<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 17, 1996.
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
GIBRALTAR STEEL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 3316 16-1445150
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
3556 LAKE SHORE ROAD
P.O. BOX 2028
BUFFALO, NEW YORK 14219-0228
(716) 826-6500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
BRIAN J. LIPKE
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
GIBRALTAR STEEL CORPORATION
3556 LAKE SHORE ROAD
P. O. BOX 2028
BUFFALO, NEW YORK 14219-0228
(716) 826-6500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
GERALD S. LIPPES, ESQ. ALAN G. STRAUS, ESQ.
ROBERT J. OLIVIERI, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM
LIPPES, SILVERSTEIN, MATHIAS & WEXLER 919 THIRD AVENUE
LLP NEW YORK, NEW YORK 10022
700 GUARANTY BUILDING (212) 735-3000
28 CHURCH STREET
BUFFALO, NEW YORK 14202-3950
(716) 853-5100
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER SHARE(1) PRICE(1) FEE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock ($.01 par
value)................ 3,450,000 shares(2) $19.125 $65,981,250 $22,753
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based upon the average of the high and low prices
of the Common Stock as quoted on the NASDAQ Stock Market on May 14, 1996.
(2) Includes up to 450,000 shares which may be issued upon exercise of the
Underwriters' over-allotment option.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
GIBRALTAR STEEL CORPORATION
FORM S-1
REGISTRATION STATEMENT
CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Forepart of the Registration Statement;
Outside Front Cover Page of the Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front and Outside Back Cover Pages
of the Prospectus
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Prospectus Summary; Summary Financial and
Operating Data; Risk Factors; Selected
Financial Data; Unaudited Pro Forma
Financial Data
4. Use of Proceeds............................ Use of Proceeds; Management's Discussion
and Analysis of Financial Condition and
Results of Operations
5. Determination of Offering Price............ Risk Factors; Underwriting
6. Dilution................................... Not Applicable
7. Selling Security Holders................... Principal and Selling Stockholders
8. Plan of Distribution....................... Underwriting
9. Description of Securities to be
Registered................................. Capitalization; Description of Capital
Stock; Shares Eligible for Future Salep
10. Interests of Named Experts and Counsel..... Legal Matters; Certain Transactions
11. Information with Respect to the
Registrant................................. Prospectus Summary; Risk Factors; Use of
Proceeds; Capitalization; Price Range of
Common Stock; Dividend Policy; Selected
Financial Data; Unaudited Pro Forma
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Transactions;
Principal and Selling Stockholders;
Description of Capital Stock; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
MAY 17, 1996
PROSPECTUS
3,000,000 SHARES
GIBRALTAR STEEL CORPORATION [LOGO OF GIBRALTAR]
COMMON STOCK
($.01 PAR VALUE)
Of the 3,000,000 shares of Common Stock, $.01 par value per share ("the Common
Stock"), of Gibraltar Steel Corporation ("the Company") being offered hereby,
2,000,000 shares are being issued and sold by the Company and 1,000,000 shares
are being sold by certain stockholders of the Company (the "Selling
Stockholders"). The Company will not receive any proceeds from the sale of
shares by the Selling Stockholders. See "Principal and Selling Stockholders".
The Common Stock is traded on the NASDAQ Stock Market ("NASDAQ") under the
symbol "ROCK". On May 16, 1996, the last reported sale price of the Common
Stock was $20.25 per share. See "Price Range of Common Stock".
SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO
PUBLIC DISCOUNT COMPANY(1) SELLING STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share................ $ $ $ $
Total(2)................. $ $ $ $
- --------------------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses payable by the Company, estimated at $ .
(2) The Company has granted the Underwriters a 30-day option to purchase up to
an aggregate of 450,000 shares of Common Stock at the Price to Public, less
the Underwriting Discount, solely to cover over-allotments, if any. If the
Underwriters exercise such option in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting".
The shares of Common Stock are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the shares of Common Stock will be made at the
office of Salomon Brothers Inc, Seven World Trade Center, New York, New York,
or through the facilities of The Depository Trust Company, on or about ,
1996.
SALOMON BROTHERS INC SMITH BARNEY INC.
The date of this Prospectus is , 1996.
<PAGE>
[MAP]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON NASDAQ, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK
ON NASDAQ IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF
1934. SEE "UNDERWRITING".
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus. Investors should carefully consider the
information set forth under "Risk Factors". Unless otherwise indicated, all
information in this Prospectus assumes no exercise of the over-allotment
option. Unless the context otherwise requires, the "Company" refers to
Gibraltar Steel Corporation and its subsidiaries.
THE COMPANY
Gibraltar Steel Corporation ("the Company"), through its subsidiaries, is a
leading processor of high value-added steel products. The Company's primary
focus is on a broad range of products and services based on cold-rolled strip
and coated sheet steel, and also heavy duty steel strapping. To complement
these products and services, the Company offers specialized metallurgical heat
treating services, operates two state-of-the-art materials management
facilities, and has an equity interest in two commercial steel pickling
operations.
Processed cold-rolled strip steel products comprise a segment of the cold-
rolled sheet steel market that is defined by more precise widths, improved
surface conditions and tighter gauge tolerances than are supplied by primary
manufacturers of flat-rolled steel products. The Company's cold-rolled strip
steel products are sold to manufacturers in the automotive, hand tool,
appliance and hardware industries, as well as to other customers who demand
critical specifications in their raw material needs. The Company's coated steel
products, which include galvanized, galvalume and pre-painted sheet products,
are sold primarily to the commercial and residential metal building industry
for roofing and siding applications. The Company's strapping products are used
in heavy duty industrial applications. Heat treating, which refines the
metallurgical properties of steel and other metals, is required to achieve
critical performance characteristics in a wide variety of consumer and
industrial applications.
The Company attributes its operating and financial success to the aggressive
pursuit of its business strategy, the key elements of which include: a focus on
high value-added, high margin products and services; a commitment to internal
growth and continuous cost reductions; a commitment to external expansion
through the acquisition of related businesses with long-term growth potential;
and a dedication to quality, service and customer satisfaction.
The pursuit of its business strategy has allowed the Company to limit the
impact of the cyclical nature of the steel industry and has enabled the Company
to achieve pre-tax profits in every year since 1976. In addition, over the past
five years the Company has increased its revenues and pre-tax profits by
compound annual growth rates of approximately 22% and 38%, respectively.
In implementing its business strategy, the Company has:
. Acquired the Wm. R. Hubbell Steel Corporation ("Hubbell Steel") in April
1995, a leading national supplier and processor of coated sheet steel
products for the commercial and residential metal building industry.
Hubbell Steel contributed approximately $63 million to the Company's
revenues in 1995.
. Acquired Carolina Commercial Heat Treating, Inc. ("CCHT") in February
1996, a leading metallurgical heat treater in the southeastern United
States. CCHT had 1995 revenues from processing customer-owned parts and
materials of approximately $21.5 million.
. Started up a new cold-rolled processing facility in Chattanooga,
Tennessee in late 1994, increasing the Company's customer base and
product distribution in the southeastern United States. This facility
has a design capacity of approximately 84,000 tons per year.
. Opened a second state-of-the-art materials management facility in
Woodhaven, Michigan in the second half of 1995, which provides
dedicated, specialized inventory management services and has a design
throughput capacity of approximately 600,000 tons per year.
3
<PAGE>
. Through its joint venture, started up a second steel pickling operation
in the second half of 1995, which added over 400,000 tons of annual
pickling capacity.
. During the second quarter of 1996, committed to substantially increase
its cold-rolling capacity at its Cleveland operation through the
construction of a new mill. The Company believes that this new mill,
with a design capacity of approximately 120,000 tons per year and a
maximum rolling width of 50 inches, will be the widest mill for the
production of cold-rolled strip steel in North America, yielding
substantial production efficiencies. Start-up of the new mill is
expected in late 1997.
The Company was incorporated under the laws of the State of Delaware in 1993.
The Company's executive offices are located at 3556 Lake Shore Road, Buffalo,
New York 14219, and its telephone number is (716) 826-6500.
THE OFFERING
<TABLE>
<S> <C>
Common Stock being offered by:
The Company....................... 2,000,000 shares
The Selling Stockholders.......... 1,000,000 shares
----------------
Total........................... 3,000,000 shares
================
Common Stock to be outstanding after
the offering......................... 12,173,900 shares(1)
Use of proceeds from the sale of
Common Stock by the Company.......... To repay outstanding bank indebtedness.
See "Use of Proceeds".
NASDAQ symbol......................... ROCK
</TABLE>
- --------
(1) Excludes (i) an aggregate of 400,000 shares of Common Stock reserved for
issuance under the Non-Qualified Plan, of which 200,000 shares were subject
to outstanding options as of March 31, 1996 at a weighted average exercise
price of $10.75 per share, (ii) an aggregate of 600,000 shares of Common
Stock reserved for issuance under the Incentive Plan (of which 200,000
shares are subject to stockholder approval) of which 270,000 shares were
subject to outstanding options as of March 31, 1996 at a weighted average
exercise price of $10.81 per share, and (iii) an aggregate of 100,000
shares of Common Stock reserved for issuance under the Restricted Stock
Plan. See "Management--Employee Plans".
4
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31,(a) ENDED MARCH 31,
------------------------------------------------ -----------------
1991 1992 1993 1994 1995(b) 1995 1996(c)
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA(d):
Net Sales............... $128,982 $145,680 $167,883 $200,142 $282,833 $58,765 $82,034
Cost of Sales........... 110,222 120,311 138,559 166,443 240,370 48,579 68,005
-------- -------- -------- -------- -------- ------- -------
Gross Profit............ 18,760 25,369 29,324 33,699 42,463 10,186 14,029
Selling, General and
Administrative......... 11,924 14,915 16,390 17,520 22,095 5,090 7,354
-------- -------- -------- -------- -------- ------- -------
Income from Operations.. 6,836 10,454 12,934 16,179 20,368 5,096 6,675
Other Income (Expense):
Interest Expense....... (2,262) (1,873) (1,621) (1,374) (3,984) (559) (1,073)
Other Income........... -- -- 200 -- -- -- --
-------- -------- -------- -------- -------- ------- -------
(2,262) (1,873) (1,421) (1,374) (3,984) (559) (1,073)
-------- -------- -------- -------- -------- ------- -------
Income Before Taxes..... 4,574 8,581 11,513 14,805 16,384 4,537 5,602
Income Taxes(e)......... 454 339 6,300 5,996 6,662 1,860 2,268
-------- -------- -------- -------- -------- ------- -------
Net Income............. $ 4,120 $ 8,242 $ 5,213 $ 8,809 $ 9,722 $ 2,677 $ 3,334
======== ======== ======== ======== ======== ======= =======
Net Income Per Share... $ .87 $ .96 $ .26 $ .33
======== ======== ======= =======
Pro Forma Net
Income(f).............. $ 3,278 $ 5,853 $ 7,337
======== ======== ========
Pro Forma Net Income Per
Share(g)............... $ .32 $ .58 $ .72
======== ======== ========
OTHER DATA:
Capital
Expenditures(h)........ $ 3,478 $ 5,750 $ 10,468 $ 16,171 $ 14,504 $ 5,527 $ 3,262
Depreciation and
Amortization........... 3,217 3,226 3,399 3,445 4,538 924 1,395
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
MARCH 31,
1994 1995 1996
-------- ------- ---------
<S> <C> <C> <C>
BALANCE SHEET DATA(i):
Current Assets....................................... $ 70,552 $86,995 $101,472
Current Liabilities.................................. 22,028 29,480 40,048
Total Assets......................................... 126,380 167,423 208,370
Total Debt........................................... 38,658 59,054 82,847
Stockholders' Equity................................. 60,396 70,244 73,578
</TABLE>
- --------
(a) One of the Company's subsidiaries historically had a fiscal year end of
October 31. Effective with the year ended December 31, 1993, such entity
adopted a calendar year end. See Note 1 to the Consolidated Financial
Statements (as hereinafter defined). As a result of such change, other
income for the year ended December 31, 1993 includes $200,000 of net income
attributable to November and December 1992 for such entity.
(b) Includes the results of Hubbell Steel from its acquisition on April 3,
1995.
(c) Includes the results of CCHT from its acquisition on February 14, 1996.
(d) See "Selected Financial Data" for unaudited pro forma presentations of the
results of operations had the following occurred on January 1, 1995: (i)
the consummation of the acquisitions of both Hubbell Steel and CCHT and
borrowings to finance such acquisitions; and (ii) the consummation of this
offering and the application of the estimated net proceeds therefrom to
reduce indebtedness and the related reduction in interest expense.
(e) Includes $5,100,000 for reinstatement of deferred income taxes upon
termination of the S Corporation status of certain of the Company's
subsidiaries during the year ended December 31, 1993.
(f) Certain of the Company's subsidiaries historically were treated as S
Corporations for federal and certain state income tax purposes. Immediately
prior to consummation of the Company's initial public offering in November
1993, such S Corporation status was terminated. Pro forma net income
assumes that each of the Company's subsidiaries had been subject to
corporate income taxation as a C Corporation during periods prior to
November 1993. See "Unaudited Pro Forma Financial Data".
5
<PAGE>
(g) Pro forma net income per share has been computed by dividing pro forma net
income by the pro forma weighted average number of common shares
outstanding during 1993. Such pro forma weighted average number of common
shares was computed giving effect to the number of shares the Company would
have had to issue to retire $15,576,000 of indebtedness and pay an S
Corporation distribution of $10,485,000 to the pre-public offering
stockholders.
(h) Excludes expenditures for acquisition of Hubbell Steel during 1995 of
$20,859,000, net of cash acquired, and expenditures for acquisition of CCHT
during the first three months of 1996 of $23,715,000, net of cash acquired.
(i) See "Capitalization" for unaudited pro forma balance sheet data assuming
that consummation of this offering and application of the estimated net
proceeds therefrom to reduce indebtedness had occurred on March 31, 1996.
6
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, prospective
purchasers should evaluate the following risk factors.
IMPACT OF CHANGING STEEL PRICES
The principal raw material used by the Company is flat-rolled carbon steel,
which the Company purchases from certain primary steel producers. The steel
industry as a whole is very cyclical, and at times pricing in the steel
industry can be volatile due to numerous factors beyond the control of the
Company, including general economic conditions, labor costs, competition,
import duties, tariffs and currency exchange rates. This volatility can
significantly affect the Company's raw material costs.
Steel processing companies are required to maintain substantial inventories
of steel to accommodate the short lead times and just-in-time delivery
requirements of their customers. Accordingly, the Company purchases steel on a
regular basis in an effort to maintain its inventory at levels that it
believes to be sufficient to satisfy the anticipated needs of its customers
based upon historic buying practices and market conditions. In an increasing
price environment, competitive conditions will determine how much of the steel
price increases can be passed on to the Company's customers. If the Company is
unable to pass on to its customers some or all of future steel price
increases, the Company's business, financial condition and results of
operations could be adversely affected.
DEPENDENCE ON AUTOMOTIVE INDUSTRY; CYCLICALITY OF DEMAND
Sales of the Company's products for use in the automotive industry accounted
for approximately 58%, 61% and 51% of the Company's net sales in 1993, 1994
and 1995, respectively, and approximately 48% of net sales for the first three
months of 1996. Such sales include sales directly to auto manufacturers and to
manufacturers of automotive components and parts. The automotive industry
experiences significant fluctuations in demand based on numerous factors such
as general economic conditions and consumer confidence. The automotive
industry is also subject, from time to time, to labor problems. The contracts
between the United Automobile Workers ("UAW") and the Canadian Auto Workers
("CAW") and General Motors Corporation ("GM"), Chrysler Corporation
("Chrysler") and The Ford Motor Company ("Ford") in both the United States and
Canada expire in September 1996 and there can be no assurance that new
agreements will be ratified by the UAW and CAW without a work stoppage. Any
prolonged disruption in business arising from such a work stoppage could have
a material adverse effect on the Company's results of operations.
The Company also sells its products to customers in other industries that
experience cyclicality in demand for products, such as the steel, appliance,
metal building and office equipment industries. None of these industries
individually represented more than 10% of the Company's annual net sales in
1995, with the exception of the metal building industry, which accounted for
approximately 18% of net sales in 1995 and 19% in the first quarter of 1996.
Downturns in demand from these industries, or in the prices that the Company
can realize from sales of its products to customers in these industries, could
have a material adverse effect on the Company's business, financial condition
and results of operations.
RELIANCE ON CERTAIN CUSTOMERS
The Company's largest customer is GM, which accounted for approximately 16%,
14% and 11% of the Company's net sales for 1993, 1994 and 1995, respectively,
and approximately 10% of net sales for the first three months of 1996. The
loss of GM as a customer or a significant reduction in the business generated
by GM would have a material adverse effect on the Company's results of
operations. Sales to GM are made through various subsidiaries, divisions and
affiliates that the Company believes act independently in their purchasing
decisions. Accordingly, the Company believes that it is unlikely that it would
lose all of the business generated by GM. There can be no assurance, however,
that the historic levels of business from GM will be maintained.
7
<PAGE>
No other customer accounted directly or indirectly for more than 10% of the
Company's annual net sales in 1993, 1994 or 1995; however, the Company's
materials management facilities provide services almost exclusively to Ford.
If Ford terminated or significantly decreased its use of the materials
management facilities, the Company might not be able to fully utilize these
facilities.
RISKS ASSOCIATED WITH FUTURE EXPANSION
Historically, the Company has grown through a combination of internal growth
and external expansion through acquisitions and a joint venture. The Company
intends to actively pursue its growth strategy in the future and currently has
certain new projects and facilities in various stages of development. See
"Business--Business Strategy". The expansion of an existing facility or
construction of a new facility could have adverse effects on the Company's
results of operations due to the impact of start-up costs and the potential
for under-utilization in the start-up phase of a facility. A substantial
portion of the Company's recent growth has been the result of its ability to
acquire businesses and successfully integrate them into the operations of the
Company. There can be no assurance that suitable acquisition candidates will
continue to be available or, if they are, that the Company will have
sufficient qualified personnel and financial resources available when needed
to successfully complete any acquisition and integration of these businesses
into its operations. Acquisitions could divert a disproportionate amount of
management time and attention. Moreover, the incurrence of additional
indebtedness to pay for expansion costs or acquisition costs could adversely
affect the Company's liquidity and financial stability. The issuance of Common
Stock to effect acquisitions could result in dilution to the Company's
stockholders. There can be no assurance that any new facility or operation
would be profitable.
COMPETITION
The steel processing market is highly competitive. The Company competes with
a number of other steel processors, some of which have greater financial and
other resources than the Company. The Company competes primarily on the basis
of the precision and range of achievable tolerances, quality, price and the
ability to meet delivery schedules dictated by customers. See "Business--
Competition".
CONTROL BY CERTAIN STOCKHOLDERS; ANTI-TAKEOVER PROVISIONS
Upon the consummation of this offering, 51.7% of the outstanding Common
Stock (including shares of Common Stock issuable under options granted which
are exercisable within 60 days) of the Company (approximately 49.8% if the
Underwriters' over-allotment option is exercised in full) will be owned by
Brian J. Lipke, Curtis W. Lipke, Neil E. Lipke and Eric R. Lipke, each an
executive officer of the Company, and Meredith A. Lipke-de Blok, an employee
of the Company (collectively, the "Lipke Family"), all of whom are siblings;
certain trusts for the benefit of each of them; and a trust under the will of
Kenneth E. Lipke, for the benefit of his widow, Patricia K. Lipke (the "Lipke
Trusts"). See "Management". As a result, the Lipke Family will continue to
have the effective power to elect the Company's Board of Directors and to
approve all actions requiring stockholder approval. See "Principal and Selling
Stockholders" and "Description of Capital Stock". In addition, certain
provisions of the Company's Certificate of Incorporation and By-Laws, as well
as provisions of the Delaware General Corporation Law, could have the effect
of deterring takeovers or delaying or preventing changes in control or
management of the Company. See "Description of Capital Stock".
DEPENDENCE ON KEY MANAGEMENT
The success of the Company's business is dependent upon the management and
leadership skills of Brian J. Lipke, the Company's Chairman of the Board,
President and Chief Executive Officer, and
8
<PAGE>
other members of the Company's senior management team. The loss of any of
these individuals or an inability to attract, retain and maintain additional
personnel could adversely affect the Company. There can be no assurance that
the Company will be able to retain its existing senior management personnel or
to attract additional qualified personnel. For a discussion of the terms of
the Company's employment agreement with Brian J. Lipke, see "Management--
Employment Agreement".
HOLDING COMPANY STRUCTURE AND RELIANCE ON DISTRIBUTIONS FROM SUBSIDIARIES
The Company has no direct business operations other than its ownership of
the capital stock of its subsidiaries. As a holding company, the Company is
dependent on dividends or other intercompany transfers of funds from its
subsidiaries to enable it to pay dividends and to meet its direct obligations.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of shares of Common Stock by the Company or certain
stockholders could adversely affect the prevailing market price of the Common
Stock. The Company, each of its directors and executive officers, the Selling
Stockholders and certain other stockholders of the Company have entered into
"lock-up" agreements ("Lock-up Agreements") with Salomon Brothers Inc, as
representative of the Underwriters (the "Representative"), whereby the Company
and such directors, executive officers and stockholders have agreed not to
offer, sell, contract to sell or otherwise dispose of, directly or indirectly,
or announce the offering of, any Common Stock or securities convertible into
or exchangeable or exercisable for shares of Common Stock, except for the
shares of Common Stock offered hereby, and shares issuable pursuant to
employee benefit plans, for a period of 90 days from the date of this
Prospectus, without the prior written consent of the Representative. Sales of
substantial amounts of Common Stock in the public market, or the perception
that such sales may occur, could have a material adverse effect on the market
price of the Common Stock. See "Shares Eligible for Future Sale."
ENVIRONMENTAL COMPLIANCE
The Company's processing centers and manufacturing facilities are subject to
many federal, state and local requirements relating to the protection of the
environment, and the Company has made and will continue to make, expenditures
to comply with such provisions. The Company believes that its facilities are
in material compliance with these laws and regulations and does not believe
that future compliance with such laws and regulations will have a material
adverse effect on its results of operations or financial condition. If
environmental laws become more stringent, the Company's environmental capital
expenditures and costs for environmental compliance could increase in the
future. In addition, due to the possibility of unanticipated factual or
regulatory developments, the amount and timing of future environmental
expenditures could vary substantially from those currently anticipated.
Moreover, certain of the Company's facilities have been in operation for many
years and, over such time, the Company and other predecessor operators of such
facilities have generated and disposed of wastes which are or may be
considered hazardous. Accordingly, it is possible that additional
environmental liabilities may arise in the future. The Company does not have
sufficient information to estimate its potential liability in connection with
any potential future remediation; however, the Company believes that if any
such remediation were required, it would occur over an extended period of
time.
The Company has been named as a potentially responsible party with respect
to the disposal of hazardous wastes at one site. Based on the facts currently
known to the Company, management expects that the costs to the Company of
remedial actions at this site will not have a material adverse effect on the
Company's results of operations or financial condition. See "Business--
Governmental Regulation".
9
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from this offering, estimated
to be approximately $37.6 million based upon an assumed public offering price
of $20.25 per share and after deduction of estimated underwriting discounts,
commissions and expenses associated with this offering, will be used to repay
certain existing indebtedness under the Credit Facility (described below), a
substantial portion of which was incurred to finance its recent acquisitions.
The Company will not receive any proceeds from the sale of shares by the
Selling Stockholders.
The Company has a $125 million revolving credit facility (the "Credit
Facility") with Chase Manhattan Bank, N.A., Fleet Bank and Mellon Bank, N.A.
which matures in November 1997. The amounts outstanding under the Credit
Facility bear interest either at various amounts above the London InterBank
Offered Rate ("LIBOR") or at the agent bank's prime rate, as selected by the
Company. At March 31, 1996, amounts outstanding under the Credit Facility were
approximately $75.1 million bearing interest at a weighted average interest
rate of 6.2%. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources".
The Credit Facility is secured by substantially all of the accounts
receivable, inventory, equipment and fixtures (but not real property) of the
Company now owned or hereafter acquired. The Credit Facility contains
covenants restricting the ability of the Company to make capital expenditures,
incur additional indebtedness, sell a substantial portion of its assets, merge
or make acquisitions or investments in an amount in excess of $10.0 million,
and obligates the Company to meet certain financial requirements. In addition,
the Credit Facility contains a restriction on Gibraltar Steel Corporation's
ability to pay dividends.
10
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1996 (i) on an actual basis, and (ii) as adjusted to give effect to this
offering and the application of the estimated net proceeds received by the
Company to repay indebtedness under the Credit Facility. See "Use of
Proceeds". This table should be read in conjunction with the Consolidated
Financial Statements and the notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------
ACTUAL AS ADJUSTED
-------- -----------
(AMOUNTS IN
THOUSANDS)
<S> <C> <C>
Short-Term Debt:
Current portion of long-term debt....................... $ 1,215 $ 1,215
-------- --------
Total Short-Term Debt................................. $ 1,215 $ 1,215
======== ========
Long-Term Debt, Net of Current Portion.................... $ 81,632 $ 44,007
Stockholders' Equity:
Common stock, $.01 par value, 50,000,000 shares
authorized, 10,173,900 shares issued and outstanding
(12,173,900 shares issued and outstanding as
adjusted)(a)........................................... 102 122
Additional paid-in capital.............................. 28,803 66,408
Retained earnings....................................... 44,673 44,673
-------- --------
Total Stockholders' Equity............................ 73,578 111,203
-------- --------
Total Capitalization.................................. $155,210 $155,210
======== ========
</TABLE>
- --------
(a) Excludes (i) an aggregate of 400,000 shares of Common Stock reserved for
issuance under the Non-Qualified Plan, of which 200,000 shares were
subject to outstanding options as of March 31, 1996 at a weighted average
exercise price of $10.75 per share, (ii) an aggregate of 600,000 shares of
Common Stock reserved for issuance under the Incentive Plan (of which
200,000 shares are subject to stockholder approval) of which 270,000
shares were subject to outstanding options as of March 31, 1996 at a
weighted average exercise price of $10.81 per share and (iii) an aggregate
of 100,000 shares of Common Stock reserved for issuance under the
Restricted Stock Plan. See "Management--Employee Plans".
11
<PAGE>
PRICE RANGE OF COMMON STOCK
The Common Stock is traded on NASDAQ under the symbol "ROCK". The following
table sets forth, for the fiscal periods indicated, the high and low sales
prices for the Common Stock on NASDAQ.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
---------------
HIGH LOW
------- -------
<S> <C> <C>
1994
First Quarter................................................ $16 1/4 $12 1/2
Second Quarter............................................... 15 10 3/4
Third Quarter................................................ 13 3/4 10 1/2
Fourth Quarter............................................... 11 1/2 9 3/4
1995
First Quarter................................................ 11 1/4 10 1/2
Second Quarter............................................... 13 1/2 10 1/2
Third Quarter................................................ 14 1/4 12 3/4
Fourth Quarter............................................... 13 1/2 10
1996
First Quarter................................................ 15 3/4 12 1/8
Second Quarter (through May 16, 1996)........................ 15 22
</TABLE>
On May 16, 1996, the last reported sales price of the Common Stock on NASDAQ
was $20.25 per share. As of May 15, 1996, there were approximately 145 record
holders of Common Stock.
DIVIDEND POLICY
The Company's present policy is to invest its earnings in the future
development and growth of the Company and the Company currently does not
anticipate paying cash dividends on the Common Stock. As a holding company,
the Company's ability to pay dividends is dependent on the receipt of payments
from its subsidiaries. Any determination to pay cash dividends in the future
will be dependent on the Company's results of operations, financial condition,
contractual restrictions and other factors deemed relevant at that time by the
Company's Board of Directors. In any event, the payment of dividends by
Gibraltar Steel Corporation is subject to restrictions under the Credit
Facility. See "Use of Proceeds".
12
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected financial data presented below have been derived from the
Company's financial statements which have been audited by Price Waterhouse
LLP, except that the data for the three months ended March 31, 1995 and 1996
are derived from unaudited consolidated financial statements which, in the
opinion of the Company, reflect all adjustments necessary for a fair
presentation. The consolidated balance sheets as of December 31, 1994 and 1995
and March 31, 1996 and the related consolidated statements of income, cash
flow and shareholders' equity for the three years ended December 31, 1995 and
the three months ended March 31, 1995 and 1996, and notes thereto (the
"Consolidated Financial Statements") appear elsewhere in this Prospectus.
Results for the three-month periods are not necessarily indicative of results
for the full year. The selected financial data presented below should be read
in conjunction with, and are qualified in their entirety by, "Management's
Discussion and Analysis of Financial Condition and Results of Operations", the
Consolidated Financial Statements and other financial information included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31,(a) ENDED MARCH 31,
------------------------------------------------ ----------------
1991 1992 1993 1994 1995(b) 1995 1996(c)
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales............... $128,982 $145,680 $167,883 $200,142 $282,833 $58,765 $82,034
Cost of Sales........... 110,222 120,311 138,559 166,443 240,370 48,579 68,005
-------- -------- -------- -------- -------- ------- -------
Gross Profit............ 18,760 25,369 29,324 33,699 42,463 10,186 14,029
Selling, General and
Administrative......... 11,924 14,915 16,390 17,520 22,095 5,090 7,354
-------- -------- -------- -------- -------- ------- -------
Income from Operations.. 6,836 10,454 12,934 16,179 20,368 5,096 6,675
Other Income (Expense):
Interest Expense....... (2,262) (1,873) (1,621) (1,374) (3,984) (559) (1,073)
Other Income........... -- -- 200 -- -- -- --
-------- -------- -------- -------- -------- ------- -------
(2,262) (1,873) (1,421) (1,374) (3,984) (559) (1,073)
-------- -------- -------- -------- -------- ------- -------
Income Before Taxes..... 4,574 8,581 11,513 14,805 16,384 4,537 5,602
Income Taxes(d)......... 454 339 6,300 5,996 6,662 1,860 2,268
-------- -------- -------- -------- -------- ------- -------
Net Income............. $ 4,120 $ 8,242 $ 5,213 $ 8,809 $ 9,722 $ 2,677 $ 3,334
======== ======== ======== ======== ======== ======= =======
Net Income Per Share... $ .87 $ .96 $ .26 $ .33
======== ======== ======= =======
Pro Forma Net
Income(e).............. $ 3,278 $ 5,853 $ 7,337
======== ======== ========
Pro Forma Net Income Per
Share(f)............... $ .32 $ .58 $ .72
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------- MARCH 31,
1991 1992 1993 1994 1995 1996
------- ------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(g):
Current Assets.............. $44,908 $44,941 $50,502 $ 70,552 $ 86,995 $101,472
Current Liabilities......... 28,116 26,111 21,905 22,028 29,480 40,048
Total Assets................ 81,325 83,407 92,868 126,380 167,423 208,370
Total Debt.................. 26,854 26,313 14,179 38,658 59,054 82,847
Stockholders' Equity........ 34,930 38,010 51,587 60,396 70,244 73,578
</TABLE>
- --------
(a) One of the Company's subsidiaries historically had a fiscal year end of
October 31. Effective with the year ended December 31, 1993, such entity
adopted a calendar year end. See Note 1 to the Consolidated Financial
Statements. As a result of such change, other income for the year ended
December 31, 1993 includes $200,000 of net income attributable to November
and December 1992 for such entity.
(b) Includes the results of Hubbell Steel from its acquisition on April 3,
1995.
(c) Includes the results of CCHT from its acquisition on February 14, 1996.
(d) Includes $5,100,000 for reinstatement of deferred income taxes upon
termination of the S Corporation status of certain of the Company's
subsidiaries during the year ended December 31, 1993.
(e) Certain of the Company's subsidiaries historically were treated as S
Corporations for federal and certain state income tax purposes.
Immediately prior to consummation of the Company's initial public offering
in November 1993, such S Corporation status was terminated. Pro forma net
income assumes that each of the Company's subsidiaries had been subject to
corporate income taxation as a C Corporation during periods prior to
November 1993. See "Unaudited Pro Forma Financial Data".
(f) Pro forma net income per share has been computed by dividing pro forma net
income by the pro forma weighted average number of common shares
outstanding during 1993. Such pro forma weighted average number of common
shares was computed giving effect to the number of shares the Company
would have had to issue to retire $15,576,000 of indebtedness and pay an S
Corporation distribution of $10,485,000 to the pre-public offering
stockholders.
(g) See "Capitalization" for unaudited pro forma balance sheet data assuming
that consummation of this offering and application of the estimated net
proceeds therefrom to reduce indebtedness had occurred on March 31, 1996.
13
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The unaudited pro forma statements of income for the year ended December 31,
1995 and the three-month period ended March 31, 1996 set forth below present
the results of operations for such year and such period as if the following
had occurred on January 1, 1995: (i) the consummation of the acquisitions of
both Hubbell Steel and CCHT and borrowings to finance such acquisitions; and
(ii) the consummation of this offering and the application of the estimated
net proceeds therefrom to reduce indebtedness and the related reduction in
interest expense. The unaudited pro forma statement of income for the year
ended December 31, 1995 includes: (i) the Company's consolidated results of
operations for the year then ended which includes Hubbell Steel since April 3,
1995; (ii) the consolidated results of operations for Hubbell Steel for the
period January 1, 1995 through April 2, 1995; and (iii) the consolidated
results of operations of CCHT for the year ended December 31, 1995. The
unaudited pro forma statement of income for the three months ended March 31,
1996 includes: (i) the Company's consolidated results of operations for such
period, which includes CCHT since February 14, 1996; and (ii) the consolidated
results for CCHT for the period January 1, 1996 through February 13, 1996.
See "Capitalization" for unaudited pro forma balance sheet data assuming
that consummation of this offering and application of the estimated net
proceeds therefrom to reduce indebtedness had occurred on March 31, 1996.
The unaudited pro forma data has been prepared on the basis of certain
assumptions and estimates. Accordingly, pro forma data may not be indicative
of the actual results the Company would have obtained had such events occurred
on January 1, 1995 with respect to income statement adjustments, or March 31,
1996 with respect to balance sheet adjustments, or the future results of the
Company. The unaudited pro forma financial data should be read in conjunction
with the Company's Consolidated Financial Statements and the notes thereto
included elsewhere in this Prospectus.
14
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
GIBRALTAR HUBBELL ACQUISITION OFFERING PRO FORMA
STEEL(a) STEEL(b) CCHT(c) ADJUSTMENTS PRO FORMA ADJUSTMENTS(h) AS ADJUSTED
---------- -------- ------- ----------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $ 282,833 $17,445 $21,459 $ 321,737 $ 321,737
Cost of Sales........... 240,370 15,215 15,285 $ (497)(d) 270,373 270,373
---------- ------- ------- ------ ---------- ----------
Gross Profit............ 42,463 2,230 6,174 497 51,364 51,364
Selling, General and
Administrative......... 22,095 4,239 3,137 (3,804)(e) 25,667 25,667
---------- ------- ------- ------ ---------- ----------
Income (Loss) from
Operations............. 20,368 (2,009) 3,037 4,301 25,697 25,697
Other Income (Expense):
Interest Expense....... (3,984) (327) - (2,530)(f) (6,841) $3,010 (3,831)
Other Income........... - - 14 - 14 - 14
---------- ------- ------- ------ ---------- ------ ----------
(3,984) (327) 14 (2,530) (6,827) 3,010 (3,817)
---------- ------- ------- ------ ---------- ------ ----------
Income (Loss) Before
Taxes.................. 16,384 (2,336) 3,051 1,771 18,870 3,010 21,880
Income Taxes (Benefit).. 6,662 (960) 38 2,056(g) 7,796 1,219 9,015
---------- ------- ------- ------ ---------- ------ ----------
Net Income (Loss)...... $ 9,722 $(1,376) $ 3,013 $ (285) $ 11,074 $1,791 $ 12,865
========== ======= ======= ====== ========== ====== ==========
Net Income Per Share... $ .96 $ 1.09 $ 1.06(i)
========== ========== ==========
Weighted Average Common
Shares Outstanding.... 10,163,817 10,163,817 12,163,817
========== ========== ==========
</TABLE>
- --------
(a) Represents the Company's consolidated results of operations for the year
ended December 31, 1995.
(b) Represents Hubbell Steel's unaudited consolidated results of operations
for the period from January 1, 1995 through April 2, 1995.
(c) Represents CCHT's consolidated results of operations for the year ended
December 31, 1995.
(d) Represents adjustment of depreciation based upon the fair value and
depreciable lives of assets acquired.
(e) Represents adjustment of nonrecurring expenses, including a $3.3 million
payment to certain Hubbell Steel employees and a $900,000 reduction of
CCHT salaries and expenses to normalized levels, offset by amortization of
goodwill.
(f) Represents additional interest expense, with a weighted average interest
rate of 8.0% during 1995, resulting from incremental debt incurred to
finance the acquisitions of Hubbell Steel and CCHT, as if such
acquisitions had occurred on January 1, 1995.
(g) Represents the tax effects of acquisition adjustments assuming that
Hubbell Steel and CCHT had been subject to corporate income taxation as C
Corporations, calculated using the Company's effective tax rate as
adjusted for amortization of goodwill. Historically, CCHT and certain
affiliates of Hubbell Steel had been treated as S Corporations for federal
and certain state income tax purposes.
(h) Represents the reduction in interest expense resulting from application of
the estimated net proceeds of this offering on January 1, 1995 to repay
$37,625,000 of indebtedness having a weighted average interest rate of
8.0% during 1995. See "Use of Proceeds".
(i) Pro forma net income per share, as adjusted, has been calculated by
dividing pro forma net income, as adjusted, by the weighted average number
of shares of Common Stock that the Company would have to issue to retire
$37,625,000 of indebtedness on January 1, 1995. See "Use of Proceeds".
15
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THE ACQUISITION OFFERING PRO FORMA
COMPANY(a) CCHT(b) ADJUSTMENTS PRO FORMA ADJUSTMENTS(g) AS ADJUSTED
---------- ------- ----------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales............... $ 82,034 $2,245 $ 84,279 $ 84,279
Cost of Sales........... 68,005 1,815 $ (59)(c) 69,761 69,761
---------- ------ ----- ---------- ----------
Gross Profit............ 14,029 430 59 14,518 14,518
Selling, General and
Administrative......... 7,354 464 44(d) 7,862 7,862
---------- ------ ----- ---------- ----------
Income (Loss) from
Operations............. 6,675 (34) 15 6,656 6,656
Other Income (Expense):
Interest Expense....... (1,073) -- (253)(e) (1,326) $659 (667)
Other Income........... -- 3 -- 3 -- 3
---------- ------ ----- ---------- ---- ----------
(1,073) 3 (253) (1,323) 659 (664)
---------- ------ ----- ---------- ---- ----------
Income (Loss) Before
Taxes.................. 5,602 (31) (238) 5,333 659 5,992
Income Taxes (Benefit).. 2,268 4 (95)(f) 2,177 267 2,444
---------- ------ ----- ---------- ---- ----------
Net Income (Loss)...... $ 3,334 $ (35) $(143) $ 3,156 $392 $ 3,548
========== ====== ===== ========== ==== ==========
Net Income Per Share... $ .33 $ .31 $ .29(h)
========== ========== ==========
Weighted Average Common
Shares Outstanding.... 10,173,900 10,173,900 12,173,900
========== ========== ==========
</TABLE>
- --------
(a) Represents the Company's unaudited consolidated results of operations for
the three months ended March 31, 1996.
(b) Represents CCHT's unaudited consolidated results of operations for the
period from January 1, 1996 through February 13, 1996.
(c) Represents adjustment of depreciation based upon the fair value and
depreciable lives of assets acquired.
(d) Represents amortization of goodwill resulting from the CCHT acquisition as
if such acquisition occurred on January 1, 1995.
(e) Represents additional interest expense, with a weighted average interest
rate of 7.0% during the period presented, resulting from incremental debt
incurred to finance the acquisition of CCHT.
(f) Represents the tax effect of acquisition adjustments, assuming that CCHT
had been subject to corporate income taxation as a C Corporation,
calculated using the Company's effective tax rate as adjusted for
amortization of goodwill. Historically, CCHT had been treated as an S
Corporation for federal and certain state income tax purposes.
(g) Represents the reduction in interest expense resulting from application of
the estimated net proceeds of this offering to repay $37,625,000 of
indebtedness having a weighted average interest rate of 7.0%. See "Use of
Proceeds".
(h) Pro forma net income per share, as adjusted, has been calculated by
dividing pro forma net income, as adjusted, by the weighted average number
of shares of Common Stock that the Company would have to issue to retire
$37,625,000 of indebtedness. See "Use of Proceeds".
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Since the Company's inception in 1972, its operations have been
characterized by the four key elements of its business strategy: a focus on
high value-added, high margin products and services; a commitment to internal
growth and continuous cost reductions; a commitment to external expansion
through the acquisition of related businesses with long-term growth potential;
and a dedication to quality, service and customer satisfaction. Because of
changes in the Company's activities from year to year, the results of
operations for prior periods may not necessarily be comparable to, or
indicative of, results of operations for current or future periods.
Implementation of the Company's business strategy has resulted in a compound
annual growth rate for sales of approximately 16% for the years 1972 through
1995, and a compound annual growth rate for pre-tax earnings of approximately
23% during the same period.
RESULTS OF OPERATIONS
The following table sets forth for each of the periods presented certain
income statement data for the Company expressed as a percentage of net sales:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------- ----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Sales..................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Sales................. 82.5 83.2 85.0 82.7 82.9
------- ------- ------- ------- -------
Gross Profit.................. 17.5 16.8 15.0 17.3 17.1
Selling, General and
Administrative............... 9.8 8.8 7.8 8.7 9.0
------- ------- ------- ------- -------
Income from Operations........ 7.7 8.0 7.2 8.6 8.1
Other Income (Expense):
Interest Expense............ (1.0) (.6) (1.4) (.9) (1.3)
Other Income................ .2 - - - -
------- ------- ------- ------- -------
(.8) (.6) (1.4) (.9) (1.3)
------- ------- ------- ------- -------
Income Before Taxes........... 6.9 7.4 5.8 7.7 6.8
Income Taxes.................. 3.8 3.0 2.4 3.1 2.7
------- ------- ------- ------- -------
Net Income.................. 3.1% 4.4% 3.4% 4.6% 4.1%
======= ======= ======= ======= =======
</TABLE>
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1995
Net sales of $82.0 million for the first quarter ended March 31, 1996
increased 39.6% from sales of $58.8 million for the prior year's first
quarter. This increase resulted primarily from the net sales of Hubbell Steel
(acquired in April 1995) for the quarter and the net sales of CCHT since its
acquisition (February 1996) during the first quarter.
Cost of sales increased slightly to 82.9% of net sales for the first three
months of 1996 from 82.7% for the prior year's first quarter. The decrease in
gross profit margin to 17.1% for the first quarter in 1996 was primarily due
to including Hubbell Steel's results. Hubbell Steel's products and services
historically have generated slightly lower margins than the Company's other
products and services.
Selling, general and administrative expenses as a percentage of net sales
increased to 9.0% for the first quarter from 8.7% the prior year comparable
period primarily due to performance-based compensation linked to the Company's
sales and profitability.
17
<PAGE>
Interest expense increased by $.5 million for the three months ended March
31, 1996 primarily due to higher average borrowings resulting from the Hubbell
and CCHT acquisitions.
As a result of the above, income before taxes increased by $1.1 million for
the three months ended March 31, 1996 to $5.6 million.
Income taxes for the three months ended March 31, 1996 approximated $2.3
million and was based on a 40.5% effective tax rate in 1996.
Year Ended 1995 Compared to Year Ended 1994
Net sales increased by $82.7 million, or 41%, to a record $282.8 million in
1995 from $200.1 million in 1994. This increase includes $63.2 million in net
sales of Hubbell since the acquisition at the beginning of the second quarter.
The remaining net sales increase was attributable to sales growth from
existing operations and new operations begun during 1995.
Cost of sales increased by $73.9 million, or 44%, to $240.3 in 1995 from
$166.4 million in 1994. As a percentage of net sales, cost of sales increased
to 85% of net sales from 83.2%. This increase was primarily due to lower
margins attributable to sales from Hubbell and lower margins generated by
start-up operations.
Selling, general and administrative expense increased by $4.6 million, or
26%, to $22.1 million in 1995 from $17.5 million in 1994. As a percentage of
net sales, selling, general and administrative expense decreased to 7.8% from
8.8% in 1994 primarily as a result of the lower costs as a percentage of sales
attributable to Hubbell.
Interest expense increased by $2.6 million primarily as a result of the
Hubbell acquisition which resulted in higher average borrowings, in addition
to higher interest rates compared to 1994 and additional borrowings resulting
from higher inventory levels to service increased sales and capital
expenditures.
As a result of the above, income before taxes increased by $1.6 million, or
11%, to a record $16.4 million in 1995 from $14.8 million in 1994.
Income taxes approximated $6.7 million in 1995, an effective rate of 40.7%
in comparison with 40.5% for 1994.
Year Ended 1994 Compared to Year Ended 1993
Net sales increased by $32.2 million, or 19%, to $200.1 million in 1994 from
$167.9 million in 1993. This increase reflects a 16% increase in tons sold
attributed to an improving economy, increased auto production and improved
demand for consumer durables, and the Company's efforts to increase market
share. Selling prices also increased as a result of tighter steel markets and
the Company's success in passing raw material price increases from steel mills
through to customers.
Cost of sales increased by $27.8 million, or 20%, to $166.4 million in 1994
from $138.6 million in 1993. As a percentage of net sales, cost of sales
increased to 83.2% of net sales from 82.5%. The Company was able to offset a
portion of the raw material price increases not immediately passed on to its
customers due to timing differences through continued improvements in
productivity and yield.
Selling, general and administrative expense increased by $1.1 million, or
7%, to $17.5 million in 1994 from $16.4 million in 1993. This increase was
primarily due to incentive-based compensation plans linked to the Company's
sales and profitability and start-up expenses related to the new cold-rolled
steel processing facility in Tennessee which began operations in late 1994. As
a percentage of net sales, selling, general and administrative expenses
decreased by 1% in 1994 primarily due to the Company's cost control programs.
18
<PAGE>
Interest expense decreased by $247,000 to $1.4 million in 1994 as a result
of initially lower debt levels in the earlier part of 1994 resulting from the
application of the proceeds of the Company's initial public stock offering in
November 1993, subsequently offset by additional borrowings resulting from
increased inventory levels to service increased sales and capital
expenditures.
Other income of $200,000 in 1993 was a result of a change in the year end of
a subsidiary.
As a result of the above, income before taxes increased by $3.3 million, or
29%, to $14.8 million in 1994 from $11.5 million in 1993. As a percentage of
net sales, income before taxes increased to 7.4% of sales in 1994 from 6.9% in
1993.
Income taxes approximated $6.0 million in 1994, an effective tax rate of
40.5%, during the Company's first full year as a C Corporation.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements are to fund its working capital
needs and raw material inventory requirements, and to fund acquisitions and
the purchase and improvement of facilities, machinery and equipment.
Historically, the Company has used income generated by operations as well as
bank financing to fund these capital needs.
Net cash provided by operating activities primarily represents net income
plus non-cash charges for depreciation and amortization and changes in working
capital positions. Because of the capital intensive nature of the Company's
business, non-cash charges for depreciation and amortization are substantial.
Net cash provided by operating activities for 1993, 1994, 1995 and the three
months ended March 31, 1996 was $10.1 million, $(8.6) million, $35.7 million
and $1.3 million, respectively.
Net cash used by investing activities for 1993, 1994, 1995 and the three
months ended March 31, 1996 was $6.6 million, $16.0 million, $35.0 million and
$27.0 million, respectively. A significant portion of the net cash used for
investment activities represents capital expenditures, such as the Company's
investment in a new warehouse facility in 1993, a new steel processing
facility in 1994 and the acquisitions of Hubbell Steel in April 1995 and CCHT
in February 1996.
The estimated net proceeds of this offering (based upon an assumed public
offering price of $20.25 per share and after deduction of underwriting
discounts, commissions and expenses associated with this offering) will be
approximately $37.6 million ($46.3 million if the Underwriters' over-allotment
option is exercised in full). The Company intends to use the net proceeds of
this offering to repay outstanding indebtedness under the Credit Facility. See
"Use of Proceeds".
Upon consummation of this offering and application of the estimated net
proceeds therefrom, aggregate borrowings outstanding under the Credit Facility
are expected to be approximately $45.2 million. The Company anticipates that
it will be able to satisfy such obligations out of funds generated from
operations.
The availability under the Credit Facility after application of the
estimated net proceeds of this offering is expected to be approximately $79.8
million. The Company believes that this availability, together with funds
generated from operations, will be sufficient to provide the Company with the
liquidity and capital resources necessary to fund its anticipated working
capital requirements for at least the next twelve months. In addition, the
Company believes that it will have the financial capability to incur
additional long-term indebtedness if that becomes appropriate in connection
with its internal and external expansion strategies. See "Risk Factors--Risks
Associated with Future Expansion".
The Company has financed its Chattanooga facility with industrial revenue
bonds in the aggregate amount of $8.0 million, repayable in equal monthly
installments through May 2002. At March 31, 1996,
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the outstanding principal amount of these bonds was approximately $7.0
million, bearing interest at an annual rate of LIBOR plus a fixed rate (6.0%
at March 31, 1996). These bonds are secured by the Company's leasehold
interest in the Chattanooga facility, as well as by fixtures and equipment
located at such facility.
The Company's Credit Facility limits the amount of the Company's capital
expenditures. The Company does not believe that these limitations will affect
its ability to implement its internal growth and external expansion
strategies.
EFFECTS OF INFLATION
The Company does not believe that inflation has had a material effect on its
results of operations over the periods presented.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-
Based Compensation". SFAS No. 123 establishes a fair-value-based method of
accounting for stock-based compensation plans and encourages, but does not
require, entities to adopt that method in place of the provisions of
Accounting Principles Board Opinion ("APBO") No. 25, "Accounting for Stock
Issued to Employees", for all arrangements under which employees receive
shares of stock or other equity instruments of the employer or the employer
incurs liabilities to employees in amounts based on the price of the stock.
SFAS No. 123 also establishes fair value as the measurement basis for
transactions in which an entity acquires goods or services from nonemployees
in exchange for equity instruments.
An entity may continue to apply APBO No. 25 in accounting for stock-based
employee compensation arrangements. However, entities doing so will be
required to disclose pro forma net income and earnings per share determined as
if the fair-value-based method established by SFAS No. 123 had been applied in
measuring compensation cost.
The provisions of SFAS No. 123 are effective for fiscal years beginning
after December 15, 1995. Following adoption of SFAS No. 123, the Company
expects to continue measuring compensation cost for employee stock
compensation plans in accordance with the provisions of APBO No. 25.
SEASONALITY
Historically, the Company has experienced stronger first half of the year
results from its business, primarily due to customer scheduled plant shutdowns
for vacations, holidays and automotive model changeovers in the third and
fourth quarters.
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BUSINESS
GENERAL
The Company, through its subsidiaries, is a leading processor of high value-
added steel products. The Company's primary focus is on a broad range of
products and services based on cold-rolled strip and coated sheet steel, and
also heavy duty steel strapping. To complement these products and services,
the Company offers specialized metallurgical heat treating services, operates
two state-of-the-art materials management facilities, and has an equity
interest in two commercial steel pickling operations.
Processed cold-rolled strip steel products comprise a segment of the cold-
rolled sheet steel market that is defined by more precise widths, improved
surface conditions and tighter gauge tolerances than are supplied by primary
manufacturers of flat-rolled steel products. The Company's cold-rolled strip
steel products are sold to manufacturers in the automotive, hand tool,
appliance and hardware industries, as well as to other customers who demand
critical specifications in their raw material needs. The Company's coated
sheet steel products, which include galvanized, galvalume and pre-painted
sheet products, are sold primarily to the commercial and residential metal
building industry for roofing and siding applications. The Company's strapping
products are used in heavy duty industrial applications. Heat treating, which
refines the metallurgical properties of steel and other metals, is required to
achieve critical performance characteristics in a wide variety of consumer and
industrial applications.
The following table sets forth the principal products and services provided
by each of the business areas of the Company and their respective end-user
markets.
<TABLE>
<CAPTION>
BUSINESS AREA PRODUCTS/SERVICES END-USER MARKETS
- ------------- ----------------- ----------------
<S> <C> <C>
Cold-rolled Strip Steel Precision-rolled high and low carbon and Automotive, hand tool,
alloy steel from 3/8" to 38" wide, .010" appliance, hardware
to .250" thick, with special edges and
finishes on ribbon wound and oscillated
coils
Coated Sheet Steel Galvanized, galvalume and pre-painted Metal buildings and
(Hubbell Steel) sheet steel in coils and cut lengths roofs, HVAC, trailers
Heat Treating Carburizing, martempering, gas Automotive, hardware,
(CCHT) nitriding, stress relieving, hardening, office equipment,
brazing and austempering of customer- military, consumer
owned parts and materials products
Strapping High-tensile steel strapping, packaging Steel, aluminum, forest
supplies, tools and tool repairs products
Precision Metals Hot-rolled, cold-rolled and coated Automotive, office
sheets and coils which are slit, edged, equipment, power
cut-to-length and oscillated transmission,
independent stampers,
electrical
Materials Management Inbound inspection, storage, just-in- Automotive
time delivery, electronic data
interchange and communication with
supplier and end-user
Pickling Removal of oxide scale from hot-rolled Automotive, service
(Joint Venture) steel, slitting, oiling and application centers, independent
of pre-lubes to customer-owned steel stampers
</TABLE>
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HISTORICAL GROWTH
The predecessor to the Company was established in 1972 by the late Dr.
Kenneth E. Lipke to acquire a Buffalo-based company that provided cold-rolling
services, distributed steel coils and blanks and manufactured and sold steel
strapping. This business grew from approximately $9 million in net sales at
the time of acquisition to approximately $22 million in fiscal 1975. In 1976,
following the acquisition by the Company of three steel processing businesses,
the Company had combined net sales of approximately $45 million. Over the next
few years, the Company successfully integrated the acquired companies with its
existing businesses, generating combined net sales of approximately $77
million in fiscal 1979.
During the period from 1980 through 1986, the Company focused on expanding
internally and positioning its operations for continued growth. Advances
implemented during this period include the addition of equipment that the
Company considered integral to its growth strategy, including a 72-inch wide
slitter for heavy gauge steel, a 60-inch wide slitter for light gauge steel, a
72-inch roll and cut line and a single head oscillator. In addition, the
Company modernized certain of its rolling mills, added several new annealing
furnaces and built an addition in which it installed a coil racking system at
its precision metals facility. As a result of these internal expansion efforts
and the economies realized following the integration of the acquired
businesses, the Company generated net sales of approximately $103 million in
fiscal 1986.
Since 1987, the Company has developed or acquired the following operations:
. The Company acquired a Cleveland based cold-rolling operation in December
1987. Since that time, this operation has increased its annual sales more
than fivefold while reducing the amount of production space by
approximately 29%.
. In 1989, the Company, through a subsidiary, became a minority joint
venture partner in Samuel Steel Pickling. In 1995, this venture installed
a second pickling line that more than doubled its steel pickling capacity
from 360,000 to approximately 800,000 tons annually.
. The Company opened a materials management facility in Buffalo in 1990,
providing inventory management, quality control and just-in-time delivery
services to a major automobile manufacturer and certain other customers.
The Company opened a second facility in Woodhaven, Michigan in 1995,
intended primarily to service the same end-user.
. In 1993, the Company opened a warehouse facility in Brownsville, Texas to
service a major customer and to expand its geographic presence to the
southwestern United States and Mexico.
. The Company constructed a new steel processing facility in Chattanooga,
Tennessee which became operational in late 1994. This facility will
enable the Company to expand its geographic coverage and diversify its
customer base in the southeastern United States.
. During April 1995, the Company acquired Hubbell Steel, a processor and
supplier of galvanized, galvalume and pre-painted sheet steel products.
This acquisition expanded the Company's product lines and provided it
with access to the commercial and residential metal building industry.
. The Company acquired CCHT, a metallurgical heat treater, in February
1996. CCHT's services complement the existing products and services of
the Company, provide access to new customers and expand its geographic
coverage in the southeastern United States.
INDUSTRY OVERVIEW
Steel processors occupy a market niche that exists between primary steel
producers and end-user manufacturers. Primary steel producers typically focus
on the sale of standard size and tolerance steel to large volume purchasers,
including steel processors. At the same time, end-user manufacturers require
steel with closer tolerances and on shorter lead times than the primary steel
producers can
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<PAGE>
provide efficiently. The Company believes that many end-user manufacturers are
unwilling to commit to the investment in technology, equipment and labor
required to further process steel for use in their manufacturing operations.
The Company believes that these factors have caused many end-user
manufacturers to find it more beneficial, from a cost, quality and
manufacturing flexibility standpoint, to purchase more fully processed steel
products from steel processors.
BUSINESS STRATEGY
Since the Company's first acquisition in 1972 of a Buffalo-based steel
processor with approximately $9 million in sales, management's strategy has
been to continuously grow and enhance the profitability of existing operations
and to expand into related value-added businesses with long-term growth
potential. The Company attributes its operating and financial success to its
aggressive pursuit of this strategy, the key elements of which include the
following:
Focus on High Value-Added, High Margin Products and Services: The Company
concentrates on fully processed, high value-added steel products and services
that typically generate high margins. This focus, together with the Company's
ability to deliver consistently reliable products and services, has
significantly contributed to profitability.
Commitment to Internal Growth and Continuous Cost Reductions: The Company
has an ongoing commitment to grow and improve the profitability of its
existing operations. To achieve this goal, management seeks to expand its
existing product lines into new markets and related products and focuses on
rigorous cost containment. The Company has made ongoing investments in new and
existing production equipment to improve yield, lower overall manufacturing
costs and expand capacity. Additionally, the Company seeks to reduce costs in
the area of inventory management by using a proprietary inventory control
system to purchase, monitor and allocate inventory throughout the entire
production process.
Commitment to External Expansion: The Company remains committed to expansion
into related businesses that offer long-term growth potential while providing
profits within a short period of time. Since its formation, the Company has
pursued this strategy by starting up new ventures as well as acquiring
existing businesses. In the last three years, the Company has developed or
acquired six significant operations. Of these, five have contributed, or are
expected to contribute, to the Company's net income within the first full year
of operation and the new facility in Chattanooga is expected to be profitable
within two years of start-up. In April 1993, the Company opened a warehouse
facility in Brownsville, Texas to service a major customer and a growing
industrial base in Mexico and the southwestern United States. The Company also
built a new steel processing facility in Chattanooga, Tennessee, which it
opened in late 1994 to service five manufacturing plants of two existing
customers as well as other manufacturers in the region's expanding automobile
and appliance industries. During April 1995, the Company acquired Hubbell
Steel, a Franklin Park, Illinois based supplier of galvanized, galvalume and
pre-painted sheet steel products. During the third quarter of 1995, the
Company opened a new materials management facility in Woodhaven, Michigan
which more than doubled the Company's capacity to over 950,000 tons per year.
Also during the third quarter of 1995, the Company's joint venture opened its
second pickling operation, which increased its total pickling capacity to
approximately 800,000 tons per year. Finally, in February 1996, the Company
acquired CCHT, a metallurgical heat treater serving the southeastern United
States. The Company believes that there are numerous attractive acquisition
candidates and plans to pursue strategic acquisitions of businesses whose
operations and product lines are complementary to those of the Company, with
an emphasis on expanding its geographic coverage and diversifying its customer
base.
Dedication to Quality, Service and Customer Satisfaction: The Company is
dedicated to providing its customers with high quality products for just-in-
time delivery, enabling it to establish strong
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<PAGE>
relationships with existing customers as well as attract new customers.
Accordingly, the Company has made significant investments in state-of-the-art
equipment, technology and facilities. In addition, the Company utilizes an
experienced team of skilled computer technicians and managers to provide
solutions to its customers' inventory control problems. The Company has an
inventory control system that allows customers to directly enter orders,
monitor work in progress and receive invoices electronically. In addition, the
Company has received preferred supplier awards from many of its customers,
including each of the major domestic automobile manufacturers. These awards
include the Chrysler Pentastar Award, the Ford Q1 Award and GM's Target for
Excellence Award. The Company also was informed by Emerson Electric Company
that it has been selected as an Emerson Distinguished Supplier for 1995.
PRODUCTS AND SERVICES
The Company utilizes any one or a combination of 20 different processes and
services to produce and deliver a variety of products on a just-in-time basis
to industrial manufacturers and fabricators in the automotive, automotive
supply, hand tool, steel, appliance, metal building, communications, hardware,
electrical, leisure time, machinery and office equipment industries. The
Company focuses on fully processed, high value-added steel products and
services, which it believes results in high profit margins and enhanced
profitability.
COLD-ROLLED STRIP STEEL
Consistent with the Company's strategy of focusing on high value-added
products and services, the Company produces a broad range of fully processed
cold-rolled strip steel products. The Company buys wide, open tolerance sheet
steel in coils from primary steel producers and processes it to specific
customer orders by performing such computer-aided processes as cold reduction,
annealing, edge rolling, roller leveling, slitting and cutting to length. Cold
reduction is the rolling of steel to a specified thickness, temper and finish.
Annealing is a thermal process which changes hardness and certain
metallurgical characteristics of steel. Edge rolling involves conditioning
edges of processed steel into square, full round or partially round shapes.
Roller leveling applies pressure across the width of the steel to achieve
precise flatness tolerances. Slitting is the cutting of steel to specified
widths. Depending on customer specifications, one or more of these processes
are utilized to produce steel strip of a precise grade, temper, tolerance and
finish. Customers for the Company's strip steel products include manufacturers
in the automotive, hand tool, appliance, hardware and other industries.
The Company has committed to substantially increase its cold-rolling
capacity at its Cleveland operation through the construction of a new rolling
mill. The Company believes that this new mill, with a design capacity of
approximately 120,000 tons per year and a maximum rolling width of 50 inches,
will be the widest mill for the production of cold-rolled strip steel in North
America, increasing productivity and yield and reducing raw materials costs.
Start-up of the new mill is expected in late 1997.
The Company operates ten rolling mills at its facilities in Cleveland, Ohio,
Chattanooga, Tennessee and Buffalo, New York, and believes it is one of only a
few steel processors capable of rolling widths of up to 38 inches. The Company
has the capability to process coils up to a maximum 72-inch outside diameter,
a size increasingly in demand by customers. Equipment at these facilities
includes a computerized, three-stand, four-high tandem mill and nine single-
stand, two- and four- high mills. The Company's rolling mills include a
hydraulic roll force system and an automatic gauge control system which is
linked to a statistical process control computer, allowing microsecond
adjustments during processing. The Company's computerized mills enable it to
satisfy industry demand for a range of steel from heavier gauge and special
alloy steels to low carbon and light gauge steels, in each case having a high-
quality finish and precision gauge tolerance. This equipment can process flat-
rolled steel to specific customer requirements for thickness tolerances as
close as .00025 inches.
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<PAGE>
The Company's rolling facilities are further complemented by 15 high
convection annealing furnaces, which allow for shorter annealing times than
conventional annealers. The Company's three newest furnaces and bases employ
state-of-the-art technology, incorporating the use of a hydrogen atmosphere
for the production of cleaner and more uniform steel. As a result of its
annealing capabilities, the Company is able to produce cold-rolled strip with
improved consistency in terms of thickness, hardness, molecular grain
structure and surface.
The Company can produce certain of its strip steel products on oscillated
coils, which wind steel strip similar to winding thread on a spool.
Oscillating the steel strips enables the Company to put at least six times
greater volume of finished product on a coil than standard ribbon winding,
allowing customers to achieve longer production runs by reducing the number of
equipment shut-downs to change coils. Customers are thus able to increase
productivity, reduce downtime, improve yield and lengthen die life. These
benefits to customers allow the Company to achieve higher margins on
oscillated products. To the Company's knowledge, only a few other steel
processors are able to produce oscillated coils, and the Company is not aware
of any competitor that can produce up to a 12,000 pound oscillated coil, which
is the maximum size produced by the Company.
OTHER PROCESSED METALS PRODUCTS AND SERVICES
Hubbell Steel. In April 1995, the Company acquired Hubbell Steel. From its
plant in Franklin Park, Illinois, Hubbell Steel supplies coated sheet steel,
including galvanized, galvalume and pre-painted products which Hubbell Steel
slits and cuts to length to customer specifications. Hubbell Steel's products
are sold primarily to over 400 customers in the commercial and residential
metal building industry for use in pre-fabricated buildings and metal roofs.
The Company believes that Hubbell Steel has the largest sales volume in
galvalume products of any steel processor in the United States. Hubbell Steel
operates an office in Monterrey, Mexico, through which it sells products to
customers in Mexico. A Hubbell Steel subsidiary, Mill Transportation Company
("MTC"), operates 23 terminals, including a major storage facility in
Charleston, S.C. Through contract owner-operators, MTC provides transportation
services for steel and other products.
Carolina Commercial Heat Treating. In February 1996, the Company acquired
CCHT. At four facilities located in North Carolina, South Carolina, Tennessee
and Georgia, CCHT provides metallurgical heat treating services, including
case-hardening, surface-hardening and through-hardening processes, for
customers in a wide variety of industries. Using methods such as annealing,
flame hardening, vacuum hardening, carburizing and nitrating, as well as a
host of other services, CCHT can harden, soften or otherwise impart desired
properties on parts made of steel, copper, and various alloys and other
metals. In addition, CCHT offers a variety of brazing services to join
metallic objects together. All parts treated by CCHT are customer-owned. CCHT
maintains a metallurgical laboratory at each facility, providing a range of
testing capabilities to add value to treated parts and enhance quality
control. Consistent quality control is maintained by application of a
statistical process control system. CCHT maintains a fleet of trucks and
trailers to provide rapid turnaround time for its customers.
Precision Metals. The Company operates two precision metals facilities in
Buffalo, New York and Chattanooga, Tennessee for flat-rolled steel and other
processed metal products that are sold to manufacturers in the automotive,
hand tool, appliance, electronics and other industries. In addition to
slitting and cutting to length, the Company's precision metals facilities
produce higher value-added products that are held to close tolerances and
tight specifications through cold-rolling, annealing, oscillating and edge
rolling. The Buffalo facility also incorporates a coil storage racking system
that holds over 1,200 coils, allowing instant access with a stacker crane,
thereby resulting in less coil damage than typical pyramid stacking.
Materials Management. The Company operates two state-of-the-art materials
management facilities that link primary steel producers and end-user
manufacturers by integrating the inventory
25
<PAGE>
purchasing, receiving, inspection, billing, storage and shipping functions and
producing true just-in-time delivery of materials. The Company's facilities
receive shipments of steel by rail and truck from primary steel producers,
which retain ownership of the steel until it is delivered to the end-user
manufacturer. The Company inspects the steel and stores it in a climate-
controlled environment on a specialized stacker crane and rack system. When an
order is placed, the Company is capable of delivering the steel to the end-
user manufacturer within one hour using Company-owned trucks that have been
custom designed to facilitate the loading and unloading process.
These facilities have a proprietary computer system that links the primary
steel producer with the end-user manufacturer and also links both parties to
the facilities. This gives them direct computer access to inventory on hand,
in transit and on order, and enables such manufacturers to transmit their
required release schedule through the computer. The shipping personnel are
then notified via computer of customer orders that have been released and
materials are promptly retrieved and shipped.
The Company believes its materials management facilities provide benefits to
primary steel producers and end-user manufacturers. The primary steel
producers can ship materials to the facilities by rail rather than by truck,
thereby enabling them to ship products more efficiently. In addition,
utilizing the specialized facilities allows primary steel producers to deliver
shipments just-in-time and with minimal transportation damage. The end-user
manufacturers can devote space previously used for raw material storage to
more productive uses. The end-user manufacturers also reduce their inventory
carrying costs because possession of inventory is not taken until shipped from
the facilities. This enables end-user manufacturers to reduce their raw
material inventory from several days or weeks to hours.
The Company's materials management facilities primarily service Ford. See
"Risk Factors--Reliance on Certain Customers".
Cleveland Pickling Joint Venture. Through a subsidiary, the Company is a
minority partner in Samuel Steel Pickling Company, a Cleveland-based steel
pickling operation.
After the hot-rolling process, the surface of sheet steel is left with a
residue known as scale, which must be removed prior to further processing by a
cleaning process known as pickling. Samuel Steel Pickling pickles steel on a
toll basis, receiving fees for its services without acquiring ownership of the
steel. Substantially all of the steel processed by the Company's Cleveland
operation and a small amount of steel processed by the Company's Buffalo
operations are pickled at Samuel Steel Pickling.
In 1995, Samuel Steel Pickling installed a second pickling operation, more
than doubling its capacity from 360,000 to approximately 800,000 tons
annually.
STEEL STRAPPING PRODUCTS
Steel strapping is banding and packaging material that is used to close and
reinforce shipping units such as bales, boxes, cartons, coils, crates and
skids. The Company is one of three major domestic manufacturers of high
tensile steel strapping, which is used in heavy duty applications. High
tensile steel strapping is subject to strength requirements imposed by the
American Association of Railroads ("AAR") for packaging of different products
for common carrier transport. This high tensile steel strapping is essential
to producers of large, heavy products such as steel, aluminum, paper and
lumber where reliability of the packaging material is critical to the safe
transport of the product.
The Company's strapping facility, located in Buffalo, New York, is ISO-9002
certified. This facility manufactures high tensile steel strapping by
slitting, oscillating, heat treating, painting and packaging
26
<PAGE>
cold-rolled coils. In pursuit of its business strategy, the Company focuses on
high value-added strapping products and superior customer service. Through
consistent equipment upgrades and employee-driven productivity improvements,
this facility has been able to maintain high quality products while reducing
costs and increasing yields.
Steel strapping is cold-rolled to precise gauge on the Company's rolling
mills, which incorporate hydraulic screw downs and automatic gauge controls
with statistical charting. This process ensures strapping of the most uniform
gauge available and produces the maximum amount of strapping per pound of
steel. All products are tested hourly by on-site laboratory personnel for
width, thickness and metallurgical properties. The facility's detailed
attention to the manufacturing process and product testing results in the
production of high quality strapping that meets or exceeds AAR specifications.
To meet the differing needs of its customers, the Company offers its
strapping products in various thicknesses, widths and coil sizes. The Company
also seeks to offer innovative products to its customers, including custom
color and printed strapping. In addition, the Company offers related strapping
products, such as seals and tools. At the request of customers, the Company is
also able to manufacture tensional strapping for lighter duty applications.
QUALITY CONTROL
The Company places great importance on providing its customers with high
quality products for critical use applications. By carefully selecting its raw
material vendors and using computerized inspection and analysis, the Company
ensures that the steel that enters its production processes will be able to
meet the most critical specifications of its customers. The Company uses
carefully documented procedures at all steps of the production process, along
with statistical process control systems linked directly to processing
equipment, to monitor and ensure that such specifications are met. Physical,
chemical and metallographic analyses are performed at all stages of the
production process to verify that mechanical and dimensional properties,
cleanliness, surface characteristics and chemical content are within
specification. The Company has received numerous awards and citations from its
customers recognizing its ability to consistently produce high quality
products, including the Chrysler Pentastar Award, the Ford Q1 Award and the GM
Target for Excellence Award, which are among the most prestigious awards in
the automotive industry. In addition, the Company was recently notified by
Emerson Electric Co. that it has been selected as an Emerson Distinguished
Supplier for 1995.
MANAGEMENT INFORMATION SYSTEMS; INVENTORY MANAGEMENT
The Company operates a proprietary data processing system to purchase,
monitor and allocate inventory throughout its production facilities, enabling
it to effectively manage inventory costs and consistently achieve a high
annual inventory turnover rate. For the 12 months ended March 31, 1996, the
Company's inventory turned approximately five times.
The system also includes a computerized order entry system enabling
customers to link their computer system to the Company's system for direct
electronic communication with respect to order entry, inventory status, work-
in-process status, billing and payment. This service is designed to improve
productivity for both customers and the Company. A number of key customers
have taken advantage of this service, and the Company believes the
availability of this service is becoming an important consideration in
customers' purchasing decisions.
