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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-22725
CRESCENT OPERATING, INC.
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(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 75-2701931
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
306 West 7th Street, Suite 1000
Fort Worth, Texas 76102
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code (817) 339-2200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
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(Title of class)
Preferred Share Purchase Rights
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
by section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the 9,050,453 shares of $0.01 par value common
stock held by non-affiliates of the registrant on March 28, 2000 was $28.9
million based upon the closing price of $3.19 on The Nasdaq Stock Market.
Number of shares of Common Stock outstanding as of March 28, 2000: 11,414,963
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement to be filed with the Securities and Exchange
Commission for registrant's 1999 Annual Meeting of Shareholders to be held in
June 2000 are incorporated by reference into Part III of this Form 10-K.
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TABLE OF CONTENTS
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PAGE
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PART I.
Item 1. Business....................................................................................... 3
Item 2. Properties..................................................................................... 21
Item 3. Legal Proceedings.............................................................................. 22
Item 4. Submission of Matters to a Vote of Security Holders............................................ 22
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.......................... 23
Item 6. Selected Financial Data........................................................................ 24
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................................................... 24
Item 7A. Quantitative and Qualitative Disclosures about Market Risk..................................... 35
Item 8 Financial Statements and Supplementary Data.................................................... 35
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure......................................................... 35
PART III.
Item 10. Directors and Executive Officers of the Registrant............................................. 36
Item 11. Executive Compensation......................................................................... 36
Item 12. Security Ownership of Certain Beneficial Owners and Management................................. 36
Item 13. Certain Relationships and Related Transactions................................................. 36
PART IV.
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K............................. 37
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This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Although the Company believes that the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, the Company's actual results could differ materially
from those the Company expects to achieve. Some of the factors that might cause
such a difference include (i) the impact of changes in the industries in which
the Company's businesses and investments operate (including equipment sales and
leasing, hospitality, temperature controlled logistics and land development) and
the economic, demographic and other competitive conditions affecting those
industries, the Company's cash flows and the value of the Company's investments,
(ii) the relatively high levels of debt that the Company maintains and the
Company's ability to generate revenue sufficient to meet debt service payments
and other operating expenses, (iii) the possibility that the Company's
outstanding debt (some of which requires so-called "balloon" payments of
principal) may be refinanced at higher interest rates or otherwise on terms less
favorable to the Company, (iv) the availability of equity and debt financing
that may be necessary or advantageous to expand or maintain the Company's
operations and investments, (v) the underperformance or non-performance of the
Company's existing business investments, (vi) any resolution of issues that
relate to the bankruptcy petition of Charter Behavioral Health Systems, LLC
("CBHS") that is unfavorable to the Company, including, but not limited to,
judgments against the Company in respect of lawsuits instituted in connection
with the closure of certain CBHS facilities prior to CBHS' filing bankruptcy,
(vii) the Company's inability to identify or pursue suitable business or
investment opportunities, (viii) the high levels of debt and rental payments
that certain of the Company's investments are subject to make the earnings of
those investments extremely sensitive to changes in operations or business
activity and (ix) the effect of the REIT Modernization Act upon future
opportunities under the Intercompany Agreement with Crescent Equities. Given
these uncertainties, readers are cautioned not to place undue reliance on such
statements. The Company is not obligated to update these forward-looking
statements to reflect any future events or circumstances.
PART I
ITEM 1. BUSINESS
THE COMPANY
Crescent Operating, Inc. ("Crescent Operating" or the "Company"), a Delaware
corporation, was formed on April 1, 1997, by Crescent Real Estate Equities
Company ("Crescent Equities" or "CEI") and its subsidiary Crescent Real Estate
Equities Limited Partnership ("Crescent Partnership"). Effective June 12, 1997
Crescent Equities distributed shares of Crescent Operating common stock to
shareholders of Crescent Equities and unit holders of Crescent Partnership, and,
on that date, Crescent Operating became a public company. Crescent Operating was
formed to be the lessee and operator of certain assets owned or to be acquired
by Crescent Partnership. The relationship between the Company and Crescent
Partnership is governed by the "Intercompany Agreement" which provides the
Company and Crescent Partnership with rights to participate in certain
transactions. The Company also engages in other business enterprises not related
to Crescent Equities or the Intercompany Agreement, such as the Equipment Sales
and Leasing segment. Unless the context otherwise requires, the terms "Crescent
Operating", "the Company", "Crescent Equities", "CEI" and "Crescent Partnership"
include the subsidiaries of each and, in the case of "CEI" and "Crescent
Equities", includes "Crescent Partnership".
On December 17, 1999, President Clinton signed into law the REIT Modernization
Act which will become effective after December 31, 2000, and contains a
provision that would permit real estate investments trusts ("REITS"), such as
Crescent Equities, to own and operate certain types of investments that are
currently owned and operated by Crescent Operating. The REIT Modernization Act
is expected to reduce the number of business opportunities that Crescent
Equities would otherwise offer to the Company pursuant to the Intercompany
Agreement. Crescent Equities has expressed an interest in certain of the
investments currently owned or operated by the Company that the REIT
Modernization Act would allow Crescent Equities to own or operate. Crescent
Operating is exploring alternatives with Crescent Equities regarding a potential
future transaction with respect to certain of the Company's assets. See
Transactions with Crescent Partnership for further discussions of the
Intercompany Agreement.
On October 25, 1999, the Company received notice from The Nasdaq-Amex Market
Group (the "Nasdaq") that, for the 30 consecutive trading days preceding such
date, the Company's common stock failed to maintain a closing bid price of
greater than or equal to $5.00 per share, the minimum closing bid price required
for continued listing under
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the Nasdaq National Market System ("NMS") maintenance standard applicable to the
Company. On March 3, 2000, the Company had a hearing before a Nasdaq panel to
determine whether the Company will be permitted to maintain its NMS listing.
Pending the outcome of the hearing, the Company's common stock will continue to
be listed for trading on NMS. In the event of an unfavorable outcome of the
hearing, the Company intends to apply for listing on the Nasdaq SmallCap Market.
While the Company believes it satisfies the requirements for listing on the
Nasdaq SmallCap Market, there can be no assurances that Nasdaq will approve
listing of the Company's shares on such market.
Crescent Operating, through various subsidiaries and affiliates, has assets and
operations comprising four business segments: (i) Equipment Sales and Leasing,
(ii) Hospitality, (iii) Temperature Controlled Logistics (formerly Refrigerated
Warehousing) and (iv) Land Development. Within these segments the Company owned
the following for all or some portion of 1999:
o THE EQUIPMENT SALES AND LEASING SEGMENT consisted of a wholly owned
interest in Crescent Machinery Company, a construction equipment sales,
leasing and service company with 18 locations in seven states.
o THE HOSPITALITY SEGMENT consisted of (i) the Company's lessee interests in
the Denver Marriott City Center, the Hyatt Regency Beaver Creek, the Hyatt
Regency Albuquerque, Canyon Ranch-Tucson, Canyon Ranch-Lenox, the Ventana
Inn and Spa, the Sonoma Mission Inn and Spa (including the Sonoma Mission
Inn Golf and Country Club), the Four Seasons Hotel in Houston, Texas and
the Renaissance Hotel in Houston, Texas (collectively, the "Hospitality
Properties"), (ii) a two-thirds interest in the Houston Center Athletic
Club Venture (see Hospitality Segment - Recent Developments) and (iii) a 5%
economic interest in CRL Investments, Inc. ("CRL"), which has an investment
in the Canyon Ranch Day Spa in the Venetian Hotel in Las Vegas, Nevada and
participates in the future use of the "Canyon Ranch" name.
o THE TEMPERATURE CONTROLLED LOGISTICS SEGMENT consisted primarily of a 40%
interest in the operations of Vornado Crescent Logistics Operating
Partnership ("AmeriCold Logistics"), which currently operates 104
refrigerated storage properties with an aggregate storage capacity of
approximately 519.2 million cubic feet, and a 1% interest in Crescent CS
Holdings Corporation ("CS I") and Crescent CS Holdings II Corporation ("CS
II", and together with CS I, the "Temperature Controlled Logistics
Partnerships").
o THE LAND DEVELOPMENT SEGMENT consisted of (i) a 4.65% economic interest in
Desert Mountain, a master planned, luxury residential and recreational
community in northern Scottsdale, Arizona, (ii) a 42.5% general partner
interest in The Woodlands Operating Company, L.P. ("Woodlands Operating"),
(iii) a 2.125% economic interest in The Woodlands Land Development Company
L.P. ("Landevco"), (iv) a 50% economic interest in COPI Colorado, LP ("COPI
Colorado"), a company that has a 10% economic interest in Crescent
Development Management Corp. ("CDMC") and (v) a 5% economic interest in an
entity which owns a 6.19% interest in the construction and operation of a
new multipurpose entertainment and sports center (the "Arena Project") in
downtown Dallas, Texas as well as a 2.6% economic interest in
Hillwood/1642, Ltd. See Land Development Segment - Recent Developments.
The Company has previously written-off its entire investment and has no
obligation or commitment to fund CBHS ongoing operations. As a result of the
write-off, and irrespective of the transactions described in Note 3 to the
Company's financial statements, the Company does not anticipate that it will
recognize any additional CBHS losses for accounting purposes. The Company does
incur costs of ownership related to the CBHS investment, such as legal and
accounting costs, and COPI Healthcare incurs costs related to due diligence on
the assets it has offered to purchase out of bankruptcy. See Other Investments -
Charter Behavioral Health Systems, LLC - Recent Developments. Because the
Company has written-off its CBHS investment and did not recognize income or loss
from CBHS in 1999, the Company no longer reports its operations related to CBHS
as a separate segment.
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SEGMENT FINANCIAL INFORMATION
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
The following is a summary of Crescent Operating's financial information
reported by segment for the year ended December 31, 1999:
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EQUIPMENT TEMPERATURE
SALES CONTROLLED LAND
AND LEASING HOSPITALITY LOGISTICS DEVELOPMENT OTHER TOTAL
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Revenues ...................................... $ 136,343 $ 246,763 $ -- $ 334,881 $ -- $ 717,987
Operating expenses ............................ 131,606 245,477 2 324,432 2,603 704,120
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Income (loss) from operations ................. 4,737 1,286 (2) 10,449 (2,603) 13,867
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Investment income (loss) ...................... -- (851) (2,275) 23,825 240 20,939
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Other (income) expense
Interest expense ......................... 6,841 738 -- 14,767 8,429 30,775
Interest income .......................... (94) (120) -- (3,441) (391) (4,046)
Other .................................... 287 -- -- (156) -- 131
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Total other (income) expense .................. 7,034 618 -- 11,170 8,038 26,860
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Income (loss) before income
taxes and minority interest .............. (2,297) (183) (2,277) 23,104 (10,401) 7,946
Income tax provision (benefit) ................ (1,081) (50) (911) 7,293 (8,722) (3,471)
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Income (loss) before minority interests........ (1,216) (133) (1,366) 15,811 (1,679) 11,417
Minority interests ............................ -- 932 -- (15,044) -- (14,112)
--------- --------- --------- --------- --------- ---------
Net income (loss) ............................. $ (1,216) $ 799 $ (1,366) $ 767 $ (1,679) $ (2,695)
========= ========= ========= ========= ========= =========
Net income (loss) per share, basic ............ $ (0.12) $ 0.08 $ (0.13) $ 0.07 $ (0.16) $ (0.26)
========= ========= ========= ========= ========= =========
Net income (loss) per share, diluted .......... $ (0.12) $ 0.08 $ (0.13) $ 0.07 $ (0.16) $ (0.26)
========= ========= ========= ========= ========= =========
EBITDA Calculation: (1)
Net income (loss) ........................ $ (1,216) $ 799 $ (1,366) $ 767 $ (1,679) $ (2,695)
Interest expense, net .................... 6,747 162 541 557 8,038 16,045
Income tax provision (benefit) ........... (1,081) 571 (1,045) 700 (8,722) (9,577)
Depreciation and amortization ............ 15,041 1,087 2,487 1,466 (133) 19,948
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EBITDA ........................................ $ 19,491 $ 2,619 $ 617 $ 3,490 $ (2,496) $ 23,721
========= ========= ========= ========= ========= =========
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(1) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. Amounts are calculated based on the Company's ownership
percentage of the EBITDA components. Management believes that EBITDA can be
a meaningful measure of the Company's operating performance, cash
generation and ability to service debt. However, EBITDA should not be
considered as an alternative to either: (i) net earnings (determined in
accordance with GAAP); (ii) operating cash flow (determined in accordance
with GAAP); or (iii) liquidity. There can be no assurance that the
Company's calculation of EBITDA is comparable to similarly titled items
reported by other companies.
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EQUIPMENT SALES AND LEASING
OVERVIEW
Crescent Machinery is engaged in the sale, leasing and service of construction
equipment and accessories to the construction and utility industries located
primarily in seven states. The Company has dramatically expanded the equipment
sales and leasing business it acquired in 1997. Historically, construction
equipment businesses have been owned and operated primarily by individuals in a
localized area. Crescent Operating has consolidated some of these businesses in
order to gain improvement through purchasing and operating efficiencies. All of
the Crescent Machinery locations are registered equipment dealers representing
major lines of equipment. This differentiates Crescent Machinery from some of
its pure rent-to-rent competition. Crescent Machinery's locations offer new and
used equipment for sale and rent, have factory trained service personnel and
provide parts and warranty service.
The management of Crescent Machinery is focused on increasing the rental and
leasing components of Crescent Machinery's business, which management believes
have the potential to generate higher profit margins while maintaining the sales
and service aspects of the dealership. Management believes that Crescent
Machinery's status as an equipment dealer affords it a competitive advantage
because Crescent Machinery is able to stock rental and leasing equipment at
reduced costs that are offered only to equipment dealers and national accounts.
Additionally, dealerships have significant advantages over rental yards in down
cycles that occur in the industry. In down cycles, contractors will retain their
equipment longer, and as a consequence, additional service and parts, which are
provided by dealerships, are required. The growth of rental fleet, while
positioning Crescent Machinery to compete more effectively in its markets, has
resulted in, and during the foreseeable future is likely to result in, increased
depreciation and interest expense.
Crescent Machinery's operations are seasonal, and adverse weather conditions,
such as extended periods of precipitation, could adversely affect its
operations. The months of June through October typically have the greatest
positive impact and the months of December, January and February typically have
the greatest negative impact on the Company's consolidated results.
Crescent Machinery competes with various large and small companies. Crescent
Machinery believes that the principal competitive factors in its markets for
sale and rental of the construction equipment and accessories it offers are
availability of requested equipment, competitive pricing, product features,
parts and service. Crescent Machinery's products and services are marketed
directly by its sales force.
