-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RFm9a4cAU0pptrzg5m8LuiPzdwFOsMOyJG/cdhaGlh0ZeAvFtCYaL265jmaq1cQN 4pvl3Jq09Ig2PGM7GuKW6Q== 0000059544-95-000003.txt : 19951107 0000059544-95-000003.hdr.sgml : 19951107 ACCESSION NUMBER: 0000059544-95-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950731 FILED AS OF DATE: 19951106 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCOLN INTERNATIONAL CORP CENTRAL INDEX KEY: 0000059544 STANDARD INDUSTRIAL CLASSIFICATION: TRANSPORTATION SERVICES [4700] IRS NUMBER: 061057509 STATE OF INCORPORATION: KY FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-05767 FILM NUMBER: 95587599 BUSINESS ADDRESS: STREET 1: P O BOX 43129 STREET 2: 120 VILLAGE SQUARE CITY: LOUISVILLE STATE: KY ZIP: 40243 BUSINESS PHONE: 5022458814 MAIL ADDRESS: STREET 1: P O BOX 43129 CITY: LOUISVILLE STATE: KY ZIP: 40253 10-K 1 FORM 10-K ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For fiscal year ended July 31, 1995 Commission File No. 0-5767 LINCOLN INTERNATIONAL CORPORATION (Exact name of registrant as specified in its charter) Kentucky 61-057092 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Suite No. 6, 120 Village Square Louisville, Kentucky 40243 Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (502)245-8814 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered none none Securities registered pursuant to Section 12(g) of the Act: Common Stock (no-par) voting Title of class Common Stock (no-par) non-voting Title of class Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO State the aggregate market value of the voting stock held by non-affiliates of the Registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. No regular market exists for either class of stock. Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the July 31, 1995. Common (voting) 100,000 Common (non-voting) 1,532,320 DOCUMENTS INCORPORATED BY REFERENCE (1) Annual Report-- 1994-1995 (2) Information Statement--1995 Portions of the above Annual Report and Information Statement to be issued are hereby incorporated by reference into Parts II and III. PART I ITEM 1: Business LINCOLN INTERNATIONAL CORPORATION (LINCOLN), incorporated in 1960, is engaged in the management of agricultural properties (Bourbon Stock Yard). AGRI-BUSINESS: BOURBON STOCK YARD COMPANY (BOURBON) BOURBON has been in continuous operation for 160 years and was merged into LINCOLN in 1978. LINCOLN INTERNATIONAL entered into a lease agreement with Kentucky Livestock Exchange, a division of Michigan Livestock Exchange, a Michigan corporation, wherein, LINCOLN leased its stockyards operations consisting of approximately seven acres with the term of the lease being for a period of 10 years beginning on July 15th, 1995, and ending on July 14th, 2005, with provisions for payment of rent based on monthly pre-tax profits with a minimum rent provision of $18,000.00 for the first two years. The lease agreement is based primarily on the number of head of farm animals similar to that type of revenue received prior to the execution of the lease. (See Part IV, Item 14(6) as to the attachment of the lease provisions herein.) Prior to the lease agreement of July 15th, 1995, Lincoln's business consists of that of normal stock yard operations of handling, receiving, shipping and reshipping, transferring and yarding of all common types of livestock including cows, feeder cattle, hogs, feeder pigs, slaughter cattle and sheep and other related stock yard activities at Louisville, Kentucky (among the largest in Kentucky). The following schedule sets forth the amount of receipt of farm animals during the last three (3) fiscal years. Since sheep are of such a small number, they are not included within the receipts comparison. 1993 1994 1995 Feeder cattle 143,964 137,676 132,184 Slaughter cattle 52,927 52,252 50,745 Hogs 51,101 47,664 45,875 Feeder pigs 14,440 11,532 11,390 Most of the animals received come from the Kentucky- Indiana area. There are numerous other smaller yards which provide little or no competition to BOURBON. Income is determined by the number of animals handled and poor market prices, weather conditions or disease over an extended period of time could materially affect the number of animals handled and thus affect its income. The animals are supplied by many farmers, none of which account for any material portion of the supply. See Item 7 of Part II herein. BOURBON is subject to the rules and regulations of and must file (publicly available) reports with, the Interstate Commerce Commission (ICC) and the United States Department of Agriculture (USDA). BOURBON'S disposal of its waste materials is in compliance with federal, state and local environmental laws. FINANCE BUSINESS: LINCOLN FINANCE COMPANY, INC. (LINCOLN FINANCE) LINCOLN INTERNATIONAL sold its last remaining finance office on December 1st, 1994, and therefore, as of the end of its fiscal year, July 31st, 1995, was a participant in no finance company operations. Prior to the sale of that finance office, the following represents the business of the Registrant in reference to its LINCOLN FINANCE business. LINCOLN FINANCE was organized and incorporated in 1960 and finances consumer and other related small loan company activities throughout the Commonwealth of Kentucky and as of July 31, 1994, had one (1) office. Lincoln Finance did finance all of its loans from its own capital. There were approximately five hundred eighty-one (581) loans. The average loan is approximately one thousand one hundred seventy ($1,170.00) Dollars with a normal maturity of twenty-four (24) months. LINCOLN had experienced a loan loss of approximately three (3%) percent of its loans and a delinquent rate of approximately six (6%) percent which compares favorably with those in the industry. See Item 7 of Part II herein. LINCOLN FINANCE was in direct competition with numerous other small loan companies, some of which may have more experience and possess greater financial resources. LINCOLN FINANCE was licensed and regulated by the Kentucky Department of Banking in its rates of interest, size of loans, and other aspects of its operations as of December 1, 1994. EMPLOYEES: As of July 31, 1995, LINCOLN employed four (4) administrative personnel. MAJOR BUSINESS SEGMENTS - FINANCIAL DATA The following is a report of the major business segments and the corresponding financial data. Prior to July 31, 1995, the Company considered its activities to comprise two segments: (1) financial lending and (2) agribusiness. After July 31, 1995, the company operated only an agribusiness. Summary data for 1995, 1994 and 1993 is as follows: 1995 % 1994 % 1993 % Revenues: Finance $58,625 4 $180,462 12 $182,089 12 Agribusiness 1,296,663 95 1,316,632 87 1,303,996 87 Other 6,884 1 10,164 1 11,420 1 Consolidated $1,362,172 $1,507,258 $1,497,505 Operating profit (loss): Finance $-15,243 $31,848 $23,204 Agribusiness 161,081 132,454 95,117 Total segments 145,838 164,302 118,321 Corporate and other expenses -246,312 -135,238 -133,261 Income (loss) from operations -100,474 29,064 -14,940 Nonoperating income 123,082 2,452 326 Interest expense -104,336 -100,519 -90,722 Loss before income taxes $-81,728 $-69,003 $-105,336 Total assets: Finance $491 0 $545,209 28 $554,569 27 Agribusiness 1,283,533 79 1,333,934 68 1,389,036 69 Total segments 1,284,024 1,879,143 1,943,605 Corporate and other 339,342 21 80,426 4 94,191 4 Consolidated $1,623,366 $1,959,569 $2,037,796 Capital expenditures: Finance $0 $0 $0 Agribusiness 5,215 8,639 63,169 Total segments 5,215 8,639 63,169 Corporate and other 695 2,565 3,196 Consolidated $5,910 $11,204 $66,365 Depreciation and amortization: Finance $286 $832 $879 Agribusiness 57,118 55,726 54,652 Total segments 57,404 56,558 55,531 Corporate and other 10,423 15,974 19,352 Consolidated $67,827 $72,532 $74,883 ITEM 2: Properties The following are the various properties owned or leased by LINCOLN as of July 31, 1995. APPROXIMATE LEASE EXPI- TYPE OF SQUARE FEET RATION DATE LOCATION PROPERTY FLOOR SPACE (RENEWAL OPTIONS) LINCOLN ADMINISTRATIVE OFFICES Louisville, KY Offices 2,600.0 ft. 04/01/96 * * * * * * * * * BOURBON STOCK YARD Louisville, KY Stock yard 32,576.0 ft. Owned real estate 20.2 acres & buildings Louisville, KY Right-of-way NA 1995 (1) for stock yard Louisville, KY Warehouse 4,000.0 ft. Owned Louisville, KY Warehouse 9,000.0 ft. Owned * * * * * * * * * (1) The right-of-way is not essential to Bourbon's operations but does provide an easier access and egress from the facility. * * * * * * * * * The properties listed above are suitable and adequate for the various needs they supply. The total fixed annual rental for all of the above leased facilities (exclusive of taxes and other charges) was $14,450. ITEM 3: Legal Proceedings Neither LINCOLN nor any of its subsidiaries is engaged in any material legal proceedings. ITEM 4: Submission of Matters to a Vote of Security Holders The only item to be voted on at the annual meeting which will be held on the 8th day of December, 1995, is the election of directors. See Part III, Item 10. PART II ITEM 5: Market for Registrant's Common Stock and Related Stockholder Matters (1) There does not exist at the present time any regular market for any common stock of the Registrant, either the voting or non-voting. (2) There are approximately 1,800 shareholders of record of the common non-voting stock of LINCOLN. There are approximately 61 shareholders of record of the voting stock of LINCOLN. (3) The Registrant has never paid or declared any dividends. (4) The Registrant has filed a Schedule 13E-3 with the Securities and Exchange Commission as a "Tender Offer" wherein it will propose to purchase a maximum of 1,000,000 shares of the (no-par) (non-voting) common stock for a tender price of thirty- five ($.35) cents per share. Reference is made to that filing for specific information and is incorporated by reference herein. ITEM 6: Selected Financial Data Years ending July 31 1995 1994 1993 1992 1991 Revenues 1362172 1507258 1497505 1517356 1892870 Income (loss) before extraordinary items -87968 -73394 -105336 70167 -224105 Net income (loss) -87968 -73394 -105336 70167 -224105 Earnings (loss) per common share: Income (loss) before extraordinary items -.05 -.04 -.07 .04 -.14 Net income (loss) -.05 -.04 -.07 .04 -.14 Cash dividends 0 0 0 0 0 Total assets 1623366 1959569 2037796 2095261 3386107 Long-term obligations 733640 819788 871068 888814 871697 ITEM 7: Management's Discussion and Analysis of Financial Condition and Results of Operations Agri-Business: Bourbon Stock Yard The revenues of Bourbon Stock Yard are based primarily on the number of livestock handled during the year. The number of livestock handled fluctuates by the cash price being paid for livestock, and various factors which influence farming conditions. Operating costs generally are influenced directly by the number of livestock received since additional labor is required to handle additional cattle. Over the past six (6) years Bourbon has averaged approximately 196,000 head of cattle per year. No year during the period has been over 7,000 head more or less than the average. The on farm inventory of cattle and calves in Kentucky at January 1, 1995 was the largest in 10 years, however, it was only up slightly over 1994 inventories. Hog inventories continue to decline in Kentucky as evidenced by a 7% decline as of January 1, 1995 as compared to 1994. During fiscal 1995 Bourbon handled approximately 48,000 hogs, which was approximately the same as in 1994. Net revenue from Stock Yard operations decreased by approximately $12,000 or 1% from the fiscal year ended July 31, 1994. This decrease in revenue was the result of decreased receipts of feeder and slaughter cattle during the year. During the year there was a decrease in the number of cattle received of approximately 2,000 head. Net revenue from Stock Yard operations increased by approximately $13,000 or 1% from the fiscal year ended July 31, 1993. This increase in revenue was the result of increased receipts from feed and truck wash services. During the year there was a decrease in the number of cattle received of 7,000 head and 4,000 hogs, however, a tariff increase in the third quarter of the previous year made up the monetary difference. Operating costs for the year ended July 31, 1995, were down approximately $40,000 or 4% as compared to 1994. The primary decrease in cost was the result of decreased cost of utilities and lost or stolen cattle. Operating costs for the year ended July 31, 1994, were down approximately $25,000 or 2% as compared to 1993. The primary decrease in cost was the result of decreased cost of labor. Utility and repairs cost increased during the period by approximately $32,000 during the period. Inflation is expected to account for an increase of approximately 3% - 4% in operating costs for goods and services purchased during the next fiscal year. During the last month of the fiscal year Lincoln entered into an agreement with Michigan Livestock Exchange whereby Michigan Livestock Exchange leased the Bourbon operations. Under the provisions of the lease Bourbon should be profitable during 1996. The Stock Yard has approximately $61,000 in accounts payable and accrued liabilities, which is within its cash flow ability to handle these obligations as they become due. Bourbon does not have any capital commitments at July 31, 1995. All funds in excess of expenses are available to the parent. FINANCE LINCOLN FINANCE CO. During the second quarter of the fiscal year Lincoln sold its remaining small loan office and reported a gain on the sale of approximately $117,000. This part of Lincoln is now inactive. CONSOLIDATED OPERATIONS Revenues from consolidated operations in 1995 decreased approximately $145,000 or 10% as compared to 1994. This decrease is primarily in the reduced revenue in the finance division. Revenues from consolidated operations in 1994 increased approximately $10,000 or 1% as compared to 1993. This increase is primarily in additional sales of feed and incidental items at Bourbon in fiscal 1994. Operating costs for the year ended July 31, 1994 were down approximately $15,000 or 1% as compared to 1994. The primary area of savings was in utilities. Operating costs for the year ended July 31, 1994 were down approximately $27,000 or 1% as compared to 1993. The primary area of savings was in salaries and wages. Operating costs, which include amortization and depreciation account for 114%, 105%, and 107% of net sales and operating revenues for the years 1995 to 1993 respectively. The company did not have any capital commitments at July 31, 1995. Working Capital at July 31, 1995 was approximately a negative $117,000 as compared to a working capital position of approximately a negative $59,000 at July 31, 1994. There were no defaults on loans payable during the year. The liquidity of the Company will depend on the lease arrangement with Michigan Livestock Exchange and the development of the remaining property owned by the Company. ITEM 8: Consolidated Financial Statements and Supplementary Data The response to this item is contained within a separate section of this report. ITEM 9: Changes in and Disagreements with Accountants None. ITEM 10: NAME, PRINCIPAL OCCUPATION AND OTHER POSITIONS WITH DIRECTORS SHARES OWNED AS OF 07/31/95 LINCOLN FOR LAST 5 YEARS SINCE VOTING % NON-VOTING % Thurman L. Sisney, President and CEO Director, Age 49 1994 91,463(1) 91.46% 287,428 18.00% Charles L. Hamilton Chairman of Board and Director, Age 69 1994 91,463(1) 91.46% 287,428 18.00% Ronald Osborn, 100 .10% 66 .001% Secretary/Treasurer of Lincoln International Corp, Age 56 _______________________________ Officers & Directors as a group 91,563 91.56% 287,494 18.00% (1) Includes shares held in names of Drivers and Drovers Diversified, Inc., a Kentucky corporation owned by Thurman L. Sisney and Charles L. Hamilton. Management has no reason to believe that any of the persons so named above will be unable or unavailable to accept nominations but should this occur, votes will be given for such other person or persons, if any, as the Board of Directors may recommend. BUSINESS HISTORY OF DIRECTORS Thurman L. Sisney - Mr. Sisney is President, and Chief Executive Officer of Lincoln International Corporation. Mr. Sisney has a masters degree in business administration and law degree from the University of Louisville and has been in private practice since 1980. He has served as general counsel to the Kentucky Finance and Administration Cabinet as well as counsel and legislative liaison to the governor of Kentucky. Mr. Sisney has also served as General Counsel and Deputy Commissioner of Agriculture and the Kentucky Department of Agriculture. Mr. Sisney is very active in civic and charitable organizations in the community including but not limited to the board of trustees of the Louisville Conference of the United Methodist Church, Founder and President of the International Association of Convention and Hospitality and Industry Attorney's Association. Charles L. Hamilton - Mr. Hamilton is Chairman of the Board of Directors of Lincoln International Corporation. Mr. Hamilton has a bachelor of science degree in agriculture from the University of Kentucky. He currently serves as president of Continental Industries, Inc. and is Vice-President of the Bullitt County Bank. He is serving on the board of supervision of the Bullitt County Soil Conservation District and has been a leader in agriculture for the Commonwealth of Kentucky. In 1994, he was inducted into the University of Kentucky Animal Science Hall of Fame and was chosen as man of the year by "Progressive Farmer" for distinguished service to the Kentucky Association of Conservation District. He has been recognized for outstanding service to Kentucky Pork Producers and the Louisville Agriculture Club as well as being recognized as distinguished alumni from University of Kentucky College of Agriculture. Mr. Hamilton has also served in 1991 to 1992 as Commissioner of Agriculture for the Kentucky Department of Agriculture and has served as chairman of the Kentucky Agriculture Resource Development Authority and State Advisory Board Task Force on Agriculture. Mr. Hamilton has also served in various civic activities including being president of the Bullitt County Chamber of Commerce. ITEM 11: The directors received no compensation for 1994-1995. ITEM 12 and ITEM 13: LINCOLN intends to file an Information Statement pursuant to Regulation 14(c) which contains all of the information required by Part III which information is incorporated herein by reference. PART IV ITEM 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K Part IV which relates to Item 14 concerning exhibits, financial statement schedules and reports is hereby amended to include the following items by reference. (3) Articles of Incorporation and By-Laws: The articles and by-laws of Lincoln International Corporation were filed as a part of its Form 10 filing in September of 1971. (10) Material Contracts: A copy of a contract for the sale of corporate assets between Farmers Friend Mineral Company, Inc., a Kentucky corporation, and wholly owned subsidiary of the Registrant, et al., to Music City Supplement Company, Inc., dated the 16th day of September, 1986, effective September 15, 1986. (3) A copy of a contract dated February 25, 1987, between Lincoln International Corporation (Registrant) and Continental Industries for the sale of inventory relating to LINCO Shell Products and retention of certain trade names or trademarks, a part of the agribusiness of Lincoln International Corporation. (4) Form 8-K filed September, 1991, reporting sale and disposition of assets of Lincoln Finance Company, Inc. to Kentucky Finance Co., Inc. of three (3) of the four (4) finance companies operated by Registrant. (5) Articles of Merger of majority held subsidiary, Professional Services, Inc., into Registrant as filed on Form 10K for fiscal year 1991-1992. Form 10-K - 1995 (1) A copy of the lease agreement dated July 15, 1995, between LINCOLN INTERNATIONAL CORPORATION and Kentucky Livestock Exchange (BOURBON STOCK YARD OPERATIONS) a division of Michigan Livestock Exchange, et al. Financial data and schedules are submitted separately as a separate schedule and are attached hereto. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Lincoln International Corporation has duly caused this report to be signed on its behalf, by the undersigned, President and Chief Executive Officer, Thurman L. Sisney, and by its principal Financial Officer and principal Accounting Officer, Secretary and Treasurer, Ronald Osborn, as thereunto duly authorized in the City of Louisville, Commonwealth of Kentucky, on the 30th day of October, 1995. LINCOLN INTERNATIONAL CORPORATION ____________________________ By: Thurman L. Sisney, President Date: ___________________________ ___________________________ By: Ronald Osborn, Sec./Treas. Date: ___________________________ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of LINCOLN INTERNATIONAL CORPORATION in the capacities and on the date indicated. SIGNATURE TITLE (1) Principal Executive Officers _________________________________ Thurman L. Sisney President & Chairman of the Board _________________________________ Ronald Osborn Secretary/Treasurer (2) Directors _________________________________ Thurman L. Sisney Director _________________________________ Charles Hamilton Director LINCOLN INTERNATIONAL CORPORATION ANNUAL REPORT FORM 10-K INDEPENDENT AUDITOR'S REPORT The Board of Directors and Stockholders Lincoln International Corporation Louisville, Kentucky We have audited the consolidated balance sheets of Lincoln International Corporation listed in the accompanying index to Financial Statements (Item 14(a)) as of July 31, 1995 and 1994, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended July 31, 1995. 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 listed in the accompanying Index to Financial Statements (Item 14(a)) present fairly, in all material respects, the consolidated financial position of Lincoln International Corporation as of July 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended July 31, 1995, in conformity with generally accepted accounting principles. POTTER & COMPANY, LLP Louisville, Kentucky October 11, 1995 LINCOLN INTERNATIONAL CORPORATION Index to Financial Statements Item 14(a) The following consolidated financial statements of Lincoln International Corporation and subsidiaries are incorporated by reference in Item 8: Consolidated balance sheets - July 31, 1995 and 1994 Consolidated statements of operations - years ended July 31, 1995, 1994, and 1993 Consolidated statements of stockholders' equity - years ended July 31, 1995, 1994, and 1993 Consolidated statements of cash flows - years ended July 31, 1995, 1994, and 1993 Notes to consolidated financial statements Supporting schedules for the three years ended July 31, 1995, 1994, and 1993: I - Condensed financial information (parent company only) II - Valuation and qualifying accounts and reserves All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto. ADDITIONAL INFORMATION FURNISHED PURSUANT TO THE REQUIREMENTS OF FORM 10-K SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) CONDENSED BALANCE SHEETS July 31, 1995 and 1994 1995 1994 A S S E T S Current assets: Cash and cash equivalents $331,447 $11,290 Accounts receivable, net 21,251 13,240 Inventories 0 681 Prepaid expenses and other current assets 7,091 11,054 Total current assets 359,789 36,265 Investments in subsidiaries 1,147,982 1,022,646 Net property, plant and equipment (Note 1) 1,260,885 1,325,105 Net franchise license 0 50,350 Total assets $2,768,656 $2,434,366 L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y Current liabilities: Notes payable $0 $90,379 Current maturities of long-term debt (Note 1) 167,558 226,084 Accounts payable 60,370 93,676 Accrued expenses 83,832 84,576 Total current liabilities 311,760 494,715 Long-term debt, less current maturities (Note 1) 733,640 777,688 Advances from subsidiaries 1,312,557 663,298 Stockholders' equity (Note 2): Common stock, $.50 stated value 816,160 816,160 Additional paid-in capital 471,300 471,300 Retained earnings (deficit) -865,890 -777,924 421,570 509,536 Less treasury stock, at cost 10,871 10,871 Total stockholders' equity 410,699 498,665 Total liabilities and stockholders' equity $2,768,656 $2,434,366 See accompanying notes. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF OPERATIONS Years ended July 31, 1995, 1994, and 1993 1995 1994 1993 Revenues: Net service and operating revenues $1,194,763$1,254,838$1,268,683 Net product sales 119,689 111,803 96,213 Loss on sale of assets -28,501 0 -1,974 Miscellaneous income 26,223 0 0 1,312,174 1,366,641 1,362,922 Costs and expenses: Cost of service and operating revenues 914,457 863,045 926,419 Cost of products sold 104,169 97,982 87,866 Operating, general and administrative expenses 383,117 407,748 373,366 Interest expense - subsidiaries 19,399 51,493 44,380 Interest expense - other 104,336 100,519 90,722 1,525,478 1,520,787 1,522,753 Loss before income tax benefit -213,304 -154,146 -159,831 Income tax benefit 0 0 0 Loss before equity in net earnings of subsidiaries -213,304 -154,146 -159,831 Equity in net earnings of subsidiaries 125,336 80,745 51,511 Net loss $-87,968 $-73,401 $-108,320 See accompanying notes. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF CASH FLOWS Years ended July 31, 1995, 1994, and 1993 1995 1994 1993 Cash flows from operating activities: Net loss $-87,968 $-73,401 $-108,320 Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 67,541 71,700 74,004 Equity in net earnings of consolidated subsidiaries -125,336 -80,745 -51,511 Loss on sale of property, equipment, and operating assets 28,501 0 1,974 Provision for losses on other receivables 0 3,081 8,000 Reduction of cash value of life insurance as additional officers' compensation 0 0 9,793 Change in assets and liabilities: (Increase) decrease in accounts receivables -8,011 -2,124 7,700 (Increase) decrease in inventories 681 -73 1,204 (Increase) decrease in other current assets 3,963 1,522 -718 Increase (decrease) in accounts payable -33,306 -2,589 44,770 Increase (decrease) in accrued expenses -744 7,334 -10,082 Net cash used in operating activities-154,679 -75,295 -23,186 Cash flows from investing activities: Proceeds from disposal of property, equipment, and operating assets 24,440 0 0 Purchases of property and equipment -5,910 -11,204 -66,365 Net cash provided by (used in) investing activities 18,530 -11,204 -66,365 Cash flows from financing activities: Net borrowings (repayments) under short-term notes payable -90,379 -1,973 2,596 Increase in advances from subsidiaries 649,259 86,187 65,088 Proceeds from long-term debt 1,389 25,489 58,068 Principal payments on long-term debt -103,963 -30,983 -34,075 Net cash provided by financing activities 456,306 78,720 91,677 Net increase (decrease) in cash and cash equivalents 320,157 -7,779 2,126 Cash and cash equivalents at beginning of year 11,290 19,069 16,943 Cash and cash equivalents at end of year $331,447 $11,290 $19,069 See accompanying notes. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) NOTES TO CONDENSED FINANCIAL STATEMENTS July 31, 1995 and 1994 1. Long-term debt Long-term debt consists of the following: 1995 1994 12% subordinated capital notes, various maturity dates, unsecured. $170,852 $252,999 Mortgage note payable, interest at 1.5% over prime (prime was 8.75% as of July 31, 1995), monthly payments of $7,566, including principal and interest, final payment due June 2011, secured by real property. 730,346 747,700 Note payable, interest at 10% monthly payments of $356, including principal and interest, final payment February 1995, collateralized by equipment, interest payments due annually. 0 3,073 901,198 1,003,772 Less current maturities 167,558 226,084 Totals $733,640 $777,688 Scheduled maturities of long-term debt during the five years subsequent to July 31, 1995 are as follows: 1996 $ 167,558 1997 38,501 1998 20,489 1999 22,691 2000 25,129 Later years 626,830 Total $ 901,198 2. Dividends The Company has received no other cash dividends from subsidiaries or 50 percent or less owned entities for any of the three fiscal years in the period ended July 31, 1995. SCHEDULE II LINCOLN INTERNATIONAL CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Years ended July 31, 1995, 1994, and 1993 Column Column Column Column Column A B C D E Additions Balance Charged Charged Balance at to to Other at Beginning Costs & Accounts Deductions End Description of Year Expenses Describe Describe of Year Year ended July 31, 1995 Reserves deducted from assets: Allowance for losses: Accounts receivable 4,081 0 0 3,331 A 750 Loans receivable - finance 16,515 7,435 0 23,950A,C 0 20,596 7,435 0 27,281 750 Accumulated amortization - Franchise license 75,529 6,294 0 81,823 D 0 96,125 13,729 0 109,104 750 Year ended July 31, 1994 Reserves deducted from assets: Allowance for losses: Accounts receivable 12,100 3,031 0 11,050 A 4,081 Loans receivable - finance 16,929 11,195 0 11,609 A 16,515 29,029 14,226 0 22,659 20,596 Accumulated amortization - Franchise license 67,137 8,392 0 0 75,529 96,166 22,618 0 22,659 96,125 Year ended July 31, 1993 Reserves deducted from assets: Allowance for losses: Accounts receivable 4,100 8,000 0 0 12,100 Loans receivable - finance 17,108 14,143 3,205 B17,527 A 16,929 21,208 22,143 3,205 17,527 29,029 Accumulated amortization - Franchise license 58,745 8,392 0 0 67,137 79,953 30,535 3,205 17,527 96,166 (A) Write-off of doubtful accounts. (B) Recoveries of accounts previously written off. (C) Includes reduction in allowance in the amount of $16,807 due to sale of finance receivables. (D) Sold Franchise license May 1, 1995. LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT July 31, 1995, 1994, and 1993 INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders Lincoln International Corporation Louisville, Kentucky We have audited the accompanying consolidated balance sheets of Lincoln International Corporation as of July 31, 1995 and 1994, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended July 31, 1995. 