvements or renovations to
the Sublet Premises without Sublessor's prior written consent and any permitted
alterations, improved, or renovations must be in compliance with the applicable
terms of the Master Lease. In connection therewith, Sublessee shall submit plans
and specifications for all such proposed alterations to the Sublet Premises to
Sublessor for review and approval.
8. USE; COMPLIANCE: Sublessee will use and occupy the Premises in
accordance with the provisions of paragraph 8 of the Master Lease and shall
fully and promptly comply with all of the requirements of the Master Lease and
all present and future laws, rules, orders, ordinances and regulations
applicable to Sublessee's use of the Sublet Premises.
9. SUBLEASE SUBJECT TO MASTER LEASE: Except as otherwise specifically
set forth herein, this Sublease and Sublessee's leasehold interest granted
hereby are subject and subordinate in all respects to all of the terms and
provisions of the Master Lease and all of such terms are incorporated herein as
if set out in full. Sublessee shall at all times fully and completely comply
with and abide by all terms, provisions, conditions and covenants of "Tenant"
contained in the Master Lease, and Sublessor shall have all rights of "Landlord"
provided for in the Master Lease, all as if Sublessee were the "Tenant"
thereunder and Sublessor were the "Landlord" thereunder. Sublessee hereby agrees
to promptly and properly satisfy all of such obligations of "Tenant" under the
Master Lease, except only for the payment of rent under paragraph (1) of the
Master Lease, the resurfacing of the parking lot under paragraph (2) of the
Master Lease and except as otherwise expressly set forth herein. In the event
that
2
<PAGE>
Sublessee fails or refuses to comply with all of the terms, provisions,
conditions and covenants set forth hereunder and/or under the Master Lease
required hereunder to be complied with, in addition to all other rights and
remedies provided for in this Sublease, Sublessor shall have the right, after
giving five (5) business days prior written notice to Sublessee of any such a
default (or no notice if the Master Lease provides for none or such lesser
notice), to take any necessary measures to ensure compliance with such
provisions and/or perform such obligations on behalf of Sublessee, and to the
extent that Sublessor incurs any costs and/or expenses in connection therewith,
to receive reimbursement from Sublessee therefor.
10. INSURANCE FOR SUBLET PREMISES: Sublessee shall maintain at its
expense throughout the Term of this Sublease, Commercial Comprehensive general
and public liability insurance. Such insurance shall afford protection to at
least a combined single limit for bodily injury, death and property damage
liability of One Million and No/100 Dollars ($1,000,000.00) per occurrence and
shall be issued in accordance with the requirements of the Master Lease. It is
Sublessor's intent that any liability insurance provided pursuant to this
paragraph shall be deemed primary insurance coverage in the event of any loss
arising from the Sublet Premises and operations covered by this Sublease.
11. BROKERAGE: The parties each represent and warrant to the other that
they have not dealt with any real estate brokers, salesmen, agents or finders to
whom a brokerage commission is due in connection herewith. If a claim for
commissions in connection with this transaction is made by any broker, salesman
or finder claiming to have dealt through or on behalf of one of the parties
hereto ("INDEMNITOR"), Indemnitor shall indemnify the other party hereunder
("INDEMNITEE"), and Indemnitee's officers, directors, agents and
representatives, from and against all liabilities, damages, claims, costs, fees
and expenses whatsoever (including reasonable attorney's fees and court costs at
all trial and appellate levels) with respect to any such claim. Notwithstanding
anything contained in this Sublease to the contrary, the provisions of this
paragraph shall survive the expiration or earlier termination of this Sublease.
12. SUBLESSOR'S COMPLIANCE: Sublessor shall promptly deliver to
Sublessee copies of all notices applicable to Sublessee received by Sublessor
under the Master Lease, such that Sublessee may comply with any requirements of
this Sublease with respect to any such notice. Sublessee shall promptly deliver
to Sublessor any notices received by Sublessee from Landlord or otherwise
pertaining to the Sublet Premises. Sublessor shall have no other duties or
obligations to Sublessee, with respect to the obligations of Landlord to
Sublessor under the Master Lease, or otherwise. Notwithstanding anything to the
contrary in this Sublease or in the Master Lease, Sublessor shall not be
required to provide any of the services, make any of the repairs, allowances,
improvements or restorations, or perform any of the other obligations that the
Landlord has agreed to provide or make or cause to be provided or made under the
provisions of the Master Lease, including, without limitation, insurance
obligations, repairs, or maintenance, and Sublessee shall rely upon, and look
solely to the Landlord for the provision or making thereof. Sublessor, upon
request of Sublessee, agrees to use reasonable efforts to cause Landlord to
observe and/or perform any such obligations; provided that, without limiting the
generality of the foregoing, the obligations of Sublessor to use "reasonable
efforts" shall not be construed as requiring Sublessor to pay any money or incur
any cost or liability beyond that which it has under this Sublease or to
institute or prosecute any legal action or proceeding. All costs reasonably
incurred by Sublessor in seeking to cause Landlord to perform its obligations
under the Master Lease with respect to the Sublet Premises shall be promptly
paid directly by Sublessee or reimbursed by Sublessee to Sublessor as Sublessor
may direct.
3
<PAGE>
If Landlord shall materially default with respect to work,
services, repairs or other obligations under the Master Lease ("LANDLORD'S
OBLIGATIONS") and Sublessor's "reasonable efforts" fail to cause Landlord to
observe or perform Landlord's Obligations, then Sublessee may at its option, in
its own name, and after written notice to Sublessor, conduct such proceedings as
may be required to cause Landlord to observe or perform Landlord's Obligations.
Sublessee shall not make any claim against Sublessor for any
damage which may arise, nor shall Sublessee's obligations hereunder be impaired,
by reason of the failure of the Landlord to keep, observe or perform any of
Landlord's Obligations pursuant to the Master Lease.
13. TIME OF ESSENCE: Time shall be of the essence of all terms and
provisions of this Sublease.
14. ESTOPPEL STATEMENT: Sublessee and Sublessor hereby agree, from time
to time, upon not less than ten (10) days prior written notice by the other or
from Landlord , to deliver to the other or Landlord, as applicable, a statement
in writing certifying (a) that this Sublease is unmodified and in full force and
effect (or, if there have been modifications, that this Sublease as modified is
in full force and effect and stating the modifications); (b) the dates to which
Rent and other charges have been paid; (c) that Sublessor or Sublessee, as
applicable, is not in default under any provisions of this Sublease, or, if in
default, the nature thereof in detail; and (d) other matters reasonably
requested by the other or by Head Landlord.
15. NOTICE: Any notice to be given under this Sublease shall be in
writing and shall be hand delivered, or by United States certified mail, postage
prepaid, return receipt requested as follows:
To Sublessor: Atlantis Plastics, Inc.
57500 C. R. 3 South
P. O. Box 2218
Elkhart, Indiana 46515
To Sublessee: II Eagles Plastics, Inc.
2610 Hart Street
Nashville, TN 37207
To Head Landlord: At such address as is provided in the
Master Lease for giving of notices to
"Landlord" thereunder.