Crescent Machinery's acquisition efforts are limited by access to capital to
fund acquisitions and by the Company's depressed stock prices, which adversely
affects the ability of Crescent Machinery to use the Company's stock as
consideration in acquisitions. Crescent Operating opened a new start-up location
in Fort Worth, Texas in August 1999 and the Company believes that it has other
opportunities to open new start-up locations in proximity to its current
operations and to expand its business with limited capital requirements.
RECENT DEVELOPMENTS
Effective March 4, 1999, the Company acquired certain assets of Westco Tractor &
Equipment, Inc. ("Westco"), a company engaged in equipment sales, leasing and
servicing, located in Santa Rosa, California. The purchase price of
approximately $2.6 million was comprised of $0.5 million cash and the assumption
of liabilities of $2.1 million.
Effective July 1, 1999, the Company acquired all of the stock of E. L. Lester
and Company ("Lester"), a company engaged in equipment sales, leasing and
servicing, located in Houston, Texas. Lester specializes in the sales and rental
of 8 to 300-ton conventional and hydraulic cranes to highway, building and
industrial contractors. The purchase price of approximately $17.2 million was
comprised of $8.9 million cash, the issuance of notes payable by Crescent
Operating in the amount of $6.0 million and the assumption of liabilities of
$2.3 million.
Effective July 1, 1999, the Company acquired all of the stock of Solveson Crane
Rental, Inc. ("Solveson"), a company engaged in equipment sales, leasing and
servicing, located in Tracy, California. Solveson specializes in
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the rental of 40 to 90-ton rough terrain cranes to highway, building and
industrial contractors. The purchase price of approximately $7.3 million was
comprised of $3.0 million cash and the assumption of liabilities of $4.3
million.
On August 1, 1999, Crescent Machinery opened a new location located in Fort
Worth, Texas. This location offers new equipment sales, equipment rental, parts
and services. A full assortment of rental equipment is available and products
from JCB, Ingersoll Rand, Terex Cranes, Target and Pioneer are available for new
equipment sales.
With the completion of the Lester, Solveson, and Westco acquisitions, and the
opening of the new location in Fort Worth, Texas, Crescent Machinery has 18
locations in Texas, California, Nevada, Oklahoma, Ohio, Indiana and Hawaii.
OPERATIONAL STATISTICS
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For The Year Ended December 31,
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1999 1998 1997 1996 1995
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Revenue:
New and used equipment sales ........ 60% 64% 51% 55% 58%
Rental equipment .................... 21%(1) 20% 34% 28% 24%
Parts and service ................... 19% 16% 15% 17% 18%
--- --- --- --- ---
Total revenue ................... 100% 100% 100% 100% 100%
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(1) Same store rental equipment revenue grew 26% from 1999 to 1998.
MARKET INFORMATION
According to survey's conducted by The CIT Group, it is expected that over 25%
more contractors will turn to distributors for their rental needs during 2000 as
compared to 1999. Top items in demand for rent are backhoes, loaders, excavating
equipment and cranes. Crescent Machinery has all such equipment available for
rent or purchase at each of its locations.
Additionally, Crescent Machinery is beginning to realize an increase in highway
construction-related business partially as a result of the Transportation Equity
Act for the 21st Century ("TEA-21"). TEA-21 provides for record federal highway
program funding of $173 billion over the next five years, which represents a 40%
increase over previous funding levels. In Texas and California, the states in
which Crescent Machinery is most active, the percentage increase in federal
funding for highway programs over previous levels is 60% and 45%, respectively.
HOSPITALITY
OVERVIEW
The Hospitality segment generally consists of the operations of the Hospitality
Properties. Each of such properties is owned by Crescent Partnership or its
affiliates and all are leased to subsidiaries of the Company under long term
leases. In addition to these properties, the Company also has other investments
in CRL and, until January 2000, the Houston Center Athletic Club Venture
("HCAC").
The Hospitality Properties are comprised of unique luxury resorts, luxury
business and convention hotels and destination health and fitness resorts and
make up a small portion of the hospitality industry. Because Crescent Operating,
for the most part, relies on third-party operators such as Marriott, Hyatt and
Four Seasons, the Company enjoys the advantage of the third-party operators'
nationwide advertising, reservation services and strong management.
The Company has limited the potential impact of downturns in the hospitality
industry on the Company by limiting Crescent Operating's guarantee of rent
payments. The Company's guarantee related to rent payments is limited to
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cash generated by the Hospitality segment, i.e. cash flows from segments other
than Hospitality would not be used to fund rent payments in the event cash flows
of the Hospitality Properties were less than scheduled rent payments.
The individual Hospitality Properties are affected by seasonality; however, the
seasonal fluctuations are varied and are determined by both location and the
nature of the business conducted on the property. The effects of seasonality of
the Hospitality Properties are generally offsetting; however, March and October
have the greatest positive impact and November through January have the greatest
negative impact on the Company's consolidated results.
The Company's Hospitality Properties in Denver, Albuquerque and Houston are
business and convention center hotels that compete against other similar hotels
in their markets. The Company believes, however, that its destination health and
fitness resorts are unique properties that have very limited competition. In
addition, the Company believes that the other remaining Hospitality Properties
experience limited or no direct competition due to their high replacement costs
and unique concepts or locations. The Hospitality Properties do compete, to a
limited extent, against business class hotels or middle-market resorts in their
geographic areas, as well as against luxury resorts nationwide and around the
world.
The Company has a 5% economic interest, representing all of the voting stock of
CRL. CRL has a 20% economic interest in CR License LLC ("CR License"), the
entity which owns the rights to the future use of the "Canyon Ranch" name. CRL
has the opportunity through July of 2000 to pay $3.0 million to obtain an
additional 10% interest in CR License. CRL also has an effective 60% economic
interest in the Canyon Ranch Spa Club located in the Venetian Hotel in Las
Vegas. The Canyon Ranch Spa Club opened in June 1999 and is the first project to
expand the franchise value of the "Canyon Ranch" name.
RECENT DEVELOPMENTS
Effective January 31, 2000, HCAC sold substantially all of its assets to an
unrelated party. Through a wholly owned subsidiary, the Company received
proceeds from the sale of $2.4 million resulting in an approximate $1.5 million
gain which will be recognized by Crescent Operating in the first quarter of
2000.
In February 2000, Crescent Operating and its hospitality subsidiaries entered
into a Master Asset Management and Administrative Services Agreement and
property management agreements with Sonoma Management Company ("SMC") to manage
the Company's hotel properties (excluding Canyon Ranch - Lenox, Canyon Ranch -
Tucson and the Hyatt Regency Beaver Creek). At the same time, the Company's
hospitality subsidiaries accepted assignment from the owners of the Sonoma
Mission Inn and Spa, the Sonoma Mission Inn Golf and Country Club and the
Ventana Inn and Spa of its property management agreements with Sonoma Management
Company. The principles of Sonoma Management Company are Sanjay and Johanna
Varma and Crescent Equities is an equity owner in Sonoma Management Company.
HOTELS AND DESTINATION HEALTH AND FITNESS RESORTS
The hotels and destination health and fitness resorts operated by the Company
are as follows:
o Hyatt Regency Beaver Creek;
o Denver Marriott City Center;
o Hyatt Regency Albuquerque;
o Sonoma Mission Inn and Spa;
o Four Seasons Hotel Houston;
o Ventana Inn and Spa;
o Renaissance Houston Hotel;
o Canyon Ranch-Tucson; and
o Canyon Ranch-Lenox.
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Crescent Partnership has committed over $40 million towards capital projects at
certain of the Hospitality Properties to further enhance the guests' experience.
The projects include:
o 30 new suites at the Sonoma Mission Inn and Spa which are expected to
be completed during the second quarter of 2000 and the spa expansion,
which was completed in December 1999;
o renovation of the guestrooms and common areas at the Four Seasons
Hotel in Houston which are expected to be completed during the third
quarter of 2000;
o renovation of the Renaissance Hotel in Houston which is expected to be
completed during the third quarter of 2000; and
o four new suites and a new spa which were completed at the Ventana Inn
and Spa during September 1999.
Certain of the above projects generate increased rent and the related
construction of the projects causes a temporary reduction in the average daily
rate of the hotel due to the negative impact on the guests' experience during
construction.
Each of the Hospitality Properties is under lease with Crescent Equities, with
terms that expire from December 2004 to June 2009 and generally provide for (i)
base rent, with periodic rent increases, (ii) percentage rent based on a
percentage of gross hotel revenues less food and beverage revenues above a
specified amount and (iii) a percentage of gross food and beverage revenues
above a specified amount. Under the leases, the Company's subsidiaries have
assumed the rights and obligations of the property owner under the respective
management agreement with the hotel operators (including the property management
agreements with Sonoma Management Company for Sonoma Mission Inn and Spa, Sonoma
Mission Inn Golf and Country Club and Ventana Inn and Spa), as well as the
obligation to pay all property taxes and other charges against the property. As
part of each of the lease agreements for eight of the Hospitality Properties,
Crescent Equities has agreed to fund all capital expenditures relating to
furniture, fixtures and equipment reserves required under the applicable
management agreements. The only exception is Canyon Ranch-Tucson, in which
instance the Company owns all furniture, fixtures and equipment associated with
the property and will fund all related capital expenditures.
All of the Company's properties, except for the Sonoma Mission Inn and Spa,
Sonoma Mission Inn Golf and Country Club and the Ventana Inn and Spa, are
managed by third party operators. Through 1999, Sonoma Mission Inn and Spa,
Sonoma Mission Inn Golf and Country Club and the Ventana Inn and Spa were
managed by the Company with asset management oversight provided by The Varma
Group. Crescent Operating, through its subsidiaries, had asset management
agreements (the "Asset Management Agreements") with The Varma Group through
1999, such that The Varma Group was the exclusive asset manager of the Company's
Hospitality Properties. Johanna Varma is a principal of The Varma Group and was
President of the Hospitality division of the Company until February 2000.
As consideration for its services under the Asset Management Agreements, which
became cancelable by the Company on January 30, 2000 and were terminated
effective February 1, 2000, The Varma Group received an annual base fee in 1999
of approximately $0.7 million, plus annual cost of living adjustments for its
asset management services related to the Hyatt Albuquerque, the Hyatt Beaver
Creek, Sonoma Mission Inn and Spa and the Denver City Center Marriott. In
addition, The Varma Group was reimbursed for its costs incurred in providing
asset management to the other Hospitality Properties.
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OPERATIONAL STATISTICS
The following table sets forth certain information about the Hospitality
Properties, excluding the Sonoma Mission Inn Golf and Country Club, HCAC and
CRL, for the years ended December 31, 1999 and 1998. The information below is
based on available rooms, except for Canyon Ranch-Tucson and Canyon Ranch-Lenox,
which are destination health and fitness resorts that measure performance based
on available guest nights.
<TABLE>
<CAPTION>
For the year ended December 31,
------------------------------------------------
Average Average Revenue
Occupancy Daily Per
Rate Rate Available Room
-------------- ------------ --------------
Location Lease Expiration Rooms 1999 1998 1999 1998 1999 1998
-------- ---------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UPSCALE BUSINESS CLASS HOTELS:
Denver Marriott City Center... Denver, CO June 2005 613 80% 80% $124 $124 $ 99 $100
Hyatt Regency Albuquerque..... Albuquerque, NM December 2005 395 66 69 106 103 70 71
Four Seasons Hotel Houston.... Houston, TX September 2007 399 66 65 197 181 129 118
Renaissance Houston........... Houston, TX June 2009 389 63 67 94 93 59 62
----- -- -- ---- ---- ---- ----
Total/Weighted Average 1,796 70% 71% $130 $125 $ 91 $ 89
===== == == ==== ==== ==== ====
LUXURY RESORTS AND SPAS:
Hyatt Regency Beaver Creek.... Avon, CO December 2004 276(1) 72% 69% $244 $233 $175 $162
Sonoma Mission Inn & Spa...... Sonoma, CA October 2006(8) 178(2) 79 82 225 235 179 194
Ventana Inn & Spa............. Big Sur, CA December 2007 62 78 63(3) 388 387 302 245(3)
----- -- -- ---- ---- ---- ----
Total/Weighted Average 516 75% 73% $255 $249 $191 $183
===== == == ==== ==== ==== ====
Guest
Nights
DESTINATION FITNESS RESORTS ------
AND SPAS:
Canyon Ranch-Tucson........... Tucson, AZ July 2006 250(4)
Canyon Ranch-Lenox............ Lenox, MA December 2006 212(4)
--- -- -- ---- ---- ---- ----
Total/Weighted Average 462 87%(5) 86%(5) $543(6) $508(6) $451(7) $422(7)
=== == == ==== ==== ==== ====
GRAND TOTAL/WEIGHTED AVERAGE 74% 74% $222 $212 $170 $162
== == ==== ==== ==== ====
</TABLE>
(1) In 1998, the number of rooms was reduced to 276 due to 19 rooms being
converted into a 20,000 square foot spa.
(2) In February 1999, 20 rooms were taken out of commission during the
construction of the spa, which is part of an approximately $20 million
expansion scheduled to be completed in April 2000. The expansion will also
include the construction of 30 additional guest rooms. Rates were
discounted during the construction period, which resulted in a lower
average daily rate and revenue per available room in 1999, as compared to
1998.
(3) Average occupancy and REVPAR decreased from the prior period due to the
closing of the Ventana Inn and Spa for approximately three months as a
result of the major access road leading to the property being washed out.
(4) Represents available guest nights, which is the maximum number of guests
that the resort can accommodate per night.
(5) Represents the number of paying and complimentary guests for the period,
divided by the maximum number of available guest nights for the period.
(6) Represents the average daily "all-inclusive" guest package charges for the
period, divided by the average daily number of paying guests for the
period.
(7) Represents the total "all-inclusive" guest package charges for the period,
divided by the maximum number of available guest nights for the period.
(8) The lease related to the Sonoma Mission Inn Golf and Country Club expires
in October 2008.
10
<PAGE> 11
MARKET INFORMATION
The following is derived from various industry sources. Average hotel room
rental rates grew 4.0%, 4.4%, 6.2% and 6.3%, in 1999, 1998, 1997, and 1996,
respectively. Within the luxury and upscale segments of the industry, average
room rental rates increased approximately 3.3% from 1998 to 1999.
Business and convention travel accounts for about two-thirds of overall room
demand and has risen along with the improving economy and increased corporate
profits. Domestic leisure travel has also increased, especially among the "baby
boomers," who are not only at the prime age for leisure travel but also have a
greater tendency to travel than previous generations. A healthier, more active
senior population is also contributing to the increase in travel. With the aging
of the "baby boomer" generation and the growing interest in quality of life
activities, the resort/spa industry also is experiencing significant growth in
the United States.