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 consolidated financial position of Lincoln International Corporation as of July 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended July 31, 1995, in conformity with generally accepted accounting principles. POTTER & COMPANY, LLP October 11, 1995 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED BALANCE SHEETS July 31, 1995 and 1994 A S S E T S 1995 1994 Current assets: Cash and cash equivalents $332,682 $21,238 Finance receivables (Note 2) 0 533,995 Other receivables (Note 3) 22,708 14,732 Inventories 0 681 Prepaid expenses 7,091 11,173 Total current assets 362,481 581,819 Net property, plant and equipment (Notes 4, 6 and 12) 1,260,885 1,327,400 Other asset: Franchise license, net of accumulated amortization of $75,529 in 1994 0 50,350 Total assets $1,623,366 $1,959,569 See accompanying notes. 2 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED BALANCE SHEETS July 31, 1995 and 1994 L I A B I L I T I E S 1995 1994 Current liabilities: Notes payable (Note 5) $0 $90,379 Current maturities of long-term debt (Note 6) 318,809 352,064 Accounts payable 60,370 93,710 Income taxes payable 6,240 4,398 Accrued expenses 93,609 98,129 Deferred insurance commissions 0 2,435 Total current liabilities 479,028 641,115 Long-term debt, less current maturities (Note 6) 733,640 819,788 Total liabilities 1,212,668 1,460,903 Commitments (Note 10) S T O C K H O L D E R S' E Q U I T Y Stockholders' equity: Common stock, voting, $.50 stated value, 100,000 shares authorized and issued 50,000 50,000 Common stock, nonvoting, $.50 stated value, 2,900,000 shares authorized, 1,532,320 shares issued 766,160 766,160 Additional paid-in capital 471,300 471,300 Retained earnings (deficit) -865,891 -777,923 421,569 509,537 Less treasury stock, nonvoting, at cost, 9,246 shares 10,871 10,871 Total stockholders' equity 410,698 498,666 Total liabilities and stockholders' equity $1,623,366 $1,959,569 3 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Years ended July 31, 1995, 1994, and 1993 1995 1994 1993 Revenues: Net service and operating revenues $1,183,858$1,214,993$1,219,203 Net product sales 119,689 111,803 96,213 Finance charges and other income earned on finance receivables 58,625 180,462 182,089 Total revenues 1,362,172 1,507,258 1,497,505 Costs and expenses: Cost of service and operating revenues 931,305 916,635 976,966 Cost of products sold 104,169 97,982 87,866 Operating, general and administrative expenses 401,660 437,917 416,548 Provision for credit losses on finance receivables 6,409 5,665 10,938 Interest expense related to finance subsidiary 19,103 19,995 20,127 Total costs and expenses 1,462,646 1,478,194 1,512,445 Income (loss) from operations -100,474 29,064 -14,940 Other income (expense): Gain (loss) on sale of property, equipment, and operating assets (Note 9) 88,640 0 -1,974 Interest expense -104,336 -100,519 -90,722 Miscellaneous 34,442 2,452 2,300 Total other income (expense) 18,746 -98,067 -90,396 Loss before income taxes -81,728 -69,003 -105,336 Provision for income taxes (Note 7) 6,240 4,398 2,984 Net loss $-87,968 $-73,401 $-108,320 Net loss per common share $-.05 $-.04 $-.07 See accompanying notes. 4 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years ended July 31, 1995, 1994, and 1993 Total Common Common Additional Retained Stock- Stock Stock Paid-in Earnings Treasury holders' Voting Nonvoting Capital (Deficit) Stock Equity Balance at July 31, 1992 $50,000 $766,160 $471,300 $-596,202 $-10,871 $680,387 Net loss 0 0 0 -108,320 0 -108,320 Balance at July 31, 1993 50,000 766,160 471,300 -704,522 -10,871 572,067 Net loss 0 0 0 -73,401 0 -73,401 Balance at July 31, 1994 50,000 766,160 471,300 -777,923 -10,871 498,666 Net loss 0 0 0 -87,968 0 -87,968 Balance at July 31, 1995 $50,000 $766,160 $471,300 $-865,891 $-10,871 $410,698 See accompanying notes. 5 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended July 31, 1995, 1994, and 1993 1995 1994 1993 Cash flows from operating activities: Net loss $-87,968 $-73,401 $-108,320 Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 67,827 72,532 74,883 Provision for credit losses on finance receivables 7,435 11,188 14,143 Provision for losses on other receivables 0 3,038 8,000 Reduction in allowance for credit losses due to sale of operating assets -16,807 0 0 (Gain) loss on sale of property, equipment, and operating assets -88,640 0 1,974 Reduction of cash value of life insurance as additional officers' compensation 0 0 9,793 Change in assets and liabilities: (Increase) decrease in other receivables -7,976 -2,783 7,917 (Increase) decrease in inventories 681 -73 1,204 (Increase) decrease in prepaid expenses 4,082 1,522 -617 Increase (decrease) in accounts payable -33,340 -2,555 44,770 Increase (decrease) in income taxes payable 1,842 1,414 -2,973 Increase (decrease) in accrued expenses -4,520 2,890 -15,338 Decrease in deferred insurance commissions -2,435 -535 -110 Net cash provided by (used in) operating activities -159,819 13,237 35,326 Cash flows from investing activities: Loans originated -146,251 -407,876 -423,460 Loans repaid 146,565 412,560 415,091 Proceeds from sale of loans 661,951 0 0 Proceeds from disposal of property, equipment and operating assets 24,690 0 0 Purchases of property and equipment -5,910 -11,204 -66,365 Principal payments received on mortgage loan 0 0 7,935 Net cash provided by (used in) investing activities 681,045 -6,520 -66,799 See accompanying notes. 6 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) Years ended July 31, 1995, 1994, and 1993 1995 1994 1993 Cash flows from financing activities: Net borrowings (repayments) under short-term notes payable $-90,379 $-4,473 $2,596 Proceeds from long-term debt 1,389 30,704 62,384 Principal payments on long-term debt -120,792 -34,771 -40,474 Net cash provided by (used in) financing activities -209,782 -8,540 24,506 Net increase (decrease) in cash and cash equivalents 311,444 -1,823 -6,967 Cash and cash equivalents at beginning of year 21,238 23,061 30,028 Cash and cash equivalents at end of year $332,682 $21,238 $23,061 Supplemental disclosures of cash flow information: Cash paid during the year for interest $124,588 $152,724 $134,933 Cash paid during the year for income taxes $4,398 $2,984 $5,942 See accompanying notes. 7 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1995, 1994, and 1993 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of Lincoln International Corporation (the Company) is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. Company's Activities: Lincoln International Corporation is engaged in the operation of a stock yard and small consumer loan company in the state of Kentucky. The Company also is engaged in the operation of ice cream franchises in the mid-western United States. On December 1, 1994, the company sold all finance receivables and ceased operations at its one remaining small consumer loan company. On May 1, 1995, the company sold its remaining territories and equipment of the ice cream operation. On July 15, 1995, the company leased the property associated with the operation of the stock yard to another stock yard operator. Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions are eliminated in consolidation. Cash and Cash Equivalents: For purposes of reporting cash flows, the Company considers all money market funds with a maturity of three months or less to be cash equivalents. Finance Receivables: All new direct cash loans of the Company have been recorded on the discount-basis. Income from discount-basis direct cash loans and retail contracts is calculated using a method which approximates the interest method. Accrual of interest income is suspended when a loan is contractually delinquent for ninety days or more at which time the loan is converted to interest-bearing. Income from interest-bearing loans is credited to income as and when collections are made. Extension fees and late charges on discount-basis direct cash loans and retail contracts are credited to income when collected. Insurance commissions are recognized over the terms of the related loans based on the straight-line method which approximates the interest method. 8 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1995, 1994, and 1993 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Allowance for Losses: Provisions for credit losses are charged to income in amounts sufficient to maintain the allowance at a level considered adequate to cover the losses of principal in the existing portfolio. The Company's charge-off policy is based on a loan- by-loan review for all receivables, which are charged-off when they have had no collections during the preceding twelve-month period. Other Receivables: Royalties are recorded as income on the accrual basis. Expenses associated with franchise fees and royalties are charged as expense as incurred. Individual unit franchise fees are recorded as income when substantially all Company obligations have been completed. Property, Plant and Equipment: Property, plant and equipment are recorded at cost. Depreciation is provided over the following estimated useful lives: Buildings and improvements 20-40 years Yard and administration building 10-55 years Leasehold improvements 3- 5 years Machinery and equipment 3-12 years The Company uses the straight-line method of computing depreciation for financial statement purposes and accelerated methods for income tax purposes. Leasehold improvements are amortized using the straight-line method over the lease term. Franchise License: The Company amortizes the license using the straight-line method over 15 years which is the term of the franchise license agreement. Income Taxes: The Company files a consolidated federal income tax return. Investment tax credits are treated as a reduction of the tax provision in the year in which the benefit is earned (flow- through method). Separate state income tax returns are filed for the Company and each subsidiary. 