Either party, from time to time, by such notice, may specify another
address to which subsequent notice shall be sent. Any notice given by hand
delivery or overnight courier (or by other means not specified herein) shall be
deemed given when received, and any notice sent by mail shall be deemed given 3
days following the date of mailing.
16. HOLD HARMLESS OF SUBLESSOR: In consideration of the Sublet Premises
being leased to Sublessee for the above Rent, Sublessee agrees that Sublessee,
at all times, will indemnify and hold harmless Sublessor from all cost, expense,
loss, damage, and liability (including reasonable legal fees and court costs at
trial and all appellate levels) whatsoever, which may arise or be claimed
against Sublessor in favor of any persons, firms or corporations, for any
injuries or damages to the persons or property of any persons, firms or
corporations, as a consequence of or arising from the use or occupancy of the
Sublet Premises by Sublessee, including the parking areas, or as a consequence
of or arising from any acts, omissions, neglect or fault of Sublessee,
Sublessee's agents, employees, or invitees, as a consequence of or arising from
Sublessee's failure to comply with the terms and provisions of this Sublease,
the Master Lease and/or any laws, statutes, ordinances, codes, regulations,
covenants or restrictions as herein provided; and that Sublessor shall not
4
<PAGE>
be liable for any damages, losses or injuries to persons or property of
Sublessee which may occur, except when such injury, loss or damage results from
the gross negligence or willful misconduct of Sublessor or of its agents,
employees or invitees. In the event Sublessor should be made a party to any
litigation commenced against Sublessee, then Sublessee shall protect and hold
Sublessor harmless, and shall pay all costs, expenses and reasonable attorney's
fees and costs incurred or paid by Sublessor, in connection with such litigation
and any appeal thereof. All personal property placed or moved into the Sublet
Premises shall be at the sole risk of Sublessee or the owner thereof, and
Sublessor shall not be liable to Sublessee for any damage to said personal
property.
17. ASSIGNMENT; SUBLETTING: Without the prior written consent of
Sublessor, which consent may be given or withheld in Sublessor's sole and
absolute discretion, notwithstanding the incorporated provisions of the Master
Lease to the contrary, Sublessee shall not, directly or indirectly, assign,
transfer, mortgage, pledge or otherwise encumber or dispose of this Sublease or
sublet the Sublet Premises or any part thereof or permit the Sublet Premises to
be occupied by other persons or parties or permit any assignment of this
Sublease by operation of law. Any assignment or sublease hereunder which is not
in compliance with the provisions of this paragraph shall be of no force or
effect and shall constitute a material default under this Sublease. No
assignment or sublease shall relieve Sublessee of its obligation hereunder.
18. CONDITION OF PREMISES ON TERMINATION OF SUBLEASE AND HOLDING OVER:
Sublessee agrees to surrender to Sublessor, at the Expiration Date, the Sublet
Premises in as good condition as the Premises were at the Commencement Date,
ordinary wear and tear and damage by casualty only excepted.
19. TAXES/LICENSES: Sublessee shall be responsible for and shall pay
before delinquency all municipal, county or state taxes assessed during the Term
of this Sublease for any of Sublessee's personal property or against Sublessee's
occupancy interest in the Sublet Premises.
20. DEFAULT: In addition to all of the rights and remedies that
Sublessor may exercise against Sublessee under the terms of this Sublease
(and/or by law) in the event of Sublessee's default, Sublessor shall be entitled
to exercise against Sublessee all of such other and further rights and remedies
as the "Landlord" may exercise against the "Tenant" under the incorporated
provision of the Master Lease. Except as may be provided for below, the
cure/grace periods provided for in the incorporated provisions of the Master
Lease with respect to defaults by the "Tenant" hereunder shall apply to defaults
by Sublessee hereunder.
If any one or more of the following events shall happen (each of which
shall be considered a material default by Sublessee under this Sublease):
A. the failure to Sublessee to comply with all of the terms
hereof, if such failure continues after the expiration of
any applicable notice and grace periods;
B. if Sublessee shall file a voluntary petition in bankruptcy or
shall be adjudicated a bankrupt or insolvent, or shall file
any petition or answer seeking any reorganization,
arrangement, composition, readjustment, liquidation, wage
earner's plan, dissolution or similar relief under the present
or any future federal bankruptcy act or any other present or
future applicable federal, state or other debtor's relief
statute or law, or shall seek or consent to or acquiesce in
the appointment of any trustee, receiver or liquidator of
Sublessee or of all or any substantial part of Sublessee's
properties or of the Sublet Premises; or
5
<PAGE>
C. in the event of any proceeding against Sublessee seeking any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under the present
or any future federal bankruptcy act or any other present or
future applicable federal, state or other debtor's relief
statute or law; or
D. if the Premises shall be seized under any levy, execution,
attachment or other process of court and the same shall not be
promptly vacated or stayed on appeal or otherwise, or if the
Sublessee's interest in the Premises is sold by judicial sale
and the sale is not promptly vacated or stayed on appeal or
otherwise;
E. any default by Sublessee under the terms of that certain
Equipment Lease between Sublessor and Sublessee of even date
herewith;
then, and in any such event, Sublessor may at any time thereafter terminate this
Sublease and retake possession, and/or declare the balance of the entire Rent
for the entire Term of this Sublease to be immediately due and payable (in which
event Sublessor may then proceed to collect all of the unpaid Rent called for by
this Sublease by distress or otherwise), and/or pursue any other remedy afforded
by law or equity.
Nothing herein contained shall be construed as precluding Sublessor
from having such remedy as may be and become necessary in order to preserve all
right and interest of Sublessor in the Premises and in this Sublease, prior to
the expiration of the grace or notice periods given Sublessee in this Sublease,
if under particular circumstances then existing the allowance of such grace or
the giving of such notice will prejudice or endanger the rights or interest of
Sublessor in this Sublease or in the Premises. All rights and remedies granted
in this Sublease to Sublessor or available at law or equity shall be cumulative
and not mutually exclusive.
21. INVALIDITY OF PROVISION: If any term or provision of this Sublease
or the application thereof to any person or circumstance shall, to any extent,
be invalid or unenforceable, the remainder of this Sublease or the application
of such term or provision to persons or circumstances other than those as to
which it is held invalid or unenforceable shall not be affected thereby and each
term and provision of this Sublease shall be valid and be enforceable to the
fullest extent permitted by law. This Sublease shall be construed in accordance
with the laws of the State of Tennessee.
22. SUCCESSORS AND ASSIGNS: All terms and provisions of this Sublease
to be observed and performed by Sublessee shall be applicable to and binding
upon Sublessee's successors and assigns, subject, however, to the restrictions
as to assignment and subletting by Sublessee as provided herein.
23. ATTORNEY'S FEES: If either party defaults in the performance of any
of the terms or provisions of this Sublease and by reason thereof the other
party employs the services of an attorney to enforce performance of the
covenants, or to perform any service based upon defaults, then in any of said
events the prevailing party shall be entitled to receive from the other party
reasonable attorneys fees and all expenses and costs incurred by the prevailing
party pertaining thereto (including costs and fees relating to any appeal) and
in enforcement of any remedy.