11
<PAGE> 12
TEMPERATURE CONTROLLED LOGISTICS
OVERVIEW
The Temperature Controlled Logistics segment consisted primarily of a 40%
interest in the operations of AmeriCold Logistics, and a 1% interest in the
Temperature Controlled Logistics Partnerships. AmeriCold Logistics,
headquartered in Atlanta, Georgia, has 6,900 employees and operates 104
temperature controlled storage facilities nationwide with an aggregate of
approximately 519 million cubic feet of refrigerated, frozen and dry storage
space. Of the 104 warehouses, AmeriCold Logistics leases 89 temperature
controlled facilities with an aggregate of approximately 428 million cubic feet
from the Temperature Controlled Logistics Partnerships, and manages 15
additional facilities containing approximately 91 million cubic feet of space.
AmeriCold Logistics provides the frozen food industry with refrigerated storage
and transportation management services.
AmeriCold Logistics entered into leases covering the refrigerated storage
facilities used in its business. The leases, which commenced in March 1999,
generally have a 15-year term with two five-year renewal options and provide for
the payment of fixed base rent and percentage rent based on revenues AmeriCold
Logistics receives from its customers. Fixed base rent is approximately $130
million per annum through 2003, $132.0 million per annum from 2004 through 2008
and $133.0 million per annum from 2009 through 2014. Percentage rent for each
lease is based on a specified percentage of revenues in excess of a specified
base amount. The aggregate base revenue amount under five of the six leases is
approximately $321.0 million and the weighted average percentage rate is
approximately 36% for the initial five-year period, approximately 39% for the
period from 2004 through 2008 and approximately 41% for the period from 2009
through February 28, 2014. The aggregate base revenue amount under the sixth
lease is approximately $32.0 million and the percentage rate is 24% for the
initial two-year period, 37.5% for the period from 2002 through 2006, 40% from
2007 through 2011 and 41% from 2012 through February 28, 2014. AmeriCold
Logistics recognized $135.8 million of rent expense from March 11, 1999
(acquisition date) through December 31, 1999. AmeriCold Logistics is required to
pay for all costs arising from the operation, maintenance and repair of the
properties, including all real estate taxes and assessments, utility charges,
permit fees and insurance premiums, as well as property capital expenditures in
excess of $5.0 million annually. AmeriCold Logistics has the right to defer the
payment of 15% of the fixed base rent and all percentage rent for up to three
years beginning on March 11, 1999 to the extent that available cash, as defined
in the leases, is insufficient to pay such rent. AmeriCold Logistics deferred
$5.4 million of rent payments for the period ending December 31, 1999.
Under the terms of the partnership agreement for AmeriCold Logistics, Vornado
Operating, Inc.("Vornado Operating") has the right to make all decisions
relating to the management and operations of AmeriCold Logistics other than
certain major decisions that require the approval of both the Company and
Vornado Operating. Vornado Operating must obtain Crescent Operating's approval
for specified matters involving AmeriCold Logistics, including approval of the
annual budget, requiring specified capital contributions, entering into
specified new leases or amending existing leases, selling or acquiring specified
assets and any sale, liquidation or merger of AmeriCold Logistics. If the
partners fail to reach agreement on certain matters prior to October 30, 2000,
Vornado Operating will be entitled to buy Crescent Operating's interest in the
partnership at cost plus 10% per annum return. If the partners fail to reach an
agreement on such matters during the period from November 1, 2000 through
October 30, 2007, Vornado Operating may set a price at which it commits to
either buy Crescent Operating's investment, or sell its own, and Crescent
Operating will decide whether to buy or sell at that price. If the partners fail
to reach agreement on such matters after October 30, 2007, either party may set
a price at which it commits to either buy the other party's investment, or sell
its own, and the other party will decide whether to buy or sell at that price.
Neither partner may transfer its rights or interest in the partnership without
the consent of the other partner. The partnership will continue for a term
through October 30, 2027, except as the partners may otherwise agree.
12
<PAGE> 13
RECENT DEVELOPMENTS
Effective March 12, 1999, the Company sold 80% of its 5% interest in the
Temperature Controlled Logistics Partnerships to Crescent Partnership for $13.2
million and received the right to require Crescent Partnership to purchase the
remaining 20% for approximately $3.4 million at any time during the next two
years, subject to compliance with certain regulatory matters. This 5% interest
represented a 2% interest in various corporations and limited liability
companies owned by the Temperature Controlled Logistics Partnerships. Crescent
Operating, through a wholly owned limited liability company, then became a 40%
partner of AmeriCold Logistics, a newly formed partnership, the remaining 60% of
which is owned by Vornado Operating. This transaction required a capital
contribution of approximately $15.5 million from Crescent Operating. As a result
of the restructuring transaction, the operations formerly associated with the
Temperature Controlled Logistics Partnerships are now conducted by AmeriCold
Logistics. Also a result of the transaction, Crescent Operating no longer
consolidates, for financial reporting purposes, the Temperature Controlled
Logistics Partnerships, which has resulted in a decrease for accounting purposes
in the investment in the Temperature Controlled Logistics Partnerships of
approximately $291 million.
The Company expects to form a new business venture with Vornado Operating on
terms and conditions similar to the Company's existing partnership arrangements
with Vornado Operating. The venture, which is to be named Transportal Network
("Transportal"), would pursue a business-to-business internet opportunity
relating to the Temperature Controlled Logistics business. The Company expects
Transportal to provide routing and load management services and to facilitate
related purchases over the internet to independent truckers, shippers and
receivers to enable them to increase efficiency. The Company's share of start-up
costs for Transportal, which relate to market research, creating a business plan
and related matters, was $0.4 million for the year ended December 31, 1999.
These costs are included in the Company's consolidated statement of operations
as "Investment Income (Loss)" for the year ended December 31, 1999. Although
Transportal has not commenced operations or finalized its business plan, the
Company expects Transportal to incur significant future losses and to require
significant equity investments. The Company anticipates that it may have to
dilute its ownership in Transportal to fund its share of Transportal's cash
needs, which may be in excess of $2.0 million. Transportal is actively seeking
additional equity investments from third parties, including venture capital
firms. Early stage internet companies, such as Transportal, with new and
unproven business models frequently encounter financial and other significant
business risks and there can be no assurance that Transportal will be a
successful business venture.
MARKET INFORMATION
Refrigerated storage facilities are comprised of production and distribution
facilities. Production facilities typically serve one or a small number of
customers, generally food processors, located nearby. These customers store
large quantities of processed or partially processed products in the facility
until they are shipped to the next stage of production or distribution.
Distribution facilities primarily warehouse a wide variety of customers'
finished products until future shipment to end-users. Each distribution facility
primarily services the surrounding regional market. AmeriCold Logistics offers
transportation management services including freight routing, dispatching,
freight rate negotiation, backhaul coordination and distribution channel
assessment. AmeriCold Logistics' temperature controlled logistics expertise and
access to both frozen food storage facilities and distribution channels enable
its customers to respond quickly and efficiently to time-sensitive orders from
distributors and retailers. Additionally, AmeriCold Logistics mines limestone at
two of its locations.
Customers of AmeriCold Logistics consist primarily of national, regional and
local frozen food manufacturers, distributors, retailers and food service
organizations including Con-Agra, Inc., H.J. Heinz & Co., McCain Foods,
Pillsbury, Sara Lee, Philip Morris, J.R. Simplot, Farmland Industries and
Unilever. AmeriCold Logistics is the largest operator of public refrigerated
storage space in the country in terms of public storage space operated. The
Company believes that AmeriCold Logistics does not have any competitors of
comparable size, however, there is competition that is national, regional and
local in nature. Breadth of service, facility locations, customer mix, warehouse
size, service performance and price are major competitive factors.
13
<PAGE> 14
OPERATIONAL INFORMATION
The following table shows the location and size of facility for each of the
properties operated by AmeriCold Logistics as of December 31, 1999:
<TABLE>
<CAPTION>
Total Cubic Total Cubic
Number of Footage Number of Footage
State Properties (in millions) State Properties (in millions)
- ------------------- ------------- -------------- ------------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Alabama 6 12.3 Missouri(1) 2 37.9
Arizona 1 2.9 Nebraska 2 4.4
Arkansas 6 33.1 New Jersey 1 2.7
California 13 53.4 New York 1 11.8
Colorado 2 3.4 North Carolina 3 8.5
Florida 5 7.5 Oklahoma 2 2.1
Georgia 7 44.5 Oregon 6 40.4
Idaho 2 18.7 Pennsylvania 4 50.8
Illinois 2 11.6 South Carolina 1 1.6
Indiana 1 9.1 South Dakota 2 6.3
Iowa 2 12.5 Tennessee 4 13.0
Kansas 2 5.0 Texas 4 27.2
Kentucky 1 2.7 Utah 1 8.6
Maine 1 1.8 Virginia 2 8.7
Massachusetts 6 15.2 Washington 6 28.7
Minnesota 1 5.9 Wisconsin 3 17.4
Mississippi 1 4.7 Canada 1 4.8
--- -----
Total 104 519.2
=== =====
</TABLE>
(1) Missouri has one underground facility. This underground facility
approximates 33.1 million cubic feet.
LAND DEVELOPMENT
OVERVIEW
The Land Development segment consisted primarily of:
o a 4.65% economic interest in Desert Mountain, a master planned, luxury
residential and recreational community in northern Scottsdale,
Arizona;
o a 42.5% general partner interest in Woodlands Operating, which
provides management, advisory, landscaping and maintenance services to
The Woodlands, Texas and is the lessee of The Woodlands Resort and
Conference Center;
o a 2.125% economic interest in Landevco, which owns approximately 7,500
acres for commercial and residential development as well as a realty
office, an athletic center, and interests in both a title company and
a mortgage company;
o a 50% economic interest in COPI Colorado, a company that has a 10%
economic interest in CDMC, which invests in entities that develop or
manage residential and resort properties (primarily in Colorado) and
provides support services to such properties.
The Land Development segment competes against a variety of other housing
alternatives including other planned developments, homes, condominiums and
townhouses. The Company believes that Desert Mountain, The Woodlands and the
entities in which CDMC has investments possess certain features that provide
competitive advantages to these developments. Both Desert Mountain and The
Woodlands have golf courses where major tournaments are played, The Tradition
and The Shell Houston Open, respectively, as well as clubhouses, multiple golf
courses and other amenities.
14
<PAGE> 15
The Woodlands is unique among developments in the Houston area because it
functions as a self-contained community. Desert Mountain does not have any
significant direct competitors due in part to the high-end amenities that it
offers. The Company believes that the entities in which CDMC has investments do
not have any direct competitors because the locations of the projects are
unique, the land is limited and the entities in which CDMC has investments own
most of the land in each location. Management believes that these attributes
help to distinguish Desert Mountain, The Woodlands and the entities in which
CDMC has investments from their competition. The Woodlands could be adversely
affected by downturns in the Houston economy. Management believes that Desert
Mountain and the most significant investments made by CDMC are not directly
affected by their local economies, as they are luxury developments and most of
the purchases are not made by local residents.
RECENT DEVELOPMENTS
The Woodlands Operating partnership agreement provides that distributions are to
be made to partners in accordance with specified payout percentages which change
based upon whether certain established cumulative preferred returns have been
earned. As cumulative preferred returns reach certain thresholds, distributions
to the Company increase from 42.5% to 49.5% and then from 49.5% to 52.5%.
Beginning in 2000, both the 42.5% and the 49.5% thresholds have been met;
therefore, the payout percentage to the Company has increased to 52.5%.
On May 29, 1999, legislation was passed that would keep The Woodlands as an
unincorporated area free from annexation from Houston for a period of at least
twelve years. Also during 1999, Anadarko Petroleum commenced construction of its
new 32 story headquarters in The Woodlands, and the $24.0 million, 1.25-mile
waterway in The Woodlands is under construction and anticipated to be completed
in early 2001. In addition, the new Carlton Woods Country Club, featuring an
18-hole Jack Nicklaus signature golf course is under construction in The
Woodland's first gated community.
In accordance with an agreement between Gerald Haddock and the Company, Mr.
Haddock, the Company's former Chief Executive Officer and President, had his
limited partnership interest in COPI Colorado redeemed by COPI Colorado in
January 2000. COPI Colorado paid Mr. Haddock approximately $2.6 million for his
approximate 16.67% limited partner interest (determined from an independent
appraisal of the value of COPI Colorado). Mr. Haddock reserved the right to
challenge the valuation performed by the independent appraiser. As a result of
the redemption of Mr. Haddock's interest, the Company has an approximate 58%
interest in COPI Colorado.
On April 29, 1999, a partnership in which CDMC has a 64% economic interest
finalized the purchase of Riverfront Park (previously known as "The Commons"), a
master planned residential development on 23 acres in the Central Platte Valley
near downtown Denver, Colorado, for approximately $25.0 million. The development
of Riverfront Park is expected to begin in the spring of 2000. The first phase
will consist of condominiums and lofts with prices ranging from $0.2 million to
$2.5 million. The acreage is in close proximity to several major entertainment
and recreational facilities, including, Coors Field (home to the Major League
Baseball's Colorado Rockies), Elitch Gardens (an amusement park), the new Pepsi
Center (home to the National Hockey League's Colorado Avalanche and the National
Basketball Association's Denver Nuggets) and the new downtown Commons Park. An
adjacent 28 acres is expected to be commercially developed by another company,
thus providing a major mixed-use community adjacent to the lower downtown area
of Denver.
On August 27, 1999 and October 27, 1999, the Company sold its investments in
Hillwood and Corporate Arena, respectively, for an aggregate sales price of
approximately $1.4 million. Together, the sales resulted in an approximate $0.2
million gain in 1999.
DESERT MOUNTAIN
Desert Mountain includes The Desert Mountain Club, a private golf, tennis and
fitness club which serves over 2,100 members and offers five Jack Nicklaus
signature 18-hole golf courses and four clubhouses. One of these courses is
Cochise, the site of the Senior PGA Tour's The Tradition golf tournament. Lyle
Anderson, the original developer of Desert Mountain, provides advisory services
in connection with the operation and development of Desert Mountain. Pursuant to
the terms of a limited partnership agreement, Desert Mountain Development
Corporation ("Desert Mountain Development") is entitled to receive 93% of the
net cash flow of Desert Mountain after certain payments
15
<PAGE> 16
to the sole limited partner, Sonora Partners Mountain Partnership which owns the
remaining 7% interest, have been made.
THE WOODLANDS OPERATING COMPANY
The Woodlands, an approximately 27,000-acre master-planned residential and
commercial community located approximately 27 miles north of Houston, Texas,
includes a shopping mall, retail centers, office buildings, a conference center
and country club and other amenities. The Greater Houston Builders Association
chose The Woodlands as its 1999 Developer of the Year.