In addition, the Company has linked its production equipment to its computer
system to allow for the gathering of production data as each order is being
processed. This information is stored in a database to be used as a basis for
preparing cost estimates for future orders. This system enhances the Company's
ability to analyze costs on an ongoing basis and allows for expeditious
response time on quotation requests.
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<PAGE>
SUPPLIERS AND RAW MATERIALS
Steel processing companies are required to maintain substantial inventories
of raw materials to accommodate the short lead times and just-in-time delivery
requirements of their customers. Accordingly, the Company generally maintains
its inventory of raw materials at levels that it believes are sufficient to
satisfy the anticipated needs of its customers based upon historic buying
practices and market conditions. The primary raw material utilized by the
Company in its processing operations is flat-rolled steel. The Company
purchases flat-rolled steel at regular intervals from a number of suppliers;
however, a majority of its steel is purchased from twelve major North American
suppliers. The Company has no long-term commitments with any of its suppliers.
The Company believes that it has adequate sources of supplies of raw materials
for its operations. See "Risk Factors--Impact of Changing Steel Prices".
TECHNICAL SERVICES
The Company employs a staff of engineers and other technical personnel and
maintains fully-equipped, modern laboratories to support its operations. These
facilities enable the Company to verify, analyze and document the physical,
chemical, metallurgical and mechanical properties of its raw materials and
products. Technical service personnel also work in connection with the
Company's sales force to determine the types of flat-rolled steel required for
the needs of the Company's customers.
SALES AND MARKETING
The Company has 25 salespeople located in Buffalo, New York; Cleveland,
Ohio; Detroit, Michigan; Bloomfield Hills, Michigan; Chicago, Illinois;
Chattanooga, Tennessee; Charlotte, North Carolina and Bethlehem, Pennsylvania
and one independent sales representative located in Simsbury, Connecticut.
This marketing staff is supported by a vice president of sales for each of the
Company's principal product lines, as well as by technical services and
metallurgical personnel. This approach enables the Company to provide a
specific sales focus on each of its principal product lines. In addition, the
Company's Executive Vice President-Commercial acts as a coordinator of all
sales activities.
CUSTOMERS AND DISTRIBUTION
The Company services more than 3,400 customers located primarily in the
midwestern, northeastern and southeastern United States, Mexico and Ontario,
Canada. In 1995, sales to automakers and automotive supply manufacturers
accounted for approximately 17% and 34%, respectively, of net sales. The
Company also sells its products to customers in the steel, appliance, hand
tool, metal building, communications, hardware, electrical, leisure time,
machinery and office equipment industries.
The Company manufactures its products almost exclusively to customer order
rather than for inventory. Although the Company negotiates annual sales orders
with a majority of its customers, these orders are subject to customer
confirmation as to product amounts and delivery dates.
The Company's largest customer is GM which, through its various subsidiaries
and affiliates, accounted for approximately 16%, 14% and 11% of the Company's
net sales in 1993, 1994 and 1995, respectively. No other customer of the
Company represented more than 10% of the Company's net sales during this
period. See "Risk Factors--Reliance on Certain Customers". The Company's
export sales were primarily to customers in Canada and Mexico and accounted
for approximately 9%, 7% and 6% of net sales in 1993, 1994 and 1995,
respectively, and 6% for the first three months of 1995 and 1996.
28
<PAGE>
COMPETITION
The steel processing market is highly competitive and fragmented. The
Company principally competes with a small number of other steel processors who
also focus on fully processed, high value-added steel products. The Company
competes on the basis of the precision and range of achievable tolerances,
quality, price and the ability to meet delivery schedules dictated by
customers. The Company's principal competitors are Worthington Industries,
Inc. and Steel Technologies, Inc., each of which may have greater financial
and other resources than the Company.
The only other major domestic manufacturers of high tensile steel strapping
are Acme Metals Incorporated and Signode Corporation, a subsidiary of Illinois
Tool Works Inc., each of whom may have greater financial and other resources
than the Company.
Hubbell Steel competes with a small number of other companies, some of which
may have greater financial and other resources.
CCHT competes with a large number of small competitors. See "Risk Factors--
Competition".
EMPLOYEES
At March 31, 1996, the Company employed 887 people. Approximately 171 of the
Company's hourly plant personnel are represented by Local No. 55 of the United
Automobile Workers under two separate contracts at the precision metals
facility and the Buffalo-based cold-rolled strip steel and strapping facility,
which expire in April 1997 and July 1999, respectively. In addition, under a
contract which expires in February 1998, approximately 25 hourly plant
personnel are represented by the Local Union No. 101, Chicago Truck Drivers,
Helpers and Warehouse Workers at the Hubbell Steel facility. The Company has
never experienced a work stoppage. The Company believes that its relationship
with its employees is good.
Approximately 700 of the Company's employees participate in performance-
based incentive compensation programs. The Company is committed to such
programs because it believes such programs motivate employees to enhance
profitability.
BACKLOG
Because of the nature of the Company's products and the short lead time
order cycle, backlog is not a significant factor in the Company's business.
The Company believes that substantially all of its backlog of firm orders
existing on March 31, 1996 will be shipped prior to the end of 1996.
29
<PAGE>
PROPERTIES
The Company currently operates 16 facilities located in New York, Michigan,
Ohio, Texas, Illinois, South Carolina, North Carolina, Tennessee and Georgia
and, through a subsidiary, is a minority partner in a joint venture with two
operations in Ohio.
The Company believes that its primary existing facilities, listed below, and
equipment are effectively utilized, well maintained, in good condition and,
together with planned capital expenditures, will be able to accommodate its
capacity needs through 1999.
<TABLE>
<CAPTION>
LOCATION FUNCTION SQUARE FOOTAGE OWNED OR LEASED
-------- -------- -------------- ---------------
<C> <S> <C> <C>
Buffalo, NY........... Headquarters 23,000 Leased
Cleveland, OH......... Cold-rolled strip steel 226,200 Leased
processing
Buffalo, NY........... Precision metals 207,000 Owned
processing; warehouse
North Charleston, SC.. Distribution warehouse 190,000 Leased
Cheektowaga, NY....... Cold-rolled strip steel 148,000 Owned
processing and strapping
products
Tonawanda, NY......... Cold-rolled strip steel 128,000 Owned
and precision metals
processing
Woodhaven, MI......... Materials management 100,000 Owned
facility
Franklin Park, IL..... Coated sheet steel and 99,000 Owned
precision metals
processing
Fountain Inn, SC...... Heat treating services 77,400 Leased
Chattanooga, TN....... Steel processing 65,000 Owned
Lackawanna, NY........ Materials management 65,000 Leased
facility
Reidsville, NC........ Heat treating services 53,500 Leased
Morristown, TN........ Heat treating services 24,200 Owned
Conyers, GA........... Heat treating services 18,700 Leased
Brownsville, TX....... Distribution warehouse 15,000 Leased
Charlotte, NC......... Administrative offices 3,400 Leased
Dearborn, MI.......... Strapping tool products 3,000 Owned
</TABLE>
GOVERNMENTAL REGULATION
The Company's processing centers and manufacturing facilities are subject to
many federal, state and local requirements relating to the protection of the
environment. The Company believes that it is in material compliance with all
environmental laws, does not anticipate any material expenditures to meet
environmental requirements and does not believe that future compliance with
such laws and regulations will have a material adverse effect on its results
of operations or financial condition.
CERCLA and similar state superfund statutes generally impose joint and
several liability on present and former owners and operators, transporters and
generators for remediation of contaminated properties regardless of fault. The
Company has been designated, along with others, as a potentially responsible
party under CERCLA, or comparable state statutes, at one site. Based on the
facts currently known to the Company, management expects that those costs to
the Company of remedial actions at the site where it has been named a
potentially responsible party will not have a material adverse effect on the
Company's results of operations or financial condition.
30
<PAGE>
The Company's operations are also governed by many other laws and
regulations, including those relating to workplace safety and worker health,
principally the Occupational Safety and Health Act and regulations thereunder
which, among other requirements, establish noise and dust standards. The
Company believes that it is in material compliance with these laws and
regulations and does not believe that future compliance with such laws and
regulations will have a material adverse effect on its results of operations
or financial condition.
LEGAL PROCEEDINGS
From time to time, the Company is named a defendant in legal actions arising
out of the normal course of business. The Company is not a party to any
pending legal proceeding the resolution of which the management of the Company
believes will have a material adverse effect on the Company's results of
operations or financial condition or to any other pending legal proceedings
other than ordinary, routine litigation incidental to its business. The
Company maintains liability insurance against risks arising out of the normal
course of business.
31
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
---- --- ----------------
<C> <C> <S>
Brian J. Lipke(a)....... 44 Chairman of the Board, President, Chief Executive
Officer and Director
Neil E. Lipke(a)........ 39 Executive Vice President--Marketing and Director
Walter T. Erazmus....... 49 Executive Vice President--Finance, Chief
Financial Officer, Secretary and Treasurer
Joseph A. Rosenecker.... 52 Executive Vice President--Commercial
Carl P. Spezio.......... 51 Executive Vice President--Manufacturing
Curtis W. Lipke(a)...... 41 Vice President--Corporate Development and
Director
Joseph W. Wark.......... 65 Vice President--Automotive
Eric R. Lipke(a)........ 36 Vice President--Transportation
Gerald S. Lippes(b)(c).. 56 Director
Arthur A. Russ, Jr.(b).. 53 Director
David N. Campbell(b).... 54 Director
William P. Montague(c).. 49 Director
</TABLE>
- --------
(a)Brian J. Lipke, Neil E. Lipke, Curtis W. Lipke and Eric R. Lipke are
brothers.
(b)Member of the Audit Committee.
(c)Member of the Compensation Committee.
The Board of Directors of the Company is divided into three classes serving
staggered terms. One-third of the directors are elected at each annual meeting
of stockholders for a term of three years to hold office until their
successors are elected and qualified. The terms of office of Curtis W. Lipke
and David N. Campbell expire in 1997; the terms of office of Neil E. Lipke and
Gerald S. Lippes expire in 1998; and the terms of office of Brian J. Lipke,
Arthur A. Russ, Jr. and William P. Montague expire in 1996. All officers serve
at the discretion of the Board of Directors.
Brian J. Lipke has been Chairman of the Board, President, Chief Executive
Officer and a director of the Company since its formation. He has been
President and Chief Executive Officer of Gibraltar Steel Corporation of New
York ("Gibraltar New York"), a predecessor and current subsidiary of the
Company, since 1987, and has been in charge of the Company's other
subsidiaries since their formation. From 1972 to 1987, Mr. Lipke held various
positions with Gibraltar New York in production, purchasing and divisional
management. He is a director of Dunlop Tire Corporation and a member of the
Chase Manhattan Bank, N.A. Regional Advisory Board.
Neil E. Lipke has been an Executive Vice President--Marketing and a director
of the Company since its formation. He has been Executive Vice President of
Gibraltar New York since 1988 and has been employed by Gibraltar New York
since 1973 in various production, sales and marketing capacities.
Walter T. Erazmus has been Executive Vice President--Finance and Chief
Financial Officer of the Company since November 1994 and of Gibraltar New York
since 1977 and has served as Secretary and Treasurer of the Company since its
formation. He was Vice President--Finance and Chief Financial Officer of the
Company from its formation to November 1994.
Joseph A. Rosenecker has been Executive Vice President--Commercial of the
Company since November 1994. He served as Vice President--Sales of the Company
from its formation until
32
<PAGE>
November 1994 and has been the director of Gibraltar New York's cold-rolled
strip operations since 1989. He was President of Gibraltar New York's strip
and strapping divisions from 1978 to 1989.
Carl P. Spezio has been Executive Vice President--Manufacturing of the
Company since November 1994. Prior thereto, he was Vice President--
Manufacturing and Quality Control of the Company since its formation. He has
been the director of Gibraltar New York's metal processing operations since
1989. He was President of the precision metals division of Gibraltar New York
from 1977 to 1989.
Curtis W. Lipke has been Vice President--Corporate Development and a
director of the Company since its formation and the director of Gibraltar New
York's Strapping Division since 1989. Prior thereto, Mr. Lipke held various
positions with Gibraltar New York, primarily in the areas of sales and
divisional management.
Joseph W. Wark has been Vice President--Automotive of the Company since its
formation and has been in charge of automotive sales for Gibraltar New York
since 1986.
Eric R. Lipke has been Vice President--Transportation of the Company since
its formation. Mr. Lipke has held various positions with Gibraltar New York
since 1976 primarily in the areas of administration and executive support.
Gerald S. Lippes has served as a director of the Company since its
formation. He has been engaged in the private practice of law since 1965 and
is a partner of the firm of Lippes, Silverstein, Mathias & Wexler LLP,
Buffalo, New York. Mr. Lippes is also a director of Mark IV Industries, Inc.
Arthur A. Russ, Jr. has served as a director of the Company since its
formation. He has been engaged in the private practice of law since 1969 and
is a member of the firm of Albrecht, Maguire, Heffern & Gregg, P.C., Buffalo,
New York.
David N. Campbell has served as a director of the Company since the
consummation of the Company's initial public offering in November 1993. Since
July 1995, Mr. Campbell has served a President of BBN Systems Technologies, a
networking technology company based in Cambridge, Massachusetts. From November
1994 to July 1995, he served as Chairman of the Board of Dunlop Tire
Corporation, and prior thereto, from March 1984 to September 1994, he served
as the Chairman of the Board and Chief Executive Officer of Computer Task
Group, Incorporated. Mr. Campbell is also a director of National Fuel Gas
Company and an advisory director of First Empire State Corporation.
William P. Montague has served as a director of the Company since
consummation of its initial public offering. He served as Executive Vice
President and Chief Financial Officer of Mark IV Industries, Inc., from 1986
to February 1996 and, since March 1, 1996, as President of said company. He is
also a director of International Imaging Materials, Inc. and a member of the
Chase Manhattan Bank, N.A. Regional Advisory Board.
BOARD COMMITTEES
The Board of Directors has a Compensation Committee, which makes
recommendations concerning salaries and incentive compensation for employees
of and consultants to the Company, and an Audit Committee, which reviews the
results and scope of the audit and other services provided by the Company's
independent auditors.
DIRECTORS' COMPENSATION
All directors other than directors who are employees of the Company receive
a retainer of $12,000 per year. In addition, each such director also receives
a fee of $1,000 for each Board of Directors or committee meeting attended and
is reimbursed for any reasonable expenses incurred in attending such meetings.
33
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation paid by the Company for services rendered during the years ended
December 31, 1993, 1994 and 1995 for the chief executive officer and the other
four most highly compensated executive officers of the Company. The amounts
shown include compensation for services rendered in all capacities.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- ------------
OTHER SECURITIES ALL
ANNUAL UNDERLYING OTHER
NAME AND FISCAL COMPEN- OPTIONS/ COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION SARS SATION(A)
- ------------------ ------ -------- -------- ------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Brian J. Lipke......... 1995 $215,000 $140,000 -- -- $ 3,844
Chairman of the Board,
President 1994 204,750 110,000 -- 15,000(b) 8,154
and Chief Executive
Officer 1993 332,292 101,000 $798 -- 10,591
Joseph A. Rosenecker... 1995 153,000 215,620 -- 12,500(c) 9,524
Executive Vice
President-- 1994 153,000 207,605 -- 10,000(c) 10,208
Commercial 1993 152,000 168,846 798 37,500(c) 9,783
Joseph W. Wark......... 1995 175,000 171,174 -- -- 7,938
Vice President--
Automotive 1994 177,692 124,428(d) -- 10,000(c) 9,934
1993 239,519 52,800(d) 488 25,000(c) 9,882
Neil E. Lipke.......... 1995 183,474 115,000 -- -- 7,186
Executive Vice
President 1994 140,000 85,000 -- 10,000(b) 8,016
and Director 1993 274,868 58,000 632 -- 9,180
Walter T. Erazmus...... 1995 152,548 130,000 -- 12,500(c) 8,069
Executive Vice
President-- 1994 141,025 85,000 -- 10,000(c) 9,350
Finance, Secretary and
Treasurer 1993 110,641 78,000 798 37,500(c) 7,364
</TABLE>
- --------
(a) Composed of: (i) the allocation in 1995 of contributions made by the
Company pursuant to the Gibraltar Steel Corporation of New York Profit
Sharing Plan in the amount of $3,318 to the account of each of Messrs.
Brian J. Lipke, Rosenecker, Wark, Neil E. Lipke and Erazmus; (ii) the
matching contributions made by the Company in 1995 pursuant to the
Gibraltar Steel Corporation of New York 401(k) Retirement Savings Plan to
Messrs. Brian J. Lipke, Rosenecker, Wark, Neil E. Lipke and Erazmus in the
amount of $0, $4,620, $4,620, $3,868 and $3,963, respectively; and (iii)
the payment in 1995 of insurance premiums on term life insurance policies
provided for Messrs. Brian J. Lipke, Rosenecker, Wark, Neil E. Lipke and
Erazmus in the amount of $526, $1,586, $0, $0 and $788, respectively.
(b) Represents options issued to Messrs. Brian J. Lipke and Neil E. Lipke
pursuant to the Non-Qualified Plan (as hereinafter defined).
(c) Represents options granted to Messrs. Rosenecker, Wark and Erazmus
pursuant to the Incentive Plan (as hereinafter defined).
(d) Includes sales commissions paid to Mr. Wark in the sum of $115,428 in 1994
and $52,800 in 1993.
34
<PAGE>
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options in 1995 to the executives named in the table above. The exercise price
of all such options is equal to the market value of Common Stock on the date
of the grant.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION
UNDERLYING EMPLOYEES IN PRICE FOR OPTION TERM
NAME AND PRINCIPAL OPTIONS/SARS FISCAL PER EXPIRATION ----------------------
POSITION GRANTED YEAR SHARE DATE 5%(b) 10%(c)
- ------------------ ------------ ------------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Brian J. Lipke,
Chairman of the Board,
President and Chief
Executive Officer..... -- -- -- -- -- --
Joseph A. Rosenecker,
Executive Vice
President--
Commercial............ 12,500 16.67% $11.00 11/05/05 $ 86,473 $ 219,140
Joseph W. Wark,
Vice President--
Automotive............ -- -- -- -- -- --
Neil E. Lipke,
Executive Vice
President
and Director.......... -- -- -- -- -- --
Walter T. Erazmus,
Executive Vice
President--Finance,
Secretary and
Treasurer............. 12,500 16.67% $11.00 11/05/05 $ 86,473 $ 219,140
</TABLE>
- --------
(a) Options granted pursuant to the Incentive Plan and the Non-Qualified Plan
become exercisable in cumulative annual increments of 25% beginning one
year from the date of grant; however, in the event of certain
extraordinary transactions, including a change of control of the Company,
the vesting of such options would automatically accelerate.
(b) Represents the potential appreciation of the options, determined by
assuming an annual compounded rate of appreciation of 5% per year over the
ten-year term of the grants, as prescribed by the rules. The amount set
forth above is not intended to forecast future appreciation, if any, of
the stock price. There can be no assurance that the appreciation reflected
in this table will be achieved.
(c) Represents the potential appreciation of the options, determined by
assuming an annual compounded rate of appreciation of 10% per year over
the ten-year term of the grant. The amounts set forth above are not
intended to forecast future appreciation, if any, of the stock price.
There can be no assurance that the appreciation reflected in this table
will be achieved.
35
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning the exercise of
options during 1995 and unexercised options held at the end of 1995 by the
executives named above.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED IN THE
UNEXERCISED OPTIONS MONEY OPTIONS
AT FISCAL YEAR END AT FISCAL YEAR END(A)
------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Brian J. Lipke,
Chairman of the Board,
President and Chief
Executive Officer......... 3,750 11,250 $ 7,969 $23,906
Joseph A. Rosenecker,
Executive Vice President--
Commercial................ 21,250 38,750 26,407 51,095
Joseph W. Wark,
Vice President--
Automotive................ 15,000 20,000 19,375 30,001
Neil E. Lipke,
Executive Vice President
and Director.............. 2,500 7,500 5,313 15,938
Walter T. Erazmus,
Executive Vice President--
Finance, Secretary and
Treasurer................. 21,250 38,750 26,407 51,095
</TABLE>
- --------
(a) Represents the difference between $12.125, the closing market value of
Common Stock as of December 31, 1995, and the exercise price of such
options.
EMPLOYMENT AGREEMENT
Pursuant to an Employment Agreement effective as of November 1, 1993 between
the Company and Brian J. Lipke (the "Employment Agreement"), Mr. Lipke will
serve as Chairman of the Board, President and Chief Executive Officer of the
Company at an annual base salary of $195,000, subject to annual adjustment as
determined by the Compensation Committee in its discretion. Currently,
Mr. Lipke's salary is $235,000 per year. In addition to his base salary, Mr.
Lipke will be eligible to participate in the Company's bonus compensation
plans and other employee benefit plans available to the Company's executive
officers. The Employment Agreement has an initial term of five years, which
automatically is extended for an additional one-year period on each
anniversary date, unless either party gives notice of intent to terminate.
The Employment Agreement provides that if the Company terminates Mr. Lipke
without cause, he shall be entitled to receive a lump sum benefit equal to 2
1/2 times his total cash compensation for the 12-month period immediately
preceding the date of his termination.
The Employment Agreement further provides for severance benefits upon a
change in control of the Company. Events that trigger a "change in control"
under the Employment Agreement include (i) certain consolidations or mergers,
(ii) certain sales or transfers of substantially all of the Company's assets,
(iii) the approval of the Company's shareholders of a plan of dissolution or
liquidation of the Company, (iv) the acquisition of 20% or more of the
Company's outstanding common stock by certain persons (other than the
Company's executive officers and directors, whether individually or as a
group) and (v) certain changes in the membership of the Company's Board of
Directors. If Mr. Lipke's employment is terminated within three years of a
change in control, he may be entitled to receive a
36
<PAGE>
lump sum severance payment equal to $100 less than three times the average of
his total cash compensation during the three-year period immediately preceding
his termination, plus medical, disability and life insurance benefits for the
rest of his life. The payments and benefits otherwise payable in the event of
a change in control are subject to an overall limitation so that the value
thereof would not constitute parachute payments that would be subject to
excise tax payments or corporate deduction disallowance under the Code. In
addition, upon a termination of Mr. Lipke's employment other than by the
Company for cause and other than voluntarily by Mr. Lipke, if he becomes
entitled to receive benefits under any of the Company's tax-qualified
retirement plans (the "Plans"), he will be entitled to receive from the
general assets of the Company an additional benefit computed as if the Plans
were not subject to any applicable limits imposed on such plans by the Code or
the Employee Retirement Income Security Act of 1974, as amended.
If Mr. Lipke dies during the term of the Employment Agreement, in addition
to any death benefits payable under life insurance maintained by the Company
and any death benefits payable under the Company's employee benefit plans, the
Company will pay to the estate of Mr. Lipke a death benefit equal to 50% of
his annual base salary plus an amount equal to all bonuses he would have
received through the end of the then current fiscal year. If he becomes
permanently disabled, Mr. Lipke will be entitled to receive from the Company
annual benefits equal to his base salary, subject to a cap of $200,000
(adjusted for cost of living increases), less amounts received under any
pension, profit sharing or disability plan or insurance policy.
In the event Mr. Lipke's employment with the Company is terminated other
than for cause, the Company will continue to provide medical, disability and
life insurance benefits to Mr. Lipke for life, subject to reduction to the
extent he receives such benefits from other sources.
Mr. Lipke has agreed in the Employment Agreement that, in the event he
terminates his employment other than following a change in control, he will
not, for a period of one year after the date of termination, participate in
any "competitive operation," as defined in the Employment Agreement.
EMPLOYEE PLANS
Non-Qualified Stock Option Plan: The Company maintains the Gibraltar Steel
Corporation Non-Qualified Stock Option Plan (the "Non-Qualified Plan") and has
reserved 400,000 shares of Common Stock for issuance thereunder. Under the
terms of the Non-Qualified Plan, options may be granted to officers and
employees of the Company as well as to non-employee directors and advisors.
The Company has granted options under the Non-Qualified Plan to certain of its
officers and directors to purchase an aggregate of 200,000 shares of Common
Stock. All of such options are exercisable pro rata over a four-year period
commencing upon consummation of this offering at an exercise price equal to
the initial public offering price of Common Stock. In the event of certain
extraordinary transactions, including a change of control of the Company,
vesting of such options would automatically accelerate.
Incentive Stock Option Plan: The Company's Gibraltar Steel Corporation
Incentive Stock Option Plan (the "Incentive Plan"), authorizes grants to
officers and other key employees of the Company and its subsidiaries of stock
options that are intended to qualify as "incentive stock options" within the
meaning of Section 422 of the Code. The Incentive Plan authorizes the granting
of stock options for up to an aggregate of 600,000 shares (of which 200,000
shares are subject to stockholder approval). Options granted under the
Incentive Plan become exercisable over a four-year period at the rate of 25%
per year commencing one year from the date of grant at an exercise price of
not less than 100% of the fair market value of the Common Stock on the date of
grant. The options will expire ten years from the date of grant. The Company
has granted to certain of its officers options to purchase an aggregate of
215,000 shares of Common Stock. In the event of certain extraordinary
transactions, including a change of control of the Company, the vesting of
such options would automatically accelerate.
37
<PAGE>
Restricted Stock Plan: Gibraltar Steel Corporation Restricted Stock Plan
(the "Restricted Stock Plan") has reserved for issuance 100,000 shares of
Common Stock to be issued upon the grant of restricted stock awards
thereunder. Under the terms of the Restricted Stock Plan, the Compensation
Committee may grant to employees of the Company and its subsidiaries
restricted stock awards to purchase shares of Common Stock at a purchase price
of $.01 per share. Such shares, when and if issued, are subject to
restrictions on transfer and to risk of forfeiture until the shares become
vested. Grantees who remain continuously employed with the Company or its
subsidiaries become vested in their shares five years after the date of the
grant, or earlier upon death, disability, retirement or other special
circumstances. No awards have been made under the Restricted Stock Plan. The
restrictions on any such stock awards automatically lapse in the event of
certain extraordinary transactions, including a change of control of the
Company.
Executive Incentive Bonus Plan: In September 1993, the Company adopted the
Gibraltar Steel Corporation Executive Incentive Bonus Plan (the "Bonus Plan")
to provide an incentive compensation program to its executive officers
commencing with the quarter ending March 31, 1994. The Bonus Plan provides for
a quarterly bonus pool (the "Bonus Pool") in an amount equal to the lesser of
(a) 60% of the aggregate base compensation of the participating executive
officers; or (b) 15% of the Company's net income before taxes and any
incentive bonuses for the quarter on which the bonuses are based. The Bonus
Pool is then adjusted as follows: 50% of the Bonus Pool is available for bonus
allocations regardless of the Company's performance; 25% is available only if
the Company satisfied its operating profit goal for the quarter as established
by the Board of Directors; and 25% is available only if the Company satisfies
its return on equity goal for the quarter as established by the Board of
Directors. Within these parameters, the Compensation Committee determines the
amount to be paid to each officer, considering such factors as the officer's
performance during the quarter and the Company's overall performance during
the quarter.
Profit Sharing Plans: Gibraltar Steel Corporation and certain of its
subsidiaries maintain profit sharing plans covering certain salaried and
hourly employees. Employer contributions are subject to determination by the
Board of Directors each year.
401(k) Plans: Gibraltar Steel Corporation and certain of its subsidiaries
also maintain 401(k) retirement savings plans covering certain salaried and
hourly employees who have completed at least six months of service. Employees
may contribute up to 10% of their annual compensation, subject to an annual
limitation as adjusted by the Code. Employee contributions may be matched by
the Company as determined by the Board of Directors prior to the beginning of
each calendar year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the executive officers of the Company serve on the compensation
committee of another entity or on any other committee of the board of
directors of another entity performing similar functions.
38
<PAGE>
CERTAIN TRANSACTIONS
On March 6, 1996, (i) 26,455 shares of Common Stock beneficially owned by
Eric R. Lipke were sold to Gerald S. Lippes, a director of the Company, (ii)
26,455 shares of Common Stock beneficially owned by Neil E. Lipke were sold to
William P. Montague, a director of the Company and (iii) 26,455 shares of
Common Stock beneficially owned by Brian J. Lipke were sold to a third party,
not affiliated with the Company. In each of these private resale transactions,
the shares of Common Stock were sold at $12.60 per share, reflecting an
approximate 10% discount from the approximate then-current NASDAQ price to
account for, among other things, the limited transferability of such shares of
Common Stock, which are "restricted" for purposes of Rule 144 under the
Securities Act.
The Lipke Family, the Lipke Trusts, the Estate of Kenneth E. Lipke
(collectively the "Lipke Interests") and the Company have entered into an
Indemnification Agreement relating to their respective tax liabilities. The
agreement provides, among other things, for (a) the indemnification by the
Company of the Lipke Interests against all losses, liabilities, interest,
penalties, attorneys' and accountants' fees resulting from any additional
federal or state income taxes imposed upon the Lipke Interests as a result of
any change in S Corporation income of any of the subsidiaries of the Company
for any period in which any such subsidiary was treated for federal and
certain state income tax purposes as an S Corporation (the "S Corporation
Periods"); and (b) indemnification of the Company by the Lipke Interests
against certain liabilities and losses with respect to federal and state
income taxes, including interest (but excluding penalties and attorneys' and
accountants' fees), resulting from any decrease in the S Corporation income of
the Lipke Interests from any of such subsidiaries during the S Corporation
Periods.
The law firm of Albrecht, Maguire, Heffern & Gregg, P.C., of which Arthur A.
Russ, Jr. is a member, provided services to the Company in 1995 and the
current year. Mr. Russ also serves as a trustee of the Lipke Trusts, which
hold shares of Common Stock. Mr. Russ shares voting and investment power with
respect to the shares of Common Stock held by the Lipke Trusts and disclaims
beneficial ownership of such shares.
The law firm of Lippes, Silverstein, Mathias & Wexler LLP, of which Gerald
S. Lippes is a partner, provided services to the Company in 1995 and the
current year.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 30, 1996, and as adjusted
to reflect the sale of 2,000,000 shares of Common Stock by the Company and the
sale of 1,000,000 shares of Common Stock by the Selling Stockholders, by (i)
each person who is known by the Company to own beneficially more than five
percent of the outstanding Common Stock; (ii) each director of the Company;
(iii) each executive officer of the Company; and (iv) all current directors
and executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
-------------------- SHARES --------------------
NAME NUMBER(A) PERCENTAGE OFFERED NUMBER PERCENTAGE
---- --------- ---------- ------- --------- ----------
<S> <C> <C> <C> <C> <C>
Brian J. Lipke(b)(c)........ 1,303,298 12.60% 200,000 1,103,298 8.94%
Eric R. Lipke(b)(d)......... 1,301,148 12.58 200,000 1,101,148 8.92
Neil E. Lipke(b)(e)......... 1,300,248 12.57 200,000 1,100,248 8.92
Curtis W. Lipke(b)(f)....... 1,314,203 12.71 200,000 1,114,203 9.03
Meredith A. Lipke-de
Blok(b)(g)................. 1,313,503 12.70 200,000 1,113,503 9.02
Patricia K. Lipke(b)(h)..... 844,485 8.17 -- 844,485 6.84
Walter T. Erazmus(b)(i)..... 27,052 * -- 27,052 *
Joseph A. Rosenecker(b)(j).. 25,594 * -- 25,594 *
Carl P. Spezio(b)(k)........ 24,915 * -- 24,915 *
Joseph W. Wark(b)(l)........ 16,603 * -- 16,603 *
Gerald S. Lippes(m)......... 61,768 * -- 61,768 *
700 Guaranty Building
28 Church Street Buffalo,
New York 14202
Arthur A. Russ, Jr.(n)...... 28,813 * -- 28,813 *
2100 Main Place Tower
Buffalo, New York 14202
William P. Montague(o)...... 51,268 * -- 51,268 *
501 John James Audubon Pky.
P.O. Box 810
Amherst, New York 14226
David N. Campbell(p)........ 15,313 * -- 15,313 *
800 Delaware Avenue
Buffalo, New York 14202
All Directors and Executive
Officers as a Group
(12 persons)(q)............ 5,470,223 52.90 800,000 4,670,223 37.85
</TABLE>
- --------
* Less than 1%.
(a) Unless otherwise indicated in the footnotes, each of the stockholders
named in this table has sole voting and investment power with respect to
the shares shown as beneficially owned by him, except to the extent that
authority is shared by spouses under applicable law.
(b) The address of each of the executive officers listed in the Summary
Compensation Table, Meredith A. Lipke-de Blok, Carl P. Spezio, Curtis W.
Lipke, Eric R. Lipke and Patricia K. Lipke is 3556 Lake Shore Road, P.O.
Box 2028, Buffalo, New York 14219-0228.
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<PAGE>
(c) Includes (i) 1,275,948 shares of Common Stock held by two trusts for the
benefit of Brian J. Lipke (of which 200,000 shares are being sold in this
offering), (ii) 1,800 shares of Common Stock held by a trust for the
benefit of the daughter of Brian J. Lipke, (iii) 1,800 shares of Common
Stock held in a custodial account for the benefit of the daughter of Brian
J. Lipke and (iv) 3,750 shares of Common Stock issuable under currently
exercisable options pursuant to the Non-Qualified Plan. Excludes 11,250
shares of Common Stock issuable under options granted to Brian J. Lipke
pursuant to the Non-Qualified Plan which are not exercisable within 60
days. Also excludes (i) 842,985 shares of Common Stock held by the Trust
U/W of Kenneth E. Lipke f/b/o Patricia K. Lipke (the "Kenneth E. Lipke
Trust"), as to which Brian J. Lipke serves as one of three trustees and
shares voting and investment power and as to which he disclaims beneficial
ownership, (ii) 4,934,182 shares of Common Stock held by several trusts
for the benefit of each of Neil E. Lipke, Curtis W. Lipke, Eric R. Lipke
and Meredith A. Lipke-de Blok, as to each of which Brian J. Lipke serves
as one of three trustees and shares voting and investment power and as to
which he disclaims beneficial ownership, (iii) 30,000 shares of Common
Stock held by a trust for the benefit of Meredith A. Lipke-de Blok, as to
which Brian J. Lipke serves as one of five trustees and shares voting and
investment power and as to which he disclaims beneficial ownership, (iv)
1,800 shares of Common Stock held by a trust for the benefit of the
daughter of Meredith A. Lipke-de Blok, as to which Brian J. Lipke serves
as one of four trustees and shares voting and investment power and as to
which he disclaims beneficial ownership and (v) 900 shares of Common Stock
held by a trust for the benefit of the son of Eric R. Lipke, as to which
Brian J. Lipke serves as one of three trustees and shares voting and
investment power and as to which he disclaims beneficial ownership.
(d) Includes (i) 1,222,568 shares of Common Stock held by a trust for the
benefit of Eric R. Lipke (of which 200,000 shares are being sold in this
offering), (ii) 900 shares of Common Stock held by a trust for the benefit
of the son of Eric R. Lipke and (iii) 2,500 shares of Common Stock
issuable under currently exercisable options granted to Eric R. Lipke
pursuant to the Non-Qualified Plan. Excludes 7,500 shares of Common Stock
issuable under options granted to Eric R. Lipke pursuant to the Non-
Qualified Plan which are not exercisable within 60 days. Also excludes (i)
1,215,068 shares of Common Stock held by a trust for the benefit of Brian
J. Lipke, as to which Eric R. Lipke serves as one of three trustees and
shares voting and investment power and as to which Eric R. Lipke disclaims
beneficial ownership, (ii) 60,880 shares of Common Stock held by a trust
for the benefit of Brian J. Lipke and 30,000 shares of Common Stock held
by a trust for the benefit of Meredith A. Lipke-de Blok, as to each of
which Eric R. Lipke serves as one of five trustees and shares voting and
investment power and as to which he disclaims beneficial ownership and
(iii) 1,800 shares of Common Stock held by a trust for the benefit of the
daughter of Brian J. Lipke, as to which Eric R. Lipke serves as one of
three trustees and shares voting and investment power and as to which he
disclaims beneficial ownership.
(e) Includes (i) 1,228,568 shares of Common Stock held by a trust for the
benefit of Neil E. Lipke (of which 200,000 shares are being sold in this
offering) and (ii) 2,500 shares of Common Stock issuable under currently
exercisable options granted to Neil E. Lipke pursuant to the Non-Qualified
Plan. Excludes 7,500 shares of Common Stock issuable under options granted
to Neil E. Lipke pursuant to the Non-Qualified Plan which are not
exercisable within 60 days. Also excludes (i) 60,880 shares of Common
Stock held by a trust for the benefit of Brian J. Lipke and 30,000 shares
of Common Stock held by a trust for the benefit of Meredith A. Lipke-de
Blok, as to each of which Neil E. Lipke serves as one of five trustees and
shares voting and investment power and as to which he disclaims beneficial
ownership, (ii) 1,800 shares of Common Stock held by a trust for the
benefit of the daughter of Brian J. Lipke, as to which Neil E. Lipke
serves as one of three trustees and shares voting and investment power and
as to which he disclaims beneficial ownership and (iii) 900 shares of
Common Stock held by a trust for the benefit of the son of Eric R. Lipke,
as to which Neil E. Lipke serves as one of three trustees and shares
voting and investment power and as to which he disclaims beneficial
ownership.
(f) Includes (i) 1,241,523 shares of Common Stock held by a trust for the
benefit of Curtis W. Lipke (of which 200,000 shares are being sold in this
offering) and (ii) 2,500 shares of Common Stock
41
<PAGE>
issuable under currently exercisable options granted to Curtis W. Lipke
pursuant to the Non-Qualified Plan. Excludes 7,500 shares of Common Stock
issuable under options granted to Curtis W. Lipke pursuant to the Non-
Qualified Plan which are not exercisable within 60 days. Also excludes (i)
60,880 shares of Common Stock held by a trust for the benefit of Brian J.
Lipke and 30,000 shares of Common Stock held by a trust for the benefit of
Meredith A. Lipke-de Blok, as to each of which Curtis W. Lipke serves as one
of five trustees and shares voting and investment power and as to which he
disclaims beneficial ownership, (ii) 1,800 shares of Common Stock held by a
trust for the benefit of the daughter of Meredith A. Lipke-de Blok, as to
which Curtis W. Lipke serves as one of four trustees and shares voting and
investment power and as to which he disclaims beneficial ownership, (iii)
1,800 shares of Common Stock held by a trust for the benefit of the daughter
of Brian J. Lipke, as to which Curtis W. Lipke serves as one of three
trustees and shares voting and investment power and as to which he disclaims
beneficial ownership and (iv) 900 shares of Common Stock held by a trust for
the benefit of the son of Eric R. Lipke, as to which Curtis W. Lipke serves
as one of three trustees and shares voting and investment power and as to
which he disclaims beneficial ownership.
(g) Includes (i) 1,300,603 shares of Common Stock held by three trusts for the
benefit of Meredith A. Lipke-de Blok (of which 200,000 shares are being
sold in this offering), (ii) 3,600 shares of Common Stock held in a
custodial account for the benefit of the daughter of Meredith A. Lipke-de
Blok and (iii) 1,800 shares of Common Stock held by a trust for the
benefit of the daughter of Meredith A. Lipke-de Blok. Excludes 60,880
shares of Common Stock held by a trust for the benefit of Brian J. Lipke,
as to which Meredith A. Lipke-de Blok serves as one of five trustees and
shares voting and investment power and as to which she disclaims
beneficial ownership.
(h) Includes 842,985 shares of Common Stock held by the Kenneth E. Lipke
Trust. Excludes 1,800 shares of Common Stock held by a trust for the
benefit of the daughter of Meredith A. Lipke-de Blok, as to which Patricia
K. Lipke serves as one of four trustees and shares voting and investment
power and as to which she disclaims beneficial ownership.
(i) Includes (i) 21,250 shares of Common Stock issuable under currently
exercisable options granted to Mr. Erazmus under the Incentive Plan, (ii)
800 shares of Common Stock held by an Individual Retirement Account for
the benefit of Mr. Erazmus, (iii) 500 shares of Common Stock held by an
Individual Retirement Account for the benefit of the spouse of Mr. Erazmus
and (iv) 1,502 shares of Common Stock allocated to Mr. Erazmus's self-
directed account under the Company's 401(k) Retirement Savings Plan.
Excludes 38,750 shares of Common Stock issuable under options granted to
Mr. Erazmus pursuant to the Incentive Plan which are not exercisable
within 60 days.
(j) Includes 21,250 shares of Common Stock issuable under currently
exercisable options granted to Mr. Rosenecker under the Incentive Plan and
(ii) 1,844 shares of Common Stock allocated to Mr. Rosenecker's self-
directed account under the Company's 401(k) Retirement Savings Plan.
Excludes 38,750 shares of Common Stock issuable under options granted to
Mr. Rosenecker pursuant to the Incentive Plan which are not exercisable
within 60 days.
(k) Includes (i) 21,250 shares of Common Stock issuable under currently
exercisable options granted to Mr. Spezio under the Incentive Plan and
(ii) 1,638 shares of Common Stock allocated to Mr. Spezio's self-directed
account under the Company's 401(k) Retirement Savings Plan. Excludes
38,750 shares of Common Stock issuable under options granted to Mr. Spezio
pursuant to the Incentive Plan which are not exercisable within 60 days.
(l) Includes (i) 15,000 shares of Common Stock issuable under currently
exercisable options granted to Mr. Wark under the Incentive Plan and (ii)
1,603 shares of Common Stock allocated to Mr. Wark's self-directed account
under the Company's 401(k) Retirement Savings Plan. Excludes 20,000 shares
of Common Stock issuable under options granted to Mr. Wark pursuant to the
Incentive Plan which are not exercisable within 60 days.
(m) Includes 25,313 shares of Common Stock issuable under currently
exercisable options granted to Mr. Lippes pursuant to the Non-Qualified
Plan. Excludes 25,937 shares of Common Stock
42
<PAGE>
issuable under options granted to Mr. Lippes pursuant to the Non-Qualified
Plan which are not exercisable within 60 days.
(n) Includes (i) 25,313 shares of Common Stock issuable under currently
exercisable options granted to Mr. Russ pursuant to the Non-Qualified Plan
and (ii) an aggregate of 1,500 shares of Common Stock held by three (3)
trusts for the benefit of Mr. Russ' children as to each of which Mr. Russ
serves as a trustee. Excludes 25,937 shares of Common Stock issuable under
options granted to Mr. Russ pursuant to the Non-Qualified Plan which are
not exercisable within 60 days. Also excludes an aggregate of (i)
6,149,250 shares of Common Stock owned by the Lipke Trusts, as to each of
which Mr. Russ serves as one of three trustees and shares voting and
investment power and as to which he disclaims beneficial ownership and
(ii) 842,985 shares of Common Stock held by the Kenneth E. Lipke Trust, as
to which Mr. Russ serves as one of three trustees and shares voting and
investment power and as to which he disclaims beneficial ownership.
(o) Includes 12,813 shares of Common Stock issuable under currently
exercisable options granted to Mr. Montague pursuant to the Non-Qualified
Plan. Excludes 13,437 shares of Common Stock issuable under options
granted to Mr. Montague pursuant to the Non-Qualified Plan which are not
exercisable within 60 days.
(p) Includes 12,813 shares of Common Stock issuable under currently
exercisable options granted to Mr. Campbell pursuant to the Non-Qualified
Plan. Excludes 13,437 shares of Common Stock issuable under options
granted to Mr. Campbell pursuant to the Non-Qualified Plan which are not
exercisable within 60 days.
(q) Includes options to purchase an aggregate of 78,750 shares of Common Stock
issuable to certain executive officers under the Incentive Plan and an
aggregate of 87,502 shares of Common Stock issuable to certain executive
officers and directors under the Non-Qualified Plan, all of which are
exercisable within 60 days. Excludes options to purchase an aggregate of
136,250 shares of Common Stock issued to certain executive officers under
the Incentive Plan and an aggregate of 112,498 shares of Common Stock
issued to certain executive officers and directors under the Non-Qualified
Plan, none of which are exercisable within 60 days.
DESCRIPTION OF CAPITAL STOCK
Upon consummation of this offering, the authorized capital stock of the
Company will consist of 50.0 million shares of Common Stock and 10.0 million
shares of preferred stock, $.01 par value per share (the "Preferred Stock").
As of May 1, 1996, there were 10,173,900 shares of Common Stock issued and
outstanding. Upon completion of this offering, there will be 12,173,900 shares
of Common Stock issued and outstanding, assuming no exercise of the
Underwriters' over-allotment option. There are no shares of the Company's
Preferred Stock outstanding.
COMMON STOCK
The issued and outstanding shares of Common Stock are, and the shares being
offered by the Company hereby will be, upon payment therefor, duly authorized,
validly issued, fully paid and nonassessable. Each outstanding share of Common
Stock entitles the holder to one vote on all matters submitted to a vote of
stockholders. The holders of outstanding shares of Common Stock are entitled
to receive dividends out of assets legally available therefor at such times
and in such amounts as the Board of Directors may from time to time determine.
See "Dividend Policy". The shares of Common Stock are neither redeemable nor
convertible, and the holders thereof have no preemptive or subscription rights
to purchase any securities of the Company. Upon liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to receive
pro rata the assets of the Company which are legally available for
distribution, after payment of all debts and other liabilities and subject to
the prior rights of any holders of preferred stock then outstanding. There is
no cumulative voting. Therefore, the holders of a majority of the shares of
Common Stock voted in an election of directors can elect all of the directors
then standing for election, subject to any rights of the holders of any
outstanding preferred stock. See "Risk Factors--Control by Certain
Stockholders; Anti-Takeover Provisions".
43
<PAGE>
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations prescribed
by law, to issue the Preferred Stock in one or more classes or series and to
fix the designations, powers, preferences, rights, qualifications, limitations
or restrictions of any such class or series. Presently, no shares of Preferred
Stock are outstanding.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
Under the Company's Certificate of Incorporation, upon consummation of this
offering (assuming no exercise of the Underwriters' over-allotment option)
there will be 36,926,100 shares of Common Stock and 10,000,000 shares of
Preferred Stock available for future issuance without stockholder approval.
These additional shares may be utilized for a variety of corporate purposes,
including future public offerings to raise additional capital or to facilitate
corporate acquisitions. See "Risk Factors--Risks Associated with Future
Expansion".
One of the effects of the existence of unissued and unreserved Common Stock
and Preferred Stock may be to enable the Board of Directors to issue shares to
persons friendly to current management, which could render more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or otherwise, and thereby protect the continuity
of the Company's management. Such additional shares also could be used to
dilute the stock ownership of persons seeking to obtain control of the
Company.
The Board of Directors is authorized without any further action by the
stockholders to determine the rights, preferences, privileges and restrictions
of the unissued Preferred Stock. The purpose of authorizing the Board of
Directors to determine such rights and preferences is to eliminate delays
associated with a stockholder vote on specific issuances. The Board of
Directors may issue Preferred Stock with voting and conversion rights which
could adversely affect the voting power of the holders of Common Stock, and
which could, among other things, have the effect of delaying, deterring or
preventing a change in control of the Company.
The Company currently has no plans to issue additional shares of Common
Stock or Preferred Stock other than shares of Common Stock which may be issued
upon the exercise of options which have been granted or which may be granted
in the future to the Company's employees or directors.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS
The Certificate of Incorporation of the Company provides that the Company
shall indemnify each officer and director of the Company to the fullest extent
permitted by applicable law. The Certificate of Incorporation also provides
that, to the fullest extent permitted by the Delaware General Corporation Law,
a director of the Company shall not be liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director.
The Certificate of Incorporation and By-Laws of the Company contain certain
provisions that are intended to enhance the likelihood of continuity and
stability in the composition of the Company's Board of Directors and which may
have the effect of delaying, deterring or preventing a future takeover or
change in control of the Company unless such takeover or change in control is
approved by the Company's Board of Directors. Such provisions may also render
the removal of the current Board of Directors and of management more
difficult.
Pursuant to the Certificate of Incorporation, the Board of Directors of the
Company is divided into three classes serving staggered three-year terms.
Directors can be removed from office only for cause and only by the
affirmative vote of the holders of a majority of the voting power of the then
outstanding shares of capital stock of the Company entitled to vote generally
in the election of directors (the "Voting Stock"), voting together as a single
class. Vacancies on the Board of Directors may only be filled by the remaining
directors and not by the stockholders.
44
<PAGE>
The By-Laws establish an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board of Directors, of
candidates for election as directors and with regard to certain matters to be
brought before an annual meeting of stockholders of the Company. In general,
notice must be received by the Company not less than 60 nor more than 90 days
prior to the date of the prior year's annual meeting and must contain certain
specified information concerning the person to be nominated or the matter to
be brought before the meeting and concerning the stockholder submitting the
proposal.
Special meetings of stockholders may be called only by the Chairman of the
Board, the President of the Company or a majority of the Board of Directors.
The Certificate of Incorporation provides that stockholders may act only at an
annual or special meeting and stockholders may not act by written consent.
The Certificate of Incorporation also provides that certain mergers, sales
of assets, issuances of securities, liquidations or dissolutions,
reclassifications or recapitalizations involving Interested Stockholders must
be approved by holders of at least 80% of the outstanding Voting Stock, unless
such transactions are approved by a majority of the Disinterested Directors
(as defined in the Company's Certificate of Incorporation) of the Company or
certain minimum price, form of consideration and procedural requirements are
satisfied. An Interested Stockholder is defined as a holder of stock
representing 20% or more of the shares of Voting Stock then outstanding. The
Certificate of Incorporation provides that the affirmative vote of the holders
of 80% of the total votes eligible to be cast in the election of directors is
required to amend, alter, change or repeal such provisions. The requirement of
such a super-majority vote could enable a minority of the Company's
stockholders to exercise veto powers over such amendments, alterations,
changes or repeals.
DELAWARE ANTI-TAKEOVER LAW
The Company is a Delaware corporation subject to the provisions of Section
203 of the Delaware General Corporation Law. Section 203 provides that, with
certain exceptions, a Delaware corporation may not engage in any of a broad
range of "business combinations" with a person or affiliate or associate of
such person who is an "interested stockholder" for a period of three years
from the date that such person became an interested stockholder unless: (a)
the transaction resulting in a person's becoming an interested stockholder or
the business combination is approved by the board of directors of the
corporation before the person became an interested stockholder; (b) the
interested stockholder acquires 85% or more of the outstanding voting stock of
the corporation in the same transaction that makes it an interested
stockholder (excluding shares owned by persons who are both officers and
directors of the corporation and shares held by employee stock ownership plans
in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer); or (c) on or after the date the person becomes an
interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66 2/3% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder.
Under Section 203, the restrictions described above also do not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of one of certain extraordinary transactions
involving the corporation and a person who had not been an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of a majority of the corporation's directors, if
such extraordinary transaction is approved or not opposed by a majority of the
directors who were directors prior to any person becoming an interested
stockholder during the previous three years or were recommended for election
or elected to succeed such directors by a majority of such directors.
An "interested stockholder" is defined as any person that is (a) the owner
of 15% or more of the outstanding voting stock of the corporation; or (b) an
affiliate or associate of the corporation and was
45
<PAGE>
the owner of 15% or more of the outstanding voting stock of the corporation at
any time within the three-year period immediately prior to the date on which
it is sought to be determined whether such person is an interested
stockholder.
A "business combination" is defined to encompass a wide variety of
transactions with or committed by an interested stockholder in which the
interested stockholder receives or could receive a benefit on other than a pro
rata basis with other stockholders, including mergers, certain asset sales,
certain issuances of additional shares to the interested stockholder,
transactions with the corporation which increase the proportionate interest in
the corporation directly owned by the interested stockholder, transactions
with the corporation which increase the proportionate interest in the
corporation directly owned by the interested stockholder or transactions in
which the interested stockholder receives certain other benefits.
Section 203 could have the effect of delaying, deterring or preventing a
change of control of the Company. The Company's stockholders, by adopting an
amendment to the Certificate of Incorporation or By-Laws of the Company, may
elect not to be governed by Section 203, effective 12 months after adoption.
Neither the Certificate of Incorporation nor the By-Laws of the Company
currently exclude the Company from the restrictions imposed by Section 203.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 12,173,900 shares of
Common Stock outstanding (assuming no exercise of the Underwriters' over-
allotment option). Of these shares, the 3,000,000 shares of Common Stock
(3,450,000 shares if the Underwriters' over-allotment option is exercised in
full) sold in this offering, plus 2,662,900 shares sold in the Company's
initial public offering in November 1993 (other than any shares sold then or
subsequently to, and not resold by, any Affiliates, as defined below), will be
freely transferable by persons other than Affiliates without restriction or
further registration under the Securities Act. 7,461,959 shares of outstanding
Common Stock (the "Affiliate Shares") are held by "affiliates" of the Company,
as that term is defined under the Securities Act ("Affiliates"), of which
52,910 shares are also "restricted securities" within the meaning of Rule 144
under the Securities Act; an additional 26,455 shares of Common Stock, held by
a third party not affiliated with the Company, are also "restricted
securities" (together, "Restricted Shares"). The Restricted Shares may not be
sold in the absence of registration under the Securities Act unless an
exemption from registration is available, including the exemption afforded by
Rule 144, as described below. The Affiliate Shares also may not be sold in the
absence of registration under the Securities Act unless an exemption from
registration is available; however, due to the length of time for which they
have been held by the Affiliates, the Affiliate Shares (other than the 52,910
shares which are also Restricted Shares) are transferable, subject to the
Lock-up Agreements described below, in accordance with the volume and other
requirements (but not the holding period requirement) of Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least
two years, including an Affiliate, is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of 1% of the then
outstanding Common Stock or the average weekly trading volume in the Common
Stock in composite trading on all exchanges during the four calendar weeks
preceding such sale. A person (or persons whose shares are aggregated) who is
not deemed an Affiliate and who has beneficially owned shares for at least
three years is entitled to sell such shares under Rule 144 without regard to
the volume limitations described above.
46
<PAGE>
The Securities and Exchange Commission has recently proposed amendments to
Rule 144 and 144(k) that would permit resales of Restricted Shares under Rule
144 after a one-year, rather than a two-year holding period, subject to
compliance with the other provisions of Rule 144, and would permit resale of
such Common Stock by non-affiliates under Rule 144(k) after a two-year, rather
than a three-year holding period. Adoption of such amendments could result in
resales of any existing or future Restricted Shares sooner than would be the
case under Rule 144 and 144(k) as currently in effect.
The Company, each of its directors and executive officers, the Selling
Stockholders and certain other stockholders of the Company have entered into
Lock-up Agreements wherein they have agreed not to offer, sell, contract to
sell or otherwise dispose of, directly or indirectly, or announce the offering
of, any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for shares of Common Stock, except for the shares
of Common Stock offered hereby, and, in the case of the Company, shares
issuable pursuant to employee benefit plans, for a period of 90 days from the
date of this Prospectus, without the prior written consent of the
Representative.
The Company has reserved 400,000 shares of Common Stock to be issued under
its Non-Qualified Plan and 400,000 shares to be issued under its Incentive
Plan; the Board of Directors has approved, subject to stockholder approval, an
increase in the number of shares issuable under the Incentive Plan to an
aggregate of 600,000 shares. Options to purchase an aggregate of 200,000 and
215,000 shares of Common Stock, respectively, are currently outstanding under
the Non-Qualified Plan and the Incentive Plan.
47
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions set forth in the Underwriting
Agreement, the Company and the Selling Stockholders have agreed to sell to
each of the Underwriters named below (the "Underwriters"), for whom Salomon
Brothers Inc is acting as Representative, and each of the Underwriters has
severally agreed to purchase from the Company and the Selling Stockholders,
the respective number of shares of Common Stock set forth opposite its name
below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------------- ----------------
<S> <C>
Salomon Brothers Inc........................................
Smith Barney Inc............................................
---------
Total............................................................ 3,000,000
=========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all of the above-
listed shares of Common Stock offered hereby (other than the shares of Common
Stock covered by the Underwriters' over-allotment option described below) if
any such shares are purchased. In the event of a default by any Underwriter,
the Underwriting Agreement provides that, in certain circumstances the
purchase commitments of the non defaulting Underwriters may be increased or
the Underwriting Agreement may be terminated.
The Company and the Selling Stockholders have been advised by the
Representative that the several Underwriters propose initially to offer the
shares of Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of $. per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $. per share to
other dealers. After this initial offering, the public offering price and such
concessions may be changed.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 450,000
additional shares of Common Stock from the Company at the same price per share
as the initial shares of Common Stock to be purchased by the Underwriters. The
Underwriters may exercise such option only to cover over-allotments, if any,
in the sale of the shares of Common Stock that the Underwriters have agreed to
purchase. To the extent that the Underwriters exercise such option, each
Underwriter will have a firm commitment, subject to certain conditions, to
purchase the same proportion of the option shares as the number of shares of
Common Stock to be purchased and offered by such Underwriter in the above
table bears to the total number of shares of Common Stock initially offered by
the Underwriters hereby.
The Company, each of its directors and executive officers, the Selling
Stockholders and certain other stockholders of the Company have agreed not to
offer, sell, contract to sell or otherwise dispose of, directly or indirectly,
or announce the offering of, any other shares of Common Stock, or any
securities convertible into or exchangeable for shares of Common Stock, except
the shares of Common Stock offered hereby, for a period of 90 days following
the commencement of this offering, without the prior written consent of the
Representative. See "Shares Eligible for Future Sale".
48
<PAGE>
In connection with this offering, certain Underwriters and selling group
members who are qualifying registered market makers on NASDAQ may engage in
passive market making transactions in Common Stock on NASDAQ in accordance
with Rule 10b-6A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), during the two business day period before commencement of
offers or sales of Common Stock in this offering. Passive market making
transactions must comply with certain volume and price limitations and must be
identified as such. In general, a passive market maker may display its bid at
a price not in excess of the highest independent bid for the security, and if
all independent bids are lowered below the passive market maker's bid, then
such bid must be lowered when certain purchase limits are exceeded.
The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act, or contribute to
payments the Underwriters may be required to make in respect thereof.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Lippes, Silverstein, Mathias & Wexler
LLP, Buffalo, New York. Certain legal matters related to this offering will be
passed upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom, New
York, New York.
Gerald S. Lippes, a partner of Lippes, Silverstein, Mathias & Wexler LLP, is
a director of the Company, and beneficially owns 36,455 shares and has been
awarded options to purchase an additional 51,250 shares of Common Stock. See
"Management--Employee Plans--Non-Qualified Stock Option Plan".
EXPERTS
The consolidated financial statements of the Company as of December 31, 1994
and 1995 and for each of the three years in the period ended December 31, 1995
included in this Prospectus have been so included in reliance upon the report
of Price Waterhouse LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing. The financial statements of
Hubbell Steel as of December 31, 1993 and 1994 and for each of the two years
in the period ended December 31, 1994 included in this Prospectus have been so
included in reliance upon the report of KPMG Peat Marwick LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing. The financial statements of CCHT as of December 31, 1994 and 1995
and for each of the two years in the period ended December 31, 1995 included
in this Prospectus have been so included in reliance upon the report of Scharf
Pera & Co., independent accountants, given on the authority of said firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company is subject to the information reporting requirements of the
Exchange Act, and in accordance therewith files reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy amendments and other information filed by
the Company may be examined without charge at, or copies obtained upon payment
of prescribed fees from, the Public Reference Section of the Commission at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W. Washington, D.C. 20549 and
are also available for inspection and copying at the regional offices of the
Commission located at Seven World Trade Center, New York, New York 10048 and
at Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois 60661.
49
<PAGE>
The Company has filed with the Commission a Registration Statement on Form
S-1 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the shares
of Common Stock offered pursuant to this Prospectus. This Prospectus does not
contain all of the information, exhibits and undertakings contained in the
Registration Statement, to which reference is hereby made. For further
information concerning the Company and the shares of Common Stock offered
hereby, reference is made to the Registration Statement, which may be examined
without charge at, or copies obtained upon payment of prescribed fees from,
the Commission and its regional offices at the locations listed above. Any
statements contained herein concerning the provisions of any document are not
necessarily complete, and in each instance reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
50
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
GIBRALTAR STEEL CORPORATION--CONSOLIDATED FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1995
Report of Independent Accountants...................................... F-2
Consolidated Balance Sheet at December 31, 1995 and 1994............... F-3
Consolidated Statement of Income for the years ended December 31, 1995,
1994
and 1993.............................................................. F-4
Consolidated Statement of Cash Flows for the years ended December 31,
1995, 1994
and 1993.............................................................. F-5
Consolidated Statement of Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993...................................... F-6
Notes to Consolidated Financial Statements............................. F-7
GIBRALTAR STEEL CORPORATION--CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996 (UNAUDITED)
Condensed Consolidated Balance Sheet at March 31, 1996 and December 31,
1995.................................................................. F-15
Condensed Consolidated Statement of Income for the three months ended
March 31, 1996 and 1995............................................... F-16
Condensed Consolidated Statement of Cash Flows for the three months
ended March 31, 1996 and 1995......................................... F-17
Notes to Condensed Consolidated Financial Statements................... F-18
WM. R. HUBBELL STEEL CORPORATION--COMBINED FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1994
Independent Auditors' Report........................................... F-20
Combined Balance Sheets at December 31, 1994 and 1993.................. F-21
Combined Statements of Earnings and Retained Earnings for the years
ended December 31, 1994 and 1993...................................... F-22
Combined Statements of Cash Flows for the years ended December 31, 1994
and 1993.............................................................. F-23
Notes to Combined Financial Statements................................. F-24
CAROLINA COMMERCIAL HEAT TREATING, INC.--FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1995
Independent Auditors' Report........................................... F-30
Balance Sheets at December 31, 1995 and 1994........................... F-31
Statements of Income for the years ended December 31, 1995 and 1994.... F-33
Statements of Stockholders' Equity for the years ended December 31,
1995 and 1994......................................................... F-34
Statements of Cash Flows for the years ended December 31, 1995 and
1994.................................................................. F-35
Notes to Financial Statements.......................................... F-36
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Gibraltar Steel Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Gibraltar
Steel Corporation and its subsidiaries at December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Buffalo, New York January 25, 1996
F-2
<PAGE>
GIBRALTAR STEEL CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
ASSETS -------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................. $ 4,123 $ 1,124
Accounts receivable........................................ 35,634 26,007
Inventories................................................ 45,274 41,988
Other current assets....................................... 1,964 1,433
-------- --------
Total current assets..................................... 86,995 70,552
Property, plant and equipment, net........................... 67,275 52,503
Other assets................................................. 13,153 3,325
-------- --------
$167,423 $126,380
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 25,845 $ 19,025
Accrued expenses........................................... 2,367 1,987
Current maturities of long-term debt....................... 1,214 740
Deferred income taxes...................................... 54 276
-------- --------
Total current liabilities................................ 29,480 22,028
Long-term debt............................................... 57,840 37,918
Deferred income taxes........................................ 9,251 5,544
Other non-current liabilities................................ 608 494
Shareholders' equity
Preferred shares, $.01 par value; authorized:
10,000,000 shares; none outstanding....................... -- --
Common shares, $.01 par value; authorized:
50,000,000 shares; issued and outstanding:
10,173,900 shares in 1995 and 10,162,900 in 1994.......... 102 102
Additional paid-in capital................................. 28,803 28,677
Retained earnings.......................................... 41,339 31,617
-------- --------
Total shareholders' equity............................... 70,244 60,396
-------- --------
$167,423 $126,380
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
GIBRALTAR STEEL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net sales................................. $ 282,833 $ 200,142 $ 167,883
Cost of sales............................. 240,370 166,443 138,559
---------- ---------- ----------
Gross profit............................ 42,463 33,699 29,324
Selling, general and administrative
expense................................... 22,095 17,520 16,390
---------- ---------- ----------
Income from operations.................. 20,368 16,179 12,934
Other income (expense):
Interest expense.......................... (3,984) (1,374) (1,621)
Other income, net......................... -- -- 200
---------- ---------- ----------
(3,984) (1,374) (1,421)
---------- ---------- ----------
Income before taxes..................... 16,384 14,805 11,513
Income taxes:
Taxes on income........................... 6,662 5,996 1,200
Reinstatement of deferred income taxes.... -- -- 5,100
---------- ---------- ----------
6,662 5,996 6,300
---------- ---------- ----------
Net income.............................. $ 9,722 $ 8,809 $ 5,213
========== ========== ==========
Net income per share...................... $ .96 $ .87
========== ==========
Pro forma (unaudited):
Income before taxes....................... $ 11,513
Pro forma interest savings................ 818
Pro forma provision for taxes............. 4,994
----------
Pro forma net income...................... $ 7,337
==========
Pro forma net income per share............ $ .72
==========
Weighted average shares outstanding
(Pro forma at December 31, 1993)......... 10,163,817 10,162,900 10,162,900
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
GIBRALTAR STEEL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................... $ 9,722 $ 8,809 $ 5,213
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization................. 4,538 3,445 3,399
Provision for deferred taxes.................. 218 676 5,100
Equity investment income...................... (641) (882) (909)
Dividends from equity investment.............. 275 377 370
(Gain) loss on disposition of property and
equipment....................................... (146) (37) (177)
Increase (decrease) in cash resulting from
changes in
(net of effects from acquisition in Hubbell):
Accounts receivable......................... 838 (6,451) 1,137
Inventories................................. 17,979 (13,354) (6,633)
Other current assets........................ (503) (390) (232)
Accounts payable and accrued expenses....... 3,390 (497) 3,835
Other assets................................ 70 (318) (1,026)
-------- -------- --------
Net cash provided by (used in) operating
activities...................................... 35,740 (8,622) 10,077
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Hubbell, net of cash acquired.... (20,859) -- --
Purchases of property, plant and equipment...... (14,504) (16,171) (10,468)
Proceeds from sale of property and equipment.... 317 173 1,817
Proceeds from sale of marketable securities..... -- -- 131
Payments received on mortgages and notes
receivable, net................................. -- -- 1,913
-------- -------- --------
Net cash used in investing activities......... (35,046) (15,998) (6,607)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of notes payable....................... -- -- (8,598)
Long-term debt reduction........................ (64,527) (15,381) (17,832)
Proceeds from notes payable..................... -- -- 3,848
Proceeds from long-term debt.................... 66,832 39,860 10,242
Net proceeds from initial public stock
offering........................................ -- -- 26,061
Distributions to shareholders................... -- -- (17,252)
-------- -------- --------
Net cash provided by (used in) financing
activities...................................... 2,305 24,479 (3,531)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalent...................................... 2,999 (141) (61)
Cash and cash equivalents at beginning of year.. 1,124 1,265 1,326
-------- -------- --------
Cash and cash equivalents at end of year........ $ 4,123 $ 1,124 $ 1,265
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
GIBRALTAR STEEL CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON SHARES ADDITIONAL
----------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
---------- ------ ---------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1992........... -- $-- $ 2,718 $ 35,292
Net income............................ -- -- -- 5,213
Distributions to shareholders......... -- -- -- (17,697)
Reorganization........................ 7,500,000 75 (75) --
Public sale of common shares at $11
per share, net......................... 2,662,900 27 26,034 --
---------- ---- ------- --------
Balance at December 31, 1993........... 10,162,900 102 28,677 22,808
Net income............................ -- -- -- 8,809
---------- ---- ------- --------
Balance at December 31, 1994........... 10,162,900 102 28,677 31,617
Net income............................ -- -- -- 9,722
Issuance of common shares to profit
sharing plan
at $11.50 per share.................. 11,000 -- 126 --
---------- ---- ------- --------
Balance at December 31, 1995........... 10,173,900 $102 $28,803 $ 41,339
========== ==== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
GIBRALTAR STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE BUSINESS
Gibraltar Steel Corporation is an intermediate steel processor which
primarily supplies high quality flat rolled steel to industrial customers,
located in the midwest, northeast and southeast United States, Canada and
Mexico, who require steel of precise thickness, width, length, edge, shape,
surface finish and temper for their own manufacturing processes.
SHAREHOLDERS' EQUITY
In November 1993, Gibraltar Steel Corporation issued 7,500,000 of its common
shares to the shareholders of several companies under common control in a tax-
free exchange for all of their outstanding common shares (the Reorganization).
Since the combining entities were under common control, the historical cost
basis was used in these consolidated financial statements.
Immediately after the Reorganization, Gibraltar Steel Corporation completed
its initial public offering of 2,662,900 common shares. The net proceeds from
the offering of approximately $26,061,000 were used for the repayment of debt.
In December 1995, the Company issued 11,000 of its common shares as a
contribution to one of its profit sharing plans.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Gibraltar
Steel Corporation and its wholly-owned subsidiaries (the Company) and require
the use of management's estimates for preparation in conformity with generally
accepted accounting principles. Significant intercompany accounts and
transactions have been eliminated.
The effect of changing the accounting year end of a subsidiary from October
31 to a calendar year end was to include $200,000 of net income of that
subsidiary in other income for the year ended December 31, 1993.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, checking accounts and all
highly liquid investments with a maturity of three months or less.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined by
using the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and are depreciated over
their estimated useful lives using the straight-line method. Accelerated
methods are used for income tax purposes. Interest is capitalized in
connection with construction of qualified assets. Under this policy, interest
of $683,000, $361,000 and $113,000 was capitalized in 1995, 1994 and 1993,
respectively.
F-7
<PAGE>
GIBRALTAR STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INTEREST RATE EXCHANGE AGREEMENTS
Interest rate swap agreements, which are used by the Company in the
management of interest rate risk, are accounted for on an accrual basis.
Amounts to be paid or received under interest rate swap agreements are
recognized as interest expense or income in the periods in which they accrue.
Swaps are not used for trading purposes.
INCOME TAXES
Prior to the Reorganization and the initial public offering, certain
subsidiaries were taxed as S Corporations under the provisions of the Internal
Revenue Code and where permitted for state purposes. Accordingly, no provision
was made for income taxes for these subsidiaries and taxable income was taxed
directly to shareholders.
In November 1993, the Company terminated the S Corporation status of the
applicable subsidiaries and became fully subject to corporate income taxes on
its earnings as a C Corporation. A final distribution was paid to pre-public
offering shareholders in the amount of $10,485,000, which represented the
Company's undistributed S Corporation earnings at the time of the S
Corporation termination. Total distributions to pre-public offering
shareholders for the year ended December 31, 1993 aggregated $17,697,000,
including a dividend in kind of approximately $445,000.
Upon termination of S Corporation status, $5,100,000 in cumulative deferred
tax liabilities were reinstated with an offsetting charge to net income.
The financial statements of the Company have been prepared using the assets
and liability approach in accounting for income taxes which requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of other assets and liabilities.
EARNINGS PER SHARE
Net income per share in 1995 and 1994 is based upon the weighted average
number of shares outstanding during the year. As certain of the subsidiaries
were S Corporations during 1993 and were not subject to Federal and State
income taxes, historical per share data for 1993 is not considered meaningful,
and accordingly, has not been presented. See Note 15 for discussion of
unaudited pro forma per share data.
2. ACQUISITION
On April 3, 1995, the Company purchased all of the outstanding capital stock
of Wm. R. Hubbell Steel Company and its subsidiary and certain of its
affiliates (Hubbell) for an aggregate cash purchase price of $21 million. In
addition, the Company repaid approximately $18 million of Hubbell's existing
bank indebtedness. Hubbell, headquartered in Chicago, Illinois, is a processor
and supplier of galvanized, galvalume and prepainted steel to the commercial
and residential metal building industries.
The acquisition has been accounted for under the purchase method, and
Hubbell's results of operations have been consolidated with the Company's
results of operations from the acquisition date. The excess of the aggregate
purchase price ($21 million) over the fair market value of assets acquired
($37 million) less liabilities assumed ($26 million) of Hubbell approximated
$10 million and will be amortized over 35 years using the straight-line
method.
F-8
<PAGE>
GIBRALTAR STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following information presents the pro forma consolidated condensed
results of operations as if the acquisition of Hubbell had occurred on January
1, 1994. The pro forma amounts may not be indicative of the results that
actually would have been achieved had the acquisition occurred as of January
1, 1994 and is not necessarily indicative of future results of the combined
companies.