9 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1995, 1994, and 1993 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Earnings Per Share: Earnings per share are based on the weighted average number of shares outstanding during each year. NOTE 2 - FINANCE RECEIVABLES Finance receivables consist of the following: 1994 Direct cash loans: Interest-bearing $ 29,942 Discount-basis 635,456 Retail contracts 12,783 678,181 Less: Unearned finance charges 127,671 Allowance for credit losses 16,515 144,186 Totals $533,995 Changes in the allowance for credit losses were as follows: Balance as of July 31, 1993 $ 16,929 Provision for credit losses 11,188 Loans charged off (17,132) Recoveries 5,530 Balance as of July 31, 1994 16,515 Provision for credit losses 7,435 Loans charged off and sold (24,977) Recoveries 1,027 Balance as of July 31, 1995 $ 0 On December 1, 1994, the finance receivables were sold. 10 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1995, 1994, and 1993 NOTE 3 - OTHER RECEIVABLES Other receivables consist of the following: 1995 1994 Accounts receivable $22,001 $16,576 Less allowance for doubtful accounts 750 4,081 21,251 12,495 Royalty receivables 1,457 2,237 Totals $22,708 $14,732 NOTE 4 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following: 1995 1994 Land $ 713,022 $ 718,022 Building and improvements 68,250 85,850 Yard and administration building 2,374,658 2,374,658 Machinery and equipment 446,600 526,774 Leasehold improvements 2,800 5,703 3,605,330 3,711,007 Less accumulated depreciation 2,344,445 2,383,607 Net property, plant and equipment $1,260,885 $1,327,400 NOTE 5 - NOTES PAYABLE Notes payable consist of the following: 1995 1994 Notes payable - officer $ 0 $15,379 Notes payable - other 0 75,000 Total $ 0 $90,379 11 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1995, 1994, and 1993 NOTE 6 - LONG-TERM DEBT Long-term debt consists of the following: 1995 1994 12% subordinated capital notes, various maturity dates, unsecured. $ 322,103 $ 421,079 Mortgage note payable, interest at 1.5% over prime (prime was 8.75% as of July 31, 1995), monthly payments of $7,566, including principal and interest, final payment due June 2011, secured by real property. 730,346 747,700 Note payable, interest at 10% monthly payments of $356, including principal and interest, final payment February 1995, collateralized by equipment. 0 3,073 1,052,449 1,171,852 Less current maturities 318,809 352,064 Totals $ 733,640 $ 819,788 Aggregate maturities required on long-term debt at July 31, 1995 are as follows: 1996 $ 318,809 1997 38,501 1998 20,489 1999 22,691 2000 25,129 Later years 626,830 Total $1,052,449 12 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1995, 1994, and 1993 NOTE 7 - INCOME TAXES The provision for income taxes consists of the following: 1995 1994 1993 Federal income taxes $ 0 $ 0 $ 0 State and local income taxes 6,240 4,398 2,984 Provision for income taxes $6,240 $4,398 $2,984 The Company has available at July 31, 1995 unused tax credits and operating loss carryforwards, which may provide future tax benefits. If not used, the carryforwards will expire as follows: Year of Tax Operating Loss Expiration Credits Carryforwards 2001 $61,247 $ 0 2002 0 170,356 2003 0 208,651 2004 0 129,419 2005 0 81,096 2006 0 216,677 2007 0 0 2008 0 89,623 2009 0 76,331 2010 0 59,836 $61,247 $1,031,989 13 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1995, 1994, and 1993 NOTE 7 - INCOME TAXES (CONTINUED) The difference between the statutory income tax rate and the Company's effective tax rate is reconciled as follows: 1995 1994 1993 Amount Percent Amount Percent Amount Percent Federal taxes (benefit) at statutory rate $-27,800 -34.0% $-23,500 -34.0% $-35,800 -34.0% Surtax exemption 0 .0% 0 .0% 0 .0% Tax effect of current operating loss available for carryover 27,800 34.0% 23,500 34.0% 35,800 34.0% Temporary differences -851 -1.0% 804 1.2% 0 .0% State and local income taxes, net of federal benefit 7,091 8.6% 3,594 5.2% 2,984 2.8% $6,240 7.6% $4,398 6.4% $2,984 2.8% A deferred tax asset due to the operating loss and tax credit carryforwards has not been recognized because it is more likely than not that it will not be realized based on current circumstances. NOTE 8 - MAJOR BUSINESS SEGMENTS The Company considers its activities to comprise two reportable segments: financial lending and agribusiness. Summary data is as follows: 1995 1994 1993 Revenues: Finance $58,625 $180,462 $182,089 Agribusiness 1,296,663 1,316,632 1,303,996 Other 6,884 10,164 11,420 Consolidated $1,362,172 $1,507,258 $1,497,505 14 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1995, 1994, and 1993 NOTE 8 - MAJOR BUSINESS SEGMENTS (CONTINUED) 1995 1994 1993 Operating profit (loss): Finance $-15,243 $31,848 $23,204 Agribusiness 161,081 132,454 95,117 Total segments 145,838 164,302 118,321 Corporate and other expenses -246,312 -135,238 -133,261 Income (loss) from operations -100,474 29,064 -14,940 Nonoperating income 123,082 2,452 326 Interest expense -104,336 -100,519 -90,722 Loss before income taxes $-81,728 $-69,003 $-105,336 Total assets: Finance $491 $545,209 $554,569 Agribusiness 1,283,533 1,333,934 1,389,036 Total segments 1,284,024 1,879,143 1,943,605 Corporate and other 339,342 80,426 94,191 Consolidated $1,623,366 $1,959,569 $2,037,796 Capital expenditures: Finance $0 $0 $0 Agribusiness 5,215 8,639 63,169 Total segments 5,215 8,639 63,169 Corporate and other 695 2,565 3,196 Consolidated $5,910 $11,204 $66,365 Depreciation and amortization: Finance $286 $832 $879 Agribusiness 57,118 55,726 54,652 Total segments 57,404 56,558 55,531 Corporate and other 10,423 15,974 19,352 Consolidated $67,827 $72,532 $74,883 15 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1995, 1994, and 1993 NOTE 9 - SALE OF OPERATING ASSETS On December 1, 1994, the Company sold all finance receivables and ceased operations at its one remaining branch of Lincoln Finance Company, Inc., in Greensburg, Kentucky. Net finance receivables of $559,858 were sold along with office equipment with a net book value of $1,839 at a gain of $117,060. The building in Greensburg, Kentucky was sold on July 6, 1995, at a gain of $8,756 in a separate transaction. On May 1, 1995, a division of the Company, Linco Marketing sold the remaining territories and equipment of the Ice Cream Churn Franchises for $5,000, at a loss of $36,285. NOTE 10 - LEASE COMMITMENTS The Company and its subsidiaries lease facilities, sales offices and equipment under operating leases, the majority of which do not extend beyond one year. Total rental expense amounted to $35,711 in 1995, $33,855 in 1994, and $29,114 in 1993. Future minimum rentals are as follows: Year ending July 31: 1996 $21,457 1997 11,180 1998 11,180 1999 5,306 2000 1,193 Totals $50,316 NOTE 11 - LEASE OF OPERATIONS On July 15, 1995, the Company leased the property associated with the operation of its stock yard to another stock yard operator. Under the agreement, the Company will receive rent at a minimum of $18,000 a month for the first two years, plus a percentage of the pre-tax profits. After the initial two years, the company will receive a percentage of the pre- tax profits with no minimum payment required. The agreement expires July 31, 2005, but may be terminated by the company upon six months notice to the lessee. The lessee is responsible at its expense, for most repairs, insurance, utilities and property taxes associated with the property. 16 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1995, 1994, and 1993 NOTE 12 - LEASE OF PROPERTY, PLANT AND EQUIPMENT The Company is the lessor of property under operating leases. Following is a summary of the Company's investment in property, plant and equipment on operating leases as of July 31, 1995: Land $ 713,022 Buildings and Improvements 68,250 Yard and administration building 2,374,658 3,155,930 Less accumulated depreciation 1,964,985 $1,190,945 Under the operating method of accounting for leases, the cost of the property, plant and equipment is recorded as an asset and is depreciated over its estimated useful life and the rental income is recognized as the lease rental payments are earned. All, but one, of the leases are month-to-month. The minimum future rentals to be received on the leases at July 31, 1995 are as follows: 1996 $ 216,000 1997 216,000 Later years 0 Total $ 432,000 17 LEASE THIS LEASE is made and entered into as of July 15, 1995, by and among Lincoln International Corporation, a Kentucky corporation ("Lessor"), and Kentucky Livestock Exchange (Bourbon Stock Yards Operations), a division of Michigan Livestock Exchange ("Lessee") and Michigan Livestock Exchange ("MLE"). WHEREAS, Lessor is the owner of the real estate described on Exhibit A attached hereto and made a part hereof (the real estate, together with all buildings, livestock pens, easements and appurtenances, all railroad spur tracks located on the real estate, and all plumbing, heating, lighting, electrical, ventilation and air conditioning systems and fixtures now or hereafter affixed to the buildings and which are necessary to the general operation and maintenance thereof, is hereinafter referred to as the ("Property"), which is currently operated as the Bourbon Stock Yards (the"Business"); WHEREAS, there is located on the Property machinery, equipment and fixtures currently used or usable in connection with the Business (the "Equipment"); and WHEREAS, Lessee desires to rent the Property and purchase the Equipment from Lessor and Lessor is willing to rent the Property and sell the Equipment to Lessee. NOW, THEREFORE, for and in consideration of the mutual covenants contained in this Lease, Lessor and Lessee agree as follows: 1. Lease of Property and Equipment; Employees. (a) Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Property on the terms and conditions set forth in the Lease. Lessor hereby represents and warrants to Lessee that other than Lessee and Lessor's mortgagee, no third party has any interest in, right to or claim against the Property. At Lessee's request from time to time, Lessor shall, at its expense, remove from the Property any items designated by Lessee. Lessor shall remove such items within a reasonable period of time (not to exceed thirty (30) days) following Lessee's notice. All of Lessee's leasehold interest and obligations as to such items shall terminate with such removal without further act of the parties. The parties hereto have determined that certain of the Equipment shall be purchased by Lessee or MLE and the purchase price and payment terms shall be negotiated in good faith between the parties. (b) The Property to be leased hereunder shall include the property and facilities used by Lessor in connection with the operation of the truckwash and Lessor shall have no obligation or liability with respect to such property or facilities. (c) Lessor hereby agrees to permit Lessee to hire any of its employees currently employed to perform services on the Property, but Lessee shall have no obligation to hire any employees, including, without limitation, those employees who are members of the Amalgamated Meat Cutters and Butchers Union of North America, AFL-CIO, Local #227. Lessor shall indemnify and hold harmless Lessee from and against any and all expenses, costs, claims, judgments, settlements, obligations and other liabilities relating to any employees of Lessor not hired by Lessee or relating to the period prior to the date hereof with respect to employees of Lessor hired by Lessee. 