Woodlands Operating was formed to provide management, advisory, landscaping and
maintenance services to entities affiliated with Crescent Operating and Crescent
Equities as well as to third parties. Pursuant to the terms of service
agreements, Woodlands Operating performs general management, landscaping and
maintenance, construction, design, sales, promotional and other marketing
services for certain properties in which Crescent Equities owns a direct or
indirect interest. In addition, Woodlands Operating monitors certain of the real
estate investments of, and provides advice regarding real estate and development
issues to, such entities. As compensation for its management and advisory
services, Woodlands Operating is paid a monthly advisory fee in an amount equal
to 3% of all costs and expenses incurred by Woodlands Operating in providing
such services. As compensation for its landscaping and maintenance services,
Woodlands Operating receives a monthly fee in an amount equal to 5% of the cost
per month of performing the required landscaping and maintenance services. Each
service agreement provides for an initial term of at least 12 months (subject to
earlier termination under certain circumstances) and will be renewed
automatically, unless terminated by either party upon giving prior notice as
specified in each agreement.
Woodlands Operating also leases The Woodlands Conference Center and Country
Club, a 364-room executive conference center with a private golf and tennis club
serving approximately 1,800 members and offering 81 holes of golf, and certain
related assets (the "Conference Center") from The Woodlands Commercial
Properties Company, L.P. ("Woodlands Commercial"), a partnership, the interests
of which are owned by Crescent Equities and certain Morgan Stanley Group funds.
Woodlands Operating leases the Conference Center on a triple net basis and will
pay base rent in the amount of $0.75 million per month during the eight-year
term of the lease. The lease also provides for the payment of percentage rent
for each calendar year in which gross receipts from the operation of the
Conference Center exceed certain amounts.
THE WOODLANDS LAND COMPANY, INC.
The Company owns all of the voting stock representing a 5% economic interest, of
The Woodlands Land Company, Inc. ("LandCo"), a residential and commercial
development corporation which was formerly wholly owned by Crescent Partnership.
LandCo holds a 42.5% general partner interest in, and is the managing general
partner of, Landevco, a Texas limited partnership in which certain Morgan
Stanley funds hold a 57.5% limited partner interest. LandCo's general partner
interest in Landevco is subject to adjustment to up to 52.5%, in the event
Landevco achieves certain levels of profitability and the Morgan Stanley funds
receive certain rates of return on their investment in Landevco. Landevco
primarily owns (i) approximately 5,400 acres of land capable of supporting the
development of more than 15,500 lots for single-family homes, (ii) approximately
2,000 acres capable of supporting more than 16.6 million net rentable square
feet of commercial development, (iii) a realty office, (iv) contract rights
relating to the operation of its property, (v) an athletic center and (vi) a 50%
interest in a title company.
CRESCENT DEVELOPMENT MANAGEMENT CORP.
CDMC's investments include direct and indirect economic interests that vary from
18% to 70% in the following: (i) two residential and commercial developments and
eight residential developments in Colorado; (ii) a Texaco gasoline station and
ancillary auto repair facility, car wash and convenience store in Colorado;
(iii) a timeshare development in Colorado; (iv) a real estate company that
markets and sells timeshare interests; (v) a real estate company that
specializes in the management of resort properties in Colorado, Utah, South
Carolina and Montana; (vi) two transportation companies that provide
approximately 80% of the airport shuttle service to Colorado resort areas; and
(vii) an interest in a partnership that owns an interest in the Ritz Carlton
Hotel in Palm Beach, Florida.
16
<PAGE> 17
Effective September 11, 1998, the Company and Gerald W. Haddock, John C. Goff
and Harry H. Frampton, III (collectively, the "CDMC Sellers") entered into a
partnership agreement (the "Partnership Agreement") to form COPI Colorado. COPI
Colorado's purpose is to hold and manage the voting stock of CDMC (and,
consequently, to manage CDMC) and to invest in shares of Crescent Operating
common stock. In September, 1998, the Company contributed to COPI Colorado $9.0
million in cash in exchange for a 50% general partner interest in COPI Colorado,
and each CDMC Seller contributed to COPI Colorado approximately 667 shares of
CDMC voting stock, which the CDMC Sellers owned individually, in exchange for an
approximately 16.67% limited partner interest in COPI Colorado; as a result and
until January 2000, the Company owned a 50% managing interest in COPI Colorado
and the CDMC Sellers collectively owned a 50% investment interest in COPI
Colorado. See Land Development - Recent Developments. The operating results of
CDMC since September 30, 1998 have been included in the consolidated results of
the Company.
As of March 30, 2000, COPI Colorado had purchased approximately 1.1 million
shares of Crescent Operating common stock at a total purchase price of $4.3
million. The average price paid for such shares, excluding brokers' commissions,
was $3.88 per share.
OPERATIONAL STATISTICS
The following table sets forth certain information as of December 31, 1999
relating to the residential development properties.
<TABLE>
<CAPTION>
Total Total Average
Total Lots/Units Lots/Units Closed
Lots/ Developed Closed Sale Price
Units Since Since Per Lot/ Range of Proposed
Land Development Planned Inception Inception Unit (1) Sale Prices Per Lot(2)
---------------- ------- --------- --------- ----------- ----------------------
<S> <C> <C> <C> <C> <C>
Desert Mountain............ 2,665 2,265 1,980 $ 480,000 $375,000-$3,000,000(3)
The Woodlands.............. 36,385 22,240 20,721 $ 48,131 $13,600-$500,000
CDMC....................... 2,283 227 216 N/A $23,000-$4,075,000
------ ------ ------
Total Land Development..... 41,333 24,732 22,917
====== ====== ======
</TABLE>
(1) Based on lots/units closed during the Company's ownership period.
(2) Based on existing inventory of developed lots and lots to be developed.
(3) Includes golf membership, which for 1999, is $175,000.
OTHER INVESTMENTS
CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC
OVERVIEW
CBHS is the largest provider of behavioral health care treatment in the United
States and currently operates 37 behavioral health care facilities in 21 states.
CBHS also operates outpatient clinics in several states and provides management
services for about 15 behavioral health care treatment programs in general acute
care hospitals in eight states. Many of CBHS' facilities offer a continuum of
care including, inpatient hospitalization, partial hospitalization, intensive
outpatient services, and, in some markets, residential treatment services.
The CBHS facilities provide structured and intensive treatment programs for
mental health and alcohol and drug dependency disorders in children, adolescents
and adults. The specialization of programs enables the clinical staff to provide
care that is specific to the patients' needs and facilitates monitoring of
patients' progress. A typical treatment program at a CBHS facility integrates
physicians and other healthcare professionals through structured activities,
patient testing, adjunctive therapies, group therapy, individual therapy and
educational programs. Treatment programs typically include one or more types of
treatment settings. For those patients who do not have a personal psychiatrist
or other specialist, the hospital refers the patient to a member of its medical
staff.
17
<PAGE> 18
The Company has written-off its entire investment and has no obligation or
commitment to fund CBHS' ongoing operations. As a result of the write-off, and
irrespective of the transactions described in Note 3 to the Company's financial
statements, the Company does not anticipate that it will recognize any
additional losses from its investment in CBHS. Because the Company has
written-off its CBHS investment and it is unlikely that the Company will
recognize any material income from CBHS in the near future due to the operating
losses currently being incurred by CBHS, the Company no longer reports its
operations related to CBHS as a separate segment.
RECENT DEVELOPMENTS
On September 9, 1999, Crescent Operating, Magellan Health Services, Inc.
("Magellan"), Crescent Partnership and CBHS completed a recapitalization of CBHS
and restructuring of the relationships among the parties. In connection with the
restructuring, Magellan transferred its remaining hospital-based assets
(including Charter Advantage, Charter Franchise Services, LLC, the call center
assets, the Charter name and related intellectual property and certain other
assets) to CBHS, and released CBHS from all accrued and future franchise fees.
As a result of the transfer, Magellan is no longer obligated to provide
franchise services to CBHS. Magellan also transferred 80% of its CBHS common
membership interest and all of its CBHS preferred membership interest to CBHS,
leaving Magellan with a 10% common membership interest. Simultaneously, Crescent
Operating reorganized its holdings leaving Crescent Operating with a 25% common
membership interest and 100% of the preferred membership interest in CBHS, and a
limited partnership controlled by individual officers of Crescent Operating and
in which Crescent Operating owns 100% of the economic interests, with a 65%
common membership interest in CBHS. Prior to the restructuring, Crescent
Operating and Magellan each held a 50% common membership interest, and a 50%
preferred membership interest in CBHS.
In connection with the restructuring, Magellan, CBHS, Crescent Partnership and
Crescent Operating also provided each other with mutual releases of all claims
and disputes against each other (including, but not limited to, claims related
to the operation of CBHS and agreements in respect of the purchase and sale of
certain assets), with certain specified exceptions, and Crescent Partnership
deferred the August 1999 rent due from CBHS to the last four months of 1999. In
addition, in connection with the settlement and mutual release of claims between
Magellan and Crescent Operating, $2.5 million that had been held in escrow was
released to Crescent Operating.
In the fourth quarter of 1999, CBHS began significant downsizing, including the
closure of 18 facilities in 1999 and 33 facilities in January 2000. The purpose
of the downsizing is to close unprofitable facilities and eliminate overhead so
that the remaining 37 facilities currently operating could be refinanced or
sold. As a result of the downsizing, the Company anticipates that CBHS' annual
revenues would be reduced from approximately $720 million to approximately $320
million. Closure of these facilities resulted in the filing by terminated
employees of several lawsuits against CBHS for alleged violation of the Worker
Adjustment and Retraining Notification Act ("WARN Act"). See Item III - Legal
Proceedings.
The reader's attention is directed to the end of this discussion about CBHS,
where information is given to the effect that COPI Healthcare does not expect to
close the acquisition of CBHS's core business assets under the asset purchase
agreement described below because the conditions to COPI Healthcare's obligation
to close are not expected to be fulfilled.
Despite the downsizing of its operations, CBHS' operating results and cash flow
were not improved sufficiently to support its current and long-term obligations.
On February 16, 2000, CBHS petitioned for relief under Chapter 11 of the United
States Bankruptcy Code. Under the protection of the bankruptcy court, CBHS
intends to sell and liquidate, in a controlled fashion, all of its ongoing
business. In conjunction with the filing by CBHS of the bankruptcy petition,
COPI Healthcare, Inc. ("COPI Healthcare"), a wholly owned subsidiary of Crescent
Operating, entered into an agreement with CBHS for the acquisition by COPI
Healthcare of CBHS' core business ("Asset Purchase Agreement"), which consists
of the assets used in the operation of 37 behavioral healthcare facilities for
$24.5 million. The bankruptcy court could seek other bids for these assets from
other interested parties and there is no assurance that COPI Healthcare's bid
will be successful or that the conditions contained in its offer can be
satisfied.
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<PAGE> 19
The closing of the transactions contemplated by the Asset Purchase Agreement is
subject to bankruptcy court approval and other conditions, including among
others, the conditions that (i) from February 16, 2000, through the date of the
closing of the transactions described in the Asset Purchase Agreement, CBHS will
have generated sufficient Earnings Before Interest Taxes Depreciation
Amortization and Rent to cover $1.7 million per month of corporate overhead and
$1.67 million per month of rent, (ii) COPI Healthcare will have obtained, as of
the closing date, a loan agreement or credit facility, on terms acceptable to
COPI Healthcare, for a working capital line of credit in the minimum amount of
$40 million, (iii) various federal and state governmental agencies will have
granted comprehensive releases to COPI Healthcare, Crescent Operating and
Crescent Equities with respect to matters pertaining to CBHS prior to the
acquisition and (iv) all contracts pertaining to operation of the assets that
COPI Healthcare desires to assume shall have been assigned to it, with all
breaches of those contracts cured, and COPI Healthcare shall have entered into
acceptable leases of the facility properties. The Asset Purchase Agreement may
be terminated at any time prior to the closing in the event that (i) the
Bankruptcy Court fails to approve the Asset Purchase Agreement, (ii) certain of
the conditions to closing set forth in the Asset Purchase Agreement are not met,
or (iii) there is a material breach of the Asset Purchase Agreement that is not
cured within 10 days. As part of the resolution of all matters that may arise in
connection with the bankruptcy of CBHS, and under certain circumstances,
Crescent Equities has indicated a willingness to negotiate and, if successful,
enter into an amended master lease or a new lease with any qualified,
credit-worthy bidder who purchases the core business of CBHS, including COPI
Healthcare.
The Company has received a written commitment from Bank of America to make
available to COPI Healthcare $25.0 million to finance the purchase of the core
business of CBHS. Based upon preliminary discussions between the Company and
Bank of America, the Company anticipates that it will issue a one-year note, at
an annual interest rate equal to the 30-day LIBOR plus 1.0%, which will be
secured by all of the assets of COPI Healthcare (whether currently existing or
acquired subsequent to the date of the note) and all of the stock or other
interests of Crescent Operating in COPI Healthcare. Richard Rainwater, Chairman
of the Board of Directors and a significant shareholder of the Company, has
agreed to guarantee (the "Guarantee") the borrowing in an amount not to exceed
$25.0 million. The Guarantee is subject to certain specified conditions,
including (i) the execution by COPI Healthcare of loan documents in respect of
the $25.0 million loan that are reasonably satisfactory to Mr. Rainwater, (ii)
the inclusion of provisions in the loan documents permitting Mr. Rainwater to
acquire COPI Healthcare's $25.0 million debt to Bank of America in the event of
a default under the loan documents, (iii) the acquisition by COPI Healthcare of
the core assets of CBHS on substantially the terms as provided in the Asset
Purchase Agreement, (iv) the execution by COPI Healthcare of an agreement to
reimburse to Mr. Rainwater all amounts funded by him pursuant to the Guarantee,
on terms that are reasonably satisfactory to Mr. Rainwater and that provide that
any such amounts funded be secured by collateral, (v) CBHS' obtaining a working
capital line of credit from a financial institution in the minimum amount of $40
million, and (vi) the payment by COPI Healthcare to Mr. Rainwater of a fee in
the amount of $0.9 million upon the making of the Guarantee. The amount of the
fee to be paid to Mr. Rainwater upon issuance of the Guaranty is based upon a
range of reasonable fees calculated by an outside consulting firm at the request
of the Company's Board of Directors. The Guarantee will expire in the event the
transactions contemplated by the Asset Purchase Agreement are not closed on or
before April 16, 2000. If COPI Healthcare is successful in acquiring the core
business of CBHS, the Company will then seek to retire the $25.0 million
facility through the sale of equity in COPI Healthcare or Crescent Operating to
existing Crescent Operating shareholders.
