<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
For the transition period from ___________________to____________________
Commission file number 1-12870
COLD METAL PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 16-1144965
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
8526 SOUTH AVENUE, YOUNGSTOWN, OHIO 44514
(Address of principal executive offices) (Zip Code)
(330) 758-1194
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes[X] No [ ]
Number of shares of Common Stock outstanding as of January 31, 2000: 6,367,500
1
<PAGE> 2
COLD METAL PRODUCTS, INC.
SEC FORM 10-Q
Quarter Ended December 31, 1999
Index
-----
<TABLE>
<CAPTION>
Page No.
PART I. - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Operations ..........................................................3
Consolidated Balance Sheets.....................................................................4
Consolidated Statements of Cash Flows...........................................................5
Notes to Consolidated Financial Statements......................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...8
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings ...................................................................11
Item 2. Changes in Securities................................................................11
Item 3. Defaults Upon Senior Securities......................................................11
Item 4. Submission of Matters to a Vote of Securities Holders................................11
Item 5. Other Information....................................................................11
Item 6. Exhibits and Reports on Form 8-K.....................................................11
Signatures.....................................................................................12
</TABLE>
2
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COLD METAL PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
December 31 December 31
----------- -----------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 49,305 $ 58,679 $ 150,201 $ 186,901
Cost of sales 43,303 59,496 131,838 178,525
----------- ----------- ----------- -----------
Gross profit (loss) 6,002 (817) 18,363 8,376
Selling, general, and administrative expenses 3,836 3,883 10,869 11,923
Impairment of long-lived assets -- 3,065 -- 3,065
Interest expense 896 1,116 2,554 3,384
----------- ----------- ----------- -----------
Income (loss) before income taxes 1,270 (8,881) 4,940 (9,996)
Income taxes expense (benefit) 468 (2,490) 1,832 (2,953)
----------- ----------- ----------- -----------
Net income (loss) $ 802 $ (6,391) $ 3,108 $ (7,043)
=========== =========== =========== ===========
Basic and diluted
Net income (loss) per share $ 0.13 $ (0.91) $ 0.49 $ (1.00)
=========== =========== =========== ===========
Weighted average common shares
outstanding 6,367,500 7,020,011 6,395,364 7,054,350
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
COLD METAL PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, March 31,
------------ ---------
1999 1999
------------ ---------
<S> <C> <C>
Assets:
Cash $ 470 $ 399
Receivables 27,812 38,772
Inventories 36,737 31,481
Prepaid and other current assets 1,215 2,729
--------- ---------
Total current assets 66,234 73,381
Property, plant and equipment - at cost 77,196 74,728
Less accumulated depreciation (37,292) (34,444)
--------- ---------
Property, plant and equipment - net 39,904 40,284
Other assets 10,535 9,563
--------- ---------
Total assets $ 116,673 $ 123,228
========= =========
Liabilities and shareholders' equity:
Short-term debt $ 6,019 $ 17,976
Accounts payable 20,166 17,221
Other current liabilities 10,793 12,611
--------- ---------
Total current liabilities 36,978 47,808
Long-term debt 38,067 37,356
Postretirement benefits 16,253 16,048
Shareholders' equity:
Common stock, $.01 par value; 15,000,000 shares
authorized, 7,532,250 shares issued 75 75
Additional paid-in capital 25,370 25,360
Retained earnings 8,430 5,640
Accumulated other comprehensive income (2,855) (3,732)
Less treasury stock, 1,164,750 and 999,750 shares, at cost (5,645) (5,327)
--------- ---------
Total shareholders' equity 25,375 22,016
--------- ---------
Total liabilities and shareholders' equity $ 116,673 $ 123,228
========= =========
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
COLD METAL PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
December 31,
------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,108 $ (7,043)
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization 2,606 3,317
Impairment of long-lived assets -- 3,065
Deferred directors' fees 10 10
Deferred income taxes 265 (1,343)
Changes in operating assets and liabilities:
Accounts receivable (3,100) 8,906
Inventory (4,822) 8,077
Accounts payable 2,626 (5,158)
Accrued expense and other (1,772) (1,319)
--------- ---------
Net cash (used in) provided by operating activities (1,079) 8,512
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (1,977) (4,217)
Sale of assets 15,153 --
--------- ---------
Net cash provided by (used in) investing activities 13,176 (4,217)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of term loans (1,115) (1,022)
Proceeds from lease financing transaction 2,076 --
Proceeds from debt 110,183 119,572
Payments of debt (122,573) (123,508)
Payment of dividends (318) --
Treasury stock acquisition (317) (249)
--------- ---------
Net cash (used in) financing activities (12,064) (5,207)
Net increase (decrease) in cash 33 (912)
Effect of translation adjustment 38 (34)
Cash at beginning of period 399 1,140
--------- ---------
Cash at end of period $ 470 $ 194
========= =========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
COLD METAL PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. OPINION OF MANAGEMENT
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments, consisting of normal recurring accruals,
necessary to present fairly the financial position of Cold Metal Products, Inc.
(the Company) as of December 31, 1999 and March 31, 1999, the results of
operations for the three month and nine month periods ended December 31, 1999
and 1998, and changes in cash flows for the nine months ended December 31, 1999
and 1998. The results of operations for the periods ended December 31, 1999 and
1998 are not necessarily indicative of the results to be expected for the full
year.
The condensed consolidated financial statements do not include footnotes and
certain financial information normally presented annually under generally
accepted accounting principles and, therefore, should be read in conjunction
with the audited consolidated financial statements contained in the Company's
annual report on Form 10-K for the year ended March 31, 1999.
NOTE 2. RESULTS OF FOREIGN OPERATIONS
The Company operates in one business segment, intermediate steel processing. The
Company derived revenues from customers in the United States of approximately
$32.9 million and $32.7 million during the three months ended December 31, 1999
and 1998 and $102.9 million and $104.6 million during the nine months ended
December 31, 1999 and 1998. The remainder of the Company's revenues are related
to customers and operations in Canada.
NOTE 3. PER SHARE CALCULATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
December 31, December 31,
------------ ------------
(In thousands)
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ 02 $ (6,391) $ 3,108 $ (7,043)
Basic average shares outstanding 6,367,500 7,020,011 6,395,364 7,054,350
Diluted average shares outstanding 6,413,158 7,020,011 6,428,403 7,054,350
Basic and diluted earnings per share $ 0.13 $ (0.91) $ 0.49 $ (1.00)
============================================================
</TABLE>
NOTE 4. INVENTORIES
<TABLE>
<CAPTION>
December 31, 1999 March 31, 1999
----------------- --------------
(In thousands)
<S> <C> <C>
Raw Materials $ 16,301 $ 12,554
Work-in-process 13,597 11,263
Finished goods 6,839 7,664
---------------------------------------
Total inventories $ 36,737 $ 31,481
=======================================
</TABLE>
6
<PAGE> 7
NOTE 5. COMMON STOCK
Under a stock repurchase program authorized by the Company's Board of Directors,
the Company purchased 165,000 shares of treasury stock in the nine month period
ended December 31, 1999 for a total of $317,000, resulting in an aggregate
purchase of treasury shares of $3.0 million which is the maximum amount
permitted by the Company's current financing agreements.
NOTE 6. COMPREHENSIVE INCOME
Comprehensive income is comprised of net income and foreign currency translation
adjustment for the period. Translation adjustments were $340,000 and $17,000 for
the three months ended December 31, 1999 and 1998, respectively and $877,000 and
$(3.7) million for the nine months ended December 31, 1999 and 1998,
respectively. Total comprehensive income (loss) for the three months ended
December 31, 1999 and 1998 was $1.1 million and $(6.4) million, respectively.
Total comprehensive income (loss) for the nine months ended December 31, 1999
and 1998 was $4.0 million and $(10.7) million, respectively.
NOTE 7. RESTRUCTURING COSTS
In the fourth quarter of fiscal 1999, the Company initiated a restructuring plan
to align it operations with current market conditions, improve the productivity
of its operations, and create a more efficient organizational structure. In
conjunction with the plan, the company recorded a pretax charge of $2.5 million
comprised of severance and other employment-related costs resulting from a
reduction in workforce. Payments under this plan totaled $.1 million in the
quarter ended December 31, 1999, $.3 million in the quarter ended September 30,
1999, $1.3 million in the quarter ended June 30, 1999, and $.6 million in the
quarter ended March 31, 1999. The remaining liability of $.2 million is expected
to be substantially paid by the end of fiscal year 2000.
NOTE 8. SALE/LEASEBACK FINANCING
In December 1999, the Company completed a sale/leaseback transaction for a new
slitter project at the Company's Indianapolis plant. The transaction has been
accounted for as financing, wherein the property remains on the books and will
be depreciated. A financing obligation representing the proceeds of $2.1 million
has been recorded, $2.0 as long term obligation and the balance as short term
obligation. The lease has a term of seven years and requires minimum annual
principle payments of $57,000 in fiscal 2000, $138,000 in fiscal 2001, $150,000
in fiscal 2002, $161,000 in fiscal 2003, $197,000 in fiscal 2004, $258,000 in
fiscal 2005 , $279,000 in fiscal 2006, and $860,000 in fiscal 2007.
7
<PAGE> 8
ITEM 2.
COLD METAL PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of financial
condition and results of operations during the periods included in the
accompanying consolidated financial statements and should be read in conjunction
with the annual financial statements.
Results of Operations
- ---------------------
The following table presents the Company's results of operations as a
percentage of net sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 87.8% 101.4% 87.8% 95.5%
-------------------------------------------------
Gross profit (loss) 12.2% -1.4% 12.2% 4.5%
Selling, general, and administrative
expenses 7.8% 6.6% 7.2% 6.4%
Impairment of long-lived assets --- 5.2% --- 1.7%
Interest expense 1.8% 1.9% 1.7% 1.8%
-------------------------------------------------
Income (loss) before income taxes 2.6% -15.1% 3.3% -5.4%
Income taxes (benefit) expense 1.0% -4.2% 1.2% -1.6%
-------------------------------------------------
Net income (loss) 1.6% -10.9% 2.1% -3.8%
=================================================
</TABLE>
Net sales for the three months ended December 31, 1999 were $49.3
million, which were $9.4 million or 16.0% less than the Company's net sales for
the corresponding period ended December 31, 1998. Lower revenue primarily
reflected the elimination of $13.7 million of revenue for the quarter ended
December 31, 1999 attributable to the Ontario, Canada service centers divested
by the Company in March 1999. After adjusting the quarter ended December 31,
1998 to remove the service center activity for comparison purposes, net sales
for the quarter ended December 31, 1999 increased $4.3 million or 9.7%. This
increase is attributable to 17.0% higher volume of tons shipped. which accounted
for $7.6 million of sales increase, offset by $3.2 million from mix of lower
revenue products sold.