24. MISCELLANEOUS: The terms Sublessor and Sublessee as herein
contained shall include singular and/or plural, masculine, feminine and/or
neuter, heirs, successors, personal representatives and/or assigns wherever the
context so requires or admits. Sublessor and Sublessee have participated fully
in the negotiation and preparation hereof, and, accordingly, this
6
<PAGE>
Sublease shall not be more strictly construed against either of the parties
hereto. Further, Sublessee shall look solely to Sublessor's leasehold interest
in the Sublet Premises for the satisfaction of any judgments or remedies
obtained by Sublessee against Sublessor under court order or otherwise with
respect to this Sublease, and no other property or assets of Sublessor or its
partners, principals, subsidiaries or parent companies, disclosed or
undisclosed, shall be subject to levy, execution, or other enforcement procedure
for the satisfaction of Sublessee's remedies under or with respect to this
Sublease. All Exhibits attached to this Sublease are hereby incorporated in and
made a part hereof. Nothing in this Sublease shall be deemed to create a
partnership or joint venture between Sublessor and Sublessee, the parties
intending their relationship hereunder to be solely that of Sublessor and
Sublessee.
25. ENTIRE AGREEMENT: This Sublease and the incorporated provisions of
the Master Lease contain the entire agreement between the parties hereto and all
previous negotiations leading hereto, and this Sublease may be modified only by
an agreement in writing signed by Sublessor and Sublessee.
26. CONSENT: Except as otherwise expressly set forth in this Sublease
and/or the Master Lease, wherever the consent or approval of either party hereto
is required, the parties agree that such consent shall not be unreasonably
withheld or delayed.
IN WITNESS WHEREOF, the parties hereto have signed, sealed and
delivered this Sublease in several counterparts each of which shall be deemed an
original, but all constituting a single agreement, as of the day and year first
above written.
Witnesses: SUBLESSOR:
ATLANTIS PLASTICS, INC.
By: /s/ JOHN GEARY
- ------------------------------ -------------------------------------
Name: John Geary
-----------------------------------
Title: Vice President and G.M.
- ------------------------------ ----------------------------------
[Corporate Seal]
SUBLESSEE:
II EAGLES PLASTICS, INC.
By: /s/ HOBART M. DERRICK & DON L. WYNE
- ------------------------------ -------------------------------------
Name: Hobart M. Derrick & Don L. Wyne
-----------------------------------
Title: Partners
- ------------------------------ ----------------------------------
[Corporate Seal]
7
<PAGE>
EXHIBIT "A"
MASTER LEASE
<PAGE>
EXHIBIT "B"
SUBLET PREMISES
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT "C"
CONDITION SUBLET PREMISES
ITEM CONDITION RESPONSIBLE
---- --------- -----------
<S> <C> <C>
1) Insulation New in place Two Eagles
(Wall) Not breaks or tears
2) Metal Walls All pushed into place Two Eagles
3) All interior walls and doors In place, in working order Two Eagles
4) All electrical In working order Two Eagles
5) Metal trim Doors (Dock) Torn and bent Atlantis
6) Exterior doors and locks Working Two Eagles
</TABLE>
EXHIBIT 10.4
AGREEMENT
THIS AGREEMENT is made as of the ___ day of August 1997, by and between
ATLANTIS PLASTICS, INC., a Florida corporation ("ATLANTIS") and II EAGLES
PLASTICS, INC., a Tennessee corporation ("EAGLES").
R E C I T A L S:
A. On even date herewith, the parties have entered into that certain
Equipment Lease ("EQUIPMENT LEASE") wherein Atlantis has agreed to lease to
Eagles, and Eagles has agreed to lease from Atlantis, certain equipment (the
"EQUIPMENT") located in Davidson County, Tennessee, as more particularly
described in the Equipment Lease.
B. Eagles intends to use the Equipment to produce certain parts (the
"PARTS") which are from time to time required by the customers of Atlantis
designated on EXHIBIT "A" attached hereto (the "CUSTOMERS").
C. Atlantis has agreed to order all Parts from to time required by the
Customers from Eagles subject to the terms, provisions and conditions of this
Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of Ten and No/100 Dollars ($10.00) and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. The recitations stated above are true and correct and by this
reference are incorporated herein.
2. The term (the "TERM") of this Agreement shall commence on even date
herewith and terminate on July 31, 1998 (the "EXPIRATION DATE"), unless sooner
terminated as hereinafter provided.
3. Subject to the provisions of paragraph 4 below, Atlantis agrees
that, during the Term, to the extent that Atlantis receives orders for any of
the Parts from any of the Customers, Atlantis shall fill such orders and obtain
such Parts only from Eagles. Eagles understands and agrees that Atlantis can not
and will not guarantee that any orders will be placed by the Customers, or if
placed, the extent and quantity of same. Further, this Agreement shall not
require Atlantis to obtain Parts from Eagles from persons or entities other than
the Customers.
4. The obligation of Atlantis to obtain Parts from Eagles as set forth
in paragraph 3 above, shall be expressly conditioned and contingent upon the
Parts being of a quality which is equal to or greater than that established as
the industry standard, and upon Eagles being able to deliver the Parts within
fourteen (14) days following receipt of an order for same from Atlantis.
5. Throughout the Term, the price for the Parts shall be as set forth
in the third column of EXHIBIT "A".
6. Throughout the Term, Eagles acknowledges and agrees not to compete,
contact, solicit or in any manner to do business with any of Atlantis' current
customers, including without limitation the Customers. Furthermore, for a period
commencing upon the
<PAGE>
Expiration Date and continuing for a period of one (1) year following the
Expiration Date, Eagles acknowledges and agrees not to compete, contact, solicit
or in any manner do business with the Customers, without the prior written
consent of Atlantis.
7. Failure by either party to perform any of its obligations under this
Agreement shall constitute a default hereunder. In addition a default by Eagles
under the Equipment Lease shall constitute default under this Agreement. The
provisions of this Agreement may be enforced by all appropriate actions at law
and in equity by the parties hereto, and their successors and assigns, with the
prevailing party in any such action entitled to reimbursement of reasonable
attorneys' fees and costs incurred at trial and all appellate levels.
8. All notices required or desired to be given under this Agreement
shall be in writing and shall be deemed given when either delivered personally,
sent by recognized overnight courier (such as Federal Express) or deposited in
the United States mail, certified mail, postage prepaid, return receipt
requested, to the parties at the following addresses, or such other addresses as
hereinafter indicated by appropriate written notice:
If to Atlantis: John Geary
57500 C. R. 3 South
P.O. Box 2118
Elkhart, Indiana 46515
If to Eagles: Bud Derrick and Don Wynn
2610 Hart Street
Nashville, TN 37207
9. MISCELLANEOUS:
(a) This Agreement shall be construed and governed in
accordance with the laws of the State of Tennessee, both substantive and
remedial.
(b) In the event any term or provision of this Agreement be
determined by appropriate judicial authority to be illegal or otherwise invalid,
such provision shall be given its nearest legal meaning or be construed as
deleted as such authority determines, and the remainder of this Agreement shall
be construed to be in full force and effect.
(c) In the event of any litigation between the parties to
this Agreement, the prevailing party shall be entitled to reasonable attorneys'
fees and court costs at trial and all appellate levels.