On March 27, 2000, COPI Healthcare notified CBHS that because it appears that
not all of the conditions to its obligation to consummate the acquisition under
the Asset Purchase Agreement appear likely to be met before the agreement
terminates by its own terms on April 16, 2000, COPI Healthcare does not expect
to close the acquisition under the Asset Purchase Agreement.
MARKET INFORMATION
In general, the operation of behavioral healthcare programs is characterized by
intense competition. The Company anticipates that competition will become more
intense as pressure to contain the rising costs of health care continues to
intensify, particularly as programs such as those operated by CBHS are perceived
to help contain mental health care costs. Each of the CBHS facilities competes
with other hospitals and behavioral healthcare facilities, some of which are
larger and have greater financial resources than those operated by CBHS. Some
competing facilities are owned and operated by governmental agencies, others by
nonprofit organizations supported by endowments and charitable contributions.
Facilities frequently draw patients from areas outside their immediate locale
and, therefore, the CBHS facilities may, in certain markets, compete with both
local and distant hospitals and other facilities. In addition, the CBHS
facilities compete not only with other psychiatric hospitals, but also with
psychiatric units in general hospitals. With respect to outpatient services,
CBHS competes with private practicing mental health professionals, publicly
funded mental health centers, and partial hospitalization and other intensive
outpatient services programs and facilities. The competitive position of a
particular facility is, to a significant degree, dependent upon the number and
quality of physicians who practice at the facility and who are members of its
medical staff. There can be no assurance that CBHS will be able to compete
effectively with its present or future competitors, and any such inability could
have a material adverse effect on the CBHS' business, financial condition and
results of operations.
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<PAGE> 20
In an era of cost-containment and the reduction of dollars available for care,
behavioral healthcare providers have focused attention on developing treatment
approaches that respond to payors' increasing demands for shorter stays, lower
costs, and expanded access to care. Changes in the mix of services, the prices
of services, and the intensity of service are all part of this response. These
changes have also been bolstered by a rapidly expanding science base, improved
medications management, and the growing availability of non-hospital treatment
settings in more and more communities that help to make it possible to manage
complex and severe illnesses in less intensive treatment settings. One of the
effects that the behavioral healthcare industry is experiencing is an increasing
percentage of non-inpatient care.
Due to these changes in the behavioral healthcare industry, a hospital's
position relative to its competitors may be affected by its ability to obtain
contracts with HMOs, PPOs and other managed care plans for the provision of
health care services. Although such contracts generally provide for discounted
services, pre-admission certification and concurrent length of stay reviews,
they also provide a strong patient referral base. The importance of entering
into contracts with HMOs, PPOs and other managed care companies varies from
market to market and depends upon the market strength of the particular managed
care company.
HICKS MUSE TATE & FURST EQUITY FUND II, LP
On March 31, 1999, the Company sold its investment in Hicks-Muse Tate & Furst
II, LP ("Hicks-Muse") for $8.1 million to an unrelated party. The sale resulted
in a $0.3 million gain which was recognized in the first quarter of 1999. All of
the sales proceeds were applied against the Company's indebtedness to Crescent
Partnership.
MAGELLAN WARRANTS
In connection with the transaction in which the Company acquired its initial 50%
membership interest in CBHS in 1997, the Company purchased, for $12.5 million,
warrants to acquire 1,283,311 shares of Magellan common stock for an exercise
price of $30 per share. The Magellan warrants are exercisable in varying
increments beginning on May 31, 1998 and ending on May 31, 2009. Management has
written down its investment in the warrants based on the estimated fair value of
the warrants of $2.4 million at December 31, 1999, using the Black-Scholes
pricing model.
TRANSACTIONS WITH CRESCENT PARTNERSHIP
Historically, Crescent Operating generally has been involved with Crescent
Equities in two types of transactions: "LESSEE TRANSACTIONS" and "CONTROLLED
SUBSIDIARY TRANSACTIONS".
o LESSEE TRANSACTIONS are those in which Crescent Operating enters into
a transaction to lease and operate real property that is owned by
Crescent Partnership but which cannot be operated by Crescent
Partnership due to Crescent Equities status as a REIT. Lessee
Transactions include the Company's leases of Hospitality Properties.
o CONTROLLED SUBSIDIARY TRANSACTIONS are those in which Crescent
Operating invests alongside Crescent Partnership in acquisitions where
Crescent Operating owns all of the voting stock, and Crescent
Partnership owns all of the non-voting stock of a corporate
acquisition vehicle which in turn acquires a target business which
cannot be operated by Crescent Partnership due to Crescent Equities'
status as a REIT. The voting stock represents the controlling interest
of the entity being purchased, and due to its status as a REIT,
Crescent Equities cannot hold a controlling interest in such entities.
Controlled Subsidiary Transactions include investments in CRL, Desert
Mountain, Landco, and the Temperature Controlled Logistics
Partnerships.
20
<PAGE> 21
Crescent Operating and Crescent Partnership have entered into the Intercompany
Agreement to provide each other with rights to participate in the types of
transactions mentioned above. The Intercompany Agreement provides, subject to
certain terms, that Crescent Partnership will provide Crescent Operating with a
right of first refusal to become the lessee of any real property acquired by
Crescent Partnership if Crescent Partnership determines that, consistent with
Crescent Equities' status as a REIT, it is required to enter into a "master"
lease arrangement. Crescent Operating's right of first refusal under the
Intercompany Agreement is conditioned upon the ability of Crescent Operating and
Crescent Partnership to negotiate a mutually satisfactory lease arrangement and
the determination of Crescent Partnership, in its sole discretion, that Crescent
Operating is qualified to be the lessee. In general, a master lease arrangement
is an arrangement pursuant to which an entire property or project (or a group of
related properties or projects) is leased to a single lessee. If a mutually
satisfactory agreement cannot be reached within a 30-day period (or such longer
period to which Crescent Operating and Crescent Partnership may agree), Crescent
Partnership may offer the opportunity to others.
Under the Intercompany Agreement, Crescent Operating has agreed not to acquire
or make (i) investments in real estate which, for purposes of the Intercompany
Agreement, includes the provision of services related to real estate and
investment in hotel properties, real estate mortgages, real estate derivatives
or entities that invest in real estate assets or (ii) any other investments that
may be structured in a manner that qualifies under the federal income tax
requirements applicable to REITs. Crescent Operating has agreed to notify
Crescent Partnership of, and make available to Crescent Partnership, investment
opportunities developed by Crescent Operating, or of which Crescent Operating
becomes aware but is unable or unwilling to pursue.
The Company anticipates that the REIT Modernization Act will have a significant
effect on the Intercompany Agreement in 2001. On December 17, 1999, President
Clinton signed into law the REIT Modernization Act which will become effective
after December 31, 2000, and contains a provision that would permit REITS, such
as Crescent Equities, to own and operate certain types of investments that are
currently owned and operated by Crescent Operating. The REIT Modernization Act
is expected to reduce the number of business opportunities that Crescent
Equities would otherwise offer to the Company pursuant to the Intercompany
Agreement. Crescent Equities has expressed an interest in certain of the
investments currently owned or operated by the Company that the REIT
Modernization Act would allow Crescent Equities to own or operate. Crescent
Operating is exploring alternatives with Crescent Equities regarding a potential
future transaction with respect to certain of the Company's assets.
EMPLOYEES
As of December 31, 1999, Crescent Operating and the following consolidated
subsidiaries had the number of employees indicated below:
<TABLE>
<S> <C>
Crescent Operating-corporate................. 13
Equipment Sales and Leasing segment.......... 432
Hospitality segment.......................... 750
Land Development segment..................... 644
-----
1,839
=====
</TABLE>
The Company has excluded employees of CBHS, Woodlands Operating, Landevco and
AmeriCold Logistics, as these subsidiaries represent equity investments for
financial reporting purposes.
ITEM 2. PROPERTIES
At December 31, 1999, the Company, through its subsidiary, Crescent Machinery,
owned fee simple interests in three properties. The properties are located in
Dallas, Austin and Houston, Texas. The Company, directly or indirectly, also
held leasehold interests in certain facilities, including the Hospitality
Properties (collectively, the "Leased Properties"). Additionally, CHBS leases
its hospital facilities. Management believes that each of the
21
<PAGE> 22
owned and the Leased Properties is adequately maintained and suitable for use in
its respective capacity. The Company or certain of its subsidiaries has entered
into lease agreements in respect of the Leased Properties, pursuant to which
each respective lessee is responsible for routine maintenance of the subject
property.
ITEM 3. LEGAL PROCEEDINGS
CBHS became the subject of Chapter 11 bankruptcy proceedings by filing a
voluntary petition on February 16, 2000, in United States Bankruptcy Court for
the District of Delaware. Although CBHS is not a subsidiary of Crescent
Operating, Crescent Operating does own a majority (90%) economic interest in
CBHS. Crescent Operating's claims against the estate of CBHS include (i) its
interests as a direct and indirect equity holder of CBHS and (ii) and its claim
for indemnification or contribution against third party lawsuits and claims
where Crescent Operating is a named defendant with CBHS, such as lawsuits based
upon alleged WARN Act violations purported to have been committed by CBHS and/or
its subsidiaries in closing behavioral health care facilities in 1999 and 2000.
To date Crescent Operating has not filed a proof of claim against CBHS with
regard to any of these claims but would expect to file proofs of claim prior to
the bar date.
Another claimant in the CBHS bankruptcy is expected to be Crescent Partnership
(either individually, or together with its parent, Crescent Equities), which is
the owner of certain facilities leased to and operated by CBHS and its
subsidiaries and is also the secured lender of $10 million to CBHS. CBHS has an
arrearage on its lease payments owed to Crescent Partnership accrued prior to
the commencement of bankruptcy. While the claims of Crescent Partnership against
CBHS are not necessarily adverse to the interests of Crescent Operating, the
interests of Crescent Partnership are separate, distinguishable and at least
nominally in conflict with the competing interests and claims of all other
interested parties in the bankruptcy, including Crescent Operating. To the
Company's knowledge, none of the directors, officers or security holders of
Crescent Operating has, in his or its individual capacity, an interest adverse
to Crescent Operating in connection with the CBHS bankruptcy; however, in their
capacities as directors, officers and/or security holders of Crescent
Partnership or Crescent Equities, certain persons may be deemed to hold
interests adverse to the Company's interest in connection with the CBHS
bankruptcy.
To date, four lawsuits, all of which seek class action certification, have been
filed against CBHS alleging violations of the WARN Act in the closing of certain
healthcare facilities. All of those lawsuits also name Crescent Operating as a
defendant. Under the automatic stay provisions of federal bankruptcy law,
lawsuits against CBHS or its subsidiaries would be stayed unless otherwise
directed by the bankruptcy court, but the lawsuits against other defendants,
including Crescent Operating, would not be stayed automatically. It is
anticipated that those suits may be stayed because CBHS and its subsidiaries are
indispensable parties. The Company anticipates that other similar lawsuits may
be filed due to the closing of other facilities. With respect to the pending
suits and possible future claims against Crescent Operating based on the closure
by CBHS of facilities in 1999 and 2000, the Company believes that such actions
are without basis under the WARN Act and should be dismissed; however, no
assurance can be given that Crescent Operating will prevail.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of the Registrant's fiscal year ended December 31, 1999.
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<PAGE> 23
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Effective June 12, 1997, shares of the Company's common stock were distributed
to shareholders of Crescent Equities and unit holders of Crescent Partnership of
record on May 30, 1997. For Crescent Equities shareholders, the distribution was
made on the basis of one share of Crescent Operating common stock for every 10
common shares of beneficial interest of Crescent Equities held on the record
date, and for limited partners of Crescent Partnership, the distribution was
made on the basis of one share of Crescent Operating common stock for every 5
units of limited partnership interest held on the record date. The Company's
common stock, $0.01 par value per share, began trading on the OTC Bulletin Board
on June 13, 1997. Effective September 8, 1997, the Company's common stock was
listed on the NASDAQ National Market under the symbol "COPI".
The following table reflects the high and low bid prices of the common stock for
each calendar quarter indicated.
<TABLE>
<CAPTION>
1999 HIGH LOW
---- -------- -------
<S> <C> <C>
March 31................................ $ 5.25 $ 3.06
June 30................................. $ 7.63 $ 3.25
September 30............................ $ 7.13 $ 4.00
December 31............................. $ 4.63 $ 2.25
</TABLE>
<TABLE>
<CAPTION>
1998 HIGH LOW
---- -------- -------
<S> <C> <C>
March 31................................ $ 25.00 $ 18.19
June 30................................. $ 24.50 $ 16.50
September 30............................ $ 17.13 $ 3.50
December 31............................. $ 6.88 $ 2.78
</TABLE>
On October 25, 1999, the Company received notice from Nasdaq that, for the 30
consecutive trading days preceding such date, the Company's common stock failed
to maintain a closing bid price of greater than or equal to $5.00 per share,
the minimum closing bid price required for continued listing under NMS
maintenance standard applicable to the Company. On March 3, 2000, the Company
had a hearing before a Nasdaq panel to determine whether the Company will be
permitted to maintain its NMS listing. Pending the outcome of the hearing, the
Company's common stock will continue to be listed for trading on NMS. In the
event of an unfavorable outcome of the hearing, the Company believes it would
be able to apply for listing on the Nasdaq SmallCap Market. While the Company
believes it satisfies the requirements for listing on the Nasdaq SmallCap
Market, there can be no assurances that Nasdaq will approve listing of the
Company's shares on such market.
As of March 28, 2000, there were approximately 252 holders of record of the
common stock of Crescent Operating.
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<PAGE> 24
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain summary historical financial information
for the Company and for the Predecessor. For purposes of this table, the
Predecessor consists of Moody-Day and Hicks-Muse. The following information
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations in Item 7 and the Financial
Statements and Supplementary Data included in Item 8.
<TABLE>
<CAPTION>
(Dollars In Thousands)
------------------------------------------------------------------------------------------
Crescent Operating, Inc. Carter-Crowley Asset Group
(Predecessor)
---------------------------------------------- ------------------------------------------
For the Period
For the Period From For the Year Ended
From January 1, December 31,
May 9, 1997 1997 ---------------------------
1999 1998 December 31, 1997 to May 8, 1997 1996 1995
------------ ------------ ----------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Revenues ........................... $ 717,987 $ 493,248 $ 156,882 $ 4,657 $ 10,394 $ 9,147
Income (loss) from Operations ...... 13,867 9,886 (993) 158 109 89
Net income (loss) .................. (2,695) 1,141 (22,165) 25 (111) 79
Income (loss) per share-basic
and diluted ..................... (.26) .10 (2.00) -- -- --
Balance Sheet Data:
Total assets ....................... $ 795,653 $ 937,333 $ 602,083 $ 17,483 $ 13,230
Total debt ......................... 421,874 371,139 258,129 5,405 3,121
Total shareholders' equity (deficit) (20,522) (16,068) (8,060) 10,925 9,358
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with the "Selected
Financial Data" and the financial statements and notes thereto, appearing
elsewhere in this report. Historical results and percentage relationships set
forth in "Selected Financial Data" should not be taken as indicative of future
operations of the Company.