For the nine months ended December 31, 1999, net sales of $150.2
million were $36.7 million lower than the $186.9 million for the comparable
period of the prior year, reflecting the elimination of revenue attributable to
the divested service centers. On a comparable location basis, year to date net
sales were up $6.0 million, or 4.1% , as a result of a 11.7% increase in volume,
which accounted for $16.9 million of sales increase, offset by $10.9 million
from mix of lower revenue product sold.
Gross profit for the three months ended December 31, 1999 was $6.0
million or 12.2% of net sales, which was an increase of $6.8 million over the
three months ended December 31, 1998. Gross loss of $.8 million for the three
months ended December 31, 1998 reflected a special charge of $2.7 million to
write-down inventory in Canada. Gross profit for the nine months ended December
31, 1999
8
<PAGE> 9
was $18.4 million, or 12.2% of net sales, compared to $8.4 million, or 4.5% of
net sales, for the nine months ended December 31, 1998, which was also impacted
by the inventory charge. The increase in margins beyond the effect of the
inventory charge for both the three months and nine months ended December 31,
1999 resulted from the elimination of the unprofitable service center
operations, cost savings from the Company's restructuring initiatives, and
increased volume at the Ottawa, Ohio and the Company's continuing Canadian
operations.
Selling, general and administrative costs of $3.8 million for the three
months ended December 31, 1999 represented 7.8% of net sales; selling and
administrative costs for the three months ended December 31, 1998 were $3.9
million, or 6.6% of net sales. Lower expense resulted from the sale of the
Ontario service centers and the effect of cost reduction efforts implemented at
the end of the prior fiscal year, somewhat offset by higher incentive
compensation accruals related to the improved profitability of the Company's
operations. For the nine month period ended December 31, 1999, selling and
administrative costs were $10.9 million, or 7.2% of net sales, compared to $11.9
million, or 6.4% of net sales for the nine months ended December 31, 1998, due
to the aforementioned items and a special charge in the prior year period
related to the former chief executive officer's retirement agreement.
For the three month period ended December 31, 1998, the Company
recorded a charge of $3.1 million to recognize the impairment of goodwill,
machinery and equipment at one of the Ontario, Canada service center locations.
This location was later divested in March, 1999.
Interest expense was $.9 million, or 1.8% of net sales for the three
months ended December 31, 1999 as compared to $1.1 million or 1.9% of net sales
for the three months ended December 31, 1998. For the nine months ended December
31, 1998, interest expense was $2.6 million, or 1.7% of net sales, compared to
$3.4 million, or 1.8% of net sales for the nine month period ended December 31,
1998. Lower interest expense primarily reflected the decrease in debt resulting
from the collection of proceeds of the service center sale.
Income before taxes was $1.3 million, or 2.6% of net sales for the
three months ended December 31, 1999. For the three months ended December 31,
1998, loss before taxes was $8.9, or 15.1% of net sales. For the nine months
ended December 31, 1999, income before taxes was $4.9 million, or 3.3% of net
sales, compared with a loss of $10.0 million, or 5.4% of net sales for the nine
months ended December 31, 1998.
Income tax expense (benefit) for the three months ended December 31,
1999 was $.5 million, or 1.0% of net sales compared to $(2.5) million, or (4.2)%
of net sales for the same period ended December 31, 1998. Tax expense (benefit)
for the nine months ended December 31, 1999 was $1.8 million, or 1.2% of net
sales, compared to $(2.9) million, or (1.6)% of net sales for the nine months
ended December 31, 1998. The effective tax rate for the three month and nine
month periods ended December 31, 1998 reflected the effect of a permanent
difference for the non-deductible goodwill impairment charge taken in the
quarter ended December 31, 1998
Net income (loss) for the three months ended December 31, 1999 was $.8
million, or $.13 per share as compared to net loss of $(6.4) million, or $(.91)
per share for the three months ended December 31, 1998. Net income (loss) for
the nine months ended December 31, 1999 was $3.1 million, or $.49 per share
compared to net loss of $(7.0) million or $(1.00) per share for the nine months
ended December 31, 1998.
9
<PAGE> 10
Liquidity and Capital Resources
- -------------------------------
During the nine months ended December 31, 1999, operating activities
used $1.1 million in cash, compared to cash provided of $8.5 million for the
nine months ended December 31, 1998. Cash inflows in the current year resulting
from income and increased payables were more than offset by increases in
receivables and inventory and a decrease in other accrued expenses. The changes
in payables, receivable, and inventory mostly reflected increased activity
levels. The decrease in other accrued expenses resulted from payments related to
the reduction in force accomplished by the Company in the last quarter of the
previous fiscal year, post-closing adjustments related to the sale of the
Ontario service centers, and other payments related to year-end accruals.
Cash provided by investing activities was $13.2 million for the nine
months ended December 31, 1999, reflecting collection of $15.1 million from the
sale of the Ontario service centers and $2.0 million of spending for capital
projects during the period.
Cash flows from financing activities consumed $12.0 million for the
nine months ended December 31, 1999. In March 1999, the Company sold its Ontario
service centers and $15.1 million was collected in the current year in relation
to this sale and used to reduce total bank debt. In December 1999, the Company
entered into a sale/leaseback transaction which provided $2.1 million of
financing with monthly payments over a seven year term.
The Company's two bank lending arrangements provided a maximum
borrowing availability of approximately $72.7 million of which $42.0 million was
outstanding at December 31, 1999. One of the borrowing facilities is a term loan
in the approximate amount of $17.7 million secured by the fixed assets of the
Company's facility in Ottawa, Ohio. At December 31, 1999, the Company was in
violation with respect to a term loan cash flow covenant which the lender has
waived through the period ending December 31, 1999. Subsequent to December 1999,
the Company expects to be in compliance.
In January, 2000, the Board of Directors declared the second regular
quarterly dividend of $.05 per share on the outstanding common stock of the
Company, payable on February 21, 2000 to shareholders of record as of February
7, 2000.
Management expects that cash generated from operating activities and
the Company's borrowing capacity will be sufficient to meet planned capital
expenditure needs and other cash requirements for the next twelve months.
Year 2000
- ---------
As of January 31, 2000, the Company has not experienced any significant
Year 2000 related problems, nor to our knowledge, have any of our suppliers. We
will continue to monitor all Year 200 related issues.
Forward-Looking Information
- ---------------------------
This document contains various forward-looking statements and
information that are based on management's beliefs as well as assumptions made
by and information currently available to management. When used in this
document, the words "expect", "believe", anticipate," "plan" and
10
<PAGE> 11
similar expressions are intended to identify forward-looking statements, which
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Because such statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward looking statements. Factors that could cause actual
results to differ materially from those expressed or implied by such
forward-looking statements include, but are not limited to, general business and
economic conditions, competitive factors such as availability and pricing of
steel, changes in customer demand, work stoppages by customers, potential
equipment malfunctions, Year 2000 problems, or other risks and uncertainties
discussed in the Company's 10K report.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings which are material
to its financial position.
ITEM 2. CHANGE IN SECURITIES
There have been no changes in securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no submission of matters to a vote of security holders.
ITEM 5. OTHER INFORMATION
During the quarter ended September 30, 1999, the Company was notified
by the New York Stock Exchange that new listing requirements of the Exchange
might make the Company ineligible for continued listing on the Exchange.
Accordingly, the Company applied for and has been accepted for listing on the
American Stock Exchange. Trading of the Company's shares on the American Stock
Exchange commenced on October 28, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit Number and Description
(10)(y) Master Lease Agreement between National City Leasing
Corporation and Coold Metal Products, Inc.
(27) Financial Data Schedule
(b) Reports on Form 8-K - None
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Cold Metal Products, Inc.
(Registrant)
/s/ Raymond P. Torok
----------------------------
Raymond P. Torok
President, Chief Executive Officer
/s/ Joseph C. Horvath
----------------------------
Joseph C. Horvath
Vice-President, Chief Financial Officer
(Principal Financial and Accounting Officer)
February 7, 2000
12
<PAGE> 1
[LOGO NATIONAL CITY (R)]
LEASING CORPORATION
MASTER EQUIPMENT LEASE AGREEMENT
--------------------------------
NO. 08321
This is a MASTER EQUIPMENT LEASE AGREEMENT between NATIONAL CITY LEASING
CORPORATION, a Kentucky corporation, whose principal office is located at 101
South Fifth Street, Louisville, Kentucky 40202 ("NATIONAL CITY") and COLD METAL
PRODUCTS, INC., a New York corporation whose principal office is located at 8526
South Avenue, Youngstown, Ohio 44514 ("LESSEE").
- --------------------------------------------------------------------------------
1. LEASE. National City agrees to lease to Lessee and Lessee agrees to lease
from National City, subject to the terms and conditions set forth herein, the
items of personal property (the "EQUIPMENT") described in each Equipment
Schedule (a "SCHEDULE") executed and delivered by the parties hereto and
incorporating the terms of this Master Equipment Lease Agreement by reference
therein (the "LEASE"). The terms "AGREEMENT", "HEREOF", "HEREIN", and
"HEREUNDER", when used in this Lease, shall mean this Lease, each Schedule and
any schedule thereto. This Agreement constitutes an agreement of lease and
nothing herein contained shall be construed as conveying to Lessee any right,
title, or interest in the Equipment except as lessee only. The parties agree
that this Lease is a "FINANCE LEASE" as defined in Sec. 2A-103(g) of the Uniform
Commercial Code ("UCC"). Lessee acknowledges either (a) that Lessee has reviewed
and approved any written Supply Contract (as defined in UCC Sec. 2A-103(y))
covering the Equipment purchased from the Supplier (as defined in UCC
Sec. 2A-103(x)) thereof for lease to Lessee or (b) that National City has
informed or advised Lessee, in writing, either previously or by this Lease of
the following: (i) the identity of the Supplier; (ii) that Lessee may have
rights under the Supply Contract; and (iii) that Lessee may contact the Supplier
for a description of any such rights Lessee may have under the Supply Contract.