2. Term. The term of this Lease (the "Term") shall be ten (10) years, commencing on July 15, 1995 (the "Commencement Date") and ending on July 31, 2005, unless earlier terminated as provided herein. Lessor may earlier terminate the Lease upon six (6) month's prior written notice to Lessee. 3. Rent. Lessee shall pay to Lessor monthly rent (the "Rent") as follows: (a) 75% of the Monthly Pre-tax Profits from the Commencement Date through July 31, 1997; (b) 25% of the Monthly Pre-tax Profits from August 1, 1997 through July 31, 1999; and (c) 50% of the Monthly Pre-tax Profits from August 1, 1999 through July 31, 2005. Provided, however, that notwithstanding any contrary provisions of this numerical paragraph 3, rent payable by Lessee to Lessor on the first day of each calendar month during the first two (2) years of the Lease shall be Eighteen Thousand Dollars ($18,000.00). The aggregate of such monthly minimum rental payments shall be deducted from other rental payments due for Lessee to Lessor above. "Monthly Pre-tax Profits" shall be the monthly pre-tax operating income of Lessee or any pro rata portion thereof, prepared on an accrual basis in accordance with generally accepted accounting principles. Except as herein otherwise provided with respect to minimum rental. To the extent there are negative Monthly Pre-tax Profits in a particular month(s) (a "Deficit"): (i) Rent shall not be due and payable for that month and (ii) Rent shall not be due and payable until the aggregate amount of Monthly Pre-tax Profits following the month in which there is a Deficit exceeds the aggregate amount of the Deficit. The amount by which the aggregate Monthly Pre-tax Profits exceeds the Deficit shall be paid as Rent. Once the Deficit has been reduced to zero, Rent shall be determined based on the Monthly Pre-tax Profits subsequent to the month in which the Deficit is reduced to zero. MLE agrees to charge lessee $3,000 per month for services provided by MLE to Lessee during the Term. Except with respect to the foregoing sentence, MLE will not charge Lessee for any services provided by MLE during the Term without the prior written consent of Lessor. Percentage Rent shall be paid to Lessor within forty- five (45) days following the last day of the preceding month. Lessor has the right to inspect the books and records of Lessee with respect to the calculation of the Rent due hereunder during the Business' normal business hours. 4. Use of Property; License. (a) The Property shall be used by Lessee and its agents in connection with the Business. Lessor shall obtain all necessary permits and licenses for the use and occupancy of the Property and warrants that the Property and the use permitted by this Lease complies with all applicable governmental laws, rules and regulations. Lessor represents and warrants that, to Lessor's knowledge, the current use of the Property does not violate any covenants, conditions, agreements or restrictions affecting all or any part of the Property. (b) Lessor hereby grants to Lessee an exclusive license to use the name "Bourbon Stock Yards" during the Term. 5. Condition; Repairs. (a) Lessee shall take possession of the Property and Equipment in the condition in which it then exists. (b) Lessee will, at its own expense, maintain the Property and Equipment in good order and repair, consistent with the condition of the Property and Equipment on the date hereof; provided, that Lessor shall make all repairs for which the cost exceeds $10,000 in any one instance and all replacements of structural elements of the Property and of the Equipment, unless the need therefore is the result of the acts or gross negligence of Lessee. Further, Lessee shall not have any responsibility or liability for structural alterations to the Property or the Equipment required by changes in governmental rules or regulations which become effective after the date of this Lease, or for any capital improvement expenditures with respect to the Property or Equipment, which expenses shall be paid by Lessor. 6. Insurance. (a) During the Term, Lessee shall maintain: (i) Comprehensive general liability insurance with respect to the Property and operations thereon, including but not limited to personal injury, blanket contractual, broad form property damage liability coverages, and workers' compensation coverage as required by law. Such liability policy or policies shall be in an amount at least equal to the amount currently maintained by Lessor or such other amount as may be mutually agreed to by the parties. (ii) Casualty coverage for all buildings and improvements on the Property and against loss or damage as provided in the standard fire and extended coverage policy with "all risk" peril coverage for not less than the full replacement cost thereof and with deductible limits approved by Lessor. (b) All insurance shall be issued by companies and be in form and substance reasonably acceptable to Lessor. Lessee, Lessor and its mortgagee shall be named insureds in such insurance policy or policies and the same shall contain waivers of subrogation claims against Lessee, its employees, agents, and mortgagees. Each policy shall provide that it shall not be canceled or altered without thirty (30) days prior notice to Lessee and Lessor. Lessee shall deliver to Lessor certificates evidencing all required insurance coverage, together with proof of payment of the premiums, on the date hereof and prior to the expiration date of the initial or any renewal policies. Failure of Lessor to object to the form or substance, including coverages, of any insurance policy within fifteen (15) days following Lessor's receipt of a copy of such policy shall constitute Lessor's express consent to the scope of coverage provided thereby. Such actual coverage shall thereupon be deemed to constitute compliance with this Paragraph 6. (c) All policies of insurance, where appropriate, shall provide that proceeds shall be payable to Lessor and Lessor's mortgagee pursuant to a standard mortgage clause; provided, however, that any proceeds of a casualty loss shall be held in an interest bearing escrow account with a bank, title company or other party mutually acceptable to Lessor and Lessee to be applied as provided in Paragraph 7. (d) Lessor and Lessee waive all rights, each against the other, for damages caused by fire or other perils covered by insurance or required to be covered by insurance hereunder, unless such waiver operates to invalidate any such policy. The insurance policies herein referred to, wherever they do not name both Lessor and Lessee as named insureds, shall be endorsed to provide for such waiver. Provided, however, that this subparagraph shall not apply in the event a loss is not covered by insurance due to either party's failure to obtain such insurance for reasons beyond the direct control of such party or due to the act or omission of any insurance agent or broker. 7. Restoration of Damage. If the Property or the Equipment is materially damaged by fire or other casualty which is not covered by insurance, other than through the gross negligence or intentional misconduct of Lessee, either party shall have the right to terminate this Lease as of the date of the fire or casualty by notice to the other within thirty (30) days after the date of such casualty, in which event Rent shall be apportioned on a per diem basis and be paid to the date of such fire or casualty. For purposes of this Paragraph 7, any damage to the Property and/or Equipment (collectively, the "Project") shall be considered material if the Project shall have been damaged or destroyed to such an extent that, in the reasonable judgment of the Lessee, (i) it cannot be reasonably restored within a period of three (3) consecutive months to the condition thereof immediately preceding such damage or destruction, or (ii) the Lessee is thereby prevented from carrying on its normal operations at the Project for a period of three (3) consecutive months. If neither party elects to terminate this Lease or if the damage is not material, this Lease shall not be terminated and Lessor shall promptly repair such damage and restore the Property and the Equipment to the condition that existed prior to the loss. Rent shall abate until the Property and Equipment is restored and put in proper condition for use and occupancy by Lessee for the purposes set forth in Paragraph 4. 