The following table sets forth financial data for the Company and the
Predecessor. The year ended December 31, 1997 includes operations of the
Predecessor from January 1, 1997 through May 8, 1997, and the operations of the
Company from May 9, 1997 through December 31, 1997. The years ended December 31,
1998 and 1999 include only the operations of the Company.
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
(In thousands) December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES
Equipment sales & leasing $ 136,343 $ 85,365 $ 15,175
Hospitality 246,763 229,491 79,468
Land development 334,881 178,392 66,896
------------ ------------ ------------
Total revenues 717,987 493,248 161,539
------------ ------------ ------------
OPERATING EXPENSES
Equipment sales & leasing 131,606 79,011 14,282
Hospitality 191,465 170,556 62,542
Hospitality properties rent 54,012 52,276 16,694
Land development 324,432 178,372 67,095
Corporate general and administrative 2,605 3,147 1,761
------------ ------------ ------------
Total operating expenses 704,120 483,362 162,374
------------ ------------ ------------
</TABLE>
24
<PAGE> 25
<TABLE>
<S> <C> <C> <C>
INCOME (LOSS) FROM OPERATIONS 13,867 9,886 (835)
------------ ------------ ------------
INVESTMENT INCOME (LOSS) 20,939 27,684 (16,423)
------------ ------------ ------------
OTHER (INCOME) EXPENSE
Interest expense 30,775 18,262 5,616
Interest income (4,046) (3,876) (1,764)
Other 131 182 (162)
------------ ------------ ------------
Total other (income) expense 26,860 14,568 3,690
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTERESTS 7,946 23,002 (20,948)
INCOME TAX PROVISION (BENEFIT) (3,471) 5,521 626
------------ ------------ ------------
INCOME (LOSS) BEFORE MINORITY INTERESTS 11,417 17,481 (21,574)
MINORITY INTERESTS (14,112) (16,340) (566)
------------ ------------ ------------
NET INCOME (LOSS) $ (2,695) $ 1,141 $ (22,140)
============ ============ ============
</TABLE>
YEAR ENDED DECEMBER 31, 1999, COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
REVENUES
Total revenue increased $224.8 million, or 45.6%, to $718.0 million for the year
ended December 31, 1999, compared with $493.2 million for the year ended
December 31, 1998. The increase in total revenue is attributable to the
following:
Equipment Sales and Leasing Segment
Equipment sales and leasing revenue increased $51.0 million, or 59.7% to $136.4
million, for the year ended December 31, 1999, compared with $85.4 million for
the year ended December 31, 1998. Significant components of the overall increase
were:
o the Company's acquisitions since January 1, 1998 and the opening of a new
location on August 1, 1999, resulting in incremental revenue of $46.1
million during the year ended December 31, 1999; and
o same store revenue increased $4.9 million for the year ended December 31,
1999, as compared to the prior year primarily due to increased rental
revenue.
Hospitality Segment
Hospitality revenue increased $17.3 million, or 7.5%, to $246.8 million for the
year ended December 31, 1999, compared with $229.5 million for the year ended
December 31, 1998. Significant components of the overall increase were:
o revenue derived from the operations of the Sonoma Mission Inn Golf and
Country Club, which was not leased by the Company until October 1998, and
the Renaissance Hotel, which was not leased by the Company until June 1999;
offset by the elimination of the Austin Omni Hotel rental income, resulting
from the termination of the lease effective December 31, 1998;
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<PAGE> 26
o revenue derived from the newly constructed Allegria Spa at the Hyatt
Regency Beaver Creek, which conducted operations for the full year ended
December 31, 1999, as compared to only four months during the year ended
December 31, 1998; and
o increased rates at certain of the Hospitality Properties resulted in higher
revenues during 1999 as compared to the corresponding period in 1998;
partially offset by
o decreased revenues at Sonoma Mission Inn and Spa due to lower occupancy and
average daily rate caused by construction at the property which
necessitated taking 20 rooms out of inventory during 1999.
Land Development Segment
Land Development revenue, which represents revenue from Desert Mountain
Development and COPI Colorado prior to the elimination of the Minority
Interests, increased $156.5 million, or 87.7%, to $334.9 million for the year
ended December 31, 1999, compared with $178.4 million for the year ended
December 31, 1998. Significant components of the overall increase were:
o revenues of COPI Colorado, which the Company did not include during the
first nine months of 1998, and which resulted in incremental revenues of
$136.1 million for the year ended December 31, 1999; and
o a $20.4 million increase in revenue from Desert Mountain Development during
the year ended December 31, 1999. The increase for the year can be
attributed to overall higher sales prices for lots as compared to the prior
year.
OPERATING EXPENSES
Total operating expenses increased $220.7 million, or 45.7%, to $704.1 million
for the year ended December 31, 1999, compared with $483.4 million for the year
ended December 31, 1998. The increase in operating expenses is attributable to
the following:
Equipment Sales and Leasing Segment
Equipment sales and leasing expenses increased $52.6 million, or 66.6%, to
$131.6 million for the year ended December 31, 1999, compared with $79.0 million
for the year ended December 31, 1998. Significant components of the overall
increase were:
o the Company's acquisitions since January 1, 1998 and the opening of a new
location on August 1, 1999, resulting in incremental operating expenses of
$45.8 million during year ended December 31, 1999; and
o increased costs of $6.8 million incurred during the year ended December 31,
1999, due mainly to an increase in rental inventory that is not
attributable to acquisitions resulting in increased depreciation expense.
Additionally, operating expenses were incurred during 1999 related to the
implementation of a new computer system, integration of acquisitions as
well as various costs incurred on acquisitions which did not come to
fruition. Management anticipates that certain of these integration costs
should not recur during 2000.
Hospitality Segment
Hospitality expenses increased $22.7 million, or 10.2%, to $245.5 million for
the year ended December 31, 1999, compared with $222.8 million for the year
ended December 31, 1998. Significant components of the overall increase were:
o rent and expenses associated with the Sonoma Mission Inn Golf and Country
Club which was not leased by the Company until October 1998, and the
Renaissance Hotel, which was not leased by the Company until June 1999;
o additional rent for the year ended December 31, 1999, resulting from
increased revenue generated by the Hospitality Properties, partially offset
by a decrease in rent for the year ended December 31, 1999, due to the
termination of the lease of the Austin Omni Hotel effective December 31,
1998;
26
<PAGE> 27
o rent and expenses associated with the newly constructed Allegria Spa at the
Hyatt Regency Beaver Creek, which was leased for only four months for the
period ended December 31, 1998; and
o additional rent associated with capital projects at the Hospitality
Properties that were incurred during the year ended December 31, 1999.
Land Development Segment
Land development expenses, which primarily represent operating costs incurred by
Desert Mountain Development and COPI Colorado prior to the elimination of the
Minority Interests, increased $146.0 million, or 81.8%, to $324.4 million for
the year ended December 31, 1999, compared with $178.4 million for the year
ended December 31, 1998. Significant components of the overall increase were:
o operating expenses of COPI Colorado, which the Company did not include
during the first nine months of 1998, and which resulted in incremental
expenses of $123.5 million during the year ended December 31, 1999; and
o a $22.3 million increase in expenses incurred by Desert Mountain
Development during the year ended December 31, 1999. The increase is
primarily attributable to overall higher development costs associated with
selling higher value lots as compared to the prior year.
Corporate General and Administrative Expenses
Corporate general and administrative expenses, totaling $2.6 million for the
year ended December 31, 1999, were comparable with such costs for the year
ended December 31, 1998. These expenses consisted of general corporate overhead
costs, such as legal and accounting costs, insurance costs and corporate
salaries.
INVESTMENT INCOME
Investment income decreased $6.8 million or 24.5%, to $20.9 million for the year
ended December 31, 1999, compared with $27.7 million for the year ended December
31, 1998. Significant components of the overall decrease were:
o equity in loss of AmeriCold Logistics in the amount of $3.7 million due to
the acquisition of AmeriCold Logistics in March 1999;
o a decrease in income of the Temperature Controlled Logistics Partnerships
in the amount of $3.6 million due to the fact that the Company no longer
consolidates the Temperature Controlled Logistics Partnerships as a result
of the restructuring of the Temperature Controlled Logistics segment;
o a decrease in investment income from Hicks-Muse in the amount of $3.2
million as a result of the Company's sale of its investment in Hicks-Muse
in March 1999;
o a decrease in equity in income of CDMC projects in the amount of $2.1
million; and
o equity in loss of CR Las Vegas, LLC in the amount of $1.1 million due to
the pre-opening expenses related to the opening of the Venetian Spa in Las
Vegas in June 1999; partially offset by
o no losses associated with CBHS for 1999 because the investment in CBHS was
written off during 1998, as compared to $5.4 million of losses recognized
in the prior year; and
o the gain on sale of 80% of the Company's interest in the Temperature
Controlled Logistics Partnerships in the amount of $1.5 million.
27
<PAGE> 28
OTHER (INCOME) EXPENSE
Other (income) expense increased $12.3 million, or 84.2%, to $26.9 million for
the year ended December 31, 1999, compared with $14.6 million for the year ended
December 31, 1998. The increase is primarily attributable to an increase in
interest expense in the amount of $12.5 million for the year ended December 31,
1999, resulting from:
o an increase in outstanding indebtedness in connection with acquisitions;
o the inclusion of interest expense of COPI Colorado (in the amount of $6.7
million, for the first nine months of 1999) in the Company's operating
results (operations of CDMC for the first nine months of 1998 were not
included during the prior year); partially offset by
o a decrease in interest expense of approximately $1.1 million at Desert
Mountain Development due to decreased indebtedness.
MINORITY INTERESTS
Minority interests decreased $2.2 million, or 13.5%, to $14.1 million for the
year ended December 31, 1999, compared to $16.3 million for the year ended
December 31, 1998. Minority Interests consist of the non-voting interests in the
Land Development segment and in CRL Investments.
INCOME TAX PROVISION (BENEFIT)
Income tax benefit of $3.5 million for the year ended December 31, 1999
represents a change of $9.0 million from the year ended December 31, 1998.
Income tax benefit consisted of a $8.7 million benefit at the corporate level, a
$1.1 million benefit for the Equipment Sales and Leasing segment, a $0.9 million
benefit for the Temperature Controlled Logistics segment, and a $0.1 million
benefit for the Hospitality segment, offset by a $7.3 million provision for the
Land Development segment.
The Company generally provides for taxes using a 40% effective rate on the
Company's share of income or loss. Additionally, for the year ended December 31,
1999, the Company released $4.2 million of its net deferred tax asset valuation
allowance, based on 1999 transactions and expected future taxable income.
Management continues to evaluate its ability to realize the deferred tax assets
quarterly by assessing the need for a valuation allowance. An inability of the
Company to execute business plans for certain of the company's segments could
affect the ultimate realization of the deferred tax assets.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUES
Total revenue increased $331.7 million, or 205.4% to $493.2 million, for the
year ended December 31, 1998, compared with $161.5 million for the year ended
December 31, 1997. The increase in total revenue is attributable to the factors
discussed in the following paragraphs.
Equipment Sales and Leasing Segment
Equipment sales and leasing revenues represent revenues from Crescent Machinery.
Equipment Sales and Leasing revenues increased approximately $70.2 million, or
461.8%, to $85.4 million for the year ended December 31, 1998, compared to $15.2
million for the year ended December 31, 1997. Significant components of the
overall increase were:
o approximately $65.4 million of the increase over the prior year relates to
the Company's acquisitions of Preco, which was effective as of December 1,
1997, Central Texas, which was effective as of April 30, 1998, Machinery,
Inc., which was effective as of June 8, 1998, Western Traction, which was
effective as of July 1,
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<PAGE> 29
1998, Harvey, Inc., which was effective as of July 31, 1998 and 4-K, which
was effective as of July 31, 1998; and
o same store revenues increased $4.8 million for the year ended December 31,
1998, as compared to the same period in the prior year, primarily as a
result of increased rental revenue.
Hospitality Segment
Hospitality revenues represent revenues from Hospitality Properties leases.
Hospitality revenues increased approximately $150.0 million, or 188.7%, to
$229.5 million for the year ended December 31, 1998, compared to $79.5 million
for the year ended December 31, 1997. The increase over the prior period is
primarily due to the fact that the Company was not involved in the Hospitality
segment prior to July 31, 1997.
Land Development Segment
Land development revenues represent revenues from Desert Mountain Development
and COPI Colorado prior to the elimination of the 95% minority interest. Land
Development revenues of $178.4 million for the year ended December 31, 1998
represent a $111.5 million, or 166.7%, increase over the year ended December 31,
1997 revenues of $66.9 million. Significant components of the overall increase
were:
o revenues of COPI Colorado, which the Company did not include prior to
September 30, 1998, and which resulted in incremental revenues of $11.2
million for the year ended December 31, 1998; and
o revenues of Desert Mountain Development, of which the Company did not
include prior to September 29, 1997, and which resulted in incremental
revenues of $93.5 million for the year ended December 31, 1998.
OPERATING EXPENSES
Total operating expenses increased $321.0 million, or 197.7%, to $483.4 million
for the year ended December 31, 1998, compared with $162.4 million for the year
ended December 31, 1997. The increase in operating expenses is attributable to
the factors discussed in the following paragraphs.
Equipment Sales and Leasing Segment
Equipment sales and leasing expenses increased $64.7 million to $79.0 million
for the year ended December 31, 1998, compared to $14.3 million for the year
ended December 31, 1997. Significant components of the overall increase were:
o approximately $62.2 million of the increase for the year ended December 31,
1998 relates to the Company's acquisitions in 1998; and
o the remaining increase relates to the additional costs incurred as a result
of the increase in equipment sales and leasing revenue.
Hospitality Segment
Hospitality expenses represent costs incurred by the full-service hotels, as
well as by the destination, health and fitness resorts and Hospitality
Properties rent paid to Crescent Equities. Hospitality expenses increased $143.6
million, or 181.3%, to $222.8 million for the year ended December 31, 1998,
compared to $79.2 million for the year ended December 31, 1997. The increase of
Hospitality expenses over the prior period amount is due to the fact that
Crescent Operating was not involved in the Hospitality segment until July 31,
1997.
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Land Development Segment
Land development expenses represent operating costs incurred by Desert Mountain
Development and COPI Colorado prior to the elimination of the 95% minority
interest. Land Development expenses of $178.4 million for the year ended
December 31, 1998, represent a $111.3 million, or 165.9%, increase over the year
ended December 31, 1997 Land Development direct expenses of $67.1 million.