<TABLE>
<CAPTION>
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
1995 1994
----------- -----------
(UNAUDITED)
<S> <C> <C>
Net sales............................................... $300,278 $273,079
=========== ===========
Income before taxes..................................... $ 16,868 $ 18,017
=========== ===========
Net income.............................................. $ 10,025 $ 10,590
=========== ===========
Net income per share.................................... $ .99 $ 1.04
=========== ===========
</TABLE>
3. ACCOUNTS RECEIVABLE
Accounts receivable are expected to be collected within one year and are net
of reserves for doubtful accounts of $491,000 and $327,000 for 1995 and 1994,
respectively.
4. INVENTORIES
Inventories at December 31 consist of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
---------------
1995 1994
------- -------
<S> <C> <C>
Raw material.................................................... $28,307 $25,791
Finished goods and work-in-process.............................. 16,967 16,197
------- -------
Total inventories............................................. $45,274 $41,988
======= =======
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost less accumulated depreciation, at
December 31 consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
---------------
1995 1994
------- -------
<S> <C> <C>
Land and land improvements..................................... $ 2,776 $ 2,260
Building and improvements...................................... 24,031 15,537
Machinery and equipment........................................ 60,267 48,353
Construction in progress....................................... 5,135 7,384
------- -------
92,209 73,534
Less accumulated depreciation and amortization................. 24,934 21,031
------- -------
Total property, plant and equipment.......................... $67,275 $52,503
======= =======
</TABLE>
F-9
<PAGE>
GIBRALTAR STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. OTHER ASSETS
Other assets at December 31 consist of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
1995 1994
------- ------
<S> <C> <C>
Equity interest in partnership.................................. $ 2,764 $2,398
Goodwill, net................................................... 9,656 --
Other........................................................... 733 927
------- ------
Total other assets............................................ $13,153 $3,325
======= ======
</TABLE>
The Company's 26% partnership interest is accounted for using the equity
method of accounting. The partnership provides a steel cleaning process called
pickling to steel processors, including the Company. Goodwill is amortized
over 35 years using the straight-line method.
7. DEBT
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
---------------
1995 1994
------- -------
<S> <C> <C>
Revolving credit notes payable.................................. $51,000 $30,150
Industrial Development Revenue Bond............................. 7,333 8,000
Other debt...................................................... 721 508
------- -------
59,054 38,658
Less current maturities......................................... 1,214 740
------- -------
Total long-term debt.......................................... $57,840 $37,918
======= =======
</TABLE>
In December 1995, the Company increased its working capital credit facility
available to $125 million expiring on November 17, 1997. This credit facility
has various interest rate options which are no greater than the bank's prime
rate and may be converted to a four year amortizing loan at any time prior to
expiration. In addition, the Company entered into an interest rate exchange
agreement (swap), as a means of managing interest rate risk related to
borrowings under the Company's revolving credit agreement. Interest rate swaps
allow the Company to convert long-term borrowings at floating rates into fixed
rates. This enables the Company to minimize the impact of interest rate
fluctuations on its operations. At December 31, 1995, the Company had one
interest rate swap agreement outstanding with a financial institution, having
a nominal amount of $25 million and a termination date of November 20, 2000 or
2002 at the option of the financial institution. At December 31, 1995,
borrowings outstanding consisted of $51 million with an interest rate of LIBOR
plus a fixed rate. The weighted average interest rate of these borrowings was
6.6% at December 31, 1995. Borrowings are secured by accounts receivable,
inventory, property, plant and equipment and other assets of the Company.
In addition, the Company has an Industrial Development Revenue Bond payable
in equal installments through May 2002, with an interest rate of LIBOR plus a
fixed rate (6.7% at December 31, 1995), which financed the cost of its
Tennessee expansion under a capital lease agreement. The cost of the facility
and equipment equal the amount of the bond and includes accumulated
amortization of $404,000. The agreement provides for the purchase of the
facility and equipment at any time during the term of the lease at scheduled
amounts or at the end of the lease in 2002 for a nominal amount.
F-10
<PAGE>
GIBRALTAR STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The aggregate maturities on long-term debt including lease purchase
obligations for the five years following December 31, 1995 are as follows:
1996, $1,214,000; 1997, $2,282,000; 1998, $13,974,000; 1999, $14,056,000; and
2000, $13,908,000.
The Company had no amounts outstanding under short-term borrowing for the
year ended December 31, 1995 and 1994.
The various loan agreements, which do not require compensating balances,
contain provisions that limit additional borrowings, capital expenditures and
require maintenance of minimum net worth and financial ratios. The Company is
in compliance with the terms and provisions of all its financing agreements.
Total cash paid for interest in the years ended December 31, 1995, 1994 and
1993 was $4,715,000, $1,345,000 and $1,801,000, respectively.
8. LEASES
The Company leases certain facilities and equipment under operating leases.
Rent expense under operating leases for the years ended December 31, 1995,
1994 and 1993 was $1,693,000, $824,000 and $795,000, respectively. Future
minimum lease payments under these operating leases are $1,587,000,
$1,393,000, $551,000, $461,000 and $471,000 for the years 1996, 1997, 1998,
1999 and 2000, respectively, and $2,832,000 thereafter through 2038.
9. EMPLOYEE RETIREMENT PLANS
Non-union employees participate in various profit sharing plans.
Contributions to these plans are funded annually and are based on a percentage
of pretax income or amounts determined by the Board of Directors.
Certain subsidiaries have multi-employer non-contributory retirement plans
providing for defined contributions to union retirement funds.
A supplemental pension plan, established in 1992, provides defined pension
benefits to certain salaried employees upon retirement. Net unfunded periodic
pension costs of $201,000 were accrued under this plan since the inception of
the plan and consisted primarily of service cost using a discount rate of 8%.
Total expense for all plans was $637,000, $699,000 and $682,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
10. OTHER POST-RETIREMENT BENEFITS
The Company provides health and life insurance to substantially all of its
employees, and to a number of retirees and their spouses from certain of its
subsidiaries. A summary of the components of the net periodic post-retirement
benefit cost charged to expense consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Service cost.................................................... $ 64 $ 53 $ 60
Interest cost................................................... 98 72 70
Amortization of transition obligations.......................... 45 45 45
---- ---- ----
Net periodic post-retirement benefit cost....................... $207 $170 $175
==== ==== ====
</TABLE>
F-11
<PAGE>
GIBRALTAR STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The approximate unfunded accumulated post-retirement benefit obligation at
December 31, consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
---------------
1995 1994
------- -------
<S> <C> <C>
Retirees....................................................... $ 476 $ 324
Other fully eligible participants.............................. 181 185
Other active participants...................................... 684 527
------- -------
$1,341 $1,036
======= =======
</TABLE>
The accumulated post-retirement benefit obligation was determined using a
weighted average discount rate of 7.5%. The medical inflation rate was assumed
to be 10% in 1995, with a gradual reduction to 5% over five years. The effect
of a 1% annual increase in the medical inflation rate would increase the
accumulated post-retirement benefit obligation by approximately $217,000 and
$150,000 and the annual service and interest costs by approximately $31,000
and $20,000 for 1995 and 1994, respectively.
One of the Company's subsidiaries also provides post-retirement health care
benefits to its unionized employees through contributions to a multi-employer
health care plan.
11. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
---------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Current tax expense
Federal................................................. $5,611 $4,275 $ 915
State................................................... 833 1,045 285
------ ------ ------
Total current........................................... 6,444 5,320 1,200
------ ------ ------
Deferred tax expense
Federal................................................. 198 740 4,077
State................................................... 20 (64) 1,023
------ ------ ------
Total deferred.......................................... 218 676 5,100
------ ------ ------
Total provision......................................... $6,662 $5,996 $6,300
====== ====== ======
</TABLE>
Deferred tax liabilities (assets) at December 31, consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
----------------
1995 1994
------- -------
<S> <C> <C>
Depreciation.................................................. $ 7,560 $ 6,014
Inventory..................................................... 1,989 --
Other......................................................... 1,168 1,103
------- -------
Gross deferred tax liabilities................................ 10,717 7,117
------- -------
State taxes................................................... (450) (460)
Other......................................................... (962) (837)
------- -------
Gross deferred tax assets..................................... (1,412) (1,297)
------- -------
Net deferred tax liabilities................................ $ 9,305 $ 5,820
======= =======
</TABLE>
F-12
<PAGE>
GIBRALTAR STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate
to pretax income from continuing operations as a result of the following
differences:
<TABLE>
<CAPTION>
(IN THOUSANDS)
---------------------
1995 1994 1993
------ ------ -------
<S> <C> <C> <C>
Statutory U.S. tax rates................................. $5,734 $5,182 $ 3,914
Increase (decrease) in rates resulting from:
State and local taxes, net............................. 554 638 83
Effect of S Corporation status......................... -- -- (2,797)
Reinstatement of deferred income taxes................. -- -- 5,100
Other.................................................. 374 176 --
------ ------ -------
$6,662 $5,996 $ 6,300
====== ====== =======
</TABLE>
Prior to the Reorganization and the public offering, the Company and its
pre-public offering shareholders entered into a tax indemnification agreement
relating to changes in their respective tax liabilities for the periods in
which any subsidiary was treated for federal and certain state income tax
purposes as an S Corporation.
Total cash paid for income taxes in the years ended December 31, 1995, 1994
and 1993 was $6,250,000, $6,100,000 and $379,000, respectively.
12. SIGNIFICANT CUSTOMERS
The Company sells its products to a wide variety of customers, primarily in
the automobile manufacturing and supply industries. Sales of processed steel
to a major automobile manufacturer purchasing through decentralized divisions
and subsidiaries in different geographical areas were $32,100,000 in 1995,
$28,700,000 in 1994 and $26,600,000 in 1993.
13. COMMITMENTS AND CONTINGENCIES
The Company is a party to certain claims and legal actions generally
incidental to its business. Management does not believe that the outcome of
these actions, which is not clearly determinable at the present time, would
significantly affect the Company's financial condition or results of
operations.
14. STOCK OPTIONS
Non-Qualified Stock Option Plan: The Company's Non-Qualified Stock Option
Plan, adopted in September 1993, provides for granting officers and employees
as well as non-employee directors and advisers to acquire an aggregate of
200,000 common shares at an exercise price equal to 100% of the market price
on the date of grant. The Company granted options to certain officers and non-
employee directors to purchase an aggregate of 200,000 shares (200,000 shares
outstanding at both December 31, 1995 and 1994) at prices ranging from $10 to
$11 per share. The options may be exercised in cumulative annual increments of
25% commencing one year after the date of grant. None of these options have
been exercised.
Incentive Stock Option Plan: The Company's Incentive Stock Option Plan,
adopted in September 1993, provides for granting officers and other key
employees stock options to acquire an aggregate of 400,000 common shares at an
exercise price of not less than 100% of the fair market value of the shares on
the date of grant. These options are exercisable at the rate of 25% per year
commencing one year from the date of grant and expire ten years from date of
grant. The Company granted options
F-13
<PAGE>
GIBRALTAR STEEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
to certain officers and employees to purchase 270,000 shares (270,000 and
197,500 shares outstanding at December 31, 1995 and 1994, respectively) at
prices ranging from $10 to $11 per share. None of these options have been
exercised.
Restricted Stock Plan: The Company's Restricted Stock Plan, adopted in
September 1993, reserved for issuance 100,000 common shares for the grant of
restricted stock awards to employees at a purchase price of $.01 per share.
Compensation expense will be measured at the date of grant of the restricted
shares for the difference between the market price of the shares and the $.01
exercise price and charged to income over the period during which the shares
vest. Such shares are subject to restrictions on transfer and to risk of
forfeiture until the shares vest. No awards have been granted under this plan.
15. UNAUDITED PRO FORMA INFORMATION
The unaudited pro forma net income for the year ended December 31, 1993
assumes (i) a reduction in interest expense resulting from the application of
a portion of the net proceeds of the initial public offering to repay
$15,576,000 of indebtedness having a weighted average interest rate of 6%, and
(ii) that all subsidiaries have been subject to income taxation as C
Corporations during 1993.
Pro forma net income per share has been computed by dividing pro forma net
income by the pro forma weighted average number of common shares outstanding
during 1993. Such pro forma weighted average number of common shares was
computed giving effect to the Reorganization, and the number of shares the
Company would have had to issue to retire the above-mentioned indebtedness and
pay an S Corporation distribution of $10,485,000 to the pre-public offering
shareholders.
F-14
<PAGE>
GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 2,215 $ 4,123
Accounts receivable.................................. 45,639 35,634
Inventories.......................................... 51,101 45,274
Other current assets................................. 2,517 1,964
-------- --------
Total current assets............................... 101,472 86,995
-------- --------
Property, plant and equipment, net..................... 81,465 67,275
Other assets........................................... 25,433 13,153
-------- --------
$208,370 $167,423
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 33,224 $ 25,845
Accrued expenses..................................... 5,467 2,367
Current maturities of long-term debt................. 1,215 1,214
Deferred income taxes................................ 142 54
-------- --------
Total current liabilities.......................... 40,048 29,480
-------- --------
Long-term debt......................................... 81,632 57,840
Deferred income taxes.................................. 12,418 9,251
Other non-current liabilities.......................... 694 608
Shareholders' equity
Preferred shares..................................... -- --
Common shares........................................ 102 102
Additional paid-in capital........................... 28,803 28,803
Retained earnings.................................... 44,673 41,339
-------- --------
Total shareholders' equity......................... 73,578 70,244
-------- --------
$208,370 $167,423
======== ========
</TABLE>
See accompanying notes to financial statements
F-15
<PAGE>
GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1996 1995
---------- ----------
(UNAUDITED)
<S> <C> <C>
Net sales................................................ $ 82,034 $ 58,765
Cost of sales............................................ 68,005 48,579
---------- ----------
Gross profit........................................... 14,029 10,186
Selling, general and administrative expense.............. 7,354 5,090
---------- ----------
Income from operations................................. 6,675 5,096
Interest expense......................................... 1,073 559
---------- ----------
Income before taxes.................................... 5,602 4,537
Provision for income taxes............................... 2,268 1,860
---------- ----------
Net income............................................. $ 3,334 $ 2,677
========== ==========
Net income per share..................................... $ .33 $ .26
========== ==========
Weighted average number of shares outstanding............ 10,173,900 10,162,900
========== ==========
</TABLE>
See accompanying notes to financial statements
F-16
<PAGE>
GIBRALTAR STEEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1996 1995
--------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................... $ 3,334 $ 2,677
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 1,395 924
Provision for deferred income taxes.................... 424 (55)
Equity investment income............................... (136) (209)
Gain on disposition of property and equipment.......... (25) (27)
Increase (decrease) in cash resulting from changes in
(net of effects from acquisition of CCHT):
Accounts receivable.................................. (6,758) (2,420)
Inventories.......................................... (5,827) (2,232)
Other current assets................................. (848) (52)
Accounts payable and accrued expenses................ 9,814 1,445
Other assets......................................... (47) 26
--------- --------
Net cash provided by operating activities.............. 1,326 77
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of CCHT, net of cash acquired................ (23,715) --
Purchases of property, plant and equipment............... (3,262) (5,527)
Proceeds from sale of property and equipment............. 26 60
--------- --------
Net cash used in investing activities.................. (26,951) (5,467)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term debt reduction................................. (12,283) (2,013)
Proceeds from long-term debt............................. 36,000 7,332
--------- --------
Net cash provided by financing activities.............. 23,717 5,319
--------- --------
Net decrease in cash and cash equivalents................ (1,908) (71)
Cash and cash equivalents at beginning of year........... 4,123 1,124
--------- --------
Cash and cash equivalents at end of period............... $ 2,215 $ 1,053
========= ========
</TABLE>
See accompanying notes to financial statements
F-17
<PAGE>
GIBRALTAR STEEL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements as of March 31,
1996 and 1995 have been prepared by the Company without audit. In the opinion
of management, all adjustments necessary to present fairly the financial
position, results of operations and cash flows at March 31, 1996 and 1995 have
been included.
Certain information and footnote disclosures including significant
accounting policies normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted. It is suggested that these condensed financial statements be read
in conjunction with the financial statements included in the Company's Annual
Report to Shareholders for the year ended December 31, 1995.
The results of operations for the three month period ended March 31, 1996
are not necessarily indicative of the results to be expected for the full
year.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
Raw material........................................... $34,739 $28,307
Finished goods and work-in-process..................... 16,362 16,967
------- -------
Total inventories...................................... $51,101 $45,274
======= =======
</TABLE>
3. RETAINED EARNINGS
The change in retained earnings consists of:
<TABLE>
<CAPTION>
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31, 1996
------------------
(UNAUDITED)
<S> <C>
Balance, beginning of year................................... $41,339
Net income................................................... 3,334
-------
Balance, end of period....................................... $44,673
=======
</TABLE>
4. EARNINGS PER SHARE
Net income per share for the three months ended March 31, 1996 and 1995 was
computed by dividing net income by the weighted average number of common
shares outstanding.
5. ACQUISITION
On April 3, 1995, the Company purchased all of the outstanding capital stock
of Wm. R. Hubbell Steel Company and its subsidiary and certain of its
affiliates (Hubbell) for an aggregate cash purchase price of $21 million. In
addition, the Company repaid approximately $18 million of Hubbell's existing
bank indebtedness.
F-18
<PAGE>
GIBRALTAR STEEL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
On February 14, 1996, the Company purchased all of the outstanding capital
stock of Carolina Commercial Heat Treating, Inc. (CCHT) for an aggregate cash
purchase price of approximately $25 million. The funding for the purchase was
provided by borrowings under the Company's existing credit facility. CCHT,
headquartered in Charlotte, North Carolina, provides heat treating, brazing
and related metal-processing services to a broad range of industries,
including the automotive, hand tools, construction equipment and industrial
machinery industries.
These acquisitions have been accounted for under the purchase method, and
Hubbell's and CCHT's results of operations have been consolidated with the
Company's results of operations from the respective acquisition dates. The
excess of the aggregate purchase price over the fair market value of net
assets of Hubbell and CCHT approximated $10 million and $12 million,
respectively, and is being amortized over 35 years from the respective
acquisition dates using the straight-line method.
The following information presents the pro forma consolidated condensed
results of operations as if the acquisitions had occurred on January 1, 1995.
The pro forma amounts may not be indicative of the results that actually would
have been achieved had the acquisitions occurred as of January 1, 1995 and are
not necessarily indicative of future results of the combined companies.
<TABLE>
<CAPTION>
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
MARCH 31,
-----------------------
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Net sales............................................... $ 84,279 $ 81,964
=========== ===========
Income before taxes..................................... $ 5,333 $ 5,747
=========== ===========
Net income.............................................. $ 3,156 $ 3,376
=========== ===========
Net income per share.................................... $ .31 $ .33
=========== ===========
</TABLE>
F-19
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Wm. R. Hubbell Steel Corporation
and Affiliated Entities:
We have audited the accompanying combined balance sheets of Wm. R. Hubbell
Steel Corporation and affiliated entities as of December 31, 1994 and 1993,
and the related combined statements of earnings and retained earnings and cash
flows for the years then ended. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Wm. R. Hubbell
Steel Corporation and affiliated entities as of December 31, 1994 and 1993,
and the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
March 17, 1995
F-20
<PAGE>
WM. R. HUBBELL STEEL CORPORATION
AND AFFILIATED ENTITIES
COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash.................................................. $ 112,865 125,094
Marketable securities................................. 472,551 504,497
Trade accounts receivable, net of allowance for
doubtful accounts of $100,000 in 1994 and 1993....... 9,292,290 8,821,191
Current portion of net investment in direct financing
leases (note 3)...................................... 156,718 151,135
Due from affiliates................................... 19,570 82,226
Inventories........................................... 15,306,779 10,887,870
Prepaid expenses and other current assets............. 468,587 505,866
Refundable income taxes............................... 125,036 --
Deferred income taxes (note 6)........................ 78,000 69,600
----------- ----------
Total current assets.................................... 26,032,396 21,147,479
----------- ----------
Net investment in direct financing leases, excluding
current portion (note 3)............................... 359,889 398,476
Property, plant, and equipment, net (note 4)............ 3,266,584 3,406,306
----------- ----------
$29,658,869 24,952,261
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable (note 5)................................ $10,624,164 10,752,411
Current installments of long-term debt (note 5)....... 1,030,060 1,278,084
Trade accounts payable................................ 8,152,503 5,289,795
Accrued liabilities................................... 359,452 590,999
Due to affiliates..................................... -- 3,941
Income taxes payable.................................. -- 69,256
----------- ----------
Total current liabilities............................... 20,166,179 17,984,486
----------- ----------
Long-term debt, excluding current installments (note
5)..................................................... 1,033,057 1,880,960
Deferred income taxes (note 6).......................... 654,000 663,100
----------- ----------
Total liabilities....................................... 21,853,236 20,528,546
----------- ----------
Stockholders' equity:
Wm. R. Hubbell Steel Corp. common stock, no par value.
Authorized 1,000 shares; issued and outstanding 200
shares............................................... 10,000 10,000
Hubbell International Trading Company common stock,
$1 par value.
Authorized, issued, and outstanding 1,000 shares..... 1,000 1,000
Hubbell Leasing Company common stock, no par value.
Authorized 100,000 shares; issued and outstanding
1,000 shares......................................... 1,000 1,000
Retained earnings..................................... 7,793,633 4,411,715
----------- ----------
Total stockholders' equity.............................. 7,805,633 4,423,715
----------- ----------
Commitments and contingencies (notes 8 and 9)........... -- --
----------- ----------
$29,658,869 24,952,261
=========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-21
<PAGE>
WM. R. HUBBELL STEEL CORPORATION
AND AFFILIATED ENTITIES
COMBINED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
----------- ----------
<S> <C> <C>
Net sales/revenues..................................... $72,936,884 81,328,958
Cost of sales.......................................... 61,258,022 69,632,044
----------- ----------
Gross profit........................................... 11,678,862 11,696,914
Selling, general, and administrative expenses.......... 6,831,561 8,559,353
----------- ----------
Operating income....................................... 4,847,301 3,137,561
Other income (expense):
Interest expense..................................... (983,281) (705,809)
Life insurance proceeds (note 10).................... 1,000,000 --
Other income net..................................... 197,898 135,452
----------- ----------
Earnings before income taxes........................... 5,061,918 2,567,204
Income taxes........................................... 1,574,000 1,152,000
----------- ----------
Net earnings........................................... 3,487,918 1,415,204
Retained earnings at beginning of year................. 4,411,715 3,646,511
Dividends paid......................................... (106,000) (650,000)
----------- ----------
Retained earnings at end of year....................... $ 7,793,633 4,411,715
=========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-22
<PAGE>
WM. R. HUBBELL STEEL CORPORATION
AND AFFILIATED ENTITIES
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings......................................... $3,487,918 1,415,204
Adjustments to reconcile net earnings to net cash
provided by
(used in) operating activities:
Depreciation and amortization...................... 475,201 475,378
Gain on sale of equipment.......................... (93,537) (17,076)
Deferred income taxes.............................. (17,500) (600)
Change in assets and liabilities:
Trade accounts receivable, net................... (471,099) (992,049)
Net investment in direct financing leases........ 33,004 394,472
Inventories...................................... (4,418,909) (2,149,680)
Prepaid expenses and other current assets........ 37,279 64,140
Refundable income taxes.......................... (125,036) --
Trade accounts payable........................... 2,862,708 (4,841,737)
Income taxes payable............................. (69,256) (494,861)
Accrued liabilities.............................. (231,547) (58,505)
---------- ----------
Net cash provided by (used in) operating activities.... 1,469,226 (6,205,314)
---------- ----------
Cash flows from investing activities:
Net proceeds from sales of marketable securities..... 31,946 (273,321)
Additions to property, plant, and equipment.......... (369,014) (840,692)
Net proceeds from sale of equipment.................. 127,072 98,758
---------- ----------
Net cash used in investing activities.................. (209,996) (1,015,255)
---------- ----------
Cash flows from financing activities:
Net proceeds (repayments) of notes payable........... (128,247) 8,077,178
Net repayments of long-term debt..................... (1,095,927) (243,141)
Net proceeds of due to affiliates.................... 58,715 14,835
Dividends paid....................................... (106,000) (650,000)
---------- ----------
Net cash provided by (used in) financing activities.... (1,271,459) 7,198,872
---------- ----------
Net decrease in cash................................... (12,229) (21,697)
Cash at beginning of year.............................. 125,094 146,791
---------- ----------
Cash at end of year.................................... $ 112,865 125,094
========== ==========
Supplemental disclosures of cash flow information--
cash paid during the year for:
Interest............................................. $ 996,094 704,522
========== ==========
Income taxes, net of refunds received................ 1,785,792 1,619,861
========== ==========
Supplemental disclosures of noncash investing and fi-
nancing activities-- equipment acquired under capital
lease obligations..................................... $ 35,540 57,788
========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-23
<PAGE>
WM. R. HUBBELL STEEL CORPORATION
AND AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of Wm. R.
Hubbell Steel Corporation (Hubbell Steel) and its wholly owned
subsidiary, Mill Transportation Company (MTC), Hubbell International
Trading Company (Hubbell International), and Hubbell Leasing Company
(Hubbell Leasing), collectively referred to as the Company. These
entities are combined on the basis of common ownership and control. All
significant intercompany balances and transactions have been eliminated
in combination.
(B) MARKETABLE SECURITIES
Marketable securities consist principally of common stocks and are
stated at fair value based on quoted market prices. Realized and
unrealized gains and losses on marketable securities are included in
other income.
(C) INVENTORIES
Inventories are stated at the lower of cost or market (net realizable
value). Cost is determined using the last-in, first-out (LIFO) method.
(D) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost less accumulated
depreciation.
Building depreciation is computed using the straight-line method over
35 years. Depreciation on equipment and furniture and fixtures is
computed principally using accelerated methods, generally over five to
ten years.
(E) INCOME TAXES
Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109 (Statement No.
109), Accounting for Income Taxes. Under the asset and liability method
of Statement No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement No. 109, the
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
Hubbell Steel and MTC have elected to be treated as C Corporations and
file consolidated federal and state tax returns.
Hubbell International and Hubbell Leasing have elected to be treated as
S Corporations under the provisions of subchapter S of the Internal
Revenue Code. The stockholders of these companies are responsible for
federal and certain state income tax liabilities arising from company
earnings.
F-24
<PAGE>
WM. R. HUBBELL STEEL CORPORATION
AND AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(F) LEASE-RELATED POLICIES
Hubbell Leasing's lease transactions are classified in accordance with
FASB Statement of Financial Accounting Standards No. 13.
Hubbell Leasing primarily enters into direct financing leases. The
present value of the future lease payments and the present value of the
residual value are recorded as the initial investment in such leases
(however, residual values are generally assumed to have no value). This
initial investment generally represents Hubbell Leasing's leased
equipment cost. Unearned lease income is equal to the difference
between the future minimum lease payments plus the residual value and
their corresponding present values. Unearned lease income is amortized
and recorded as revenue over the term of the lease by applying a
constant periodic rate of return to the declining net investment.
(G) RECLASSIFICATIONS
Certain amounts included in the 1993 financial statements have been
reclassified to conform with the 1994 presentation.
(2)INVENTORIES
Had the specific cost identification method (replacement cost) been used,
inventories would have been $6,552,000 greater than reported at December
31, 1994, and $5,197,000 greater than reported at December 31, 1993.
(3)NET INVESTMENT IN DIRECT FINANCING LEASES
Net investment in direct financing leases is as follows:
<TABLE>
<CAPTION>
1994 1993
--------- --------
<S> <C> <C>
Minimum lease payments receivable (less allowance for
lease receivable bad debts of $158,900 and $291,000 at
December 31, 1994 and 1993, respectively)............. $ 643,655 681,285
Unearned lease income.................................. (127,048) (131,674)
--------- --------
Net investment in direct financing leases.............. 516,607 549,611
Less current portion................................... 156,718 151,135
--------- --------
$ 359,889 398,476
========= ========
</TABLE>
At December 31, 1994, future minimum lease payments to be received are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31 AMOUNT
----------------------- ---------
<S> <C>
1995.............................................................. $ 374,979
1996.............................................................. 224,139
1997.............................................................. 131,157
1998.............................................................. 53,124
1999.............................................................. 19,156
---------
802,555
Less allowance for lease receivable bad debts..................... (158,900)
---------
$ 643,655
=========
</TABLE>
F-25
<PAGE>
WM. R. HUBBELL STEEL CORPORATION
AND AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(4)PROPERTY, PLANT, AND EQUIPMENT
A summary of property, plant, and equipment is as follows:
<TABLE>
<CAPTION>
1994 1993
----------- ----------
<S> <C> <C>
Land.................................................. $ 380,000 380,000
Building and improvements............................. 2,743,574 2,711,791
Warehouse equipment................................... 2,188,215 2,041,238
Automobiles, trucks, and other equipment.............. 514,820 538,611
Furniture and fixtures................................ 266,100 266,100
Office equipment...................................... 597,237 541,266
----------- ----------
6,689,946 6,479,006
Less accumulated depreciation......................... 3,423,362 3,072,700
----------- ----------
$ 3,266,584 3,406,306
=========== ==========
(5)DEBT OBLIGATIONS
NOTES PAYABLE
A summary of notes payable is as follows:
<CAPTION>
1994 1993
----------- ----------
<S> <C> <C>
Notes payable to bank................................. $10,340,001 10,546,127
Other notes payable................................... 284,163 206,284
----------- ----------
$10,624,164 10,752,411
=========== ==========
</TABLE>
Hubbell Steel, MTC, and Hubbell International maintain a line of credit
with their primary bank which provides for borrowings equal to the lesser
of $15,000,000 or a calculated amount based upon qualifying accounts
receivable and inventories with interest at prime (8.5% at December 31,
1994) plus 1/2%. Borrowings, which are payable upon demand, are secured by
a subordinated interest in certain of Hubbell Steel's property, plant, and
equipment and a primary interest in substantially all other assets. The
loan agreement contains various covenants. At December 31, 1994, all
covenants have been met or waived.
Borrowings under the line of credit are subject to cross default provisions
with all long-term debt.
Other notes payable represent unsecured notes payable due upon demand to
employees and persons related to employees with interest at prime.
F-26
<PAGE>
WM. R. HUBBELL STEEL CORPORATION
AND AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
LONG-TERM DEBT
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ---------
<S> <C> <C>
Mortgage note issued in connection with Industrial
Development Revenue Bond with interest at 92.26% of
prime, due in monthly installments of $11,111 plus
interest through July, 1996 and a final installment
on August 1, 1996.................................... $ 211,125 344,457
Mortgage note issued in connection with a building
purchase with interest at 8%, due in monthly
installments of $3,429 through September 2002 and a
final balloon payment of $286,389 due November 1,
2002................................................. 390,626 400,019
$1,500,000 term note payable which bears interest at
prime (8.5% at December 31, 1994) plus 1/2%, due in
monthly installments of $46,725 plus interest through
May 1996, secured by substantially all the assets of
Hubbell Steel, MTC, and Hubbell International........ 749,125 1,309,825
$1,200,000 term note payable which bears interest at
prime (8.5% at December 31, 1994) plus 1/2%, paid in
1994................................................. -- 281,398
$500,000 term note payable which bears interest at
prime (8.5% at December 31, 1994) plus 1/2%, due in
monthly installments of $8,333 plus interest through
September 1997, secured by substantially all the
assets of Hubbell Leasing and guaranteed by Hubbell
Steel and MTC........................................ 275,009 375,005
$330,000 term note payable which bears interest at
prime (8.5% at December 31, 1994) plus 1/2%, due in
monthly installments of $9,167 plus interest through
August 1996, secured by substantially all the assets
of Hubbell Leasing and guaranteed by Hubbell Steel
and MTC.............................................. 192,500 302,500
$250,000 term note payable which bears interest at
prime (8.5% at December 31, 1994) plus 1/2%, due in
monthly installments of $6,944 plus interest through
September 1995, secured by substantially all the
assets of Hubbell Leasing and guaranteed by Hubbell
Steel and MTC........................................ 62,512 145,840
$100,000 term note payable which bears interest at
prime (8.5% at December 31, 1994) plus 1/2%, due in
monthly installments of $1,667 plus interest through
August 1999 secured by substantially all the assets
of Hubbell Leasing and guaranteed by Hubbell Steel
and MTC.............................................. 93,332 --
$100,000 term note payable which bears interest at
prime (8.5% at December 31, 1994) plus 1/2%, due in
monthly installments of $2,778 plus interest through
August 1997 secured by substantially all the assets
of Hubbell Leasing and guaranteed by Hubbell Steel
and MTC.............................................. 88,888 --
---------- ---------
Total long-term debt.................................. 2,063,117 3,159,044
Less current installments............................. 1,030,060 1,278,084
---------- ---------
$1,033,057 1,880,960
========== =========
</TABLE>
F-27
<PAGE>
WM. R. HUBBELL STEEL CORPORATION
AND AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Hubbell Steel's mortgage note issued in connection with the Industrial
Development Revenue Bond is secured by Hubbell Steel's property, plant, and
equipment, substantially all other assets of Hubbell Steel, and the
unconditional guarantees of MTC and Hubbell International. The loan
agreement contains covenants regarding maintenance of minimum net worth and
restrictions on dividends, stock repurchases, and capital expenditures. At
December 31, 1994, all covenants have been met or waived.
The aggregate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31 AMOUNT
----------------------- ----------
<S> <C>
1995............................................................. $1,030,060
1996............................................................. 513,075
1997............................................................. 129,182
1998............................................................. 32,946
1999............................................................. 27,337
Thereafter....................................................... 330,517
----------
$2,063,117
==========
</TABLE>
(6) INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
---------- -------- ---------
<S> <C> <C> <C>
1994:
Federal...................................... $1,288,500 (35,500) 1,253,000
State........................................ 303,000 18,000 321,000
---------- ------- ---------
$1,591,500 (17,500) 1,574,000
========== ======= =========
1993:
Federal...................................... 848,000 20,000 868,000
State........................................ 277,000 7,000 284,000
---------- ------- ---------
$1,125,000 27,000 1,152,000
========== ======= =========
</TABLE>
Consolidated income tax expense for the Company amounted to $1,574,000 for
1994 (an effective rate of 31%) and $1,152,000 for 1993 (an effective rate
of 42.0%). The actual tax expense differs from the "expected" tax expense
as shown below:
<TABLE>
<CAPTION>
1994 1993
---------- ---------
<S> <C> <C>
Computed "expected" income tax expense at 34%........ $1,721,000 873,000
Increase (reduction) in income taxes resulting from:
Nontaxable life insurance proceeds................. (340,000) --
Subchapter S Corporations' losses.................. 7,000 60,000
State income taxes, net of related federal income
taxes............................................. 211,900 187,400
Nondeductible travel and entertainment expenses.... 12,600 7,500
Other.............................................. (38,500) 24,100
---------- ---------
$1,574,000 1,152,000
========== =========
</TABLE>
F-28
<PAGE>
WM. R. HUBBELL STEEL CORPORATION
AND AFFILIATED ENTITIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
-------- -------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts......................... $ 42,000 42,000
Other................................................... 36,000 27,600
-------- -------
78,000 69,600
-------- -------
Deferred tax liabilities:
Excess tax over financial statement depreciation........ 173,000 166,800
Excess of tax loss in limited partnership over book
loss................................................... 481,000 496,300
-------- -------
654,000 663,100
-------- -------
Net deferred tax liabilities.............................. $576,000 593,500
======== =======
</TABLE>
The Company has not recorded a valuation allowance related to its deferred
tax assets. In assessing the realizability of deferred tax assets,
management considered whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized.
(7)EMPLOYEE BENEFIT PLAN
The Company has a 401(k) defined contribution plan (Plan) covering all of
its employees. The Company contributes a percentage of participants'
earnings to the Plan. Contributions amounted to approximately $26,000 and
$28,000 for the years ended December 31, 1994 and 1993, respectively.
(8)LEASE COMMITMENTS
The Company leases certain warehouse and office facilities. Total rent
expense under these operating lease agreements was approximately $427,000
and $398,000 for the years ended December 31, 1994 and 1993, respectively.
Minimum annual rental commitments under these leases are as follows:
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
1995................................................................ $505,000
1996................................................................ 72,000
1997................................................................ 33,000
--------
$610,000
========
</TABLE>
(9)CONTINGENCIES
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's combined financial position.
(10)LIFE INSURANCE PROCEEDS
In 1994, the Company received $1,000,000 of life insurance proceeds on a
policy related to the death of a key officer. This amount is included in
other income.
F-29
<PAGE>
Board of Directors
Carolina Commercial Heat Treating, Inc.
Charlotte, North Carolina
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheets of Carolina Commercial Heat
Treating, Inc. as of December 31, 1995 and 1994, and the related statements of
income, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Carolina Commercial Heat
Treating, Inc. as of December 31, 1995 and 1994, and the results of its
operations and cash flows for the years then ended, in conformity with
generally accepted accounting principles.
Scharf Pera & Co.
Charlotte, North Carolina
January 18, 1996
F-30
<PAGE>
CAROLINA COMMERCIAL HEAT TREATING, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and temporary investments....................... $ 1,361,491 $ 1,166,003
Trade accounts receivable............................ 2,294,394 2,261,594
Current portion of notes receivable.................. 20,453 10,453
Prepaid and other assets............................. 10,312 60,215
----------- -----------
Total current assets............................... 3,686,650 3,498,265
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land................................................. 339,236 295,175
Buildings............................................ 446,352 446,352
Building equipment................................... 432,682 428,570
Shop equipment....................................... 15,416,261 13,737,233
Sales equipment...................................... 55,624 56,175
Office equipment..................................... 459,142 446,547
Motor vehicles....................................... 423,720 457,941
Leasehold improvements............................... 168,185 167,408
Equipment deposits................................... 65,798 450,853
----------- -----------
17,807,000 16,486,254
Less--accumulated depreciation..................... 10,991,277 10,072,635
----------- -----------
6,815,723 6,413,619
----------- -----------
OTHER ASSETS:
Long-term portion of notes receivable................ 616,434 458,044
Cash surrender value of officers' life insurance..... 1,037,824 872,177
Intangible assets.................................... 10,592 11,412
----------- -----------
1,664,850 1,341,633
----------- -----------
$12,167,223 $11,253,517
=========== ===========
</TABLE>
F-31
<PAGE>
CAROLINA COMMERCIAL HEAT TREATING, INC.
BALANCE SHEETS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................... $ 652,588 $ 555,418
Current portion of long-term debt.................. 214,681 465,305
Accrued pension contribution....................... 129,851 109,211
Accrued expenses................................... 328,354 767,928
Accrued withholdings and taxes, other than income.. 121,308 120,626
Income taxes payable............................... 11,849 5,009
----------- -----------
Total current liabilities........................ 1,458,631 2,023,497
----------- -----------
LONG-TERM DEBT--less current portion................. 273,786 676,863
----------- -----------
DEFERRED INCOME TAXES................................ 8,000 14,000
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 75,000 shares
authorized,
49,200 shares issued and outstanding............ 49,200 49,200
Additional paid-in capital......................... 102,414 102,414
Retained earnings.................................. 10,506,235 8,628,586
----------- -----------
10,657,849 8,780,200
Less treasury stock at cost--2,100 shares.......... (241,043) (241,043)
----------- -----------
10,416,806 8,539,157
----------- -----------
$12,167,223 $11,253,517
=========== ===========
</TABLE>
See Notes to Financial Statements
F-32
<PAGE>
CAROLINA COMMERCIAL HEAT TREATING, INC.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
NET SALES............................................. $21,458,596 $20,621,268
COST OF SALES......................................... 15,293,976 15,011,995
----------- -----------
Gross profit........................................ 6,164,620 5,609,273
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE........... 3,274,209 3,462,784
----------- -----------
Income from operations.............................. 2,890,411 2,146,489
OTHER INCOME (EXPENSE):
Interest expense.................................... (54,183) (90,579)
Other income, net................................... 215,028 73,709
----------- -----------
160,845 (16,870)
----------- -----------
Income before taxes................................. 3,051,256 2,129,619
Taxes on income..................................... 38,200 29,825
----------- -----------
NET INCOME.......................................... $ 3,013,056 $ 2,099,794
=========== ===========
</TABLE>
See Notes to Financial Statements
F-33
<PAGE>
CAROLINA COMMERCIAL HEAT TREATING, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
-------------- ----------------
ADDITIONAL
PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------- ------ --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993, as previously
stated.................. 49,200 $49,200 2,100 $(241,043) $102,414 $ 7,754,150 $ 7,664,721
Prior period
adjustment.............. -- -- -- -- -- (225,358) (225,358)
------ ------- ----- --------- -------- ----------- -----------
Balance at December 31,
1993, as restated....... 49,200 49,200 2,100 (241,043) 102,414 7,528,792 7,439,363
Dividends paid........ -- -- -- -- -- (1,000,000) (1,000,000)
Net income, as
previously stated....... -- -- -- -- -- 2,301,581 2,301,581
Prior period
adjustment.............. -- -- -- -- -- (201,787) (201,787)
------ ------- ----- --------- -------- ----------- -----------
Net income, as
restated................ -- -- -- -- -- 2,099,794 2,099,794
------ ------- ----- --------- -------- ----------- -----------
Balance at December 31,
1994, as restated....... 49,200 49,200 2,100 (241,043) 102,414 8,628,586 8,539,157
Dividends paid........ -- -- -- -- -- (1,135,407) (1,135,407)
Net income............ -- -- -- -- -- 3,013,056 3,013,056
------ ------- ----- --------- -------- ----------- -----------
Balance at December 31,
1995.................... 49,200 $49,200 2,100 $(241,043) $102,414 $10,506,235 $10,416,806
====== ======= ===== ========= ======== =========== ===========
</TABLE>
See Notes to Financial Statements
F-34
<PAGE>
CAROLINA COMMERCIAL HEAT TREATING, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................... $3,013,056 $2,099,794
Adjustments to reconcile net income to net cash
provided by
operating activities:
Depreciation and amortization..................... 1,311,762 1,113,383
(Gain) loss on sale of equipment.................. (13,352) 84,103
(Increase) decrease in:
Trade accounts receivable....................... (32,800) (636,820)
Prepaid and other assets........................ 49,903 (27,886)
Income tax refund receivable.................... -- 3,108
Increase (decrease) in:
Accounts payable................................ 97,170 109,396
Accrued pension contribution.................... 20,640 10,250
Accrued salaries and wages...................... (439,574) 415,625
Accrued taxes other than income................. 682 29,731
Income tax payable.............................. 6,840 5,009
Deferred income taxes........................... 4,000 7,144
---------- ----------
Net cash provided by operations................... 4,018,327 3,212,837
---------- ----------
Cash flows from investing activities:
Payments received on notes receivable............... 15,641 11,258
Additions on notes receivable....................... (184,031) (44,100)
Increase in cash surrender value of officers' life
insurance............................................. (165,647) (121,923)
Proceeds from the sale of property, plant and
equipment............................................. 67,227 48,470
Purchase of property, plant and equipment........... (1,766,920) (1,768,573)
---------- ----------
Net cash used in investing activities............. (2,033,730) (1,874,868)
---------- ----------
Cash flows from financing activities:
Distributions to shareholders....................... (1,135,407) (1,000,000)
Payments on long-term debt obligations.............. (510,803) (316,181)
Proceeds from long-term debt obligations............ 15,996 245,000
Payments on notes payable........................... (158,895) --
---------- ----------
Net cash flows used in financing activities....... (1,789,109) (1,071,181)
---------- ----------
Net increase in cash.................................. 195,488 266,788
Cash--beginning of year............................... 1,166,003 899,215
---------- ----------
Cash--end of year..................................... $1,361,491 $1,166,003
========== ==========
</TABLE>
See Notes to Financial Statements
F-35
<PAGE>
CAROLINA COMMERCIAL HEAT TREATING, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
THE COMPANY:
Carolina Commercial Heat Treating, Inc. (the Company) is engaged in heat
treating industrial users' metal parts. The Company's corporate headquarters
and marketing division are located in Charlotte, North Carolina. The Company
operates heat treating plants in Fountain Inn, South Carolina; Morristown,
Tennessee; Reidsville, North Carolina; and Conyers, Georgia. The Company's
primary customers are manufacturers.
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are recorded at cost. Depreciation is recorded
on the straight-line method over the estimated useful lives of 25-32 years for
buildings and building equipment, 5-7 years for shop equipment, sales
equipment and office equipment, 5 years for motor vehicles and 32 years for
leasehold improvements. Equipment deposits consists of commercial heat
treating equipment not yet placed in service. Maintenance and repair costs are
expensed as incurred. Gains or losses on dispositions are reflected in income.
INTANGIBLE ASSETS:
During 1993, the Company acquired intangible assets of $12,300 in connection
with the acquisition of the Conyers, Georgia heat treating plant. These
intangible assets are being amortized on the straight-line method over the
estimated useful lives of 15 years.
INCOME TAXES:
The Company's stockholders have elected for the corporation to be taxed
under the provision of Subchapter S of the Internal Revenue Code. Under this
provision, the stockholders are taxed on their proportionate share of the
Company's taxable income.
The State of Tennessee does not recognize the Subchapter S provision of the
Internal Revenue Code. Income taxes have been provided on the proportionate
share of income attributable to Tennessee. Deferred income taxes are provided
on timing differences between financial and taxable income and result
principally from the use of different depreciation methods for tax and
financial reporting purposes. The Company has adopted SFAS 109, Accounting for
Income Taxes, to account for deferred income taxes. Deferred taxes are
computed based on the tax liability or benefit in future years of the reversal
of temporary differences in the recognition of income or deduction of expenses
between financial and tax reporting purposes. Under the provisions of SFAS
109, the Company elected not to restate prior years' financial statements
because the effect was not significant.
SELF-INSURANCE:
The company is generally self-insured for losses and liabilities related to
workers' compensation and health insurance claims. The Company's maximum self-
insured exposure for workers' compensation claims is limited to $100,000 per
individual and $1,000,000 in aggregate. The Company's maximum self-insured
exposure for health insurance claims is limited to $35,000 per individual and
$960,000 in aggregate. Losses are accrued based upon the Company's estimates
of the aggregate liability for claims incurred based on Company experience.
F-36
<PAGE>
CAROLINA COMMERCIAL HEAT TREATING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
NOTE 2--PRIOR PERIOD ADJUSTMENT:
Prior period adjustments have been made to reflect a change in accounting
for bonuses payable to the Company's executive officers. The net effect of
this change in accounting policy has been to decrease ending retained earnings
for the year ended December 31, 1993 by $225,358, increase selling, general
and administrative expense for the year ended December 31, 1994 by $201,787,
and to increase accrued expenses at December 31, 1994 by $427,145, from
amounts previously reported. All amounts affected have been restated in the
financial statements.
NOTE 3--RELATED PARTY TRANSACTIONS:
The Company leases its corporate headquarters from Old Pineville Properties.
Rents paid to this partnership were $27,000 during the years ended December
31, 1995 and 1994. The Company leases its Fountain Inn, South Carolina, and
Reidsville, North Carolina heat treating plants from Blacksmith Leasing.
During the years ended December 31, 1995 and 1994, the Company paid this
partnership rents totaling $243,000. These partnerships are comprised of
certain of the Company's shareholders.
NOTE 4--NOTES RECEIVABLE--RELATED PARTIES:
Notes receivable from related parties at December 31, 1995 and 1994
consisted of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Note receivable from Old Pineville Properties dated December,
1986,
due in 120 monthly payments of $1,187 including interest at
9 percent;
secured by the corporate headquarters building.............. $ 14,647 $ 26,959
Note receivable--trust; increased monthly by a portion of the
life insurance
policies premiums; payment due out of the life insurance
proceeds upon
death of the insured........................................ 460,568 441,538
Note receivable--stockholder dated July, 1995, due in 180
monthly payments
of $1,430 including interest at 6.42 percent; unsecured..... 161,672 --
-------- --------
636,887 468,497
Less current portion......................................... 20,453 10,453
-------- --------
$616,434 $458,044
======== ========
</TABLE>
NOTE 5--DEFINED CONTRIBUTION PLAN:
The Company sponsors a defined contribution plan covering substantially all
of its employees which have met certain specified service qualifications. All
contributions to this plan are at the discretion of the Company's Board of
Directors and are limited to the maximum amount allowable under Internal
Revenue Service regulations. The expense for the contribution to this plan for
the years ended December 31, 1995 and 1994, was $130,686 and $109,211,
respectively.
F-37
<PAGE>
CAROLINA COMMERCIAL HEAT TREATING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
NOTE 6--LONG-TERM DEBT:
Long-term debt at December 31, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
-------- ----------
<S> <C> <C>
Commercial note payable dated December 21, 1993; due in 60
monthly
installments of $12,023, including interest at 7.5
percent; secured by
equipment costing $6,963,429.............................. $386,366 $ 497,168
Promissory note payable dated December 31, 1993; due in 3
annual installments of $200,000 plus interest payable
quarterly at 8 percent; first installment due December 31,
1994; secured by equipment costing $1,017,700............. -- 400,000
Promissory note payable dated December 31, 1994; due in 19
monthly installments of $12,895; first installment due
January 1, 1995; unsecured................................ 90,260 245,000
Capitalized lease payable dated February, 1995; payable in
36 monthly installments of $486.75 plus interest at 6
percent beginning April, 1995; secured by shop equipment.. 11,841 --
-------- ----------
488,467 1,142,168
Less current portion....................................... 214,681 465,305
-------- ----------
$273,786 $ 676,863
======== ==========
</TABLE>
At December 31, 1995, long-term debt was due in aggregate annual installments
as follows:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1996....................................................... 214,681
1997....................................................... 134,143
1998....................................................... 139,643
Thereafter.................................................. --
--------
$488,467
========
</TABLE>
NOTE 7--INCOME TAXES:
The provision for Tennessee state income taxes at December 31, 1995 and 1994
consisted of the following:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
State income tax at statutory rates........................ $40,121 $27,816
Tax credits................................................ (5,921) (5,135)
Deferred income taxes...................................... 4,000 7,144
------- -------
$38,200 $29,825
======= =======
</TABLE>
F-38
<PAGE>
CAROLINA COMMERCIAL HEAT TREATING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
NOTE 8--COMMITMENTS AND CONTINGENCIES:
The Company occupies certain facilities and uses certain equipment under
operating leases. Commitments under operating leases with terms extending
beyond one year at December 31, 1995, were as follows:
<TABLE>
<CAPTION>
RELATED PARTIES REAL
REAL PROPERTY PROPERTY VEHICLES
--------------- -------- --------
<S> <C> <C> <C>
1996......................................... 270,000 60,219 147,240
1997......................................... 270,000 64,130 132,990
1998......................................... 256,500 65,412 113,715
1999......................................... 256,500 38,598 108,240
2000......................................... 256,500 -- 97,265
Thereafter.................................... 702,000 -- 35,913
</TABLE>
For the years ended December 31, 1995 and 1994, operating lease expense was
$358,619 and $352,290, respectively. Operating lease expenses paid to related
parties for the years ended December 31, 1995 and 1994 was $270,000.
NOTE 9--OTHER MATTERS:
MAJOR CUSTOMERS:
For the years ended December 31, 1995 and 1994, respectively, the Company
had sales to one customer representing 16 percent and 15 percent of its total
for the years then ended.
F-39
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY OF THE UNDER-
WRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITA-
TION OF AN OFFER TO BUY THE COMMON STOCK OFFERED HEREBY TO ANY PERSON BY ANY-
ONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY
BE MADE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 10
Capitalization........................................................... 11
Price Range of Common Stock.............................................. 12
Dividend Policy..........................................................
Selected Financial Data.................................................. 13
Unaudited Pro Forma Financial Data....................................... 14
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 17
Business................................................................. 21
Management............................................................... 32
Certain Transactions..................................................... 39
Principal and Selling Stockholders....................................... 40
Description of Capital Stock............................................. 44
Shares Eligible for Future Sale.......................................... 46
Underwriting............................................................. 48
Legal Matters............................................................ 49
Experts.................................................................. 49
Additional Information................................................... 49
Index to Financial Statements............................................ F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS OFFERING), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PAR-
TICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.
3,000,000 SHARES
GIBRALTAR STEEL CORPORATION
COMMON STOCK
($.01 PAR VALUE)
(L O G O)
SALOMON BROTHERS INC
SMITH BARNEY INC.
PROSPECTUS
DATED , 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than selling commissions,
payable by the registrant in connection with the sale of the Common Stock
being registered. All of the amounts shown are estimates, except for the
registration fee, the NASD filing fee and the NASDAQ listing fee.
<TABLE>
<S> <C>
Filing fee for registration statement............................... $22,753
NASD filing fee..................................................... 7,099
Blue Sky fees and expenses.......................................... *
Printing and engraving expenses..................................... *
Legal fees and expenses............................................. *
Accounting fees and expenses........................................ *
NASDAQ listing fee.................................................. 17,500
Miscellaneous....................................................... *
-------
TOTAL............................................................. $ *
=======
</TABLE>
- --------
*To be supplied by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Indemnification of directors is authorized under Section 145 of the Delaware
General Corporation Law, which generally provides as follows:
Under Section 145(a) of the General Corporation Law of Delaware,
Registrant may indemnify any officer or director in any action other than
actions by or in the right of Registrant, whether civil, criminal,
administrative or investigative, if such director or officer acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of Registrant, and, with respect to any criminal action or
proceedings has no reasonable cause to believe his conduct was unlawful.
Under Section 145(b) Registrant may indemnify any officer or director in
any action by or in the right of Registrant against expenses actually and
reasonably incurred by him in the defense or settlement of such action if
such officer or director acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of Registrant, except
where such director or officer shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to Registrant,
unless, on application, the Court of Chancery or the court in which such
action or suit was brought shall determine that, despite the adjudication
of liability, such person in view of all the circumstances is fairly and
reasonably entitled to indemnity for such expenses as the court shall deem
proper. Section 145(c) provides for mandatory indemnification of officers
or directors who have been successful on the merits or otherwise in the
defense of any action, suit or proceeding referred to in subsections (a)
and (b)). Section 145(d) authorizes indemnification under subsections (a)
and (b) in specific cases if approved by Registrant's Board of Directors or
stockholders upon a finding that the officer or director in question has
met the requisite statutory standards of conduct. Section 145(g) empowers
Registrant to purchase insurance coverage for any director, officer,
employee or agent against any liability incurred by him in his capacity as
such, whether or not Registrant would have the power to indemnify him under
the provisions of the General Corporation Law. The foregoing is only a
summary of the described sections of the Delaware General Corporation Law
and is qualified in its entirety by referenced to such sections.
The Certificate of Incorporation of the Company provides that the Company
shall indemnify each officer and director of the Company to the fullest extent
permitted by applicable law. The Certificate of Incorporation also provides
that, to the fullest extent permitted by the Delaware General Corporation Law,
a director of the Company shall not be liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director.
II-1
<PAGE>
ITEM 16. RECENT SALES OF UNREGISTERED SECURITIES
Except as hereinafter set forth, there have been no sales of unregistered
securities of the Registrant by the Registrant within the past three years:
Immediately prior to the consummation of its initial public offering in
November 1993, the Company consummated a reorganization whereby it issued an
aggregate of 7,500,000 shares of Common Stock to the then-existing
stockholders of each of its subsidiaries in exchange for all of the
outstanding capital stock of the subsidiaries. No underwriters, brokers or
finders were employed in connection with this reorganization. The number of
shares of Common Stock issued by the Company in connection with this
reorganization was determined by the existing stockholders of each of the
subsidiaries based upon an independent appraisal of each of the subsidiaries
and was not the result of an arms-length negotiation. The shares of Common
Stock issued in connection with this reorganization were issued in
transactions not involving a public offering in reliance on the exemption
provided under Section 4(2) of the Securities Act.
ITEM 17. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------- ------- -------------
<C> <S> <C>
* 1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-69304))
3.2 By-Laws of the Registrant (incorporated by reference
to Exhibit 3.2 to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-69304))
4.1 Specimen Common Share Certificate (incorporated by
reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-1 (Registration
No. 33-69304)).
* 5.1 Opinion of Lippes, Silverstein, Mathias & Wexler LLP
10.1 Credit Agreement dated November 10, 1994 among
Gibraltar Steel Corporation and Gibraltar Steel
Corporation of New York and Chase Manhattan Bank, N.A.
as Administrative Agent and the Banks listed in
Schedule 1 thereof (incorporated by reference to
Exhibit 10.1 to the Registrant's Current Report on
Form 8-K dated November 14, 1994).
10.2 Amendment Agreement dated as of December 28, 1995
among Gibraltar Steel Corporation, Gibraltar Steel
Corporation of New York, The Chase Manhattan Bank,
N.A., Fleet Bank, Mellon Bank, N.A. and The Chase
Manhattan Bank, N.A., as Administrative Agent
(incorporated by reference to Exhibit 10.32 to the
Registrant's Annual Report on Form l0-K for the year
ended December 31, 1995).
10.3 Partnership Agreement of Samuel Pickling Management
Company dated June 1, 1988 between Cleveland Pickling,
Inc. and Samuel Manu-Tech, Inc. (incorporated by
reference to Exhibit 10.7 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-69304))
10.4 Partnership Agreement dated May 1988 among Samuel
Pickling Management Company, Universal Steel Co., and
Ruscon Steel Corp., creating Samuel Steel Pickling
Company, a general partnership (incorporated by
reference to Exhibit 10.8 to the Registrant's
Registration Statement on Form S-1(Registration No.
33-69304)).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------- ------- -------------
<C> <S> <C>
10.7 Agreement dated April 24, 1994 between Gibraltar
Metals Division and International Union, United
Automobile, Aerospace and Agricultural Implement
Workers of America (UAW) and its Amalgamated Local No.
55. (incorporated by reference to Exhibit 10.26 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994).
10.8 Agreement dated July 30, 1993 between Gibraltar Strip
and Strapping Division and International Union United
Automobile Aerospace and Agricultural Implement
Workers of America (UAW) and its Amalgamated Local No.
55. (incorporated by reference to Exhibit 10.10 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-69304)).
10.9 Lease dated December 1, 1987 between American Steel
and Wire Corporation as Lessor and Gibraltar Strip
Steel, Inc., as Lessee, as amended by an Amendment to
Lease dated February 1, 1992. (incorporated by
reference to Exhibit 10.11 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-69304)).
10.10 Bond Purchase Agreement dated June 16, 1994 among the
Industrial Development Board of the County of
Hamilton, Tennessee, Fleet Bank of New York and
Gibraltar Steel Corporation of Tennessee.
10.11 Lease dated September 1, 1990 between Erie County
Industrial Development Agency and Integrated
Technologies International, Ltd. (incorporated by
reference to Exhibit 10.13 to the Registrant's
Registration Statement on Form S-1 Registration No.
33-69304)).
10.12 Lease dated June 4, 1993 between Buffalo Crushed
Stone, Inc. and Gibraltar Steel Corporation
(incorporated by reference to Exhibit 10.14 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.13 Employment Agreement dated as of November 1, 1993
between the Registrant and Brian J. Lipke incorporated
by reference to Exhibit 10.15 to the Registrant's
Registration Statement on Form S-1 (Registration
No. 33-69304)).
10.14 Gibraltar Steel Corporation Executive Incentive Bonus
Plan (incorporated by reference to Exhibit 10.16 to
the Registrant's Registration Statement on Form S-1
(Registration No. 33-69304)).
10.15 Agreement dated June 29, 1992 for Adoption by
Gibraltar Steel Corporation of Chase Lincoln First
Bank, N.A. (now Chase Manhattan Bank, N.A.) Non-
Standardized Prototype 401(k) Retirement Savings Plan
(incorporated by reference to Exhibit 10.17 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-69304)).
10.16 Gibraltar Steel Corporation Incentive Stock Option
Plan, Second Amendment and Restatement.
10.17 Gibraltar Steel Corporation Non-Qualified Stock Option
Stock Plan, First Amendment and Restatement.
10.18 Gibraltar Steel Corporation Profit Sharing Plan dated
August 1, 1984, as Amended April 14, 1986 and May 1,
1987 (incorporated by reference to Exhibit 10.21 to
the Registrant's Registration Statement on Form S-1
(Registration No. 33-69304)).
10.19 Gibraltar Steel Corporation 401(k) Plan (incorporated
by reference to
Exhibit 4.1 to the Registrant's Registration Statement
on Form S-8 (Registration Number 33-87034)).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------- ------- -------------
<C> <S> <C>
10.20 Gibraltar Strip Steel, Inc. Profit Sharing and
Retirement Plan (incorporated by reference to Exhibit
4.2 to the Registrant's Registration Statement on Form
S-8 (Registration Number 33-87034)).
10.21 Lease dated January 11, 1996 between Turn Key
Warehousing, Inc., as Lessor and Gibraltar Metals, a
division of Gibraltar Steel Corporation of New York,
as Lessee.
10.22 Stock Purchase Agreement dated as of April 3, 1995
among Gibraltar Steel Corporation of New York and
Albert Fruman, Marshall Fruman, Lee Fruman, Dale
Fruman and William R. Hubbell Trust under agreement
dated July 20, 1980 (incorporated by reference to
Exhibit 10.1 to the Registrant's Current Report on
Form 8-K dated April 6, 1995).
10.23 Purchase Agreement dated as of February 14, 1996 among
Gibraltar Steel Corporation and Harold J. Hendershot,
Jr., James M. Hendershot, Nancy Hendershot Preston,
Martha M. Hendershot, Harold J. Hendershot, III,
Kirsten P. Hendershot, Traci H. Kennedy, Christine L.
Collins, Wayne D. Collins, Jason P. Collins and
Michael N. Preston (incorporated by reference to
Exhibit 10.1 to the Registrant's Current Report on
Form 8-K dated February 26, 1996).
10.24 Lease dated November 2, 1992 between MGI Properties
and Mill Transportation Company, as modified by Lease
Extension and Modification Agreement dated as of July
24, 1995 between MGI Holdings, Inc. and Mill
Transportation Company.
10.25 Real Property Lease Agreement dated February 14, 1996
between Blacksmith Leasing and Carolina Commercial
Heat Treating, Inc.
10.26 Real Property Lease Agreement dated February 14, 1996
between Blacksmith Leasing and Carolina Commercial
Heat Treating, Inc.
10.27 Lease dated as of August 1, 1995 between John W. Rex
and Carolina Commercial Heat Treating, Inc.
21.1 Subsidiaries of the Registrant
23.1 Consent of Lippes, Silverstein, Mathias & Wexler LLP
(contained in Exhibit 5.1 to this registration
statement)
23.2 Consent of Price Waterhouse LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Scharf Pera & Co.
24.1 Power of Attorney (contained in part III of this
registration statement)
</TABLE>
- --------
*To be supplied by amendment.
(b) Financial Statement Schedules:
Schedule VIII -- Valuation and Qualifying Accounts and Reserves.
Schedule X -- Supplementary Income Statement Information.
ITEM 18. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such
II-4
<PAGE>
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(b) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430(A) and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and this offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
JANUARY 1, COSTS AND OTHER (1) DECEMBER 31,
1993 EXPENSES ACCOUNTS DEDUCTIONS 1993
Description ---------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Allowance for bad
debts................... $260 $178 $-- $(125) $313
==== ==== ==== ===== ====
<CAPTION>
ADDITIONS
----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
JANUARY 1, COSTS AND OTHER (1) DECEMBER 31,
1994 EXPENSES ACCOUNTS DEDUCTIONS 1994
Description ---------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Allowance for bad
debts................... $313 $ 53 $ 15 $ (54) $327
==== ==== ==== ===== ====
<CAPTION>
ADDITIONS
----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
JANUARY 1, COSTS AND OTHER (1) DECEMBER 31,
1995 EXPENSES ACCOUNTS(2) DEDUCTIONS 1995
Description ---------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Allowance for bad
debts................... $327 $ 50 $149 $ (35) $491
==== ==== ==== ===== ====
</TABLE>
(1) Deductions relate to write-off of specific accounts.
(2) Includes $161,000 from acquired company and subsidiaries.
II-6
<PAGE>
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994 1993
------- ------- ---------
<S> <C> <C> <C>
Maintenance and repairs.............................. $ * $ * $ 1,882
Depreciation and amortization of intangible assets,
preoperating costs
and similar deferrals............................... * * *
Taxes, other than payroll and income taxes........... * * *
Royalties............................................ * * *
Advertising costs.................................... * * *
</TABLE>
* Less than 1% of total sales.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BUFFALO,
STATE OF NEW YORK ON MAY 17, 1996.
GIBRALTAR STEEL CORPORATION
s/ Brian J. Lipke
By __________________________________
BRIAN J. LIPKE
CHAIRMAN OF THE BOARD, PRESIDENT
AND
CHIEF EXECUTIVE OFFICER
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints Brian J. Lipke, Neil E. Lipke, Curtis W.
Lipke, and Walter T. Erazmus, and each of them, his true and lawful attorney-
in-fact and agent, with full power of substitution, for him and in his name,
place and stead, in any and all capacities, to sign any or all amendments to
this Registration Statement and to file the same with all exhibits thereto,
and other documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorney-if-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in or about the premises, as fully and to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-if-fact and agent, or his substitute or substitutes,
may lawfully do or come to be done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
s/ Brian J. Lipke Chairman of the Board, May 17, 1996
- ------------------------------------- President and Chief
BRIAN J. LIPKE Executive Officer
(Principal Executive
Officer)
s/ Walter T. Erazmus Executive Vice May 17, 1996
- ------------------------------------- President--Finance
WALTER T. ERAZMUS and Chief Financial
Officer (Principal
Financial Officer and
Principal Accounting
Officer)
s/ Curtis W. Lipke Director May 17, 1996
- -------------------------------------
CURTIS W. LIPKE
s/ Neil E. Lipke Director May 17, 1996
- -------------------------------------
NEIL E. LIPKE
III-1
<PAGE>
SIGNATURE TITLE DATE
s/ Gerald S. Lippes Director May 17, 1996
- -------------------------------------
GERALD S. LIPPES
s/ Arthur A. Russ, Jr. Director May 17, 1996
- -------------------------------------
ARTHUR A. RUSS, JR.
s/ William P. Montague Director May 17, 1996
- -------------------------------------
WILLIAM P. MONTAGUE
Director May , 1996
- -------------------------------------
DAVID N. CAMPBELL
III-2
<PAGE>
EXHIBIT 10.10
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE COUNTY OF HAMILTON, TENNESSEE
(HAMILTON COUNTY, TENNESSEE)
and
FLEET BANK OF NEW YORK
and
GIBRALTAR STEEL CORPORATION OF TENNESSEE
BOND PURCHASE AGREEMENT
Dated as of June 16, 1994
$8,000,000
The Industrial Development Board of the County of
Hamilton, Tennessee
1993 Taxable Industrial Development Revenue Bonds
(Gibraltar Steel Corporation of Tennessee Facility)
<PAGE>
TABLE OF CONTENTS
BOND PURCHASE AGREEMENT
ARTICLE I
DEFINITIONS ............................................................... 1
ARTICLE II
REPRESENTATIONS AND COVENANTS.............................................. 1
Section 2.01. Representations and Covenants by Issuer...................... 1
Section 2.02. Representations and Covenants by Bank........................ 4
Section 2.03. Representations and Covenants by Company..................... 5
ARTICLE III
CLOSING OF LOAN, FUNDING OF LOAN AND
PURCHASE AND SALE OF BOND.................................................. 10
Section 3.01. Closing Date............................................. 10
Section 3.02. Conditions Precedent to Closing ......................... 10
Section 3.03. Intentionally Omitted ................................... 13
Section 3.04. Mutilated, Lost, Stolen or Destroyed Bonds .............. 13
Section 3.05. Registration, Reissue or Transfer of Bonds .............. 14
Section 3.06. Execution of Indenture .................................. 15
Section 3.07. Assignment to Trustee ................................... 15
Section 3.08. Terms of Indenture and New Bonds ........................ 16
Section 3.09. Opinion of Bond or Independent Counsel .................. 16
Section 3.10. Exchange of Bonds ....................................... 17
Section 3.11. Company to Bear All Expenses ............................ 17
ARTICLE IV
BOND PROCEEDS AND ESTABLISHMENT OF FUNDS .................................. 17
Section 4.01. Establishment of Funds................................... 17
Section 4.02. Application of Bond Proceeds; Deposits into Project Fund: 17
Section 4.03. Use of Money in Project Fund............................. 17
Section 4.04. Intentionally Omitted.................................... 18
Section 4.05. Intentionally Omitted.................................... 18
Section 4.06. Payments into Renewal Fund; Application of Renewal Fund.. 18
Section 4.07. Intentionally Omitted.................................... 18
Section 4.08. Investment of Moneys..................................... 18
ARTICLE V
PAYMENT AND PREPAYMENT BY ISSUER .......................................... 19
Section 5.01. Payment of Principal, Interest and Premium .............. 19
Section 5.02. Prepayment and Redemption of Bonds ...................... 19
Section 5.03. Special Obligation ...................................... 22
Section 5.04. Defeasance............................................... 22
<PAGE>
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES ............................................ 23
Section 6.01. Events of Default Defined ............................... 23
Section 6.02. Remedies on Default...................................... 23
Section 6.03. Remedies Cumulative...................................... 24
ARTICLE VII
MISCELLANEOUS ............................................................. 24
Section 7.01. Company to Pay Expenses.................................. 24
Section 7.02. Recording and Filing..................................... 24
Section 7.03. Notices.................................................. 25
Section 7.04. Amendment................................................ 26
Section 7.05. Binding Effect .......................................... 26
Section 7.06. Execution of Counterparts................................ 26
Section 7.07. Applicable Law .......................................... 26
Section 7.08. Severability............................................. 26
Section 7.09. Table of Contents and Section Headings Not Controlling .. 26
Section 7.10. Survival of obligations.................................. 27
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BOND PURCHASE AGREEMENT
THIS BOND PURCHASE AGREEMENT (the "Bond Purchase Agreement") dated as of
June 16, 1994 is among THE INDUSTRIAL DEVELOPMENT BOARD OF THE COUNTY OF
HAMILTON, TENNESSEE, a public corporation of the State of Tennessee having its
office at c/o Shumacker & Thompson, P.C., Suite 500, First Tennessee Building,
Chattanooga, Tennessee 37402 (the "Issuer"), FLEET BANK OF NEW YORK, a banking
corporation duly organized and existing under the laws of the State of New York
having an office at 10 Fountain Plaza, Buffalo, New York 14202 (the "Bank") and
GIBRALTAR STEEL CORPORATION OF TENNESSEE, a business corporation duly organized
and validly existing under the laws of the State of Tennessee having its
principal place of business at 3556 Lake Shore Road, Buffalo, New York 14219
(the "Company").
The Bank has agreed to lend to the Issuer the aggregate principal amount of
EIGHT MILLION AND N0/100 DOLLARS ($8,000,000) to finance the acquisition,
construction and equipping of the Facility and to purchase the Issuer's 1993
Taxable Industrial Development Revenue Bonds, to be issued in one series,
evidencing the Issuer's obligation to repay such principal amount, and the
Issuer has agreed to issue, execute and deliver the Bonds, on the terms of this
Bond Purchase Agreement.
The Series 1 Bond Proceeds will constitute a term loan (the "Term Loan")
upon the terms and conditions set forth in the Series 1 Bond.
Accordingly, the parties agree as follows:
ARTICLE I
DEFINITIONS
Definition of Terms. All of the capitalized terms used in this Bond
Purchase Agreement and not otherwise defined shall have the same meanings
assigned thereto in the Schedule of Definitions attached hereto as SCHEDULE A
and made a part hereof.
ARTICLE II
REPRESENTATIONS AND COVENANTS
Section 2.01. Representations and Covenants by Issuer. The Issuer
represents and covenants to the Bank and the Company that:
A. The Issuer is an industrial development corporation duly established and
validly existing under the Act and is a public corporation duly organized and
validly existing under the laws of the State.
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B. Under the Act, it is the Issuer's purpose to advance the Public Purposes
of the State. In accordance with the Act, the Issuer has determined to acquire
the Land, construct the Improvements and purchase the Equipment which together
constitute the Facility, and to lease the Facility to the Company pursuant to
the Lease Agreement.