2. TERM; ACCEPTANCE; RENT; RETURN. The term of lease of each item of Equipment
shall commence on the date the Lessee accepts the Equipment (the "COMMENCEMENT
DATE") as evidenced by the Certificate of Delivery and Acceptance pertaining to
such Equipment and, unless earlier terminated pursuant to the provisions hereof,
shall continue for the term specified in each Schedule. Lessee's execution and
delivery of a Certificate of Delivery and Acceptance shall constitute Lessee's
irrevocable acceptance of the Equipment covered thereby for all purposes of this
Agreement. Lessee shall pay to National City (at National City's office
specified above, or as National City may otherwise designate), rent as specified
in each Schedule. Each date on which an installment of rent is payable is
hereinafter called a "RENT PAYMENT DATE". As to each Schedule, the first Rent
Payment Date shall be the Rent Payment Date set forth therein, with the
succeeding Rent Payment Dates as set forth therein. In addition, if applicable,
Lessee shall pay interim rent for the period between the Commencement Date and
the first Rent Payment Date, based on a 30-day month and the number of days
between the Commencement Date and the first Rent Payment Date. Lessee shall also
pay to National City, on demand, a late payment charge of 5% of each installment
of rent and any other amount owing hereunder which is not paid when due. Upon
the expiration or earlier termination of the term of lease of each item of
Equipment leased hereunder, Lessee shall at its expense return such item to
National City at such location as National City may designate, in the condition
required to be maintained by Section 7 hereof, provided that Lessee may elect an
alternative disposition of the Equipment pursuant to Section 20 hereof.
3. NO WARRANTIES. Lessee acknowledges that: National City is not the
manufacturer of the Equipment nor the manufacturer's agent nor a dealer therein;
and NATIONAL CITY HAS NOT MADE AND DOES NOT MAKE ANY REPRESENTATION OR WARRANTY
WHATSOEVER, EITHER EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY, FITNESS,
CONDITION, DESIGN OR OPERATION OF THE EQUIPMENT, ITS FITNESS FOR A PARTICULAR
PURPOSE, THE QUALITY OR CAPACITY OF THE MATERIALS IN THE EQUIPMENT OR
WORKMANSHIP IN THE EQUIPMENT, NOR ANY OTHER REPRESENTATION OR WARRANTY OF ANY
KIND WHATSOEVER. Lessee confirms that it has made (or will make) the selection
of each item of Equipment on the basis of its own judgment and expressly
disclaims reliance upon any statements, representations or warranties made by
National City. National City shall not be liable to Lessee for any matter
relating to the ordering, manufacture, purchase, delivery, assembly,
installation, testing, operation or expense of any kind caused by the Equipment.
National City shall not be liable for any consequential damages as that term is
used in UCC Sec. 2-719(3). National City hereby assigns to Lessee all rights
which National City has or may acquire against any manufacturer, supplier, or
contractor with respect to any warranty and representation relating to the
Equipment leased hereunder. Lessee acknowledges that Lessee has reviewed and
approved the Purchase Order, Supply Contract or Purchase Agreement covering the
Equipment purchased from the vendor or Supplier thereof for lease to Lessee.
4. EQUIPMENT TO REMAIN PERSONAL PROPERTY; LOCATION; IDENTIFICATION; INSPECTION.
Lessee represents that the Equipment shall be and at all times remain separately
identifiable personal property. Lessee shall, at its expense, take such action
as may be necessary to prevent any third party from acquiring any right to or
interest in the Equipment by virtue of the Equipment being deemed to be real
property or a part of other personal property and shall indemnify National City
against any loss which it may sustain by reason of Lessee's failure to do so.
Except for maintenance or repairs permitted or required in Section 7 hereof, the
Equipment may not be removed from the location specified in the Schedule
pertaining thereto without National City's prior written consent and Lessee's
provision of reasonable documentation as requested by National City. If
requested by National City, Lessee shall attach to and maintain on the Equipment
a conspicuous plate or marking disclosing ownership therein. National City or
its representatives may, at reasonable times, inspect the Equipment.
5. TAXES; INDEMNITY. Lessee agrees to pay, and to indemnify and hold National
City harmless from, all license fees, assessments, and sales, use, property,
excise and other taxes and charges (other than federal income taxes and taxes
imposed by any other jurisdiction which are based on, or measured by, the net
income of National City) imposed upon or with respect to (a) the Equipment or
any part thereof arising out of or in connection with the shipment of Equipment
or the possession, ownership, use or operation thereof, or (b) this Agreement or
the consummation of the transactions herein contemplated. National City shall
prepare and file any and all returns required in connection with the obligations
which Lessee has assumed under this section, except such filings as National
City may, at its option, direct
<PAGE> 2
[LOGO NATIONAL CITY (R)]
LEASING CORPORATION
Lessee to make. Each party shall upon request furnish the other a copy of any
such filing made or governmental invoice received covering such obligations.
Lessee further agrees to assume liability for, and to indemnify and hold
National City harmless against, all claims, costs, expenses, damages and
liabilities arising from or pertaining to the manufacture, assembly,
installation, ownership, use, possession and operation of the Equipment,
including, without limitation, latent and other defects, whether or not
discoverable by Lessee or any other person, any expense, liability or loss
directly or indirectly related to or arising out of any injury to any person or
tangible or intangible property, whether arising from negligence or under any
theory of strict or absolute liability or any other cause, or any claim for
patent or copyright infringement, together with all legal fees and expenses
reasonably incurred by National City in connection with any liability asserted
against it, whether groundless or otherwise. Lessee shall, and shall cause all
other persons, if any, operating or in possession of the Equipment, to comply at
all times and in all respects with all laws and regulations (whether federal,
state, or local and whether statutory, administrative, judicial, or other) and
with every lawful governmental order (whether administrative or judicial)
pertaining to the operation and use of the Equipment and, without limiting the
generality of the foregoing, will, and will cause each such person to, (i)
operate, and use the Equipment in compliance with all Environmental Laws and
handle all Hazardous Materials in compliance therewith, and (ii) comply with and
keep in full effect each approval, certification, license, permit, or other
authorization required by any Environmental Law for the conduct of any activity
upon or within the Equipment, and will indemnify National City from and against
any and all liabilities and any and all fees, costs and expenses arising out of
use of the Equipment.
"ENVIRONMENTAL LAW" means the Clean Air Act (42 USC Sec. 7401 et seq.),
Comprehensive Environmental Response, Compensation, and Liability Act (42 USC
Sec. 9601 et seq.), the Hazardous Material Transportation Act (49 USC Sec. 1801
et seq.), the Resource Conservation and Recovery Act (42 USC Sec. 6901 et seq.),
the Federal Water Pollution Control Act (33 USC Sec. 1251 et seq.), the Toxic
Substances Control Act (15 USC Sec. 2601 et seq.) and the Occupational Safety
and Health Act (29 USC Sec. 651 et seq.), as such laws have been or hereafter
may be amended, and the regulations promulgated pursuant thereto, and any and
all similar present or future federal, state, or local laws and the regulations
promulgated pursuant thereto and "HAZARDOUS MATERIAL" means any chemical,
material, or substance which could be detrimental to animal health, human
health, vegetation, the environment or the Equipment which is, or the disposal,
manufacture, release, storage or transport of which is, or exposure to which is,
prohibited, restricted, or otherwise regulated under any Environmental Law;
The agreements and indemnities contained in this section shall survive the
expiration or earlier termination of this Agreement.
6. ASSIGNMENTS; SUBLETTING; ENCUMBRANCES.
(a) LESSEE WILL NOT WITHOUT NATIONAL CITY'S PRIOR WRITTEN CONSENT, ASSIGN OR
TRANSFER THIS LEASE OR ANY INTEREST HEREIN, OR SUBLEASE OR RELINQUISH POSSESSION
OF, OR CREATE OR SUFFER TO EXIST ANY LIEN, MORTGAGE, SECURITY INTEREST OR
ENCUMBRANCE UPON THE EQUIPMENT.
(b) NATIONAL CITY MAY ASSIGN OR TRANSFER THIS LEASE OR NATIONAL CITY'S INTEREST
IN THE EQUIPMENT WITHOUT NOTICE TO LESSEE. ANY ASSIGNEE OF NATIONAL CITY SHALL
HAVE ALL OF THE RIGHTS, BUT NONE OF THE OBLIGATIONS, OF NATIONAL CITY UNDER THIS
LEASE AND LESSEE AGREES THAT IT WILL NOT ASSERT AGAINST ANY ASSIGNEE OF NATIONAL
CITY ANY DEFENSE, COUNTERCLAIM, OR OFFSET THAT LESSEE MAY HAVE AGAINST NATIONAL
CITY(LESSEE RESERVES ITS RIGHTS TO HAVE RECOURSE DIRECTLY AGAINST NATIONAL CITY
ON ACCOUNT OF SUCH DEFENSE, COUNTERCLAIM OR OFFSET). No assignment shall relieve
National City of its obligations, and no assignee shall be required to perform
National City's obligations under this Agreement or under any Schedule except as
set forth herein, it being the intent of National City to assign the benefits
but not the obligations hereunder. Lessee acknowledges that any assignment or
transfer by National City shall not materially change Lessee's duties or
obligations under this Lease nor increase the burdens or risks imposed on
Lessee.
7. USE; REPAIRS; ETC. Lessee will cause the Equipment to be operated in
accordance with the manufacturer's or supplier's instructions or manuals by
competent and duly qualified personnel only and in compliance with all laws and
regulations and the insurance policies required to be maintained hereunder.