(d) In construing this Agreement, the singular shall be held
to include the plural, the plural shall be held to include the singular, the use
of any gender shall be held to include every other and all genders, and captions
and paragraph headings shall be disregarded.
(e) Time shall be of the essence in the performance of this
Agreement.
10. This Agreement constitutes the entire understanding and agreement
between the parties and supersedes and fully replaces any and all prior
agreements between the parties with respect to the subject matter hereof and
there are no representations or warranties, expressed or implied, except as may
be specifically
Page 2
<PAGE>
set forth herein. This Agreement may not be changed, altered or modified except
by an instrument in writing signed by the party against whom enforcement of such
change would be sought. This Agreement shall be binding upon the parties hereto
and their respective successors and permitted assigns.
EXECUTED as of the day and year first above written.
Signed, sealed and delivered ATLANTIS:
in the presence of:
ATLANTIS:
ATLANTIS PLASTICS, INC.
a Florida corporation
By: /s/ JOHN GEARY
- ------------------------------ -------------------------------------
Name: John Geary
-----------------------------------
Title: Vice President and G.M.
- ------------------------------ ----------------------------------
SUBLESSEE:
EAGLES:
II EAGLES PLASTICS, INC.
a Tennessee corporation
By: /s/ HOBART M. DERRICK & DON L. WYNE
- ------------------------------ -------------------------------------
Name: Hobart M. Derrick & Don L. Wyne
-----------------------------------
Title: Partners
- ------------------------------ ----------------------------------
Page 3
<PAGE>
EXHIBIT "A"
CUSTOMER PRICE LIST
Page 4
EXHIBIT 10.5
EQUIPMENT LEASE
THIS LEASE ("LEASE") is made and entered into as of the ____ day of
August, 1997, by and between ATLANTIS PLASTICS, INC. successor to Cyanede
Plastics, Inc., a Florida corporation ("LESSOR"), and II EAGLES PLASTICS, INC.,
a Tennessee corporation ("LESSEE").
R E C I T A L S:
A. Lessee desires to lease certain equipment from Lessor, and Lessor
desires to lease certain equipment to Lessee, subject to and upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the payment of rent and other
charges provided for in this Lease, the covenants and conditions hereinafter set
forth, and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Lessor and Lessee hereby covenant and agree as
follows:
1. RECITALS: The foregoing recitals are true and correct and are
incorporated herein by this reference.
2. EQUIPMENT LEASE: Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, upon the terms and conditions hereinafter set forth, that
certain equipment (the "EQUIPMENT") more particularly described on EXHIBIT "A"
attached hereto and made a part which Equipment is located on the premises (the
"Premises") more particularly described on EXHIBIT "B" attached hereto and made
a part hereof.
3. TERM: The term ("TERM") of the Lease shall commence on September 1,
1997 ("COMMENCEMENT DATE") and shall continue until and shall expire on April
30, 1998, unless sooner terminated as hereinafter provided ("EXPIRATION DATE").
4. RENT: Commencing on the Commencement Date, and thereafter throughout
the Term of this Lease, Lessee hereby agrees to pay to Lessor "Base Rent" for
the Equipment in the total amount for the Term of One Hundred Forty-Five
Thousand No/100 Dollars ($145,000.00) payable as follows: (a) seven (7) equal
monthly installments of Five Thousand and No/100 Dollars ($5,000.00) with the
first such payment due on September 1, 1997 and subsequent installments due on
the first (1st) day of each month thereafter, and (b) a balloon payment in the
amount of One Hundred Ten Thousand and No/100 ($110,000.00) which shall be
payable on the first day of April, 1998, or upon earlier termination of this
Lease. Each payment of rent under this Lease is to be made without offset or
deduction whatsoever and to be accompanied by applicable sales tax, both in
lawful money of the United States of America, at Lessor's address as designated
from time to time by Lessor. The term "RENT" as used in this Lease shall mean
"Base Rent" and all other charges and costs due by Lessee to Lessor under this
Lease.
A. EQUIPMENT RENT NET TO LESSOR. Except as otherwise expressly
provided herein, Lessee intends the Base Rent payments for the Equipment to be
absolutely net to Lessor, and Lessee shall comply with all laws, and shall pay
all taxes, license and registration fees and similar charges imposed on the
ownership, possession or use of the Equipment during the term and all costs of
maintenance, repair, replacement and insurance of the Equipment, all lessee's
sole cost and expense. Lessee shall pay Lessor all costs and expenses, including
reasonable attorney's
<PAGE>
fees, before and in connection with litigation and appellate or bankruptcy
proceedings, storage, caretaking, and repossession expenses in connection with
the enforcement of Lessor's rights hereunder.
Failure to pay any installment of Rent or any other payment or charge
required hereunder for a period of ten (10) days after its due date shall
constitute a default under this Equipment Lease.
5. EQUIPMENT MAINTENANCE. Lessee shall maintain the Equipment in good
operating condition, repair and appearance, and protect same from deterioration;
shall only use the Equipment for its intended purposes and in the regular course
of Lessee's business, within the Equipment's normal capacity, without abuse, and
in a manner contemplated by the manufacturer thereof; shall cause the Equipment
to be operated only by competent, properly trained and licensed operators; shall
pay all expenses of operation of the Equipment and maintenance thereon; and
shall not make modifications, alterations or additions to the Equipment, other
than normal operating accessories or controls, without the consent of Lessor.
The Equipment shall at all times remain on the Premises, all as presently
installed.
Furthermore, Lessee agrees to comply with all the laws and
regulations regarding the use and maintenance of the Equipment and to pay all
licenses, fees, assessments and sales, use, property, excise and other taxes
hereinafter imposed by any government or governmental agency upon the Equipment
or with respect to the use of the Equipment.
6. EQUIPMENT LESSOR'S PROPERTY, RECORDING. The Equipment is and shall
at all times remain, the property of Lessor; and Lessee shall have no right,
title or interest therein or thereto except as expressly set forth herein. The
Equipment is and shall at all times during the Term be and remain personal
property notwithstanding that the Equipment or any part thereof may now be, or
hereafter become, in any manner affixed or attached to real property or any
improvements thereon. Lessee will not change, mark, deface or remove any
insignia, identification number, numbering or lettering which is on the
Equipment at the time of delivery thereof or which is thereafter placed thereon
identifying the Equipment. If Lessor supplies Lessee with labels or tags stating
that the Equipment is owned by Lessor, Lessee shall affix such labels to and
keep them in a prominent place on the Equipment.
Lessee shall at its expense protect and defend Lessor's title,
at all times keeping the Equipment free from any legal process and/or
encumbrances whatsoever, other than those caused by and relating solely to acts
or omissions of Lessor, including, but not limited to liens, attachments, levies
and executions, and shall give Lessor immediate written notice thereof and shall
reimburse and indemnify Lessor from any loss caused thereby.