C. The Issuer has full legal and corporate right, power and authority to
execute, deliver and perform each of the Issuer Documents, including, but not
limited to, the power to execute, deliver, issue and sell the Bonds and receive
the Bond Proceeds as provided for by this Bond Purchase Agreement; to apply the
Bond Proceeds to the Costs of the Facility; to lease the Facility to the Company
pursuant to the Lease Agreement; to pledge and assign certain revenues derived
and to be derived by the Issuer from the Lease Agreement to the Bank pursuant to
the Pledge and Assignment; and to grant a deed of trust on and security interest
in the Facility to the Bank pursuant to the Deed of Trust and the Issuer
Security Agreement to secure, among other things, the punctual payment of the
principal of, and premium, if any, and interest on the Bonds.
D. By the Bond Resolution, the Issuer has duly authorized the execution,
delivery and performance of each of the Issuer Documents. The issuance,
execution and delivery of the Bonds and such documents when executed and
delivered by the Issuer shall constitute legal, valid and binding obligations of
the Issuer enforceable in accordance with their respective terms.
E. There is no action, suit, proceeding or investigation at law or in
equity pending or to the knowledge of the Issuer threatened in any court or
before any administrative body, either state or Federal, calling into question
the creation, organization or existence of the Issuer, the Issuer's right or
authority to exercise any of its powers conferred by the Act, the validity of
any of the Issuer Documents, or the authority of the Issuer to execute, deliver
and perform any of the Issuer Documents or to issue, execute and deliver the
Bonds.
F. Neither the execution and delivery of the Issuer Documents and all other
documents contemplated thereby, the issuance, execution and delivery of the
Bonds and the consummation of the transactions contemplated thereby nor the
fulfillment of or compliance with the provisions of the Bonds and any of the
Issuer Documents and all other documents contemplated thereby will conflict with
or result in a breach of any of the terms, conditions or provisions of the Act,
any other applicable law or ordinance of the State or any political subdivision
thereof or the Certificate of Establishment, or By-laws of the Issuer, as
amended, or of any corporate restriction or any agreement or instrument to which
the Issuer is a party or by
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which it or its Property is bound, or will constitute a default under any of the
foregoing.
G. Except for a filing with the Tennessee State Director of Local Finance
regarding the issuance of the Bond and a filing under Tennessee Public Chapter
1000 regarding property tax abatements, each of which will be made by the Issuer
on a timely basis, no further consent, authorization or approval of, or filing
or registration with, any governmental or regulatory body is required for the
execution and delivery of the Issuer Documents and the performance of the
transactions contemplated thereby.
H. All requirements and conditions specified in the Act, the Certificate of
Establishment and the By-laws of the Issuer and all other applicable laws and
regulations that govern the adoption of the Bond Resolution, the provision and
lease of the Facility to the Company pursuant to the Lease Agreement, and the
execution and delivery of the Issuer Documents and the issuance, execution and
delivery of the Bonds have been fulfilled.
I. Except as provided in Section 9.5 of the Lease Agreement, the Issuer
will take no action and, to the extent of its ability to do so, will suffer no
action to be taken to terminate its existence.
J. The Issuer will apply the proceeds from the sale of the Bonds to the
purposes and subject to the provisions specified in this Bond Purchase Agreement
and the Lease Agreement.
K. The Issuer will take all action and do all things which it is authorized
by law to take and do in order to perform and observe all covenants and
agreements on its part to be performed and observed under the Issuer Documents
and the Bonds and in order to provide for and to assure payment of the Bonds and
interest thereon when due.
L. The Issuer will not create, make or suffer to exist (1) any Lien on the
Facility, other than Permitted Encumbrances, or (2) any assignment of any
revenues derived or to be derived from the Lease Agreement, other than the
Pledge and Assignment.
M. The Issuer will not take any action impairing any authority, right or
benefit given or conferred by the Bond Resolution or any Issuer Document.
N. The Issuer will cause to be paid the principal of, and premium, if any
and the interest on the Bonds as the same
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become due, but solely to the extent provided in Section 5.03 hereof.
O. The Issuer will execute, acknowledge when appropriate, and deliver from
time to time at the request of the Bank such instruments and documents as in the
opinion of the Bank are necessary or desirable to carry out the intent and
purpose of this Bond Purchase Agreement.
P. Any certificate signed by an Authorized Representative, or any other
officer of the Issuer, and delivered to the Bank shall be deemed a
representation and warranty by the Issuer to the Bank as to the statements made
therein.
Q. The Issuer repeats, confirms and incorporates by reference herein, with
the same effect as if set forth herein in full, all the representations and
covenants made by it in the Lease Agreement.
Section 2.02. Representations and Covenants by Bank. The Bank hereby agrees
with and represents to the Issuer that:
A. The Bank is purchasing the Bonds for its own account and not for the
account of others.
B. The Bank has not offered the Bonds for re-sale and presently it has no
arrangement, written or oral, with any person for the distribution, transfer, or
re-sale of the Bonds and in the event of any such distribution, re-transfer or
re-sale, the Bank will comply in all respects with the securities laws of the
United States, the State and any other state of the United States (including the
District of Columbia), to the extent then applicable, and in that regard will
make or cause to be made to any prospective purchaser or transferee such
disclosures with respect to the affairs and condition, financial or otherwise,
of the Company, any other Guarantors or the Issuer as may be then required or
reasonably appropriate under the circumstances.
C. The Bank has had an opportunity to make such investigations and has had
access to such information concerning the affairs and the condition, financial
or otherwise, of the Issuer, the Company or any other Guarantors in connection
with and as a basis for the purchase of the Bonds as the Bank deems necessary
under the circumstances and in that connection, the Bank acknowledges that
neither the Issuer nor its counsel have made any investigation or inquiry with
respect to the affairs or condition, financial or otherwise, of the Company or
any other Guarantors; neither the Issuer nor its counsel have made and do not
make any representation to the Bank with respect to the adequacy, sufficiency or
accuracy of any financial statements or other information provided to the Bank
with respect to the
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ability of the Company or any other Guarantors to pay the Bonds or fulfill its
or their other obligations with respect to the transactions contemplated in
connection therewith.
Section 2.03. Representations and Covenants by Company. The Company
represents and covenants to the Bank and the Issuer that:
A. The Company is a business corporation duly organized and validly
existing under the laws of the State. The Company will maintain its corporate
existence in good standing and remain or become duly qualified or licensed and
in good standing as a foreign corporation in each jurisdiction in which the
conduct of its businesses requires such qualification or license.
B. The Company has full legal right, power and authority to execute,
deliver and perform each of the Company Documents, and all other documents
contemplated thereby.
C. The Company has duly authorized the execution, delivery and performance
of each of the Company Documents. The issuance, execution and delivery of such
documents when executed and delivered by the Company shall constitute legal,
valid and binding obligations of the Company enforceable in accordance with
their respective terms.
D. There is no action, suit, proceeding or investigation at law or in
equity pending or to the knowledge of the Company threatened in any court or
before any administrative body, either state or Federal, calling into question
the creation, organization or existence of the Company, the Company's right or
authority to exercise any of its powers, the validity of the Company Documents,
or the authority of the Company to execute, deliver or perform any of the
Company Documents.
E. The Company will take all action and do all things which it is
authorized by law to take and do in order to perform and observe all covenants
and agreements on its part to be performed and observed under the Company
Documents.
F. The Company will execute, acknowledge, when appropriate, and deliver
from time to time at the request of the Bank such instruments and documents as
in the opinion of the Bank are necessary or desirable to carry out the intent
and purpose of this Bond Purchase Agreement.
G. The Company repeats, confirms and incorporates by reference herein, with
the same effect as if set forth herein in full, all the representations and
covenants made by it in the Lease Agreement.
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H. The Company covenants for itself and on behalf of the Issuer that all
advances of the Term Loan received under this Bond Purchase Agreement and the
Deed of Trust and the right to receive such advances will be held by the Company
in trust solely for the purpose of constructing, acquiring, improving,
equipping, furnishing and/or bettering the Improvements, to the extent that such
Improvements constitute a "project" within the meaning of the Act.
I. The Company will not take or omit to take any action which action or
omission will in any way cause the proceeds from the sale of the Bonds to be
applied in a manner contrary to that contemplated by the Bonds, the Bond
Purchase Agreement and the other Bond Documents, as in force from time to time.
J. Corporate Guarantor, on a consolidated basis, shall maintain a ratio of
income before taxes to interest expense of not less than 3:5 to 1 at all times.
K. Corporate Guarantor, on a consolidated basis, shall maintain a ratio of
its liabilities (including those liabilities subordinated to Bank) to Tangible
Net Worth not to exceed the ratio stated on EXHIBIT B hereto for each of the
stated periods.
L. Corporate Guarantor, on a consolidated basis, will maintain a Tangible
Net Worth of not less than the amount stated on EXHIBIT B hereto at the times
stated therein.
M. Corporate Guarantor will furnish to Bank: (i) within forty-five (45)
days after the end of each of the first three (3) fiscal quarters of each of
Company's fiscal years unaudited, consolidated and consolidating, balance sheets
and income statements of Company at and as of the end of each such quarter, all
in such detail as Bank may reasonably request, together with a compliance
certificate, in form and substance satisfactory to Bank, certifying to Corporate
Guarantor's compliance with the financial ratios and covenants in the loan
documents pertaining to Corporate Guarantor; (ii) within one hundred twenty
(120) days after the end of each fiscal year of Corporate Guarantor, annual
audited, consolidated financial statements of Corporate Guarantor audited by
independent certified public accountants satisfactory to Bank, together with a
compliance certificate, in form and substance satisfactory to Bank, certifying
to Corporate Guarantor's compliance with the financial ratios and covenants in
the loan documents pertaining to Corporate Guarantor.
N. Corporate Guarantees; Corporate Guarantor. Company and Corporate
Guarantor shall each permit Bank to conduct field
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examinations of their respective accounts receivable, inventory and other
assets, at such times as Bank shall determine in its discretion.
O. Company and Corporate Guarantor shall allow Bank and any persons
designated by Bank access to all locations where Company's inventory is located
and shall cooperate in the periodic inspection thereof. Company shall also
permit Bank to periodically inspect and review Company's books and records and
to make extracts from and copies of such books and records. Company agrees to
pay for the reasonable costs and expenses incurred by Bank in connection with
such inspections.
P. Company, Corporate Guarantor and each Affiliate Guarantor will promptly
inform Bank of the commencement of any action, suit, counterclaim or proceeding
against Company, Corporate Guarantor or any Affiliate Guarantor involving (i) a
claim in excess of Five Hundred Thousand Dollars ($500,000.00), unless such
claim is fully covered by insurance; (ii) a claim which results in the aggregate
of all claims then outstanding and not fully insured to exceed Five Hundred
Thousand Dollars ($500,000.00); (iii) a claim which would materially adversely
affect the business of Company; or (iv) a claim which questions the validity of
this Agreement, the Deed of Trust, the Assignment of Rents, the Company Security
Agreement, any of the Bond Documents, any of the Company Documents, any
agreement or document executed in connection herewith or any action taken or to
be taken pursuant to any of the foregoing.
Q. Company and Corporate Guarantor will promptly pay all of its taxes,
assessments and other governmental charges prior to the date on which penalties
are attached thereto, establish adequate reserves for the payment of all taxes
and assessments and make all required withholding and other tax deposits;
provided, however, that nothing herein contained shall be interpreted to require
the payment of any tax, assessment or charge so long as its validity is being
contested in good faith.
R. Company shall: (i) at all times, maintain insurance with responsible
insurance carriers as to which Bank is a named insured, mortgagee and loss
payee, as appropriate, against fire, theft and other hazards on all of its
property so insurable, in such manner and to the extent that like properties are
usually insured by other operating businesses of a similar character in the same
general localities, (ii) at all times, maintain adequate insurance with
responsible insurance carriers against liability on account of damage to persons
or property and under all applicable workers' compensation laws; and (iii)
promptly deliver to Bank upon request, certificates of insurance for any of
those insurance policies required to be carried by Company pursuant hereto.
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S. Company shall promptly notify Bank in writing of (i) any material
adjustment or assessment by any taxing authority as soon as it has knowledge
thereof and the results of any audit of any tax returns of Company after its
completion; (ii) the occurrence of any event or the existence of a condition
which constitutes, or which but for a requirement of lapse of time or notice, or
both would constitute, an Event of Default; or (iii) any default by Company in
the performance of any terms or conditions contained in any of the Bond
Documents or any mortgage, indenture or instrument relating to borrowed money or
the lease of real or personal property to which Company is a party.
T. Company shall deliver to Bank, promptly upon the Bank's request, copies
of (i) all annual reports, including schedules and attachments, filed with the
Internal Revenue Service or PBGC by Company or a Controlled Group Member with
respect to any Pension Plan or Welfare Plan and (ii) all notices Company or a
Controlled Group Member receives from the Internal Revenue Service, PBGC, or
U.S. Department of Labor with respect to any Pension Plan, Welfare Plan, or
Multiemployer Plan, promptly after the filing or receipt of such documents. As
soon as possible, and in any event within thirty (30) days after Company knows
or has reason to know that any Reportable Event or Prohibited Transaction has
occurred with respect to any Pension Plan or Welfare Plan, or that the PBGC or
Company or any Controlled Group member has instituted or will institute
proceedings under Title IV or ERISA to terminate any Pension Plan, or that
application will be made to the Secretary of the Treasury for a waiver of the
minimum funding standard pursuant to Section 414(d) of the Code with respect to
any Pension Plan or Multiemployer Plan, Company or Controlled Group Member will
deliver to Bank a certificate of the Chief Financial Officer of Company or
Controlled Group Member setting forth details as to such Reportable Event or
Prohibited Transaction or Pension Plan termination or waiver application and the
action Company or Controlled Group Member proposes to take with respect thereto.
U. Upon receipt by Company of: (a) notice that the operations of Company or
any Subsidiary are not in full compliance with requirements of applicable
federal, state or local environmental, health and safety statutes and
regulations, (b) notice that Company or any Subsidiary is subject to federal or
state investigation evaluating whether any remedial action is needed to respond
to the release of any hazardous or toxic waste, substance or constituent, or
other substance into the environment, or (c) notice that any properties or
assets of Company, or of any Subsidiary are subject to an Environmental Lien,
Company shall notify Bank of such notice and the steps Company plans to take in
response thereto.
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V. During the term of this Agreement, Company will execute and deliver to
Bank and, as necessary, pay for the filing of all documents Bank may request in
connection with this Agreement, and defend any action, proceeding or claim
affecting the security for the Bonds.
W. Corporate Guarantor, on a consolidated basis, will not incur in any one
fiscal year aggregate capital expenditures in excess of Ten Million Dollars
($10,000,000) unless such capital expenditures are financed by Bank. The
indebtedness represented by the Bonds shall not be included for the purpose of
this calculation.
X. Company and Corporate Guarantor will not declare, make or incur any
liability to make or pay any distributions, dividends, acquisition, redemption
or retirement of its stock or any warrants, rights or options therefor, without
the prior written consent of Bank.
Y. Corporate Guarantor, on a consolidated basis, will not mortgage, pledge
or otherwise encumber or suffer to be encumbered any of its assets except for
liens granted to Bank or to the Issuer pursuant to the Bond Documents or to
Chase Manhattan Bank prior to the date hereof.
Z. Corporate Guarantor and its subsidiaries, will not make loans or
advances to, or guarantee, endorse or otherwise be or become liable or
contingently liable in connection with the obligations or indebtedness
(including, but not limited to indebtedness for borrowed money or for the
deferred purchase price of property, the face amount of all letters of credit
issued for the account of such person and all drafts drawn thereunder and not
repaid, all liabilities secured by any lien or any property owned by such
person, even though such person has not assumed or become liable for the payment
thereof and lease obligations of such person which, in accordance with GAAP,
should be capitalized, but excluding guaranties or other contingent obligations)
of any other person, including any subsidiary, directly or indirectly, or permit
any subsidiary to do so, except (i) as an endorser of instruments for the
payment of money deposited to its bank account for collection in the ordinary
course of business; (ii) trade credit extended in the ordinary course of
business; (iii) advances made in the usual course of business to officers and
employees for travel and other out-of-pocket expenses incurred by them on behalf
of Gibraltar Steel Corporation of New York, the Company, or any subsidiaries in
connection with their business; (iv) Gibraltar Steel Corporation may guaranty
obligations or indebtedness of Persons in an amount not to exceed $5,000,000.00
in the aggregate; (v) Gibraltar Steel Corporation and Gibraltar Steel
Corporation of New York may guaranty IRB obligations of Gibraltar Steel of
Tennessee in the
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original principal amount of $8,000,000.00; (vi) Gibraltar Steel Corporation of
New York may advance to the Gibraltar Steel Corporation amounts from time to
time not to exceed $5,000,000.00 in the aggregate at any one time outstanding;
(vii) existing Indebtedness as set forth on Schedule 4.15 attached to the Credit
Agreement dated as of December 31, 1993 among Gibraltar Steel Corporation,
Gibraltar Steel Corporation of New York, The Chase Manhattan Bank, N.A., as
Agent, The Chase Manhattan Bank, N.A. and Fleet Bank of New York and (viii)
Gibraltar Steel Corporation of New York and Gibraltar Steel Corporation may
advance amounts from time to time not to exceed in the aggregate at any one time
outstanding the following amounts to each of the following Subsidiaries:
Subsidiary Amount
---------- ------
Gibraltar Strip Steel $7,500,000
Gibraltar Steel Corporation
of Tennessee $5,000,000
Integrated Technologies
International, Ltd. $1,000,000
Kydco Holdings $1,000,000
Cleveland Pickling $1,000,000
AA. None of Corporate Guarantor, its subsidiaries and Company will convey,
lease or sell all or any substantial portion of its or their property, assets or
business to any person or entity except the sale of inventory in the ordinary
course of business.
BB. For purposes of this section "substantial portion" shall mean any and
all purchases or transfer prices in excess of $1,000,000 in the aggregate in any
one fiscal year and any transaction shall be permissible only if no Default
shall occur as a result thereof.
CC. Corporate Guarantor or its subsidiaries may merge or consolidate with
or into any other corporation, partnership or entity, acquire the capital stock
or substantially all of the assets of any other person or entity or change its
corporate structure provided that Corporate Guarantor or such subsidiary is
the surviving entity, that the aggregate transaction price for all such
transactions during the term hereof does not exceed $10,000,000, that the
surviving entity has guaranteed or will guarantee the payment of the Bonds and
that no Event of Default shall then exist.
DD. Payments by Corporate Guarantor, on a consolidated annual basis, for
operating leases, as defined by generally accepted accounting principles, shall
not exceed $2,500,000.
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ARTICLE III
CLOSING OF LOAN, FUNDING OF LOAN AND
PURCHASE AND SALE OF BOND
Section 3.01. Closing Date. On the Closing Date the Bank agrees, subject to
the terms and conditions of this Bond Purchase Agreement and the Bonds, to pay
to the Issuer as the purchase price thereof the aggregate principal amount of
EIGHT MILLION AND N0/100 DOLLARS ($8,000,000.00) in immediately available funds
upon receipt of the Bonds in such aggregate principal amount. The Bank shall
make such payment in immediately available funds by depositing the amount of
Eight Million Dollars ($8,000,000) in the Project Fund, pursuant to Section 4.02
hereof.
Section 3.02. Conditions Precedent to Closing.
A. The Issuer's obligation to deliver the Bonds and accept payment therefor
is conditioned upon the purchase of the Bonds in accordance herewith on the
Closing Date and is subject to the further condition that all documents,
certificates, opinions and other items delivered on the Closing Date shall be
reasonably satisfactory in form and substance to Issuer's counsel.
B. The obligation of the Bank to purchase the Bonds shall be subject to the
receipt by the Bank of each of the following in form and substance satisfactory
to the Bank and its counsel:
1. The executed original Bonds in the form set forth in EXHIBIT A hereto;
2. Evidence as to (i) the due organization and existence of the Issuer, the
Company and any other Guarantors; (ii) the due authorization and execution of
each of the Bond Documents; (iii) the discharge and release of all Liens on the
Facility (except for Permitted Encumbrances); (iv) the vesting of title to the
Facility in the Issuer; (v) the absence of litigation involving the Issuer, the
Company, or any other Guarantors which might materially affect the transactions
contemplated hereby; (vi) the existence of all required consents and the absence
of any Event of Default or any event which with the giving of notice or the
passage of time would be an Event of Default with respect to any Bond Documents;
(vii) the truth and accuracy of all representations and warranties contained in
the Bond Documents; (viii) the delivery to the title company for filing or
recording, as appropriate, of documents necessary to perfect the lien of the
security interests granted pursuant to the Issuer Security Agreement, the
Affiliate Security Agreements
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and the Company Security Agreement in connection with the transactions
contemplated hereby and by the Lease Agreement, the Deed of Trust, the Leasehold
Deed of Trust, the Pledge and Assignment, the Assignment of Rents and the
Guaranty; (ix) the payment of all fees and expenses of the Issuer and the Bank;
(x) the delivery to the title company for filing or recording, as appropriate,
of documents necessary to modify the Deed of Trust, the Leasehold Deed of Trust,
the Memorandum of Lease and the Pledge and Assignment to conform to the terms
hereof; and (xi) the receipt of all necessary governmental permits, licenses and
other authorizations relating to the acquisition, construction, equipping, use
and operation of the Facility;
3. A certified copy of the Bond Resolution; proof of due corporate action
by the Issuer, the Company and the Corporate Guarantor; and executed duplicate
originals of the Bond Documents (except for the Bonds);
4. Opinions of counsel to the Issuer, the Company and any other Guarantors
as to each of the matters set forth in subsection B.2 above and such other
matters as the Bank may require;
5. An opinion of Issuer's Counsel as to the due existence and authority of
the Issuer and the valid issuance of the Bond;
6. Certificates or policies evidencing the insurance required to be
obtained by the Company pursuant to the Lease Agreement;
7. The policy evidencing title insurance as required to be obtained by the
Company pursuant to the Lease Agreement covering the Land and Improvements in
the amount of $4,000,000;
8. Evidence that all real estate taxes, assessments and water and sewage
charges levied or assessed against the Facility have been paid in full and (b)
any applicable conveyance tax law has been complied with;
9. A certificate of a duly authorized officer of the Company certifying
that: (i) the representations and warranties contained in Section 2.03 of this
Agreement are correct on and as of the Closing Date as though made on and as of
such date; and (ii) no event has occurred and is continuing, or would result
from the sale and delivery of the Bond, which constitutes an Event of Default or
would constitute an Event of Default but for the requirement that notice be
given or time elapse or both;
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10. A Phase I Environmental Report, in form and content satisfactory to the
Bank, and prepared, at the Bank's request, by a company of the Bank's choice,
showing that there are no environmental problems at the Facility site in
Chattanooga, Tennessee. The Company shall have paid all fees for such report on
or before the Closing Date.
11. A duly executed copy of a fee simple deed and associated real estate
closing documents evidencing the acquisition by the Company of title to the Land
in the name of the Issuer, and any improvements thereon, free and clear of all
liens and encumbrances, and a title insurance policy in form and substance
satisfactory to the Bank declaring the Bank a named insured in respect of such
real property.
12. Evidence, satisfactory to the Bank, that fire, casualty and other
insurance is in force for the Facility and the contents thereof in accordance
with the requirements of Sections 6.4 and 6.5 of the Lease Agreement.
13. An appraisal, performed by an independent appraiser satisfactory to the
Bank, of the real estate and improvements at the Centre South Riverport
Industrial Park site in Chattanooga, Tennessee, on an "as-built" basis. The real
estate appraisal shall be dated within one year of the Closing Date and shall be
obtained by the Bank from an appraiser of the Bank's choice. The Company shall
have paid the appraisal fee on or before the date of this Agreement.
14. Evidence, satisfactory to the Bank, that all government permits are in
force which are required for the construction of the Facility and the operation
of the business of the Company, including evidence that the Facility will, when
completed, comply with all applicable zoning laws and regulations.
15. Such additional certificates, instruments or other documents as the
Issuer or the Bank may reasonably require.
Section 3.03. Intentionally Omitted.
Section 3.04. Mutilated, Lost, Stolen or Destroyed Bonds.
A. In the event any Bond is mutilated, lost, stolen or destroyed, the
Issuer may execute and, upon its request, the Company shall authenticate and
deliver, a new Bond of like maturity, interest rate and principal amount and
bearing the same number as the mutilated, destroyed, lost or stolen Bond, in
exchange for the mutilated Bond or in substitution for the Bond so destroyed,
lost or stolen. In every case of exchange or
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substitution, the applicant shall furnish to the Issuer, the Company and the
Bank (i) such security or indemnity as may be required by them to hold each of
them harmless from all risks, however remote, and (ii) evidence to their
satisfaction of the mutilation, destruction, loss or theft of the applicant's
Bond and of the ownership thereof. Upon the issuance of any Bond upon such
exchange or substitution, the Issuer may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses, including counsel fees, of the Issuer, the
Company or the Bank. In case any Bond which has matured or is about to mature
shall become mutilated or be destroyed, lost or stolen, the Issuer may, instead
of issuing a Bond in exchange or substitution therefor, pay or authorize the
payment of the same (without surrender thereof except in the case of a mutilated
Bond) if the applicant for such payment shall furnish to the Issuer, the Company
and the Bank such security or indemnity as they may require to hold them
harmless and evidence to the satisfaction of the Issuer, the Company and the
Bank of the mutilation, destruction, loss or theft of such Bond and of the
ownership thereof.
B. Every Bond issued pursuant to the provisions of shall constitute an
additional contractual Issuer (whether or not the destroyed, lost or be found at
any time to be enforceable) and to all the benefits of this Bond Purchase and
proportionately with any and all other under this Bond Purchase Agreement.
C. The Bond shall be held and owned upon the express condition that the
provisions of this Section 3.04 are exclusive, with respect to the replacement
or payment of a mutilated, destroyed, lost or stolen Bond, and shall preclude
all other rights or remedies, notwithstanding any law or statute existing or
hereinafter enacted to the contrary.
Section 3.05. Registration, Reissue or Transfer of Bonds. So long as any
Bond or Bonds remain outstanding, the Issuer shall maintain and keep, at the
office of the Bank (unless the Bank shall have resigned as Bond Registrar of the
Issuer), books for the transfer and registration of the Bonds; and upon
presentation thereof for such purpose at such office, the Issuer shall register
or cause to be registered therein, and permit to be transferred thereon, under
such reasonable regulations as it or the Bank may prescribe, any Bond entitled
to registration or transfer. So long as any Bond or Bonds remain outstanding,
the Issuer shall make all necessary provisions to permit the exchange of Bonds
at the office of the Bank. The Bank is hereby appointed and agrees to serve as
Bond Registrar for the Issuer for the purposes of registering and making
transfers on such registration books; provided, however, that at any time the
Bank shall no
<PAGE>
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longer be an Owner of the Bonds, the Bank may, upon 30 days' written notice to
the Issuer, resign from such offices and the Issuer shall appoint a successor
Bond Registrar. By execution of this Bond Purchase Agreement, the Bank accepts
such appointment as Bond Registrar. Each Bond shall be transferable only upon
the books of the Issuer, which shall be kept for that purpose at the office of
the Bank (unless the Bank shall have resigned as Bond Registrar of the Issuer),
by the registered Owner thereof in person or by his attorney duly authorized in
writing, upon surrender thereof together with a written instrument of transfer
satisfactory to the Bank duly executed by the registered Owner or his attorney
duly authorized in writing. Upon the transfer of any such Bond, the Issuer shall
issue in the name of the transferee a new Bond or Bonds of the same aggregate
principal amount and maturity and rate of interest as the surrendered Bond.
The Issuer and the Bank, or any successor Bond Registrar of the Issuer, may
deem and treat the person in whose name any outstanding Bond shall be registered
upon the books of the Issuer as the absolute Owner of such Bond, whether such
Bond shall be overdue or not, for all purposes, and neither the Issuer nor the
Bank nor any successor Bond Registrar of the Issuer shall be affected by any
notice to the contrary. The term "Bond" or "Bonds" shall include a Bond or Bonds
issued by the Issuer in exchange for or upon transfer of any Bond under this
Section 3.05.
If any Owner of the Bond proposes to transfer the Bond with the result that
there shall be more than one Owner of the Bond, the Owner shall make such
arrangements as shall be satisfactory to the Issuer and the Company and in
accordance with Section 3.06 hereof, for the appointment of a trustee and the
execution of the Indenture for the benefit of the Bondholders, in form
satisfactory to the Issuer and the Company, at the expense of the Company.
Section 3.06. Execution of Indenture. If at any time the Bank shall so
request of the Issuer, whether or not there is more than one Owner of the Bonds,
the Issuer will, as soon as practicable after the receipt of a written request
from the Bank, execute and deliver an Indenture of Trust (the "Indenture") to a
bank or trust company, as trustee, which (a) is satisfactory to the Bank, the
Issuer and the Company, (b) is organized under the laws of the State or
organized under the laws of the United States of America, (c) has its principal
office in the State and (d) has a capital and surplus of at least $10,000,000 or
such lesser amount as shall be satisfactory to the Bank, the Issuer and the
Company (if there be such an institution willing, qualified and able to accept
the trust upon reasonable or customary terms). The Indenture shall provide for
the issuance (and the Issuer will authorize the issuance thereunder as herein
<PAGE>
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provided) of a principal amount of new industrial development revenue bonds of
the Issuer (the "New Bonds"), in aggregate principal amount equal to the
aggregate principal amount of such Bonds Outstanding and unpaid at the time of
such authorization, bearing interest at the same rate as such Outstanding Bonds
and in all other respects substantially similar to and having substantially all
the rights and privileges carried by the Bonds.
Section 3.07. Assignment to Trustee. In connection with the execution of
the Indenture, the Bank shall assign to the trustee under the Indenture, to be
held by such trustee for the benefit of all the owners of the Bonds, all of the
rights of the Issuer assigned to the Bank in accordance with the Pledge and
Assignment and all of the Bank's rights pursuant to the Guaranty and the Deed of
Trust, and in that connection will execute and deliver all such instruments and
documents as may be deemed necessary or appropriate by the Bank.
Section 3.08. Terms of Indenture and New Bonds. The Indenture and the New
Bonds to be issued thereunder shall, insofar as may be appropriate, embody the
substance of all covenants, conditions and provisions of this Bond Purchase
Agreement and the Bonds, respectively, together with such other provisions as
may be desirable (and not inconsistent with the provisions of this Bond Purchase
Agreement, the Lease Agreement, the Bond Resolution and the Bonds) and as are
usually contained in indentures of similar issuers providing for bonds of
comparable aggregate principal amount and maturity, or are usually contained in
such bonds. The Indenture and the New Bonds shall be in form and substance
satisfactory to the Bank and in such forms as may be necessary to comply with
any applicable recording or other statutes and with any rules or regulations
thereunder and with the decisions of Federal and State courts. The New Bonds
shall be issuable in definitive form as registered bonds without coupons in the
same denominations (or in denominations of $5,000 or multiples thereof) and
maturities as the Outstanding Bonds originally issued, and shall be in
typewritten form and may be reproduced by xerographic, photocopy or other
comparable process.
Section 3.09. Opinion of Bond or Independent Counsel. At the time of the
execution of the Indenture, Independent Counsel shall furnish to the Bank, and
to the trustee under the Indenture an opinion to the effect that (i) the
Indenture and the New Bonds are in form in compliance with this Article III,
(ii) the Indenture has been duly authorized, executed and delivered by the
Issuer and is a legal, valid and binding obligation of the Issuer enforceable in
accordance with its terms, (iii) the Indenture (or a financing statement or
similar notice thereof if and to the extent permitted or required by applicable
law) has been properly recorded or filed in all public
<PAGE>
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offices in which recording or filing is necessary to perfect the liens and
security interests, assigned in accordance with Section 3.07 of this Bond
Purchase Agreement, as valid first liens and security interests, (iv) the
remedies provided in the Indenture are enforceable in accordance with their
terms (except as such remedies may be limited by bankruptcy laws or by other
laws which do not, in the opinion of such counsel, materially interfere with the
practical realization of the benefits provided by the Indenture for the New
Bonds outstanding thereunder or make inadequate the remedies necessary for such
realization), and (v) the New Bonds have been duly authorized and will, when
executed, authenticated and delivered as herein and in the Indenture provided,
constitute legal, valid and binding obligations of the Issuer enforceable in
accordance with their terms and will be entitled to the benefits of the
Indenture, as aforesaid.
Section 3.10. Exchange of Bonds. After the execution and delivery of the
Indenture, upon surrender of any Bond or Bonds by its owner, the Issuer will
deliver to such owner, in exchange for such Bond or Bonds, New Bonds in the same
aggregate principal amount with the same maturity as the Bond or Bonds
surrendered, in such authorized denominations as the owner may elect and bearing
interest from the date to which interest shall have been paid on the Bond or
Bonds so surrendered.
Section 3.11. Company to Bear All Expenses. The Company shall bear all
expenses in connection with the preparation, issuance and delivery of the
Indenture, the New Bonds, the assignments to the trustee, and all related
documents (including any official statement), all trustee fees and all legal
fees incurred by the Issuer, the Bank, or the trustee, all recording or filing
fees incurred in connection with any of the documents, and all stamp or other
taxes payable in respect of the issuance and delivery of the New Bonds.
ARTICLE IV
BOND PROCEEDS AND ESTABLISHMENT OF FUNDS
Section 4.01. Establishment of Funds. The following trust funds are hereby
established with the Bank and shall be held, maintained and administered by the
Bank on behalf of the Issuer in accordance with this Bond Purchase Agreement:
1. The Industrial Development Board of the County of Hamilton, Tennessee
Project Fund - Gibraltar Steel Corporation of Tennessee Facility (the
"Project Fund").
2. The Industrial Development Board of the County of Hamilton, Tennessee
Renewal Fund - Gibraltar Steel
<PAGE>
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Corporation of Tennessee Facility (the "Renewal Fund").
Section 4.02. Application of Bond Proceeds; Deposits into Project Fund.
The Bank shall deposit all Bond Proceeds of the Series 1 Bond in the Project
Fund. The amounts in the Project Fund shall be subject to a security interest,
lien and charge in favor of the Bank until disbursed as provided herein.
Section 4.03. Use of Money in Project Fund. The Bank shall disburse moneys
in the Project Fund in such manner as the Company may direct in writing from
time to time, upon the satisfaction of the conditions set forth in Section 3.02B
hereof and the receipt of such supporting documentation as the Bank may
reasonably require to evidence use of the moneys in accordance with Section
2.03(H) hereof.
Section 4.04. Intentionally Omitted
Section 4.05. Intentionally Omitted.
Section 4.06. Payments into Renewal Fund; Application of Renewal Fund.
A. The Net Proceeds resulting from any insurance award, condemnation award,
title insurance or recovery from any contractor, subcontractor, materialman or
other Person with respect to the Facility shall be deposited in the Renewal
Fund. The amounts in the Renewal Fund shall be subject to a security interest,
lien and charge in favor of the Bank until disbursed as provided herein.
B. Except as otherwise provided in this Section 4.06, the Bank shall apply
the amounts deposited in the Renewal Fund to the prepayment of the principal of
the Bonds.
C. If an Event of Default shall exist at the time of a deposit of Net
Proceeds in the Renewal Fund, the Bank, unless it exercises the remedy provided
by Section 10.2(a)(iv) of the Lease Agreement, shall apply the amounts deposited
in the Renewal Fund to the payment of the principal of the Bonds.
<PAGE>
- 19 -
D. If an Event of Default shall not exist at the time of a deposit in the
Renewal Fund and if the Company elects to replace, repair, rebuild, restore or
relocate the Facility, the Bank shall apply the amounts in the Renewal Fund to
the payment (or reimbursement to the extent the same have been paid by or on
behalf of the Company or the Issuer) of the costs of the replacement, repair,
rebuilding, restoration or relocation of the Facility, in accordance with the
terms of Article VII of the Lease Agreement and upon requisitions submitted to
the Bank and signed by an Authorized Representative of the Company. Such
requisitions shall be in substantially the same form and subject to the same
conditions as requisitions from the Construction Fund. The Bank shall apply any
amount remaining in the Renewal Fund after the completion of replacing,
repairing, rebuilding, restoring or relocating the Facility, to the prepayment
of the principal of the Bonds.
Section 4.07. Intentionally Omitted.
Section 4.08. Investment of Moneys.
A. Moneys held in any fund established pursuant to Section 4.01 hereof
shall be invested and reinvested by the Bank in Authorized Investments, pursuant
to written direction by the Authorized Representative of the Company, or
pursuant to oral direction promptly confirmed in writing by such Authorized
Representative. Such investments shall mature in such amounts and have maturity
dates or be subject to redemption at the option of the holder on or prior to the
date on which the amounts invested therein will be needed for the purposes of
such Fund. The Bank may at any time sell or otherwise reduce to cash a
sufficient amount of such investments whenever the cash balance in such Fund is
insufficient for the purposes thereof. Any such investments shall be held by or
under control of the Bank and shall be deemed at all times a part of the Fund
for which such moneys are invested, and the interest accruing thereon and any
profit realized from such investment shall be credited and held in and any loss
shall be charged to the applicable Fund.
B. The Bank may make any investment permitted by this Section 4.07 through
its own bond department. The Bank shall not be liable for any depreciation in
the value of any investment made pursuant to this Section 4.07 or for any loss
arising from any such investment.
<PAGE>
- 20-
ARTICLE V
PAYMENT AND PREPAYMENT BY ISSUER
Section 5.01. Payment of Principal, Interest and Premium. The Issuer shall
pay the principal of, interest on and premium, if any, on each Bond in
accordance with the provisions of such Bond and as provided in Section 5.03
hereof.
Section 5.02. Prepayment and Redemption of Bonds.
A. Optional Prepayment. At the option of the Issuer, upon direction of the
Company, the Bonds may be prepaid at any time in whole or from time to time in
part on any Bond Payment Date in multiples of $10,000 principal amount at a
prepayment price equal to 100% of the principal amount thereof plus interest
accrued to the prepayment date, provided that such payment complies with the
terms and conditions set forth in the Bond. The Company may direct such
prepayment only if it shall prepay an amount of rent under the Lease Agreement
which is equal to the amount of such prepayment, plus accrued interest and shall
reimburse the Issuer for any Prepayment Premium paid by the Issuer under Section
5.02D hereof.
Except as provided in 5.02(D) below, the Bonds may be prepaid in whole, but
not in part, at any time at a prepayment price equal to 100% of the principal
amount of the Bonds to be prepaid plus interest accrued thereon to the date of
prepayment upon the Issuer's and the Company's compliance with the terms and
conditions set forth in the Bonds and the occurrence of any of the following
events:
(i) the Facility shall have been damaged or destroyed to such
extent that, in the opinion of an Authorized Representative
of the Company and of an Independent Engineer (in each case
expressed in a certificate filed with the Issuer and the
Bank within sixty (60) days after such damage or
destruction), (a) the Facility cannot be reasonably restored
within a period of four (4) consecutive months after such
damage or destruction to the condition thereof immediately
preceding such damage or destruction, or (b) the Company is
thereby prevented or is reasonably expected to be thereby
prevented from carrying on its normal operations within the
Facility for a period of four (4) consecutive months after
such damage or destruction, or (c) the cost of restoration
of the Facility would exceed the Net Proceeds of insurance
carried thereon, plus the amount for which the Company is
self-insured as
<PAGE>
- 21 -
the result of permitted deductible amounts under Section 6.5
of the Lease Agreement; or
(ii) title to, or the use of, all or any part of the Facility
shall have been taken by Condemnation so that in the opinion
of an Authorized Representative of the Company and of an
Independent Engineer (in each case expressed in a
certificate filed with the Issuer and the Bank within sixty
(60) days after the date of such taking), the Company is
thereby prevented from carrying on its normal operations
therein for a period of four (4) consecutive months after
such taking; or
(iii) as a result of changes in the Constitution of the State or
the Constitution of the United States of America or of
legislative or administrative action (whether federal, state
or local) or by final decree, judgment or order of any court
or administrative body (whether federal, state or local)
entered after the Company's contest thereof in good faith,
the Lease Agreement, in the opinion of an Authorized
Representative of the Company expressed in a certificate
filed with the Issuer and the Bank within sixty (60) days
after the happening of the event, becomes void or
unenforceable or impossible of performance in accordance
with the intent and purposes of the parties or imposes
material additional burdens or liabilities on the Company.
The Company may direct such prepayment only if it shall prepay an amount of
rent under the Lease Agreement which is equal to the amount of the prepayment
described above, plus accrued interest and shall reimburse the Issuer for any
Prepayment Premium paid by the Issuer under Section 5.02D hereof.
The amount of any prepayment shall be applied to installments of principal
in inverse order of maturity and shall not diminish the amount of monthly
payments due under the Bonds until the Bonds are paid in full.
B. Mandatory Prepayment. The Bonds shall be prepaid, in whole or in part,
at a prepayment price of 100% of the amount so prepaid plus accrued interest to
the date of prepayment at the times and in the amounts set forth below:
<PAGE>
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(i) on the Bond Payment Date next succeeding the earlier of
the date of completion of replacing, repairing,
rebuilding, restoring or relocating the Facility or the
election by the Company not to so apply the Net
Proceeds resulting from any insurance, condemnation
award or title insurance award in the amount remaining
in the Renewal Fund to be applied to the prepayment of
the Bonds as provided in Section 4.06 hereof; and
(iii) on the Bond Payment Date next succeeding the
completion of the application of the Net Proceeds
resulting from any recovery from any contractor,
subcontractor, materialmen or other Person as provided
in Section 7.4 of the Lease Agreement in the amount
remaining in the Renewal Fund to be applied to the
prepayment of the Bonds as provided in such Section and
Section 4.06 hereof;
C. Application of Partial Prepayments. A partial prepayment of the
principal of the Bonds shall be applied to the principal of the Bond having the
largest maturity outstanding.
D. Redemption. The Bonds shall be subject to mandatory redemption, without
premium or penalty, upon certain conditions all as more fully provided in such
Bonds.
Section 5.03. Special Obligation.
A. The Bonds are a special obligation of the Issuer, and the principal of,
interest and premium, if any, on the Bonds and all other charges payable
pursuant to or expenses or liabilities incurred with respect to obligations
under the Issuer Documents and all other documents contemplated thereby shall be
payable solely out of (i) the revenues and other moneys of the Issuer derived
and to be derived from the leasing, sale or other disposition of the Facility,
(ii) pursuant to the Pledge and Assignment, and as otherwise provided in the
Bond Resolution and the Bond Documents. Neither the members, officers, agents or
employees of the Issuer, nor any person executing the Bonds, shall be liable
personally or be subject to any personal liability or accountability by reason
of the issuance of the Bonds. The Bonds are not and shall not be a debt of the
State or any municipality (including without limitation the County) of the State
and neither the State nor any such municipality (including without limitation
the County), shall be liable thereon.
B. All payments made by or on behalf of the Company to the Owner of the
Bonds or upon its order, pursuant to the Bond Documents shall, to the extent of
the sum or sums so paid, satisfy and discharge the liability of the Issuer for
moneys
<PAGE>
- 23 -
payable upon the Bonds or pursuant to this Bond Purchase Agreement.
C. No recourse shall be had for the payment of the principal of or interest
on the Bonds or for any claim based thereon or upon any obligation, covenant or
agreement in this Agreement, against any past, present or future officer or
member of the Board of Directors of the Issuer, under any rule of law or equity,
statute or constitution or by the enforcement of any assessment or penalty or
otherwise, and all such liability of any such officer or board member as such is
hereby waived and released.
Section 5.04. Defeasance.
If there shall (i) be paid the principal of, premium, if any, and interest
on the Bonds at the rate set forth in the Bonds and all other amounts payable by
the Issuer hereunder or (ii) be deposited with the Bank an amount sufficient to
pay (a) the principal of, premium, if any, and interest on the Bonds on the
dates when due, or to prepay the principal of, and interest on the Bonds at the
rate set forth in the Bonds in accordance with its terms and the terms of this
Bond Purchase Agreement, and (b) all other amounts payable by the Issuer
hereunder, then in such event the security interests created by the Deed of
Trust, the Issuer Security Agreement and the Pledge and Assignment shall
thereupon terminate and be discharged and satisfied and then all the moneys and
properties of the Issuer shall be free and clear of such security interests. In
such event the Bank shall execute and record or file all documents requested by
the Issuer to effect such discharge and satisfaction.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
Section 6.01. Events of Default Defined. The term Event of Default shall
have the meaning set forth in Schedule A hereto and shall include, but not be
limited to, the following:
A. The principal or prepayment price of or interest on any Bond shall not
be paid on the date when due; or
B. An Event of Default under the Deed of Trust, the Leasehold Deed of
Trust, the Lease Agreement, the Guaranty, any Affiliate Guaranty, any related
document or any indenture, loan agreement, credit agreement, capital lease or
other agreement to which the Company is a party or by which it or its assets is
bound, or under the Credit Agreement between the Corporate
<PAGE>
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Guarantor, Gibraltar Steel Corporation of New York, the Chase Manhattan Bank,
N.A., as agent and the Chase Manhattan Bank, N.A. and Fleet Bank of New York
dated as of December 31, 1993, shall have occurred and be continuing; or
C. Any representation or warranty made by (i) the Issuer in the Issuer
Documents or (ii) the Company in the Company Documents or any other instrument
or certificate executed in connection herewith or therewith or (iii) any other
Guarantor or Affiliate Guarantor in the Guaranty or any Affiliate Guaranty (so
as to be an Event of Default under any of the Issuer Documents or the Company
Documents) shall prove to have been false or misleading in any material respect
when made; or
D. The failure by the Issuer or the Company to observe or perform any
covenant, condition or agreement on its part to be observed or performed
hereunder, other than the obligation of the Company to pay principal and
interest on the Bonds, for a period of thirty (30) days after written notice,
specifying such failure and requesting that it be remedied, given to the Issuer
and the Company by the Bank.
Section 6.02. Remedies on Default. Whenever any Event of Default shall have
occurred, the Bank or any owner of the Bonds may take, to the extent permitted
by law, any one or more of the following remedial steps: (i) terminate its
obligation to disburse the moneys in the Project Fund and the Renewal Fund, (ii)
declare the outstanding principal of and interest on the Bonds to be forthwith
due and payable, whereupon the same shall become forthwith due and payable
without protest, presentment, notice or demand, all of which are expressly
waived by the Issuer, or (iii) exercise any one or more of the remedies provided
in the Deed of Trust, the Leasehold Deed of Trust, the Lease Agreement, the
Pledge and Assignment, the Assignment of Rents, the Company Security Agreement,
the Affiliate Security Agreements, the Issuer Security Agreement, the Guaranty
or any or all of the Affiliate Guaranties and/or any of the other Bond
Documents.
Section 6.03. Remedies Cumulative. No failure on the part of the Bank to
exercise any of its rights and no delay in exercising and no course of dealing
with respect to any such right shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any other remedies provided by law.
ARTICLE VII
<PAGE>
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MISCELLANEOUS
Section 7.01. Company to Pay Expenses. The Company agrees to pay (i) the
reasonable fees and expenses of the Bank, the Issuer and their respective
counsel, and all other costs and expenses incidental to the financing hereunder,
the issuance of the Bonds and the costs of producing the documents referred to
herein; (ii) all taxes, if any, upon all documents and transactions pursuant to,
or contemplated by, this Bond Purchase Agreement; (iii) all expenses of all
filings and recordings pursuant to, or contemplated by, this Bond Purchase
Agreement; and (iv) all costs of collection (including reasonable counsel fees)
upon the occurrence of an Event of Default under the Bond Documents.
Section 7.02. Recording and Filing.
A. The Issuer shall be responsible for the recording or filing and the
Company, on behalf of and as agent for the Issuer, shall cause to be recorded or
filed, the Lease Agreement or a memorandum thereof, the Deed of Trust, the
Leasehold Deed of Trust, the Pledge and Assignment, the Assignment of Rents, any
agreement modifying any of the foregoing, and all other security instruments and
financing statements in such manner and in such places as may be required by law
to perfect the security interests contemplated herein and therein.
B. The Issuer and the Company hereby irrevocably appoint the Bank, their
agent and attorney-in-fact (which appointment shall be deemed to be an agency
coupled with an interest) to execute and file on their behalf financing
statements and amendments thereto to perfect and continue perfecting the
security interests held by it.
C. The Bank shall cause to be filed all security instruments, including
without limitation continuation statements under the Uniform Commercial Code of
the State, in such manner and in such places as may be required by law to
protect and maintain in force all such security interests held by it.
Section 7.03. Notices. All notices, requests; demands or other
communications shall be either delivered personally or be sent by certified
mail, postage prepaid, return receipt requested addressed as follows or to such
other addresses as any party may specify in writing to the other:
<PAGE>
- 26 -
To the Issuer:
The Industrial Development Board of the County of
Hamilton, Tennessee
c/o Shumacker & Thompson
Suite 500, First Tennessee Building
701 Market Street
Chattanooga, Tennessee 37402-4800
Attention: Ross I. Schram, III, Esq.
To the Company:
Gibraltar Steel Corporation of Tennessee
3556 Lake Shore Road
Buffalo, New York 14219
Attention: Mr. Walter Erazmus Chief Financial Officer
With a copy to:
Miller & Martin
Volunteer State Life Building
832 Georgia Avenue, 10th Floor
Chattanooga, Tennessee 37402
Attention: Alfred E. Smith, Jr., Esq.
To the Bank:
Fleet Bank of New York
Corporate Banking Group
10 Fountain Plaza, 9th Floor
Buffalo, New York 14202
Attention: John J. Larry Vice President
With a copy to:
Nixon, Hargrave, Devans & Doyle
1600 Main Place Tower
Buffalo, New York 14202
Attention: D. Bruce Kratz, Esq.
Such notices shall be deemed to have been given upon receipt or upon the
refusal of the party being notified to accept delivery of such notice.
Section 7.04. Amendment. This Bond Purchase Agreement may not be amended,
changed, modified, altered or terminated except by a written instrument executed
and delivered by the parties hereto.
<PAGE>
- 27 -
Section 7.05. Binding Effect. This Bond Purchase Agreement shall be binding
upon and inure to the benefit of the Issuer, the Company, the Bank and their
respective successors and assigns.
Section 7.06. Execution of Counterparts. This Bond Purchase Agreement may
be executed in several counterparts, each of which shall be an original and all
of which shall constitute but one and the same instrument.
Section 7.07. Applicable Law. This Bond Purchase Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard or reference to its conflict of laws principles.
Section 7.08. Severability. In the event any provision of this Bond
Purchase Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
Section 7.09. Table of Contents and Section Headings Not Controlling. The
Table of Contents and the headings of the several sections in this Bond Purchase
Agreement have been prepared for the convenience of reference only and shall not
control, affect the meaning of or be taken as an interpretation of any provision
of this Bond Purchase Agreement.
Section 7.10. Survival of Obligations. This Bond Purchase Agreement and the
representations and warranties contained herein shall survive the purchase and
sale of the Bonds and shall remain in full force and effect until the Bonds or
any replacement or New Bonds substituted therefor in accordance with the terms
hereof, together with interest thereon, and all amounts payable under this Bond
Purchase Agreement shall have been paid in full. However, the obligation of the
Issuer to make payments required by Section hereof shall survive the termination
of this Bond Purchase Agreement and the payment in full of the Bonds.
<PAGE>
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IN WITNESS WHEREOF, the parties have caused this Bond Purchase Agreement to
be duly executed as of the day and year first above written.
THE INDUSTRIAL DEVELOPMENT BOARD OF
THE COUNTY 0F HAMILTON, TENNESSEE
By: /s/ Dan Mayfield
----------------------
Dan Mayfield
Chairman
FLEET BANK OF NEW YORK
By: /s/ John J. Larry
----------------------
John J. Larry
Vice President
GIBRALTAR STEEL CORPORATION OF
TENNESSEE
By: /s/ Walter Erazmus
----------------------
Walter Erazmus
Chief Financial Officer
<PAGE>
- 29 -
STATE OF TENNESSEE)
: SS.:
COUNTY OF HAMILTON)
On this 15th day of June, 1994, before me personally came Dan Mayfield, to
me known, who, being by me, duly sworn, did depose and say that he resides at
Chattanooga, TN; that he is the Chairman of THE INDUSTRIAL DEVELOPMENT BOARD OF
THE COUNTY OF HAMILTON, TENNESSEE, the public corporation of the State of
Tennessee described in and which executed the within Bond Purchase Agreement;
and that he signed his name thereto by order of the Board of Directors of said
public corporation.
My commission expires: /s/
July 24, 1996 Notary Public
<PAGE>
- 30 -
STATE OF TENNESSEE)
: SS.:
COUNTY OF HAMILTON)
On this 16th day of June, 1994, before me personally came JOHN J. LARRY, to
me known, who, being by me duly sworn, did depose and say that he resides at
Grand Island, New York; that he is the Vice President of FLEET BANK OF NEW YORK,
the banking institution described in and which executed the within Bond Purchase
Agreement; and that he signed his name thereto by order of the Board of
Directors of such banking institution.
/s/
Notary Public
112096
<PAGE>
- 31 -
STATE OF TENNESSEE)
:SS.:
COUNTY OF HAMILTON)
On this 16th day of June, 1994, before me personally came Walter Erazmus,
to me known, who, being by me duly sworn, did depose and say that he resides at
East Amherst, NY; that he is the V.P. Finance & Treasurer of GIBRALTAR STEEL
CORPORATION OF TENNESSEE, the business corporation described in and which
executed the within Bond Purchase Agreement; and that he signed his name thereto
by order of the Board of Directors of said corporation.
/s/
Notary Public
112096
<PAGE>
EXHIBIT A
FORM OF BONDS
<PAGE>
ATTENTION:
THIS BOND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT REGISTRATION UNDER SAID ACT OR
EXEMPTION THEREFROM
THE PRINCIPAL OF AND INTEREST ON THIS BOND ARE
SPECIAL OBLIGATIONS OF THE INDUSTRIAL DEVELOPMENT
BOARD OF THE COUNTY OF HAMILTON, TENNESSEE (THE
"ISSUER"). THIS BOND SHALL NOT CONSTITUTE A DEBT
OR INDEBTEDNESS OF THE STATE OF TENNESSEE, THE
COUNTY OF HAMILTON, OR OF ANY OTHER MUNICIPALITY
BUT SHALL BE PAYABLE BY THE INDUSTRIAL DEVELOPMENT
BOARD OF THE COUNTY OF HAMILTON, TENNESSEE SOLELY
FROM THE SOURCES REFERRED TO IN THIS BOND.
THE ISSUER HAS NO TAXING POWER.
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE COUNTY OF HAMILTON, TENNESSEE
HAMILTON COUNTY, TENNESSEE
1993 TAXABLE INDUSTRIAL DEVELOPMENT REVENUE BOND
(GIBRALTAR STEEL CORPORATION OF TENNESSEE FACILITY)
Series I
No. R-1 $8,000,000
THE INDUSTRIAL DEVELOPMENT BOARD OF THE COUNTY OF HAMILTON, TENNESSEE, a
public corporation of the State of Tennessee (the "Issuer"), acknowledges
itself indebted, and for value received hereby promises to pay, solely from the
source and as hereinafter provided, to FLEET BANK OF NEW YORK, 10 Fountain
Plaza, Buffalo, New York, 14202 (the "Bank"), or registered assigns, the
principal sum borrowed by the Issuer in the amount of Eight Million and No/100
Dollars ($8,000,000) or the aggregate principal amount of all advances made by
the Owner to the Issuer pursuant to the Bond Purchase Agreement, as defined
herein, as shown on the Schedule of Aggregate Principal Amount of Advances of
Bond Proceeds annexed hereto as Schedule A, whichever amount is less, on June
16, 2004 or sooner as provided herein. In no case may the outstanding principal
amount of this Bond exceed $8,000,000. The outstanding principal amount hereof
shall bear interest upon the terms set forth herein.
All capitalized terms used herein, unless otherwise defined, shall have the
meaning ascribed to such terms in Schedule A to the Bond Purchase Agreement (as
hereinafter defined), which Schedule A is hereby incorporated by reference in
this Bond and made a part hereof.
The outstanding principal amount hereof shall bear interest during the
Permanent Loan Period, at the election of the
<PAGE>
-2-
Company, at the per annum rate (a) equal to the Bank's "Stated Prime Rate" (as
defined in the Bond Purchase Agreement) as the Stated Prime Rate may be
determined from time to time, or (b) at the LIBOR Rate (as defined in the Bond
Purchase Agreement) plus one and fifteen one hundredth percent (1.15%), each
rate calculated on a 360-day basis for the actual number of days outstanding or
at such other rate as is provided for by this Bond upon the occurrence of
certain events. The LIBOR Rate may be exercised for a period of not less than
thirty (30) nor more than one hundred eighty (180) consecutive days. The Company
shall give the Bank not less than three (3) days notice of its election to use
the LIBOR Rate. The Stated Prime rate will be applied at any time that a LIBOR
Rate election is not in effect.
Interest accruing from the date hereof shall be payable monthly in arrears
commencing on the first day of the month immediately following the month in
which the Closing Date occurs and continuing on the first day of each calendar
month thereafter until the date that the outstanding principal amount hereof and
all accrued interest is paid in full.
Each monthly payment shall be applied by the Bank first to the payment of
interest and then to the reduction and payment of principal.
The principal of this Bond shall be paid in eighty-four (84) installments
consisting of eighty-three (83) consecutive monthly installments, commencing on
the first day of the month immediately following the month in which the first
anniversary of the Closing Date occurs and continuing on the first day of each
calendar month thereafter for eighty-three (83) months, and a final installment
which shall be payable upon the Maturity Date. The eighty-four (84) installments
shall each be in the amount of Ninety-Five Thousand Two Hundred and Thirty-Eight
Dollars ($95,238) each.
The entire unpaid principal amount of this Bond, together with all accrued
and unpaid interest thereon, shall become due and payable on the Maturity Date,
unless earlier paid or redeemed in full. From and after the Maturity Date, any
unpaid principal shall bear interest at the Default Rate, as defined below.
Any payment of interest or principal which is due on a Saturday, Sunday or
a day which banks are authorized or required to be closed in the State of New
York shall be payable on the next succeeding day that the Bank is open for
the transaction of business. In the event any payment is not paid in immediately
available funds on or before the tenth day of the calendar month in which it is
due, the Issuer shall pay the same together with a late payment penalty in an
amount equal to two percent (2%) of
<PAGE>
-3-
the amount of such overdue payment. If an event of default occurs hereunder or
under the Bond Purchase Agreement dated the Closing Date among the Issuer, the
Bank and the Company (the "Bond Purchase Agreement") or under the Lease
Agreement dated as of September 30, 1993 between the Issuer and the Company (the
"Lease Agreement"), or under any related document, then default interest shall
be charged on the balance due on this Bond at the Stated Prime Rate, as the same
may change from time to time, plus four percent (4%) per annum (the "Default
Rate").
This Bond shall be payable in lawful money of the United States of America.
Payment on this Bond shall be made at the office of the registered owner of this
Bond. So long as the Bank shall be the sole Owner of this Bond, such payments
shall be made at the office of the Bank at 10 Fountain Plaza, Buffalo, New York
14202 or at such other address as the Bank may designate in writing to the
Issuer.
This Series 1 Bond is one of a duly authorized issue of the Issuer's 1993
Taxable Industrial Development Revenue Bonds (Gibraltar Steel Corporation of
Tennessee Facility) and is issued in the aggregate principal amount of
$8,000,000 (the "Bond") and is issued pursuant to a bond resolution duly adopted
by the Issuer (the "Resolution") and the Bond Purchase Agreement for the
purposes (i) of financing certain industrial facilities located in the City of
Chattanooga, Hamilton County, Tennessee (the "Facility"), which have been leased
to the Company under and pursuant to, and as more fully described in, the Lease
Agreement, and (ii) of paying necessary expenses incidental thereto, so as to
thereby protect and promote the well being of the people of the State of
Tennessee.
This Bond is secured by (i) a Deed of Trust and Security Agreement dated as
of September 30, 1993 from the Issuer to the Bank (the "Deed of Trust"),
covering certain land located in the City of Chattanooga, Hamilton County,
Tennessee and more particularly described therein, (ii) a Leasehold Deed of
Trust and Security Agreement dated as of September 30, 1993 from the Company to
the Bank (the "Leasehold Deed of Trust") covering the Company's right, title and
interest under the Lease Agreement, (iii) a Pledge and Assignment with
Acknowledgment thereof by the Company dated as of the Closing Date from the
Issuer to the Bank (the "Pledge and Assignment") of certain rights and remedies
of the Issuer under the Lease Agreement, and (iv) security interests in certain
assets of the Company, its Affiliates and the Issuer pursuant to the Company
Security Agreement, the Affiliate Security Agreements and the Issuer Security
Agreement, each dated the Closing Date. Payment of the principal of, premium, if
any, and interest on the Bond is unconditionally guaranteed together with
payment of all other 1993 Taxable Industrial Revenue Bonds of the Issuer with
respect to the Gibraltar Steel Corporation of Tennessee Facility and together
with all amounts owing by the
<PAGE>
- 4 -
Company to the Bank, by the Company and by Gibraltar Steel Corporation pursuant
to a Guaranty Agreement dated as of the Closing Date (the "Guaranty") and by the
Company's Affiliates pursuant to the Affiliate Guaranties dated as of the
Closing Date (the "Affiliate Guaranties").
This Bond is a special obligation of the Issuer and is payable solely out
of the revenues and other moneys derived and to be derived from the leasing, any
sale or other disposition of the Facility and as otherwise provided in the
Resolution, the Bond Purchase Agreement, the Lease Agreement, the Pledge and
Assignment, the Deed of Trust, the Leasehold Deed of Trust, the Company Security
Agreement, the Affiliate Security Agreements, the Issuer Security Agreement, the
Guaranty and the Affiliate Guaranties. Reference is hereby made to each of those
documents and to all amendments and supplements thereto for a description of the
rights, duties, and obligations of the Issuer, the Company, the Guarantors and
the owner of this Bond. By acceptance of this Bond, the Owner hereof assents to
all the provisions of such documents and of all of the Bond Documents and all
amendments and supplements thereto.
Neither the members, officers, agents or employees of the Issuer, nor any
person executing this Bond, shall be liable personally or be subject to any
personal liability or accountability by reason of the issuance of this Bond.
THIS BOND IS NOT AND SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OF THE STATE OF
TENNESSEE OR ANY MUNICIPALITY OF THE STATE OF TENNESSEE (INCLUDING WITHOUT
LIMITATION HAMILTON COUNTY, TENNESSEE), AND NEITHER THE STATE OF TENNESSEE NOR
ANY MUNICIPALITY OF THE STATE OF TENNESSEE (INCLUDING WITHOUT LIMITATION
HAMILTON COUNTY, TENNESSEE) SHALL BE LIABLE HEREON.
All payments made by or on behalf of the Company to the Bank, or to its
successors or assigns, or upon its or their order, pursuant to the Lease
Agreement, Pledge and Assignment, Deed of Trust, Affiliate Guaranties or
Guaranty shall, to the extent of the sum or sums so paid, satisfy and discharge
the liability of the Issuer upon this Bond or under the Bond Purchase Agreement.
The installments of principal on this Bond may be prepaid prior to
maturity, in whole or in part, at the option of the Issuer without premium or
penalty, in multiples of $10,000. This Bond may be prepaid prior to maturity in
whole, at the option of the Issuer, without premium or penalty, in certain
extraordinary circumstances set forth in Section 5.02(A) of the Bond Purchase
Agreement. In addition, this Bond shall be prepaid prior to maturity, in whole
or in part, as set forth in Section 5.02(B) of the Bond Purchase Agreement. Any
and all such partial prepayments shall be applied on the outstanding principal
<PAGE>
- 5 -
of this Bond in the manner set forth in Section 5.02(C) of the Bond Purchase
Agreement.
The Owner of this Series 1 Bond shall have the right to cause this series 1
Bond to be redeemed prior to maturity in whole (but not in part) on, or at any
time after the eighth anniversary of the Closing Date (the "Series 1 Redemption
Date") provided that such put option is exercised by written notice to Issuer
not less than six (6) months prior to the redemption date (the "Redemption
Date"). The redemption price (the "Redemption Price") for a redemption pursuant
to this paragraph shall be the sum of (i) the unpaid principal amount of this
Bond to be redeemed and (ii) accrued and unpaid interest on this Bond to the
date of redemption.
When the Owner shall elect to cause this Series 1 Bond to be redeemed in
accordance with the above paragraph, the Owner shall provide the Issuer with a
written notice which shall state as follows: (i) that this Series 1 Bond is
being called for redemption pursuant to the provisions hereof; (ii) the
Redemption Date; (iii) that this Bond will be redeemed at the office of the
Issuer; (iv) that on the Redemption Date there shall become due and payable the
principal amount of this Series 1 Bond being called for redemption, accrued
interest on this Series 1 Bond to the date of redemption; and (v) that from and
after the redemption date interest on the principal amount of this Bond shall
cease to accrue. Failure to give notice by mailing as required by this paragraph
or any defect therein shall not affect the validity of any proceeding for the
redemption of this Bond. Upon the Issuer's receipt of such written notice, the
Issuer may direct the Owner, in writing prior to the Redemption Date, to
transfer the Bond, on the Redemption Date and at the Issuer's cost and expense,
to an entity selected by the Issuer, in exchange for payment to the Owner in
full of all amounts, including principal and interest, due on the Bonds.
If the Issuer shall not, prior to the Redemption Date, direct the Owner to
transfer the Bond, in exchange for full payment thereof, then the Series 1 Bond
so called for redemption shall become due and payable on the Redemption Date so
designated at the Redemption Price, plus interest accrued and unpaid to the date
of redemption, and, upon presentation and surrender thereof at the offices
specified in such notice, together with, in the case of Bonds presented by other
than the Owner, a written instrument of transfer duly executed by the Owner, or
his duly authorized attorney, such Series 1 Bond, shall be paid at the
Redemption Price plus interest accrued and unpaid to the date of redemption. If,
on the Redemption Date, monies for the redemption of the entire series I Bond,
together with interest to the date of redemption, shall be held by the Issuer so
as to be available therefor on said date and if notice of redemption shall have
been given as aforesaid, then from and after the Redemption
<PAGE>
- 6 -
Date, interest on the Bonds or portions thereof of such Series and maturity so
called for redemption shall cease to accrue and become payable. If said monies
shall not be so available on the Redemption Date, such Bonds or portions thereof
shall continue to bear interest until paid at the same rate as they would have
borne had they not been called for redemption.
All monies received by Bank for redemption of the Series 1 Bond, whether in
whole or in part, shall be applied by Bank first to the payment of accrued
interest on the principal amount of this Series 1 Bond being called for
redemption; second, to the reduction and payment of the remaining unpaid
principal amount of the Series I Bond being called for redemption.
Upon the occurrence of an Event of Default, as defined in Section 6.01 of
the Bond Purchase Agreement, the principal hereof and accrued interest hereon
may be declared to be forthwith due and payable in the manner, upon the
conditions and with the effect provided in said Bond Purchase Agreement.
This Bond shall be binding upon the Issuer, its successors and assigns and
shall inure to the benefit of the Bank and its successors and assigns.
Subject to the effect of federal and state securities laws, this Bond is
fully negotiable and transferable only upon the books of the Issuer kept by the
Bank as the agent and registrar of the Issuer, by the registered Owner hereof in
person or by his attorney duly authorized in writing, upon the surrender of the
Bond, together with a written instrument of transfer satisfactory to the Bank,
duly executed by the registered owner or his attorney duly authorized in
writing, and thereupon a new Bond or Bonds, in registered form, in the same
aggregate principal amount and of the same maturity and rate of interest shall
be issued to the transferees in exchange therefor as provided in the Bond
Purchase Agreement, and upon payment of any costs and charges prescribed
therein.
The Issuer and the Bank may deem and treat the Person in whose name this
Bond is registered as the absolute Owner hereof for all purposes, and neither
the Issuer nor the Bank shall be affected by any notice to the contrary.
Upon payment in full of the principal of, premium, if any, and interest on
this Bond, this Bond shall be surrendered to the Issuer.
In no event shall the amount of interest due and payable under this Bond
exceed the maximum rate of interest allowed by applicable law. In the event any
such payment is paid by the Issuer or received by the owner, then such excess
sums shall be credited as a payment of principal, unless the Issuer
<PAGE>
- 7 -
shall notify the owner in writing that the Issuer elects to have such excess sum
returned to the Issuer. It is the express intent of this Bond that the Issuer
not pay and the Owner not receive, directly or indirectly, in any manner
whatsoever, interest in excess of that which may be lawfully paid by the Issuer
under applicable law.
IN WITNESS WHEREOF, THE INDUSTRIAL DEVELOPMENT BOARD OF THE COUNTY OF
HAMILTON, TENNESSEE has caused this Bond to be executed in its name by the
manual signature of its as of the 16th day of June, 1994.
THE INDUSTRIAL DEVELOPMENT BOARD OF
THE COUNTY OF HAMILTON, TENNESSEE
By___________________________________
Dan Mayfield
Chairman
<PAGE>
- 8 -
ATTENTION:
THIS BOND HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND MAY NOT BE
SOLD OR TRANSFERRED WITHOUT REGISTRATION
UNDER SAID ACT OR EXEMPTION THEREFROM
<PAGE>
- 9 -
AUTHENTICATION BY THE COMPANY
This Bond is the Bond mentioned in the within mentioned Bond Purchase Agreement.
GIBRALTAR STEEL CORPORATION OF
TENNESSEE
By_________________________________
Walter Erazmus
Chief Financial Officer
<PAGE>
- 10 -
Prior to any transfer of this Bond, all payments or partial prepayments of
principal of the within Bond shall be appropriately endorsed by the Owner hereof
on the table below.
Amount paid
Date or prepaid Unpaid balance Signature
- ---- ---------- -------------- ---------
<PAGE>
- 11 -
(FORM OF ASSIGNMENT)
FOR VALUE RECEIVED the undersigned hereby sells,
assigns and transfers unto ____________________________________ (please print or
typewrite name and address of transferee) _________________________________
__________________________________________ the within Bond and all right, title
and interest thereunder, and hereby irrevocably constitutes and appoints
_________________________________________, attorney to transfer the within
Bond on the books kept for registration thereof, with full power of substitution
in the premises.
Dated: ___________________ __________________________________
In the presence of:
__________________________________
<PAGE>
EXHIBIT B
FINANCIAL COVENANTS/RATIOS
Liabilities to Tangible Net Worth
1.25:1 from December 31, 1993 through December 30, 1995
1.00:1 from December 31, 1995 and thereafter
Tangible Net Worth
$50,000,000 from December 31, 1993 through December 30, 1995
with such Tangible Net Worth requirement increasing $5,000,000
with each successive fiscal year ending after December 30, 1995.
<PAGE>
SCHEDULE A TO BOND PURCHASE AGREEMENT
SCHEDULE OF DEFINITIONS
"Act" means the Tennessee Industrial Development Corporations Act of 1955,
Chapter 210 of the Public Acts of 1955, as codified in Sections 7-53-101 et
seq., of the Tennessee Code Annotated, as heretofore amended and as hereafter
amended from time to time.
"Acknowledgment" means the Acknowledgment by the Company of the Pledge and
Assignment.
"Act of Bankruptcy" means the filing of a petition in bankruptcy (or other
commencement of a bankruptcy or similar proceeding) by or against the Company or
the Issuer under any applicable bankruptcy, reorganization, insolvency or
similar law as is now or hereafter in effect.
"Affiliates" means collectively, Gibraltar Strip Steel, Gibraltar Steel of
New York, Cleveland Pickling, Integrated Technologies International Limited and
Kydco Holdings.
"Affiliate Guaranties" means, collectively, the Guaranty Agreements dated
as of the Closing Date between the Bank and each of Gibraltar Strip Steel,
Gibraltar Steel of New York, Cleveland Pickling, Integrated Technologies
International Limited and Kydco Holdings, as the same may be amended from time
to time.
"Affiliate Security Agreements" means, collectively, the Security
Agreements dated as of the Closing Date between the Bank and each of Corporate
Guarantor, Gibraltar Strip Steel, Gibraltar Steel of New York, Cleveland
Pickling, Integrated Technologies International Limited and Kydco Holdings, as
the same may be amended from time to time.
"Assigned Leases" means those Leases which have been conditionally assigned
by the Company to the Bank pursuant to the Assignment of Rents.
"Assignment of Rents" means the Assignment of Subleases and Rents dated as
of the Closing Date made by the Company to the Bank.