Lessee shall, at its own cost and expense, enter into and keep in force during
the term hereof a maintenance agreement with the manufacturer of the Equipment
or such other maintenance vendor as may be approved in writing by National City,
to maintain, service and repair the Equipment so as to keep it in as good
operating condition as it was when it first became subject to this Lease,
ordinary wear and tear excepted. National City shall have the right to approve
such maintenance agreement (which approval shall not be unreasonably withheld)
and shall be furnished with an executed copy thereof. Lessee shall, at its own
cost and expense, to the extent not covered by the aforesaid maintenance
agreement, maintain the Equipment in good operating condition. Replacement parts
shall be free and clear of any mortgage, lien, charge, or encumbrance (and title
thereto shall vest in National City immediately upon installation, attachment or
incorporation of the same in, on or into such Unit). Upon termination of this
Lease, at the expiration of the Lease Term or otherwise, the Equipment shall be
returned to National City in as good operating condition as when it became
subject to this Lease, ordinary wear and tear excepted, and in such condition as
to be acceptable to the manufacturer for regular maintenance without any
remedial maintenance. Lessee will not alter or add to the Equipment without
National City's prior written consent. Lessee will remove any attachments,
alterations or accessories and return the Equipment to its original condition,
normal wear and tear excepted, at the termination of this Lease if National City
shall so demand. In the absence of such demand, all attachments, alterations or
accessories shall become part of the Equipment at the time of their attachment
thereto.
8. LOSS; DAMAGE. If National City determines that any Equipment is lost, stolen,
destroyed, damaged beyond repair or rendered permanently unfit for normal use
for any reason, or in the event of any condemnation, confiscation, seizure, or
requisition of title to or use of such Equipment (a "CASUALTY OCCURRENCE"),
Lessee will, at the option of National City, either (a) replace the same with
Equipment in good repair or (b) promptly pay to National City an amount equal to
the Rent in respect of the Equipment suffering a Casualty Occurrence due and
payable on the first Rent Payment Date following the date of the Casualty
Occurrence, plus a sum equal to the Stipulated Loss Value of such Equipment
determined as of the Rent Payment Date next following the date of the Casualty
Occurrence as set out in the appropriate Schedule, less any physical damage
insurance proceeds paid to National City as a result of said Casualty
Occurrence.
As of the Rent Payment Date next following the Casualty Occurrence, the Rent for
such Equipment shall cease to accrue and the term of this Lease as to such
Equipment shall terminate and (except in the case of loss, theft or complete
destruction of the Equipment) National City shall be entitled to recover
possession of the Equipment. National City hereby appoints Lessee its agent to
dispose of any Equipment
2
<PAGE> 3
[LOGO NATIONAL CITY (R)]
LEASING CORPORATION
suffering a Casualty Occurrence at the best price obtainable on an "AS IS, WHERE
IS" basis without recourse or warranties of any kind. Provided that National
City has been paid the Stipulated Loss Value and all Rent and other sums due and
owing as to such Equipment, Lessee shall be entitled to the net proceeds of such
sale to the extent such proceeds do not exceed the Stipulated Loss Value of such
Equipment. Any excess shall be paid to National City .
9. INSURANCE. Lessee shall maintain at all times, at Lessee's expense, insurance
as specified in the applicable Schedule, including, but not limited to: (a) "all
risk" or broad form property insurance, as well as flood, earthquake and boiler
and machinery coverage, where applicable, as specified in the applicable
Schedule or full replacement value, whichever is greater, naming National City
as the loss payee; (b) comprehensive general liability insurance as specified in
the applicable Schedule, including coverage for products/completed operations,
broad contractor liability, broad contractual liability, fire legal liability
and personal injury, naming National City as an additional insured as respects
its interests under this Agreement; and (c) umbrella liability coverage as
provided in the applicable Schedule.
Lessee agrees that the insurance coverage required hereunder shall be placed
with insurers with at least an "A/IX" rating from A. M. Best or with such
insurers as shall be satisfactory to National City.
Each insurance policy shall contain a clause requiring the insurer to give to
National City at least 30-days prior written notice of any cancellation or
non-renewal of any policy, with 10 days prior written notice if cancellation is
due to non-payment of premiums and shall provide that no act, omission or breach
of warranty by Lessee under the terms of the policy shall give rise to any
defense against payment of the insurance proceeds to National City. Lessee shall
furnish to National City a certificate or other evidence satisfactory to
National City that such insurance coverage is in effect on the Commencement Date
of each Schedule (or, if progress payments and/or interim funding is provided
hereunder, on the date the applicable Progress Payment and Interim Funding Rider
is signed by Lessee), on an annual basis thereafter, provided, however, that
National City shall be under no duty to ascertain as to the existence or
adequacy of such insurance. National City makes no representation that the
minimum insurance coverage requirements in a Schedule will be adequate at all
times to satisfy Lessee's obligations hereunder. Lessee is fully responsible for
payment of all deductibles under such insurance polices and shall indemnify and
hold National City harmless from any deductible related to such insurance
polices. Lessee has the responsibility to provide additional insurance coverage
to maintain coverage hereunder in an amount adequate to fulfill its obligation
hereunder and is consistent with insurance coverage for similar risks in
Lessee's industry or line of business.
10. NONCANCELLABLE AGREEMENT; LESSEE'S OBLIGATIONS UNCONDITIONAL. This Agreement
cannot be canceled or terminated except as expressly provided herein. Lessee
agrees that its obligation to pay all rent and other amounts payable hereunder
and to perform its duties with respect hereto shall be absolute and
unconditional under any and all circumstances, including, without limitation,
the following: (a) any setoff, counterclaim, recoupment, defense or other right
which Lessee may have against National City, the manufacturer, or supplier of
any Equipment or anyone else for any reason whatsoever; (b) any defect in the
condition, design, title, operation or fitness for use, or any damage to or loss
of any Equipment; (c) any insolvency, reorganization or similar proceedings by
or against Lessee; or (d) any other event or circumstances whatsoever, whether
or not similar to the foregoing.
Each rent or other payment made by Lessee hereunder shall be final and Lessee
will not seek to recover all or any part of such payment from National City for
any reason whatsoever.
11. EVENTS OF DEFAULT AND REMEDIES.
(a) An Event of Default shall occur hereunder if: (i) Lessee shall fail to make
any payment of rent or other amount owing hereunder when due and such failure
shall continue for a period of 10 days; (ii) Lessee shall fail to perform or
observe any other covenant, agreement or condition hereunder within 30 days of
written notice thereof being given by National City to Lessee, or if more than
30 days are reasonably required, Lessee fails to commence to diligently perform
such obligations within such 30 days; (iii) Lessee shall make any representation
or warranty to National City herein or in any document or certificate furnished
National City in connection herewith which shall prove to be incorrect at the
time made and on the date of any Schedule entered into hereunder; (iv) Lessee or
any guarantor of Lessee's obligations hereunder (a "GUARANTOR") shall become
insolvent or make an assignment for the benefit of creditors or consent to the
appointment of a trustee or receiver, (v) a trustee or receiver shall be
appointed for Lessee or a Guarantor or for a substantial part of its property or
for the Equipment, or reorganization, arrangement, insolvency, dissolution or
liquidation proceedings shall be instituted by or against Lessee or a Guarantor
and such appointment or proceedings are not terminated after 60 days; (vi)
Lessee or a Guarantor liquidates, dissolves, or enters into any consolidation,
merger, or other combination (unless Lessee is the surviving entity after such
consolidation or merger), or sells, leases or disposes of a substantial portion
of its business or assets, unless (x) the entity formed by the consolidation, or
into which Lessee or a Guarantor is merged or the person or entity that acquires
all or substantially all of Lessee's or a Guarantor's assets shall be organized
under the laws of the United States or any state thereof and (y) National City
is reasonably satisfied as to the creditworthiness of such person or entity and
(z) not less than 30 days prior thereto such person or entity assumes all the
obligations of Lessee or a Guarantor hereunder pursuant to an assignment and
assumption agreement in form and substance satisfactory to National City; (vii)
the current holders of 51% of the outstanding capital stock of a Lessee or a
Guarantor that is not a publicly traded corporation shall cease to be the
shareholders of Lessee or a Guarantor or cease to have the unconditional right
to elect a majority of Lessee's or a Guarantor's board of directors (unless
Lessee or a Guarantor shall have provided 60-days' prior written notice to
National City of the proposed disposition of stock and National City shall have
consented thereto in writing); (viii) an individual Guarantor shall become
legally incapacitated or die; (ix) Lessee and/or a Guarantor shall suffer an
adverse material change in its financial condition from the date hereof, and as
a result thereof National City deems itself or any of its Equipment to be
insecure; or (x) Lessee and/or a Guarantor shall be in default under any other
agreement at any time executed with National City or any affiliate or subsidiary
of National City Corporation.
(b) If an Event of Default occurs hereunder then National City may declare this
Agreement to be in default and may do one or more of the following with respect
to any or all of the Equipment as National City in its sole discretion may
elect, to the extent permitted by, and subject to compliance with any mandatory
requirements of applicable law then in effect: (i) terminate this Lease
effective immediately; or (ii) demand that Lessee, and Lessee shall at its
expense upon such demand, return the Equipment promptly to National City in the
manner and condition required by and otherwise in accordance with the provisions
of Section 2 hereof, as if the Equipment were being returned at the expiration
of its term of lease hereunder, or National City, at its option, may enter upon
the premises where the Equipment is located and take
3
<PAGE> 4
[LOGO NATIONAL CITY (R)]
LEASING CORPORATION
possession of and remove the same by summary proceedings or otherwise, all
without liability to Lessee for damage to property or otherwise; or (iii) take
possession of any or all Equipment and remove the same without liability for
injuries suffered through or loss caused by such repossession; LESSEE WAIVES ANY
AND ALL RIGHTS TO NOTICE AND JUDICIAL HEARING WITH RESPECT TO THE REPOSSESSION
OR ATTACHMENT OF THE EQUIPMENT BY NATIONAL CITY IN THE EVENT OF DEFAULT
HEREUNDER BY LESSEE; in the event National City proceeds pursuant to this
subsection (iii), National City may sell any or all Equipment at public or
private sale as is commercially reasonable given the existing conditions on an
"AS IS, WHERE IS" basis without recourse or warranties of any kind, or otherwise
hold, use, operate, or keep idle such Equipment, as National City in its sole
discretion determines is commercially reasonable free and clear of all rights of
Lessee; or (iv) whether or not National City has exercised any other right
hereunder, by written notice to Lessee, cause Lessee to pay National City (as
liquidated damages for loss of a bargain and not as a penalty) on the date
specified in such notice an amount equal to the Rent due and payable on the
first Rent Payment Date following the date of the notice of Lease termination
plus a sum equal to the appropriate Stipulated Loss Value determined as of the
Rent Payment Date next following the date of the notice of Lease termination as
set out in the applicable Schedule; or (v) National City may exercise any other
right or remedy which may be available to it under applicable law or proceed by
appropriate court action to enforce the terms hereof or to recover damages for
the breach hereof.