7. EQUIPMENT LEASED "AS IS." Lessee has selected the equipment and
Lessor has not and does not herein make any warranties, expressed or implied, as
to the merchantability, fitness for a particular purpose or quality of the
Equipment and Sublessee is leasing the Equipment in its "as-is, where-is"
condition, with all faults. Lessee understands and agrees that the Equipment is
not new, and has been used prior to consummation of this Lease. It is agreed
that Lessor shall not be responsible as to the condition of the Equipment and
the Lessee agrees to look only to the manufacturer and/or actual supplier for
any possible defects, be they latent or patent, and will further only look to
the aforementioned manufacturer and/or supplier, and not
- 2 -
<PAGE>
to the Lessor, for any other claims. It is specifically acknowledged and agreed
that: (i) Lessee is leasing the Equipment in its "AS IS, WHERE IS" condition,
and (ii) the "As-Is" nature of this Lease is a material inducement for Lessor to
enter into this Lease.
8. INSURANCE. Lessee shall keep the Equipment fully insured against all
risks of loss or damage from every cause and of every character whatsoever for
the full replacement value thereof, and shall carry public liability insurance,
both personal injury and property damage, covering the Equipment and the
operation thereof. All said insurance shall be in forms and amounts and written
by insurance companies satisfactory to Lessor. Lessee, at its own expense, shall
pay the premiums thereof and deliver to Lessor the policies of insurance. Each
insurer shall agree, by endorsement upon the policy or policies issued by it or
by independent instrument furnished to Lessor, that Lessor shall be an
additional named insured on all such policies and the policies shall provide
that Lessor will receive thirty (30) days prior written notice of the effective
date of any alteration or cancellation of such policy(ies).
Any proceeds of insurance payable as a result of loss or
damage to the Equipment shall be applied at the option of Lessor, (a) toward the
replacement, restoration or repair of Equipment which may be lost, stolen,
destroyed or damaged, or (b) toward payment of the obligations of Lessee
hereunder. No loss, theft, damage or destruction of the Equipment shall relieve
Lessee of the obligation to pay Rent. In case of the failure of Lessee to
procure or maintain such insurance or to comply with any other provision of this
Lease, Lessor shall have the right, but shall not be obligated, to effect such
insurance or compliance on behalf of and at the expense of Lessee. In that
event, all moneys spent by and expenses of Lessor in effecting such insurance or
compliance shall be deemed to be additional rent, and shall be paid by Lessee to
Lessor forthwith. If Lessor determines that any item of the Equipment is lost,
stolen, destroyed or damaged beyond repair, Lessor may, in lieu of the
foregoing, require that Lessee pay Lessor in cash all sums then owed by Lessee
to Lessor under this Lease, together with the unpaid balance of the total rent
of said item or items on the date of such loss, theft, damage or destruction.
9. RISK OF LOSS. Lessee hereby assumes the entire risk of loss to the
Equipment throughout the Term from any kind and every cause whatsoever. In event
of loss, Lessor shall have the option: (a) to require Lessee, at Lessee's cost,
to repair the Equipment, returning it to the previous condition; or (b) to
require Lessee, at Lessee's cost, to replace same with like Equipment acceptable
to Lessor and in good condition and of equivalent value, which replacement shall
become property of the Lessor, or (c) to require Lessee to pay Lessor the
balance of all unpaid rents. In case Lessee shall fail to repair, replace or pay
for any destroyed or damaged Equipment, Lessor may repair same at Lessee's
expense, and any sums expended by Lessor in connection therewith shall be
charged as additional rental, payable forthwith.
10. INDEMNITY. Lessee shall defend, indemnify and hold harmless Lessor,
its agents, officers, servants and employees from any and all liabilities,
losses, damages, injuries, claims, demands, fines, penalties, costs and expenses
of every kind and nature, whether or not covered by insurance, including, but
not limited to, reasonable legal fees and disbursements, before and during trial
and all appellate proceedings, arising out of or in any way connected with the
ownership, selection, possession,
- 3 -
<PAGE>
leasing, renting, operation, control, use, maintenance, delivery and/or return
of the Equipment.
Additionally, Lessee agrees to pay and indemnify and hold
Lessor harmless from and against any sales, use, VAT, stamp, gross receipts,
business, property, ad valorem, import, export or other taxes, tolls, levies,
imposts, duties, charges or withholdings from or of any nature (together with
any penalties, fines or interests thereon) imposed against Lessor or Lessee on
any Equipment upon or with respect to the ownership of any Equipment or the
delivery, leasing, possession, exchange, use, operation, transportation, or
return of any Equipment hereunder or upon the rentals, receipts, earnings or
payments arising therefrom or under or with respect to this agreement.
Lessee and Lessor agree for income tax purposes that this
Lease is intended to be a true lease. In order to allow Lessor to properly file
its income tax return(s), Lessee shall provide to Lessor from time to time
information as Lessor may reasonably request.
11. EVENTS OF DEFAULT. If after expiration of any applicable grace
periods, (a) Lessee shall default in the payment of any rent or in making any
other payment hereunder when due, or (b) Lessee shall default in the payment
when due of any indebtedness of Lessee to Lessor arising independently of this
Lease, or (c) Lessee shall breach any warranty hereunder, or (d) Lessee shall
default in the performance of any other covenant herein, or (e) Lessee becomes
insolvent or makes an assignment for the benefit of creditors, or (f) Lessee
applies for or consents to the appointment of a receiver, trustee, conservator
or liquidator of Lessee or of all or a substantial part of the assets of Lessee,
or if such receiver, trustee, conservator or liquidator is appointed without the
application or consent of Lessee, or (g) a petition is filed by or against
Lessee under any bankruptcy law providing for the relief of creditors, or (h) if
Lessee shall permit any lien or encumbrance, other than a lien or encumbrance of
Lessor, to remain on the Equipment for a period of thirty (30) days, or (i) if
Lessee attempts to remove (unless Lessor has consented to such removal in
writing), sell, transfer, sublet or part with possession of the Equipment, or
any of it, or (j) if Lessee defaults under the terms of that certain Sublease
entered into on even date herewith by and between Lessor and Lessee (the
"Sublease"), or (k) if Lessee permits the Equipment to be improperly operated
and/or maintained or used, then, to the extent permitted by applicable law,
Lessor shall have the right to exercise any one or more of the remedies as
provided in Paragraph 12 below.
12. LESSOR'S REMEDIES. In the case of any Default by Lessee hereunder,
Lessor may, at any time thereafter, terminate this Lease and retake possession
of the Equipment and/or declare the entire amount of unpaid total rent for the
balance of the term of this Lease due and payable, whereupon the same shall
become immediately due and payable, and (a) retain all prior payments of rent
and the Equipment, or (b) retain all prior payments of rent and sell the
Equipment at public or private sale with notice to Lessee, with or without
having the Equipment at the sale, and the proceeds of such sale, less expenses
of retaking, storage, repairing and reasonable attorney's fees shall be applied
to the payment of the unpaid total rent for the balance of the term of this
Lease, Lessee remaining liable for the balance of the unpaid total rent. Lessee
shall be liable for any and all expenses Lessor may incur in connection with the
enforcement of any of its remedies herein, including, but not limited to,
collection costs, court costs, and reasonable attorney's fees and costs before,
- 4 -
<PAGE>
during and after trial and at all appellate or bankruptcy proceedings.