"Authorized Investments" means (i) obligations of the State, the State of
New York or the United States of America or (ii) obligations, the principal and
interest of which are guaranteed by the State, the State of New York or the
United States of America or (iii) obligations of any agency of the
<PAGE>
United States of America which may from time to time be legally purchased by
savings banks within the State or the State of New York as an investment of
funds belonging to them or under their control or (iv) bankers' acceptances of,
or certificates of deposit issued by, or time deposits with, any bank, trust
company or national banking association (including the Bank) having undivided
capital and surplus aggregating at least $25,000,000 or (v) repurchase
agreements or other contracts for the purchase and sale of and secured by
obligations of the type specified in (i) through (iii) above or (vi) commercial
paper of any Person other than the Company or any related person which has been
classified for rating purposes by Moody's National Credit Office as Prime-1 or
by Standard & Poor's as A-1 or (vii) other obligations described in Section
103(a) of the Code.
"Authorized Representative" means, in the case of the Issuer, the Chairman,
Vice Chairman, Secretary or Assistant Secretary of the Issuer; in the case of
the Company, its President, Treasurer and any Vice President; and, in the case
of both, such additional persons as, at the time, are designated to act on
behalf of the Issuer or the Company, as the case may be, by written certificate
furnished to the Bank and to the Issuer or the Company, as the case may be,
containing the specimen signature of each such person and signed on behalf of
(i) the Issuer by the Chairman, Vice Chairman, Secretary or Assistant Secretary
of the Issuer, or (ii) the Company by the President, Treasurer or any Vice
President of the Company.
"Bank" means (i) Fleet Bank of New York, a banking corporation duly
organized under the laws of the State of New York or (ii) its successors or
assigns, or (iii) any surviving, resulting or transferee banking institution.
"Bill of Sale" means the Bill of Sale given by the Company to the Issuer
with respect to the Equipment, dated the Closing Date, as the same may be
amended from time to time.
"Bond" or Bonds" means the Issuer's 1993 Taxable Industrial Development
Revenue Bonds (Gibraltar Steel Corporation of Tennessee Facility) issued in the
aggregate principal amount of $8,000,000 authorized to be issued pursuant to
@-he Bond Resolution and sold to the Bank pursuant to the Bond Purchase
Agreement which are in substantially the form of Exhibit A attached to the Bond
Purchase Agreement. The Bonds are issued in the form of a Series 1 Bond in the
principal amount of $8,000,000 maturing in the year 2004.
-2-
<PAGE>
"Bond Documents" means the Bond Purchase Agreement, the Bonds, the Lease
Agreement, the PILOT Agreement, the Pledge and Assignment, the Deed of Trust,
the Leasehold Deed of Trust, the Issuer Security Agreement, the Company Security
Agreement, the Assignment of Rents, the Environmental Compliance and
Indemnification Agreement, the Guaranty, the Affiliate Guaranties, the Affiliate
Security Agreements and the Modification Agreement.
"Bond Payment Date" means any date on which each Debt Service Payment shall
be payable on the Bonds so long as the Bonds shall be outstanding.
"Bond Proceeds" means the aggregate amount, plus accrued interest, paid to
the Issuer by the Bank pursuant to the Bond Purchase Agreement as the purchase
price of the Bonds.
"Bond Purchase Agreement" means the Bond Purchase Agreement dated as of
the Closing Date among the Issuer, the Company and the Bank, as the same may be
amended from time to time.
"Bond Registrar" means the Bank as bond registrar with respect to the Bonds
and its successors and assigns in such capacity.
"Bond Resolution" means the resolution adopted by the Issuer on September
2, 1993 authorizing the issuance, execution, sale and delivery of the Bond and
the execution and delivery of the Issuer Documents, as such resolution may be
amended or supplemented from time to time.
"Bondholder" means Owner.
"Business Day" means any day other than a Saturday, a Sunday, a legal
holiday or a day on which banking institutions in New York, New York or any city
in which the principal office of the Bank is located are authorized by law or
executive order to remain closed.
"Cleveland Pickling", means Cleveland Pickling Inc., a Delaware
corporation.
"Closing Date" means June 16, 1994 which is the date of sale and delivery
of the Bonds.
"Code" means the Internal Revenue Code of 1986, and any successor statute
of similar import, and the final and temporary
- 3 -
<PAGE>
regulations of the Department of the Treasury promulgated thereunder, in each
case as in effect from time to time. References to sections of the Code shall be
construed to refer to any successor sections.
"Company" means Gibraltar Steel Corporation of Tennessee, a business
corporation duly organized and validly existing under the laws of the State, and
its successors and assigns.
"Company Documents" means the Bond Purchase Agreement, the Bill of Sale,
the Lease Agreement, the Acknowledgment, the Assignment of Rents, the Leasehold
Deed of Trust, the Company Security Agreement, the PILOT Agreement, the
Environmental Compliance and Indemnification Agreement, the Guaranty, the
Affiliate Guaranties, the Affiliate Security Agreements and the Modification
Agreement.
"Company Security Agreement" means the Security Agreement dated as of the
Closing Date between the Company and the Bank, as the same may be amended from
time to time.
"Company's Subsidiaries" or "Subsidiary" means any entity in which Company
directly or indirectly possesses a controlling interest.
"Condemnation" means the taking of title to, or the use of, Property under
the exercise of the power of eminent domain by any governmental entity or other
Person acting under governmental authority.
"Controlled Group" means a controlled group of corporations of which
Company is a member within the meaning of Section 414(b) of the Code, any group
of corporations or entities under common control with Company within the meaning
of Section 414(b) of the Code, any group of corporations or entities under
common control with Company within the meaning of Section 414(c) of the Code or
any affiliated service group of which Company is a member within the meaning of
Section 414(m) of the Code.
"Controlled Group Member" means each trade or business (whether or not
incorporated) which is a member of a Controlled Group.
"Corporate Guarantor" means Gibraltar Steel corporation, a corporation duly
organized and in good standing
- 4 -
<PAGE>
under the laws of the State of New York, and any successors, transferees or
assigns thereof.
"Cost of the Facility" or "Costs of the Facility" means all those costs and
items of expense listed in Section 4.3 of the Lease Agreement.
"County" means the County of Hamilton, Tennessee.
"Current Assets" means those assets of Company classified as current in
accordance with generally accepted accounting principles.
"Current Liabilities" means those liabilities of Company classified as
current in accordance with generally accepted accounting principles with
adequate provisions for all accrued liabilities, including, without limitation,
all federal and state taxes, except those taxes classified as deferred in
accordance with generally accepted accounting principles.
"Debt Service Payment" means, with respect to any Bond Payment Date, (i)
the interest payable on such Bond Payment Date on all Bonds then Outstanding,
plus (ii) the principal or Redemption Price, if any, payable on such Bond
Payment Date on all such Bonds.
"Deed" means the Deed given by the County to the Issuer with respect to the
Land and the existing improvements thereon.
"Deed of Trust" means the Deed of Trust dated as of September 30, 1993
covering, among other things, the Facility, given by the Issuer to the Trustee
for the use and benefit of the Bank as security for the payment of the Bonds, as
the same may be modified, amended, renewed or extended from time to time.
"Environmental Compliance and Indemnification Agreement" means the
Environmental Compliance and Indemnification Agreement dated the date hereof and
given by the Company in favor of the Bank, as the same may be amended from time
to time.
"Environmental Lien" means a lien in favor of the United States government
or any state or political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory, or administrative functions of or
pertaining to government for (i) any liability under federal or state
environmental laws or regulations, or (ii) for damages arising from or costs
incurred by such governmental entity in response to a release of a hazardous or
toxic waste substance or constituent, or other substance into the environment.
- 5 -
<PAGE>
"Equipment" means all machinery, equipment and other personal property used
and to be used in connection with the Facility and financed with Bond Proceeds.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import and regulations thereunder,
as in effect from time to time. References to sections of ERISA shall be
construed also to refer to any successor sections.
"Event of Default" means any of the events defined as an Event of Default
by Section 6.01 of the Bond Purchase Agreement, by Section 10.1 of the Lease
Agreement, by Section 4.1 of the Guaranty, by Paragraph 13 of the Deed of Trust
by Paragraph 13 of the Leasehold Deed of Trust or under any credit agreement or
loan with Chase Manhattan Bank, N.A.
"Facility" means the Land, the Improvements and the Equipment leased to the
Company under the Lease Agreement, acquired, constructed, equipped and installed
with Bond Proceeds.
"Fiscal Year" means the twelve (12) month period beginning on January 1 in
any year or such other fiscal year as the Company may select from time to time.
"Gibraltar Strip) Steel", means Gibraltar Strip Steel, Inc., a Delaware
corporation.
"Gibraltar Steel of New York", means Gibraltar Steel Corporation of New
York, a New York corporation.
"Government obligations" means (i) obligations of the United States of
America or (ii) obligations, the principal and interest of which are guaranteed
by the United States of America.
"Guaranty" means the Guaranty Agreement by the Guarantors to the Bank dated
as of the Closing Date, as the same may be amended from time to time.
"Guarantors" means, collectively, the Company and Gibraltar Steel
Corporation, a Delaware corporation, and "Guarantor" shall mean any one of the
Guarantors.
"Improvements" means all those buildings, improvements, structures and
other related facilities (i) affixed or attached to the Land, (ii) financed with
Bond Proceeds or with any payment by the Company pursuant to the Lease
Agreement, and (iii) not part of the Equipment, all as they may exist from time
to time.
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<PAGE>
"Independent Counsel" means an attorney or attorneys or firm or firms of
attorneys duly admitted to practice law before the highest court of any state of
the United States of America or in the District of Columbia and not a full time
employee of the Issuer, the Company, the Guarantors or the Bank.
"Integrated Technologies International Limited", means Integrated
Technologies International, Ltd, a Delaware corporation.
"Issuer" means the (i) The Industrial Development Board of the County of
Hamilton, Tennessee, a public corporation duly created and existing under the
Act, its successors and assigns, and (ii) any local governmental body resulting
from or surviving any consolidation or merger to which the Issuer or its
successors may be a party.
"Issuer Documents" means the Bond Purchase Agreement, the Bonds, the Lease
Agreement, the Pledge and Assignment, the Deed of Trust, the Issuer Security
Agreement, the PILOT Agreement and the Modification Agreement.
"Issuer Security Agreement" means the Security Agreement dated as of the
Closing Date between the Issuer and the Bank, as the same may be amended from
time to time.
"Kydco Holdings" means Kydco Holdings, Inc., a New York corporation.
"Land" means the property leased by the Issuer to the Company pursuant to
the Lease Agreement and more particularly bounded and described in SCHEDULE "All
attached thereto.
"Lease Agreement" means the Lease Agreement dated as of September 30, 1993
by and between the Issuer, as lessor, and the Company, as lessee, with respect
to the Facility, as the same may be amended from time to time.
"Lease Term" means the duration of the leasehold estate created in the
Lease Agreement as specified in section 5.2 of the Lease Agreement.
"Leasehold Deed of Trust" means the Leasehold Deed of Trust dated as of
September 30, 1993 covering, among other things, the Facility, given by the
Company to the Trustee for the use and benefit of the Bank as security for the
payment of the Bonds, as the same may be modified, amended, renewed or extended
from time to time.
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<PAGE>
"LIBOR Rate" means the London Interbank Offering Rate which is the rate as
determined on the basis of the offered rates for deposits in U.S. dollars for a
period of time comparable to such LIBOR Advance which appear on the Telerate
page 3750 as of 11:00 a.m. London time on the day that is three Banking Days
preceding the first day of such LIBOR Advance. If such rate does not appear on
the Telerate page 3750 the rate for that date will be determined on the basis of
the offered rates for deposits in U.S. dollars for a period of time comparable
to such LIBOR Advance which are offered by four major banks in the London
intermarket at approximately 11:00 a.m. London time, on the day that is three
Banking Days preceding the first day of such LIBOR Advance. The principal London
office of each of the four major London banks will be requested to provide a
quotation of its U.S. dollar deposit offered rate. If at least two such
quotations are provided as requested, the rate for that date will be determined
on the basis of the rates quoted for loans in U.S. dollars to leading European
banks for a period of time comparable to such LIBOR Advance offered by major
banks in New York City at approximately 11:00 a.m. New York City time, on the
day that is three Banking Days preceding the first day of such LIBOR Advance. In
the event that the Bank is unable to obtain any such quotation as provided
above, it will be deemed that LIBOR pursuant to a LIBOR Advance cannot be
determined.
In the event that the Board of Governors of the Federal Reserve System
shall impose a Reserve Percentage with respect to LIBOR deposits of the Bank,
then for any period during which such Reserve Percentage shall apply, LIBOR
shall be equal to the amount determined above divided by an amount to 1 minus
the Reserve Percentage.
"Lien" means any interest in Property securing an obligation owed to a
Person whether such interest is based on the common law, statute or contract,
and including, but not limited to, the security interest arising from a
mortgage, deed of trust, encumbrance, pledge, conditional sale or trust receipt
or a lease, consignment or bailment for security purposes. The term "Lien"
includes reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other similar title exceptions
and encumbrances, including, but not limited to, mechanics', materialmen's,
warehousemen's, carriers' and other similar encumbrances, affecting real
property.
"Maturity Date" means June 16, 2004.
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<PAGE>
"Modification Agreement" means the Modification Agreement dated as of the
Closing Date among the Issuer, the Trustee, the Bank and the Company, as the
same may be amended from time to time.
"Multiemployer Plan" means any employee benefit plan (a) which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and (b)
to which Company or any controlled Group Member has or had an obligation to
contribute.
"Net Proceeds" means so much of the gross proceeds with respect to which
that term is used as remain after payment of all expenses, costs and taxes
(including attorneys' fees) incurred in obtaining such gross proceeds.
"Outstanding" or "Bonds Outstanding" or "Outstanding Bonds" means all bonds
which have been authenticated by the Company and delivered by the Issuer under
the Bond Purchase Agreement, or any supplement thereto, except: (a) any Bond
cancelled by the Bank because of payment or redemption prior to maturity; (b)
any Bond deemed paid in accordance with the provisions of Section 3.04 of the
Bond Purchase Agreement, except that any such Bond shall be considered
Outstanding until the maturity date thereof only for the purposes of being
exchanged or registered; and (c) any Bond in lieu of or in substitution for
which another Bond shall have been authenticated and delivered pursuant to
Section 3.09 of the Bond Purchase Agreement, unless proof satisfactory to the
Bank is presented that any Bond, for which a Bond in lieu of or in substitution
therefor shall have been authenticated and delivered, is held by a bona fide
purchaser, as that term is defined in Article 8 of the Uniform Commercial Code
of the State, as amended, in which case both the Bond so substituted and
replaced and the Bond or Bonds so authenticated and delivered in lieu thereof or
in substitution therefor shall be deemed Outstanding.
"Owner" means the registered owner of any Bond as shown on the registration
books maintained by the Bond Registrar pursuant to the Bond Purchase Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation established under
Title IV of ERISA or any other governmental agency, department or
instrumentality succeeding to the functions of the said corporation.
"Pension Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) as defined in Section 3(2) of ERISA maintained for employees
of Company, Company's Subsidiaries
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<PAGE>
or any Controlled Group Member or to which Company or any Controlled Group
member made, or was required to make, contributions at any time within the
preceding six years.
"Permanent Loan Period" means the period beginning on the Closing Date and
ending on June 16, 2004.
"Permitted Encumbrances" means (i) exceptions to title set forth in the
Title Report and accepted by the Bank in writing, (ii) the Deed of Trust, (iii)
the Lease Agreement, (iv) the Pledge and Assignment, (v) the Assignment of
Rents, (vi) utility, access and other easements and rights-of-way, restrictions
and exceptions that do not materially impair the utility or the value of the
Property affected thereby for the purposes for which it is intended, (vii) the
Leasehold Deed of Trust, (viii) liens created by the Company Security Agreement,
(ix) liens created by the Issuer Security Agreement, (x) mechanics',
materialmen's, warehousemen's, carriers' and other similar Liens which are
approved in writing by the Bank or its counsel, (xi) encumbrances permitted by
the Bond Purchase Agreement, (xii) Liens for taxes not yet delinquent and (xiii)
liens created by the Security Agreement entered into by the Company in
connection with the Credit Agreement dated as of December 31, 1993 among
Gibraltar Steel Corporation, Bank and The Chase Manhattan Bank, N.A. and any
other liens or encumbrances in favor of The Chase Manhattan Bank, N.A. pursuant
to any agreement dated on or before December 31, 1993.
"Person" or "Persons" means an individual, partnership, corporation,
limited liability company, trust or unincorporated organization, and a
government or agency or political subdivision or branch thereof, or any other
entity.
"PILOT Agreement" means the Agreement for Payments in Lieu of Ad Valorem
Taxes dated as of September 17, 1993 among the Company, the County and the
Issuer, and joined by the Hamilton County Trustee and the Hamilton County
Assessor of Property, as amended from time to time.
"Pledge and Assignment" means the Pledge and Assignment with Acknowledgment
thereof by the Company dated as of September 30, 1993 from the Issuer to the
Bank.
"Prohibited Transaction" shall have the meaning set forth in Section 406 of
ERISA or Section 4975 of the Code.
"Project Fund" means the fund so designated which is created by Section
4.01 of the Bond Purchase Agreement.
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<PAGE>
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Public Purposes" means the State's objective to authorize the
incorporation in the several municipalities in the State of public corporations
to finance, acquire, own, lease and/or dispose of properties, to the end that
such corporations may be able to maintain and increase employment opportunities,
increase the production of agricultural commodities, and increase the quantity
of housing available in affected municipalities by promoting industry, trade,
commerce, tourism and recreation, agricultural and housing construction, by
inducing manufacturing, industrial, governmental, educational, financial,
service, commercial, recreational and agricultural enterprises to locate in or
remain in the State and further the use and production of the State's
agricultural products and natural resources, and to vest such corporations with
all powers that may be necessary to enable them to accomplish such purposes.
"Renewal Fund" means the fund so designated and created pursuant to Section
4.01 of the Bond Purchase Agreement.
"Reportable Event" means (i) a reportable event described in Section 4043
of ERISA and regulations thereunder; or (ii) a withdrawal by a substantial
employer from a single employer plan which has two or more contributing
sponsors, at least two of which are not under common control, as referred to in
Section 4063(b) of ERISA.
"Schedule of Definitions" means this Schedule of Definitions attached to
the Bond Purchase Agreement, as the same may be amended from time to time.
"Series 1 Bond" means the Issuer's Series 1 1993 Taxable Industrial
Development Revenue Bond (Gibraltar Steel Corporation of Tennessee Facility)
issued in the principal amount of $8,000,000 maturing on December 31, 2003.
"State" means the State of Tennessee.
"Stated Prime Rate" means the rate of interest established by the Bank from
time to time as a guide for determining actual lending rates to the Bank's
customers.
"Substitute Facilities" means facilities of substantially the same nature
as the proposed Facility.
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<PAGE>
"Tangible Net Worth" means the depreciated book value of all assets of
Company with no adjustments due to upward revaluation of assets less (i)
intangible assets and (ii) total liabilities of Company.
"Title Report" means Title Policy No. 112-02-033616, Case No. 931057 issued
by Lawyers Title Insurance Corporation to the Bank on October 1, 1993, as
amended or revised from time to time on or prior to the Closing Date.
"Trustee" means Louann Smith, acting as the trustee under the Deed of Trust
and the Leasehold Deed of Trust, and her successors and assigns.
"Unassigned Rights" means the rights of the Issuer in moneys payable
pursuant to and under Sections 4.3(vi), 5.3(b), 6.4(b) and (c), 6.7, 8.2,
10.4(a) and 11.2(b) of the Lease Agreement.
"Welfare Plan" means an employee welfare benefit plan as defined in Section
3(l) of ERISA, maintained for employees of Company or any Controlled Group
Member.
"Working Capital" means the excess of Current Assets over Current
Liabilities.
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<PAGE>
EXHIBIT 10.16
GIBRALTAR STEEL CORPORATION
INCENTIVE
STOCK OPTION PLAN
Second Amendment and Restatement
WHEREAS, Gibraltar Steel Corporation, a Delaware corporation with offices
at 3556 Lake Shore Road, Buffalo, New York 14219 (the "Company") adopted an
incentive stock option plan known as the Gibraltar Steel Corporation Incentive
Stock Option Plan (the "Plan") on September 21, 1993 to enable the Company to
attract and retain highly qualified individuals as officers and key employees of
the Company by providing such officers and key employees an equity based form of
incentive compensation; and
WHEREAS, the Company amended the Plan effective August 9, 1994 to allow
members of the Committee of Directors that administers the Plan to be eligible
to receive options under the terms of other plans which, from time to time, are
adopted and maintained by the Company including, but not limited to, the
Gibraltar Steel Corporation Non-Qualified Stock Option Plan; and
WHEREAS, the Company desires to amend the Plan to increase the total number
of shares of common stock, par value $.01 per share of the Company (hereinafter
the "Common Stock") which may be issued in connection with options granted
pursuant to the terms of the Plan by Two Hundred Thousand (200,000) shares; and
WHEREAS, the Company desires to amend and restate the terms of the
documents containing the terms of the Plan to incorporate the terms of the first
amendment to the Plan into the terms of such plan document, to provide for the
increase in the number of shares of Common Stock of the Company which may be
issued in connection with the exercise of options granted pursuant to the terms
of the Plan and to make certain other technical amendments to the terms of the
Plan;
NOW, THEREFORE, in consideration of the foregoing, the Company hereby
adopts the following as the Second Amendment and Restatement of the Gibraltar
Steel Corporation Incentive Stock Option Plan effective as of February 15, 1996:
1. Purpose of Plan. The Gibraltar Steel Corporation Incentive Stock Option
Plan (the "Plan") is intended to provide officers and other key employees of the
Company and officers and other key employees of any subsidiaries of the Company
as that term is defined in Section 3 below (hereinafter individually referred to
as a "Subsidiary" and collectively as "Subsidiaries") with an additional
incentive for them to promote the success of
<PAGE>
the business, to increase their proprietary interest in the success of the
Company and its Subsidiaries, and to encourage them to remain in the employ of
the Company or its Subsidiaries. The above aims will be effectuated through the
granting of certain stock options, as herein provided, which are intended to
qualify as Incentive Stock Options ("ISOs") under Section 422 of the Internal
Revenue Code of 1986, as the same has been and shall be amended ("Code").
2. Administration. The Plan shall be administered by a Committee (the
"Committee") composed of not less than two (2) Directors of the Company who
shall be appointed by and serve at the pleasure of the Board of Directors of the
Company. Any Director that serves as a member of the Committee shall not receive
or be eligible to receive a grant of an option or any other equity security of
the Company under this Plan during the period of his or her service as a member
of the Committee and during the one year period prior to his or her service as a
member of the Committee. If the Committee is composed of two (2) Directors, both
members of the Committee must approve, in writing, any action to be taken by the
Committee in order for such action to be deemed to be an action of the Committee
pursuant to the provisions of this Plan. If the Committee is composed of more
than two (2) Directors, a majority of the Committee shall constitute a quorum
for the conduct of its business, and (a) the action of a majority of the
Committee members present at any meeting at which a quorum is present, or (b)
action taken without a meeting by the approval in writing of a majority of the
Committee members, shall be deemed to be action by the Committee pursuant to the
provisions of the Plan. The Committee is authorized to adopt such rules and
regulations for the administration of the Plan and the conduct of its business
as it may deem necessary or proper.
Any action taken or interpretation made by the Committee under any
provision of the Plan or any option granted hereunder shall be in accordance
with the provisions of the Code, and the regulations and rulings issued
thereunder as such may be amended, promulgated, issued, renumbered or continued
from time to time hereafter in order that, to the greatest extent possible, the
options granted hereunder shall constitute "incentive stock options" within the
meaning of the Code. All action taken pursuant to this Plan shall be lawful and
with a view to obtaining for the Company and the option holder the maximum
advantages under the law as then obtaining, and in the event that any dispute
shall arise as to any action taken or interpretation made by the Committee under
any provision of the Plan, then all doubts shall be resolved in favor of such
having been done in accordance with the said Code and such revenue laws,
amendments, regulations, rulings and provisions as may then be applicable. Any
action taken or interpretation made by the Committee under any provision of the
Plan shall be final. No member of the Board
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<PAGE>
of Directors or the Committee shall be liable for any action, determination or
interpretation taken or made under any provision of the Plan or otherwise if
done in good faith.
3. Participation. The Committee shall determine from among the officers and
key employees of the Company and its Subsidiaries (as such term is defined in
Section 424 of the Code) those individuals to whom options shall be granted
(sometimes hereinafter referred to as "Optionees"), the terms and provisions of
the options granted (which need not be identical), the time or times at which
options shall be granted and the number of shares of Common Stock, (or such
number of shares of stock in which the Common Stock may at any time hereafter be
constituted), for which options are granted. Notwithstanding the foregoing, in
no event shall any individuals that are Directors of the Company be granted or
awarded any options under the terms of this Plan.
In selecting Optionees and in determining the number of shares for which
options are granted, the Committee may weigh and consider the following factors:
the office or position of the optionee and his degree of responsibility for the
growth and success of the Company and its Subsidiaries, length of service,
remuneration, promotions, age and potential. The foregoing factors shall not be
considered to be exclusive or obligatory upon the Committee, and the Committee
may properly consider any other factors which to it seem appropriate. The terms
and conditions of any option granted by the Committee under this Plan shall be
contained in a written statement which shall be delivered by the Committee to
the Optionee as soon as practicable following the Committee's establishment of
the terms and conditions of such option.
An Optionee who has been granted an option under the Plan may be granted
additional options under the Plan if the Committee shall so determine.
Notwithstanding the foregoing, if at the time an option is granted to an
individual under this Plan, the individual owns stock of the Company possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any of its Subsidiaries, (or if such individual would be
deemed to own such percentage of such stock under Section 424(d) of the Code)
such option shall continue to be valid and binding upon the Company according to
its terms but shall not be deemed to have been granted under this Plan and shall
not be deemed to be an "incentive stock option" as defined in Section 422(b) of
the Code. In addition, in no event shall any options be granted under this Plan
at any time after the termination date set forth at the end of this Plan.
3
<PAGE>
4. Shares Subject to the Plan. The Company is authorized to issue options
under this Plan for the purchase of the number of shares of Common Stock
described in the following provisions of this Section 4. On September 21, 1993
(the date on which this Plan became effective), the aggregate number of shares
of Common Stock which was reserved for issuance pursuant to options which were
permitted to be granted hereunder was Four Hundred Thousand (400,000) shares
(subject to the anti-dilutive adjustments provided for by Section 5 hereof).
Effective February 15, 1996, in addition to the number of shares of Common Stock
reserved for issuance pursuant to options which were permitted to be granted as
of February 14, 1996, an additional Two Hundred Thousand (200,000) shares of
Common Stock shall be reserved for issuance pursuant to options which may be
granted hereunder. Accordingly, the total number of shares of Common Stock which
may be issued pursuant to the exercise of options which may be granted under the
terms of this Plan shall be equal to the sum of Four Hundred Thousand (400,000)
shares (subject to anti-dilutive adjustments made at any time after September
21, 1993 pursuant to Section 5 hereof) and Two Hundred Thousand (200,000) shares
(subject to anti-dilutive adjustments made at any time after February 15, 1996
pursuant to Section 5 hereof).
Notwithstanding the foregoing, if this amendment and restatement to the
Plan is not approved by the stockholders of the Company within twelve (12)
months following the effective date of this amendment and restatement, any
options issued pursuant to the terms of this Plan at any time after the total
number of shares of Common Stock which may be acquired upon the exercise of all
previously issued options equals Four Hundred Thousand (400,000) shares (subject
to the anti-dilutive adjustments provided for by Section 5 hereof) shall
continue to be valid and binding upon the Company pursuant to their terms but
shall not be deemed to have been issued under the terms of this Plan and shall
not be deemed to be an "incentive stock option" as defined in section 422(b) of
the Code. With respect to shares subject to options which expire or terminate
pursuant to the provisions of this Plan without having been exercised in full,
such shares shall be considered to be available again for placement under
options granted thereafter under the Plan. Shares issued pursuant to the
exercise of incentive stock options granted under the Plan shall be fully paid
and non-assessable.
5. Anti-Dilution Provisions. The aggregate number of shares of Common Stock
and the class of such shares as to which options may be granted under the Plan,
the number and class of such shares subject to each outstanding option, the
price per share thereof (but not the total price), and the number of such shares
as to which an option may be exercised at any one time, shall all be adjusted
proportionately in the event of any change, increase or decrease in the
outstanding shares of Common Stock Company or any change in classification of
its Common Stock without receipt of consideration by the Company which results
4
<PAGE>
either from a split-up, reverse split or consolidation of shares, payment of a
stock dividend, recapitalization, reclassification or other like capital
adjustment so that upon exercise of the option, the Optionee shall receive the
number and class of shares that he would have received had he been the holder of
the number of shares of Common Stock for which the option is being exercised
immediately preceding such change, increase or decrease in the outstanding
shares of Common Stock. Any such adjustment made by the Committee shall be final
and binding upon all Optionees, the Company, and all other interested persons.
Any adjustment of an incentive stock option under this paragraph shall be made
in such manner as not to constitute a "modification" within the meaning of
Section 424(h)(3) of the Code.
Anything in this Article 5 to the contrary notwithstanding, no fractional
shares or scrip representative of fractional shares shall be issued upon the
exercise of any option. Any fractional share interest resulting from any change,
increase or decrease in the outstanding shares of Common Stock or resulting from
any reorganization, merger, or consolidation for which adjustment is provided in
this Article 5 shall disappear and be absorbed into the next lowest number of
whole shares, and the Company shall not be liable for any payment for such
fractional share interest to the optionee upon his exercise of the option.
6. Option Price. The purchase price under each option issued shall be
determined by the Committee at the time the option is granted, but in no event
shall such purchase price be less than one hundred percent (100%) of the fair
market value of the Common Stock on the date of the grant. If the Common Stock
is listed upon an established stock exchange or exchanges on the day the option
is granted, such fair market value shall be deemed to be the highest closing
price of the Common Stock on such stock exchange or exchanges on the day the
option is granted, or if no sale of the Company's Common Stock shall have been
made on any stock exchange on that day, on the next preceding day on which there
was a sale of such stock.
If the Common Stock is listed in the NASDAQ National Market System, the
fair market value of the Common Stock shall be the average of the high and low
closing sale prices in the NASDAQ National Market System on the day the option
is granted, or if no sale of the Common Stock shall have been made on the NASDAQ
National Market System on that day, on the next preceding day on which there was
a sale of such stock.
7. Option Exercise Periods. The time within which any option granted
hereunder may be exercised shall be, by its terms, not earlier than one (1) year
from the date such option is granted and not later than ten (10) years from the
date such option is granted. The Optionee must remain in the continuous
employment of the Company or any of its Subsidiaries from the
5
<PAGE>
date of the grant of the option to and including the date of exercise of option
in order to be entitled to exercise his option. Options granted hereunder shall
be exercisable in such installments and at such dates as the Committee may
specify. In addition, with respect to all options granted under this Plan,
unless the Committee shall specify otherwise, the right of each Optionee to
exercise his option shall accrue, on a cumulative basis, as follows:
(a) one-fourth (1/4) of the total number of shares of Common Stock which
could be purchased (subject to adjustment as provided in Section 5 hereof) (such
number being hereinafter referred to as the "Optioned Shares") shall become
available for purchase pursuant to the option at the end of the one (1) year
period beginning on the date of the option grant;
(b) one-fourth (1/4) of the Optioned Shares shall become available for
purchase pursuant to the option at the end of the two (2) year period beginning
on the date of the option grant;
(c) one-fourth (1/4) of the Optioned Shares shall become available for
purchase pursuant to the option at the end of the three (3) year period
beginning on the date of the option grant; and
(d) one-fourth (1/4) of the Optioned Shares shall become available for
purchase pursuant to the option at the end of the four (4) year period beginning
on the date of the option grant.
Continuous employment shall not be deemed to be interrupted by transfers
between the Subsidiaries or between the Company and any Subsidiary, whether or
not elected by termination from any Subsidiary of the Company and re-employment
by any other Subsidiary or the Company. Time of employment with the Company
shall be considered to be one employment for the purposes of this Plan, provided
there is no intervening employment by a third party or no interval between
employments which, in the opinion of the Committee, is deemed to break
continuity of service. The Committee shall, at its discretion, determine the
effect of approved leaves of absence and all other matters having to do with
"continuous employment". Where an optionee dies while employed by the Company or
any of its Subsidiaries, his options may be exercised following his death in
accordance with the provisions of Section 10 below.
Notwithstanding the foregoing provisions of this Section 7, in the event
the Company or the stockholders of the Company enter into an agreement to
dispose of all or substantially all of the assets or stock of the Company by
means of a sale, merger, consolidation, reorganization, liquidation, or
otherwise, or in the event a Change of Control shall occur, an
6
<PAGE>
option shall become immediately exercisable with respect to the full number of
shares subject to that option during the period commencing as of the date of
execution of such agreement and ending as of the earlier of (i) ten (10) years
from the date such option was granted, or (ii) ninety (90) days following the
date on which a Change in Control occurs or the disposition of assets or stock
contemplated by the agreement is consummated. Ninety (90) days following the
consummation of any such disposition of assets or stock, or Change in Control,
this Plan and any unexercised options issued hereunder (or any unexercised
portion thereof) shall terminate and cease to be effective, unless provision is
made in connection with such transaction for assumption of options previously
granted or the substitution for such options of new options covering the
securities of a successor corporation or an affiliate thereof, with appropriate
adjustments as to the number and kind of securities and prices.
For purposes of this Plan, a "Change in Control" shall be deemed to have
occurred if:
(a) any "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than thirty percent (30%) of the then outstanding voting
stock of the Company, otherwise than through a transaction arranged by, or
consummated with the prior approval of its Board of Directors; or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company (and
any new director whose election to the Board of Directors or whose nomination
for election by the Company's stockholders was approved by a vote of at least
two thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) (the "Continuing Directors") cease for any reason to
constitute a majority thereof; or
(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company immediately prior
thereto continuing to represent (either by remaining outstanding or being
converted into voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation (provided,
however, that if prior to the merger or consolidation, the Board of Directors of
the Company adopts a resolution that is approved by a majority of the Continuing
Directors providing that such merger or consolidation shall not constitute a
"Change in Control" for purposes of the
7
<PAGE>
Plan, then such a merger or consolidation shall not constitute a "Change in
Control"); or
(d) the stockholders of the Company approve an agreement for the sale or
disposition by the Company of all or substantially all the assets of the
Company.
Any change or adjustment made pursuant to the terms of this paragraph shall
be made in such a manner so as not to constitute a "modification" as defined in
Section 424 of the Code, and so as not to cause any incentive stock option
issued under this Plan to fail to continue to qualify as an incentive stock
option as defined in Section 422(b) of the Code. Notwithstanding the foregoing,
in the event that any such agreement shall be terminated without consummating
the disposition of said stock or assets, any unexercised unaccrued installments
that had become exercisable solely by reason of the provisions of this paragraph
shall again become unaccrued and unexercisable as of said termination of such
agreement; subject, however, to such installments accruing pursuant to the
normal accrual schedule provided in the terms under which such option was
granted. Any exercise of an installment prior to said termination of said
agreement shall remain effective despite the fact that such installment became
exercisable solely by reason of the Company or its stockholders entering into
said agreement to dispose of the stock or assets of the Company.
8. Exercise of Option. Options shall be exercised as follows:
(a) Notice and Payment. Each option, or any installment thereof, shall be
exercised, whether in whole or in part, by giving written notice to the Company
at its principal office, specifying the options being exercised (by reference to
the date of the grant of the option), the number of shares to be purchased and
the purchase price being paid, and accompanied by the payment of all or such
part of the purchase price as shall be specified in the option, by cash,
certified or bank check payable to the order of the Company. Each such notice
shall contain representations on behalf of the optionee that he acknowledges
that the Company is selling the shares being acquired by him under a claim of
exemption from registration under the Securities Act of 1933 as amended (the
"Act"), as a transaction not involving any public offering; that he represents
and warrants that he is acquiring such shares with a view to "investment" and
not with a view to distribution or resale; and that he agrees not to transfer,
encumber or dispose of the shares unless: (i) a registration statement with
respect to the shares shall be effective under the Act, together with proof
satisfactory to the Company that there has been compliance with applicable state
law; or (ii) the Company shall have received an opinion of counsel in form and
content satisfactory to the Company to the effect that the transfer qualifies
under Rule 144 or some other disclosure
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exemption from registration and that no violation of the Act or applicable state
laws will be involved in such transfer, and/or such other documentation in
connection therewith as the Company's counsel may in its sole discretion
require.
(b) Issuance of Certificates. Certificates representing the shares
purchased by the Optionee shall be issued as soon as practicable after the
optionee has complied with the provisions of Section 8(a) hereof.
(c) Rights as a Stockholder. The Optionee shall have no rights as a
stockholder with respect to the shares of Common Stock purchased until the date
of the issuance to him of a certificate representing such shares.
9. Assignment of Option. Subject to the provisions of Section 10, options
granted under this Plan may not be assigned voluntarily or involuntarily or by
operation of law. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of, or to subject to execution, attachment or similar process,
any incentive stock option, or any right thereunder, contrary to the provisions
hereof shall be void and ineffective, shall give no right to the purported
transferee, and shall, at the sole discretion of the Committee, result in
forfeiture of the option with respect to the shares involved in such attempt.
10. Effect of Termination of Employment, Death or Disability. (a) In the
event of the termination of employment of an Optionee during the two (2) year
period after the date of issuance of an option to him either by reason of: (i) a
discharge for cause; or (ii) voluntary separation on the part of the Optionee
and without consent of the Company or the Subsidiary for whom the Optionee was
employed, any option or options theretofore granted to him under this Plan, to
the extent not theretofore exercised by him, shall forthwith terminate.
(b) In the event of the termination of employment of an Optionee (otherwise
than by reason of death or retirement of the Optionee at his Retirement Date) by
the Company or by any of the Subsidiaries employing the optionee at such time,
any option or options granted to him under the Plan to the extent not
theretofore exercised shall be deemed cancelled and terminated forthwith, except
that, subject to the provisions of subparagraph (a) of this Section, such
Optionee may exercise any options theretofore granted to him, which have not
then expired and which are otherwise exercisable within the provisions of
Section 7 hereof, within three (3) months after such termination. If the
employment of an optionee shall be terminated by reason of the Optionee's
retirement at his Retirement Date by the Company or by any of the Subsidiaries
employing the Optionee at such time, the Optionee shall have the right to
exercise such option or options held by him to the extent that such options have
not expired, at any time within three (3) months after such retirement. The
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provisions of Section 7 to the contrary notwithstanding, upon retirement, all
options held by an Optionee shall be immediately exercisable in full. The
transfer of an Optionee from the employ of the Company to a Subsidiary
corporation of the Company or vice versa, or from one Subsidiary corporation of
the Company to another, shall not be deemed to constitute a termination of
employment for purposes of this Plan.
(c) In the event that an Optionee shall die while employed by the Company
or by any of the Subsidiaries or shall die within three (3) months after
retirement on his Retirement Date (from the Company or any Subsidiary), any
option or options granted to him under this Plan and not theretofore exercised
by him or expired shall be exercisable by the estate of the Optionee or by any
person who acquired such option by bequest or inheritance from the Optionee in
full, notwithstanding Section 7, at any time within one (1) year after the death
of the Optionee. References hereinabove to the Optionee shall be deemed to
include any person entitled to exercise the option after the death of the
Optionee under the terms of this Section.
(d) In the event of the termination of employment of an Optionee by reason
of the Optionee's disability, the Optionee shall have the right, notwithstanding
the provisions of Section 7 hereof, to exercise all options held by him, to the
extent that options have not previously expired or been exercised, at any time
within one (1) year after such termination. The term "disability" shall, for
the purposes of this Plan, be defined in the same manner as such term is defined
in Section 22(e)(3) of the Internal Revenue Code of 1986.
(e) For the purposes of this Plan, "Retirement Date" shall mean, with
respect to an Optionee, the date the Optionee is otherwise entitled to retire
under the retirement plan of the Company or, if applicable, the Subsidiary by
whom the optionee is employed.
11. Amendment and Termination of the Plan. The Board of Directors of the
Company may at any time suspend, amend or terminate the Plan; provided, however,
that except as permitted in Section 13 hereof, no amendment or modification of
the Plan which would:
(a) increase the maximum aggregate number of shares as to which options may
be granted hereunder (except as contemplated in Section 5); or
(b) reduce the option price or change the method of determining the option
price; or
(c) increase the time for exercise of options to be granted or those which
are outstanding beyond the terms of ten (10) years; or
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<PAGE>
(d) change the designation of the employees or class of employees eligible
to receive options under this Plan, may be adopted unless with the approval of
the holders of a majority of the outstanding shares of Common Stock represented
at a stockholders' meeting of the Company, or with the written consent of the
holders of a majority of the outstanding shares of Common Stock. No amendment,
suspension or termination of the Plan may, without the consent of the holder of
the option, terminate his option or adversely affect his rights in any material
respect.
12. Incentive Stock Options; Power to Establish Other Provisions. It is
intended that the Plan shall conform to and (except as otherwise expressly set
forth herein) each option shall qualify and be subject to exercise only to the
extent that it does qualify as an "incentive stock option" as defined in Section
422 of the Code and as such section may be amended from time to time or be
accorded similar tax treatment to that accorded to an incentive stock option by
virtue of any new revenue laws of the United States. The Board of Directors may
make any amendment to the Plan which shall be required so to conform the Plan.
Subject to the provisions of the Code, the Committee shall have the power to
include such other terms and provisions in options granted under this Plan as
the Committee shall deem advisable, provided, however, that no option shall be
granted hereunder which does not qualify under the Code.
13. Maximum Annual Value of Options Exercisable. Notwithstanding any
provisions of this Plan to the contrary if: (a) the sum of: (i) the fair market
value (determined as of the date of the grant) of all options granted to an
Optionee under the terms of this Plan which become exercisable for the first
time in any one calendar year; and (ii) the fair market value (determined as of
the date of the grant) of all options previously granted to such Optionee under
the terms of this Plan or any other incentive stock option plan of the Company
or its subsidiaries which also become exercisable for the first time in such
calendar year; exceeds (b) $100,000; then, (c) those options shall continue to
be binding upon the Company in accordance with their terms but, to the extent
that the aggregate fair market of all such options which become exercisable for
the first time in any one calendar year (determined as of the date of the grant)
exceeds $100,000, such options shall not be deemed to be incentive stock options
as defined in Section 422(b) of the Code. Accordingly, no optionee shall be
entitled to exercise options granted under any incentive stock option plan of
the Company and any parent or subsidiary of the Company, in any single calendar
year, for shares of Common Stock the value of which (determined at the time of
grant of the options) exceeds $100,000 except to the extent such options first
become exercisable in previous complete calendar years. For purposes of the
foregoing, the determination of which options shall be recharacterized as not
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being incentive stock options issued under the terms of this Plan shall be made
in inverse order of their grant dates and, accordingly, the last options
received by the Optionee shall be the first options to be recharacterized as not
being incentive stock options granted pursuant to the terms of the Plan.
14. General Provisions (a) No incentive stock option shall be construed as
limiting any right which the Company or any parent or subsidiary of the Company
may have to terminate at any time, with or without cause, the employment of an
Optionee.
(b) The Section headings used in this Plan are intended solely for
convenience of reference and shall not in any manner amplify, limit, modify or
otherwise be used in the construction or interpretation of any of the provisions
hereof.
(c) The masculine, feminine or neuter gender and the singular or plural
number shall be deemed to include the other whenever the content so indicates or
requires.
(d) No options shall be granted under the Plan after ten (10) years from
the date the Plan is adopted by the Board of Directors of the Company or
approved by the stockholders of the Company, whichever is earlier.
15. Effective Date and Duration of the Plan. The Plan became effective on
September 21, 1993, the date the adoption of the Plan was approved by the Board
of Directors of the Company. On November 5, 1993, as required by Section 422 of
the Code, the Plan was approved by the Stockholders of the Company. The Plan
will terminate on September 20, 2003; provided however, that the termination of
the Plan shall not be deemed to modify, amend or otherwise affect the terms of
any options outstanding on the date the Plan terminates.
IN WITNESS WHEREOF, the undersigned has executed this Plan by and on behalf
of the Company on and as of the 15th day of February, 1996.
GIBRALTAR STEEL CORPORATION
By: /s/ Brian J. Lipke
--------------------------
DATE ADOPTED BY BOARD OF DIRECTORS: September 21, 1993
DATE APPROVED BY STOCKHOLDERS: November 5, 1993
TERMINATION DATE: September 21, 2003
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EXHIBIT 10.17
GIBRALTAR STEEL CORPORATION
NON-QUALIFIED STOCK OPTION PLAN
First Amendment and Restatement
WHEREAS, Gibraltar Steel Corporation, a Delaware corporation with offices
at 3556 Lake Shore Road, Buffalo, New York 14219 (the "Company") adopted a
non-qualified stock option plan known as the "Gibraltar Steel Corporation
Non-Qualified Stock Option Plan") on September 21, 1993 to enable the Company to
attract to membership on the Board of Directors of the Company, individuals with
substantial consulting experience with respect to the legal, financial and
operational concerns of large public and privately held corporations; and
WHEREAS, the Company desires to amend the Plan to increase the number of
shares of common stock par value $.01 per share of the Company (hereinafter the
"Common Stock") which may be issued in connection with options granted pursuant
to the terms of the Plan by Two Hundred Thousand shares (200,000); and
WHEREAS, the Company desires to amend and restate the terms of the document
which contains the terms of the Plan to provide for the increase in the number
of shares of Common Stock of the Company which may be issued in connection with
the exercise of options granted pursuant to the terms of the Plan and to make
certain other technical amendments to the terms of the Plan;
NOW, THEREFORE, in consideration of the foregoing, the Company hereby
adopts the following as the First Amendment and Restatement of the Gibraltar
Steel Corporation Non-Qualified Stock Option Plan effective as of February 15,
1996:
1. Purpose of Plan. The Gibraltar Steel Corporation Non-Qualified Stock
option Plan (the "Plan") is intended to provide a tool to the management of the
Company for attracting, motivating and retaining highly qualified officers and
key employees to employment with the Company by providing such officers and
other key employees with an additional incentive to promote the success of the
business, to increase their proprietary interest in the success of the Company
and to encourage them to remain in the employ of the Company and its
subsidiaries and affiliates.
A further purpose of the Plan is to provide the Company's management with
an additional equity based program which can be used to attract individuals with
substantial consulting experience with respect to the legal, financial and
operational concerns of large public and privately held corporations to
membership on the Company's Board of Directors.
<PAGE>
2. Administration. The Plan shall be administered by a Committee (the
"Committee") which shall be composed of not less than two (2) Directors of the
Company who shall be appointed by and serve at the pleasure of the Board of
Directors of the Company. If the Committee is composed of two (2) Directors,
both members of the Committee must approve, in writing, any action to be taken
by the Committee in order for such action to be deemed an action of the
Committee pursuant to the provisions of the Plan. If the Committee is composed
of more than two (2) Directors, a majority of the Committee shall constitute a
quorum for the conduct of its business, and (a) the action of a majority of the
Committee members present at any meeting at which a quorum is present, or (b)
action taken without a meeting by the approval, in writing, of a majority of the
Committee members, shall be deemed to be action by the Committee pursuant to the
provisions of the Plan. The Committee is authorized to adopt such rules and
regulations for the administration of the Plan as it may deem necessary or
proper.
Any action taken or interpretation made by the Committee under any
provision of the Plan shall be final. No member of the Board of Directors or the
Committee shall be liable for any action, determination or interpretation taken
or made under any provision of the Plan or otherwise if done in good faith.
3. Participation. The Committee shall determine which individuals shall be
granted options under the terms of this Plan, which individuals may, but are not
required to, include officers and employees of the Company, legal or financial
advisors to the Company and non-employee Directors of the Company (all such
individuals being sometimes hereinafter referred to as "Optionees").
4. Option Terms. The Committee shall establish the terms and conditions
(which need not be identical) upon which the options granted hereunder may be
exercised, the time or times at which options shall be granted and the number of
shares of Common Stock (or such number of shares of stock in which such Common
Stock may at any time hereafter be constituted), for which options are granted.
The terms and conditions established by the Committee with respect to any option
granted by the Committee under this Plan shall be contained in a written
statement which shall be delivered by the Committee to the Optionee as soon as
practicable following the Committee's establishment of the terms and conditions
of such Option.
Notwithstanding the foregoing, unless otherwise modified by action of the
Company's Board of Directors, the following terms and conditions shall apply
with respect to any options granted hereunder:
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(a) in the case of an individual that is an employee of the Company or any
of its subsidiaries or affiliates, the right to exercise options granted
hereunder shall be conditioned on the continuous employment of such individual
by the Company or any of its subsidiaries or affiliates between the date of the
grant of the option and the date of exercise of the option;
(b) in the case of an individual that is a member of the Board of Directors
of the Company or the Board of Directors of any subsidiary or affiliate of the
Company but is not an employee of the Company or any subsidiary or affiliate of
the Company, the right to exercise options granted hereunder shall be
conditioned on the continuous membership by such individual on the Board of
Directors of the Company or any such subsidiary or affiliate;
(c) with respect to options granted under the Plan prior to the closing of
the public offering of the Company's Common Stock (the "Public Offering") the
right to exercise such options shall accrue, on a cumulative basis, as follows:
(i) one fourth (1/4) of the total number of shares of Common Stock
which could be purchased (subject to adjustment as provided for in Section
6 hereof) (such number being hereinafter referred to as the "Optioned
Shares") shall become available for purchase pursuant to the option at the
end of the one (1) year period following the closing of the Public
Offering;
(ii) one-fourth (1/4) of the Optioned Shares shall become available
for purchase pursuant to the option at the end of the two (2) year period
following the closing of the Public Offering;
(iii) one-fourth (1/4) of the Optioned Shares shall become available
for purchase pursuant to the option at the end of the three (3) year period
following the closing of the Public Offering; and
(iv) one-fourth (1/4) of the Optioned Shares shall become available
for purchase pursuant to the option at the end of the four (4) year period
following the closing of the Public Offering.
An Optionee who has been granted an option under the Plan may be granted
additional options under the Plan if the Committee shall so determine.
The purchase price payable for Common Stock in connection with the exercise
of options granted hereunder shall be determined by the Committee at the time of
the grant of any options hereunder.
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In addition, except as otherwise set forth above and subject to the
provisions of Section 7 hereof, at the time of the grant of any options under
this Plan, the Committee shall establish the time at which and within which such
options may be exercised.
5. Shares Subject to the Plan. The Company is authorized to issue options
under the Plan for the purchase of the number of shares of Common Stock
described in the following provisions of this Section 5. On September 21, 1993
(the date on which this Plan became effective), the aggregate number of shares
of Common stock which was reserved for issuance pursuant to options which were
permitted to be granted hereunder was Two Hundred Thousand (200,000) shares
(subject to the anti-dilutive adjustments provided for by Section 6 hereof).
Effective February 15, 1996, in addition to the number of shares of Common Stock
reserved for issuance pursuant to the options which were permitted to be granted
as of February 14, 1996, an additional Two Hundred Thousand (200,000) shares of
Common Stock shall be reserved for issuance pursuant to options which may be
granted hereunder. Accordingly, the total number of shares of Common Stock which
may be issued pursuant to the exercise of options which may be granted under the
terms of this Plan shall be equal to the sum of Two Hundred Thousand (200,000)
shares (subject to anti-dilutive adjustments made at any time after September
21, 1993 pursuant to Section 6 hereof) and Two Hundred Thousand (200,000) shares
subject to anti-dilutive adjustments made at any time after February 15, 1996
pursuant to Section 6 hereof). With respect to any shares which are subject to
options which expire or terminate pursuant to the provisions of the Plan without
having been exercised in full, such shares shall be considered to be available
again for placement under options granted thereafter under the Plan. Shares
issued pursuant to the exercise of stock options granted under the Plan shall be
fully paid and nonassessable.
6. Anti-Dilution Provisions. The aggregate number of shares of Common Stock
and the class of such shares as to which options may be granted under the Plan,
the number and class of such shares subject to each outstanding option, the
price per share thereof (but not the total price), and the number of such shares
as to which an option may be exercised at any one time, shall all be adjusted
proportionately in the event of any change, increase or decrease in the
outstanding shares of Common Stock or any change in classification of its Common
Stock without receipt of consideration by the Company which results either from
a split-up, reverse split or consolidation of shares, payment of a stock
dividend, recapitalization, reclassification or other like capital adjustment so
that upon exercise of the option, the Optionee shall receive the number and
class of shares that he would have received had he been the holder of the number
of shares of Common Stock for which the option is being exercised immediately
preceding such change, increase or decrease in the
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<PAGE>
outstanding shares of Common Stock. Any such adjustment made by the Committee
shall be final and binding upon all optionees, the Company and all other
interested persons.
7. Option Exercises Upon a Change in Control. Notwithstanding the
provisions of Section 4 hereof, in the event that the Company or the
stockholders of the Company enter into an agreement to dispose of all or
substantially all of the assets or stock of the Company by means of a sale,
merger, consolidation, reorganization, liquidation, or otherwise, or in the
event a Change of Control shall occur, each outstanding option shall become
immediately exercisable with respect to the full number of shares subject to
such options during the period commencing as of the date of execution of such
agreement and ending as of the earlier of (i) ten (10) years from the date such
option was granted, or (ii) ninety (90) days following the date on which a
Change in Control occurs or the disposition of assets or stock contemplated by
the agreement is consummated. Ninety (90) days following the consummation of any
such disposition of assets or stock, or Change in Control, this Plan and any
unexercised options issued hereunder (or any unexercised portion thereof) shall
terminate and cease to be effective, unless provision is made in connection with
such transaction for assumption of options previously granted or the
substitution for such options of new options covering the securities of a
successor corporation or an affiliate thereof, with appropriate adjustments as
to the number and kind of securities and prices.
For purposes of this Plan, a "Change in Control" shall be deemed to have
occurred if:
(a) any "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than thirty percent (30%) of the then outstanding voting
stock of the Company, otherwise than through a transaction arranged by, or
consummated with the prior approval of its Board of Directors; or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company (and
any new director whose election to the Board of Directors or whose nomination
for election by the Company's stockholders was approved by a vote of at least
two thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) (the "Continuing Directors") cease for any reason to
constitute a majority thereof; or
(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other
5
<PAGE>
than a merger or consolidation which would result in the voting securities of
the Company immediately prior thereto continuing to represent (either by
remaining outstanding or being converted into voting securities of the surviving
entity) at least 80% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation (provided, however, that if prior to the merger or
consolidation, the Board of Directors of the Company adopts a resolution that is
approved by a majority of the Continuing Directors providing that such merger or
consolidation shall not constitute a "Change in Control" for purposes of the
Plan, then such a merger or consolidation shall not constitute a "Change in
Control"); or
(d) the stockholders of the Company approve an agreement for the sale or
disposition by the Company of all or substantially all the assets of the
Company.
Notwithstanding the foregoing, in the event that any such agreement shall
be terminated without consummating the disposition of said stock or assets, any
unexercised unaccrued installments that had become exercisable solely by reason
of the provisions of this paragraph shall again become unaccrued and
unexercisable as of said termination of such agreement; subject, however, to
such installments accruing pursuant to the normal accrual schedule provided in
the terms under which such option was granted. Any exercise of an installment
prior to said termination of said agreement shall remain effective despite the
fact that such installment became exercisable solely by reason of the Company or
its stockholders entering into said agreement to dispose of the stock or assets
of the Company.
8. Exercise of Option. Options shall be exercised as follows:
(a) Notice and Payment. Each option, or any installment thereof, shall be
exercised, whether in whole or in part, by giving written notice to the Company
at its principal office, specifying the options being exercised (by reference to
the date of the grant of the option), the number of shares to be purchased and
the purchase price being paid, and accompanied by the payment of all or such
part of the purchase price as shall be specified in the option, by cash,
certified or bank check payable to the order of the Company. Each such notice
shall contain representations on behalf of the Optionee that he acknowledges
that the Company is selling the shares being acquired by him under a claim of
exemption from registration under the Securities Act of 1933 as amended (the
"Act"), as a transaction not involving any public offering; that he represents
and warrants that he is acquiring such shares with a view to "investment" and
not with a view to distribution or resale; and that he agrees not to transfer,
encumber or dispose of the shares unless: (i) a
6
<PAGE>
registration statement with respect to the shares shall be effective under the
Act, together with proof satisfactory to the Company that there has been
compliance with applicable state law; or (ii) the Company shall have received an
opinion of counsel in form and content satisfactory to the Company to the effect
that the transfer qualifies under Rule 144 or some other disclosure exemption
from registration and that no violation of the Act or applicable state laws will
be involved in such transfer, and/or such other documentation in connection
therewith as the Company's counsel may in its sole discretion require.
(b) Issuance of Certificates. Certificates representing the
shares purchased by the optionee shall be issued as soon as practicable after
the optionee has complied with the provisions of Section 8(a) hereof.
(c) Rights as a Stockholder. The optionee shall have no rights as a
stockholder with respect to the shares purchased until the date of the issuance
to him of a certificate representing such shares.
9. Assignment of Option. Subject to the provisions of Section 10(e)
hereof, options granted under this Plan may not be assigned voluntarily or
involuntarily or by operation of law. Any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of, or to subject to execution, attachment or
similar process, any stock option, or any right thereunder, contrary to the
provisions hereof shall be void and ineffective, shall give no right to the
purported transferee, and shall, at the sole discretion of the Committee, result
in forfeiture of the option with respect to the shares involved in such attempt.
10. Effect of Termination of Employment, Removal, Death or Disability. (a)
If an optionee is employed by the Company or any subsidiary or affiliate of the
Company on the date he receives a grant of an option and if such Optionee's
employment with the Company or is terminated by reason of: (i) a discharge for
cause; or (ii) voluntary separation on the part of the Optionee and without
consent of the Company or the subsidiary or affiliate of the Company that the
Optionee is employed by, any option or options theretofore granted to him under
this Plan, to the extent not theretofore exercised by him, shall be terminated.
(b) If an Optionee is a non-employee member of the Board of Directors of
the Company or any subsidiary or affiliate of the Company on the date he
receives the grant of an option and if such Optionee's membership on the Board
of Directors of the Company and on the Board of Directors of all other
subsidiaries and affiliates of the Company is terminated by reason of: (i)
removal for cause; or (ii) voluntary resignation on the part of the Optionee
without the consent of the other members of the Board of Directors of the
Company or such other members of each
7
<PAGE>
subsidiary or affiliate of the Company whose Board of Directors the Optionee is
a member of, any option or options theretofore granted to him under this Plan,
to the extent not otherwise exercised by him, shall be terminated.
(c) If an Optionee is employed by the Company or any subsidiary or
affiliate of the Company at the time he receives a grant of an option hereunder
and if such Optionee's employment with the Company or any such subsidiary or
affiliate of the Company is terminated by reason of the Optionee's retirement at
age 65 under the terms of the retirement plan of the Company or such subsidiary
or affiliate of the Company that is the employer of such Optionee, the Optionee
shall have the right to exercise such option or options held by him to the
extent that such options have not expired, at any time within three (3) months
after such retirement.
(d) If an optionee is a non-employee member of the Board of Directors of
the Company or any subsidiary or affiliate of the Company at the time he
receives a grant of an option hereunder and if such Optionee's membership on the
Board of Directors of the Company and all subsidiaries and affiliates of the
Company is terminated by reason of the Optionee's resignation at or after his
attainment of age 65, the Optionee shall have the right to exercise such option
or options held by him to the extent that such options have not expired, at any
time within three (3) months after such retirement.
(e) In the event that an Optionee shall die at any time that options
granted hereunder are outstanding, any option or options granted to him under
this Plan and not theretofore exercised by him or expired shall be exercisable
by the estate of the Optionee or by any person who acquired such option by
bequest or inheritance from the optionee in full at any time within one (1) year
after the death of the Optionee. References hereinabove to the Optionee shall be
deemed to include any person entitled to exercise the option after the death of
the optionee under the terms of this Section.
(f) If an Optionee is employed by the Company or any subsidiary or
affiliate of the Company at the time he receives a grant of an option hereunder
and if his employment with the Company or any such subsidiary or affiliate of
the Company is terminated by reason of his disability, the Optionee shall have
the right to exercise all options held by him to the extent that such options
have not previously expired or been exercised, at any time within one (1) year
after such termination. If an Optionee is a non-employee member of the Board of
Directors of the Company or any subsidiary or affiliate of the Company at the
time he receives a grant of an option hereunder and if his membership on the
Board of Directors of the Company and all other subsidiaries and affiliates of
the Company is terminated by
8
<PAGE>
reason of his disability, the optionee shall have the right to exercise all
options held by him to the extent that such options have not previously expired
or been exercised, at any time within one (1) year after such termination. The
term "disability" shall, for the purposes of this Plan, be defined in the same
manner as such term is defined in Section 22(e)(3) of the Internal Revenue Code
of 1986.
11. Indemnity. The Company shall indemnify and hold harmless any person who
is or has been a member of the Committee appointed under Section 2 hereof or the
Board of Directors of the Company, from and against any and all loss, expense,
liability or costs, including, without limitation, reasonable attorney's fees
that may be imposed upon or reasonably incurred by him in connection with or
resulting from any claim, action, suit or proceeding to which he may be a party
or in which he may be involved by reason of any action taken or failure to act
under the Plan provided that such person provides the Company prompt written
notice of any such claim together with the opportunity to defend against claim
or action at the Company's expense.
12. Amendment and Termination of the Plan. The Board of Directors of the
Company may at any time suspend, amend or terminate the Plan.
13. General Provisions. (a) No stock option granted hereunder shall be
construed as limiting any right which the Company or any parent or subsidiary of
the Company may have to terminate at any time, with or without cause, the
employment of an Optionee or an optionee's membership on the Board of Directors
of the Company or the Board of Directors of any subsidiary or affiliate of the
Company.
(b) The Section headings used in this Plan are intended solely for
convenience of reference and shall not in any manner amplify, limit, modify or
otherwise be used in the construction or interpretation of any of the provisions
hereof.
(c) The masculine, feminine or neuter gender and the singular or plural
number shall be deemed to include the other whenever the content so indicates or
requires.
14. Effective Date and Duration of the Plan. The Plan shall became
effective on September 21, 1993 and shall continue until terminated by the Board
of Directors of the Company or, if earlier, the date that all shares of Common
Stock which may be issued in connection with the exercise of options which may
be granted under the terms of the Plan have been issued.
9
<PAGE>
IN WITNESS WHEREOF the undersigned has executed this Plan on and as of the
15th day of February, 1996.
GIBRALTAR STEEL CORPORATION
By: /s/ Brian J. Lipke
---------------------------------
10
<PAGE>
EXHIBIT 10.21
THE STATE OF TEXAS ) (
COUNTY OF CAMERON ) (
LEASE AGREEMENT
THIS Lease Agreement is made this 11th day of January, 1996, in the City of
Brownsville, State of Texas, by and between TURN KEY WAREHOUSING, INC., a Texas
Sub-Chapter S Corporation, Brownsville, Cameron County, Texas 78521, and
GIBRALTAR METALS, a Division of GIBRALTAR STEEL CORPORATION, a New York
corporation, at 1050 Military Road, Buffalo, Erie County, New York 14217.
WHEREAS, TURN KEY WAREHOUSING, Inc., is the "operator" of a parcel of
property located at 200 Texas Avenue in Brownsville, Cameron County, Texas,
which is a warehouse/shipping facility, and said Limited Liability Company
wishes to lease said property to any interested tenant.
WHEREAS, GIBRALTAR METALS, A DIVISION OF GIBRALTAR STEEL CORPORATION is
involved in a business requiring the use of such a facility and wishes to lease
such property for use in connection with its respective business needs.
WHEREAS, the parties are willing and able to enter into this Lease
Agreement and the offer to lease has been accepted by the appropriate party.
NOW, THEREFORE, for and in consideration of the premises and mutual
promises of the parties and the mutual benefits they will gain by the
performance thereof, all in accordance with the provisions hereinafter set
forth, TURN-KEY WAREHOUSING, Inc., hereinafter referred to as "LESSOR", and
GIBRALTAR METALS, A DIVISION OF GIBRALTAR STEEL CORPORATION, hereinafter
referred to as "LESSEE", agree as follows:
I .
TERM OF AGREEMENT
This lease Agreement shall be for a term beginning on the 1st day of
January, 1996, and terminating on the 31st day of December, 1997. At the end of
such term, LESSOR shall have the right to re-take the leased property, or
alternatively, to re-lease same.
<PAGE>
II.
PROPERTY BEING LEASED
The property being leased by LESSOR to LESSEE is a property described as
"fifteen thousand (15,000) square feet (approximately) of a warehouse facility
located at 200 Texas Avenue, Brownsville, Cameron County, Texas of the LESSOR,
as described in greater detail in the diagram annexed hereto as Exhibit "A" and
incorporated by reference herein.
III.
USE OF PREMISES
The property being leased by LESSEE may be used only for the operation of a
warehouse/shipping facility (for trans-shipment and related purposes), as shall
be defined by LESSOR. In this connection, LESSEE shall have the right to
determine the hours during which all or any part of the said facility will be
open for patronage. In no event will the leasehold premises or any part thereof
be used or occupied as a residence or overnight facility.
IV.
LEASEHOLD FACILITIES AND OPERATION
LESSEE shall maintain and operate the said leased area, facilities and/or
services in a lawful and proper manner, in accordance with the following:
A. In the event LESSEE is adjudicated as bankrupt or files for bankruptcy
protection, this Lease Agreement shall be unaffected and continue to
be in force.
B. In the event the demised premises is subjected to condemnation
proceedings, the Lease Agreement shall remain in effect to the extent
possible and the lease will be prorated accordingly, in light of any
such taking of the premises; in any event, any award of condemnation
proceeds shall be retained by LESSOR only.
C. No hazardous substances or waste materials will be placed onto or
stored on the demised premises, in violation of law or the public
health, safety and welfare.
<PAGE>
D. This Lease Agreement is subject to any deeds of trust, security
interests or mortgages that do or will constitute a lien against the
property where the demised premises is located; to this extent, the
parties hereto will execute any instruments, releases or other
documents and required to subordinate thereunder.
E. LESSOR shall perform services for LESSEE pursuant to the terms and
conditions of the Service Agreement annexed hereto as Exhibit "A" and
incorporated by reference herein, which may be terminated by either
party on sixty (60) days prior written notice, in accordance with the
terms set forth in Exhibit "A".
F. LESSEE shall at all times maintain such area, facilities and services
in a safe, sound and clean condition, and shall provide the personnel,
equipment, services and commodities necessary to effect same.
G. LESSOR shall be responsible for repairs in any manner related to the
operation of said business, and for any and all damages to any
facility or equipment used by LESSEE under this Agreement.
H. LESSEE agrees not to erect, affix, display, post or place any sign,
notice, advertisement or bill in or about any part of the demised
premises or on any equipment or facilities used by LESSEE, without
first securing the consent and approval of LESSOR, and will not be
unreasonably withheld.
I. LESSOR shall be responsible for providing electric, water, sewage or
garbage utilities (as appropriate) for the demised premises; the
responsibility for any other utilities (e.g., telephone) is vested
LESSEE. However, the costs of such utilities provided by LESSOR shall
be reimbursed by LESSEE (on a pro-rata, per square foot, basis).
(Incorporated in the actual Lease Agreement - Exhibit "A").
<PAGE>
V.
RENTAL FEES
In consideration for the use of the property being leased, LESSEE will pay
LESSOR the following sums during the term of this Lease Agreement on a monthly
basis, such sums to be paid on or before the first of each month: the sum of
FIVE THOUSAND SEVEN HUNDRED TWENTY FIVE AND 00/100ths ($5725.00) DOLLARS a month
(as calculated in the currency of the United States of America) for the term of
this lease. In the event of a renewal of this lease, rental fees shall be
subject to renegotiation in connection with such renewal, but at no time shall
the monthly rent to less than the foregoing amounts. Any late payment will
require the payment of a charge of FIFTY AND NO/100THS ($50.00) DOLLARS a day to
avoid a default. Any holding over beyond the expiration of the lease term will
require the payment of the pro-rata rentals, in accordance with the rates above.
To secure the payment of the said rental fees, LESSOR is vested with a
landlord's lien under this Lease Agreement, by contract, and by virtue of
Subchapter B of Chapter 54 of the Texas Property Code, by law.
V.
INGRESS AND EGRESS
During the term of this Lease Agreement, LESSOR shall allow reasonable
ingress and egress to the property being leased.
VII.
INSURANCE
During the term of this Lease Agreement, LESSOR shall procure and keep in
force the following insurance.
A) Workman's Compensation Insurance protecting all of its employees on
the premises;
B) Liability and Property Damage Insurance with limits as to personal
injury and death;
C) Fire and Hazard Insurance (including extended coverage) for the
leasehold premises.
LESSOR shall supply to GIBRALTAR METALS, A DIVISION OF GIBRALTAR STEEL
CORPORATION certificates of insurance naming GIBRALTAR METALS, A DIVISION OF
GIBRALTAR STEEL CORPORATION as loss-payee.
<PAGE>
VIII.
INDEMNITY
LESSEE shall indemnify, defend and hold harmless LESSOR from any and all
liabilities, claims, demands, actions, losses, damages and costs, including all
costs of defense thereof, of any nature whatsoever, for injury to or death of
persons or loss or damage to property, or for any other reason, occurring on the
leased premises or in any manner arising out of or connected with LESSEES' use
and occupation of the said premises during the term of this Lease Agreement or
any time of occupancy of the said premises by LESSEE, including any claims,
liabilities and actions based upon nuisance or inverse condemnation or
environmental penalties or assessments, and including claims and actions based
upon the acts or omissions of LESSEE, or its agents and employees. Upon demand,
LESSEE shall, at its own expense, defend LESSOR against any and all such
liabilities, claims, demands, actions, losses, damages and costs. Moreover,
LESSEE shall give LESSOR prompt notice of any claim within its knowledge that in
any way directly or indirectly affects either LESSOR or LESSEE. Both parties
shall have the right to participate in the defense of such claim to the extent
of their interest.
IX.
TERMINATION
This Lease Agreement may be terminated prior to the end of the aforesaid
leasehold term: (A) by the mutual agreement of the parties, set forth in writing
and signed by the parties; or (B) should either party default in conforming with
or adhering to any requirement, condition or term of this Lease Agreement, and
after such default is brought to the attention of the defaulting party, such
default is not corrected within fifteen (15) days. Either party may, at its
option, extend the period for performance to correct any such default; if eight
party attempts to terminate this Lease Agreement on the basis of default, the
defaulting party has to be given an opportunity to be heard before the
termination is finalized.
X.
ASSIGNMENT
This Lease Agreement may be assigned or sublet at all or in part by LESSEE
with the consent and approval LESSOR, as set forth in writing and signed by both
parties, however, LESSEE shall remain fully liable thereon. Any assignee or
sublessee will be bound by the terms of this Lease Agreement. LESSOR reserves
the right to assign this Lease Agreement in conjunction with the sale or
purchase of the property upon which the leasehold is located.
<PAGE>
XI.
COMPLIANCE WITH ALL LAWS
Both parties will act, at all times, in compliance with all pertinent City
and County ordinances, orders, regulations and policies, as well as all
applicable State and Federal Laws.
XII.
NON-WAIVER
Any waiver by either party of any default or breach of this Lease Agreement
shall not be a continuing waiver of such default or breach, nor as a waiver of
or permission for (express or implied) any other or subsequent default or
breach.
XIII.
PARTIES BOUND
This Lease Agreement shall be binding upon and inure to the benefit or the
parties to this Lease Agreement and their respective heirs, executors,
administrators, legal representatives, successors and assigns, as appropriate.
XIV.
"ACT OF GOD" EXCUSES PERFORMANCE
In the event that either party shall be prevented from completing
performance of their respective obligations hereunder by an "act of God" or any
other occurrence whatsoever which is beyond the control of the parties hereto,
then they shall be excused from any further performance of their obligations and
undertakings hereunder, provided however, that in the event that any such
performance is only interrupted or delayed, the affected party shall only be
excused from such performance for such period of time as is reasonably necessary
after such occurrence to remedy the effects thereof.