In addition, Lessee shall pay National City all costs and expenses incurred by
National City as a result of Lessee's default hereunder or the termination
hereof, including, without limitation, reasonable attorney's fees and costs
arising out of repossession and disposal of the Equipment.
Provided Lessee has previously paid to National City the sum of the Stipulated
Loss Value, Rent due and owing and other costs and expenses incurred pursuant
hereto, Lessee shall be entitled to the net proceeds of any such sale,
disposition or re-lease of the Equipment to the extent they do not exceed the
Stipulated Loss Value. Any excess shall be retained by National City. To the
extent the Equipment is re-leased by National City, Lessee shall be credited the
present value of the lease rental stream at the discount rate of National City
Prime as of the date the re-lease is agreed to between the parties. Furthermore,
to the extent the parties to this Lease need to determine the present value of
any moneys due under the Lease, the parties agree that the discount rate shall
be National City Prime.
"NATIONAL CITY PRIME" means the fluctuating rate of interest which is publicly
announced from time to time by National City Bank, Cleveland, Ohio, at its
principal place of business as being its "prime rate" or "base rate" thereafter
in effect, with each change in the Prime Rate automatically, immediately and
without notice changing the fluctuating interest rate thereafter applicable
hereunder. The Prime Rate is not necessarily the lowest rate of interest then
available from National City Bank on fluctuating rate loans
In addition, Lessee shall continue to be liable for all indemnities under this
Lease and for all reasonable attorney fees and other costs and expenses
resulting from the termination hereof and/or the exercise of National City's
remedies, including placing any Equipment in the condition required by Section 7
hereof. Except as expressly provided above, no remedy referred to in this
section is exclusive, but each shall be cumulative and in addition to any other
remedy referred to herein or otherwise available to National City at law or
equity; and the exercise or beginning of exercise by National City of any one or
more of such remedies shall not preclude the simultaneous or later exercise by
National City of any other remedies. No express or implied waiver by National
City of an Event of Default shall constitute a waiver of any other or subsequent
Event of Default. To the extent permitted by law, Lessee waives any rights now
or hereafter conferred by statute or otherwise which may require National City
to sell, re-lease or otherwise use the Equipment in mitigation of National
City's damages or which may otherwise limit or modify any of National City's
rights or remedies.
12. INDEMNIFICATION FOR TAX BENEFITS.
(a) National City, as the owner of the Equipment, shall be entitled to such
deductions, credits and other benefits as are provided by the Internal Revenue
Code of 1986, as amended, (hereinafter called the "CODE") to an owner of
property.
(b) Lessee agrees that neither it nor any entity controlled by it, in control of
it, or under common control with it, directly or indirectly, will at any time
take any action or file any returns or other documents inconsistent with the
foregoing and that each of such corporations will file such returns, take such
action and execute such documents as may be reasonable and necessary to
facilitate accomplishment of the intent thereof. Lessee agrees to copy or make
available for inspection and copying by National City such records as will
enable National City to determine whether it is entitled to the benefit of any
amortization or depreciation deduction which may be available from time to time
with respect to the Equipment.
(c) If National City, under any circumstances or for any reason whatsoever,
except for acts of National City or future changes in the Code, shall lose,
shall not have or shall lose the right to claim, or there shall be disallowed or
recaptured all or any portion of the federal tax depreciation deductions with
respect to any item of Equipment based on depreciation or National City's full
cost of such item of Equipment and computed on the basis of a method of
depreciation provided by the Code as National City in its complete discretion
may select, then Lessee agrees to pay National City upon demand an amount which,
after deduction of all taxes required to be paid by National City in respect to
the receipt thereof under the laws of any federal, state or local government or
taxing authority of the United States or of any taxing authority or governmental
authority of any foreign country, shall be equal to the sum of (i) an amount
equal to the additional income taxes paid or payable by National City in
consequence of the failure to obtain the benefit of a depreciation deduction,
and (ii) any interest and/or penalty which may be assessed in connection with
any of the foregoing.
(d) The provisions of this Section 12 shall survive the expiration or earlier
termination of this Agreement.
13. NATIONAL CITY'S RIGHTS TO PERFORM. If Lessee fails to make any payment
required to be made hereunder or fails to comply with any other agreements
contained herein, National City may make such payment or comply with such
agreement, and the amount of such payment and the reasonable expenses of
National City incurred in connection with such payment or compliance, shall be
payable by Lessee on demand.
14. FURTHER ASSURANCES. Lessee will, at its expense, promptly and duly execute
and deliver to National City such further documents and assurances and take such
further action as National City may from time to time request in order to more
effectively carry out the intent and purpose of this Agreement so as to
establish and protect the rights, interest and remedies intended to be created
in favor of National City hereunder, including, without limitation, the
execution
4
<PAGE> 5
[LOGO NATIONAL CITY (R)]
LEASING CORPORATION
and filing of financing statements and continuation statements with respect to
the Equipment and this Agreement. Lessee authorizes National City or its agents
or assigns to effect any such filing (including signing any financing statements
in the name of Lessee with the same force and effect as if signed by Lessee or
the filing of any financing statements without the signature of Lessee, if
permitted in the relevant jurisdiction) and National City's expenses with
respect thereto shall be payable by Lessee on demand.
15. NOTICES. All notices and other communications required to be given to any
party hereunder shall be in writing and delivered by a recognized overnight
courier service or mailed by regular mail to such party at the address set forth
above or at such other address as it may designate to other parties. All
communications mailed by regular mail shall be assumed to arrive within 3
business days after the postmarked date.
16. MISCELLANEOUS. Any provision of this Agreement which is unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such unenforceability without invalidating the remaining provisions hereof, and
any such unenforceability in any jurisdiction shall not render unenforceable
such provision in any other jurisdiction. To the extent permitted by applicable
law, Lessee waives (a) any provision of law which renders any provision hereof
unenforceable in any respect; (b) any and all rights and remedies conferred upon
a Lessee by Article 2A of the UCC and any rights conferred by statute or
otherwise that may limit or modify National City's rights as described in this
Agreement.
Provided the Lessee is not in default under any provision of this Lease,
National City shall not interfere with Lessee's quiet enjoyment of the use of
the Equipment pursuant to the terms of this Agreement and National City shall
defend and protect such quiet enjoyment against all persons claiming by, through
or under National City. This Agreement and the provisions hereof shall inure to
the benefit of National City and its successors and assigns, and shall be
binding on and inure to the benefit of Lessee and its successors and assigns.
17. CONDITIONS PRECEDENT. The obligation of National City contained in Section 1
hereof shall be subject to the following conditions precedent: (a) there shall
have occurred no material adverse change in the business or the financial
condition of Lessee from the date hereof until the Commencement Date of any
Schedule; (b) Lessee shall have furnished National City with a certificate or
other evidence satisfactory to National City that insurance coverage as required
by Section 9 hereof is in effect as to the item of Equipment desired to be
leased; (c) upon the request of National City, Lessee shall furnish National
City opinions of counsel in form and substance acceptable to National City; (d)
unless specifically waived by National City, Lessee shall have furnished
National City waivers, in form and substance acceptable to National City, of all
rights in or to Equipment of any landlord or mortgagee of any real property upon
which the Equipment is or is to be situated; and (e) all other instruments and
legal and corporate proceedings in connection with the transactions contemplated
herein shall be satisfactory in form and substance to National City, and counsel
to National City shall have received copies of all documents which it may have
requested in connection therewith.
If any of the above conditions is not satisfied at the time Lessee submits any
Schedule, National City shall have no obligation under this Agreement to lease
the items of personal property covered thereby to Lessee.
18. FINANCIALS. Lessee agrees that for so long as any item of Equipment shall be
leased under this Agreement, Lessee will deliver or cause to be delivered to
National City (a) as soon as practicable, and in any event within 60 days after
the end of each quarterly period (other than the fourth quarterly period) for
each fiscal year of Lessee, the balance sheet of Lessee as of the end of such
quarterly period together with the related statements of income and expenses for
such quarterly period all in reasonable detail prepared in accordance with
generally accepted accounting principles consistently applied throughout the
period involved and certified by Lessee's chief financial officer; and (b) as
soon as practicable, and in any event within 120 days after the close of each
fiscal year of Lessee, the audited balance sheet of Lessee as of the end of such
fiscal year together with related statements of income and surplus for such
fiscal year all in reasonable detail, prepared in accordance with generally
accepted accounting principles consistently applied throughout the period
involved and certified by an independent public accountant acceptable to
National City.