All remedies of Lessor hereunder are cumulative and may to the extent
permitted by law be exercised concurrently or separately, and the exercise of
any one remedy shall not be deemed to be an exclusive election of such remedy
only or to preclude the exercise of any other remedy. No failure on the part of
Lessor to exercise, and no delay in exercising any right or remedy hereunder,
shall operate as a waiver thereof; nor shall any single or partial exercise by
Lessor of any right or remedy hereunder preclude any other or further exercise
of any right or remedy under this Lease or as permitted by applicable law or in
equity.
13. ASSIGNMENT OF EQUIPMENT. Without Lessor's prior written consent,
which consent may be withheld in the sole discretion of Lessor, Lessee shall not
(a) assign, transfer, pledge, hypothecate or otherwise dispose of this Lease,
the Equipment, or any interest therein, or (b) sublet or lend the Equipment or
any part of it or permit it to be used by anyone other than Lessee or Lessee's
employees or other than in the ordinary course of Lessee's business. Lessor may
not assign this Lease or grant a security interest in this Lease and/or the
Equipment, in whole or in part.
14. RETURN OF EQUIPMENT. Unless the Equipment becomes the property of
Lessee pursuant to the terms of paragraph 19 hereof, upon the termination or
expiration of the Term hereof, or otherwise when required by the terms of this
Lease, Lessee shall deliver to Lessor the Equipment in the same condition,
repair and working order as received, less normal depreciation and wear.
15. NOTICES. Any written notices or demand under this Agreement may be
given by one party hereto to the other by hand delivery or registered or
certified mail, return receipt requested, mailing it to the party at its address
as set forth above, or at such address as the party may provide in writing from
time to time. Notice or demand so mailed shall be effective when deposited in
the United States mail, duly addressed and with postage prepaid. Lessee shall
use the Equipment in a careful manner and shall comply with all laws relating to
its possession, use or maintenance. If more than one Lessee is named in this
lease, the liability of each shall be joint and several. Lessor may, at its
option, construe all covenants herein as conditions and all conditions herein
are covenants.
16. BROKERAGE: The parties each represent and warrant to the other that
they have not dealt with any real estate brokers, salesmen, agents or finders to
whom a brokerage commission is due in connection herewith. If a claim for
commissions in connection with this transaction is made by any broker, salesman
or finder claiming to have dealt through or on behalf of one of the parties
hereto ("INDEMNITOR"), Indemnitor shall indemnify the other party hereunder
("INDEMNITEE"), and Indemnitee's officers, directors, agents and
representatives, from and against all liabilities, damages, claims, costs, fees
and expenses whatsoever (including reasonable attorney's fees and court costs at
all trial and appellate levels) with respect to any such claim. Notwithstanding
anything contained in this Lease to the contrary, the provisions of this
paragraph shall survive the expiration or earlier termination of this Lease.
17. ENFORCEMENT COSTS. If any legal action or other proceeding is
brought for the enforcement of this Lease, or because of an alleged dispute,
breach, or default in connection
- 5 -
<PAGE>
with any provision of this Lease, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees, court costs, and all
expenses even if not taxable court costs (including, without limitation, all
such fees, costs, and expenses incident to arbitration, appellate, bankruptcy,
and post-judgment proceedings), incurred in the action or proceeding or any
appeal, in addition to any other relief to which the party or parties may be
entitled. Attorneys' fees include legal assistant time, expert witness fees,
investigative fees, administrative costs, and all other charges billed by the
Attorney to the prevailing party.
18. FINANCING STATEMENTS. Lessee authorizes Lessor to file a financing
statement covering this transaction in any and all jurisdictions which have
adopted the uniform Commercial Code and at Lessor's request, Lessee will join
Lessor in executing financing statements pursuant to the Uniform Commercial
Code. Lessee authorizes Lessor to file financing statements signed only by
Lessor in all jurisdictions where permitted by law. Even though it is
specifically understood and agreed that Lessor is the owner of the Equipment and
no financing statement is required, Lessor may at its discretion file a
financing statement for information purposes only.
19. PURCHASE OF EQUIPMENT. Provided that Lessee has paid to Lessor all
of the Rent required hereunder, and that the Lessee is not in default under this
Lease or the Sublease, then, in consideration of this Lease, Lessee acknowledges
and agrees on the Expiration Date to sell the Equipment to Lessee for Ten and
No/100 Dollars ($10.00). Upon such sale the Equipment shall become the property
of Lessee and Lessor will transfer to Lessee, without recourse, representation
or warranty (other than warranty of title), all of Lessors right, title and
interest, if any, in and to the Equipment. Lessee understands and agrees that
upon the occurrence of any default hereunder and/or termination of this Lease,
all of Lessee's rights under this paragraph, and Lessor's obligation to sell the
Equipment to Lessee, shall be terminated and null and void.
20. NO RECOURSE. Notwithstanding anything to the contrary in this
Lease, Lessor's maximum liability hereunder for the satisfaction of any remedy
Lessee may have hereunder or in connection herewith against Lessor shall not
exceed the then market value of the Equipment (excluding any liens or
encumbrances with respect thereto). Such exculpation of liability shall be
absolute without any exception whatsoever and shall survive termination of this
Lease.
21. INVALIDITY OF PROVISION: If any term or provision of this Sublease
or the application thereof to any person or circumstance shall, to any extent,
be invalid or unenforceable, the remainder of this Sublease or the application
of such term or provision to persons or circumstances other than those as to
which it is held invalid or unenforceable shall not be affected thereby and each
term and provision of this Sublease shall be valid and be enforceable to the
fullest extent permitted by law. This Sublease shall be construed in accordance
with the laws of the State of Tennessee.
22. SUCCESSORS AND ASSIGNS: All terms and provisions of this Lease to
be observed and performed by Lessee shall be applicable to and binding upon
Lessee's successors and assigns.
23. ATTORNEY'S FEES: If either party defaults in the performance of any
of the terms or provisions of this Lease and by reason thereof the other party
employs the services of an
- 6 -
<PAGE>
attorney to enforce performance of the covenants, or to perform any service
based upon defaults, then in any of said events the prevailing party shall be
entitled to receive from the other party reasonable attorneys fees and all
expenses and costs incurred by the prevailing party pertaining thereto
(including costs and fees relating to any appeal) and in enforcement of any
remedy.
24. MISCELLANEOUS: The terms Lessor and Lessee as herein contained
shall include singular and/or plural, masculine, feminine and/or neuter, heirs,
successors, personal representatives and/or assigns wherever the context so
requires or admits. Lessor and Lessee have participated fully in the negotiation
and preparation hereof, and, accordingly, this Lease shall not be more strictly
construed against either of the parties hereto. All Exhibits attached to this
Lease are hereby incorporated in and made a part hereof. Nothing in this Lease
shall be deemed to create a partnership or joint venture between Lessor and
Lessee, the parties intending their relationship hereunder to be solely that of
Lessor and Lessee.
25. ENTIRE AGREEMENT: This Lease contains the entire agreement between
the parties hereto and all previous negotiations leading hereto, and this Lease
may be modified only by an agreement in writing signed by Lessor and Lessee.