XV.
ENTIRE AGREEMENT; AMENDMENT
This instrument contains the entire agreement between the parties relating
to the rights herein granted and obligations herein assumed, and supersedes any
prior understandings, representations, memorandums or agreements regarding the
property that is the subject of this Lease Agreement. Any oral representations
or modifications
<PAGE>
concerning this instrument shall be of no force or effect. This Lease Agreement
may be amended, provided that no amendment, modification or alteration of the
terms of this Lease Agreement shall be binding unless the same is in writing and
duly executed by the parties hereto.
XVI.
BREACH OF OBLIGATIONS
This Lease Agreement is entire as to all of the performances to be rendered
under it. Breach of any obligation to be performed by either party shall
constitute a breach of the entire Lease Agreement and shall give the other party
the right to terminate this Lease Agreement, in accordance with the Paragraph
regarding termination above.
XVII.
LAW GOVERNING
This Lease Agreement shall be governed by and construed in accordance with
the laws of the State of Texas.
XVIII.
VENUE
The obligations and undertakings of each of the parties to this Lease
Agreement shall be performable in Cameron County, Texas.
XIX.
NOTICE
All notices to either party shall be sent by certified or registered mail
addressed to the parties as set forth above, at their respective addresses set
forth above, or at such other address as may be otherwise designated.
XX.
INVALIDITY
If any term, provision, covenant or condition of this Lease Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the provisions of this Lease Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Moreover, it is the intention of
<PAGE>
the parties to this Lease Agreement that in lieu of each clause or provision of
this agreement that is held to be invalid, void or unenforceable, there be added
as a part of this Lease Agreement a clause or provision as similar in terms to
such invalid, void or unenforceable clause or provision as may be possible which
shall nevertheless be legal, valid and enforceable.
XXI.
INTERPRETATION
Both of the parties hereto have been represented by or have had the
opportunity to be represented by counsel in the negotiation and drafting of this
Lease Agreement, and accordingly, this Lease Agreement shall not be construed in
favor of either party. Moreover, this Lease Agreement and any and all writings
made in connection with this Lease Agreement shall be written in the English
language, and the wording and meaning of any such matters in the English
language shall govern and control.
XXII.
ARBITRATION
LESSOR reserves the right to enforce this correction of defaults arising
under this Lease Agreement by and through summary proceedings filed in a Justice
Of The Peace Court. However, as to any other matters arising under this Lease
Agreement, any controversy or claim arising out of or relating to this
agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Association, and the
Federal Arbitration Act; judgment upon the award rendered by the arbitrators may
be entered in any court having jurisdiction thereof.
XXIII.
ATTORNEY FEES
If any such summary or arbiter proceeding is initiated to resolve a dispute
arising under or relating to this Lease Agreement by either of the parties
hereto, it is expressly agreed that the prevailing party shall be entitled to
recover from the other party reasonable attorney fees and related costs in
addition to any other relief that may be awarded.
TIME OF ESSENCE
Time is of the essence of this Lease Agreement.
<PAGE>
EXECUTED in duplicate on this the 11th day of January, 1996, at
Brownsville, Cameron County, Texas.
TURN-KEY WAREHOUSING INC., LESSOR
By: /S/ ROBERT S. HUGHES
----------------------------------------
Robert S. Hughes, President
ATTEST:
s/ M. Carmona
- ---------------------------------
GIBRALTAR METALS, A DIVISION OF
GIBRALTAR STEEL CORPORATION, LESSEE
By: /s/ DOUGLAS A. NIXON
-----------------------------------------
Douglas Nixon, Vice President/Gen.Mgr.
ATTEST:
s/ Chester J. Cyrek
- ---------------------------------
ACKNOWLEDGMENTS
THE STATE OF TEXAS) (
) (
COUNTY OF CAMERON ) (
This instrument was acknowledged before me on February 5, 1996, by ROBERT
S. HUGHES, President of TURN-KEY WAREHOUSING, INC., a Texas Sub-Chapter S
Corporation, on behalf of said Company.
- --------------------------- /s/ LYNETTE M. HAMMIT
LYNETTE M. HAMMIT -----------------------------------------
NOTARY PUBLIC Notary Public in and for
State of Texas the State of Texas
Comm. Exp. 04-08-98
- ---------------------------
THE STATE OF NEW YORK) (
) (
COUNTY OF ERIE ) (
This instrument was acknowledged before me on Jan. 24, 1996, by DOUGLAS A
NIXON, Vice President and General Manager of GIBRALTAR METALS, A DIVISION OF
GIBRALTAR STEEL CORPORATION, on behalf of said Company
/s/ CHESTER J. CYREK
----------------------------------------
Notary Public in and for
the State of ___________________________
CHESTER J. CYREK
NOTARY PUBLIC, STATE OF NEW YORK
QUALIFIED IN ERIE COUNTY
My Commission Expires Sept. 30, 1996
<PAGE>
THE STATE OF TEXAS) (
) (
COUNTY OF CAMERON ) (
SERVICE AGREEMENT
THIS SERVICE AGREEMENT is made this 11th day of January, 1996, in
Brownsville, Cameron County, Texas, between TURN-KEY WAREHOUSING, Inc., a Texas
Sub-Chapter S Corporation, 200 Texas Avenue, Brownsville, Cameron County, Texas
78521, and GIBRALTAR METALS, A DIVISION OF GIBRALTAR STEEL CORPORATION, a New
York Corporation, of 1050 Military Road, Buffalo, Erie County, New York 15217,
regarding the provision of certain business services as follows:
I.
This Service Agreement constitutes an independent agreement, but is
governed by and to be construed in accordance with the Lease Agreement by and
between the said parties on the date set forth above.
Accordingly, certain provisions that would normally be set forth in this
Agreement have already been set forth in such Lease Agreement, which are adopted
herein and incorporated by reference herein.
II.
Supplementing the terms of the said Lease Agreement, the parties hereto
agree that TURN-KEY WAREHOUSING, Inc., will not only lease space to GIBRALTAR
METALS, A DIVISION OF GIBRALTAR STEEL CORPORATION, but that TURN-KEY
WAREHOUSING, Inc., will, on behalf of GIBRALTAR METALS, A DIVISION OF GIBRALTAR
STEEL CORPORATION, perform various administrative services involving the
shipping, warehousing and transportation of certain goods, in accordance with
the terms set forth in a letter/proposal forwarded to GIBRALTAR METALS, A
DIVISION OF GIBRALTAR STEEL CORPORATION, in consideration of the rates and
charges set forth in such proposal, a copy of which is annexed hereto as Exhibit
"A" and incorporated by reference herein for all purposes as if fully copied
and set forth at length.
III.
TURN-KEY WAREHOUSING, Inc., will perform all acts necessary to successfully
fulfill the purpose of this contract and shall, at all times, faithfully,
industriously and to the best of its abilities, experience and talents, perform
all the duties that may be required of and from it pursuant to the express and
implicit terms hereof and to the reasonable satisfaction of GIBRALTAR METALS, A
DIVISION OF
SERVICE AGREEMENT - PAGE #1
<PAGE>
GIBRALTAR STEEL CORPORATION in consideration of the payment, by GIBRALTAR
METALS, A DIVISION OF GIBRALTAR STEEL CORPORATION, of charges accrued as set
forth in the appropriate invoice of TURN-KEY WAREHOUSING, Inc.
IV.
The parties hereto shall not be construed to have the relationship of
partners, joint venturers, principal-agent, employer-employee or master-servant.
The parties hereto are separate business organizations who enter into this
contract for their respective benefit.
V.
This Agreement may be terminated for cause (including the failure to pay
the charges accrued under this Agreement), to-wit, any action or omission
constituting a breach of the terms of this Agreement or by mutual agreement of
both parties, or upon sixty (60) days prior written notice (for any reason,
with or without cause) to the other party, in accordance with the terms set
forth in Exhibit "A". This Agreement shall be effective upon execution and
terminate one (1) year thereafter.
VI.
During the term of this Lease Agreement, LESSOR shall procure and keep in
force the following insurance:
A) Workman's Compensation Insurance protecting all of its employees
on the premises;
B) Liability and Property Damage Insurance with limits as to
personal injury and death;
C) Fire and Hazard Insurance (including extended coverage) for the
leasehold premises.
LESSOR shall supply to GIBRALTAR METALS, A DIVISION OF GIBRALTAR STEEL
CORPORATION certificates of insurance naming GIBRALTAR METALS, A DIVISION OF
GIBRALTAR STEEL CORPORATION as loss-payee.
SERVICE AGREEMENT - PAGE #2
<PAGE>
EXECUTED in duplicate on this 11th day of January, 1996 at Brownsville, Cameron
County, Texas.
TURN-KEY WAREHOUSING, Inc., Lessor
BY: /s/ ROBERT S. HUGHES
-----------------------------------
Robert S. Hughes, President
ATTEST
/s/ M. CARMONA
- ------------------------------------
GIBRALTAR METALS, A DIVISION OF
GIBRALTAR STEEL CORPORATION, Lessee
BY: /s/ DOUGLAS A. NIXON
-----------------------------------
Douglas Nixon, Vice President/Gen.Mgr.
ATTEST:
/s/ CHESTER J. CYREK
- ------------------------------------
CHESTER J. CYREK
NOTARY PUBLIC, STATE OF NEW YORK
QUALIFIED IN ERIE COUNTY
My Commission Expires Sept. 30, 1996
<PAGE>
EXHIBIT "A"
WAREHOUSE SPACE
15,000 Square Feet at $4.58 per Square Feet per year gross*
*Taxes/Utilities and maintenance included.
2 yrs. @ $4.32 ft. yr. (initialed BH and DN)
HANDLING
Trucks - unloaded or loaded for a cost of $80.00 flat rate during normal
working hours (8:00 a.m. to 5:00 p.m., Monday thru Friday). Overtime cost billed
at $25.00 per hour for actual hours worked.
Rail Cars - unloaded or loaded for a cost of $250.00 flat rate during
normal working hours (8:00 a.m. to 5:00 p.m., Monday thru Friday). Overtime cost
billed at $25.00 per hour for actual hours worked.
DELIVERY
Truck Deliveries on flatbed trailers from 200 Texas Avenue Warehouse to
Brownsville destinations at a cost of $90.00 per trip.
ADMINISTRATIVE COST
A 3% Administrative fee will be assessed to monthly invoice total for
administrative requirements. These services include but are not limited to
inventory control/reporting, summary reports, fax/mailing, and other services
provided by Turn Key Warehousing.
TERMINATION OF SERVICE CONTRACT
No penalty for non-renewal after the one year term is completed.
DISCOUNT APPLICATION
The following volume discounts will be applied to monthly invoices based on
invoice total:
a) Up to $8000 0%
b) $8000 to $11,999 2%
c) $12,000 to $13,999 4%
d) $14,000 to $15,999 6%
e) Over $16,000 8%
<PAGE>
Turn Key Warehousing, Inc.
200 Texas Avenue, Brownsville, Texas 78521
Phone (210) 504-0202 Fax (210) 504-0206
TO: Mr. Doug Nixon
FROM: Bob Hughes
DATE: 01/19/96
RE: 1996 Contracts
Enclosed are the six copies of the 1996 Contracts. I've noted the reduction in
space cost on the "Attachment A" for a two year commitment. If you are
agreeable to the two year term, you can make the change on the contract and
initial the annotation on "Attachment A". Please don't hesitate to call if you
have any questions or concerns.
Regards,
/s/ ROBERT S. HUGHES
- ----------------------------
Robert S. Hughes - owner
<PAGE>
[LOGO] CB
COMMERCIAL
EXHIBIT 10.24
ARTICLE ONE: BASIC TERMS
This Article One contains Basic Terms of this Lease between the Landlord
and Tenant named below. Other Articles, Sections and Paragraphs of the Lease
referred to in this Article One explain and define the Basic Terms and are to be
read in conjunction with the Basic Terms.
Section 1.01. Date of Lease: November 2, 1992
Section 1.02. Landlord (include legal entity): MGI Properties
Address of Landlord: 30 Rowes Wharf
Boston, MA 02110
Section 1.03. Tenant (include legal entity): Mill Transportation
Company
Address of Tenant: 11305 Franklin Avenue
Franklin Park, IL 60131-1106
Section 1.04. Property: The Property is part of Landlord's
multi-tenant real property development known as 7606 Rivers Avenue, North
Charleston, South Carolina, and described or depicted in Exhibit "A" (the
"Project"). The Project includes the land, the buildings and all other
improvements located on the land, and the common areas described in Paragraph
4.05(a). The Property is (include street address, approximate square footage
and description) that specific portion of the +191,899 square foot industrial
building situated on 8.57 acres located at 7606 Rivers Avenue, consisting of
approximately 108,088 square feet as described in Exhibit "A".
Section 1.05. Lease Term: 3 years 0 months beginning on January 1,
1993, or such other date as is specified in this Lease, and ending December 31,
1995. Notwithstanding anything to the contrary contained herein. Tenant shall
have the right to occupy the Property in accordance with the terms of this Lease
prior to the Commencement Date, during which time Tenant shall be responsible
for its pro rata share of utilities and common area maintenance expenses as
outlined in Section 4.03 and Section 4.05, but not for Base Rent.
Section 106. Permitted Uses: (See Article Five) General business
offices, distribution and warehousing. Tenant will not engage in any operation
that would involve other than normal ware and tear on the building without prior
written consent or Landlord.
Section 1.07. Tenant's Guarantor: (If none, so state) Hubbell Steel
Corporation
Section 1.08. Brokers: (See Article Fourteen) (If none, so state)
Landlord's Broker: CB Commercial Real Estate Group, Inc.
Tenant's Broker: Barkley Frasier Company
Section 1.09. Commission Payable to Landlord's Broker: (See Article
Fourteen) $43,775.64
Section 1.10. Initial Security Deposit: (See Section 3.03) $20,266.50
Section 1.11. Vehicle Parking Space Allocated to Tenant: (See Section
4.05) in accordance with Exhibit A
Section 1.12. Rent and Other Charges Payable by Tenant:
(a) BASE RENT: ____________________ Dollars ($20,266.50 per month for
the first 36 months, as provided in Section 3.01
(b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes above the "Base
Real Property Taxes" (See Section 4.02) (ii) Utilities (See Section 4.03); (iii)
Increased Insurance Premiums above "Base Premiums" (See Section 4.04); (iv)
Tenant's Initial Pro Rata Share of Common Area Expenses 56% (See Section 4.05);
(v) Maintenance, Repairs and Alterations (See Article Six).
Section 1.13. Costs and Charges Payable by Landlord: (a) Base Real
Property Taxes (See Section 4.02); (b) Base Insurance Premiums (See Section
4.04(c)); (c) Maintenance and Repair (See Article Six).
Section 1.14 Landlord's Share of Profit on Assignment or Sublease:
(See Section 9.05) Fifty percent (50%) of the Profit (the "Landlord's Share").
Section 1.15. Riders: The following Riders are attached to and made a part of
this Lease: (If none, so state)
Addendum
Guaranty of Lease
(C) 1988 Southern California Chapter Initials/s/_______________
of the Society of Industrial /s/_______________
and Office Realtors, Inc.
(Multi-Tenant Gross Form)
<PAGE>
ARTICLE TWO: LEASE TERM
Section 2.01. Lease of Property For Lease Term. Landlord leases the
Property to Tenant and Tenant leases the Property from Landlord for the Lease
Term. The Lease Term is for the period stated in Section 1.05 above and shall
begin and end on the dates specified in Section 1.05 above, unless the beginning
or end of the Lease Term is changed under any provision of this Lease. The
"Commencement Date" shall be the date specified in Section 1.05 above for the
beginning of the Lease Term, unless advanced or delayed under any provision of
this Lease.
Section 2.02. Delay in Commencement. Landlord shall not be liable to
Tenant if Landlord does not deliver possession of the Property to Tenant on the
Commencement Date. Landlord's non-delivery of the Property to Tenant on that
date shall not affect this Lease or the obligations of Tenant under this Lease
except that the Commencement Date shall be delayed until Landlord delivers
possession of the Property to Tenant and the Lease shall be extended for a
period equal to the delay in delivery of possession of the Property to Tenant,
plus the number of days necessary to end the Lease Term on the last day of a
month. If Landlord does not deliver possession of the Property to Tenant within
sixty (60) days after the Commencement Date, Tenant may elect to cancel this
Lease by giving written notice to Landlord within ten (10) days after the sixty
(60)-day period ends. If Tenant gives such notice, the Leae shall be cancelled
and neither Landlord nor Tenant shall have any further obligations to the other.
If Tenant does not give such notice, Tenant's right to cancel the Lease shall
expire and the Lease Term shall commence upon the delivery of possession of the
Property to Tenant. If delivery of possession of the Property to Tenant is
delayed, Landlord and Tenant shall, upon such delivery, execute an amendment to
this Lease setting forth the actual Commencement Date and expiration date of the
Lease. Failure to execute such amendment shall not affect the actual
Commencement Date and expiration date of the Lease.
Section 2.03. Early Occupancy. If Tenant occupies the Property prior
to the Commencement Date, Tenant's occupancy of the Property shall be subject
to all of the provisions of this Lease. Early occupancy of the Property shall
not advance the expiration date of this Lease.
Notwithstanding anything to the contrary contained herein, Tenant shall
have the right to occupy the Property in accordance with the terms of this Lease
prior to the Commencement Date, during which time Tenant shall be responsible
for its pro rata share of utilities and common area maintenance expenses as
outlined in Section 4.03 and Section 4.05, but not for Base Rent.
Section 2.04. Holding Over. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse
Landlord for and indemnify Landlord against all damages which Landlord incurs
from Tenant's delay in vacating the Property. If Tenant does not vacate the
Property upon the expiration or earlier termination of the Lease and Landlord
thereafter accepts rent from Tenant, Tenant's occupancy of the Property shall
be a "month-to-month" tenancy, subject to all of the terms of this Lease
applicable to a month-to-month tenancy, except that the Base Rent then in effect
shall be increased by twenty-five percent (25%).
ARTICLE THREE: BASE RENT
Section 3.01. Time and Manner of Payment. Upon execution of this Lease,
Tenant shall pay Landlord the Base Rent in the amount stated in Paragraph
1.12(a) above for the first month of the Lease Term. On the first day of the
second month of the Lease Term and each month thereafter, Tenant shall pay
Landlord the Base Rent, in advance, without offset, deduction or prior demand.
The Base Rent shall be payable at Landlord's address or at such other place as
Landlord may designate in writing.
Section 3.03. Security Deposit; Increases.
(a) Upon the execution of this Lease, Tenant shall deposit with
Landlord a cash Security Deposit in the amount set forth in Section 1.10 above.
Landlord may apply all or part of the Security Deposit to any unpaid rent or
other charges due from Tenant or to cure any other defaults of Tenant. If
Landlord uses any part of the Security Deposit, Tenant shall restore the
Security Deposit to its full amount within ten (10) days after Landlord's
written request. Tenant's failure to do so shall be a material default under
this Lease. No interest shall be paid on the Security Deposit. Landlord shall
not be required to keep the Security Deposit separate from its other accounts;
however, the Security Deposit shall be deemed to be held in trust to be applied
in accordance with this Lease.
(C) 1988 Southern California Chapter Initials/s/____________
of the Society of Industrial /s/____________
and Office Realtors, /R/ Inc.
(Multi-Tenant Gross Forms)
<PAGE>
Section 3.04. Termination; Advance Payments. Upon termination of this
Lease under Article Seven (Damage or Destruction), Article Eight (Condemnation)
or any other termination not resulting from Tenant's default, and after Tenant
has vacated the Property in the manner required by this Lease, Landlord shall
refund or credit to Tenant (or Tenant's successor) the unused portion of the
Security Deposit, any advance rent or other advance payments made by Tenant to
Landlord, and any amounts paid for real property taxes and other reserves which
apply to any time periods after termination of the Lease.
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.01. Additional Rent. All charges payable by Tenant other
than Base Rent are called "Additional Rent." Unless this Lease provides
otherwise, Tenant shall pay all Additional Rent then due with the next monthly
installment of Base Rent. The term "rent" shall mean Base Rent and Additional
Rent.
Section 4.02. Property Taxes.
(a) Real Property Taxes. Landlord shall pay the "Base Real Property
Taxes" on the Property during the Lease Term. Base Real Property Taxes are real
property taxes applicable to the Property as shown on the tax bill for the most
recent tax fiscal year ending prior to the Commencement Date. However, if the
structures on the Property are not completed by the tax lien date of such tax
fiscal year, the Base Real Property Taxes are the taxes shown on the first tax
bill showing the full assessed value of the Property after completion of the
structures. Tenant shall pay Landlord the amount, if any, by which the real
property taxes during the Lease Term exceed the Base Real Property Taxes.
Subject to Paragraph 4.02(c), Tenant shall make such payments within fifteen
(15) days after receipt of Landlord's statement showing the amount and
computation of such increase. Landlord shall reimburse Tenant for any real
property taxes paid by Tenant covering any period of time prior to or after the
Lease Term.
(b) Definition of "Real Property Tax." "Real property tax" means: (i)
any real property, levy, charge, assessment, or tax imposed by any taxing
authority against the Property; (ii) any tax or charge for fire protection,
streets, sidewalks, road maintenance, refuse or other services provided to the
Property by any governmental agency; any charge or fee replacing any tax
previously included within the definition of real property tax. "Real property
tax" does not, however, include Landlord's federal or state income, franchise,
inheritance or estate taxes.
(c) Joint Assessment. If the Property is not separately assessed,
Landlord shall reasonably determine Tenant's share of the real property tax
payable by Tenant under Paragraph 4.02(a) from the assessor's worksheets or
other reasonably available information. Tenant shall pay such share to Landlord
within fifteen (15) days after receipt of Landlord's written statement and
reasonable detail showing such proportionate share determination.
(d) Personal Property Taxes.
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall try to have personal property taxes separately from the Property.
(ii) If any of Tenant's personal property is taxed with the
Property, Tenant shall pay Landlord the taxes for the personal property within
fifteen (15) days after Tenant receives a written statement from Landlord for
such personal property taxes.
Section 4.03. Utilities. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities and services supplied to
the Property. However, if any services or utilities are jointly metered with
other property, Landlord shall make a reasonable determination of Tenant's
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within fifteen (15) days after receipt of Landlord's
written statement and reasonable detail showing such proportionate share
determined.
Section 4.04. Insurance Policies.
(a) Liability Insurance. During the Lease Term, Tenant shall maintain a
policy of commercial general liability insurance (sometimes known as broad form
comprehensive general liability insurance) insuring Tenant against liability for
bodily injury, property damage (including loss of use of property) and personal
injury arising out of the operation, use or occupancy of the Property, Tenant
shall name Landlord as an additional insured under such policy. The initial
amount of such insurance shall be One Million Dollars ($1,000,000) per
occurrence and shall be subject to periodic increase based upon inflation,
increased liability awards, recommendation of Landlord's professional insurance
advisers and other relevant factors. The liability insurance obtained by Tenant
under this Paragraph 4.04(a) shall (i) be primary and non-contributing; The
amount and coverage of such insurance shall not limit Tenant's liability nor
relieve Tenant of any other obligation under this Lease. Landlord may also
obtain comprehensive public liability insurance in an amount and with coverage
determined by Landlord insuring Landlord against liability arising out of
ownership, operation, use or occupancy of the Property. The policy obtained by
Landlord shall not be contributory and shall not provide primary insurance.
(b) Property and Rental Income Insurance. During the Lease Term, Landlord
shall maintain policies of insurance covering loss of or damage to the Property
in the full amount of its replacement value. Such policy shall provide
protection against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, special extended perils (all
risk), sprinkler leakage and any other perils which Landlord deems reasonably
necessary. Landlord shall have the right to obtain flood and earthquake
insurance if required by any lender holding a security interest in the
Property. Landlord shall not obtain insurance for Tenant's fixtures or
equipment or building improvements installed by Tenant on the Property. During
the Lease Term, Landlord shall also maintain a rental income insurance policy,
with loss payable to Landlord.
(c) 1988 Southern California Chapter Initials/s/____________
of the Society of Industrial /s/____________
and Office Realtors, Inc.
(Multi-Tenant Gross Form)
<PAGE>
(c) Payment of Premiums.
(i) Landlord shall pay the "Base Premiums" for the insurance
policies maintained by Landlord under Paragraph 4.04(b). If the Property has
been previously fully occupied, the "Base Premiums" are the insurance premiums
paid during or applicable to the last twelve (12) months of such prior
occupancy. If the Property has not been previously fully occupied or has
been occupied for less than twelve (12) months, the Base Premiums are the lowest
annual premiums reasonably obtainable for the required insurance for the
Property as of the Commencement Date.
(ii) Tenant shall pay Landlord the amount, if any, by which the
insurance premiums for all policies maintained by Landlord under Paragraph
4.04(b) have increased over the Base Premiums, whether such increases result
from the nature of Tenant's occupancy, any act or omission of Tenant, the
increased value of the Property or general rate increases. However, if Landlord
substantially increases the amount of insurance carried or the percentage of
insured value after the period during which the Base Premiums were calculated,
Tenant shall only pay Landlord the amount of increased premiums which would have
been charged by the insurance carrier if the amount of insurance or percentage
of insured value had not been substantially increased by Landlord. This
adjustment in the amount due from the Tenant shall be made only once during the
Lease Term. Thereafter, Tenant shall be obligated to pay the full amount of any
additional increases in the insurance premiums, including increases resulting
from any further increases in the amount of insurance or percentage of insured
value. Subject to Section 4.05, Tenant shall pay Landlord the increases over the
Base Premiums within fifteen (15) days after receipt by Tenant of a copy of the
premium statement or other evidence of the amount due. If the insurance policies
maintained by Landlord cover improvements or real property other than the
Property, Landlord shall also deliver to Tenant a statement of the amount of the
premiums applicable to the Property showing, in reasonable detail, how such
amount was computed. If the Lease Term expires before the expiration of the
insurance period, Tenant's liability shall be pro rated on an annual basis.
(d) General Insurance Provisions.
(i) Any insurance which Tenant is required to maintain under
this Lease shall include a provision which requires the insurance carrier to
give Landlord not less than thirty (30) days' written notice prior to any
cancellation or modification of such coverage.
(ii) If Tenant fails to deliver any policy, certificate or
renewal to Landlord required under this Lease within the prescribed time period
or if any such policy is cancelled or modified during the Lease Term without
Landlord's consent, Landlord may obtain such insurance, in which case Tenant
shall reimburse landlord for the cost of such insurance within fifteen (15) days
after receipt of a statement that indicates the cost of such insurance.
(iii) Tenant shall maintain all insurance required under this
Lease with companies holding a "General Policy Rating" of A-12 or better, as set
forth in the most current issue of "Best Key Rating Guide". Landlord and Tenant
acknowledge the insurance markets are rapidly changing and that insurance in the
form and amounts described in the Section 4.04 may not be available in the
future. Tenant acknowledges that the insurance described in this Section 4.04
is for the primary benefit of Landlord. If at any time during the Lease Term,
Tenant is unable to maintain the insurance required under the Lease, Tenant
shall nevertheless maintain insurance coverage which is customary and
commercially reasonable in the insurance industry for Tenant's type of business,
as that coverage may change from time to time. Landlord makes no representation
as to the adequacy of such insurance to protect Landlord's or Tenant's
interests. Therefore, Tenant shall obtain any such additional property or
liability insurance which Tenant deems necessary to protect Landlord and Tenant.
(iv) Unless prohibited under any applicable insurance policies
maintained, Landlord and Tenant each hereby waive any and all rights of recovery
against the other, or against the officers, employees, agents or representatives
of the other, for loss of or damage to its property or the property of others
under its control, if such loss or damage is covered by any insurance policy in
force (whether or not described in this Lease) at the time of such loss or
damage. Upon obtaining the required policies of insurance, Landlord and Tenant
shall give notice to the insurance carriers of this mutual waiver of
subrogation.
Section 4.05. Common Areas; Use, Maintenance and Costs.
(a) Common Areas. As used in this Lease, "Common Areas" shall mean all
areas within the Project which are available for the common use of tenants of
the Project and which are not leased or held for the exclusive use of Tenant or
other tenants, including, but not limited to, parking areas, driveways,
sidewalks, loading areas, access roads, corridors, landscaping and planted
areas. Landlord, from time to time, may change the size, location, nature and
use of any of the Common Areas, convert Common Areas into leaseable areas,
construct additional parking facilities (including parking structures) in the
Common Areas, and increase or decrease Common Area land and/or facilities.
Tenant acknowledges that such activities may result in inconvenience to Tenant.
Such activities and changes are permitted if they do not materially affect
Tenant's use of the Property.
(b) Use of Common Areas. Tenant shall have the nonexclusive right (in
common with other tenants and all others to whom Landlord has granted or may
grant such rights) to use the Common Areas for the purposes intended, subject to
such reasonably rules and regulations as Landlord may establish from time to
time. Tenant shall abide by such rules and regulations and shall use its best
effort to cause others who use the Common Areas with Tenant's express or implied
permission to abide by Landlord's rules and regulations. At any time, Landlord
may close any Common Areas to perform any acts in the Common Areas as, in
Landlord's judgment, are desirable to improve the Project; provided, however,
that Landlord shall not unreasonably interfere with or disrupt Tenants' use of
the Property as a result of such acts. Tenant shall not interfere with the
rights of Landlord, other tenants or any other person entitled to use the Common
Areas.
(c) Specific Provision re: Vehicle Parking. Tenant shall be entitled to
use the number of vehicle parking spaces in the Project allocated to Tenant in
Section 1.11 of the Lease without paying any additional rent. Tenant's parking
shall not be reserved and shall be limited to vehicles no larger than standard
size automobiles or pickup utility vehicles. Vehicles shall be parked only in
striped parking spaces and not in driveways, loading areas or other locations
not specifically designated for parking. Handicapped spaces shall only be used
by those legally permitted to use them. If Tenant parks more vehicles in
(c) 1988 Southern California Chapter Initials ____________________
of the Society of Industrial
and Office Realtors, /R/ Inc. ____________________
(Multi-Tenant Gross Form)
<PAGE>
in the parking area than the number set forth in Section 1.11 of this Lease,
such conduct shall be a material breach of this Lease. In addition to Landlord's
other remedies under the Lease, Tenant shall pay a daily charge determined by
Landlord for each such additional vehicle. In no event shall Tenant cause trucks
or other vehicles to impede access or visibility of other space in the Project.
(d) Maintenance of Common Areas. Landlord shall maintain the Common
Areas in good order, condition and repair and shall operate the Project, in
Landlord's sole discretion, as a first-class industrial/commercial real property
development. Tenant shall pay Tenant's pro rata share (as determined below) of
all costs incurred by Landlord for the operation and maintenance of the Common
Areas. Common Area costs include, but are not limited to, cost and expenses for
the following: gardening and landscaping; utilities, water and sewage charges;
maintenance of signs (other than tenant's signs); premiums for liability,
property damage, fire and other types of casualty insurance on the Common Areas
and worker's compensation insurance; all property taxes and assessments levied
on or attributable to the Common Areas and all Common Area improvements; all
personal property taxes levied on or attributable to personal property used in
connection with the Common Areas; rental or lease payments paid by Landlord for
rented or leased personal property used in the operation or maintenance of the
Common Areas; fees for required licenses and permits; repairing, resurfacing,
repaving, maintaining, painting, lighting, cleaning, refuse removal, security
and similar items; reserves for roof replacement and exterior painting and other
appropriate reserves. Landlord may cause any or all of such services to be
provided by third parties and the cost of such services shall be included in
Common Area costs. Common Area costs shall not include depreciation of real
property which forms part of the Common Areas.
(e) Tenant's Share and Payment. Tenant shall pay Tenant's annual pro
rata share of all Common Area costs (prorated for any fractional month) upon
written notice from Landlord that such costs are due and payable, and in any
event prior to delinquency. Tenant's pro rata share shall be calculated by
dividing the square foot area of the Property, as set forth in Section 1.04 of
the Lease, by the aggregate square foot area of the Project which is leased or
held for lease by tenants, as of the date on which the computation is made.
Tenant's initial pro rata share is set out in Paragraph 1.12(b). Any changes in
the Common Area costs and/or the aggregate area of the Project leased or held
for lease during the Lease Term shall be effective on the first day of the month
after such change occurs. Landlord may, at Landlord's election, estimate in
advance and charge to Tenant as Common Area costs, all real property taxes for
which Tenant is liable under Section 4.02 of the Lease, all insurance premiums
for which Tenant is liable under Section 4.04 of the Lease, all maintenance and
repair costs for which Tenant is liable under Section 6.04 of the Lease, and all
other Common Area costs payable by Tenant hereunder. At Landlord's election,
such statements of estimated Common Area costs shall be delivered monthly,
quarterly or at any other periodic intervals to be designated by Landlord.
Landlord may adjust such estimates at any time based upon Landlord's experience
and reasonable anticipation of costs. Such adjustments shall be effective as of
the next rent payment date after notice to Tenant. Within sixty (60) days after
the end of each calendar year of the Lease Term, Landlord shall deliver to
Tenant a statement prepared in accordance with generally accepted accounting
principles setting forth, in reasonable detail, the Common Area costs paid or
incurred by Landlord during the preceding calendar year and Tenant's pro rata
share. Upon receipt of such statement, there shall be an adjustment between
Landlord and Tenant, with payment of or credit given by Landlord (as the case
may be) so that Landlord shall receive the entire amount of Tenant's share of
such costs and expenses for such period.
Section 4.06. Late Charges. Tenant's failure to pay rent promptly may
cause Landlord to incur unanticipated costs. The exact amount of such costs
are impractical or extremely difficult to ascertain. Such costs may include,
but are not limited to, processing and accounting charges and late charges which
may be imposed on Landlord by any ground lease, mortgage or trust deed
encumbering the Property. Therefore, if Landlord does not receive any rent
payment within ten (10) days after it becomes due, Tenant shall pay Landlord a
late charge equal to ten percent (10%) of the overdue amount. The parties agree
that such late charge represents a fair and reasonable estimate of the costs
Landlord will incur by reason of such late payment.
Section 4.07. Interest on Past Due Obligations. Any amount owed by
Tenant to Landlord which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date of such amount. However,
interest shall not be payable on late charges to be paid by Tenant under this
Lease. The payment of interest on such amounts shall not excuse or cure any
default by Tenant under this Lease. If the interest rate specified in this
Lease is higher than the rate permitted by law, the interest rate is hereby
decreased to the maximum legal interest rate permitted by law.
ARTICLE FIVE: USE OF PROPERTY
Section 5.01. Permitted Uses. Tenant may use the Property only for the
Permitted Uses set forth in Section 1.06 above.
Section 5.02. Manner of Use. Tenant shall not cause or permit the
Property to be used in any way which constitutes violation of any law,
ordinance, or governmental regulation or order, which annoys or interferes with
the rights of tenants of the Project, or which constitutes a nuisance or waste.
Tenant shall obtain and pay for all permits, required for operation of Tenant's
business at the Property and shall promptly take all actions necessary to comply
with all applicable statutes, ordinances, rules, regulations, orders and
requirements regulating the use by Tenant of the Property including the
Occupational Safety and Health Act.
Section 5.03. Hazardous Materials. As used in this Lease, the term
"Hazardous Materials" means any flammable item, explosives, radioactive
materials, hazardous or toxic substances, material or waste or related
materials, including any substances defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials" or "toxic
substances" now or subsequently regulated under any applicable federal, state or
local laws or regulations, including without limitation petroleum-based
products, paints, solvents, lead, cyanide, DDT, printing inks, acids,
pesticides, ammonia
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of the Society of Industrial
and Office Realtors, /R/ Inc. __________________
(Multi-Tenant Gross Form)
<PAGE>
compounds and other chemical products, asbestos, PCBs and similar compounds, and
including any different products and materials which are subsequently found to
have adverse affects on the environment or the health and safety of persons.
Tenant shall not cause or permit any Hazardous Materials to be generated,
produced, brought upon, used, stored, treated or disposed of in or about the
Property by Tenant, its agents, employees, contractors, sublessees or invitees
without the prior written consent of Landlord. Landlord shall be entitled to
take into account such other factors or facts as Landlord may reasonably
determine to be relevant in determining whether to grant or withhold consent to
Tenant's proposed activity with respect to Hazardous Material. In no event,
however, shall Landlord be required to consent to the installation or use of any
storage tanks on the Property. Landlord represents and warrants to Tenant
that, to the best of Landlord's knowledge, the Property complies with all
applicable environmental laws, rules and regulations and is free from Hazardous
Materials.
Section 5.04. SIGNS AND AUCTIONS. Tenant shall not place any signs on
the Property without Landlord's prior written consent. Tenant shall not conduct
or permit any auctions or sheriff's sales at the Property. Landlord agrees that
Tenant shall have the right to erect a reasonable sign on the Property visibly
identifying Tenant's business, with Landlord's prior consent, not to be
unreasonably withheld with respect to the sign and the location on the Property.
Section 5.05. INDEMNITY. Tenant shall indemnify Landlord against and
hold Landlord harmless from any and all costs, claims or liability arising from:
(a) Tenant's use of the Property; (b) the conduct of Tenant's business or
anything else done or permitted by Tenant to be done in or about the Property,
including any contamination of the Property or any other property resulting from
the presence or use of Hazardous Material caused or permitted by Tenant; (c) any
breach or default in the performance of Tenant's obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant. Tenant shall defend Landlord against
such cost, claim or liability at Tenant's expense with counsel reasonably
acceptable to Landlord or, at Landlord's election, Tenant shall reimburse
Landlord for any legal fees or costs incurred by Landlord in connection with any
such claim. As a material part of the consideration to Landlord, Tenant assumes
all risk of damage to property or injury to persons in or about the Property
caused by Tenant, and Tenant hereby waives all claims in respect thereof against
Landlord, except for any claim arising out of Landlord's gross negligence or
willful misconduct. As used in this Section, the term "Tenant" shall include
Tenant's employees, agents, contractors and invitees, if applicable. Landlord
shall indemnify Tenant and hold Tenant harmless from and against any and all
costs, claims and liability resulting from a breach of Landlord's obligations
hereunder.
Section 5.06. LANDLORD'S ACCESS. Landlord or its agents may enter the
Property at all reasonable times to show the Property to potential buyers,
investors or tenants or other parties; to do any other act or to inspect and
conduct tests in order to monitor Tenant's compliance with all applicable
environmental laws and all laws governing the presence and use of Hazardous
Material; or for any other purpose Landlord deems necessary. Landlord shall
give Tenant prior notice of such entry, except in the case of an emergency.
Landlord may place customary "For Sale" or "For Lease" signs on the Property.
Section 5.07. QUIET POSSESSION. If Tenant pays the rent and complies
with all other terms of this Lease, Tenant may occupy and enjoy the Property for
the full Lease Term, subject to the provisions of this Lease.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.01. EXISTING CONDITIONS. Tenant accepts the Property in its
condition as of the execution of the Lease, subject to all recorded matters,
laws, ordinances, and governmental regulations and orders. Except as
provided herein, Tenant acknowledges that neither Landlord nor any agent of
Landlord has made any representation as to the condition of the Property or the
suitability of the Property for Tenant's intended use. Tenant represents and
warrants that Tenant has made its own inspection of and inquiry regarding the
condition of the Property and is not relying on any representations of Landlord
or any Broker with respect thereto. If Landlord or Landlord's Broker has
provided a Property Information Sheet or other Disclosure Statement regarding
the Property, a copy is attached as an exhibit to the Lease.
Section 6.02. EXEMPTION OF LANDLORD FROM LIABILITY. Landlord shall
not be liable for any damage or injury to the person, business (or any loss of
income therefrom), goods, wares, merchandise or other property of Tenant,
Tenant's employees, invitees, customers or any other person in or about the
Property, whether such damage or injury is caused by or results from: (a) fire,
steam, electricity, water, gas or rain; (b) the breakage, leakage, obstruction
or other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures or any other cause; (c) conditions arising in
or about the Property or upon other portions of the Project, or from other
sources or places; or (d) any act or omission of any other tenant of the
Project. Landlord shall not be liable for any such damage or injury even though
the cause of or the means of repairing such damage or injury are not accessible
to Tenant. The provisions of this Section 6.02. shall not, however, exempt
Landlord from liability for Landlord's gross negligence or willful misconduct.
Section 6.03. LANDLORD'S OBLIGATIONS. Subject to the provisions of
Article Seven (Damage or Destruction) and Article Eight Condemnation), and
except for damage caused by any act or omission of Tenant, or Tenant's
employees, agents, contractors or invitees, Landlord shall keep the foundation,
roof and structural portions of exterior walls of the improvements on the
Property in good order, condition and repair. However, Landlord shall not be
obligated to maintain or repair windows, doors, plate glass or the surfaces of
walls. Landlord shall not be obligated to make any repairs under this Section
6.03. until a reasonable time after receipt of a written notice from Tenant of
the need for such repairs. Intentionally Omitted.
Section 6.04. TENANT'S OBLIGATIONS.
(a) Except as provided in Section 6.03, Article Seven (Damage or
Destruction) and Article Eight (Condemnation), Tenant shall keep all interior
portions of the Property (including nonstructural, interior, systems and
equipment) in good order, condition and repair (including interior repainting
and refinishing, as needed). If any portion of the Property or any system or
equipment in the Property which Tenant is obligated to repair cannot be fully
repaired or restored, Tenant shall promptly replace such portion of the Property
or system or equipment in the Property, regardless of whether the benefit of
such replacement extends beyond the Lease Term; but if the benefit or useful
life of such replacement extends beyond the Lease Term (as such term may be
extended by exercise of any options), the useful life of such replacement shall
be prorated over the remaining portion of the Lease Term (as extended), and
Tenant shall be liable only for that portion of the cost which is applicable to
the Lease Term (as extended). Tenant shall maintain a preventive maintenance
contract providing for the regular inspection and maintenance of the heating and
air conditioning system by a licensed heating and air conditioning contractor.
Landlord shall have the right, upon written notice to Tenant, to undertake the
responsibility for preventive maintenance of the heating and air conditioning
system at Tenant's expense. In addition, Tenant shall, at Tenant's expense,
repair any damage to the roof, foundation or structural portions of walls caused
by Tenant's acts or omissions. It is the intention of Landlord and Tenant that,
at all times during the Lease Term, Tenant shall maintain the Property in an
attractive, first-class and fully operative condition.
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of the Society of Industrial --------------
and Office Realtors,(R) Inc. /s/RW
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(Multi-Tenant Gross Form)
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(b) Tenant shall fulfill all of Tenant's obligations under this Section
6.04 at Tenant's sole expense. If Tenant fails to maintain, repair or replace
the Property as required by this Section 6.04, Landlord may, upon (10) days'
prior notice to Tenant (except that no notice shall be required in the case of
an emergency), enter the Property and perform such maintenance or repair
(including replacement, as needed) on behalf of Tenant. In such case, Tenant
shall reimburse Landlord for all costs incurred in performing such maintenance
or repair immediately upon demand.
Section 6.05. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS
(a) Tenant shall not make any alterations, additions, or improvements to
the Property without Landlord's prior written consent, except for non-structural
alterations which do not exceed Ten Thousand Dollars ($10,000) in cost
cumulatively over the Lease Term and which are not visible from the outside of
any building of which the Property is part. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any alterations,
additions, or improvements constructed in violation of this Paragraph 6.05(a)
upon Landlord's written request. All alterations, additions, and improvements
shall be done in a good and workmanlike manner, in conformity with all
applicable laws and regulations, and by a contractor approved by Landlord. Upon
completion of any such work, Tenant shall provide Landlord with "as built"
plans, copies of all construction contracts, and proof of payment for all labor
and materials.
(b) Tenant shall pay when due all claims for labor and material
furnished on behalf of Tenant to the Property. Tenant shall give Landlord at
least twenty (20) days' prior written notice of the commencement of any work on
the Property, regardless of whether Landlord's consent to such work is required.
Landlord may elect to record and post notices of non-responsibility on the
Property.
Section 6.06. CONDITION UPON TERMINATION. Upon the termination of the
Lease, Tenant shall surrender the Property to Landlord, broom clean and in the
same condition as received except for ordinary wear and tear which Tenant was
not otherwise obligated to remedy under any provision of this Lease. However,
Tenant shall not be obligated to repair any damage which Landlord is required to
repair under Article Seven (Damage or Destruction). In addition, Landlord may
require Tenant to remove any alterations, additions or improvements (whether or
not made with Landlord's consent) prior to the expiration of the Lease and to
restore the Property to its prior condition, all at Tenant's expense. All
alterations, additions and improvements which Landlord has not required Tenant
to remove shall become Landlord's property and shall be surrendered to Landlord
upon the expiration or earlier termination of the Lease, except that Tenant may
remove any of Tenant's machinery or equipment which can be removed without
material damage to the Property. Tenant shall repair, at Tenant's expense, any
damage to the Property caused by the removal of any such machinery or equipment.
In no event, however, shall Tenant remove any of the following materials or
equipment (which shall be deemed Landlord's property) without Landlord's prior
written consent: any power wiring or power panels; lighting or lighting
fixtures; wall coverings; drapes, blinds or other window coverings; carpets or
other floor coverings; heaters, air conditioners or any other heating or air
conditioning equipment; fencing or security gates; or other similar building
operating equipment and decorations.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.01. PARTIAL DAMAGE TO PROPERTY.
(a) Tenant shall notify Landlord in writing immediately upon the
occurrence of any damage to the Property. If the Property is only partially
damaged (i.e., less than fifty percent (50%) of the Property is untenantable as
a result of such damage or less than fifty percent (50%) of Tenant's operations
are materially impaired) and if the proceeds received by Landlord from the
insurance policies described in Paragraph 4.04(b) are sufficient to pay for the
necessary repairs, this Lease shall remain in effect and Landlord shall repair
the damage as soon as reasonably possible. Landlord may elect (but is not
required) to repair any damage to Tenant's fixtures, equipment, or improvements.
If any such repairs cannot be completed within 180 days from the date of such
damage, Tenant shall have the right to terminate the Lease upon written notice
to Landlord.
(b) If the insurance proceeds received by Landlord are not sufficient
to pay the entire cost of repair, or if the cause of the damage is not covered
by the insurance policies which Landlord maintains under Paragraph 4.04(b),
Landlord may elect either to (i) repair the damage as soon as reasonably
possible, in which case this Lease shall remain in full force and effect, or
(ii) terminate this Lease as of the date the damage occurred. Landlord shall
notify Tenant within thirty (30) days after receipt of notice of the occurrence
of the damage whether Landlord elects to repair the damage or terminate the
Lease. If Landlord elects to terminate the Lease Tenant may elect to continue
this Lease in full force and effect, in which case Tenant shall repair any
damage to the Property and any building in which the Property is located. Tenant
shall pay the cost of such repairs, except that upon satisfactory completion of
such repairs, Landlord shall deliver to Tenant any insurance proceeds received
by Landlord for the damage repaired by Tenant. Tenant shall give Landlord
written notice of such election within ten (10) days after receiving Landlord's
termination notice.
(c) If the damage to the Property occurs during the last six (6) months
of the Lease Term and such damage will require more than thirty (30) days to
repair, either Landlord or Tenant may elect to terminate this Lease as of the
date the damage occurred, regardless of the sufficiency of any insurance
proceeds. The party electing to terminate this Lease shall give written
notification to the other party of such election within thirty (30) days after
Tenant's notice to Landlord of the occurrence of the damage.
Section 7.02. SUBSTANTIAL OR TOTAL DESTRUCTION. If the Property is
substantially or totally destroyed by any cause whatsoever except for Tenant's
gross negligence or willful misconduct (i.e., the damage to the Property is
greater than partial damage as described in Section 7.01), and regardless
whether Landlord receives any insurance proceeds, this Lease shall terminate as
of the date the destruction occurred
(c) 1988 Southern California Chapter SIOR(TM) Initials /s/
of the Society of Industrial ---------
and Office Realtors,(R) Inc. /s/ RW
---------
(Multi-Tenant Gross Form)
7
<PAGE>
Section 7.03. Temporary Reduction of Rent. If the Property is destroyed or
damaged and Landlord or Tenant repairs or restores the Property pursuant to the
provisions of this Article Seven, any rent payable during the period of such
damage, repair and/or restoration shall be reduced according to the degree, if
any, to which Tenant's use of the Property is impaired. However, the reduction
shall not exceed the sum of one year's payment of Base Rent, insurance premiums
and real property taxes. Except for such possible reduction in Base Rent,
insurance premiums and real property taxes, Tenant shall not be entitled to any
compensation, reduction, or reimbursement from Landlord as a result of any
damage, destruction, repair, or restoration of or to the Property.
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of
eminent domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever occurs
first. If more than twenty percent (20%) of the floor area of the building in
which the Property is located, or which is located on the Property, is taken,
either Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10 days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
takes title or possession). If neither Landlord nor Tenant terminates this
Lease, this Lease shall remain in effect as to the portion of the Property not
taken, except that the Base Rent and Additional Rent shall be reduced in
proportion to the reduction in the floor area of the Property. Any Condemnation
award or payment shall be distributed in the following order: (a) first, to any
ground lessor, mortgagee or beneficiary under a deed of trust encumbering the
Property, the amount of its interest in the Property; (b) second, to Tenant,
only the amount of any award specifically designated for loss of or damage to
Tenant's trade fixtures or removable personal property; and (c) third, to
Landlord, the remainder of such award, whether as compensation for reduction in
the value of the leasehold, the taking of the fee, or otherwise. If this Lease
is not terminated, Landlord shall repair any damage to the Property caused by
the Condemnation, except that Landlord shall not be obligated to repair any
damage for which Tenant has been reimbursed by the condemning authority. If the
severance damages received by Landlord are not sufficient to pay to such repair,
Landlord shall have the right to either terminate this Lease or make such repair
at Landlord's expense.
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.01. Landlord's Consent Required. No potion of the Property
or of Tenant's interest in this Lease may be acquired by any other person or
entity, whether by sale, assignment, mortgage, sublease, transfer, operation of
law, or act of Tenant, without Landlord's prior written consent, except as
provided in Section 9.02 below. Landlord has the right to grant or withhold its
consent as provided in Section 9.05 below. Any attempted transfer without
consent shall be void and shall constitute a non-curable breach of this Lease.
If Tenant is a partnership, any cumulative transfer of more than twenty percent
(20%) of the partnership interests shall require Landlord's consent. If Tenant
is a corporation, any change in the ownership of a controlling interest of the
voting stock of the corporation shall require Landlord's consent. Landlord
hereby waives any statutory or contractual liens against any property of Tenant
now or hereafter located upon or used in connection with the Property.
Section 9.02. Tenant Affiliate. Tenant may assign this Lease or
sublease the Property, without Landlord's consent, to any corporation which
controls, is controlled by or is under common control with Tenant, or to any
corporation resulting from the merger of or consolidation with Tenant ("Tenant's
Affiliate"). In such case, any Tenant's Affiliate shall assume in writing all
of Tenant's obligations under this Lease.
Section 9.03. No Release of Tenant. No transfer permitted by this
Article Nine, whether with or without Landlord's consent, shall release Tenant
or change Tenant's primary liability to pay the rent and to perform all other
obligations of Tenant under this Lease. Landlord's acceptance of rent from any
other person is not a waiver of any provision of this Article Nine. Consent to
one transfer is not a consent to any subsequent transfer. If Tenant's
transferee defaults under this Lease, Landlord may proceed directly against
Tenant without pursuing remedies against the transferee. Landlord may consent
to subsequent assignments or modifications of this Lease by Tenant's transferee,
without notifying Tenant or obtaining its consent. Such action shall not relieve
Tenant's liability under this Lease.
Section 9.04. Offer to Terminate. If Tenant desires to assign the
Lease or sublease the Property, Tenant shall have the right to offer, in
writing, to terminate the Lease as of a date specified in the offer. If Landlord
elects in writing to accept the offer to terminate within twenty (20) days after
notice of the offer, the Lease shall terminate as of the date specified and all
the terms and provisions of the Lease governing termination shall apply. If
Landlord does not so elect, the Lease shall continue in effect until otherwise
terminated and the provisions of Section 9.05 with respect to any proposed
transfer shall continue to apply.
Section 9.05. Landlord's Consent.
(a) Tenant's request for consent to any transfer described in Section
9.01 shall set forth in writing the details of the proposed transfer, including
the name, business and financial condition of the prospective transferee,
financial details of the proposed transfer (e.g., the term of and the rent and
security deposit payable under any proposed assignment or sublease), and any
other information Landlord deems relevant. Landlord shall have the right to
withhold consent, if reasonable, or to grant consent, based on the following
factors: (i) the business of the proposed assignee or subtenant and the proposed
use of the Property; (ii) the net worth and financial reputation of the proposed
assignee or subtenant; (iii) Tenant's compliance with all of its obligations
under the Lease; and (iv) such other factors as Landlord may reasonably deem
relevant. If Landlord objects to a proposed assignment solely because of the net
worth and/or financial reputation of the proposed assignee, Tenant may
nonetheless sublease (but not assign), all or a portion of the Property to the
proposed transferee, but only on the other terms of the proposed transfer.
Landlord agrees not to unreasonably withhold or delay its consent to an
assignment or sublease.
(b) If Tenant assigns or subleases, the following shall apply:
(i) Tenant shall pay to Landlord as Additional Rent under the Lease
the Landlord's Share (stated in Section 1.14) of the Profit (defined below) on
such transaction as and when received by Tenant, unless Landlord gives written
notice to Tenant and the assignee or subtenant that Landlord's Share shall be
paid by the assignee or subtenant to Landlord directly.
/c/1988 Southern California 8 Initials /s/
Chapter of the Society of ____________________
Industrial Office Realtors, /R/ (Multi-Tenant Gross Form)
/s/
____________________
<PAGE>
The "Profit" means (A) all amounts paid to Tenant for such assignment or
sublease, including "key" money, monthly rent in excess of the monthly rent
payable under the Lease, and all fees and other consideration paid for the
assignment of sublease, including fees under any collateral agreements,
less (B) costs and expenses directly incurred by Tenant in connection with
the execution and performance of such assignment or sublease for real
estate broker's commissions and costs of renovation or construction of
tenant improvements required under such assignment or sublease. Tenant is
entitled to recover such costs and expenses before Tenant is obligated to
pay the Landlord's Share to Landlord. The Profit in the case of a sublease
of less than all the Property is the rent allocable to the subleased space
as a percentage on a square footage basis.
(ii) Tenant shall provide Landlord a written statement certifying
all amounts to be paid from any assignment or sublease of the Property
within thirty (30) days after the transaction documentation is signed, and
Landlord may inspect Tenant's books and records to verify the accuracy of
such statement. On written request, Tenant shall promptly furnish to
Landlord copies of all the transaction documentation, all of which shall be
certified by Tenant to be complete, true and correct. Landlord's receipt of
Landlord's Share shall not be consent to any further assignment or
subletting. The breach of Tenant's obligation under this Paragraph 9.05(b)
shall be a material default of the Lease.
Section 9.06. NO MERGER. No merger shall result from Tenant's sublease
of the Property under this Article Nine, Tenant's surrender of this Lease or
the termination of this Lease in any other manner. In any such event, Landlord
may terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.01. COVENANTS AND CONDITIONS. Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants
and conditions.
Section 10.02. DEFAULTS. Tenant shall be in material default under this
Lease:
(a) If Tenant abandons the Property or if Tenant's vacation of the Property
results in the cancellation of any insurance described in Section 4.04;
(b) If Tenant fails to pay rent or any other charge when due;
Notwithstanding anything to the contrary contained herein, Tenant shall have a
period of five (5) business days after notice from Landlord in which to cure
any default in the payment of any amounts due hereunder and during such five
(5) business day cure period Landlord shall not have the right to exercise any
remedies hereunder (it being understood that the provisions of Section 4.06 and
4.07 hereof shall not apply until the end of any such five (5) business day
period).
(c) If Tenant fails to perform any of Tenant's non-monetary obligations
under this Lease for a period of thirty (30) days after written notice from
Landlord; provided that if more than thirty (30) days are required to complete
such performance, Tenant shall not be in default if Tenant commences such
performance within the thirty (30)-day period and thereafter diligently pursues
its completion. However, Landlord shall not be required to give such notice if
Tenant's failure to perform constitutes a non-curable breach of this Lease. The
notice required by this Paragraph is intended to satisfy any and all notice
requirements imposed by law on Landlord and is not in addition to any such
requirement.
(d) (i) If Tenant makes a general assignment or general arrangement for the
benefit of creditors; (ii) if a petition for adjudication of bankruptcy or for
reorganization or rearrangement if filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant's assets located at the
Property or of Tenant's interest in this Lease and possession is not restored to
Tenant within thirty (30) days; or (iv) if substantially all of Tenant's assets
located at the Property or of Tenant's interest in this Lease is subjected to
attachment execution or other judicial seizure which is not discharged within
thirty (30) days. If a court of competent jurisdiction determines that any of
the acts described in this subparagraph (d) is not a default under this Lease,
and a trustee is appointed to take possession (or if Tenant remains a debtor in
possession) and such trustee or Tenant tranfers Tenant's interest hereunder,
then Landlord shall receive, as Additional Rent, the excess, if any, of the rent
(or any other consideration) paid in connection with such assignment or sublease
over the rent payable by Tenant under this Lease.
(e) If any guarantor of the Lease revokes or otherwise terminates, or
purports to revoke or otherwise terminate, any guaranty of all or any portion
of Tenant's obligations under the Lease. Unless otherwise expressly provided,
no guaranty of the Lease is revocable.
Section 10.03. REMEDIES. On the concurrence of any material default by
Tenant, Landlord may, at any time thereafter with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have.
(a) Terminate Tenant's right to possession of the Property by any lawful
means, in which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Property to Landlord. In such event, Landlord shall
be entitled to recover from Tenant all damages incurred by Landlord by reason of
Tenant's default, including (i) the worth at the time of the award of the unpaid
Base Rent, Additional Rent and other charges which Landlord had earned at the
time of the termination (ii) the worth at the time of the award of the amount by
which the unpaid Base Rent, Additional Rent and other charges which Landlord
would have earned after termination until the time of the award exceeds the
amount of such rental loss that Tenant proves Landlord could have reasonably
avoided; (iii) the worth at the time of the award of the amount by which the
unpaid Base Rent, Additional Rent and other charges which Tenant would have paid
for the balance of the Lease Term after the time the award exceeds the amount of
such rental loss that Tenant proves Landlord could have reasonably avoided; and
(iv) any other amount reasonably necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under the Lease or which in the ordinary course of things would be likely to
result therefrom, including, but not limited to, any costs or expenses Landlord
incurs in maintaining or preserving the Property after such default, the cost
recovering possession of the Property, expenses of reletting, including
necessary renovation or alteration of the Property, Landlord's reasonable
attorneys' fees incurred in connection therewith, and any real estate commission
paid or payable. As used in subparts (i) and (ii) above, the "worth at the time
of the award" is computed by allowed by allowing interest on unpaid amount at
the rate of fifteen percent (15%) per annum, or such lesser amount as may then
be the maximum lawful rate. As used subpart (iii) above, the "worth at the time
of the award" is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award, plus one percent
(1%). If Tenant has abandoned the Property, Landlord shall have the option of
(i) retaking possession of the Property and recovering from Tenant the amount
specified in this Paragraph 10.03(a), or (ii) proceeding under Paragraph
10.03(b);
(C) 1988 Southern California Chapter SIOR(TM) Initials /s/
of the Society of Industrial -----------
and Office Realtors, (R) Inc. /s/ RW
-----------
(Multi-Tenant Gross Form)
9
<PAGE>
(b) Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant has abandoned the Property. In
such event, Landlord shall be entitled to enforce all of Landlord's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due;
(c) Pursue any other remedy no or hereafter available to Landlord under
the laws or judicial decisions of the state in which the Property is
located.
Section 10.04. REPAYMENT OF "FREE" RENT. If this Lease provides for a
postponement of any monthly rental payments, a period of "free" rent or other
rent concession, such postponed rent or "free" rent is called the "Abated Rent".
Tenant shall be credited with having paid all of the Abated Rent on the
expiration of the Lease Term only if Tenant has fully, faithfully, and
punctually performed all of Tenant's obligations hereunder, including the
payment of all rent (other than the Abated Rent) and all other monetary
obligations and the surrender of the Property in the physical condition required
by this Lease. Tenant acknowledges that its right to receive credit for the
Abated Rent is absolutely conditioned upon Tenant's full, faithful and punctual
performance of its obligations under this Lease. If Tenant defaults and does not
cure within any applicable grace period, the Abated Rent shall immediately
become due and payable in full and this Lease shall be enforced as if there were
no such rent abatement or other rent concession. In such case Abated Rent shall
be calculated based on the full initial rent payable under this Lease.
Section 10.05. AUTOMATIC TERMINATION. Notwithstanding any other term or
provision hereof to the contrary, the Lease shall terminate on the occurrence of
any act which affirms the Landlord's intention to terminate the Lease as
provided in Section 10.03 hereof, including the filing of an unlawful detainer
action against Tenant. On such termination, Landlord's damages for default shall
include all costs and fees, including reasonable attorneys' fees that Landlord
incurs in connection with the filing, commencement, pursuing and/or defending of
any action in any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy restraining any action to evict
Tenant; or the pursuing of any action with respect to Landlord's right to
possession of the Property. All such damages suffered (apart from Base Rent and
other rent payable hereunder) shall constitute pecuniary damages which must be
reimbursed to Landlord prior to assumption of the Lease by Tenant or any
successor to Tenant in any bankruptcy or other proceeding.
Section 10.06. CUMULATIVE REMEDIES. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.01: SUBORDINATION. Landlord shall have the right to
subordinate this Lease to any ground lease, deed of trust or mortgage
encumbering the Property, any advances made on the security thereof and any
renewals, modifications, consolidations, replacements or extensions thereof,
whenever made or recorded. Tenant shall cooperate with Landlord and any lender
which is acquiring a security interest in the Property or the Lease. Tenant
shall execute such further documents and assurances as such lender may require,
provided that Tenant's obligations under this Lease shall not be increased in
any way, and Tenant shall not be deprived of its rights under this Lease.
Tenant's right to quiet possession of the Property during the Lease Term shall
not be disturbed if Tenant pays the rent and performs all of Tenant's
obligations under this Lease and is not otherwise in default. If any ground
lessor, beneficiary or mortgagee elects to have this Lease prior to the lien of
its ground lease, deed of trust or mortgage and gives written notice thereof to
Tenant, this Lease shall be deemed prior to such ground lease, deed of trust or
mortgage whether this Lease is dated prior or subsequent to the date of said
ground lease, deed of trust or mortgage or the date of recording thereof.
Section 11.02. ATTORNMENT. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust, mortgage, or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease. Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest.
Section 11.03. SIGNING OF DOCUMENTS. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so. If Tenant fails to do so within ten (10)
days after written request, Tenant hereby makes, constitutes and irrevocably
appoints Landlord, or any transferee or successor of Landlord, the attorney-in-
fact of Tenant to execute and deliver any such instrument or document.
Section 11.04. ESTOPPEL CERTIFICATES.
(a) Upon Landlord's written request, Tenant shall execute, acknowledge
and deliver to Landlord a written statement certifying: (i) that none of the
terms or provisions of this Lease have been changed (or if they have been
changed, stating how they have been changed); (ii) that this Lease has not been
cancelled or terminated; (iii) the last date of payment of the Base Rent and
other charges and the time period covered by such payment; (iv) that Landlord is
not in default under this Lease (or, if Landlord is claimed to be in default,
stating why); and (v) such other representations or information with respect to
Tenant or the Lease as Landlord may reasonably request or which any prospective
purchaser or encumbrancer of the Property may reasonably request. Tenant shall
deliver such statement to Landlord within ten (10) days after Landlord's
request. Landlord may give any such statement by Tenant to any prospective
purchaser or encumbrancer of the Property. Such purchaser or encumbrancer may
rely conclusively upon such statement as true and correct.
(C) 1988 Southern California Chapter SIOR(TM) Initials /s/
of the Society of Industrial -----------
and Office Realtors, (R) Inc. /s/ RW
-----------
(Multi-Tenant Gross Form)
10
<PAGE>
ARTICLE TWELVE: LEGAL COSTS
Section 12.01. LEGAL PROCEEDINGS. If Tenant or Landlord shall be in
breach or default under this Lease, such party (the "Defaulting Party") shall
reimburse the other party (the "Nondefaulting Party") upon demand for any costs
or expenses that the Nondefaulting Party incurs in connection with any breach or
default of the Defaulting Party under this Lease, whether or not suit is
commenced or judgment entered. Such costs shall include legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the
provisions of this Lease is commenced, the court in such action shall award to
the party in whose favor a judgment is entered, a reasonable sum as attorneys'
fees and costs. The losing party in such action shall pay such attorneys' fees
and costs. Tenant shall also indemnify Landlord against and hold Landlord
harmless from all costs, expenses, demands and liability Landlord may incur if
Landlord becomes or is made a party to any claim or action (a) instituted by
Tenant against any third party, or by any third party against Tenant, or by or
against any person holding any interest under or using the Property by license
of or agreement with Tenant; (b) for foreclosure of any lien for labor or
material furnished to or for Tenant or such other person; (c) otherwise arising
out of or resulting from any act or transaction of Tenant or such other person;
or (d) necessary to protect Landlord's interest under this Lease in a
bankruptcy proceeding, or other proceeding under Title 11 of the United States
Code, as amended. Tenant shall defend Landlord against any such claim or
action at Tenant's expense with counsel reasonably acceptable to Landlord or, at
Landlord's election, Tenant shall reimburse Landlord for any legal fees or costs
Landlord incurs in any such claim or action.
Section 12.02. LANDLORD'S CONSENT. Tenant shall pay Landlord's
reasonable attorneys' fees incurred in connection with Tenant's request for
Landlord's consent under Article Nine (Assignment and Subletting), or in
connection with any other act which Tenant proposes to do and which requires
Landlord's consent.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section 13.01. NON-DISCRIMINATION. Tenant promises, and it is a
condition to the continuance of this Lease, that there will be no discrimination
against, or segregation of, any person or group of persons on the basis of race,
color, sex, creed, national origin or ancestry in the leasing, subleasing,
transferring, occupancy, tenure or use of the Property or any portion thereof.
Section 13.02. LANDLORD'S LIABILITY; CERTAIN DUTIES.
(a) As used in this Lease, the term "Landlord" means only the current
owner or owners of the fee title to the Property or Project or the leasehold
estate under a ground lease of the Property or Project at the time in question.
Each Landlord is obligated to perform the obligations of Landlord under this
Lease only during the time such Landlord owns such interest or title. Any
Landlord who transfers its title or interest is relieved of all liability with
respect to the obligations of Landlord under this Lease to be performed on or
after the date of transfer. However, each Landlord shall deliver to its
transferee all funds that Tenant previously paid if such funds have not yet been
applied under the terms of this Lease.
(b) Tenant shall give written notice of any failure by Landlord to
perform any of its obligations under this Lease to Landlord and to any ground
lessor, mortgagee or beneficiary under any deed of trust encumbering the
Property whose name and address have been furnished to Tenant in writing.
Landlord shall not be in default under this Lease unless Landlord (or such
ground lessor, mortgagee or beneficiary) fails to cure such non-performance
within thirty (30) days after receipt of Tenant's notice. However, if such non-
performance reasonably requires more than thirty (30) days to cure, Landlord
shall not be in default if such cure is commenced within such thirty (30)-day
period and thereafter diligently pursued to completion.
(c) Notwithstanding any term or provision herein to the contrary, the
liability of Landlord for the performance of its duties and obligations under
this Lease is limited to Landlord's interest in the Property and the Project,
and neither the Landlord nor its partners, shareholders, officers or other
principals shall have any personal liability under this Lease. Landlord
represents and warrants that it is the owner fee simple title to the Project and
the Property and has full and unconditional rights (including proper and valid
trust authorization) to lease the Property to Tenant and to enter into the
agreements contained herein pursuant to the terms hereof.
Section 13.03 SEVERABILITY. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.
Section 13.04 INTERPRETATION. The captions of the Articles or Sections
of this Lease are to assist the parties in reading this Lease and are not a part
of the terms or provisions of this Lease. Whenever required by the context of
this Lease, the singular shall include the plural and the plural shall include
the singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents, employees, contractors,
invitees, successors or others using the Property with Tenant's expressed or
implied permission.
Section 13.05. INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS. This
Lease is the only agreement between the parties pertaining to the lease of the
Property and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.
Section 13.06. NOTICES. All notices required or permitted under this
Lease shall be in writing and shall be personally delivered or sent by certified
mail, return receipt requested, postage prepaid. Notices to Tenant shall be
delivered to the address specified in Section 1.03 above, except that upon
Tenant's taking possession of the Property, the Property shall be Tenant's
address for notice purposes. Notices to Landlord shall be delivered to the
address specified in Section 1.02 above. All notices shall be effective upon
delivery. Either party may change its notice address upon written notice to the
other party.
Section 13.07. WAIVERS. All waivers must be in writing and signed by the
waiving party. Landlord's failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.
Section 13.08. NO RECORDATION. Tenant shall not record this Lease
without prior written consent from Landlord. However, either Landlord or Tenant
may require that a "Short Form" memorandum of this Lease executed by both
parties be recorded. The party requiring such recording shall pay all transfer
taxes and recording fees.
(C) 1988 Southern California Chapter SIOR(TM) Initials /s/
of the Society of Industrial -------
and Office Realtors, (R) Inc. /s/ RW
-------
(Multi-Tenant Gross Form)
11
<PAGE>
Section 13.09 BINDING EFFECT; CHOICE OF LAW. This Lease binds any party
who legally acquires any rights or interest in this Lease from Landlord or
Tenant. However, Landlord shall have no obligation to Tenant's successor unless
the rights or interests of Tenant's successor are acquired in accordance with
the terms of this Lease. The laws of the state in which the Property is located
shall govern this Lease.
Section 13.10. CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY. If Tenant
is a corporation, each person signing this Lease on behalf of Tenant represents
and warrants that he has full authority to do so and that this Lease binds the
corporation.
Section 13.11. JOINT AND SEVERAL LIABILITY. All parties signing this
Lease as Tenant shall be jointly and severally liable for all obligations of
Tenant.
Section 13.12. FORCE MAJEURE. If Landlord cannot perform any of its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond Landlord's control include, but are not
limited to, acts of God, war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, shortages of labor or material, government regulation
or restriction and weather conditions.
Section 13.13. EXECUTION OF LEASE. This Lease may be executed in
counterparts and, when all counterpart documents are executed, the counterparts
shall constitute a single binding instrument. Landlord's delivery of this Lease
to Tenant shall not be deemed to be an offer to lease and shall not be binding
upon either party until executed and delivered by both parties.
Section 13.14. SURVIVAL. All representations and warranties of
Landlord and Tenant shall survive the termination of this Lease.
ARTICLE FOURTEEN: BROKERS
Section 14.01. BROKER'S FEE. When this Lease is signed by and
delivered to both Landlord and Tenant, Landlord shall pay a real estate
commission to Landlord's Broker named in Section 1.08 above, if any, as provided
in the written agreement between Landlord and Landlord's Broker, or the sum
stated in Section 1.09 above for services rendered to Landlord by Landlord's
Broker in this transaction. Landlord shall pay Landlord's Broker a commission
if Tenant exercises any option to extend the Lease Term. If a Tenant's Broker
is named in Section 1.08 above, Landlord's Broker shall pay an appropriate
portion of its commission to Tenant's Broker if so provided in any agreement
between Landlord's Broker and Tenant's Broker. Nothing contained in this Lease
shall impose any obligation on Landlord to pay a commission or fee to any party
other than Landlord's Broker.
Section 14.02. PROTECTION OF BROKERS. If Landlord sells the Property,
or assigns Landlord's interest in this Lease, the buyer or assignee shall, by
accepting such conveyance of the Property or assignment of the Lease, be
conclusively deemed to have agreed to make all payments to Landlord's Broker
thereafter required of Landlord under this Article Fourteen. Landlord's Broker
shall have the right to bring a legal action against Landlord but not Tenant to
enforce or declare rights under this provision. The prevailing party in such
action shall be entitled to reasonable attorneys' fees to be paid by the losing
party. Such attorneys' fees shall be fixed by the court in such action. This
Paragraph is included in this Lease for the benefit of Landlord's Broker.