19. REPRESENTATION, WARRANTIES AND COVENANTS. Lessee represents, warrants and
covenants that (a) if Lessee is a corporation, Lessee is duly organized and
validly existing in good standing under the laws of the state of its
incorporation and is duly qualified and licensed to do business as a foreign
corporation in good standing in those jurisdictions where such qualifications
are necessary to authorize Lessee to carry on its present business and
operations and to own its properties or to perform its obligations hereunder;
(b) if Lessee is a partnership, Lessee is duly organized and validly existing
under the partnership laws of its state of domicile and is duly authorized in
any foreign jurisdiction where such qualification is necessary to authorize
Lessee to carry on it present business and operations and to own its properties
and to perform its obligations hereunder; (c) if Lessee is a limited liability
company, Lessee is duly organized and validly existing under the laws of its
state of domicile and is duly authorized in any foreign jurisdiction where such
qualification is necessary to authorize Lessee to carry on it present business
and operations and to own its properties and to perform its obligations
hereunder; (d) Lessee has full power, authority and legal right to execute,
deliver and carry out as Lessee the terms and provisions of this Agreement and
any other documents in connection with this lease transaction; (e) if Lessee is
a corporation, Lessee's execution, delivery and performance of this Agreement
and the other documents and agreements referred to herein, and the performance
of its obligations under this Agreement have all been authorized by all
necessary corporate action, do not require the approval or consent of
stockholders, or of any trustee or holders of any indebtedness or obligation of
Lessee and will not violate any law, governmental rule, regulation or order
binding upon Lessee or any provision of any indenture, mortgage, contract or
other agreement to which Lessee is a party or by which it is bound or to which
it is subject, and will not violate any provision of the Certificate of
Incorporation, By-laws or any preferred stock agreement of Lessee; (f) if Lessee
is a partnership, Lessee's execution, delivery and performance of this Agreement
and the other documents and agreements referred to herein, and the performance
of its obligations under this Agreement have all been authorized by all
necessary partnership actions; (g) if Lessee is a limited liability company,
Lessee's execution, delivery and performance of this Agreement and the other
documents and agreements referred to herein, and the performance of its
obligations under this Agreement have all been authorized by all necessary
member action; (h) there are no pending or threatened investigations, actions or
proceedings before any court or administrative agency or other tribunal body,
which seek to question or set aside any of the transactions contemplated by this
Agreement, or which, if adversely determined, would materially affect the
condition, business or operation of Lessee; (i) Lessee is not in default in any
material manner in the payment or performance of any of its obligations or in
the
5
<PAGE> 6
[LOGO NATIONAL CITY (R)]
LEASING CORPORATION
performance of any contract, agreement or other instrument to which it is a
party or by which it or any of its assets may be bound; (j) the balance sheet of
Lessee as of the end of its most recent fiscal year and the related profit and
loss statement of Lessee for the fiscal year ended on said date, including the
related schedules and notes, together with the report of an independent
certified public accountant, heretofore delivered to National City, are all true
and correct and present fairly (x) the financial position of Lessee as at the
date of said balance sheet and (y) the results of the operations of Lessee for
said fiscal year; (k) all proceedings required to be taken by Lessee to
authorize the lease of the Equipment from National City and to protect National
City's interest in such Equipment, free and clear of all liens and encumbrances
whatsoever, have been taken; (l) Lessee has no significant liabilities
(contingent or otherwise) which are not disclosed by or reserved against the
financial statements referred to in (j) above; (m) all the financial statements
referred to in (j) above have been prepared in accordance with generally
accepted accounting principles and practices applied on a basis consistently
maintained throughout the period involved; (n) there has been no change which
would have a material adverse effect on the business or financial condition of
Lessee from that set forth in the balance sheet referred to in (j) above; (o) no
authorization, consent, approval, license, exemption of or filing or
registration with court, governmental unit or department, commission, board,
bureau, agency, instrumentality or the like is required or necessary for the
valid execution and delivery of the Agreement, any bill of sale and the other
documents and agreements referred to herein; (p) this Master Lease Agreement,
the Schedules and any accompanying documents, having been duly authorized,
executed and delivered to National City, constitute legal, valid and binding
obligations of Lessee, enforceable against Lessee in accordance with the terms
thereof except as such terms may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditor's rights generally; and (q) the
Equipment is personal property and neither real property nor a fixture.
The foregoing representations, warranties and covenants shall be deemed to be
made on the date hereof and again on the date Lessee executes each Schedule.
20. OPTIONS. National City and Lessee hereby agree that so long as no Event of
Default shall have occurred and be continuing Lessee may have such options as
are set forth in the applicable Schedule.
21. CHOICE OF LAW. The rights and liabilities of the parties under this
Agreement and each Schedule shall be interpreted, enforced and governed in all
respects by the laws of State of Ohio. Lessee hereby consents and subjects
itself to the jurisdiction of every local, state and federal court within
State of Ohio, agrees that except as otherwise required by law, Lessee shall
never file or maintain any action or proceeding in connection with this
Agreement or any Schedule in any court outside State of Ohio, waives personal
service of any and all process in connection therewith and consents to the
service of such process upon Lessee in the manner provided in the Agreement
for giving notice. LESSEE HEREBY KNOWINGLY AND VOLUNTARILY WAIVES JURY TRIAL
IN RESPECT OF ANY ACTION OR PROCEEDING IN CONNECTION WITH THIS AGREEMENT OR
ANY SCHEDULE.
22. ATTORNEY'S FEES. If National City commences any action to enforce or define
any right or obligation of Lessee under this Agreement or any Schedule, Lessee
shall pay to National City all reasonable attorney's fees and all other legal
expenses (including for expert and other witnesses) for preparation,
negotiation, filing, maintenance, defense, settlement and appeal of litigation
paid or incurred by National City.
23. HEADINGS. The headings for the various sections of this Agreement are
intended solely for convenience of reference and are not intended nor shall they
be used to construe, explain, modify or place any meaning upon any provision
hereof.
24. MODIFICATION. Neither this Agreement nor any Schedule can be modified or
amended except by written agreement signed and currently dated by both
signatories hereto. Lessee's Initials: ________
25. COUNTERPARTS; ORIGINALS. The parties may execute this Agreement and any
Schedule in any number of counterparts. All such counterparts of this Agreement
shall constitute one Agreement. One copy of the Agreement and each Schedule
shall be designated as the "ORIGINAL" and all other copies shall be
"DUPLICATES". Only the "ORIGINAL" shall constitute chattel paper.
26. LESSEE'S ACKNOWLEDGMENT OF NO EXTRINSIC PROMISES. LESSEE AGREES THAT THERE
HAVE BEEN NO REPRESENTATIONS, AGREEMENTS, STATEMENTS, PROMISE, UNDERSTANDINGS OR
INDUCEMENTS (COLLECTIVELY IN THIS SECTION "PROMISES") MADE TO LESSEE BY OR ON
BEHALF OF NATIONAL CITY OR ANY THIRD PERSON IN CONNECTION WITH THIS AGREEMENT,
ANY SCHEDULE, ANY EQUIPMENT LEASED HEREUNDER, OR ANY PRESENT OR FUTURE
TRANSACTION OF WHICH THIS AGREEMENT AND/OR ANY SCHEDULE IS OR BECOMES A PART
OTHER THAN THOSE PROMISES, IF ANY, EXPRESSLY IN WORDS MADE IN THIS AGREEMENT AND
EACH SCHEDULE.
27. ENTIRE AGREEMENT. THIS AGREEMENT IS AN INTEGRATION AND EACH SCHEDULE IS AN
INTEGRATION AND RESPECTIVELY THE ENTIRE AGREEMENT BETWEEN THE PARTIES RELATING
TO THE SUBJECT MATTER OF EACH TRANSACTION EMBRACED THEREBY. ALL AGREEMENTS,
REPRESENTATIONS, PROMISES, INDUCEMENTS, STATEMENTS AND UNDERSTANDINGS, PRIOR TO
AND CONTEMPORANEOUS WITH THIS AGREEMENT AND PRIOR TO AND CONTEMPORANEOUS WITH
EACH SCHEDULE, WRITTEN OR ORAL, BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT
MATTER OF EACH SUCH TRANSACTION, IF ANY, ARE AND EACH IS SUPERSEDED BY THIS
AGREEMENT AND BY EACH SCHEDULE AS IT IS EXECUTED.
- --------------------------------------------------------------------------------
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
[SIGNATURE PAGE FOLLOWS]
- --------------------------------------------------------------------------------
6
<PAGE> 7
[LOGO NATIONAL CITY (R)]
LEASING CORPORATION
- --------------------------------------------------------------------------------
Executed as of the 30th day of December, 1999.
By execution hereof, the signer hereby certifies that he/she has read this
Agreement and that he/she is duly authorized to execute this Master Equipment
Lease Agreement on behalf of the Lessee.
COLD METAL PRODUCTS,INC.
(a New York corporation)
By: /s/ Joseph C. Horvath
---------------------
Title: Chief Financial Officer
-----------------------
NATIONAL CITY LEASING CORPORATION
(a Kentucky corporation)
By: /s/ Mary L. Scott
-----------------
Title: Vice President
--------------
7
<PAGE> 8
EQUIPMENT SCHEDULE NO. 00001
DATED DECEMBER 30, 1999
-----------------
TO
MASTER EQUIPMENT LEASE AGREEMENT NO. 08321 (THE "AGREEMENT")
DATED DECEMBER 30, 1999
-----------------
BY AND BETWEEN
NATIONAL CITY LEASING CORPORATION ("NATIONAL CITY")
AND
COLD METAL PRODUCTS, INC. ("LESSEE").
THIS EQUIPMENT SCHEDULE (the "SCHEDULE") is executed and delivered by National
City and Lessee, pursuant to and in accordance with the Agreement, including
defined terms used herein.
A. EQUIPMENT. The Equipment covered by this Schedule consists of the following
items:
QUANTITY MANUFACTURER/MODEL DESCRIPTION SERIAL #
-------- ------------------ ----------- --------
ONE (1) ALCOS 52" X .250" X 50,000 LB SLITTING
LINE FURTHER DESCRIBED PER THE
ATTACHED SCHEDULE A
SALES TAX
TOTAL ACQUISITION COST: $2,100,000.00
NAME AND ADDRESS OF SUPPLIER OF EQUIPMENT:
------------------------------------------
Alcos Machinery Inc.
190 Harry Walker Parkway
Newmarket, Ontario L3Y 784
B. LOCATION. The Equipment shall be located at:
2301 South Holt Road, Indianapolis, Indiana 46251
C. TERM. The term of lease of said Equipment under the Agreement shall commence
on the date Lessee accepts the Equipment as evidenced by the Certificate of
Delivery and Acceptance pertaining to such Equipment and, unless terminated
pursuant to the provisions of the Agreement, shall terminate on December 30,
2006.
D. RENT. As Rent for said Equipment throughout the terms of lease referred to
in the preceding paragraph C, Lessee shall pay to National City in
accordance with the terms of the Agreement, forty eight (48) consecutive
rental payments of $24,453.33 each, immediately followed by forty eight (48)
consecutive rental payments of $29,887.40. Rent payments shall be made
monthly in advance. The first Rent Payment Date shall be December 30, 1999,
with subsequent Rent payments commencing January 30, 2000, to and including
November 30, 2006. Lessee shall pay Interim Rent in an amount equal to
$815.11 multiplied by the number of days between the Commencement Date and
the first Rent Payment Date. Lessee shall also pay the applicable sales tax
or use tax as invoiced by National City.