Significant components of the overall increase were:
o operating expenses of COPI Colorado, which the Company did not include
prior to September 30, 1998, and which resulted in incremental expenses of
$11.8 million for the year ended December 31, 1998; and
o operating expenses of Desert Mountain Development, which the Company did
not include prior to September 29, 1997, and which resulted in incremental
expenses of $97.3 million for the year ended December 31, 1998.
Corporate General and Administrative Expenses
Corporate general and administrative expenses of $3.1 million for the year ended
December 31, 1998, consists of general corporate overhead costs such as legal
and accounting costs, insurance costs and corporate salaries. The increase in
general and administrative expenses of $1.3 million over the year ended December
31, 1997 is due to additional costs incurred as a result of the substantial
growth of the Company since the prior year as well as 1998 being the first full
year of operations.
INVESTMENT INCOME (LOSS)
Investment income increased $44.1 million, or 268.9%, to $27.7 million for the
year ended December 31, 1998, compared to a loss of $16.4 million for the year
ended December 31, 1997. The overall increase in investment income over the
prior year is due to the Company owning the majority of its investments for less
than half of the year in 1997, as well as the fact that the CBHS investment was
written off in early 1998 resulting in no further losses being recognized in
connection with CBHS in 1998. Significant components of the overall increase
were:
o an increase in investment income from Hicks-Muse in the amount of $2.5
million;
o an increase in equity in income of Landevco in the amount of $16.8 million;
o an increase in equity in income of Woodlands Operating in the amount of
$1.0 million;
o equity in income of CDMC projects in the amount of $5.6 million;
o equity in income of the Temperature Controlled Logistics Partnerships in
the amount of $4.0 million; and
o decreased equity in losses of CBHS in the amount of $14.2 million.
OTHER (INCOME) EXPENSE
Other (income) expense increased $10.9 million, or 294.6%, to $14.6 million for
year ended December 31, 1998, compared to $3.7 million for the year ended
December 31, 1997. Significant components of the overall increase were:
o an increase in interest expense in the amount of $12.6 million due
primarily to increased debt levels at Crescent Operating and Crescent
Machinery as a result of acquisitions late in 1997 and in 1998, as well as
the inclusion of a full year of interest for Desert Mountain Development in
1998 as compared to only three months in 1997; partially offset by
o an increase in interest income in the amount of $2.1 million due primarily
to interest income from lot sale notes receivable at Desert Mountain
Development and interest income on the notes receivable from Landevco
neither of which was acquired until September 29, 1997.
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MINORITY INTERESTS
Minority interests of approximately $16.3 million for the year ended December
31, 1998 consisted primarily of the 95% minority interest in the Temperature
Controlled Logistics and the Land Development segments. The increase of $15.8
million over the year ended December 31, 1997 amount of $0.6 million is due to
the acquisitions of the Temperature Controlled Logistics and Land Development
segments occurring in October 1997 and September 1997, respectively.
INCOME TAX (PROVISION) BENEFIT
Income tax provision of approximately $5.5 million for the year ended December
31, 1998 consisted of a $2.7 million tax provision for the Hospitality segment,
a $7.4 million tax provision for the Land Development segment and a $1.5 million
tax provision for the Equipment Sales and Leasing segment, offset by a $2.2
million benefit for the Healthcare segment and a $4.1 million benefit at the
corporate level. The Company generally provides for taxes using an assumed 40%
effective rate on the Company's share of income or loss. The effective rate
presented in the statement of operations is skewed primarily due to the minority
interests in the Company's operations.
LIQUIDITY AND CAPITAL RESOURCES
Recognizing that cash flow from its assets would not be likely to provide the
Company with adequate capital to meet its requirements during 2000, the Company
during the first quarter of 2000 extended certain payment obligations by
reaching agreements with Crescent Equities to defer until 2001 payments on
certain of Crescent Operating's obligations to Crescent Equities otherwise
scheduled to be made in 2000. With these agreements, the Company believes that
it will be able to meet its capital requirements during 2000 with the recurring
cash flow of its assets.
CASH FLOWS
Cash and cash equivalents include amounts from all consolidated subsidiaries,
including subsidiaries not wholly owned. Changes, therefore, do not necessarily
represent increases or decreases in cash directly available to the Company.
Cash and cash equivalents were $39.0 million and $42.8 million at December 31,
1999 and December 31, 1998, respectively. The 8.9% decrease is attributable to
$9.4 million and $34.5 million of cash used in operating and investing
activities, respectively, offset by $40.1 million of cash provided by financing
activities.
OPERATING ACTIVITIES
Net cash flows used in operating activities for the year ended December 31, 1999
were $9.4 million compared with the net cash provided by operating activities
of $36.1 million and $45.6 million for the years ended December 31, 1998 and
1997, respectively. The Company's outflow of cash used in operating activities
of $9.4 million was primarily attributable to outflows from:
o net loss of $2.7 million;
o a decrease in deferred income taxes of $24.6 million;
o equity in income from unconsolidated subsidiaries of $19.0 million;
o an increase in real estate of $40.6 million; and
o increases in accounts receivable of $13.1 million.
The outflow of cash used in operating activities was partially offset by inflows
from:
o non-cash depreciation and amortization of $33.7 million;
o increases in accounts payable and accrued expenses of $17.9 million; and
o increases in deferred revenue of $36.5 million.
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INVESTING ACTIVITIES
Net cash flows used in investing activities for the year ended December 31, 1999
were $34.5 million compared with the net cash used in investing activities of
$121.7 million and $66.7 million for the years ended December 31, 1998 and 1997,
respectively. The Company's outflow of cash used in investing activities of
$34.5 million was primarily attributable to outflows from:
o acquisitions of business interests of $28.5 million;
o acquisitions of business interests by Controlled Subsidiaries of $3.8
million;
o purchases of property and equipment of $79.5 million;
o contributions to investments of Controlled Subsidiaries of $11.9 million.
The outflow of cash used in investing activities was partially offset by inflows
from:
o proceeds from the sale of investments of $23.5 million;
o proceeds from the sale of property and equipment of $30.5 million;
o net proceeds from sale and collection of notes receivable of $8.3 million;
and
o distributions from investments of Controlled Subsidiaries of $24.0
million.
FINANCING ACTIVITIES
Net cash flows provided by financing activities for the year ended December 31,
1999 were $40.1 million compared with the net cash provided by financing
activities of $85.1 million and $64.7 million for the years ended December 31,
1998 and 1997, respectively. The Company's inflow of cash provided by financing
activities of $40.1 million was primarily attributable to inflows from:
o proceeds of all long-term debt of $343.4 million; and
o capital contributions attributable to Minority Interests of $35.5 million.
The inflow of cash provided by financing activities was partially offset by
outflows from:
o payments of all long-term debt of $313.5 million; and
o distributions to Minority Interests of $20.8 million.
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FINANCING ATTRIBUTABLE TO CORPORATE AND WHOLLY OWNED SUBSIDIARIES
In August 1999, the Company renewed its $15.0 million unsecured bank line of
credit from Bank of America. The line of credit bears interest at the LIBOR rate
plus 1% per annum, payable monthly and all principal and unpaid interest on the
line of credit will be payable in August 2001. The $15.0 million available under
the line of credit from Bank of America was fully drawn as of December 31, 1999.
Effective March 12, 1999, the Company agreed to make a permanent reduction in
its $30.4 million 12% line of credit with Crescent Partnership commensurate with
the proceeds from the sale of 80% of the Company's 2% interest in the
Temperature Controlled Logistics Partnerships. On March 12, 1999, the Company
received $13.2 million of proceeds and correspondingly permanently reduced the
availability under the line of credit from $30.4 million to $17.2 million. The
line of credit bears interest at the rate of 12% per annum, compounded
quarterly, payable on an interest-only basis during its term, which expires on
the later of (i) May 21, 2002 or (ii) five years after the last draw under the
line of credit (in no event shall the maturity date be later than June 2007).
Draws may be made under the line of credit until June 22, 2002. The line of
credit is a recourse obligation and amounts outstanding thereunder are
collateralized, to the extent not prohibited by pre-existing arrangements, by a
first lien on the assets which the Company now owns or may acquire in the
future. The line of credit is cross-collateralized and cross-defaulted with the
Company's other borrowings from Crescent Partnership. As of December 31, 1999,
$17.2 million was outstanding under the line of credit.
Also effective March 12, 1999, the Company obtained from Crescent Partnership a
$19.5 million term note bearing interest at a rate of 9% per annum. The term
note is payable on an interest-only basis during its term, which expires in May
2002. The note is cross-collateralized and cross-defaulted with the Company's
other borrowings from Crescent Partnership. Upon inception of this line of
credit, the Company immediately borrowed the full $19.5 million with which it
contributed approximately $15.5 million in connection with the formation of
AmeriCold Logistics and used the remaining $4.0 million of proceeds to reduce
the amount outstanding under the 12% line of credit with Crescent Partnership.
As of December 31, 1999, $19.5 million was outstanding under the line of credit.
The Company funded its contribution to COPI Colorado using the proceeds from a
$9 million term loan from Crescent Partnership. The loan bears interest at 12%
per annum, with interest payable quarterly and the full original principal
amount of $9.0 million, together with any accrued but unpaid interest, payable
in May 2002. The Company's interest in COPI Colorado secures the loan, which is
cross-collateralized and cross-defaulted with the Company's other borrowings
from Crescent Partnership. As of December 31, 1999, $9.0 million was outstanding
under the line of credit.
As a part of the acquisition of a two-thirds interest in the HCAC, the Company
borrowed $0.8 million from Crescent Partnership at an interest rate of 8.5% per
annum. The $0.8 million note was collateralized by the two-thirds interest in
HCAC. Monthly principal and interest payments on the $0.8 million loan commenced
in November 1997. As of December 31, 1999, there was $0.5 million outstanding on
the $0.8 million note; the note was paid in full in January 2000 upon the sale
by HCAC of its assets.
Crescent Machinery has various equipment notes payable and floor plan notes
under credit facilities which are collateralized by the equipment financed. The
equipment notes are payable in monthly principal and interest payments and bear
interest at 6.0% to 10.9% per annum and mature between 2000 and 2007. The floor
plan notes do not bear interest, do not require monthly principal or interest
payments and generally have terms ranging from three to twelve months. As of
December 31, 1999, the outstanding balance on the equipment notes was $102.5
million and on the floor plan notes was $21.5 million.
In connection with the formation and capitalization of Crescent Operating in the
second quarter of 1997, Crescent Operating received approximately $14.1 million
in cash from Crescent Partnership and Crescent Partnership loaned Crescent
Operating approximately $35.9 million pursuant to a five-year term loan,
maturing on May 8, 2002, of which approximately $13.8 million was outstanding as
of December 31, 1999. The loan is a recourse loan that is collateralized, to the
extent not prohibited by pre-existing arrangements, by a first lien on the
assets which the Company now owns or may acquire in the future. The loan bears
interest at the rate of 12% per annum, compounded quarterly, with required
quarterly principal and interest payments limited by quarterly cash flow of the
Company as defined in the applicable credit agreement.
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FINANCING ATTRIBUTABLE TO NON WHOLLY OWNED SUBSIDIARIES
Desert Mountain Properties also has a credit agreement with Crescent Partnership
pursuant to which Crescent Partnership has advanced funds to Desert Mountain
Properties through a "Junior Note" and a "Senior Note". The Junior Note
evidences a $60.0 million advance from Crescent Partnership to Desert Mountain
Properties and accrues interest at 14% per annum. The Senior Note evidences a
$110.0 million advance from Crescent Partnership to Desert Mountain Properties
and accrues interest at 10% per annum. The principal and interest on both the
Junior Note and the Senior Note are payable in quarterly installments, based on
proceeds from the operations of Desert Mountain Properties. As of December 31,
1999, the outstanding balances of the Junior Note and Senior Note were $60.0
million and $6.1 million, respectively.
Desert Mountain Properties entered into a $45 million credit facility with
National Bank of Arizona in May 1998. The facility is comprised of (i) a $35
million line of credit available for vertical financing related to new home
construction and bears an annual interest at the prime rate and (ii) a $10
million line of credit available for borrowings against certain notes receivable
issued by Desert Mountain Properties and bears an annual interest rate of prime
plus 1%. The credit facility expires June 2000 with interest payable monthly,
collateralized by land owned by Desert Mountain Properties, deeds of trust on
lots sold and home construction. As of December 31, 1999, the outstanding
balance on the line of credit with National Bank of Arizona was $13.8 million.
CDMC has three lines of credit with Crescent Partnership, one of which was
increased from $40.2 million to $48.2 million effective January 1, 1999 and then
from $48.2 million to $56.2 million in December 1999. The line of credit bears
interest at 11.5% per annum, compounded annually. Principal and interest
payments are due as distributions from projects are received, as defined by the
applicable agreement. The line of credit is due August 2004. As of December
1999, $49.4 million was outstanding on the $56.2 million line of credit. The
second line of credit of $22.9 million (which by mutual agreement of borrower
and lender was effectively converted into a term loan of $16.4 million) bears
interest at 12.0% per annum, compounded annually. Principal and interest
payments are due as distributions from projects are received, as defined by the
applicable agreement. The line of credit is due January 2003. As of December 31,
1999, $16.4 million was outstanding on the $22.9 million line of credit. The
third line of credit with Crescent Partnership for $40.0 million bears interest
at 11.5% per annum. Principal and interest payments are due as distributions are
received, as defined by the applicable credit agreement. The line of credit is
due December 2006. As of December 31, 1999, $14.5 million was outstanding on the
$40.0 million line of credit. The lines of credit are collateralized by CDMC's
interests in East West Resort Development partnerships, East West Resorts, LLC
and other CDMC property. CDMC also has a term loan with Crescent Partnership for
$3.1 million maturing June 2005. The note bears interest at 12%, with interest
payable quarterly and principal payable annually in accordance with an
increasing schedule. The note is collateralized by CDMC's interests in East West
Resorts, LLC, the East West Development partnerships and CDMC's other property.
As of December 31, 1999, $2.6 million was outstanding on the $3.1 million term
note. Generally, CDMC's loans with Crescent Partnership are cross-collateralized
and cross-defaulted.
The operating entities in which CDMC invests have various construction loans for
East West projects which are collateralized by deeds of trust, security
agreements and a first lien on the assets conveyed. The notes are payable in
monthly principal and interest payments and bear interest at 8.0% to 13.9% per
annum. The notes mature between 2000 and 2005. As of December 31, 1999, the
outstanding balance on these construction notes was $45.0 million in the
aggregate.