Section 14.03. AGENCY DISCLOSURE; NO OTHER BROKERS. Landlord and
Tenant each warrant that they have dealt with no other real estate broker(s) in
connection with this transaction except: CB Commercial Real Estate Group, Inc.,
who represents Landlord and Barkley Frasier Company, who represents Tenant.
In the event that CB Commercial represents both Landlord and Tenant,
Landlord and Tenant herby confirm that they were timely advised of the dual
representation and that they consent to the same, and that they do not expect
said broker to disclose to either of them the confidential information of the
other party.
ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER OR RIDERS ATTACHED
HERETO OR IN THE BLANK SPACE BELOW. IF NO ADDITIONAL PROVISIONS ARE INSERTED,
PLEASE DRAW A LINE THROUGH THE SPACE BELOW.
Tenant hereto agrees to comply with all applicable federal, state and
local laws, regulations, codes, ordinances and administrative orders having
jurisdiction over the parties, property or the subject matter of this Agreement,
including, but not limited to, the 1964 Civil Rights Act and all amendments
thereto, the Foreign Investment In Real Property Tax ACt and the Comprehensive
Environmental Response Compensation and Liability Act. Landlord represents
that, to the best of its knowledge without inquiry, the Property presently
complies with the foregoing matters, including the Americans with Disabilities
Act.
MGI Properties is a Massachusetts Trust and all persons dealing with the
Trust must look solely to the property of this Trust for the enforcement of any
claims against the Trust. Neither the Trustees, officers, agents nor
shareholders of this Trust assume any personal liability in connection with its
business or assume any personal liability for obligations entered into on its
behalf.
(C) 1988 Southern California Chapter SIOR(TM) Initials /s/
of the Society of Industrial -----------
and Office Realtors, (R) Inc. /s/ RW
-----------
(Multi-Tenant Gross Form)
12
<PAGE>
Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialled all Riders
which are attached to or incorporated by reference in this Lease.
"LANDLORD"
Signed on November 10 , 1992
--------------- -- ----------------------------------------
MGI Properties
at Boston, Massachusetts .
--------------------------- ----------------------------------------
By: /s/ Robert Ware
------------------------------------
Robert Ware
Its: Executive Vice President
------------------------------------
By:
-------------------------------------
Its:
------------------------------------
"TENANT"
Signed on November 7 , 1992
--------------- -- ----------------------------------------
Mill Transportation Company
at Franklin Park, Illinois .
--------------------------- ----------------------------------------
By: /s/
------------------------------------
Its: President
------------------------------------
By: /s/
------------------------------------
Its: Secretary
------------------------------------
IN ANY REAL ESTATE TRANSACTION, IT IS RECOMMENDED THAT YOU CONSULT WITH
A PROFESSIONAL, SUCH AS A CIVIL ENGINEER, INDUSTRIAL HYGIENIST OR OTHER PERSONS
WITH EXPERIENCE IN EVALUATING THE CONDITION OF THE PROPERTY, INCLUDING THE
POSSIBLE PRESENCE OF ASBESTOS, HAZARDOUS MATERIALS AND UNDERGROUND STORAGE
TANKS.
THIS PRINTED FORM LEASE HAS BEEN DRAFTED BY LEGAL COUNSEL AT THE
DIRECTION OF THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND
OFFICER REALTORS (R), INC. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE
SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICER REALTORS,
INC. (R), ITS LEGAL COUNSEL, THE REAL ESTATE BROKERS NAMED HEREIN, OR THEIR
EMPLOYEES OR AGENTS, AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT OR TAX
CONSEQUENCES OF THIS LEASE OR OF THIS TRANSACTION. LANDLORD AND TENANT SHOULD
RETAIN LEGAL COUNSEL TO ADVISE THEM ON SUCH MATTERS AND SHOULD RELY UPON THE
ADVICE OF SUCH LEGAL COUNSEL.
(C) 1988 Southern California Chapter SIOR(TM) Initials /s/
of the Society of Industrial ------------
and Office Realtors, (R) Inc. /s/ RW
------------
(Multi-Tenant Gross Form)
13
<PAGE>
ADDENDUM TO THE
LEASE AGREEMENT BY AND BETWEEN
MGI PROPERTIES
EXHIBIT A
- ---------
[CHART]
must look solely to the property of
Neither the Trustees, officers, agents nor shareholders of this
in connection with its business or assume any personal liability for
obligations entered into
J74165-1
<PAGE>
ADDENDUM TO THE
LEASE AGREEMENT BY AND BETWEEN
MGI PROPERTIES (LANDLORD) AND
MILL TRANSPORTATION COMPANY (TENANT)
DATED NOVEMBER 2, 1992
1. During the first twelve (12) months of the initial lease term, Tenant shall
have the first right of first refusal to lease the adjacent building area
designated in Exhibit "A" as expansion area and consisting of + 83,811
square feet. Tenant shall have five (5) business days from receipt of
Landlord's written notice of the lease rate and terms which have been
offered to provide written acceptance of this offer. However, in no event
shall the lease rate for the expansion area be less than $2.25 per square
foot annually.
2. During the first twelve (12) months of the initial lease term, Tenant
shall have the right to purchase the Project consisting of + 191,899 square
feet situated on 8.57 acres subject to price and terms to be mutually agreed
upon by Landlord and Tenant.
3. In addition to the initial security deposit (Section 1.10), Tenant agrees to
pay the first month's rent (January 1993) at lease execution.
RIDER A
- -------
Notwithstanding anything to the contrary contained herein, Tenant shall have
the right occupy the Property in accordance with the terms of this Lease prior
to the Commencement Date, during which time Tenant shall be responsible for its
pro rata share of utilities and common area maintenance expenses as outlined in
Section 4.03 and Section 4.05, but not for Base Rent.
RIDER B
- -------
Landlord represents and warrants to Tenant that, to the best of Landlord's
knowledge, the Property complies with all applicable environmental laws, rules
and regulations and is free from Hazardous Materials.
RIDER C
- -------
Landlord agrees that Tenant shall have the right to erect a reasonable sign
on the Property visibly identifying Tenant's business, with Landlord's prior
consent, not to be unreasonably withheld with respect to the sign and the
location on the Property.
RIDER D
- -------
Landlord shall indemnify Tenant and hold Tenant harmless from and against
any and all costs, claims and liability resulting from a breach of Landlord's
obligations hereunder.
RIDER E
- -------
Intentionally Omitted
RIDER F
- -------
If any such repairs cannot be completed within 180 days from the date of
such damage, Tenant shall have the right to terminate the Lease upon written
notice to Landlord.
RIDER G
- -------
Landlord hereby waives any statutory or contractual liens against any
property of Tenant now or hereafter located upon or used in connection with the
Property.
RIDER H
- -------
Notwithstanding anything to the contrary contained herein, Tenant shall have
a period of five (5) business days after notice form Landlord in which to cure
any default in the payment of any amounts due hereunder and during such five (5)
business day cure period Landlord shall not have the right to exercise any
remedies hereunder (it being understood that the provisions of Section 4.06 and
4.07 hereof shall not apply until the end of any such five (5) business day
period).
RIDER I
- -------
Intentionally Omitted.
RIDER J
- -------
Landlord represents and warrants that it is the owner fee simple title to
the Project and the Property and has full and unconditional rights (including
proper and valid trust authorization) to lease the Property to Tenant and to
enter into the agreements contained herein pursuant to the terms hereof.
RIDER K
- -------
Tenant hereto agrees to comply with all applicable federal, state and local
laws, regulations, codes, ordinances and administrative orders having
jurisdiction over the parties, property or the subject matter of this Agreement,
including, but not limited to, the 1964 Civil Rights Act and all amendments
thereto, the Foreign Investment In Real Property Tax Act and the Comprehensive
Environmental Response Compensation and Liability Act. Landlord represents that,
to the best of its knowledge without inquiry, the Property presently complies
with the foregoing matters, including the Americans with Disabilities Act.
RIDER L
- -------
MGI Properties is a Massachusetts Trust and all persons dealing with the
Trust must look solely to the property of this Trust for the enforcement of any
claims against this Trust. Neither the Trustees, officers, agents nor
shareholders of this Trust assume any personal liability in connection with its
business or assume any personal liability for obligations entered into on its
behalf.
<PAGE>
[CB LOGO] CB COMMERCIAL REAL ESTATE GROUP, INC.
COMMERCIAL BROKERAGE AND MANAGEMENT
LICENSED REAL ESTATE BROKER
This Guaranty of Leased (the "Guaranty") is attached to and made part of that
certain real estate Lease (the "Lease") dated November 2, 1992, between
________________
MGI Properties
_______________________________________________, as Landlord, and______________
Mill Transportation Company
_____________________________________________________, as Tenant, covering the
Property commonly known as 7606 Rivers Avenue, North Charleston, South
_____________________________________________________
Carolina. The terms used in this Guaranty shall have the same definitions as
________
set forth in the Lease. In order to induce Landlord to enter into the Lease
with Tenant, Hubbell Steel Corporation
__________________________________________________________________
("Guarantors"), have agreed to execute and deliver this Guaranty to Landlord.
Each Guarantor acknowledges that Landlord would not enter into the Lease if each
Guarantor did not execute and deliver this Guaranty to Landlord.
1. Guaranty. In consideration of the execution of the Lease by Landlord and as
a material inducement to Landlord to execute the Lease, each Guarantor hereby
irrevocably, unconditionally, jointly and severally guarantees the full, timely
and complete (a) payment of all rent and other sums payable by Tenant to
Landlord under the Lease, and any amendments or modifications thereto by
agreement or course of conduct, and (b) performance of all covenants,
representations and warranties made by Tenant and all obligations to be
performed by Tenant pursuant to the Lease, and any amendments or modifications
thereto by agreement or course of conduct. The payment of those amounts and
performance of those obligations shall be conducted in accordance with all
terms, covenants and conditions set forth in the Lease, without deduction,
offset or excuse of any nature and without regard to the enforceability or
validity of the Lease, or any part thereof, or any disability of Tenant.
2. Landlord's Rights. Landlord may perform any of the following acts at any
time during the Lease Term, without notice to or assent of any Guarantor and
without in any way releasing, affecting or impairing any of Guarantor's
obligations or liabilities under this Guaranty: (a) alter, modify or amend the
Lease by agreement or course of conduct, (b) grant extensions or renewals of the
Lease, (c) assign or otherwise transfer its interest in the Lease, the Property,
or this Guaranty, (d) consent to any transfer or assignment of Tenant's or any
future tenant's interest under the Lease, (e) release one or more Guarantor, or
amend or modify this Guaranty with respect to any Guarantor, without releasing
or discharging any other Guarantor from any of such Guarantor's obligations or
liabilities under this Guaranty, (f) take and hold security for the payment of
this Guaranty and exchange, enforce, waive and release any such security, (g)
apply such security and direct the order or manner of sale thereof as Landlord,
in its sole discretion, deems appropriate, and (h) foreclose upon any such
security by judicial or nonjudicial sale, without affecting or impairing in any
way the liability of Guarantor under this Guaranty, except to the extent the
indebtedness has been paid.
3. Tenant's Default. This Guaranty is a guaranty of payment and performance,
and not of collection. Upon any breach or default by Tenant under the Lease,
Landlord may proceed immediately against Tenant and/or any Guarantor to enforce
any of Landlord's rights or remedies against Tenant or any Guarantor pursuant to
this Guaranty, the Lease, or at law or in equity without notice to or demand
upon either Tenant or any Guarantor. This Guaranty shall not be released,
modified or affected by any failure or delay by Landlord to enforce any of its
rights or remedies under the Lease or this Guaranty, or at law or in equity.
4. Guarantor's Waivers. Each Guarantor hereby waives (a) presentment, demand
for payment and protest of non-performance under the Lease, (b) notice of any
kind including, without limitation, notice of acceptance of this Guaranty,
protest, presentment, demand for payment, default, nonpayment, or the creation
or incurring of new or additional obligations of Tenant to Landlord, (c) any
right to require Landlord to enforce its rights or remedies against Tenant under
the Lease, or otherwise, or against any other Guarantor, (d) any right to
require Landlord to proceed against any security held from Tenant or any other
party, (e) any right of subrogation and (f) any defense arising out of the
absence, impairment or loss of any right of reimbursement or subrogation or
other right or remedy of Guarantors against Landlord or any such security,
whether resulting from an election by Landlord, or otherwise. Any part payment
by Tenant or other circumstance which operates to toll any statute of
limitations as to Tenant shall operate to toll the statute of limitations as to
Guarantor.
5. Separate and Distinct Obligations. Each Guarantor acknowledges and agrees
that such Guarantor's obligations to Landlord under this Guaranty are separate
and distinct from Tenant's obligations to Landlord under the Lease. The
occurrence of any of the following events shall not have any effect whatsoever
on any Guarantor's obligations to Landlord hereunder, each of which obligations
shall continue in full force or effect as though such event had not occurred:
(a) the commencement by Tenant of a voluntary case under the federal bankruptcy
laws, as now constituted or hereafter amended or replaced, or any other
applicable federal or state bankruptcy, insolvency or other similar law
(collectively, the "Bankruptcy Laws"), (b) the consent by tenant to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator or similar official of Tenant or for any
substantial part of its property, (c) any assignment by Tenant for the benefit
of creditors, (d) the failure of Tenant generally to pay its debts as such debts
become due, (e) the taking of corporate action by Tenant in the furtherance of
any of the foregoing; or (f) the entry of a decree or order for relief by a
court having jurisdiction in respect of Tenant in any involuntary case under the
Bankruptcy Laws, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of Tenant or for any substantial
part of its property, or ordering the winding-up or liquidation of any of its
affairs and the continuance of any such decree or order unstayed and in effect
for a period of sixty (60) consecutive days. The liability of Guarantors under
this Guaranty is not and shall not be affected or impaired by any payment made
to Landlord under or related to the Lease for which Landlord is required to
reimburse Tenant pursuant to any court order or in settlement of any dispute,
controversy or litigation in any bankruptcy, reorganization, arrangement,
moratorium or other federal or state debtor relief proceeding. If, during any
such proceeding, the Lease is assumed by Tenant or any trustee, or thereafter
assigned by Tenant or any trustee to a third party, this Guaranty shall remain
in full force and effect with respect to the full
Initials /s/
________________________________
________________________________
1983 Southern California Chapter of the
Society of Industrial Realtors,/R/Inc.
Reprinted under license
<PAGE>
performance of Tenant, any such trustee or any such third party's obligations
under the Lease. If the Lease is terminated or rejected during any such
proceeding, or if any of the events described in Subparagraphs (a) through (f)
of this Paragraph 5 occur, as between Landlord and each Guarantor, Landlord
shall have the right to accelerate all of Tenant's obligations under the Lease
and each Guarantor's obligations under this Guaranty. In such event, all such
obligations shall become immediately due and payable by Guarantors to Landlord.
Guarantors waive any defense arising by reason of any disability or other
defense of Tenant or by reason of the cessation from any cause whatsoever of the
liability of Tenant.
6. SUBORDINATION. All existing and future advances by Guarantor to Tenant, and
all existing and future debts of Tenant to any Guarantor, shall be subordinated
to all obligations owed to Landlord under the Lease and this Guaranty.
7. SUCCESSORS AND ASSIGNS. This Guaranty binds each Guarantor's personal
representatives, successors and assigns.
8. ENCUMBRANCES. If landlord's interest in the Property or the Lease, or the
rents, issues or profits therefrom, are subject to any deed of trust, mortgage
or assignment for security, andy Guarantor's acquisition of Landlord's interest
in the Property or Lease shall not affect any of Guarantor's obligations under
this Guaranty. In such event, this Guaranty shall nevertheless continue in full
force and effect for the benefit of any mortgagee, beneficiary, trustee or
assignee or any purchaser at any sale by judicial foreclosure or under any
private power of sale, and their successors and assigns. Any married Guarantor
expressly agrees that Landlord has recourse against any Guarantor's separate
property for all of such Guarantor's obligations hereunder.
9. GUARANTOR'S DUTY. Guarantors assume the responsibility to remain informed
of the financial condition of Tenant and of all other circumstances bearing upon
the risk of Tenant's default, which reasonable inquiry would reveal, and agree
that Landlord shall have no duty to advise Guarantors of information known to it
regarding such condition or any such circumstance.
10. LANDLORD'S RELIANCE. Landlord shall not be required to inquire into the
powers of Tenant or the officers, employees, partners or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed under
this Guaranty.
11. INCORPORATION OF CERTAIN LEASE PROVISIONS. Each Guarantor hereby
represents and warrants to Landlord that such Guarantor has received a copy of
the Lease, has read or had the opportunity to read the Lease, and understands
the terms of the Lease. The provisions in the Lease relating to the execution
of additional documents, legal proceedings by Landlord against Tenant,
severability of the provisions of the Lease, interpretation of the lease,
notices, waivers, the applicable laws which govern the interpretation of the
Lease and the authority to the Tenant to execute the Lease are incorporated
herein in their entirety by this reference and mae a part hereof. Any reference
in those provisions to "Tenant" shall mean each Guarantor and any reference in
those provisions to the "Lease" shall mean this Guaranty, except that (a) any
notice which any Guarantor desires or is required to provide to Landlord shall
be effective only if signed by all Guarantors and (b) any notice which Landlord
desires or is required to provide to any Guarantor shall be sent to such
Guarantor at such Guarantor's address indicated below, or if no address is
indicated below, at the address for notices to be sent to Tenant under the
Lease.
Signed on November 7, , 1992 Hubbell Steel Corporation
__________________ __ ________________________________________
________________________________________
11305 Franklin Avenue By: /s/
___________________________________ ____________________________________
Franklin Park, Illinois 60131 Its:
___________________________________ _____________________________________
Address
Signed on , 1992
__________________ __ ________________________________________
________________________________________
By:
___________________________________ _____________________________________
Its:
___________________________________ _____________________________________
Address
- --------------------------------------------------------------------------------
CONSULT YOUR ATTORNEY - This document has been prepared for approval by your
attorney. No representation or recommendation is made by CB Commercial Real
Estate Group, Inc. or the Southern California Chapter of the Society of
Industrial Realtors,(R)Inc., or the agents or employees of either of them as to
the legal sufficiency. legal effect, or tax consequences of this document or
the transaction to which it relates. These are questions for your attorney.
- --------------------------------------------------------------------------------
1983 Southern California Chapter of the
Society of Industrial Realtors,(R)Inc.
Reprinted under license
<PAGE>
LEASE EXTENSION AND MODIFICATION AGREEMENT
------------------------------------------
AGREEMENT, dated as of this 24 day of July 1995 between MGI HOLDINGS,
INC., a Delaware corporation, having an office at 30 Rowes Wharf, Boston,
Massachusetts 02110 (hereinafter called "Landlord"), and MILL TRANSPORTATION
COMPANY, an Illinois corporation having an office at 11305 Franklin Avenue,
Franklin Park, Illinois 60131-1106 (hereinafter called "Tenant").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS:
1. Landlord and Tenant executed that certain lease dated as of November
2, 1992 (the "Lease"), covering approximately 108,088 square feet (the "Demised
Premises") in the industrial building located at 7606 Rivers Avenue, North
Charleston, South Carolina (the "Building"), as more particularly described in
the Lease, for a term to expire on December 31, 1995 (the "Expiration Date"),
unless sooner terminated pursuant to any of the terms, covenants and conditions
of the Lease or pursuant to law;
2. Standard Corporation as Sublessor, and Tenant, as Sublessee,
entered into that certain warehouse sublease dated June, 1994 (the "Sublease")
wherein, Standard subleased to Tenant approximately 83,811 square feet (the
"Subleased Premises") in the Building for a term to expire on January 31, 1996
(at the "Sublease Expiration Date"); and
3. Landlord and Tenant now desire to extend the term of the Lease as
hereinafter provided, to include the Subleased Premises within the Demised
Premises, and to otherwise amend and modify the Lease in certain other respects
as hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is agreed as follows;
FIRST: The term of the Lease is hereby extended for an additional
-----
period of two (2) years commencing on January 1,
<PAGE>
1996 (hereinafter called the "Extended Term Commencement Date") and ending on
December 31, 1997 (the "Extended Expiration Date"), unless sooner terminated
pursuant to any of the terms, covenants and conditions of the Lease or pursuant
to law, upon all of the terms, covenants and conditions contained in the Lease,
except as hereinafter expressly provided.
SECOND: Effective from and after the Extended Term Commencement Date,
the Lease shall be amended as follows:
A. The Expiration Date shall be amended to December 31, 1997;
B. Base Rent shall be payable at the rate of TWO HUNDRED FIFTY-FOUR
THOUSAND SIX AND 80/100THS ($254,006.80) DOLLARS per annum, payable in
equal monthly installments of $21,167.23 each, payable in the time and
manner provided for in the Lease;
C. The term "Base Real Property Taxes" (as defined in Section 4.02(a) of
the Lease), shall continue to mean the Property Taxes payable for the
1993 fiscal tax year or THIRTY-FOUR THOUSAND FOUR HUNDRED NINETY-EIGHT
AND 63/100THS ($34,498.63);
D. The term "Base Premiums" (as defined in Section 4.04(i) shall continue
to mean TWO THOUSAND EIGHT HUNDRED TWENTY-ONE AND 00/100THS ($2,821.00);
and
E. Tenant shall continue to pay on a net basis, all of the charges for
common area maintenance costs as provided for in Section 4.05 of the
Lease.
SECOND: Effective February 1, 1996, i.e., the Lease shall be further
------
amended by including the Subleased Premises within the Demised Premises as
hereinafter provided.
From and after February 1, 1996, the Lease shall be further amended as
follows:
A. The term "Demised Premises" shall mean the entire Building
consisting of 191,899 square feet;
B. The Base Rent shall be increased by the sum of ONE HUNDRED NINETY-
SIX THOUSAND NINE HUNDRED FIFTY-FIVE AND 85/100THS ($196,955.85)
DOLLARS per annum to FOUR HUNDRED FIFTY THOUSAND NINE HUNDRED SIXTY-
TWO AND 65/100THS ($450,962.65) DOLLARS per annum ($37,580.22 per
month); and
C. Tenant shall continue to pay for Property Tax increases, insurance
increases and net common area charges pursuant to paragraph C, D and
E of Article SECOND hereof.
------
THIRD: Landlord shall not be obligated to make any improvements or
alterations to the Demised Premises and Tenant agrees to continue in and accept
possession of the Demised
-2-
<PAGE>
Premises in its present "as-is" physical condition on the Extended Term
Commencement Date.
FOURTH: Landlord and Tenant represent and warrant to the other that
------
neither consulted nor negotiated with any broker or finder with regard to his
Lease Extension Agreement other than Landlord's agent, David T. Orr of Latt
Purcer Industrial Services, Inc.
FIFTH: Except to the extent modified and amended by the provisions of
-----
this Agreement, and as so modified and amended, the Lease is hereby ratified and
confirmed in all respects and shall be binding upon the parties hereto and their
successors and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals as of the day and year first above written.
LANDLORD:
--------
MGI HOLDINGS, INC.
-----------------
By:/s/
_____________________________
TENANT:
______
MILL TRANSPORTATION COMPANY
--------------------------
By: /s/ Alfred L. Walker, President
______________________________________
-3-
<PAGE>
EXHIBIT 10.25
STATE OF SOUTH CAROLINA )
) LEASE AGREEMENT
COUNTY OF GREENVILLE )
THIS REAL PROPERTY LEASE AGREEMENT is made and entered into the 14 day of
February, 1916 , by and between Blacksmith Leasing, a South Carolina General
Partnership, (hereinafter referred to as "Lessor") and Carolina Commercial Heat
Treating, Inc., a Nevada corporation, (hereinafter referred to as "Lessee").
W I T N E S S E T H :
IN CONSIDERATION of the rentals, covenants and conditions Hereinafter set
forth, and intending to be legally bound thereby, Lessor and Lessee do hereby
covenant and agree as follows:
1. Lease of Demised Premises: The Lessor does hereby lease and demise to
the Lessee, and the Lessee does hereby take and hire from the Lessor, upon and
subject to the terms, conditions, covenants and provisions hereinafter set
forth, all that certain piece, parcel or lot of land located in Reidsville,
North Carolina, together with the buildings, and any other improvements of any
nature whatsoever located therein (such pieces, parcels or lots of land,
together with the buildings, and any other improvements of any nature whatsoever
being referred to hereinafter as the "Demised Premises"), the Demised Premises
being more fully described on Exhibit A, attached hereto and incorporated herein
by reference.
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 1 of 33
<PAGE>
2. Term. To Have And To Hold the Demised Premises for and during a term of
fourteen (14) years, beginning with the commencement date hereinbelow set
forth.
3. Commencement Date. The term of this Lease shall commence on February,
14, 1996 (the "Commencement Date") and end no later than the fourteenth
anniversary of the Commencement Date. In connection herewith, it is understood
and agreed that every twelve calendar months from such Commencement Date shall
constitute a lease year. Upon expiration of the term of this Lease, this Lease
shall automatically terminate without any further actions by either party except
as otherwise set forth in this section.
If Lessee remains in possession of the Demised Premises after the
expiration of either the original term of this Lease such possession shall, at
Lessor's option, be as a month-to-month tenant-at-will on all of the same terms
and conditions as are in effect on the last day of the preceding term, except
that:
(a) If there is another party who is scheduled to take possession as a new
lessee of the Demised Premises and would do so but for Lessee's continued
possession of the Demised Premises; or
(b) If Lessee continues in possession of the Demised Premises in disregard
of its obligation to vacate; then the Base Rent for each month (or any portion)
of Lessee's hold-over period shall be payable at the rate of double the Rent
effective on
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 2 of 33
<PAGE>
the last day of the preceding term; provided that:
(i) If Lessee continues in possession of the Demised Premises and is
unable to vacate despite using its best efforts; and
(ii) There is no other party scheduled to take possession of the
Demised Premises as a new lessee; then the Rent for each month (or any
portion) of Lessee's hold-over period shall be payable at the rate of ONE
HUNDRED TEN PERCENT (110%) of the Base Rent for the previous month for
each month that Lessee continues in possession of the Demised Premises.
4. Rental. Lessee shall pay a total annual rent of Ninety-Six Thousand
Eight Hundred Twenty-Seven Dollars ($96,827) for the first year of the lease
term. Upon the first and second anniversaries of the Commencement Date, the rent
for the subsequent lease year shall increase by Three Thousand Eight Hundred
Twenty Seven Dollars ($3,827) over that paid for the current lease year. On the
third and each subsequent anniversary of the Commencement Date, the rent for the
subsequent lease year shall increase by Four Thousand Seven Hundred Eighty-Three
Dollars ($4,783) over that paid for the current lease year. The annual rental
for each lease year shall be payable in twelve (12) equal monthly installments,
in advance, with the first such monthly payment due on the Commencement Date.
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 3 of 33
<PAGE>
5. Use of the Demised Premises. The Lessor acknowledges that the Lessee
contemplates using the Demised Premises for conducting a heat treating business.
The Lessee covenants and agrees not to occupy or use the Demised Premises or
permit the same to be occupied or used contrary to any statutes, rules, order,
ordinance, requirement or regulation applicable thereto, or in a manner which
would constitute a public or private nuisance. Lessee shall be responsible for
complying with, honoring and observing all conditions to its use and occupancy
of the Demised Premises and environmental compliance which shall or may be
imposed by any federal, state, local or municipal governmental authority charged
with the responsibility therefor to the extent such environmental compliance
results from Lessee's use and occupancy of the Demised Premises. Lessee may use
and store, in the ordinary course of business, but shall not commit the
on premises discharge of, any petroleum product, petroleum by-product, petroleum
derivative or any other hazardous or toxic material in any form or content
during the term of this Lease.
6. Maintenance and Repair. The Lessee covenants and agrees that it will,
at its own expense, maintain and promptly repair the roof, exterior and
structural portions of the buildings, and any other improvements part of the
Demised Premises, and will perform any other repair considered to be a capital
improvement or which extends the usable life of any improvements part of the
Demised Premises. Lessee shall also keep and maintain in good
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 4 of 33
<PAGE>
repair the parking lot located on the Demised Premises. The Lessee covenants and
agrees that it will, at its own expense, keep and maintain in good order,
condition, and repair, the interior of all buildings part of the Demised
Premises and all other portions of the Demised Premises including plumbing,
heating, air conditioning, refrigeration, and electrical facilities. Lessee
further agrees that all damage or injury done to the Demised Premises by Lessee
or any person(s) who may be in, or upon the Demised Premises, shall be repaired
by Lessee at its sole cost and expense.
7. Alterations and Improvements. Subject to the conditions imposed below,
Lessee shall have the right and privilege to make such alterations,
improvements, additions and changes, structural or otherwise, during the term of
this Lease, at its own cost and expense, in and to the Demised Premises in such
manner as it may deem necessary or convenient to promote the interests of its
business; provided, however, that changes to the structural portions of the
buildings must first be submitted to Lessor for its written approval, which
approval shall not be unreasonably withheld. Any alterations, improvements,
additions or changes made to the Demised Premises by or for the Lessee under the
terms of this paragraph shall attach to the realty and become the property of
the Lessor at and upon termination of this Lease.
Lessee shall provide insurance, protecting the interests of Lessor and
Lessee, as their respective interests may appear, to
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 5 of 33
<PAGE>
cover the work of mechanics, laborers and materialmen, prior to the commencement
of any such alterations or improvements. If the Demised Premises become subject
to any lien or encumbrance of any kind, including, but not limited to, any
mechanics or materialmen's lien on account of labor, services or material
furnished to or for the benefit of Lessee or claimed to have been furnished to
or for the benefit of Lessee, Lessee shall immediately take whatever action as
shall be necessary or required to remove the lien or encumbrance within thirty
(30) days of the filing thereof. if Lessee has not removed the lien or
encumbrance within the aforesaid thirty (30) day period, Lessee shall provide
Lessor with a bond or other reasonably acceptable form of financial assurance,
to protect Lessor and the Demised Premises from such claims, from such bonding
company(ies) and in such form satisfactory to Lessor, in an aggregate amount
equal to the full amount of the lien or encumbrance (including costs and
expenses).
8. Trade Fixtures. Lessee shall have the right to place or install upon the
Demised Premises such new trade fixtures as it shall deem desirable for the
conduct of its business, and all trade fixtures so placed in or upon the Demised
Premises at the expense of the Lessee (whether or not readily removable) shall
remain the property of the Lessee and all or any part thereof may be removed by
Lessee. Provided, however, if any such trade fixtures are not removed by the
Lessee within sixty (60) days of
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 6 of 33
<PAGE>
the date it vacates the Demised Premises, such trade fixtures shall become the
property of the Lessor. If Lessee should require financing for certain trade
fixtures it desires to be installed on the Demised Premises, Lessor agrees to
execute a waiver and/or release, if requested to do so, in favor of any person
or party other than Lessee who holds title to, or a security interest in, such
equipment, fixtures or other personal property installed on, or placed in any
building part of, the Demised Premises permitting the removal of such equipment,
fixtures and other personal property by such legal owner or secured party;
provided that such shall be given only where required as a condition of Lessee's
obtaining necessary financing in connection with the purchase and installation
of such equipment, fixtures or other personal property or upon refinancing of
its obligation. In the event removal of such financed trade fixtures shall
cause damage or disfigurement to the Demised Premises, or to the walls,
ceilings or floors of buildings part of the Demised Premises, the cost of
repairing the same shall be borne by the Lessee.
9. Surrender of Demised Premises. Upon the expiration of this Lease, Lessee
shall surrender the Demised Premises to Lessor in as good order and condition as
at the commencement of the primary term of this Lease, unrestored alterations,
reasonable wear and tear, damage by fire, other casualty and the elements
excepted.
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 7 of 33
<PAGE>
10. Assignment and Subletting. Lessee shall not assign, mortgage, or
otherwise encumber this Lease or sublet, license, or permit all or any part of
the Demised Premises to be used by others, whether voluntarily or involuntarily,
by operation of law, or otherwise, without Lessor's prior written consent.
However, Lessee may assign this Lease or sublet the Demised Premises to a
wholly-owned subsidiary of Lessee for the use set forth in Section 5 of this
Lease if Lessee is otherwise in full compliance with the terms and conditions of
this Lease and if Lessee agrees, in writing (in form and content satisfactory to
the Lessor), to guarantee as surety the full and faithful performance of the
subsidiary, assignee, or sublessee. In addition, Lessee may assign this Lease
in connection with the sale of the entire business conducted by Lessee at the
Demised Premises if the buyer expressly assumes, in writing (form and content
satisfactory to Lessor), Lessee's obligations under this Lease, Lessee
otherwise is in full compliance with the terms and conditions of this Lease, and
Lessee obtains Lessor's prior written consent to such an assignment which
consent shall not be unreasonably withheld or delayed. To obtain Lessor's
consent to such assignment, the following conditions shall, at a minimum, be
met:
(a) The buyer must furnish Lessor with a copy of its most current
financial statement evidencing to Lessor's reasonable satisfaction that it can
assume the financial
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 8 of 33
<PAGE>
obligations of this Lease;
(b) The buyer must have a business reputation and financial resources at
least as good and substantial as that of Lessee on the date hereof and such
date thereafter; and
(c) Lessee shall not be relieved of any liability or responsibility under
the terms of this Lease by reasons of such assignment, but shall nevertheless
remain liable hereunder, as surety and guarantor.
Taxes.
(a) Lessee agrees to pay all real estate taxes and assessments imposed or
levied against the Demised Premises, including the buildings, improvements and
the land on which the same are located, during the term of this Lease and any
extension thereof.
(b) Lessee agrees to pay all applicable rental taxes and use taxes (other
than income taxes upon the receipt of the rental payments by Lessor), if any,
levied upon the Rent and the use of the Demised Premises, as well as any taxes
assessed or imposed against any leasehold interest or any personal property of
any kind owned, installed or used by Lessee at or upon the Demised Premises,
during the term of this Lease and any extension thereof. Lessee shall also be
responsible for any franchise, corporate, income, profits, or revenue tax,
assessment charge or levy applicable to the business of Lessee conducted upon
the Demised
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 9 of 33
<PAGE>
Premises.
(c) Upon failure of Lessee to make timely payment of any taxes or
assessments due, Lessor shall have the right, but shall not be required, to
advance the amounts required for payment directly to the authorities making such
levy or assessment, and shall add the amount so paid, plus any interest and
penalty imposed, to the rental accruing to the Lessor hereunder for the next
succeeding month or months as the case may be. Provided, however, Lessee shall
not be required, unless required by law, to make any payment of taxes or
assessments, nor shall Lessor pay the same on its behalf, during the period that
Lessee is diligently and in good faith pursuing its rights under subparagraph
(d) below so long as the Lessee provides Lessor with adequate security for the
payment of said taxes when any protest period expires.
(d) Both Lessor and Lessee shall have the right to diligently contest in
good faith by proper legal proceedings any tax assessment, levy or other
governmental charge or imposition, the expense of which shall be paid by the
moving party desiring to so contest. In connection herewith, Lessor and Lessee
agree, at the expense of the moving party, to cooperate and to execute and
deliver all appropriate papers, documents or other instruments which may be
necessary or proper to permit the moving party to contest any such tax
assessment or levies.
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 10 of 33
<PAGE>
12. Insurance.
(a) The Lessee agrees to defend, indemnify and/or hold and save the Lessor
harmless at all times during the Lease and any extension hereof from and against
any and all loss, damage, cost or expense on account of any claim for injury
(including death) or damage either to person or property sustained by the Lessor
or by any other person which arises out of the use and occupancy of the Demised
Premises by the Lessee (except those resulting from the Lessor's unlawful
intentional or grossly negligent acts). In connection herewith, Lessee at its
own cost and expense shall provide and keep in force for the benefit and
protection of the Lessee and Lessor, as their respective interests may appear
and with the Lessor as an additional named insured, a general liability policy
or policies in standard form protecting the Lessee and Lessor against any and
all liability occasioned by accident or personal injury with minimum limits of
Five Million Dollars ($5,000,000). Lessee shall provide Lessor with a
certificate of insurance from the insurer evidencing such insurance. A renewal
policy shall be secured not less than ten (10) days prior to the expiration of
any policy and a new certificate of the insurer, with proof of payment of
premium evidencing such insurance, shall be deposited with the Lessor upon such
renewal. The Lessor shall have the right to settle and adjust all liability
claims against Lessor and all claims of Lessor
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 11 of 33
<PAGE>
against the insuring companies; and upon written request of the Lessor, Lessee
shall at the Lessee's own cost and expense appear for and defend the Lessor in
any action to which the Lessor may be made a party arising out of any such claim
for injury or damage (except those suits resulting from the Lessor's unlawful
intentional or grossly negligent acts).
(b) Lessee covenants and agrees to carry fire and extended coverage
insurance on all improvements part of the Demised Premises insuring the Lessor
and Lessee as their interests may appear against hazards customarily insured
against by fire and extended coverage type of insurance as now contained in
policies in effect in the State of South Carolina, in an amount equal to the
full replacement value of such improvements a part thereof, and to pay the
premium or premiums on said insurance when due. Lessee shall provide Lessor with
a certificate of insurance from the insurer evidencing such insurance and any
renewal thereof, and evidence of renewal shall be given to Lessor not less than
ten (10) days prior to expiration of any policy term.
(c) Lessee covenants and agrees to carry business interruption/business
overhead insurance to cover any losses which might occur as a result of a fire
or other casualty to the Demised Premises, and to pay the premium or premiums on
said insurance when due. Lessee shall provide Lessor with a Certificate of
Insurance from the insurer evidencing such insurance and any renewal thereof.
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 12 of 33
<PAGE>
Evidence of renewal shall be given to Lessor not less than ten (10) days prior
to the expiration of any policy term.
(d) Lessor agrees to defend, indemnify and/or hold and save the Lessee
harmless at all times during the Lease and any extension hereof from and against
any and all loss, damage, cost or expense on account of any claim for injury
(including death) or damage to either person or property sustained by the Lessee
or by any third person which arises out of or resulting from the Lessor's
unlawful, intentional, or grossly negligent acts. Upon written request of the
Lessee, Lessor shall at Lessor's own cost and expense appear for and defend the
Lessee in any action to which the Lessee may be made a party arising out of any
such claim for injury or damage resulting from the Lessor's unlawful,
intentional or grossly negligent acts.
(e) Lessor and Lessee hereby waive any and all rights of recovery against
the other for or arising out of damage to or destruction of the Demised Premises
and any other of their property from causes then included under the policy or
policies required by this section, or any endorsements and, if any additional
premium is required to effectuate such waiver, then such additional premium
shall be paid by the beneficiary of such waiver of subrogation.
13. Loss by Fire or Other Casualty. In the event that any improvements part
of the Demised Premises are partially
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 13 of 33
<PAGE>
destroyed by fire or other casualty, the proceeds of the policy(ies) required
under Section 12 shall be used to restore said improvements to their condition
prior to said loss and the rental due and payable under the terms of this Lease
shall be abated to the extent that such loss negatively effects Lessee's ability
to operate its business from the Demised Premises but only to the extent that
such lost rental is paid to the Lessor under the business interruption/business
overhead insurance Lessee is required to obtain. In the event no such insurance
exists, then the Lessee's rental obligation shall not abate. In the event said
improvements should be totally destroyed by fire or other casualty, the entire
proceeds of such policy shall be used, to the extent that the Lessor and Lessee
agree, to restore said improvements to their condition prior to said loss
without unnecessary delay. Rent shall be abated during the period of
reconstruction, or until the Lessor receives replacement value for the loss if
no reconstruction is to take place, to the extent that such lost rental is paid
to the Lessor under the business interruption/business overhead insurance Lessee
is required to obtain. In the event that no such insurance exists, then the
Lessee's rental obligation shall not abate. Any additional costs which may be
necessary to restore said premises in the event of a total loss shall be borne
by the Lessor; provided, that in the event any damage to or destruction of such
improvements cannot reasonably be repaired within one hundred
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 14 of 33
<PAGE>
eighty (180) days, and results in Lessee no longer being able to operate its
business, then both the Lessor and the Lessee shall have the option to
terminating this Lease, whereupon all rents herein provided shall abate. Any
insurance policy required under the terms of this Lease shall contain a loss
payable endorsement to the Lessor, Lessee and any mortgagee as their interests
may appear. A copy of such policy or policies certified by the agent as in full
force and effect shall be delivered to the Lessor.
Lessor and Lessee hereby waive any and all rights of recovery against the
other for or arising out of damage to or destruction of the Demised Premises and
any other of their property from causes then included under standard fire and
extended coverage insurance policies or endorsements and, if any additional
premium is required to effectuate such waiver, then such additional premium
shall be paid by the beneficiary of such waiver of subrogation.
14. Condemnation. If all or any portion of the Demised Premises is taken
under any condemnation or eminent domain proceeding and if the remaining portion
thereof is untenantable, unusable or inadequate for Lessee's purposes, this
Lease shall terminate on the date which said Demised Premises or such portion
thereof is so taken and the rental shall be accounted for between the Lessee and
Lessor as of such date. In the event that this Lease shall not so terminate, the
rent shall equitably abate from the date of such taking and Lessor shall at its
own cost and
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 15 of 33
<PAGE>
expense restore the Demised Premises to a complete architectural unit, including
improvements made by Lessee and in such case Lessee shall have no interest in
the condemnation award. In the event of a taking of the entire Demised Premises
or such portion thereof that the Demised Premises is rendered untenantable,
unusable or inadequate for Lessee's purposes, Lessee shall be entitled to share
in any condemnation award made to Lessor to the extent of an amount equal to the
amortization cost to the Lessee (amortized monthly on a straight line basis over
the balance of the term of this Lease from and after the date of construction or
installation) of (1) all leasehold improvements to the Demised Premises made by
Lessee during the term of this Lease, and (2) installation cost of Lessee's
fixtures and equipment in and to the Demised Premises, less the condemnation
award, if any, that may be made directly to Lessee by the condemning authority.
In the event of a termination of this Lease, as hereinabove provided, it is
understood and agreed that any such termination shall be without prejudice to
the rights of either the Lessor or Lessee to seek a separate award and recover
from the condemning authority compensation for such damage caused by
condemnation, it being further understood and agreed that neither shall have any
rights in the award made to the other by any condemnation authority, except as
expressly provided for hereinabove.
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 16 of 33
<PAGE>
15. Bankruptcy, Breach or Default. If at any time during the term hereof
and any renewal, proceedings in bankruptcy shall be instituted by or against the
Lessee which results in adjudication of bankruptcy or if the Lessee shall file
or any creditor of the Lessee shall file, or any person or persons shall file
any petition under Chapters 7 or 11 of the United State Bankruptcy Code, as the
same is now in force or may hereafter be amended, and the Lessee shall be
adjudicated bankrupt, or if a receiver of the business or assets of the Lessee
be appointed and such appointment shall not be vacated within sixty (60) days
after notice thereof to the Lessee, or the Lessee makes an assignment for the
benefit of creditors, or any sheriff, marshall, constable or keeper takes
possession of the Demised Premises or property of the Lessee located thereon by
virtue of an attachment or execution proceedings, or if any payment of rent
shall be past due or unpaid for a period of ten (10) days following receipt by
Lessee of written notice thereof by Lessor, or if any of the terms or conditions
of this Lease Agreement be violated and not cured within ten (10) days following
the giving of written notice thereof by Lessor to Lessee, or if not curable
within ten (10) days, if Lessee shall diligently and in good faith pursue such
cure, this Lease shall, at the option of the Lessor, terminate and the Lessor
may thereupon lawfully enter into or upon the Demised Premises or any part
thereof, repossess the same and expel Lessee therefrom,
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 17 of 33
<PAGE>
without prejudice to any other claim or remedies the Lessor may have for the
collection of rent and/or for damages for breach of this Lease. Upon such
termination, all installments of rent earned to the date of termination shall
become due and payable. Should the Lessor elect to reenter, as herein provided,
or should it take possession pursuant to legal proceedings or pursuant to any
notice provided by law, it may either terminate this Lease and institute suit
for damages resulting from such breach, or it may from time to time, without
terminating this Lease, relet said Demised Premises or any part thereof for the
account of the Lessee for such terms and at such rental or rentals and upon such
other terms and conditions as Lessor, in its own discretion may deem advisable,
and rentals from such reletting shall be applied: first, to the payment of any
costs in such reletting; second, to the payment of any indebtedness other than
rent due hereunder from Lessee to Lessor; and third, to the payment of rent due
and unpaid hereunder. Should such rentals received from such reletting during
any month be less than that agreed to be paid during that month by the Lessee
hereunder, the Lessee shall pay such deficiency to Lessor. Such deficiencies
shall be calculated and paid monthly. After an authorized assignment or
subletting, the occurrence of any of the foregoing defaults shall affect this
Lease only if caused by the Assignee or Sublessee and simultaneous notice of any
such default shall be given by the Lessor, not only to the Assignee or Sublessee
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 18 of 33
<PAGE>
but also to the Lessee, in order that the Lessee may have the same opportunity
to remedy the default as the Assignee or Sublessee.
16. Subordination. Lessee agrees to subordinate this Lease to any mortgage
that Lessor may have placed or may hereafter place upon the Demised Premises and
Lessee agrees to execute on demand any instrument reasonably required by a
mortgagee; provided, however, that all such mortgages shall by appropriate
provision provide (or by separate recordable agreement executed by the owners
and holders of such mortgages so provide) that as long as Lessee shall not be in
default in the performance of its obligations under this Lease, neither this
Lease or Lessee's right to remain in exclusive possession of the Demised
Premises shall be affected or disturbed by reason of any default by Lessor under
any such mortgage, and, if such mortgage shall be foreclosed, this Lease and all
Lessee's rights and obligations hereunder shall survive such foreclosure and
continue in full force and effect. In connection herewith, it is understood and
agreed that any subordination agreement executed pursuant to this paragraph
shall specifically contain a standard nondisturbance provision as hereinabove
intended by the parties hereto. In connection herewith, it is further understood
and agreed that should the Lessor become in default in the payment of principal
or interest of any mortgage executed pursuant to authority vested in the Lessor
under this paragraph, Lessee may, at its option cure such defaults by making the
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 19 of 33
<PAGE>
delinquent payments with any penalties involved to the mortgage, which payments
shall be considered in lieu of the next ensuing payment or payments due under
this Lease to the extent of such payments to the mortgagee.
17. Lessor's Right of Entry. Lessee agrees that Lessor or its agents or
representatives shall have the right to enter into and upon the Demised Premises
or any part thereof during regular business hours for the purpose of inspecting
the same to ensure that the covenants and conditions of this Lease are being
respected by the Lessor.
18. Licenses, Utility Charges, Etc. Lessee shall make payment of all sums
due on account of utility services provided to the Demised Premises, including
but not limited to water, gas, electric and janitorial services as they shall
accrue and be due and payable. Lessee agrees to pay its own telephone charges.
Lessee agrees to make payment of all sums due on account of occupational
licenses and other licenses or permits necessary in the operation of the
business to be conducted on the Demised Premises.
19. Lessee's option to Purchase Property
(a) Lessor grants to Lessee the option to purchase the Demised Premises at
the time, for the consideration and upon the terms and conditions set forth
below.
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 20 of 33
<PAGE>
(b) The Tenant may purchase the Demised Premises at any time during the
period of the Lease. Provided, however, the right to exercise the option is
conditioned upon the Lessee not being in default at the time of exercise and the
payment by Lessee of all basic rent, additional rent, and other special payments
as provided in this Lease to the date of the completion of the purchase of the
property by Lessee.
(c) Lessee election to exercise this option must be evidenced by written
notice addressed to the Lessor, sent by registered or certified mail to Lessor's
office or to any other place designated by Lessor by written notice to the
Lessee. if Lessee elects to exercise the option it shall give Lessor sixty (60)
days prior written notice. If the option is exercised Lessor and Lessee will
within the sixty day notice period execute and deliver a formal Contract of Sale
which shall provide that the sale shall be all cash and that ten percent (10%)
of such cash payment shall be paid upon the execution and delivery of the
Contract. The balance of the cash payment shall be made at closing which shall
take place within thirty (30) days from the date of the execution and delivery
of the contract.
(d) In the event that the option is exercised at any time during the first
three (3) years of the Lease term the option price shall be Three Million Eighty
Thousand Dollars ($3,080,000.00). In the event that the option is exercised at
any
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 21 of 33
<PAGE>
time during the fourth and all subsequent years of the Lease the option price
shall be Three Million Five Hundred Eighty Thousand Dollars ($3,580,000.00).
(e) Unless otherwise required by applicable law, all expenses in connection
with the transfer of the Demised Premises, including but not limited to, title
insurance, recording fees, and all other closing costs shall be paid by Lessee,
with the exception of deed preparation and deed stamps.
(f) If this Lease expires or is terminated in any manner for any reason,
except as a result of Lessor's failure to perform its Covenants hereunder, all
of Lessee's rights under this option shall cease and this option shall be void.
(g) Lessor and Lessee have, simultaneously with the execution of this
Lease, a lease for property located in Fountain Inn, South Carolina (the
"Fountain Inn Lease"). The Fountain Inn Lease includes an option to purchase
that property. The Lessor and Lessee intend and agree that this option may only
be exercised simultaneously with the exercise of the Fountain Inn Lease option,
and that the option price set forth herein shall include the acquisition of the
Fountain Inn property.
(h) If the option is exercised, at closing the Lessee/Purchaser shall be
conveyed good and marketable title, free and clear of all liens and
encumbrances.
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 22 of 33
<PAGE>
20. Signs. Lessee shall have the right, at its own cost and expense,
throughout the term of this Lease to install and maintain signs at such places
upon the Demised Premises as Lessee, in its sole discretion, may desire provided
said installation complies with the laws affecting said location. Upon the
expiration of this Lease, Lessee shall remove any such signs placed upon said
Demised Premises and shall repair any damage to the Demised Premises caused by
the erection or removal thereof.
21. Indemnity. Lessee agrees to indemnify and hold Lessor harmless against
any and all expenses, loss or liability paid, suffered or incurred as a result
of any breach by Lessee or its Assignees or Sublessees of any covenants or
conditions of this Agreement or the negligence of the Lessee, its agents or
employees. Without intending to limit any of the warranties contained
hereinabove, the Lessee agrees to indemnify, defend and hold the Lessor harmless
from and against any claims, demands, lawsuits, damages, assessments, fines,
penalties, costs or other expense (including reasonable attorney's fees and
court costs) arising from or in any way related to actual or threatened damage
to the environment, agency costs of an investigation, personal injury or death,
or damage to property, due to a release or alleged release of hazardous
materials on, under or adjacent to the Demised Premises or in the surface or
ground water located on, under or adjacent to the Demised Premises, or gaseous
emissions from the
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 23 of 33
<PAGE>
Demised Premises or any other condition existing on the Demised Premises
resulting from the use by Lessee or existence caused by Lessee of hazardous
materials, whether such claim proves to be true or false. Lessee further agrees
that its indemnity obligations shall include but are not limited to, liability
for damages resulting from the personal injury or death of an employee of
Lessee, regardless of whether the Lessee has paid the employee under the
Worker's Compensation laws of the state of South Carolina, or other similar
federal or state legislation for the protection of employees. The term "property
damage" as used in this paragraph includes, but is not limited to, damage to any
property of the Lessee, the Lessor and any third party.
Lessee hereby further agrees to indemnify and hold Lessor harmless from and
against all liability, including all foreseeable and unforeseeable consequential
damages, directly or indirectly arising out of the use, generation, storage or
disposal of hazardous materials including without limitation, the cost of any
required or necessary inspection, audit, cleanup or detoxification and the
preparation of any closure or other required plans, consent orders, license
applications or the like, whenever arising, to the full extent that such action
is attributable, directly or indirectly, to the use, generation, storage or
disposal of hazardous materials on the Demised Premises during the tenancy of
Lessee.
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 24 of 33
<PAGE>
22. Title and Quiet Enjoyment. Lessor warrants and covenants to Lessee that
Lessor is, at the time of the execution of these presents, lawfully seized and
possessed of the Demised Premises in fee simple and that he has a good and
marketable title thereto and has the full right to lease the same for the term
aforesaid, and that as long as Lessee is not in default hereunder, the Lessee
may peaceably and quietly have, hold, occupy and enjoy the Demised Premises and
all the appurtenances thereto without hindrance on the part of the Lessor. In
connection herewith, Lessor agrees to warrant and defend Lessee to such peaceful
and quiet use and possession of the Demised Premises against the claims of all
persons claiming by, through or under Lessor.
23. Estoppel Certificate. Within ten (10) days after Lessor or any
mortgagee of Lessor requests same from Lessee, Lessee shall execute and deliver
to Lessor or such mortgagee an "Estoppel Certificate". Such Estoppel Certificate
shall state that this Lease remains in full force and effect without any
modification, shall state any reasonable representatives requested by Lessor or
said mortgagee, and shall state that Lessee has no setoffs against Base Rent or
any items reserved as rent hereunder. If this Lease has been modified or if
Lessee has any setoffs, such Certificate shall state the exact nature of the
modification and the precise amount of the setoffs and basis therefor.
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 25 of 33
<PAGE>
24. Lessor's Rights to Finance or Sell Sublet to Lease. Lessor has the
absolute right, without Lessee's consent, to obtain financing on or to further
mortgage its interest in the Demised Premises and all of Lessor's rights and
interests therein, or to sell the Demised Premises under and subject to Lessee's
rights hereunder. Provided, however, that all such mortgages which Lessor places
on the property shall, by appropriate provision, provide (or by separate
recordable agreement executed by the owners and holders of such mortgages so
provide) that as long as Lessee shall not be in default in the performance of
its obligations under this Lease, neither this Lease nor the Lessee's right to
remain in exclusive possession of the Demised Premises shall be effected or
disturbed by reason of any default by Lessor under any such mortgage and if such
mortgage shall be foreclosed, this Lease and all Lessee's rights and obligations
hereunder shall survive such foreclosure and continue in full force and effect.
25. Covenant Against Waste. Lessee shall not cause or permit any waste,
damage, or injury to the Demised Premises. Lessee, at its own costs and expense,
shall keep the Demised Premises and all buildings and improvements thereon, and
the adjoining sidewalks, curbs, parking areas and pavement, landscaping, access
roads and signage, in good order and repair, and shall make all necessary
improvements, replacements, and renewals including all structural repairs
necessary to maintain the
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 26 of 33
<PAGE>
foregoing in such good condition and repair.
26. Interest on Late Fees. All sums paid by Lessee after the due date
therefor shall bear interest at a rate equal to the "National Prime" designated
as such in the Wall Street Journal, as adjusted from time to time, plus two
percent (2%).
27. Fountain Inn Lease. Any default under the Fountain Inn Lease shall
constitute an event of default under this Lease. Further, unless specifically
granted in this Lease or the Fountain Inn Lease, neither party may terminate one
of the leases without also terminating the other.
28. Waiver of Custom. Notwithstanding any usage, or custom, Lessor shall
have the right at all times to enforce strictly the provisions of this Lease. If
Lessor fails at any time to enforce strictly any Lease provision(s), such
failure shall not be construed as having created a custom or waiver in any way
contrary to the specific provisions of this Lease or as having in any way or
manner modified this Lease.
29. No Construction Against Drafter. This Lease shall be interpreted and
construed without regard to customary principles of interpretation and
construction of legal instruments which construe ambiguities against the party
causing an instrument to be drafted.
30. Notices. Any notice or demand under the terms of this Lease or under
any statute which must or may be given or made
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 27 of 33
<PAGE>
by a party hereto shall be in writing and shall be given or made by registered
or certified mail addressed to the respective parties as follows:
TO THE LESSOR: Blacksmith Leasing
c/o Mr. Harold J. Hendershot, Jr.
Spring Island
Route 6, Box 284-H
Okatie, SC 29910
With a copy to:
Mr. Dennis C. Gilchrist
Gilchrist Law Firm, P.A.
Post Office Box 691
Greenville, SC 29602
TO THE LESSEE: Carolina Commercial Heat Treating, Inc.
C/O Gibraltar Steel Corporation
of New York
Post Office Box 2028
Buffalo, NY 14219
Attn: Mr. Walt Erazmus
With a copy to:
Mr. Robert J. Olivieri
Lippes, Silverstein, Mathias & Wexler
700 Guaranty Building
28 Church Street
Buffalo, NY 14202-3950
Such notice or demand shall be deemed to have been given or made when
deposited, postage prepaid, in the United States mail. The above addresses may
be changed at any time by giving ten (10) days prior written notice as
hereinabove provided.
31 . Rights of Successors and Assigns. The covenants and conditions
contained in this Lease shall bind and inure to the benefit of the Lessor and
Lessee and their respective heirs,
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 28 of 33
<PAGE>
executors, administrators, successors and assigns, but neither the Lessor nor
Lessee shall be bound or liable unless and until this Lease shall have been
executed and delivered by both Lessor and Lessee.
32. Divisibility. If any term or provision of this Lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such terms or
provisions to persons or circumstances other than those as to when it is held
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
33. Entire Agreement. This instrument and the Fountain Inn Lease contains
the entire and only agreement between the parties, and no oral statement or
representations or prior written matter not contained in this instrument shall
have any force or effect. This Lease shall not be modified or amended in any way
except by a writing executed by both parties.
34. Choice of Law. This Agreement shall be governed by the laws of the
State of South Carolina.
35. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 29 of 33
<PAGE>
IN WITNESS WHEREOF the undersigned parties have caused this Lease to be
executed, and their respective seals affixed, as of the day and year first above
written.
IN THE PRESENCE OF: LESSOR:
Blacksmith Leasing
/s/ LISA A. STIDHAM By: /s/ HAROLD J. HENDERSHOT, JR.
- --------------------------------------- ---------------------------------
Harold J. Hendershot, Jr.
General Partner
/s/ ROY W. BOGGS
- ---------------------------------------
/s/ LISA A. STIDHAM By: /s/ JAMES M. HENDERSHOT
- --------------------------------------- ---------------------------------
James M. Hendershot
General Partner
/s/ ROY W. BOGGS
- ---------------------------------------
/s/ LISA A. STIDHAM By: /s/ NANCY H. PRESTON
- --------------------------------------- ---------------------------------
NANCY H. PRESTON
General Partner
/s/ ROY W. BOGGS
- ---------------------------------------
LESSEE:
Carolina Commercial Heat
Treating, Inc.
/s/ LISA A. STIDHAM By: /s/ HAROLD J. HENDERSHOT, JR.
- --------------------------------------- ---------------------------------
/s/ ROY W. BOGGS Its: CEO
- --------------------------------------- ---------------------------------
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 30 of 33
<PAGE>
STATE OF SOUTH CAROLINA )
COUNTY OF GREENVILLE ) PROBATE
PERSONALLY appeared before me the undersigned witness and made oath that
(s)he saw the within Blacksmith Leasing by Harold J. Hendershot, Jr., a General
Partner, sign, seal and as its act and deed deliver the within document and that
(s)he with the other witness subscribed above witnessed the execution thereof.
/s/ Roy W. Boggs
---------------------------------------
SWORN to before me this 14th
day of February, 1996
/s/ MARK TOMASZEK
- --------------------------------- (SEAL)
Notary Public for South Carolina
My Commission Expires: 8/14/2001
STATE OF SOUTH CAROLINA )
COUNTY OF GREENVILLE ) PROBATE
PERSONALLY appeared before me the undersigned witness and made oath that
(s)he saw the within Blacksmith Leasing by James M. Hendershot, a General
Partner, sign, seal and as its act and deed deliver the within document and that
(s)he with the other witness subscribed above witnessed the execution thereof.
/s/ Roy W. Boggs
---------------------------------------
SWORN to before me this 14th
day of February, 1996
/s/ MARK TOMASZEK
- --------------------------------- (SEAL)
Notary Public for South Carolina
My Commission Expires: 8/14/2001
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 31 of 33
<PAGE>
STATE OF SOUTH CAROLINA )
COUNTY OF GREENVILLE ) PROBATE
PERSONALLY appeared before me the undersigned witness and made oath that
(s)he saw the within Blacksmith Leasing by Nancy H. Preston, a General
Partner, sign, seal and as its act and deed deliver the within document and that
(s)he with the other witness subscribed above witnessed the execution thereof.
/s/ Roy W. Boggs
---------------------------------------
SWORN to before me this 14th
day of February, 1996
/s/ MARK TOMASZEK
- --------------------------------- (SEAL)
Notary Public for South Carolina
My Commission Expires: 8/14/2001
STATE OF SOUTH CAROLINA )
COUNTY OF GREENVILLE ) PROBATE
PERSONALLY appeared before me the undersigned witness and made oath that
(s)he saw the within Carolina Commercial Heat Treating, Inc. by Harold J.
Hendershot, Jr., its CE0, sign, seal and as its act and deed deliver the within
document and that (s)he with the other witness subscribed above witnessed the
execution thereof.
/s/ Roy W. Boggs
---------------------------------------
SWORN to before me this 14th
day of February, 1996
/s/ MARK TOMASZEK
- --------------------------------- (SEAL)
Notary Public for South Carolina
My Commission Expires: 8/14/2001
Lease Agreement of Reidsville
North Carolina Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 32 of 33
<PAGE>
Reidsville, N.C.
BEGINNING at a railroad spike in the center of Groom Road, same being the
northeast corner of that property sold to Groom Road Properties by deed recorded
in Deed Book 669 at Page 556 in the office of the Register of Deeds for
Rockingham County, same being the northeast corner of Tract No. 3 as per survey
for Citizens Development Corporation recorded in Map Book 12 at page 52 in the
office of Register of Deeds for Rockingham County, running thence with the east
line of Groom Road Properties South 02 deg. 47 min. 20 sec. east and passing
through a concrete monument at 30.76 feet for a total distance of 697.45 feet
to a concrete monument; thence south 56 deg. 24 min. 13 sec. East 365.35 feet
to an iron; thence a new line through Tract No. 6 of Citizens Development
Corporation North 02 deg. 47 min. 20 sec. West 826.10 feet to an iron in the
south margin of Groom Road; thence continuing on the same course 30.07 feet
to a point in the center of Groom Road; thence with the center of Groom Road
North 88 deg. 52 min. West 34.35 feet; thence with the center of said road
North 80 deg. 45 min. 56 sec. West 242.25 feet; thence North 79 deg. 59 min.
55 sec. West 23.50 feet to the point of beginning, containing 5.23 acres, more
or less, of which 0.21 acres is in the State Highway Commission
right-of-way, leaving a net usuable area of 5.02 acres, according to that survey
by Southern Mapping & Engineering Company dated October, 1969, revised
September 23, 1971, of property of Citizens Development Corporation.
SAVE AND EXCEPT from the above property an easement for a sanitary sewer line
crossing the southern portion of the above described tract, which easement is
20 feet in width and extends from a point where said sewer easement exists in
the east margin of Groom Road Properties land as described in Book 669 at
page 556 in the office of the Register of Deeds for Rockingham County and runs
South 77 deg. 22 min. 32 sec. east through the property herein conveyed to the
easternmost boundary thereof and which easement contains an additional area
beginning at a point 10 feet easterly from the western boundary of the property
herein conveyed along the aforementioned easement and running thence South 02
deg. 47 min. 20 sec. east, parallel with the western boundary of the
property herein conveyed, to the southern boundary of the property herein
conveyed. Citizens Development Corporation, its successors or assigns, expressly
reserve the right to go upon the premises for the purposes of maintaining or
repairing sanitary sewer lines along said easements, and it is understood that
the easements consist of an area 20 feet in width along the courses herein
above mentioned.
<PAGE>
EXHIBIT 10.26
STATE OF SOUTH CAROLINA )
) LEASE AGREEMENT
COUNTY OF GREENVILLE )
THIS REAL PROPERTY LEASE AGREEMENT is made and entered into the 14th day of
February, 1996, by and between Blacksmith Leasing, a South Carolina General
Partnership, (hereinafter referred to as "Lessor") and Carolina Commercial Heat
Treating, Inc., a Nevada corporation, (hereinafter referred to as "Lessee").
W I T N E S S E T H :
IN CONSIDERATION of the rentals, covenants and conditions hereinafter set
forth, and intending to be legally bound thereby, Lessor and Lessee do hereby
covenant and agree as follows:
1. Lease of Demised Premises: The Lessor does hereby lease and demise to
the Lessee, and the Lessee does hereby take and hire from the Lessor, upon and
subject to the terms, conditions, covenants and provisions hereinafter set
forth, all that certain piece, parcel or lot of land located in Fountain Inn,
South Carolina, together with the buildings, and any other improvements of any
nature whatsoever located therein (such pieces, parcels or lots of land,
together with the buildings, and any other improvements of any nature whatsoever
being referred to hereinafter as the "Demised Premises"), the Demised Premises
being more fully described on Exhibit A, attached hereto and incorporated
herein by reference.
Lease Agreement of Fountain
Inn Property by and between
Blacksmith Leasing and
Carolina Commercial Heat
Treating, Inc.
Page 1 of 33
<PAGE>
2. Term. To Have And To Hold the Demised Premises for and during a term of
fourteen (14) years, beginning with the commencement date hereinbelow set
forth.
3. Commencement Date. The term of this Lease shall commence on February 14,
1996 (the "Commencement Date") and end no later than the fourteenth anniversary
of the Commencement Date. In connection herewith, it is understood and agreed
that every twelve calendar months from such Commencement Date shall constitute a
lease year. Upon expiration of the term of this Lease, this Lease shall
automatically terminate without any further actions by either party except as
otherwise set forth in this section.
If Lessee remains in possession of the Demised Premises after the
expiration of either the original term of this Lease such possession shall, at
Lessor's option, be as a month-to-month tenant-at-will on all of the same terms
and conditions as are in effect on the last day of the preceding term, except
that:
(a) If there is another party who is scheduled to take possession as a new
lessee of the Demised Premises and would do so but for Lessee's continued
possession of the Demised Premises; or
(b) If Lessee continues in possession of the Demised Premises in disregard
of its obligation to vacate; then the Base Rent for each month (or any portion)
of Lessee's hold-over period shall be payable at the rate of double the Rent
effective on
Lease Agreement of Fountain
Inn Property by
and between Blacksmith Leasing
and Carolina Commercial Heat
Treating, Inc.
Page 2 of 33
<PAGE>
the last day of the preceding term; provided that:
(i) If Lessee continues in possession of the Demised Premises and is unable
to vacate despite using its best efforts; and
(ii) There is no other party scheduled to take possession of the Demised
Premises as a new lessee; then the Rent for each month (or any portion) of
Lessee's hold-over period shall be payable at the rate of ONE HUNDRED TEN
PERCENT (110%) of the Base Rent for the previous month for each month that
Lessee continues in possession of the Demised Premises.
4. Rental. Lessee shall pay a total annual rent of One Hundred Fifty-Six
Thousand One Hundred Seventy-Three Dollars ($156,173) for the first year of the
lease term. Upon the first and second anniversaries of the Commencement Date,
the rent for the subsequent lease year shall increase by Six Thousand one
Hundred Seventy-Three Dollars ($6,173) over that paid for the current lease
year. On the third and each subsequent anniversary of the Commencement Date, the
rent for the subsequent lease year shall increase by Seven Thousand Seven
Hundred Seventeen Dollars ($7,717) over that paid for the current lease year.
The annual rental for each lease year shall be payable in twelve (12) equal
monthly installments, in advance, with the first such monthly payment due on the
Commencement Date.
Lease Agreement of Fountain
Inn Property by and between
Blacksmith Leasing and
Carolina Commercial Heat
Treating, Inc.
Page 3 of 33
<PAGE>
5. Use of the Demised Premises. The Lessor acknowledges that the Lessee
contemplates using the Demised Premises for conducting a heat treating business.
The Lessee covenants and agrees not to occupy or use the Demised Premises or
permit the same to be occupied or used contrary to any statutes, rules, order,
ordinance, requirement or regulation applicable thereto, or in a manner which
would constitute a public or private nuisance. Lessee shall be responsible for
complying with, honoring and observing all conditions to its use and occupancy
of the Demised Premises and environmental compliance which shall or may be
imposed by any federal, state, local or municipal governmental authority charged
with the responsibility therefor to the extent such environmental compliance
results from Lessee's use and occupancy of the Demised Premises. Lessee may use
and store, in the ordinary course of business, but shall not commit the
on-premises discharge of, any petroleum product, petroleum by-product, petroleum
derivative or any other hazardous or toxic material in any form or content
during the term of this Lease.
6. Maintenance and Repair. The Lessee covenants and agrees that it will,
at its own expense, maintain and promptly repair the roof, exterior and
structural portions of the buildings, and any other improvements part of the
Demised Premises, and will perform any other repair considered to be a capital
improvement or which extends the usable life of any improvements part of the
Lease Agreement of Fountain
Inn Property by and between
Blacksmith Leasing and
Carolina Commercial Heat
Treating, Inc.
Page 4 of 33
<PAGE>
Demised Premises. Lessee shall also keep and maintain in good repair the parking
lot located on the Demised Premises. The Lessee covenants and agrees that it
will, at its own expense, keep and maintain in good order, condition, and
repair, the interior of all buildings part of the Demised Premises and all other
portions of the Demised Premises including plumbing, heating, air conditioning,
refrigeration, and electrical facilities. Lessee further agrees that all damage
or injury done to the Demised Premises by Lessee or any person(s) who may be in,
or upon the Demised Premises, shall be repaired by Lessee at its sole cost and
expense.
7. Alterations and Improvements. Subject to the conditions imposed below,
Lessee shall have the right and privilege to make such alterations,
improvements, additions and changes, structural or otherwise, during the term of
this Lease, at its own cost and expense, in and to the Demised Premises in such
manner as it may deem necessary or convenient to promote the interests of its
business; provided, however, that changes to the structural portions of the
buildings must first be submitted to Lessor for its written approval, which
approval shall not be unreasonably withheld. Any alterations, improvements,
additions or changes made to the Demised Premises by or for the Lessee under the
terms of this paragraph shall attach to the realty and become the property of
the Lessor at and upon termination of this Lease.
Lease Agreement of Fountain
Inn Property by and between
Blacksmith Leasing and
Carolina Commercial Heat
Treating, Inc.
Page 5 of 33
<PAGE>
Lessee shall provide insurance, protecting the interests of Lessor and
Lessee, as their respective interests may appear, to cover the work of
mechanics, laborers and materialmen, prior to the commencement of any such
alterations or improvements. If the Demised Premises become subject to any lien
or encumbrance of any kind, including, but not limited to, any mechanics or
materiaimen's lien on account of labor, services or material furnished to or for
the benefit of Lessee or claimed to have been furnished to or for the benefit of
Lessee, Lessee shall immediately take whatever action as shall be necessary or
required to remove the lien or encumbrance within thirty (30) days of the filing
thereof. if Lessee has not removed the lien or encumbrance within the aforesaid
thirty (30) day period, Lessee shall provide Lessor with a bond or other
reasonably acceptable form of financial assurance, to protect Lessor and the
Demised Premises from such claims, from such bonding company(ies) and in such
form satisfactory to Lessor, in an aggregate amount equal to the full amount of
the lien or encumbrance (including costs and expenses).
8. Trade Fixtures. Lessee shall have the right to place or install upon the
Demised Premises such new trade fixtures as it shall deem desirable for the
conduct of its business, and all trade fixtures so placed in or upon the Demised
Premises at the expense of the Lessee (whether or not readily removable) shall
remain the property of the Lessee, and all or any part thereof may
Lease Agreement of Fountain
Inn Property by and between
Blacksmith Leasing and
Carolina Commercial Heat
Treating, Inc.
Page 6 of 33
<PAGE>
be removed by Lessee. Provided, however, if any such trade fixtures are not
removed by the Lessee within sixty (60) days of the date it vacates the Demised
Premises, such trade fixtures shall become the property of the Lessor. If
Lessee should require financing for certain trade fixtures it desires to be
installed on the Demised Premises, Lessor agrees to execute a waiver and/or
release, if requested to do so, in favor of any person or party other than
Lessee who holds title to, or a security interest in, such equipment, fixtures
or other personal property installed on, or placed in any building part of, the
Demised Premises permitting the removal of such equipment, fixtures and other
personal property by such legal owner or secured party; provided that such shall
be given only where required as a condition of Lessee's obtaining necessary
financing in connection with the purchase and installation of such
equipment, fixtures or other personal property or upon refinancing of its
obligation. In the event removal of such financed trade fixtures shall cause
damage or disfigurement to the Demised Premises, or to the walls, ceilings or
floors of buildings part of the Demised Premises, the cost of repairing the same
shall be borne by the Lessee.