<PAGE> 9
E. INSURANCE. The insurance required pursuant to Section 9 of the Agreement
shall include:
1. PHYSICAL DAMAGE TO ALL EQUIPMENT LEASED UNDER THIS SCHEDULE:
a. Minimum Scope of Coverage: All-Risk Property coverage, including
flood, earthquake and boiler and machinery where applicable.
b. Minimum Dollar Limits of Coverage: Not less than the full
replacement value of the Equipment at the time of payment to
National City of insurance proceeds.
c. Maximum Deductibles: Not more than $10,000.00 per occurrence. Lessee
is liable for all deductible amounts.
2. GENERAL LIABILITY:
a. MINIMUM SCOPE OF COVERAGE: Commercial general liability coverage,
occurrence form, for bodily injury and property damage, including
products and completed operations, broad contractor liability, broad
contractual liability;, fire legal liability and personal injury.
b. Minimum Dollar Limits of Coverage: (i) $1,000,000.00 combined single
limit per occurrence; (ii) $2,000,000.00 annual general aggregate.
c. Maximum Loss Retention: Not more than $10,000.00 per occurrence.
Lessee is liable for all retention amounts.
3. UMBRELLA LIABILITY INSURANCE:
a. Minimum Scope of Coverage: General liability, employer's liability
and automobile liability.
b. Minimum Dollar Limits of Coverage: $N/A per occurrence and annual
aggregate.
c. Maximum Deductible/Retention: Not more than $N/A per occurrence.
Lessee is liable for all deductible/retention amounts.
F. TAX ASSUMPTIONS. National City has made certain tax assumptions pursuant to
Section 12 of the Agreement, these assumptions are as follows:
The Modified Accelerated Cost Recovery System (MACRS) property class for
the Equipment is seven (7) years.
G. OPTIONS. See Rider(s) I, II and III, attached hereto and by this reference
made a part hereof.
H. STIPULATED LOSS VALUE. The Stipulated Loss Value of the Equipment or any
item of Equipment as of any particular computation date shall be determined
on the basis of and be equal in amount to
(a) the value of the item of Equipment that would be obtained in a
transaction between an informed and willing buyer and seller as of
the date the Stipulated Loss Value is to be computed pursuant to the
Agreement, net of all expenses and costs whatsoever which would be
incidental to the reclamation of the Equipment and the sale thereof
as determined (at Lessee's expense) by an independent appraiser
selected by National City, but in no event shall be less than
fifteen percent (15%) of the original cost of such item of
Equipment, plus
(b) the present value of all future rental payments reserved in the
Lease relating to such Equipment or item of Equipment and contracted
to be paid over the unexpired term of the Lease discounted at a rate
equal to National City Bank Prime as of the date of computation,
plus
(c) interest at the rate of 18% per annum, or the highest rate permitted
by law, on the total of (a) and (b) from the computation date until
paid to National City.
2
<PAGE> 10
I. INCORPORATION OF AGREEMENT. All provisions of the Agreement are hereby
incorporated by reference in this Equipment Schedule to the same extent as
if fully set forth herein, and Lessee confirms that each representation and
warranty made in Section 19 of the Agreement is true and correct as of the
date hereof.
APPROVED AND AGREED to by the parties hereto as of the date set forth above.
COLD METAL PRODUCTS, INC.
(a New York corporation)
(The undersigned affirms that he/she is duly authorized to execute and deliver
this Equipment Schedule on behalf of Lessee.)
By: /s/ Joseph C. Horvath
---------------------
Title: Chief Financial Officer
-----------------------
NATIONAL CITY LEASING CORPORATION
(a Kentucky corporation)
By: /s/ Mary L. Scott
-----------------
Title: Vice President
--------------
3
<PAGE> 11
COLD METAL PRODUCTS, INC.
-------------------------
SCHEDULE A
----------
TO
MASTER LEASE NO. 08321-01
EQUIPMENT LIST
--------------
QUANTITY DESCRIPTION
- -------- -----------
1 .52" X .250" X 50,000 LBS SLITTING LINE, COMPRISED OF
THE FOLLOWING:
1 COIL STORAGE RACKS
MODEL # CSR-50K-52
S/N CMP 825-19-7-99
1 AUTOMATIC EDGE GUIDE CONTROL
MODEL #EG-52
S/N CMP-829-19-7-99
1 RETRACTABLE OUTBOARD SUPPORT MODEL # OBS-50K-52
S/N CMP-827-19-7-99
1 TRANSFER TURNSTILE MODEL # TT4-50K-52
S/N CMP-854-19-7-99
1 TRAVERSING DOWNENDER WITH PROGRAMMABLE DOWNENDER
S/N CMP-855-19-7-99
1 FLIPPER & CARRY OVER TABLE MODEL FT-52
S/N CMP-835-19-7-99
1 SLITTER ENTRY UNIT
WITH ALLIGATOR TYPE DRAG BOARD MODEL # EU-52-250
S/N CMP-836-19-7-99
1 SCRAP CHOPPER
2 INTERCHANGEABLE RECOILER DRUMS AND MANDRELS
S/N CMP-850/851-19-7-99
1 DRIVE UNIT (PART OF STRIP TENSION UNIT)
1 SLITTER DRIVE UNIT
S/N CMP-837-19-7-99
1 SLITTER STORAGE CAROUSEL (CENTRE PART ONLY)
MODEL SSCI-3-52
S/N CMP-840-19-7-99
1 SLITTER INJECTOR UNIT MODEL SIU-3-52
S/N CMP-839-19-7-99
1 SCRAP CONVEYOR SYSTEM
<PAGE> 12
PAGE 2
COLD METAL PRODUCTS, INC.
-------------------------
SCHEDULE A
----------
TO
MASTER LEASE NO. 08321-01
EQUIPMENT LIST
--------------
QUANTITY DESCRIPTION
- -------- -----------
1 RECOILER THREADING TABLE MODEL # RTT-52
S/N CMP-849-19-7-99
1 LOOP THREADING TABLE MODEL # LTT-52
S/N CMP-843-19-7-99
1 STRIP TENSION UNIT WITH STRIP OILING FACILITY MODEL
# STU-52-250
S/N CMP-844-19-7-99
1 EXIT CROP SHEAR MODEL #EXCS-52-250
S/N CMP-848-19-7-99
1 SLITTER STORAGE CAROUSEL
MODEL # SSCI-3-52
S/N CMP-19-7-99
1 PIT TYPE ENTRY COIL CAR (WITH DRIVEN SNUBBER ROLL FEATURE)
MODEL # PCC-50K-52
S/N CMP-826-19-7-99
1 DOUBLE TELESCOPING COIL PEELER
MODEL # DTCP-52-250
S/N CMP-830-19-7-99
1 ENTRY PINCH ROLL MODEL #EPR-52-250
S/N CMP-831-19-7-99
1 FLATTENER
MODEL 4F-52-250
S/N CMP-832-19-7-99
1 ENTRY CROP SHEAR
MODEL # ENCS-52-250
S/N CMP-833-19-7-99
1 RECOILER DRIVE UNIT
1 SINGLE MANDREL UNCOILER WITH "PUP" COIL DISCHARGE UNIT AND
POLYURELHANE SADDLES
MODEL # SMU-50K-52
S/N CMP-827-19-7-88
1 ROTATING COIL CAR TABLE WITH 260 DEG CAPABILITY
MODEL # CCT-50K-52
S/N CMP-853-19-7-99
1 HYDRAULIC POWER UNIT
<PAGE> 13
PAGE 3
COLD METAL PRODUCTS, INC.
-------------------------
SCHEDULE A
----------
TO
MASTER LEASE NO. 08321-01
EQUIPMENT LIST
--------------
QUANTITY DESCRIPTION
- -------- -----------
1 TRIPLE SEPARATOR CADDY FOR TENSION UNIT
MODEL # STC-52
S/N CMP-846-19-7-99
1 SINGLE SEPARATOR CADDY FOR TENSION UNIT
MODEL #RTC-52
S/N CMP-847-19-7-99
2 INTERCHANGEABLE 3M COVERED TENSION ROLLS
3 TRANSFORMERS
1 @ 330KVA: 1@ 275 KVA; 1 @ 51 KVA
5 HYDRAULIC MANIFOLDS
4 HYDRAULIC CYLINDERS
2 ELECTRICAL CONTROL CABINETS
(1 FOR SLITTER, 1 FOR RECOILER)
1 ELECTRICAL CONTROL CONSOLE
1 AUTOMATIC EDGE GUIDE SYSTEM (INCLUDING SERVO UNIT)
1 BOX THREAD PRORECTORS
2 TABLES AND GUARDS
1 HYDRAULIC CYLINDER FOR TRAVERSING DOWNENDER
1 TURRET RECOILER WITH OVERARM STRIP SEPARATOR AND 2
RECOILING DRUMS
MODEL # TR-50K-52-16/20
S/N CMP-850-19-7-99
2 INTERCHANGEABLE SLITTER HEAD
MODEL # SU-6-52/28
S/N CMP-837-19-7-99
CMP-838-19-7-99
2 SLITTER HEADS
(3 SETS 80 KNIVES PER SET)
COWLES "MAXCUT" ROTARY SLITTING KNIVES
14.000" OD X 9.0015/9.0025" HOLE X .32000" (+\- .000040")
THICK 1.000" WIDE HALF ROUND KEYWAY
<PAGE> 14
PAGE 4
COLD METAL PRODUCTS, INC.
-------------------------
SCHEDULE A
----------
TO
MASTER LEASE NO. 08321-01
EQUIPMENT LIST
--------------
QUANTITY DESCRIPTION
- -------- -----------
55 COWLES "MAXCUT" ROTARY SLITTING KNIVES
14.000" OD X 9.0015/9.0025" HOLE X .50000" (+\- .000040")
THICK 1.000" WIDE HALF ROUND KEYWAY
<PAGE> 15
RIDER I
TO
EQUIPMENT SCHEDULE NO. 00001 (THE "SCHEDULE")
DATED DECEMBER 30, 1999
-----------------
TO
MASTER EQUIPMENT LEASE AGREEMENT NO. 08321 (THE "AGREEMENT")
DATED DECEMBER 30, 1999
-----------------
BY AND BETWEEN
NATIONAL CITY LEASING CORPORATION ("NATIONAL CITY")
AND
COLD METAL PRODUCTS, INC. ("LESSEE")
THIS RIDER is executed and delivered by National City and Lessee in regard to
the Schedule.