IN WITNESS WHEREOF, the parties hereto have signed, sealed and
delivered this Lease in several counterparts each of which shall be deemed an
original, but all constituting a single agreement, as of the day and year first
above written.
Witnesses: LESSOR:
ATLANTIS PLASTICS, INC.
By: /s/ JOHN GEARY
- ------------------------------ -------------------------------------
Name: John Geary
-----------------------------------
Title: Vice President and G.M.
- ------------------------------ ----------------------------------
[Corporate Seal]
SUBLESSEE:
II EAGLES PLASTICS, INC.
By: /s/ HOBART M. DERRICK & DON L. WYNE
- ------------------------------ -------------------------------------
Name: Hobart M. Derrick & Don L. Wyne
-----------------------------------
Title: Partners
- ------------------------------ ----------------------------------
[Corporate Seal]
- 7 -
<PAGE>
EXHIBIT "A"
EQUIPMENT LIST
- 8 -
<PAGE>
EXHIBIT "B"
PREMISES
- 9 -
EXHIBIT 10.6
ELEVENTH AMENDMENT TO CREDIT AGREEMENT
This Eleventh Amendment to Credit Agreement, dated as of November 3,
1997 (this "Agreement"), is between ATLANTIS PLASTICS, INC., a Florida
corporation ("Borrower"), and HELLER FINANCIAL, INC., a Delaware corporation in
its individual capacity as a Lender and in its capacity as agent for the Lenders
("Agent").
W I T N E S S E T H :
WHEREAS, Agent, Borrower and Lenders are parties to that certain Credit
Agreement dated as of February 22, 1993 (as heretofore amended, the "Credit
Agreement"). Capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Credit Agreement.
WHEREAS, the parties wish to amend the Credit Agreement as provided
herein.
NOW, THEREFORE, the parties agree as follows:
1. AMENDMENTS TO THE CREDIT AGREEMENT. Effective as of September 30,
1997, the Credit Agreement is amended as follows:
A. Subsection 6.2 is hereby amended by deleting such
subsection in its entirety and replacing it with the following:
"6.2 FIXED CHARGE COVERAGE. The Fixed Charge Coverage, on a
trailing twelve (12) Fiscal Month basis, shall not be less
than 0.75 for the Fiscal Quarters ending September 30, 1997
and thereafter."
B. Subsection 6.5 is hereby amended by deleting such
subsection in its entirety and replacing it with the following:
"6.5 EBIDAT. EBIDAT, on a trailing twelve (12) Fiscal Month
basis, shall not be less than the following for the respective
Fiscal Quarters:
FISCAL QUARTER ENDING
ON THE FOLLOWING DATES EBIDAT
September 30, 1997 $20,500,000
December 31, 1997
and thereafter $19,000,000"
1
<PAGE>
2. REPRESENTATIONS AND WARRANTIES. To induce Agent and Lenders to enter
into this Agreement, Borrower represents and warrants to Heller that:
(a) AUTHORITY AND BINDING EFFECT. The execution, delivery, and
performance by Borrower of this Agreement is within its corporate power, has
been duly authorized by all necessary corporate action (including, without
limitation, shareholder approval), has received all necessary government
approvals (if any shall be required), and does not and will not contravene or
conflict with any provision of law applicable to Borrower, the Certificate of
Incorporation or Bylaws of Borrower, or any order, judgment, or decree of any
court or other agency of government or any agreement, instrument, or document
binding upon Borrower; and the Credit Agreement as heretofore amended and as
amended as of the date hereof is the legal, valid, and binding obligation of
Borrower enforceable against Borrower in accordance with its terms.
(b) NO DEFAULT. No Default or Event of Default under the
Credit Agreement, as amended hereby, has occurred and is continuing.
3. MISCELLANEOUS.
(a) CAPTIONS. Section captions used in this Agreement are
for convenience only, and shall not affect the construction of this Agreement.
(b) GOVERNING LAW. This Agreement shall be a contract made
under and governed by the laws of the State of Illinois, without regard to
conflict of laws principles. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(c) COUNTERPARTS. This Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same Agreement.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon Agent, Borrower and Lenders and their respective successors and assigns,
and shall inure to the sole benefit of Agent, Borrower and Lenders and the
successors and assigns of Agent, Borrower and Lenders.
2
<PAGE>
(e) REFERENCES. Any reference to the Credit Agreement
contained in any notice, request, certificate, or other document executed
concurrently with or after the execution and delivery of this Agreement shall be
deemed to include this Agreement unless the context shall otherwise require.
(f) CONTINUED EFFECTIVENESS. Notwithstanding anything
contained herein, the terms of this Agreement are not intended to and do not
serve to effect a novation as to the Credit Agreement. The parties hereto
expressly do not intend to extinguish the Credit Agreement. Instead, it is the
express intention of the parties hereto to reaffirm the indebtedness created
under the Credit Agreement which is evidenced by the Notes and secured by the
Collateral. The Credit Agreement as amended hereby and each of the other Loan
Documents remains in full force and effect.
(g) COSTS, EXPENSES AND TAXES. Borrower affirms and
acknowledges that subsection 10.1 of the Credit Agreement applies to this
Agreement and the transactions and Agreements and documents contemplated
hereunder.
Delivered at Chicago, Illinois, as of the day and year first above
written.
ATLANTIS PLASTICS, INC.
By: /s/ PAUL RUDOVSKY
-------------------------------------
Name Printed: Paul Rudovsky
---------------------------
Title: Executive V.P., Finance & Administration
-----------------------------------------
HELLER FINANCIAL, INC.,
Individually and as Agent
By: /s/ DANIEL O'DONNELL
-------------------------------------
Name Printed: Daniel O'Donnell
---------------------------
Title: Senior Vice President
----------------------------------
3
<PAGE>
ACKNOWLEDGMENT
Each of Atlantis Molded Plastics, Inc., Atlantis Plastic Injection
Molding, Inc. (f/k/a Cyanede Plastics, Inc.), Atlantis Plastic Films, Inc. and
Pierce Plastics, Inc. hereby acknowledges and consents to the terms of this
Agreement and hereby affirms, ratifies and confirms all of the terms and
provisions of the such entity's Guaranty in favor of Agent and Lenders.
ATLANTIS MOLDED PLASTICS, INC.
By: /s/ PAUL RUDOVSKY
-------------------------------------
Name Printed: Paul Rudovsky
---------------------------
Title: Executive V.P., Finance & Administration
-----------------------------------------
ATLANTIS PLASTIC INJECTION
MOLDING, INC.
By: /s/ PAUL RUDOVSKY
-------------------------------------
Name Printed: Paul Rudovsky
---------------------------
Title: Executive V.P., Finance & Administration
-----------------------------------------
ATLANTIS PLASTIC FILMS, INC.
By: /s/ PAUL RUDOVSKY
-------------------------------------
Name Printed: Paul Rudovsky
---------------------------
Title: Executive V.P., Finance & Administration
-----------------------------------------
PIERCE PLASTICS, INC.