9. Surrender of Demised Premises. Upon the expiration of this Lease, Lessee
shall surrender the Demised Premises to Lessor in as good order and condition as
at the commencement of the primary term of this Lease, unrestored alterations,
reasonable wear
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Inn Property by and between
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and tear, damage by fire, other casualty and the elements excepted.
10. Assianment and Sublettincr. Lessee shall not assign, mortgage, or
otherwise encumber this Lease or sublet, license, or permit all or any part of
the Demised Premises to be used by others, whether voluntarily or involuntarily,
by operation of law, or otherwise, without Lessor's prior written consent.
However, Lessee may assign this Lease or sublet the Demised Premises to a
wholly-owned subsidiary of Lessee for the use set forth in Section 5 of this
Lease if Lessee is otherwise in full compliance with the terms and conditions of
this Lease and if Lessee agrees, in writing (in form and content satisfactory to
the Lessor), to guarantee as surety the full and faithful performance of the
subsidiary, assignee, or sublessee. In addition, Lessee may assign this Lease in
connection with the sale of the entire business conducted by Lessee at the
Demised Premises if the buyer expressly assumes, in writing (form and content
satisfactory to Lessor), Lessee's obligations under this Lease, Lessee
otherwise is in full compliance with the terms and conditions of this Lease, and
Lessee obtains Lessor's prior written consent to such an assignment which
consent shall not be unreasonably withheld or delayed. To obtain Lessor's
consent to such assignment, the following conditions shall, at a minimum, be
met:
(a) The buyer must furnish Lessor with a copy of its most current financial
statement evidencing to Lessor's
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Inn Property by and between
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reasonable satisfaction that it can assume the financial obligations of this
Lease;
(b) The buyer must have a business reputation and financial resources at
least as good and substantial as that of Lessee on the date hereof and such date
thereafter; and
(c) Lessee shall not be relieved of any liability or responsibility under
the terms of this Lease by reasons of such assignment, but shall nevertheless
remain liable hereunder, as surety and guarantor.
11. Taxes.
(a) Lessee agrees to pay all real estate taxes and assessments imposed or
levied against the Demised Premises, including the buildings, improvements and
the land on which the same are located, during the term of this Lease and any
extension thereof.
(b) Lessee agrees to pay all applicable rental taxes and use taxes (other
than income taxes upon the receipt of the rental payments by Lessor), if any,
levied upon the Rent and the use of the Demised Premises, as well as any taxes
assessed or imposed against any leasehold interest or any personal property of
any kind owned, installed or used by Lessee at or upon the Demised Premises,
during the term of this Lease and any extension thereof. Lessee shall also be
responsible for any franchise, corporate, income, profits, or revenue tax,
assessment, charge or levy
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Inn Property by and between
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applicable to the business of Lessee conducted upon the Demised Premises.
(c) Upon failure of Lessee to make timely payment of any taxes or
assessments due, Lessor shall have the right, but shall not be required, to
advance the amounts required for payment directly to the authorities making such
levy or assessment, and shall add the amount so paid, plus any interest and
penalty imposed, to the rental accruing to the Lessor hereunder for the next
succeeding month or months as the case may be. Provided, however, Lessee shall
not be required, unless required by law, to make any payment of taxes or
assessments, nor shall Lessor pay the same on its behalf, during the period that
Lessee is diligently and in good faith pursuing its rights under subparagraph
(d) below so long as the Lessee provide Lessor with adequate security for the
payment of said taxes when any protest period expires.
(d) Both Lessor and Lessee shall have the right to diligently contest in
good faith by proper legal proceedings any tax assessment, levy or other
governmental charge or imposition, the expense of which shall be paid by the
moving party desiring to so contest. In connection herewith, Lessor and Lessee
agree, at the expense of the moving party, to cooperate and to execute and
deliver all appropriate papers, documents or other instruments which may be
necessary or proper to permit the moving party to contest any such tax
assessment or levies.
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12. Insurance.
(a) The Lessee agrees to defend, indemnify and/or hold and save the Lessor
harmless at all times during the Lease and any extension hereof from and against
any and all loss, damage, cost or expense on account of any claim for injury
(including death) or damage either to person or property sustained by the Lessor
or by any other person which arises out of the use and occupancy of the Demised
Premises by the Lessee (except those resulting from the Lessor's unlawful,
intentional or grossly negligent acts). In connection herewith, Lessee at its
own cost and expense shall provide and keep in force for the benefit and
protection of the Lessee and Lessor, as their respective interests may appear
and with the Lessor as an additional named insured, a general liability policy
or policies in standard form protecting the Lessee and Lessor against any and
all liability occasioned by accident or personal injury with minimum limits of
Five Million Dollars ($5,000,000). Lessee shall provide Lessor with a
certificate of insurance from the insurer evidencing such insurance. A renewal
policy shall be secured not less than ten (10) days prior to the expiration of
any policy and a new certificate of the insurer, with proof of payment of
premium evidencing such insurance, shall be deposited with the Lessor upon such
renewal. The Lessor shall have the right to settle and adjust all liability
claims against Lessor and all claims of Lessor
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Inn Property by and between
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against the insuring companies; and upon written request of the Lessor, Lessee
shall at the Lessee's own cost and expense appear for and defend the Lessor in
any action to which the Lessor may be made a party arising out of any such claim
for injury or damage (except those suits resulting from the Lessor's unlawful,
intentional or grossly negligent acts).
(b) Lessee covenants and agrees to carry fire and extended coverage
insurance on all improvements part of the Demised Premises insuring the Lessor
and Lessee as their interests may appear against hazards customarily insured
against by fire and extended coverage type of insurance as now contained in
policies in effect in the State of South Carolina, in an amount equal to the
full replacement value of such improvements a part thereof, and to pay the
premium or premiums on said insurance when due. Lessee shall provide Lessor with
a certificate of insurance from the insurer evidencing such insurance and any
renewal thereof, and evidence of renewal shall be given to Lessor not less than
ten (10) days prior to expiration of any policy term.
(c) Lessee covenants and agrees to carry business interruption/business
overhead insurance to cover any losses which might occur as a result of a fire
or other casualty to the Demised Premises, and to pay the premium or premiums on
said insurance when due. Lessee shall provide Lessor with a Certificate of
Insurance from the insurer evidencing such insurance and any renewal thereof.
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Evidence of renewal shall be given to Lessor not less than ten (10) days prior
to the expiration of any policy term.
(d) Lessor agrees to defend, indemnify and/or hold and save the Lessee
harmless at all times during the Lease and any extension hereof from and against
any and all loss, damage, cost or expense on account of any claim for injury
(including death) or damage to either person or property sustained by the Lessee
or by any third person which arises out of or resulting from the Lessor's
unlawful, intentional, or grossly negligent acts. Upon written request of the
Lessee, Lessor shall at Lessor's own cost and expense appear for and defend the
Lessee in any action to which the Lessee may be made a party arising out of any
such claim for injury or damage resulting from the Lessor's unlawful,
intentional or grossly negligent acts.
(e) Lessor and Lessee hereby waive any and all rights of recovery against
the other for or arising out of damage to or destruction of the Demised Premises
and any other of their property from causes then included under the policy or
policies required by this section, or any endorsements and, if any additional
premium is required to effectuate such wavier, then such additional premium
shall be paid by the beneficiary of such waiver of subrogation.
13. Loss by Fire or Other Casualty. In the event that any improvements part
of the Demised Premises are partially
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destroyed by fire or other casualty, the proceeds of the policy(ies) required
under Section 12 shall be used to restore said improvements to their condition
prior to said loss and the rental due and payable under the terms of this Lease
shall be abated to the extent that such loss negatively effects Lessee's ability
to operate its business from the Demised Premises but only to the extent that
such lost rental is paid to the Lessor under the business interruption/business
overhead insurance Lessee is required to obtain. In the event no such insurance
exists, then the Lessee's rental obligation shall not abate. In the event said
improvements should be totally destroyed by fire or other casualty, the entire
proceeds of such policy shall be used, to the extent that the Lessor and Lessee
agree, to restore said improvements to their condition prior to said loss
without unnecessary delay. Rent shall be abated during the period of
reconstruction, or until the Lessor receives replacement value for the loss if
no reconstruction is to take place, to the extent that such lost rental is paid
to the Lessor under the business interruption/business overhead insurance Lessee
is required to obtain. In the event that no such insurance exists, then the
Lessee's rental obligation shall not abate. Any additional costs which may be
necessary to restore said premises in the event of a total loss shall be borne
by the Lessor; provided, that in the event any damage to or destruction of such
improvements cannot reasonably be repaired within one hundred
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Inn Property by and between
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eighty (180) days, and results in Lessee no longer being able to operate its
business, then both the Lessor and the Lessee shall have the option to
terminating this Lease, whereupon all rents herein provided shall abate. Any
insurance policy required under the terms of this Lease shall contain a loss
payable endorsement to the Lessor, Lessee and any mortgagee as their interests
may appear. A copy of such policy or policies certified by the agent as in full
force and effect shall be delivered to the Lessor.
Lessor and Lessee hereby waive any and all rights of recovery
against the other for or arising out of damage to or destruction of the Demised
Premises and any other of their property from causes then included under
standard fire and extended coverage insurance policies or endorsements and, if
any additional premium is required to effectuate such waiver, then such
additional premium shall be paid by the beneficiary of such waiver of
subrogation
14. Condemnation. If all or any portion of the Demised Premises is taken
under any condemnation or eminent domain proceeding and if the remaining portion
thereof is untenantable, unusable or inadequate for Lessee's purposes, this
Lease shall terminate on the date which said Demised Premises or such portion
thereof is so taken and the rental shall be accounted for between the Lessee and
Lessor as of such date. In the event that this Lease shall not so terminate, the
rent shall equitably abate from the date of such taking and Lessor shall at its
own cost and
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Inn Property by and between
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expense restore the Demised Premises to a complete architectural unit, including
improvements made by Lessee and in such case Lessee shall have no interest in
the condemnation award. In the event of a taking of the entire Demised Premises
or such portion thereof that the Demised Premises is rendered untenantable,
unusable or inadequate for Lessee's purposes, Lessee shall be entitled to share
in any condemnation award made to Lessor to the extent of an amount equal to the
amortization cost to the Lessee (amortized monthly on a straight line basis over
the balance of the term of this Lease from and after the date of construction or
installation) of (1) all leasehold improvements to the Demised Premises made by
Lessee during the term of this Lease, and (2) installation cost of Lessee's
fixtures and equipment in and to the Demised Premises, less the condemnation
award, if any, that may be made directly to Lessee by the condemning authority.
In the event of a termination of this Lease, as hereinabove provided, it is
understood and agreed that any such termination shall be without prejudice to
the rights of either the Lessor or Lessee to seek a separate award and recover
from the condemning authority compensation for such damage caused by
condemnation, it being further understood and agreed that neither shall have any
rights in the award made to the other by any condemnation authority, except as
expressly provided for hereinabove.
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15. Bankruiptcy, Breach or Default. If at any time during the term hereof
and any renewal, proceedings in bankruptcy shall be instituted by or against the
Lessee which results in adjudication of bankruptcy or if the Lessee shall file
or any creditor of the Lessee shall file, or any person or persons shall file
any petition under Chapters 7 or 11 of the United State Bankruptcy Code, as the
same is now in force or may hereafter be amended, and the Lessee shall be
adjudicated bankrupt, or if a receiver of the business or assets of the Lessee
be appointed and such appointment shall not be vacated within sixty (60) days
after notice thereof to the Lessee, or the Lessee makes an assignment for the
benefit of creditors, or any sheriff, marshall, constable or keeper takes
possession of the Demised Premises or property of the Lessee located thereon by
virtue of an attachment or execution proceedings, or if any payment of rent
shall be past due or unpaid for a period of ten (10) days following receipt by
Lessee of written notice thereof by Lessor, or if any of the terms or conditions
of this Lease Agreement be violated and not cured within ten (10) days following
the giving of written notice thereof by Lessor to Lessee, or if not curable
within ten (10) days, if Lessee shall diligently and in good faith pursue this
cure, this Lease shall, at the option of the Lessor, terminate and the Lessor
may thereupon lawfully enter into or upon the Demised Premises or any part
thereof, repossess the same and expel Lessee therefrom,
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without prejudice to any other claim or remedies the Lessor may have for the
collection of rent and/or for damages for breach of this Lease. Upon such
termination, all installments of rent earned to the date of termination shall
become due and payable. Should the Lessor elect to reenter, as herein provided,
or should it take possession pursuant to legal proceedings or pursuant to any
notice provided by law, it may either terminate this Lease and institute suit
for damages resulting from such breach, or it may from time to time, without
terminating this Lease, relet said Demised Premises or any part thereof for the
account of the Lessee for such terms and at such rental or rentals and upon such
other terms and conditions as Lessor, in its own discretion may deem advisable,
and rentals from such reletting shall be applied: first, to the payment of any
costs in such reletting; second, to the payment of any indebtedness other than
rent due hereunder from Lessee to Lessor; and third, to the payment of rent due
and unpaid hereunder. Should such rentals received from such reletting during
any month be less than that agreed to be paid during that month by the Lessee
hereunder, the Lessee shall pay such deficiency to Lessor. Such deficiencies
shall be calculated and paid monthly. After an authorized assignment or
subletting, the occurrence of any of the foregoing defaults shall affect this
Lease only if caused by the Assignee or Sublessee and simultaneous notice of
any such default shall be given by the Lessor, not only to the Assignee or
Sublessee
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Inn Property by and between
Blacksmith Leasing and
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but also to the Lessee, in order that the Lessee may have the same opportunity
to remedy the default as the Assignee or Sublessee.
16. Subordination. Lessee agrees to subordinate this Lease to any mortgage
that Lessor may have placed or may hereafter place upon the Demised Premises and
Lessee agrees to execute on demand any instrument reasonably required by a
mortgagee; provided, however, that all such mortgages shall by appropriate
provision provide (or by separate recordable agreement executed by the owners
and holders of such mortgages so provide) that as long as Lessee shall not be in
default in the performance of its obligations under this Lease, neither this
Lease or Lessee's right to remain in exclusive possession of the Demised
Premises shall be affected or disturbed by reason of any default by Lessor under
any such mortgage, and, if such mortgage shall be foreclosed, this Lease and all
Lessee's rights and obligations hereunder shall survive such foreclosure and
continue in full force and effect. In connection herewith, it is understood and
agreed that any subordination agreement executed pursuant to this paragraph
shall specifically contain a standard nondisturbance provision as hereinabove
intended by the parties hereto. In connection herewith, it is further understood
and agreed that should the Lessor become in default in the payment of principal
or interest of any mortgage executed pursuant to authority vested in the Lessor
under this paragraph, Lessee may, at its option cure such defaults by making the
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delinquent payments with any penalties involved to the mortgage, which payments
shall be considered in lieu of the next ensuing payment or payments due under
this Lease to the extent of such payments to the mortgagee.
17. Lessor's Riaht of Entry. Lessee agrees that Lessor or its agents or
representatives shall have the right to enter into and upon the Demised Premises
or any part thereof during regular business hours for the purpose of inspecting
the same to ensure that the covenants and conditions of this Lease are being
respected by the Lessor.
18. Licenses, Utility Charges, Etc. Lessee shall make payment of all sums
due on account of utility services provided to the Demised Premises, including
but not limited to water, gas, electric and janitorial services as they shall
accrue and be due and payable. Lessee agrees to pay its own telephone charges.
Lessee agrees to make payment of all sums due on account of occupational
licenses and other licenses or permits necessary in the operation of the
business to be conducted on the Demised Premises.
19. Lessee's Option to Purchase Property
(a) Lessor grants to Lessee the option to purchase the Demised Premises at
the time, for the consideration and upon the terms and conditions set forth
below.
(b) The Tenant may purchase the Demised Premises at
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any time during the period of the Lease. Provided, however, the right to
exercise the option is conditioned upon the Lessee not being in default at the
time of the exercise and the payment by Lessee of all basic rent, additional
rent, and other special payments as provided in this Lease to the date of the
completion of the purchase of the property by Lessee.
(c) Lessee election to exercise this option must be evidenced by written
notice addressed to the Lessor, sent by registered or certified mail to Lessor's
office or to any other place designated by Lessor by written notice to the
Lessee. if Lessee elects to exercise the option it shall give Lessor sixty (60)
days prior written notice. If the option is exercised Lessor and Lessee will
within the sixty day notice period execute and deliver a formal Contract of Sale
which shall provide that the sale shall be all cash and that ten percent (10%)
of such cash payment shall be paid upon the execution and delivery of the
Contract. The balance of the cash payment shall be made at closing which shall
take place within thirty (30) days from the date of the execution and delivery
of the contract.
(d) In the event that the option is exercised at any time during the first
three (3) years of the Lease term the option price shall be Three Million Eighty
Thousand Dollars ($3,080,000.00). In the event that the option is exercised at
any time during the fourth and all subsequent years of the Lease the
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Inn Property by and between
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Carolina Commercial Heat
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option price shall be Three Million Five Hundred Eighty Thousand Dollars
($3,580,000.00).
(e) Unless otherwise required by applicable law, all expenses in connection
with the transfer of the Demised Premises, including but not limited to, title
insurance, recording fees, and all other closing costs shall be paid by Lessee
with the exception of deed preparation and deed stamps.
(f) If this Lease expires or is terminated in any manner for any reason,
except as a result of Lessor's failure to perform its Covenants hereunder, all
of Lessee's rights under this option shall cease and this option shall be void.
(g) Lessor and Lessee have, simultaneously with the execution of this
Lease, a lease for property located in Reidsville, North Carolina (the
"Reidsville Lease"). The Reidsville Lease includes an option to purchase that
property. The Lessor and Lessee intend and agree that this option may only be
exercised simultaneously with the exercise of the Reidsville Lease option, and
that the option price set forth herein shall include the acquisition of the
Reidsville property.
(h) If the option is exercised, at closing the Lessee/Purchaser shall be
conveyed good and marketable title, free and clear of all liens and
encumbrances.
20. Signs. Lessee shall have the right, at its own cost and expense,
throughout the term of this Lease to install and
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maintain signs at such places upon the Demised Premises as Lessee, in its sole
discretion, may desire provided said installation complies with the laws
affecting said location. Upon the expiration of this Lease, Lessee shall remove
any such signs placed upon said Demised Premises and shall repair any damage to
the Demised Premises caused by the erection or removal thereof.
21. Indemnity. Lessee agrees to indemnify and hold Lessor
harmless against any and all expenses, loss or liability paid, suffered or
incurred as a result of any breach by Lessee or its Assignees or Sublessees of
any covenants or conditions of this Agreement or the negligence of the Lessee,
its agents or employees. Without intending to limit any of the warranties
contained hereinabove, the Lessee agrees to indemnify, defend and hold the
Lessor harmless from and against any claims, demands, lawsuits, damages,
assessments, fines, penalties, costs or other expense (including reasonable
attorney's fees and court costs) arising from or in any way related to actual or
threatened damage to the environment, agency costs of an investigation, personal
injury or death, or damage to property, due to a release or alleged release of
hazardous materials on, under or adjacent to the Demised Premises or in the
surface or ground water located on, under or adjacent to the Demised Premises,
or gaseous emissions from the Demised Premises or any other condition existing
on the Demised Premises resulting from the use by Lessee or existence caused by
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Lessee of hazardous materials, whether such claim proves to be true or false.
Lessee further agrees that its indemnity obligations shall include but are not
limited to, liability for damages resulting from the personal injury or death of
an employee of Lessee, regardless of whether the Lessee has paid the employee
under the Worker's Compensation laws of the state of South Carolina, or other
similar federal or state legislation for the protection of employees. The term
"property damage" as used in this paragraph includes, but is not limited to,
damage to any property of the Lessee, the Lessor and any third party.
Lessee hereby further agrees to indemnify and hold Lessor harmless from and
against all liability, including all foreseeable and unforeseeable consequential
damages, directly or indirectly arising out of the use, generation, storage or
disposal of hazardous materials including without limitation, the cost of any
required or necessary inspection, audit, cleanup or detoxification and the
preparation of any closure or other required plans, consent orders, license
applications or the like, whenever arising, to the full extent that such action
is attributable, directly or indirectly, to the use, generation, storage or
disposal of hazardous materials on the Demised Premises during the tenancy of
Lessee.
22. Title and Ouiet Enloyment. Lessor warrants and covenants to Lessee that
Lessor is, at the time of the execution of
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Inn Property by and between
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Carolina Commercial Heat
Treating, Inc.
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these presents, lawfully seized and possessed of the Demised Premises in fee
simple and that he has a good and marketable title thereto and has the full
right to lease the same for the term aforesaid, and that as long as Lessee is
not in default hereunder, the Lessee may peaceably and quietly have, hold,
occupy and enjoy the Demised Premises and all the appurtenances thereto without
hindrance on the part of the Lessor. In connection herewith, Lessor agrees to
warrant and defend Lessee to such peaceful and quiet use and possession of the
Demised Premises against the claims of all persons claiming by, through or under
Lessor.
23. Estoppel Certificate. Within ten (10) days after Lessor or any
mortgagee of Lessor requests same from Lessee, Lessee shall execute and deliver
to Lessor or such mortgagee an "Estoppel Certificate". Such Estoppel Certificate
shall state that this Lease remains in full force and effect without any
modification, shall state any reasonable representatives requested by Lessor or
said mortgagee, and shall state that Lessee has no setoffs against Base Rent or
any items reserved as rent hereunder. If this Lease has been modified or if
Lessee has any setoffs, such Certificate shall state the exact nature of the
modification and the precise amount of the setoffs and basis therefor.
24. Lessor's Riaht to Finance or Sell Sublect to Lease. Lessor has the
absolute right, without Lessee's consent, to obtain financing on or to further
mortgage its interest in the Demised
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Premises and all of Lessor's rights and interests therein, or to sell the
Demised Premises under and subject to Lessee's rights hereunder. Provided,
however, that all such mortgages which Lessor places on the property shall, by
appropriate provision, provide (or by separate recordable agreement executed by
the owners and holders of such mortgages so provide) that as long as Lessee
shall not be in default in the performance of its obligations under this Lease,
neither this Lease nor the Lessee's right to remain in exclusive possession of
the Demised Premises shall be effected or disturbed by reason of any default by
Lessor under any such mortgage and if such mortgage shall be foreclosed, this
Lease and all Lessee's rights and obligations hereunder shall survive such
foreclosure and continue in full force and effect.
25. Covenant Against Waste. Lessee shall not cause or permit any waste,
damage, or injury to the Demised Premises. Lessee, at its own costs and expense,
shall keep the Demised Premises and all buildings and improvements thereon, and
the adjoining sidewalks, curbs, parking areas and pavement, landscaping, access
roads and signage, in good order and repair, and shall make all necessary
improvements, replacements, and renewals including all structural repairs
necessary to maintain the foregoing in such good condition and repair.
26. Interest on Late Fees. All sums paid by Lessee after the due date
therefor shall bear interest at a rate equal to
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the "National Prime" designated as such in the Wall Street Journal, as adjusted
from time to time, plus two percent (2%).
27. Reidsville Lease. Any default under the Reidsville Lease shall
constitute an event of default under this Lease. Further, unless specifically
granted in this Lease or the Reidsville Lease, neither party may terminate one
of the leases without also terminating the other.
28. Waiver of Custom. Notwithstanding any law usage, or custom, Lessor
shall have the right at all times to enforce strictly the provisions of this
Lease. If Lessor fails at any time to enforce strictly any Lease provisions,
such failure shall not be construed as having created a custom or waiver in any
way contrary to the specific provisions of this Lease or as having in any way or
manner modified this Lease.
29. No Construction Against Drafter. This Lease shall be interpreted and
construed without regard to customary principles of interpretation and
construction of legal instruments which construe ambiguities against the party
causing an instrument to be drafted.
30. Notices. Any notice or demand under the terms of this Lease or under
any statute which must or may be given or made by a party hereto shall be in
writing and shall be given or made by
Lease Agreement of Fountain
Inn Property by and between
Blacksmith Leasing and
Carolina Commercial Heat
Treating, Inc.
Page 27 of 33
<PAGE>
registered or certified mail addressed to the respective parties as follows:
TO THE LESSOR: Blacksmith Leasing
c/o Mr. Harold J. Hendershot, Jr.
Spring Island
Route 6, Box 284-H
Okatie, SC 29910
With a copy to:
Mr. Dennis C. Gilchrist
Gilchrist Law Firm, P.A.
Post Office Box 691
Greenville, SC 29602
TO THE LESSEE: Carolina Commercial Heat Treating,Inc.
C/O Gibraltar Steel Corporation
of New York
Post Office Box 2028
Buffalo, NY 14219
Attn: Mr. Walt Erazmus
With a copy to:
Mr. Robert J. Olivieri
Lippes, Silverstein, Mathias & Wexler
700 Guaranty Building
28 Church Street
Buffalo, NY 14202-3950
Such notice or demand shall be deemed to have been given or made when
deposited, postage prepaid, in the United States mail. The above addresses may
be changed at any time by giving ten (10) days prior written notice as
hereinabove provided.
31. Rights of Successors and Assigns. The covenants and conditions
contained in this Lease shall bind and inure to the benefit of the Lessor and
Lessee and their respective heirs, executors, administrators, successors and
assigns, but neither the
Lease Agreement of Fountain
Inn Property by and between
Blacksmith Leasing and
Carolina Commercial Heat
Treating, Inc.
Page 28 of 33
<PAGE>
Lessor nor Lessee shall be bound or liable unless and until this Lease shall
have been executed and delivered by both Lessor and Lessee.
32. Divisibility. If any term or provision of this Lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or un-
enforceable, the remainder of this Lease, or the application of such terms or
provisions to persons or circumstances other than those as to when it is held
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
33. Entire Agreement. This instrument and the Reidsville Lease contains the
entire and only agreement between the parties, and no oral statement or
representations or prior written matter not contained in this instrument shall
have any force or effect. This Lease shall not be modified or amended in any way
except by a writing executed by both parties.
34. Choice of Law. This Agreement shall be governed by the laws of the
State of South Carolina.
35. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Lease Agreement of Fountain
Inn Property by and between
Blacksmith Leasing and
Carolina Commercial Heat
Treating, Inc.
Page 29 of 33
<PAGE>
IN WITNESS WHEREOF the undersigned parties have caused this Lease to be
executed, and their respective seals affixed, as of the day and year first above
written.
IN THE PRESENCE OF: LESSOR:
Blacksmith Leasing
/s/ Lisa A. Stidham By: /s/ HAROLD J. HENDERSHOT, JR.
- --------------------------------------- ---------------------------------
Harold J. Hendershot, Jr.
General Partner
/s/ Roy W. Boggs
- ---------------------------------------
/s/ Lisa A. Stidham By: /s/ JAMES M. HENDERSHOT
- --------------------------------------- ---------------------------------
James M. Hendershot
General Partner
/s/ Roy W. Boggs
- ---------------------------------------
/s/ Lisa A. Stidham By: /s/ NANCY H. PRESTON
- --------------------------------------- ---------------------------------
NANCY H. PRESTON
General Partner
/s/ Roy W. Boggs
- ---------------------------------------
LESSEE:
Carolina Commercial Heat
Treating, Inc.
/s/ Lisa A. Stidham By: /s/ HAROLD J. HENDERSHOT, JR.
- --------------------------------------- ---------------------------------
/s/ Roy W. Boggs Its: CEO
- --------------------------------------- ---------------------------------
Lease Agreement of Fountain
inn Property by and between
Blacksmith Leasing and
Carolina Commercial Heat
Treating, Inc.
Page 30 of 33
<PAGE>
STATE OF SOUTH CAROLINA )
COUNTY OF GREENVILLE ) PROBATE
PERSONALLY appeared before me the undersigned witness and made oath that
(s)he saw the within Blacksmith Leasing by Harold J. Hendershot, Jr., a General
Partner, sign, seal and as its act and deed deliver the within document and that
(s)he with the other witness subscribed above witnessed the execution thereof.
/s/ Roy W. Boggs
---------------------------------------
SWORN to before me this 14th
day of February, 1996
/s/
- --------------------------------- (SEAL)
Notary Public for South Carolina
My Commission Expires: 8/14/2001
STATE OF SOUTH CAROLINA )
COUNTY OF GREENVILLE ) PROBATE
PERSONALLY appeared before me the undersigned witness and made oath that
(s)he saw the within Blacksmith Leasing by James M. Hendershot, a General
Partner, sign, seal and as its act and deed deliver the within document and that
(s)he with the other witness subscribed above witnessed the execution thereof.
/s/ Roy W. Boggs
---------------------------------------
SWORN to before me this 14th
day of February, 1996
/s/
- --------------------------------- (SEAL)
Notary Public for South Carolina
My Commission Expires: 8/14/2001
Lease Agreement of Fountain
inn Property by and between
Blacksmith Leasing and
Carolina Commercial Heat
Treating, Inc.
Page 31 of 33
<PAGE>
STATE OF SOUTH CAROLINA )
COUNTY OF GREENVILLE ) PROBATE
PERSONALLY appeared before me the undersigned witness and made oath that
(s)he saw the within Blacksmith Leasing by Nancy H. Preston, a General Partner,
sign, seal and as its act and deed deliver the within document and that (s)he
with the other witness subscribed above witnessed the execution thereof.
/s/ Roy W. Boggs
---------------------------------------
SWORN to before me this 14th
day of February, 1996
/s/
- --------------------------------- (SEAL)
Notary Public for South Carolina
My Commission Expires: 8/14/2001
STATE OF SOUTH CAROLINA )
COUNTY OF GREENVILLE ) PROBATE
PERSONALLY appeared before me the undersigned witness and made oath that
(s)he saw the within Carolina Commerical Heat Treating, Inc. by Harold J.
Hendershot, its CEO, sign, seal and as its act and deed deliver the within
document and that (s)he with the other witness subscribed above witnessed the
execution thereof.
/s/ Roy W. Boggs
---------------------------------------
SWORN to before me this 14th
day of February, 1996
/s/
- --------------------------------- (SEAL)
Notary Public for South Carolina
My Commission Expires: 8/14/2001
Lease Agreement of Fountain
Inn Property by and between
Blacksmith Leasing and
Carolina Commercial Heat
Treating, Inc.
Page 32 of 33
<PAGE>
LEGAL DESCRIPTION FOR FOUNTAIN INN, SOUTH CAROLINA
ALL THAT PIECE, PARCEL OR TRACT OF LAND, lying, being and situate in the
County of Laurens, State of South Carolina, Dials Township, in the south of the
corporate limits of the Town of Fountain Inn with the following metes and bounds
according to a plat and survey made by Lewis C. Godsey, Surveyor, February 8,
1968:
BEGINNING at a spike in the center of the intersection of a county road and
State Highway No. 14 (Hunts Bridge Road) and running thence N 65(degrees) 20' E
along the center of said county road, a distance of 726.65 feet to a point joint
front corner with lot of Thompson; thence with the joint line of Thompson S 20o
53' 53" E a distance of 375.26 feet to a point; thence N 65(degrees) 20' E a
distance of 175 feet to a point; thence S 20(degrees) 52' 45" E a distance of
627.17 feet to a point; thence S 64(degrees) 20' 11" W a distance of 454.76 feet
to the northerly line of Frontage Road; thence along the northerly line of
Frontage Road N 55(degrees) 8' 42" W a distance of 627.8 feet; thence continuing
along the northerly line of Frontage Road N 41(degrees) 07' 50" W a distance of
136.85 feet; thence continuing along the northerly line of Frontage Road N
33(degrees) 20' 44" W a distance of 128.45 feet; thence continuing along the
northerly line of Frontage Road N 26(degrees) 41' 24" W a distance of 172.55
feet to the point or place of beginning.
<PAGE>
EXHIBIT 10.27
LEASE
THIS AGREEMENT is made as of this 1st day of August 1995, by and among JOHN
W. REX ("Lessor") and CAROLINA COMMERCIAL HEAT TREATING, INC., a Nevada
corporation ("Lessee").
W I T N E S S E T H:
WHEREAS, Lessor is the owner of certain Premises hereinafter described and
located in Conyers, Georgia, which he leased to Lindberg Corporation pursuant to
a lease dated August S, 1985 ("Lindberg Lease"). Lindberg Corporation assigned
the Lindberg Lease to Lessee pursuant to an Assignment and Assumption Agreement
("Assignment Agreement") dated June 4, 1994, with a term that commenced on said
date and was agreed to end July 31, 1995; and
WHEREAS, Lessor and Lessee desire to enter into this Lease for the Premises
hereinafter described, upon termination of the Assignment Agreement, in
accordance with the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties, in consideration of the mutual covenants
contained herein and intending to be legally bound hereby, agree as follows:
1. PREMISES. Lessor leases to Lessee, and Lessee leases from Lessor, that
certain parcel of land, together with the buildings and improvements thereon
erected, located in Conyers, Georgia (the "Premises"), more particularly
described in Schedule "A" attached hereto and made a part hereof. Lessee has
inspected
<PAGE>
the Premises and accepts the Premises in "as is" condition (except as otherwise
set forth in Section 18 hereof) as evidenced by execution of this Lease.
2. TERM.
A. Original Term; Option to Renew. The original term of this Lease
shall be for three (3) years, shall commence on August 1, 1995, and shall
terminate on July 31, 1998. Upon expiration of the original term of this
Lease, this Lease shall automatically terminate without any further action by
either party hereto except as otherwise set forth in this Section. However,
Lessee, if it is otherwise in full compliance with the terms and conditions of
this Lease, shall have the option to extend the term of this Lease for one (1)
additional period of three (3) years upon the same terms and conditions except
that the provision for Base Rent (as hereinafter defined) shall be adjusted, in
an amount determined by the mutual agreement of both Lessor and Lessee, prior to
commencement of the extended term. Lessee shall exercise its option for such
extension by giving written notice thereof to Lessor not less than one hundred
twenty (120) days prior to the expiration of the original term of this Lease.
Such extension shall be and become effective only when Lessor and Lessee shall
have executed a new Lease which sets forth the new Base Rent and the other
covenants, conditions, and terms of this Lease along with any necessary
modifications.
-2-
<PAGE>
B. Hold-Over. If Lessee remains in possession of the Premises after
the expiration of either the original term of this Lease or of the extended
term, except pursuant to an exercise of the option to extend in accordance
herewith or with the written consent of Lessor, such possession shall, at
Lessor's option, be as a month-to-month tenant-at-will on all of the same terms
and conditions as are in effect on the last day of the preceding term, except
that:
(i) If there is another party who is scheduled to take possession
as a new lessee of the Premises and would do so but for Lessee's continued
possession of the Premises; or
(ii) If Lessee continues in possession of the Premises in
disregard of its obligation to vacate; then the Base Rent for each month (or any
portion) of Lessee's hold-over period shall be payable at the rate of double the
Base Rent effective on the last day of the preceding term; provided that:
(iii) If Lessee continues in possession of the Premises and is
unable to vacate despite using its best efforts; and
(iv) There is no other party scheduled to take possession of the
Premises as a new lessee; then the Base Rent for each month (or any portion) of
Lessee's hold-over period shall be payable at the rate of ONE HUNDRED TEN
-3-
<PAGE>
PERCENT (110%.) of the Base Rent for the previous month for each month that
Lessee continues in possession of the Premises.
3. RENT. Lessee agrees to pay Lessor, as minimum rent ("Base Rent"), for
the Premises during each year of the original term of this Lease, the sums
hereinafter set forth. The Base Rent for the first year of the original term of
this Lease shall be the annual sum of SIXTY-THREE THOUSAND SIX HUNDRED DOLLARS
($63,600.00), payable in equal monthly installments of FIVE THOUSAND THREE
HUNDRED DOLLARS ($5,300.00) each. The Base Rent for the second year of the
original term of this Lease commencing August 1, 1996, shall be the annual sum
of SIXTY-FOUR THOUSAND EIGHT HUNDRED SEVENTY-TWO DOLLARS ($64,872.00), payable
in equal monthly installments of FIVE THOUSAND FOUR HUNDRED SIX DOLLARS
($5,406.00) each. The Base Rent for the third year of the original term of this
Lease commencing August 1, 1997, shall be the annual sum of SIXTY-SIX THOUSAND
ONE HUNDRED SIXTY-EIGHT DOLLARS ($66,168.00), payable in equal monthly
installments of FIVE THOUSAND FIVE HUNDRED FOURTEEN DOLLARS ($5,514.00) each.
Monthly installments of the Base Rent shall be paid, in advance, on the first
day of each month, commencing August 1, 1995. All sums payable by Lessee to
Lessor under this Lease shall be paid in the same manner as the Base Rent and
shall constitute additional rent hereunder.
-4-
<PAGE>
4. POSSESSION AND USE OF PREMISES. Lessee shall have the right to use the
Premises for heat treatment and processing, and related warehousing and
maintenance, and any other lawful use so long as such use is specifically
permitted under local zoning laws. Lessee at all times shall comply with all
applicable federal, state, and local laws, ordinances, and regulations
applicable to its use of and operations at the Premises.
5. LESSEE'S RIGHT OF FIRST REFUSAL TO PURCHASE. In the event Lessor shall
receive a bona fide offer to purchase the Premises during the term of this Lease
(including any extension), and the offer of purchase shall be satisfactory to
Lessor, Lessor shall give Lessee the privilege of purchasing the Premises at the
same price and on the same terms of the offer. Lessor shall give Lessee written
notice of this privilege by sending Lessee a copy of the offer to purchase.
Lessee shall accept the offer, in writing, and sign a contract to purchase the
Premises on the same terms and conditions, within the period of thirty (30) days
after the date the offer is mailed to Lessee by Lessor. If Lessee fails to
accept the offer to purchase and to sign a contract within the period provided,
Lessor shall be at liberty to sell the Premises to any third party on the same
terms and conditions as offered to Lessee, free from any further application of
the right of first refusal contained in this Section 5. If Lessor sells the
Premises to a third party in the manner set forth in this Section 5, Lessee's
-5-
<PAGE>
right of first refusal shall expire and the provisions of this Section 5 shall
thereafter be rendered null and void.
6. TAXES.
A. Real Estate Taxes. Lessor agrees to pay all real estate taxes and
assessments imposed or levied against the Premises, including the buildings,
improvements and the land on which the same are located, during the term of this
Lease and any extension thereof.
B. Other Taxes. Lessee agrees to pay all applicable rental taxes and
use taxes, if any, levied upon the Base Rent and the use of the Premises, as
well as any taxes assessed or imposed against any leasehold interest or any
personal property of any kind owned, installed or used by Lessee at or upon the
Premises, during the term of this Lease and any extension thereof. Lessee shall
also be responsible for any franchise, corporate, income, profits, or revenue
tax, assessment, charge or levy applicable to the business of Lessee conducted
upon the Premises.
7. INSURANCE.
A. Lessee's Responsibility. Lessee agrees to maintain, at its own
cost and expense, during the term of this Lease and any extension thereof, a
policy of general, public liability and property damage insurance in a reputable
company authorized to do business in the State of Georgia, in which policy
Lessor shall be named as an additional insured, as his interest may appear, and
to
-6-
<PAGE>
furnish current certificates evidencing the existence of such insurance, upon
execution of this Lease and within ten (10) days after demand by Lessor, which
certificates shall provide that such insurance shall not be cancelled except
after thirty (30) days' written notice to Lessor. Such policy shall provide
primary coverage for the benefit of Lessor and Lessee, as their respective
interests may appear, in an amount of at least ONE MILLION DOLLARS
($1,000,000.00) single limit combined bodily injury and property damage each
occurrence, to cover all situations where any person or persons claim bodily
injury, death, or property damage in or upon the Premises. Lessee also agrees to
maintain, at its own cost and expense, during the term of this Lease and any
extension thereof, a policy of fire and wind storm with extended coverage
insurance for the full insurable value of the buildings and improvements covered
by this Lease and shall name Lessor as an additional named insured thereon, as
his interest may appear. Lessee agrees to furnish current certificates
evidencing the existence of such insurance upon execution of this Lease and
within ten (10) days after demand, providing that such insurance shall not be
cancelled except after thirty (30) days' written notice to Lessor.
B. Lessee Hold Harmless. Lessee agrees to indemnify, defend, and hold
Lessor harmless from any and all claims of others for injuries to persons or
property occurring in or upon the Premises and arising out of the use,
occupancy, or operation of the
-7-
<PAGE>
Premises by Lessee, except for such claims for injuries as are caused by the
negligent, intentional, or willful acts of Lessor.
C. Waiver of Claims. Each party to this Lease waives all claims for
recovery from the other party for any loss or damage to any of his, its, or
their property covered by valid and collectible insurance to the extent of any
recovery collected under such insurance.
8. UTILITIES AND SERVICE. Lessee agrees to pay for all utilities and
services which may be furnished to it or used by it in or about the Premises
including, but not limited to, all water, fuel, gas, oil, heat, electricity,
power, telephones, trash removal, and sewer service. Under no circumstances
shall Lessor be required to furnish or be responsible for the furnishing of or
the failure of any utility company or public authorities to furnish any
utilities or any other service of any kind to the Premises or any part thereof.
9. REPAIRS. Lessee, during the term of this Lease or any extension thereof,
shall at its own cost and expense be responsible for all maintenance to the
Premises and shall make all necessary or appropriate repairs, replacements,
renewals, and additions required to keep and maintain the Premises (including
the roof, outside walls and electrical, plumbing, sprinkler, burglar alarm,
lighting, heating and air conditioning systems) and all other systems,
equipment, and appurtenant apparatus in good order and condition.
-8-
<PAGE>
Lessee further agrees that all damage or injury done to the Premises by Lessee
or any person(s) who may be in, or upon the Premises, shall be repaired by
Lessee at its sole cost and expense. Any repairs, replacements, renewals, and
additions, and any labor performed or materials furnished in, on, or about the
Premises, shall be performed and furnished by Lessee in strict compliance with
all applicable federal, state, and local laws, regulations, and ordinances of
all governmental bodies having jurisdiction over the Premises and the
requirements of any board of underwriters having jurisdiction. Lessee agrees, at
the expiration of any term of this Lease, or upon the earlier termination
hereof, to quit and surrender the Premises in good condition and repair,
reasonable wear and tear excepted. Subject to the provisions of Section 25 of
this Lease, with the written prior approval of Lessor, Lessee shall have the
right to make such minor alterations and modifications to the Premises as Lessee
may deem desirable. Any and all damage to the Premises resulting from such
alterations and modifications shall be repaired by Lessee at Lessee's sole cost
and expense.
10. REMOVAL OF EQUIPMENT, MACHINERY AND OTHER PROPERTY. Upon any
termination of this Lease, so long as Lessee is otherwise in full compliance
with the terms and conditions of this Lease, Lessee shall be allowed to remove
all of its equipment, machinery, trade fixtures, and other items of Lessee's
personal property, including but not limited to furnaces, hoists, trolley rails,
furniture, and
-9-
<PAGE>
fixtures. Lessee agrees to repair any and all damage to the Premises caused by
such removal and to leave the Premises in as good condition and repair as the
Premises is in at the present time, reasonable wear and tear, excepted.
11. DESTRUCTION OF PREMISES.
A. Partial Destruction. If any event causes a partial destruction of
the buildings land improvements located upon the Premises during the original
term of this Lease or any extension thereof, Lessor shall restore the same with
reasonable promptness if such repairs and restoration can reasonably be made by
Lessor, using the proceeds of insurance contemplated by Section 7 hereof, within
six (6) months from the date of the partial destruction. In such case, such
partial destruction shall in no way void this Lease. However, the Base Rent
reserved to be paid shall be abated proportionately as to such damaged portion
of the Premises within which Lessee is unable to reasonably carry on its normal
business operations because of such partial destruction, until the same has been
restored. Nothing herein shall adversely affect or limit Lessor's right to
collect the proceeds of any insurance procured by Lessee for the benefit of
Lessor and/or on the Premises, nor adversely affect nor limit Lessee's right to
collect any insurance proceeds for losses or damage affecting its personal
property.
B. Total Destruction. If any event causes a total destruction of the
buildings and improvements located upon the
-10-
<PAGE>
Premises during the original term of this Lease or any extension thereof, and if
in the reasonable discretion of an architectural engineer selected by Lessor and
Lessee the Premises cannot reasonably be expected to be repaired and restored,
using the proceeds of insurance contemplated by Section 7 hereof, within six (6)
months from the date of the total destruction, this Lease shall absolutely
terminate, and the Base Rent and other items reserved as rent in this Lease
shall abate for the balance of the term. Nothing in this Lease shall be
construed to adversely affect or limit Lessor's right to collect the proceeds of
any insurance procured by Lessee for the benefit of Lessor and/or on the
Premises, nor affect nor limit Lessee's right to collect an insurance proceeds
for losses or damage affecting its personal property.
C. Use of Insurance Proceeds. Should the total or partial destruction
of the Premises result from causes covered by fire, extended coverage and/or
other insurance contemplated hereby to be furnished by Lessee, the insurance
proceeds shall be paid to Lessor and used by Lessor to effect the required
repairs and restoration as contemplated hereby.
12. CONDEMNATION.
A. Entire Premises. If any competent authority condemns the entire
Premises for any public use or purpose, then the Lease term shall cease on the
day prior to the taking of
-11-
<PAGE>
possession by such authority or on the day prior to the vesting of the Premises
in such authority, whichever occurs first. Base Rent shall be paid to and
adjusted as of that day. The entire amount of any reward for such taking as it
may relate to the Premises shall belong exclusively to Lessor; provided,
however, that Lessee shall be eligible to obtain its own condemnation award for
any loss of its use and occupancy of the buildings and other improvements
located upon the Premises and any loss of its personal property.
B. Partial Taking. If any competent authority condemns a portion of
the Premises and as a result there is a major change in the use and/or occupancy
of the buildings and other improvements which in the reasonable determination of
Lessee will prevent Lessee from using the same in substantially the same manner
as before used, then Lessee may either terminate this Lease on the date when the
authority requires the part of the Premises for such public purpose, or
continue to use and occupy the remaining portion. If Lessee remains in
possession and occupies the remaining portion, all the terms and conditions of
this Lease shall remain in full force and effect with respect to such remaining
portion, except that the Base Rent reserved to be paid shall be
equitably, adjusted according to the amount and value of such remaining space
as decided by an architectural engineer selected by Lessor and Lessee.
C. Temporary Taking. If the condemning authority should take only the
right to possession of the Premises for a fixed period of time or for the
duration of an emergency or other
-12-
<PAGE>
temporary condition, then this Lease shall continue in full force and effect
without any abatement of Base Rent.
D. No Prejudice. The foregoing procedures shall be without prejudice
to the rights of either Lessor or Lessee to recover compensation from the
condemning authority for any loss or damage caused by such condemnation.
Neither Lessor nor Lessee shall have any rights in or to any award made to the
other by the condemning authority. Lessee is specifically permitted to
prosecute, directly or with Lessor against the condemning authority in such
condemnation proceedings for loss of business or depreciation to or damage to or
cost of removal of, or for the value of stock, machinery, equipment, furniture,
and other personal property belonging to Lessee and for the amount of leasehold
improvements made by Lessee. Lessee shall have the right to notice and to
participate in all such condemnation proceedings. Lessor shall not settle any
such condemnation proceedings without the prior written consent of Lessee, not
to be unreasonably withheld.
13. DEFAULT.
A. Events. The following events shall constitute events of default
under this Lease:
(i) If Lessee fails to pay the Base Rent or any item reserved as
rent hereunder, and such failure shall continue for a period of ten (10) days;
-13-
<PAGE>
(ii) If Lessee ceases operation at the Premises for more than ten
(10) days; provided, however, if Lessee continues to pay the Base Rent due and
payable in a timely manner, has complied with its duty to maintain the Premises
as stated in Paragraph 9 of this Lease, has complied with its duty to maintain
insurance coverage as stated in Paragraph 7A of this Lease, and has otherwise
performed or observed all of its other duties and obligations under this Lease,
then Lessor shall not exercise any of Lessor's rights and remedies herein
provided solely because of Lessee's cessation of operations, as aforesaid;
(iii) If Lessee fails to perform or observe any of its other
duties and obligations under this Lease, which failure or neglect continues for
thirty (30) days after Lessor gives Lessee written notice; provided, however, if
Lessee with due diligence, dispatch and good faith attempts with best efforts to
correct such default, then Lessor shall not exercise any of the rights and
remedies herein so long as Lessee cures the default within forty-five (45) days
from the original date Lessor notifies Lessee of such default;
(iv) If Lessee makes a general assignment for the benefit of
creditors; admits in writing its inability to pay its debts as they become due;
files a petition in bankruptcy; is adjudged a bankrupt or insolvent; files a
petition seeking any reorganization, arrangement" composition, readjustment,
liquidation, dissolution, or similar relief under any present or future
-14-
<PAGE>
statute, law, or regulation; files an answer admitting or not contesting the
material allegations of a petition against it in any such proceeding; or seeks
or consents to or acquiesces in the appointment of any trustee, receiver, or
liquidator of Lessee or any material part of its property; or
(v) If within sixty (60) days after commencement of any
bankruptcy or other proceedings against Lessee seeking any reorganization,
arrangement, composition, readjustment, liquidation, or dissolution, or similar
relief under any present or future federal, state or local statute, law, or
regulation, such proceedings shall not have been dismissed; or if, within sixty
(60) days after the appointment without the consent or acquiescence of Lessee of
any trustee, receiver, or liquidator of Lessee or any material part of its
properties, such appointment shall not have been vacated.
B. Remedies. After any event of default occurs, Lessor may lawfully declare
the termination of this Lease and the acceleration of Base Rent and all other
sums reserved as rent under this Lease. In addition, Lessor may at its election
terminate Lessee's right to possession without the termination of this Lease
and/or declare all installments of Base Rent and all other sums reserved as rent
under this Lease immediately due and payable. Lessor may, in any such case, also
re-enter the Premises and exercise any right or remedy existing at law or in
equity. All
-15-
<PAGE>
remedies available to Lessor under this Lease shall be cumulative and in
addition to Lessor's rights at law and in equity.
14. EJECTMENT. If Lessee, after at least ten (10) days' prior written
notice and an opportunity for cure, violates any conditions of this Lease, or if
Lessee remains in possession of the Premises after the original term or
extension term expires, Lessee empowers any attorney to file an agreement for
entering in any competent court an amicable action and judgment in ejection
against Lessee and all parties claiming under Lessee. Such action shall allow
Lessor to immediately recover the Premises, for which this Lease shall be
Lessee's sufficient warrant.
15. SURRENDER. Upon any termination of this Lease, whether by forfeiture,
lapse of time, or otherwise, or upon termination of Lessee's right to
possession, Lessee shall at once surrender and deliver up the Premises to Lessor
in good condition and repair, reasonable wear and tear excepted.
16. PRIOR FILING OF WAIVER OF LIENS. Lessee shall not make any alterations
or improvements to and/or at the Premises without first obtaining Lessor's prior
written approval of Lessee's plans and specifications, which shall not be
unreasonably withheld. Lessee shall provide insurance, protecting the interests
of Lessor and Lessee, as their respective interests may appear, to cover the
work of mechanics, laborers and materialmen, prior to the
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commencement of any such alterations or improvements. If the Premises become
subject to any lien or encumbrance of any kind, including, but not limited to,
any mechanics' or materialmen's lien on account of labor, services or material
furnished to or for the benefit of Lessee or claimed to have been furnished to
or for the benefit of Lessee, Lessee shall immediately take whatever action as
shall be necessary or required to remove the lien or encumbrance within thirty
(30) days of the filing thereof. If Lessee has not removed the lien or
encumbrance within the aforesaid thirty (30) day period, Lessee shall provide
Lessor with a bond or other reasonably acceptable form of financial assurance,
to protect Lessor and the Premises from such claims, from such bonding
company(ies) and in such form satisfactory to Lessor, in an aggregate amount
equal to the full amount of the lien or encumbrance (including costs and
expenses).
17. ASSIGNMENT AND SUBLETTING. Lessee shall not assign, mortgage, or
otherwise encumber this Lease or sublet, license, or permit all or any part of
the Premises to be used by others, whether voluntarily, by operation of law, or
otherwise, without Lessor's prior written consent. However, Lessee may assign
this Lease or sublet the Premises to a wholly-owned subsidiary of Lessee for the
use set forth in Section 4 of this Lease if Lessee is otherwise in full
compliance with the terms and conditions of this Lease and if Lessee agrees, in
writing (in form and content
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satisfactory to Lessor), to guarantee as surety the full and faithful
performance of the subsidiary, assignee, or sublessee. In addition, Lessee may
assign this Lease in connection with the sale of the entire business conducted
by Lessee at the Premises if the buyer expressly assumes, in writing (in form
and content satisfactory to Lessor), Lessee's obligations under this Lease,
Lessee otherwise is in full compliance with the terms and conditions of this
Lease, and Lessee obtains Lessor's prior written consent to such assignment. To
obtain Lessor's consent to such assignment, the following conditions shall, at a
minimum, be met:
A. Financial Qualification of Buyer. The buyer must furnish Lessor
with a copy of its most current financial statement evidencing to Lessor's
reasonable satisfaction that it can assume the financial obligations of this
Lease;
B. Good Reputation of Buyer. The buyer must have a business reputation
and financial resources at least as good and substantial as that of Lessee on
the date hereof and such date thereafter; and
C. Lessee Remains Obligated as Surety. Lessee shall not be relieved of
any liability or responsibility under the terms of this Lease by reason of such
assignment, but shall nevertheless remain liable hereunder, as surety and
guarantor.
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18. LEGAL OBLIGATIONS RE CONDITION OF PREMISES.
A. General. Lessor and Lessee acknowledge that certain federal, state,
and local laws, rules, and regulations are now in effect and that additional
laws, rules, and regulations may be enacted relating to or affecting the
Premises and concerning the impact on the environment of construction, land use,
maintenance and operation of buildings and improvements, and the conduct of
business thereon. Lessee shall comply with all present and future laws,
regulations, and rules of applicable federal, state, county, and other
governmental authorities with respect to the Premises and Lessee's business
conducted thereon. Lessee shall not cause, or permit to be caused, any. act or
practice upon the Premises, by negligence, omission, or otherwise, that would
or may adversely affect the environment. In addition to and not in limitation of
the foregoing, Lessee agrees that it shall not cause or permit any Hazardous
Substance (as hereinafter defined) to be disposed of on or in the Premises.
Lessee may use, store, and generate Hazardous Substances (as hereinafter
defined) on the Premises in connection with the conduct of its business thereon
provided that any such use, storage, or generation is in accordance with all
applicable laws, rules, and regulations. As used herein, the term "Hazardous
Substance(s)" means any substance that is toxic, ignitable, reactive, or
corrosive or that is regulated by any federal, state, or local governmental
agency, law, rule or regulation, and includes without limitation any and all
material or substances defined as
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"Hazardous Waste," "Extremely Hazardous Waste," or a "Hazardous Substance"
pursuant to any federal, state, or local governmental agency, law, or
regulation, asbestos and asbestos-containing materials, PCBs, petroleum and
petroleum products, chemicals known to cause cancer or reproductive toxicity,
pollutants, contaminants, and substances which are or may be toxic to humans,
animals, plants, or the environment.
B. Lessor' s Indemnity. Lessor agrees to indemnify, defend, and hold
Lessee harmless for any non-compliance of the Premises under federal, state, or
local environmental laws, rules, or regulations that occurred before the date of
Lessee's initial use and occupancy of the Premises under the lease and which
was not caused by or cannot be attributed to Lessee's use and occupancy of the
Premises, including, without limitation, any and all claims, damages, fines,
judgments, clean-up, removal or restoration costs, investigation expenses,
penalties, costs, liens, liabilities, or losses, including reasonable
attorney's fees and expenses, arising from the presence of any Hazardous
Substance on or in the Premises, except to the extent caused by Lessee or
Lessee's use of the Premises. Lessee has provided Lessor with a copy of the
Phase I and Phase II environmental tests which Lessee conducted on the Premises
prior to taking possession thereof, which are attached to this Lease as Schedule
"B" hereto and made a part hereof. Schedule "B" shall serve as evidence of the
environmental condition of the Premises prior to Lessee's initial use and
occupancy of same.
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C. Lessee's Indemnity. Lessee shall not be responsible for indemnifying,
defending, or holding Lessor harmless for any non-compliance of the Premises
with federal, state, or local environmental laws, rules, or regulations that
existed prior to Lessee's initial use and occupancy of same and that is
disclosed on Schedule "B" hereto. Upon the expiration of this Lease, Lessee may
again conduct Phase I and Phase II environmental tests, in a manner and from
such companies reasonably acceptable to Lessor, at Lessee's own cost and
expense, and forthwith provide Lessor with a copy of said tests (the "Final
Audits"). Lessee agrees to indemnify, defend, and hold Lessor harmless for any
non-compliance of the Premises with federal, state, or local environmental laws,
rules, or regulations that was caused by or can be attributed to Lessee's use
and occupancy of the Premises, including, without limitation, any and all
claims, damages, fines, judgments, clean-up, removal or restoration costs,
investigation expenses, penalties, costs, liens, liabilities, or losses,
including reasonable attorney's fees and expenses, arising from the presence of
any Hazardous Substance on or in the Premises (whether or not the use thereof is
otherwise permitted hereunder), which may be demonstrated by a comparison
between the test results in Schedule "B" hereto and the test results set forth
in the Final Audits conducted at the expiration of this Lease, if the Lessee
chooses to conduct such Final Audits.
D. Lessor's Representation. Lessor represents that there is no
civil, criminal, or administrative action, suit,
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demand, claim, hearing, notice, or demand letter, notice of violation,
investigation, or proceeding pending or to his knowledge threatened against the
Premises relating in any way to any environmental law.
E. Duty to Notify. Lessee agrees to provide immediate notice to Lessor
of any release of, or discovery of the presence of, any Hazardous Substance on
or in the Premises. Lessee shall provide Lessor with copies of all forms,
reports, and other documents required to be filed by Lessee with any federal,
state, or local governmental agency regulating the environment within ten (10)
days after filing same with said governmental agencies.
F. Survival. Lessee's indemnity obligation with respect to
environmental matters under this Section 18 shall continue after any termination
of this Lease to the extent that (1) the presence of any Hazardous Substances is
disclosed by the Final Audits in excess of the Hazardous Substances that existed
prior to Lessee's initial use and occupancy of same and that is disclosed on
Schedule "B" hereto or (2) no Final Audits are provided by Lessee. Lessee's
indemnify obligation under this action 18 with respect to environmental matters
shall otherwise survive for one (1) year after any termination of this Lease if
no Hazardous Substances in excess of that which may be shown in Schedule "B"
hereto are disclosed in the Final Audits. Lessee's indemnity obligation other
than with respect to environmental matters under this Section 18 shall survive
for one (1) year after
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any termination of this Lease with respect to all other obligations of Lessee
hereunder.
19. AGREEMENT BINDING. This Lease shall be binding upon and inure to the
benefit of the parties hereto and upon their respective heirs, personal
representatives, successors, and permitted assigns.
20. GOVERNING LAW. This Lease shall be governed by the laws of the State of
Georgia.
21. NOTICES. Lessor shall give all notices to Lessee in writing, by United
States mail, certified with postage prepaid, and addressed to:
Carolina Commercial Heat Treating, Inc.
6313 Old Pineville Road
P. 0. Box 240867
Charlotte, North Carolina 28224
Attention: Chief Executive Officer
With a copy to:
Dennis C Gilchrist, Esquire
Gilchrist Law Firm, P.A.
601 East McBee Avenue
Suite 200
Greenville, South Carolina 29601
Lessee shall make all payments and give any notices to Lessor in writing,
by United States mail, certified with postage prepaid, and addressed to:
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Mr. John W. Rex
Valley Forge Road and Eighth Street
Lansdale, Pennsylvania 19446
With a copy to:
William R. Wanger, Esquire
Pearlstine/Salkin Associates
1250 South Broad Street
Lansdale, Pennsylvania 19446-04-31
Any party may designate a new address by written notice given to the other
party.
22. ESTOPPEL CERTIFICATE. Within ten (10) days after Lessor or any
mortgagee of Lessor requests same from Lessee, Lessee shall execute and deliver
to Lessor or such mortgagee an "Estoppel Certificate." Such Estoppel Certificate
shall state that this Lease remains in full force and effect without any
modification, shall state any reasonable representations requested by Lessor or
said mortgagee, and shall state that Lessee has no setoffs against Base Rent or
any items reserved as rent hereunder. If this Lease has been modified or if
Lessee has any setoffs, such Certificate shall state the exact nature of the
modification and the precise amount of the setoffs and basis therefor.
23. QUIET ENJOYMENT. If Lessee pays the Base Rent, all other sums reserved
as rent hereunder, and performs all other terms and conditions of this Lease, it
shall quietly have and enjoy the right to use and occupy the Premises during the
Lease term without hindrance or interference by anyone claiming by or through
Lessor.
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However, Lessee takes subject to the reservations and conditions of this Lease
and specifically acknowledges taking under the terms and conditions of the
existing recorded mortgage on the Premises.
24. LESSOR'S RIGHT TO FINANCE SUBJECT TO LEASE. Lessor has the absolute
right, without Lessee's consent, to obtain financing on or to further mortgage
its interest in the Premises and all of Lessor's rights and interests therein,
under and subject to Lessee's rights hereunder.
25. ZONING AND RIGHT TO EXPAND. Lessor represents and warrants that the
local zoning laws applicable to the Premises permit Lessee to operate a heat
treatment and processing business thereon in the manner presently conducted.
Lessor makes no representation or warranty with respect to Lessee's right to
expand the buildings and improvements located upon the Premises. However, Lessor
agrees to provide Lessee with a reasonable area for expansion of its operations
upon the Premises within the area shown with an "X" on the map attached as
Schedule "C" hereto, subject to the application of all applicable federal,
state, and local laws, ordinances, and regulations. In such event, Lessor and
Lessee shall mutually determine how much expansion is to be carried out, the
rental to be paid therefor, and such other terms and conditions as shall be
agreed upon, in writing, by Lessor and Lessee. All such improvements and
expansion shall be done at the sole cost and expense of Lessee.
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26. LESSOR'S RIGHT TO SELL THE PREMISES. Lessee acknowledges that Lessor
has the absolute right to sell the Premises under and subject to this Lease and
Lessee's rights hereunder. If Lessor sells the Premises during the original term
or extension of this Lease, the new owner of the Premises shall be obligated to
assume, in writing, all of Lessor's obligations hereunder arising after the
date of sale. Lessee agrees to and shall release Lessor from this Lease and any
further obligations upon any such sale by Lessor and assumption, as aforesaid.
27. ALL PROPER CORPORATE ACTION HAS BEEN TAKEN. Lessee shall provide Lessor
with a resolution of its of Board of Directors approving the execution of this
Lease prior to the execution hereof.
28. NO THIRD PARTY BENEFIT. This Lease is entered into for the sole
protection and benefit of Lessor and Lessee. No other person(s) or entities
shall have any right of action under this Lease.
29. COVENANT AGAINST WASTE. Lessee shall not cause or permit any waste,
damage, or injury to the Premises. Lessee, at its own cost and expense, shall
keep the Premises and all buildings and improvements thereon, and the adjoining
sidewalks, curbs, parking areas and pavement, landscaping, access roads and
signage, in good order and repair, and shall make all necessary improvements,
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replacements, and renewals including all structural repairs necessary to
maintain the foregoing in such good condition and repair.
30. MEMORANDUM OF LEASE. Lessee may record, at its sole cost and expense, a
Memorandum of this Lease in title form attached as Schedule "D" hereto and
Lessor agrees to execute same; provided, however, that upon execution of such
Memorandum of Lease, Lessee shall also execute and deliver to Lessor a form of
Termination of Memorandum of Lease, in the form attached as Schedule "E"
hereto, which Termination of Memorandum of Lease shall be held by Lessor until
termination of this Lease in accordance with the terms thereof at which time it
shall be recorded by Lessor.
31. INDEMNIFICATION FOR LIABILITIES RESULTING FROM LESSEE'S ACTS OR
OMISSIONS. Lessee shall indemnify, defend and hold Lessor harmless from and
against all liabilities, costs and expenses, and losses incurred by Lessor as a
result of:
A. Lessee's failure to perform any of its obligations under this
Lease;
B. Any accident, injury, or damage happening in or about the Premises
or appurtenances, or on or under the adjoining access roads, sidewalks,
pavement, curbs, parking areas or resulting from the condition, maintenance, or
operation of the Premises or of the adjoining access roads, sidewalks, pavement,
curbs, or parking areas;
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C. Failure of Lessee to comply with any governmental
requirements; and
D. Any mechanics' or materialmen's lien or security agreement filed
against the Premises or any equipment thereon or therein, or any materials used
in the construction or alteration of any building or improvements thereon. If
any party institutes an action against Lessee in which Lessor is made a party
defendant, Lessee shall indemnify, defend, and save Lessor harmless from all
costs, expenses, and liabilities, including reasonable attorney's fees, incurred
by Lessor in such action. If an action is brought to recover any Base Rent or
any item reserved as rent under this Lease, for or on account of any breach of
or to enforce or interpret any term, covenant, or condition of this Lease, or
for the recovery of possession of the Premises, Lessor may recover from Lessee,
as part of Lessor's costs, reasonable attorney's fees and costs.
32. INTEREST ON LATE FEES. All sums paid by Lessee after the due date
therefor shall bear interest at a rate equal to the "National Prime" designated
as such in The Wall Street Journal, as adjusted from time to time, plus two
percent (2%). Time shall be deemed of the essence for all purposes of this
Lease.
33. INSPECTION AND ACCESS. Lessee shall permit Lessor or his agents to
inspect or examine the Premises at any reasonable time after reasonable notice.
Lessee shall permit Lessor to make all
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repairs, alterations, improvements, or additions to the Premises or to the
building and improvements thereon erected that Lessor deems desirable or
necessary or that Lessee is required but fails so to do. Such repairs,
alterations, improvements, or additions shall not be construed as a full or
partial eviction of Lessee, and the Base Rent shall not abate in any
manner while such work is being performed, whether by reason of resulting loss
or interruption of Lessee's business or any other reason.
34. ALTERATIONS AND ADDITIONS. Lessee may, at its own cost and expense,
install additional improvements upon the Premises, provided that such
alterations and improvements shall not adversely affect the structural soundness
of the Premises or any buildings and improvements which exist upon the Premises.
All such alterations and improvements shall be in accordance with plans and
specifications which shall in all instances first be subjected to Lessor's prior
written approval. In making any alterations and improvements, Lessee shall
comply with all applicable federal, state, and local laws, ordinances, and
regulations and insurance organizations.
35. WAIVER OF CUSTOM. Notwithstanding any law, usage, or custom, Lessor
shall have the right at all times to enforce strictly the provisions of this
Lease. If Lessor fails at any time to enforce strictly any Lease provision(s),
such failure shall not be construed as having created a custom or waiver in any
way
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contrary to the specific provisions of this Lease or as having in any way or
manner modified this Lease.
36. CAPTIONS. The captions contained in this Lease are for the convenience
of the parties only. They do not in any way modify, amplify, alter, or give full
notice of the provisions contained in this Lease.
37. AMENDMENTS; ENTIRE AGREEMENT. This Lease may be changed, waived,
discharged, or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge, or termination is
sought. This Lease constitutes the entire agreement between Lessee and Lessor.
There are no promises, representations, or understandings between the parties of
any kind or nature whatsoever except as set forth in this Lease.
38. PARTIAL INVALIDITY. If in any circumstance any clause or provision of
this Lease or its application to any party is to any extent rendered invalid or
unenforceable, the remainder of this Lease, or the application of such clause or
provision to parties or in circumstances other than those as to which it is
valid or unenforceable, shall not be affected, and each remaining clause and
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
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39. NO CONSTRUCTION AGAINST DRAFTER. This Lease shall be interpreted and
construed without regard to customary principles of interpretation and
construction of legal instruments which construe ambiguities against the party
causing an instrument to be drafted.
40. COUNTERPARTS. This Lease may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Lease, intending
to be legally bound, as of the day and year first above written.
Witness: Lessor:
William R. Wanger /s/ John W. Rex (SEAL)
- --------------------- ---------------------
(please print name) JOHN W. REX
/s/ William R. Wanger
- ---------------------
(Signature)
Wilhelm L. Gruszecki
- ---------------------
(please print name)
/s/ Wilhelm L. Gruzecki
- -----------------------
(signature)
LESSEE:
CAROLINA COMMERCIAL HEAT
TREATING, INC.
Attest: By: /s/ JAMES M. HENDERSHOT
Title: Asst. Secretary Title: President
(CORPORATE SEAL)
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SCHEDULE A
Land Lot 320 of the 16th District of Rockdale County, Georgia and shown as
Lots 2, 3 and 4 on plat prepared for Rex of Georgia, Inc. by Robert M. Buhler
Registered Surveyor, dated August 1, 1979, and more fully and particularly
described as follows:
BEGINNING at an x found on rock located on the Northwest right-of-way of Georgia
Highway #138 (100 foot right-of-way) said rock being located 1,244.41 feet
Northeast from the Northeast right-of-way of Pine Log Road, (100 foot
right-of-way) as measured along the Northwest right-of-way of Georgia Highway
#138; thence North 42 degrees 50' 05" West 250 feet to iron pin found at
corner; thence North 47 degrees 09' 55" East 300 feet to iron pin found at
corner; thence South 42 degrees 50' 05" East 250 feet to iron pin found located
on the Northwest right-of-way of Georgia Highway #138; thence South 49 degrees
09' 55" West along the Northwest right-of-way of Georgia Highway #138, 300 feet
to corner and point, of beginning.
<PAGE>
EXHIBIT 21.1
Subsidiaries
The following is a list of the subsidiaries of Gibraltar Steel Corporation.
The names of indirectly owned subsidiaries are indented under the names of their
respective parent corporations:
Gibraltar Steel Corporation of New York New York
Wm. R. Hubbell Steel Corporation Illinois
Mill Transportation Company Illinois
Carolina Commercial Heat Treating, Inc. Nevada
Gibraltar Strip Steel, Inc. Delaware
Integrated Technologies International, Ltd. Delaware
Cleveland Pickling, Inc. Delaware
GIT Limited New York
Gibraltar Steel Corporation of Tennessee Tennessee
<PAGE>
EXHIBIT 23.2
Consent of Independent Accountants
----------------------------------
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated January 25, 1996 relating
to the consolidated financial statements of Gibraltar Steel Corporation, which
appears in such Prospectus. We also consent to the application of such report to
the consolidated Financial Statement Schedules for the three years ended
December 31, 1995 listed under Item 16 of this Registration Statement when such
schedules are read in conjunction with the consolidated financial statements
referred to in our report. The audits referred to in such report also included
these schedules. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Buffalo, New York
May 17, 1996
<PAGE>
Exhibit 23.3
KPMG Peat Marwick LLP
The Board of Directors
Gibralter Steel Corporation:
We consent to the inclusion of our report dated March 17, 1995, with respect
to the combined balance sheets of Wm. R. Hubbell Steel Corporation and
subsidiary and affiliated entities as of December 31, 1994 and 1993, and the
related combined statements of earnings and retained earnings, and cash flows
for each of the years in the two-year period ended December 31, 1994, which
report appears in the S-1 of the Gibralter Steel Corporation dated May 17, 1996.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
May 15, 1996
<PAGE>
SCHARF PERA & CO.
Exhibit 23.4
The Board of Directors
Carolina Commerical Heat Treating, Inc.
We consent to the inclusion of our report dated January 18, 1996 with
respect to the balance sheets of Carolina Commerical Heat Treating, Inc. as of
December 31, 1995 and 1994, and the related statements of income, stockholders'
equity and cash flows for the years then ended, which report appears in the Form
S-1 of Gibraltar Steel Corporation dated May 17, 1996.
/s/ Scharf Pera & Co.
May 17, 1996
Charlotte, North Carolina