8. Condemnation. (a) If the whole or a material part of the Property and the Equipment shall be condemned by any public authority having the power of eminent domain or conveyed to such public authority in lieu of the exercise of the power of eminent domain, then the Term shall cease on the date when possession of the Property and the Equipment or such portion thereof so taken shall be required by the condemning authority and all Rent shall be paid up to that day. For the purposes of this Paragraph 8, any taking shall be considered material if title in and to, or the temporary use of, all or substantially all of the Property shall have been taken under the exercise of the power of eminent domain by any governmental authority, or person acting under governmental authority (including such a taking as in the judgement of the Lessee, results in the Lessee's being prevented thereby from carrying on its normal operations at the Property. Lessee shall have no right to share in such award except to the extent provided in Paragraph 8.(c). (b) If the condemnation is not material, this Lease shall remain in full force and effect except that Lessor shall, at its own cost and expense, promptly make all necessary repairs or alterations to the Property. (c) All damages awarded or paid for the Property shall belong to Lessor; provided, however, that Lessor shall not be entitled to any separate award made to Lessee for loss of business, depreciation to and cost of removal of trade equipment or fixtures, relocation expenses or other damages incurred by Lessee provided that such separate award is not made as a result of Lessee's contest of Lessor's right to receive the entire award for diminution in value of the leasehold or of the fee. 9. Utilities. Lessee shall pay as and when due, all water, gas and electric light and power bills taxed or charged on the Property or attributable thereto as well as all charges for security services during the Term. Lessee shall furnish all heating, ventilation, air-conditioning and heated water to the Property. Except when caused by the acts or neglect of Lessor or Lessor's default under this Lease, Lessor shall not be liable for damages, by abatement of Rent or otherwise, for interruption or failure of, or delay in, furnishing any service or utility serving the Property. Lessor represents and warrants that all water, sewer, gas, electric, telephone, drainage and other utility equipment, facilities and services required by law or necessary for the use permitted pursuant to Paragraph 4 are installed and connected pursuant to valid permits, and are separately metered to the Property, are in good operating condition and that no condition exists which would result in the termination or impairment of such utility services. 10. Taxes. Lessee shall pay, prior to delinquency, all ad valorem state, county, municipal and school real estate taxes, installments of special assessments, and personal property taxes which shall be payable during the Term with respect to the Property. Lessee shall pay before delinquency all taxes, assessments, license fees and other public charges levied, assessed or imposed upon its business operations and its leasehold improvements, merchandise and other personal property in or about the Property. Each party shall deliver to the other copies of receipts showing payment of said obligations within thirty (30) days after the respective payments evidenced thereby; provided, however, that nothing contained in this Paragraph 10 shall prevent Lessee from contesting the amount or validity of any tax, provided Lessee's use of the Property is not impaired thereby. 11. Alterations. (a) Lessee shall not make any alterations that would materially impair the fair market value or the structural integrity of the Property without the prior written consent of Lessor. The making of any alterations or installation of any equipment or trade fixtures shall be accomplished (1) in a good and workmanlike manner, and (2) in compliance with all applicable laws and regulations. The making of any alterations by Lessee and the installation of equipment and trade fixtures shall be paid by Lessee, so that the Property shall be free from any lien, mortgage, conditional sales agreement, security interest or title retention agreement. Upon request, Lessee shall deliver to Lessor evidence of payment, contractors affidavits, and full and final waivers of all liens for labor, services and materials. (b) Except as otherwise provided in this paragraph, title to all alterations (other than equipment and trade fixtures) shall immediately vest in Lessor and shall be deemed part of the Property and subject to all the terms of this Lease. Any equipment and trade fixtures of whatever nature placed or installed in or upon the Property by Lessee shall remain its property and may be removed by Lessee upon the expiration or termination of this Lease. 12. Inspection. Lessor may, at reasonable times during normal business hours and upon reasonable notice to Lessee, enter to perform any necessary repairs or capital improvements that Lessor is required or permitted to do pursuant to the terms of this Lease. If any emergency presents an immediate, serious threat to persons or property in or about the Property, Lessor shall have the absolute right at any time to enter upon the Property to abate such emergency, using such force as may be reasonably necessary to effect such entrance without liability to Lessee therefor. In the exercise of its rights hereunder, Lessor shall use reasonable efforts to refrain from interfering with Lessee's business operations and to minimize any inconvenience, disturbance, loss of business, nuisance or other damage arising out of such entries. 13. Default; Remedies. (a) The occurrence of any one or more of the following events (and "Event of Default") shall constitute a breach of this Lease by Lessee: (i) Failure to pay Rent as it becomes due and payable, and such failure continues for more than ten business (10) days after Lessee's receipt of written notice from Lessor. (ii) Failure to perform or observe any other material term or provision of this Lease, and such failure continues for a period of thirty (30) days after Lessee's receipt of Lessor's written notice; provided, however, that if the nature of Lessee's default is such that more than twenty (20) days are reasonably required for its cure, then Lessee shall not be deemed to be in default if Lessee commences such cure within said twenty (20) day period and thereafter diligently prosecutes such cure to completion. (b) After the occurrence and during the continuation of an Event of Default, Lessor shall have the right to: (i) Terminate this Lease by giving to Lessee not less than ninety (90) days' advance written notice of Lessor's election to do so, in which event the Term shall end and all right, title and interest of Lessee hereunder shall expire on the date stated in such notice; or (ii) Terminate Lessee's right of possession without terminating this Lease by giving not less than ninety (90) days' advance written notice to Lessee that Lessee's right of possession shall end on the date stated in such notice, in which event Lessee's right of possession shall cease on the date stated in such notice. (c) If Lessor exercises either of the remedies provided in the foregoing Paragraphs 13.(b)(i) or 13.(b)(ii), Lessee shall vacate the Property and surrender possession thereof to Lessor and Lessor may re-enter and take possession of the Property with process of law if Lessee has not so surrendered possession or without process of law if Lessee has done so. (d) If (i) Lessor defaults in the observance or performance of any obligation on Lessor's part to be observed or performed under the terms of this Lease or Lessor defaults in the payment or performance of any obligation arising in connection with any mortgage or other encumbrance on the Property, (ii) Lessee notifies Lessor of the existence of said default, and (iii) said default shall continue for a period of sixty (60) days after said notice, then Lessee may either (a) terminate this Lease upon written notice to Lessor after the expiration of said sixty (60) day period, or (b) perform the obligation of Lessor hereunder and thereafter set-off the amount of any expenditure or obligation paid or incurred by Lessee (including, but not limited to, reasonable attorney's fees), together with interest thereon at an interest rate of 10% per annum (the "Default Rate") from the date incurred, in curing Lessor's default against the Rent next due under this Lease. At the time that any set-off against the Rent is taken, Lessee shall provide Lessor with copies of all invoices substantiating the amount claimed by Lessee to have been paid or incurred in curing Lessor's default. Lessee shall not be liable for any Rent payable with respect to any period after termination hereunder. 14. Covenant Not to Compete. During the Term, neither Lessor nor MLE shall, directly or indirectly, by or for themselves or as the agent of another or through others as their agent, own, manage, operate, control, be compensated by, participate in, render advice to, have any right to or interest in any other business directly or indirectly engaged in the sale of services competitive with Lessee anywhere within a 50 mile radius of the Property. The necessity of protection against the competition of MLE and Lessor and the nature and scope of such protection has been carefully considered by the parties hereto. The parties agree and acknowledge that the duration, scope and geographic areas applicable to the covenant not to compete described in this Paragraph are reasonable and that adequate compensation has been received by MLE and Lessor for such obligations. If, however, any court determines that any of the restrictions are not reasonable, the parties hereby give the court the right and power to interpret, alter, amend or modify any or all of the terms contained herein to include as much of the scope, time period and geographic area as will render such restrictions enforceable. MLE and Lessor each agree that in the event of its breach or violation or attempted breach or violation of this Paragraph, said provisions, or any of them, may be enforced by an injunction in a suit in equity, and that a temporary or preliminary injunction or restraining order may be granted immediately upon the commencement of any such suit and without notice. (a) Lessor and Lessee shall mutually agree upon any capital improvement projects to be undertaken with respect to the Property and Equipment. 