PURCHASE OPTION.
----------------
Provided no event of default has occurred and is continuing under the Lease, the
purchase option for the Equipment pursuant to Section 20 of the Agreement shall
be a price equal to the then appraised Fair Market Sales Value of the Equipment,
as determined (at Lessee's expense) by an independent appraiser selected by
National City. In order to exercise its option, as regards each Schedule and for
not less than all of the Equipment identified to that Schedule, Lessee must give
National City written notice at least 90 days prior to the expiration of the
lease term with respect thereto, and remit the purchase price in cash to
National City or its assigns on or before said expiration date. After receipt of
the purchase price in accordance herewith, National City will transfer to Lessee
all of its right, title and interest in the Equipment purchased AS-IS, WHERE-IS,
without recourse, representation or warranty of any kind, express or implied,
except as to title and the absence of liens or encumbrances arising by, through
or under National City. "FAIR MARKET SALES VALUE" for the purpose hereof shall
be determined on the basis of and be equal in amount to the value that would be
obtained in a transaction between an informed and willing buyer and an informed
and willing seller, and the cost of moving the Equipment from the location of
current use shall not be a deduction from such value.
Dated: December 30, 1999
-----------------
COLD METAL PRODUCTS, INC.
(a New York corporation)
By: /s/ Joseph C. Horvath
---------------------
Title: Chief Financial Officer
-----------------------
NATIONAL CITY LEASING CORPORATION
(a Kentucky corporation)
By: /s/ Mary L. Scott
-----------------
Title: Vice President
--------------
<PAGE> 16
RIDER II
TO
EQUIPMENT SCHEDULE NO. 00001 (THE "SCHEDULE")
DATED DECEMBER 30, 1999
-----------------
TO
MASTER EQUIPMENT LEASE AGREEMENT NO. 08321 (THE "AGREEMENT")
DATED DECEMBER 30, 1999
-----------------
BY AND BETWEEN
NATIONAL CITY LEASING CORPORATION ("NATIONAL CITY")
AND
COLD METAL PRODUCTS, INC. ("LESSEE")
THIS RIDER is executed and delivered by National City and Lessee in regard to
the Schedule.
EARLY BUY-OUT OPTION
--------------------
Provided no event of default has occurred and is continuing under the Lease,
pursuant to Section 20 of the Agreement, Lessee has a one time election on the
85th rental payment date under the Lease to terminate the lease and purchase
all, but not less than all, of the Equipment for 31.67% of the Total Acquisition
Cost as set forth in the Schedule. Lessee must give National City written notice
of its election of this option at least 90-days prior to such rental payment
date that Lessee wishes to exercise such election. Provided all payments,
including, but not limited to rental payments, have been made pursuant to the
Lease up to and including the date of the termination hereunder and after
receipt of the purchase price in accordance herewith, National City will
transfer to Lessee all of its right, title and interest in the Equipment
purchased AS-IS, WHERE-IS, without recourse, representation or warranty of any
kind, express or implied, except as to title and the absence of liens or
encumbrances arising by, through or under National City.
Dated: December 30, 1999
-----------------
COLD METAL PRODUCTS, INC.
(a New York corporation)
By: /s/ Joseph C. Horvath
---------------------
Title: Chief Financial Officer
-----------------------
NATIONAL CITY LEASING CORPORATION
(a Kentucky corporation)
By: /s/ Mary L. Scott
-----------------
Title: Vice President
--------------
<PAGE> 17
RIDER III
TO
EQUIPMENT SCHEDULE NO. 00001 (THE "SCHEDULE")
DATED DECEMBER 30, 1999
-----------------
TO
MASTER EQUIPMENT LEASE AGREEMENT NO. 08321 (THE "AGREEMENT")
DATED DECEMBER 30, 1999
-----------------
BY AND BETWEEN
NATIONAL CITY LEASING CORPORATION ("NATIONAL CITY")
AND
COLD METAL PRODUCTS, INC. ("LESSEE")
THIS RIDER is executed and delivered by National City and Lessee in regard to
the Schedule.
MAINTENANCE
-----------
1. In addition to the requirements of Section 7 of the Agreement relating
to the condition of the Equipment upon return thereof by the Lessee to
National City, the Equipment upon its return shall be in compliance
with the following conditions:
A. Lessee will maintain the Equipment in a condition and manner
suggested by the original manufacturer as required to validate any
warranty.
B. Lessee will maintain the Equipment in good operating condition and
appearance, and cannot discriminate such maintenance between owned
or leased equipment.
C. Lessee will use only manufacturer's approved replacement parts and
components in the performance of any maintenance and repair of the
Equipment.
D. Lessee will maintain current maintenance and repair records for the
Equipment in a useable manner.
E. Lessee will not make any alterations to the leased Equipment without
prior written approval of the Lessor.
F. Lessee will not make any alterations to the Equipment that will
damage or restrict the Equipment from its initial use and design.
ANY EQUIPMENT UPGRADES, ADDITIONS OR MODIFICATIONS, PREVIOUSLY
APPROVED IN WRITING BY LESSOR, SHALL BECOME A PART OF THE EQUIPMENT
AND WILL BE RETURNED WITH THE EQUIPMENT.
G. Lessee shall, at its sole cost and expense, enter into and maintain
in force, for the term of each Equipment Schedule, a maintenance
contract with the manufacturer of the Equipment or such party as
shall be acceptable to Lessor, and shall provide Lessor with a copy
of such contract and all related supplements thereto.
H. If Lessee has the Equipment maintained by a party other than the
manufacturer, Lessee assumes and agrees to pay any costs necessary
to have the manufacturer re-certify that the Equipment will be
eligible upon resale for the manufacturer's maintenance contract at
the manufacturer's standard rates.
2. All defined terms in the Agreement shall have the same meaning herein.
<PAGE> 18
3. All provisions of the Agreement and the Schedule, unless specifically
modified herein, are hereby ratified and shall continue in full force and
effect without change or amendment.
Dated: December 30, 1999
-----------------
COLD METAL PRODUCTS, INC.
(a New York corporation)
By: /s/ Joseph C. Horvath
---------------------
Title: Chief Financial Officer
-----------------------
NATIONAL CITY LEASING CORPORATION
(a Kentucky corporation)
By: /s/ Mary L. Scott
-----------------
Title: Vice President
--------------
<PAGE> 19
CERTIFICATE OF DELIVERY AND ACCEPTANCE
--------------------------------------
The undersigned hereby certifies that COLD METAL PRODUCTS, INC. ("LESSEE") has
inspected, received, approved and hereby accepts delivery and installation of
the following Equipment upon the terms and conditions set forth herein and in
that certain Master Equipment Lease Agreement (the "AGREEMENT") No. 08321 dated
DECEMBER 30, 1999, Equipment Schedule No. 00001, dated DECEMBER 30, 1999, with
NATIONAL CITY LEASING CORPORATION ("NATIONAL CITY").
1. DESCRIPTION OF EQUIPMENT:
QUANTITY MANUFACTURER/MODEL DESCRIPTION SERIAL #
-------- ------------------ ----------- --------
ONE (1) ALCOS 52" X .250" X 50,000 LB SLITTING
LINE FURTHER DESCRIBED PER THE
ATTACHED SCHEDULE A
2. LOCATION OF EQUIPMENT: 2301 South Holt Road, Indianapolis, Indiana 46251
3. DATE OF ACCEPTANCE: December 30, 1999.
-----------------
4. REPRESENTATIONS AND WARRANTIES:
(a) Lessee confirms that each item of Equipment listed herein:
(i) has been delivered to it, is duly assembled and
installed in good order and condition and is of the
size, design, capacity and manufacture selected by it
and meets the provisions of any purchase order
pursuant to which National City has acquired title
thereto; and
(ii) if applicable, has been marked as showing National
City's interest in the items of Equipment in
accordance with Section 4 of the Agreement.
(b) Lessee acknowledges that National City is not responsible for
the performance, maintenance or service of the Equipment and
that any payment, rent and all other sums payable under the
Agreement shall be paid as such become due irrespective of the
performance or condition of the Equipment.
(c) Lessee further confirms that no event has occurred and is
continuing or would result from the purchase or lease of the
Equipment above which constitutes an Event of Default under
the Agreement or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both.
(d) Lessee's execution of this Certificate constitutes irrevocable
acceptance of the Equipment herein described, AS-IS, WHERE-IS
for all purposes of the Agreement and authorizes National City
to pay the cost of such Equipment as shown on the Equipment
Schedule to any supplier or vendor of the Equipment.
<PAGE> 20
Date of Certificate: December 30, 1999
-----------------
COLD METAL PRODUCTS, INC.
(a New York corporation)
By: /s/ Joseph C. Horvath
---------------------
Title: Chief Financial Officer
-----------------------
Receipt is hereby acknowledged by National City this 30th day of December, 1999.
NATIONAL CITY LEASING CORPORATION
(a Kentucky corporation)
By: /s/ Mary L. Scott
-----------------
Title: Vice President
--------------
2
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 470
<SECURITIES> 0
<RECEIVABLES> 27,812
<ALLOWANCES> 325
<INVENTORY> 36,737
<CURRENT-ASSETS> 66,234
<PP&E> 77,196
<DEPRECIATION> 37,292
<TOTAL-ASSETS> 116,673
<CURRENT-LIABILITIES> 36,978
<BONDS> 0
0
0
<COMMON> 75
<OTHER-SE> 25,300
<TOTAL-LIABILITY-AND-EQUITY> 116,673
<SALES> 49,305
<TOTAL-REVENUES> 49,305
<CGS> 43,303
<TOTAL-COSTS> 43,303
<OTHER-EXPENSES> 3,836
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 896
<INCOME-PRETAX> 1,270
<INCOME-TAX> 468
<INCOME-CONTINUING> 802
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 802
<EPS-BASIC> .13
<EPS-DILUTED> .13
</TABLE>