By: /s/ PAUL RUDOVSKY
-------------------------------------
Name Printed: Paul Rudovsky
---------------------------
Title: Executive V.P., Finance & Administration
-----------------------------------------
4
EXHIBIT 10.7
THIRD AMENDMENT TO CREDIT AGREEMENT
This Third Amendment to Credit Agreement, dated to be effective as of
June 30, 1997 (this "Agreement") is by and between ATLANTIS PLASTICS, INC., a
Florida corporation and ATLANTIS PLASTICS INJECTION MOLDING, INC., a Kentucky
corporation (collectively, the "Borrower"), and NATIONAL CITY BANK, NORTHEAST
(the "Bank").
RECITALS
A. Borrower and Bank are parties to that certain Credit Agreement
dated as of May 19, 1995 and amended the same on September 30,
1995 and December 31, 1995 (the "Credit Agreement").
Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Credit Agreement.
B. The parties hereto wish to amend the Credit Agreement, as
provided herein.
NOW THEREFORE, in consideration of the foregoing, the covenants and
conditions contained herein, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Amendment to the Credit Agreement. The Credit Agreement is
amended as follows:
Section 2B.08 is amended and restated in its entirety to read
as follows:
2B.08 BORROWING BASE - The Borrowing Base at any given time
shall be the aggregate of
(a) an amount equal to eighty-five percent (85%) of the net
book value (after deducting any discount or other
incentive for early payment but without deducting any
valuation reserve) of the Eligible Receivables, plus
(b) an amount equal to fifty percent (50%) of the Eligible
Inventory,
all as reasonably determined by Bank either on the basis of
the then most recent Borrowing Base Report furnished by
Borrower to Bank pursuant to subsection 3A.01 or on the basis
of the then most recent field audit (if any) made or other
information received by Bank.
Section 3B.02 of the Credit Agreement is amended and restated
in its entirety to read as follows:
3B.02 FIXED CHARGE COVERAGE - Fixed Charge Coverage on a
trailing twelve (12) Fiscal Month basis, shall not be less
than the following:
March 31, 1996, June 30, 1996 and September 30, 1996 .70
December 31, 1996 .90
June 30, 1997 .90
September 30, 1997 .80
End of any fiscal quarter thereafter 1.05
Section 3B.05 of the Credit Agreement is amended and restated
in its entirety to read as follows:
<PAGE>
3B.05 EBIDAT - EBIDAT, on a trailing twelve (12) Fiscal Month
basis, shall not be less than the following for the following
respective fiscal quarters:
TRAILING TWELVE-FISCAL MONTH
PERIOD ENDING ON THE LAST DAY
OF EACH FISCAL QUARTER ENDING
ON THE FOLLOWING DATES EBIDAT
December 31, 1995 $18,500,000.00
March 31, 1996 $16,000,000.00
June 30, 1996 $19,000,000.00
September 30, 1996 $22,900,000.00
December 31, 1996 $23,248,000.00
March 31, 1997 $23,500,000.00
June 30, 1997 $22,000,000.00
September 30, 1997 $20,500,000.00
December 31, 1997 $24,202,000.00
2. Representations and Warranties. To induce Bank to enter
into this Agreement, Borrower represents and warrants to Bank that:
(a) Authority and Binding Effect. The execution,
delivery, and performance by Borrower of this Agreement is within its
corporate power, has been duly authorized by all necessary corporate
action (including, without limitation, shareholder approval), has
received all necessary government approvals (if any shall be required),
and does not and will not contravene or conflict with any provision of
law applicable to Borrower, the Articles of Incorporation or Bylaws of
Borrower, or any order, judgment, or decree of any court or other
agency of government or any agreement, instrument, or document binding
upon Borrower, and the Credit Agreement as heretofore amended as of the
date hereof is the legal, valid, and binding obligation of Borrower
enforceable against Borrower in accordance with its terms.
(b) No Default. No Default or Event of Default under
the Credit Agreement has occurred and is continuing.
(c) Warranties and Representations. The warranties
and representations of Borrower contained in this Agreement, the Credit
Agreement, and the Financing Agreements, shall be true and correct as
of the date hereof, with the same effect as though made on such date
except to the extent that such representations and warranties expressly
relate solely to an earlier date, in which such representations or
warranties were true and correct as of such earlier date.
3. Miscellaneous.
(a) Captions. Section captions used in this Agreement
are for convenience only, and shall not affect the construction of this
Agreement.
(b) Governing Law. This Agreement shall be a contract
made under and governed by the laws of the State of Ohio, without
regard to conflict of laws principals. Whenever possible, each
provision of this Agreement shall be interpreted in such a manner as to
be effective and valid under applicable law, but if any provision of
this Agreement shall be prohibited by or invalid under such law, such
provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
<PAGE>
(c) Counterparts. This Agreement may be executed in
counterparts, each of which counterparts shall be deemed to be an
original, but all of such counterparts shall together constitute but
one and the same Agreement.
(d) Successors and Assigns. This Agreement shall be
binding upon Borrower and Bank and their respective successors and
assigns, and shall inure to the sole benefit of Borrower and Bank and
the successors and assigns of Borrower and Bank.
(e) References. Any reference to the Credit Agreement
or the Financing Agreements contained in any notice, request,
certificate, or other document executed concurrently with or after the
execution and delivery of this Agreement shall be deemed to include
this Agreement unless the context shall otherwise require.
(f) Continued Effectiveness. Notwithstanding anything
contained herein, the terms of this Agreement are not intended to and
do not serve to effect a novation as to the Credit Agreement. The
parties hereto expressly do not intend to extinguish the Credit
Agreement. Instead, it is the express intention of the parties hereto
to reaffirm the indebtedness created under the Credit Agreement which
is evidenced by the notes provided for therein and secured by the
Collateral. The Credit Agreement and each of the Loan Documents remain
in full force and effect.
Delivered at Youngstown, Ohio, on October 31, 1997.
ATLANTIS PLASTICS, INC.
(a Florida corporation)
By: /s/ PAUL RUDOVSKY
-------------------------------------
Name Printed: Paul Rudovsky
---------------------------
Title: Executive V.P., Finance & Administration
-----------------------------------------
ATLANTIS PLASTICS INJECTION
MOLDING, INC.
(a Kentucky corporation)
By: /s/ PAUL RUDOVSKY
-------------------------------------
Name Printed: Paul Rudovsky
---------------------------
Title: Executive V.P., Finance & Administration
-----------------------------------------
NATIONAL CITY BANK, NORTHEAST
By: /s/ BRIAN V. KOCHUNAS
------------------------------
Printed Name: Brian V. Kochunas
--------------------
Title: Vice President
--------------------------
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<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 6,804
<SECURITIES> 0
<RECEIVABLES> 29,495
<ALLOWANCES> 790
<INVENTORY> 17,169
<CURRENT-ASSETS> 57,614
<PP&E> 115,518
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<TOTAL-ASSETS> 167,666
<CURRENT-LIABILITIES> 24,754
<BONDS> 103,233
0
0
<COMMON> 707
<OTHER-SE> 30,869
<TOTAL-LIABILITY-AND-EQUITY> 167,666
<SALES> 193,748
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<CGS> 165,484
<TOTAL-COSTS> 165,484
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<INTEREST-EXPENSE> 8,616
<INCOME-PRETAX> (25)
<INCOME-TAX> 432
<INCOME-CONTINUING> (457)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (457)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
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