15. Surrender; Holding Over. (a) On the expiration date of this Lease or on the termination of Lessee's right of possession, Lessee shall remove its personal property, equipment and trade fixtures and peacefully yield up the Property and Equipment to Lessor in substantially the same condition as on the date hereof, ordinary wear and tear, casualty loss, condemnation and acts of Lessor excepted. (b) A holding over by Lessee beyond the expiration of the Term shall give rise to a month-to-month tenancy only. If Lessee continues to occupy the Property and Equipment on a month- to-month tenancy, all of the provisions of this Lease shall continue to be effective except that either party may, upon prior written notice, terminate such month-to-month tenancy. 16. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be, personally delivered or sent by facsimile transmission with confirming copy sent by overnight courier (such as Express Mail, Federal Express, etc.) and a delivery receipt obtained and addressed to the intended recipient as follows: If to Lessor: Lincoln International Corporation 120 Village Square Suite 6 Louisville, Kentucky 40243 Telephone No.: 502-245-8814 Facsimile No.: 502-245-8817 ATTN: Lee Sisney If to Lessee or MLE: Michigan Livestock Exchange Telephone No.: Facsimile No.: ATTN: or at such other address as either party may provide to the other in writing for the stated purpose of receiving notices. 17. Quiet Possession. Lessor covenants that Lessee shall peaceably and quietly have, hold and enjoy the Property and Equipment during the Term, subject to the terms hereof. 18. Hazardous Substances. (a) Lessee shall, and Lessee shall cause all of its employees, agents, contractors and subcontractors and any other persons from time to time present on or occupying the Property (other than the employees, agents, contractors and subcontractors or Lessor), to operate its Business in substantial compliance with all Federal, state or local laws, ordinances or regulations relating to industrial hygiene or to the environmental conditions on, under or about the Property (collectively, "Environmental Laws"), including those relating to flammable materials, explosives, petroleum (including crude oil), radioactive materials, hazardous wastes, toxic substances or related materials, including, without limitation, any asbestos, asbestos containing materials, PCB's or any substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," or "toxic substances" (collectively referred to hereinafter as "Hazardous Substances"). (b) Notwithstanding the provisions of Paragraph 18.(a), Lessor shall remain liable for all loss, damage, cost, expense and liabilities pertaining to the presence of Hazardous Substances on the Property or any other premises of Lessor or violations of any Environmental Laws related to the Property or any other premises of Lessor prior to the date hereof, whether known or unknown or whether resulting from the acts of Lessor or its predecessors in title, and to any present or future claims relating thereto. Lessee shall have the right to join and participate in, as a party if it so elects, any legal proceedings or actions initiated by any person or entity in connection with any claims relating to the Property. Lessor shall be solely responsible for, and shall indemnify, defend, and hold harmless Lessee and its directors, officers, employees, agents, successors and assigns from and against, any loss, damage, cost, expense or liability directly or indirectly arising out of or attributable to the use, generation, storage, release, threatened release, discharge, disposal, or presence of Hazardous Substances on, under or about the Property or any other premises of Lessor or any violation of any Environmental Laws related to the Property or any other premises of Lessor by parties other than Lessee, including, without limitation: (1) all foreseeable consequential damages; (2) the costs of any required or necessary repair, cleanup or detoxification of the Property, and the preparation and implementation of any closure, remedial or other required plans; and (3) all costs and expenses incurred by Lessee in connection with clauses (1) and (2), including, but not limited to, attorneys' and consultants' fees and expenses. The foregoing indemnity, defense, and hold harmless agreement shall survive the expiration, cancellation or termination of this Lease and exercise of the option hereunder. Any loss, damage, cost, expense or liability incurred by Lessee for which Lessor is responsible or for which Lessor has indemnified Lessee shall be paid to Lessee on demand, together with interest thereon at the Default Rate from the date incurred. 19. Waiver; Indemnity. (a) To the extent covered by policies of insurance maintained or required to be maintained hereunder, Lessee releases Lessor and its officers, directors, agents and employees from and waives all claims for damages to person or property sustained by Lessee resulting, directly or indirectly, from any occurrence, condition, or defect in or about the Property or any part thereof, from any equipment or appurtenance thereon, or from any accident in or about the Property. (b) To the extent covered by policies of insurance maintained or required to be maintained hereunder, Lessor releases Lessee and its officers, directors, agents and employees from and waives all claims for damages to person or property sustained by Lessor resulting, directly or indirectly, from any occurrence, condition, or defect in or about the Property or any part thereof, from any equipment or appurtenance thereon, form any accident on or about the Property. (c) To the extent not expressly prohibited by law, Lessee agrees to hold Lessor and its officers, directors, agents and employees harmless and to indemnify each of them against claims, expenses or liabilities, including reasonable attorneys' fees and expenses, arising from any breach on the part of Lessee in the performance of its covenants or agreements under this Lease or from Lessee's acts or neglect or that of its officers, directors, agents or employees, but only to the extent that such claims, expenses or liabilities are not covered by proceeds of insurance. (d) To the extent not expressly prohibited by law, Lessor agrees to hold Lessee and its officers, directors, agents and employees harmless and to indemnify each of them against claims, expenses or liabilities, including reasonable attorneys' fees and expenses, arising from any breach on the part of Lessor in the performance of its covenants or agreements under this Lease or from the breach of any representation or warranty of Lessor set forth in this Lease or from Lessor's acts or neglect or that of its officers, directors, agents or employees, but only to the extent that such claims, expenses or liabilities are not covered by proceeds of insurance. 20. Force Majeure. Anything in this Lease to the contrary notwithstanding, Lessee and/or Lessor shall not be deemed in default with respect to the performance of any obligation on its part to be performed under this Lease if such default shall be directly due to any strike, lockout, civil commotion, war-like operation, invasion, rebellion, hostilities, military or usurped power, sabotage, governmental regulation or controls, inability to obtain any material or service, or through acts of God or other cause or causes whether similar or dissimilar to those enumerated beyond the control of Lessee and/or Lessor, as the case may be, and the period for Lessee and/or Lessor to perform such obligation shall be extended by a period equal to the period of delay caused by such reason. 21. Miscellaneous. (a) This Lease including the Exhibits and documents referred to herein contains the entire agreement between the parties and may be modified only in a writing signed by the parties. (b) The terms of this Lease are binding upon an inure to the benefit of the parties and their respective heirs, legal representatives, successors and assigns. Nothing in this Lease shall be deemed to or be construed as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto or any other relationship, other than that of landlord and tenant. (c) The paragraph headings are for convenience only. All grammatical changes required to make the provisions of this Lease apply to the past, present and future, and in the plural sense where appropriate, and to corporations, associations, partnerships or individuals, male or female, shall be assumed as though in each case fully expressed. (d) This Lease shall be governed by the laws of the State of Kentucky. If any term of this Lease is held invalid, illegal or unenforceable, in whole or in part, the validity of the remaining part of such term or of any other term of this Lease shall not be affected thereby. This Lease shall be construed to have been mutually prepared by the parties. (e) Time is of the essence of this lease. (f) If any provision of this Lease requires Lessor's approval, that approval shall at all times be based on a reasonable standard. (g) If either Lessor or Lessee shall bring any action or proceeding for damages for an alleged breach of any provision of this Lease, to recover Rent, or to enforce, protect or establish any right or remedy hereunder, the prevailing party shall be entitled to recover as a part of such action or proceeding reasonable attorneys' fees and court costs. IN WITNESS WHEREOF, the undersigned have executed this Lease as of the date and year first above written. LINCOLN INTERNATIONAL CORPORATION By: ----------------------------------------- Its: ----------------------------------------- KENTUCKY LIVESTOCK EXCHANGE (BOURBON STOCK YARDS OPERATION) a division of Michigan Livestock Exchange By: ----------------------------------------- Its: ----------------------------------------- MICHIGAN LIVESTOCK EXCHANGE By: ----------------------------------------- Its: ----------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----