CRL has a line of credit with Crescent Partnership in the amount of $7.0 million
bearing interest at a rate of 12% per annum. The line of credit is due August
2003. The principal and interest are payable as CRL receives distributions
pursuant to the CR License Operating Agreement and the CR Las Vegas Operating
Agreement. As of December 31, 1999, $5.7 million was outstanding under the line
of credit.
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YEAR 2000 ISSUES
The Company, along with an independent firm, assessed information technology
systems (such as accounting systems and network operating systems) and
non-information technology systems (such as microcontrollers). As the assessment
phase was completed at each of the locations, the Company implemented a
modification phase to address any issues discovered in the assessment phase. The
modification phase was followed by a testing phase to determine that the
appropriate corrective action had been taken. The testing phase was completed
successfully in advance of December 31, 1999.
Through the date of this Form 10-K, the Company has experienced no material
unresolved problems related to the Year 2000, including the changeover from
December 31, 1999 to January 1, 2000, and the leap day, February 29, 2000. In
addition, none of the Company's major suppliers has failed to meet its
obligations as a result of Year 2000. The Company's share of total costs
associated with its Year 2000 compliance efforts was less than $1.0 million.
The Company will continue to monitor its information technology systems and
non-information technology systems, through the middle of the Year 2000, to
ensure that any latent Year 2000 issues that may arise are promptly addressed.
The Company does not anticipate any additional material expenditures related to
Year 2000 compliance.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has fixed and variable rate notes payable and lines of credit which
are subject to market risk related to changes in interest rates. The Company
manages its market risk by attempting to match anticipated inflow of cash from
its operating, investing and financing activities with anticipated outflow of
cash to fund debt payments, investments and other cash requirements. The Company
does not use derivative financial instruments to manage interest rate risk.
As of December 31, 1999, the Company had amounts outstanding under variable rate
notes payable and lines of credit totaling $128.4 million, with a weighted
average interest rate of 9.0% per annum. A hypothetical 10% increase in the
weighted average interest rate on the Company's variable rate notes and lines of
credit would cause a $1.2 million increase in interest expense and a decrease in
the Company's earnings and cash flows of $0.9 million, based on the amount of
variable rate debt outstanding as of December 31, 1999. In the event that
interest rates increase significantly and the Company continues to have
significant amounts outstanding under variable rate notes and credit lines,
depending upon market conditions, the Company may be able to substitute fixed
rate notes for some of its variable rate notes and credit lines to minimize its
exposure to interest rate risk. There can be no assurance, however, that any
such substitution could be arranged on terms that are satisfactory to the
Company.
As of December 31, 1999, the Company had amounts outstanding under fixed rate
notes payable and lines of credit totaling $293.4 million, with a weighted
average interest rate of 10.5% per annum. In the event that interest rates
decrease significantly, and market interest rates are substantially lower than
the rates on the Company's fixed rate notes and credit lines, the Company would
be able to reduce interest expense if it were able to prepay and/or refinance
these instruments. There can be no assurance, however, that the Company would be
able to prepay or refinance its debt on terms that are satisfactory to the
Company in a declining interest rate environment.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this Item is contained in the Company's Consolidated
Financial Statements as indicated in the Index on Page F-1 of this Annual Report
on Form 10-K, and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
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PART III
Certain information required by Part III is omitted from this report in that the
Company will file a definitive proxy statement with the Securities and Exchange
Commission (the "Commission") pursuant to Regulation 14A ("Proxy Statement") not
later than 120 days after the end of the fiscal year covered by this report, and
certain information to be included therein is incorporated herein by reference.
Only those sections of the Proxy Statement which specifically address the items
set forth herein are incorporated by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated by reference to the
Company's Proxy Statement to be filed with the Commission for its annual
shareholders' meeting to be held in June 2000.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's Proxy Statement to be filed with the Commission for its annual
shareholders' meeting to be held in June 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's Proxy Statement to be filed with the Commission for its annual
shareholders' meeting to be held in June 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Company's Proxy Statement to be filed with the Commission for its annual
shareholders' meeting to be held in June 2000.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of the Annual Report on Form 10-K:
1. Financial Statements
Information with respect to this Item is contained on pages F-1 to
F-82 of this Annual Report on Form 10-K.
2. Financial Statement Schedules
Information with respect to this Item is listed on page F-1 of this
Annual Report on Form 10-K.
3. Exhibits
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
3.1 First Amended and Restated Certificate of Incorporation
(filed as Exhibit 3.3 to the Company's registration
statement on Form S-1 dated July 12, 1997 ("Form S-1")
and incorporated by reference herein)
3.2 First Amended and Restated Bylaws (filed as Exhibit 3.4
to Form S-1 and incorporated by reference herein)
3.3 Amendment of Article V of First Amended and Restated
Bylaws (filed as Exhibit 3.3 to the Company's June 30,
1998 Form 10-Q ("June 30, 1998 Form 10-Q") and
incorporated by reference herein)
3.4 Repeal of Amendment of Article V of First Amended and
Restated Bylaws (filed as Exhibit 3.4 to the Company's
September 30, 1998 Form 10-Q ("September 30, 1998 Form
10-Q") and incorporated by reference herein)
4.1 Specimen stock certificate (filed as Exhibit 4.1 to Form
S-1 and incorporated by reference herein)
4.2 Preferred Share Purchase Rights Plan (filed as Exhibit
4.2 to Form S-1 and incorporated by reference herein)
4.3 First Amendment to Preferred Share Purchase Rights
Agreement dated as of September 25, 1998, between
Crescent Operating, Inc. and Bank Boston, N.A., as
Rights Agent (filed as Exhibit 4.3 to September 30, 1998
Form 10-Q and incorporated by reference herein)
4.4 Second Amendment to Preferred Share Purchase Rights
Agreement dated as of March 4, 1999, between Crescent
Operating, Inc. and Bank Boston, N.A., as Rights Agent
(filed as Exhibit 4.4 to March 31, 1999 Form 10-Q
("March 31, 1999 Form 10-Q") and incorporated by
reference herein)
10.1 Amended Stock Incentive Plan (filed as Exhibit 10.1 to
Form S-1 and incorporated by reference herein)
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10.2 Intercompany Agreement between Crescent Operating, Inc.
and Crescent Real Estate Equities Limited Partnership
(filed as Exhibit 10.2 to the Company's Quarterly Report
on Form 10-Q for the Quarter Ended June 30, 1997 ("June
30, 1997 Form 10-Q") and incorporated by reference
herein)
10.3 Amended and Restated Operating Agreement of Charter
Behavioral Health Systems, LLC (filed as Exhibit 10.3 to
June 30, 1997 Form 10-Q and incorporated by reference
herein)
10.5 Amended and Restated Credit and Security Agreement,
dated as of May 30, 1997, between Crescent Real Estate
Equities Limited Partnership and Crescent Operating,
Inc., together with related Note (filed as Exhibit 10.5
to the Company's September 30, 1997 Form 10-Q
("September 30, 1997 Form 10-Q") and incorporated by
reference herein)
10.6 Line of Credit and Security Agreement, dated as of May
21, 1997, between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc., together with
related Line of Credit Note (filed as Exhibit 10.6 to
September 30, 1997 Form 10-Q and incorporated by
reference herein)
10.7 Acquisition Agreement, dated as of February 10, 1997,
between Crescent Real Estate Equities Limited
Partnership and Carter-Crowley Properties, Inc. (filed
as Exhibit 10.7 to Form S-1 and incorporated by
reference herein)
10.10 Security Agreement dated September 22, 1997 between COI
Hotel Group, Inc., as debtor, and Crescent Real Estate
Equities Limited Partnership, as lender, together with
related $1 million promissory note (filed as Exhibit
10.10 to September 30, 1997 Form 10-Q and incorporated
by reference herein)
10.11 Security Agreement dated September 22, 1997 between COI
Hotel Group, Inc., as debtor, and Crescent Real Estate
Equities Limited Partnership, as lender, together with
related $800,000 promissory note (filed as Exhibit 10.11
to September 30, 1997 Form 10-Q and incorporated by
reference herein)
10.12 Amended and Restated Asset Management dated August 31,
1997, to be effective July 31, 1997, between Wine
Country Hotel, LLC and The Varma Group, Inc. (filed as
Exhibit 10.12 to September 30, 1997 Form 10-Q and
incorporated by reference herein)
10.13 Amended and Restated Asset Management Agreement dated
August 31, 1997, to be effective July 31, 1997, between
RoseStar Southwest, LLC and The Varma Group, Inc. (filed
as Exhibit 10.13 to September 30, 1997 Form 10-Q and
incorporated by reference herein)
10.14 Amended and Restated Asset Management Agreement dated
August 31, 1997, to be effective July 31, 1997, between
RoseStar Management LLC and The Varma Group, Inc. (filed
as Exhibit 10.14 to September 30, 1997 Form 10-Q and
incorporated by reference herein)
10.15 Agreement for Financial Services dated July 1, 1997,
between Crescent Real Estate Equities Company and
Petroleum Financial, Inc. (filed as Exhibit 10.15 to
September 30, 1997 Form 10-Q and incorporated by
reference herein)
10.16 Credit Agreement dated August 27, 1997, between Crescent
Operating, Inc. and NationsBank of Texas, N.A. together
with related $15.0 million promissory note (filed as
Exhibit 10.16 to September 30, 1997 Form 10-Q and
incorporated by reference herein)
38
<PAGE> 39
10.17 Support Agreement dated August 27, 1997, between Richard
E. Rainwater, John Goff and Gerald Haddock in favor of
Crescent Real Estate Equities Company and NationsBank of
Texas, N.A. (filed as Exhibit 10.17 to September 30,
1997 Form 10-Q and incorporated by reference herein)
10.18 1997 Crescent Operating, Inc. Management Stock Incentive
Plan (filed as Exhibit 10.18 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997
("December 31, 1997 Form 10-K") and incorporated by
reference herein)
10.19 Memorandum of Agreement executed November 16, 1997,
among Charter Behavioral Health Systems, LLC, Charter
Behavioral Health Systems, Inc. and Crescent Operating,
Inc. (filed as Exhibit 10.19 to December 31, 1997 Form
10-K and incorporated by reference herein)
10.20 Purchase Agreement dated August 31, 1997, by and among
Crescent Operating, Inc., RoseStar Management LLC,
Gerald W. Haddock, John C. Goff and Sanjay Varma (filed
as Exhibit 10.20 to December 31, 1997 Form 10-K and
incorporated by reference herein)
10.21 Stock Purchase Agreement dated August 31, 1997, by and
among Crescent Operating, Inc., Gerald W. Haddock, John
C. Goff and Sanjay Varma (filed as Exhibit 10.21 to
December 31, 1997 Form 10-K and incorporated by
reference herein)
10.22 Amended and Restated Lease Agreement, dated June 30,
1995 between Crescent Real Estate Equities Limited
Partnership and RoseStar Management LLC, relating to the
Denver Marriott City Center (filed as Exhibit 10.17 to
the Annual Report on Form 10-K of Crescent Real Estate
Equities Company for the Fiscal Year Ended December 31,
1995 (the "1995 CEI 10-K") and incorporated by reference
herein)
10.23 Lease Agreement, dated December 19, 1995 between
Crescent Real Estate Equities Limited Partnership and
RoseStar Management LLC, relating to the Hyatt Regency
Albuquerque (filed as Exhibit 10.16 to the 1995 CEI 10-K
and incorporated by reference herein)
10.24 Form of Amended and Restated Lease Agreement, dated
January 1, 1996, among Crescent Real Estate Equities
Limited Partnership, Mogul Management, LLC and RoseStar
Management LLC, relating to the Hyatt Regency Beaver
Creek (filed as Exhibit 10.12 to the 1995 CEI 10-K and
incorporated by reference herein)
10.25 Lease Agreement, dated July 26, 1996, between Canyon
Ranch, Inc. and Canyon Ranch Leasing, L.L.C., assigned
by Canyon Ranch, Inc. to Crescent Real Estate Equities
Limited Partnership pursuant to the Assignment and
Assumption Agreement of Master Lease, dated July 26,
1996 (filed as Exhibit 10.24 to the Quarterly Report on
Form 10-Q/A of Crescent Real Estate Equities Company for
the Quarter Ended June 30, 1997 (the "1997 CEI 10-Q")
and incorporated by reference herein)
10.26 Lease Agreement, dated November 18, 1996 between
Crescent Real Estate Equities Limited Partnership and
Wine Country Hotel, LLC (filed as Exhibit 10.25 to the
Annual Report on Form 10-K of Crescent Real Estate
Equities Company for the Fiscal Year Ended December 31,
1996 and incorporated by reference herein)
10.27 Lease Agreement, dated December 11, 1996, between Canyon
Ranch-Bellefontaine Associates, L.P. and Vintage
Resorts, L.L.C., as assigned by Canyon
Ranch-Bellefontaine Associates, L.P. to Crescent Real
Estate Funding VI, L.P. pursuant to the Assignment and
Assumption Agreement of Master Lease, dated December 11,
1996 (filed as Exhibit 10.26 to the 1997 CEI 10-Q and
incorporated by reference herein)
39
<PAGE> 40
10.28 Master Lease Agreement, dated June 16, 1997, between
Crescent Real Estate Funding VII, L.P. and Charter
Behavioral Health Systems, LLC and its subsidiaries,
relating to the Facilities (filed as Exhibit 10.27 to
the 1997 CEI 10-Q and incorporated by reference herein)
10.29 Form of Indemnification Agreement (filed as Exhibit
10.29 to December 31, 1997 Form 10-K and incorporated by
reference herein)
10.30 Purchase Agreement, dated as of September 29, 1997,
between Crescent Operating, Inc. and Crescent Real
Estate Equities Limited Partnership, relating to the
purchase of Desert Mountain Development Corporation
(filed as Exhibit 10.30 to December 31, 1997 Form 10-K
and incorporated by reference herein)
10.31 Lease Agreement dated December 19, 1997, between
Crescent Real Estate Equities Limited Partnership, as
Lessor, and Wine Country Hotel, as Lessee, for lease of
Ventana Inn (filed as Exhibit 10.31 to the Company's
March 31, 1998 Form 10-Q ("March 31, 1998 Form 10-Q")
and incorporated by reference herein)
10.32 Lease Agreement dated September 22, 1997, between
Crescent Real Estate Equities Limited Partnership, as
Lessor, and COI Hotel Group, Inc., as lessee, for lease
of Four Seasons Hotel, Houston (filed as Exhibit 10.32
to March 31, 1998 Form 10-Q and incorporated by
reference herein)
10.33 Asset Purchase Agreement dated December 19, 1997, among
Crescent Operating, Inc., Preco Machinery Sales, Inc.,
and certain individual Preco shareholders (filed as
Exhibit 10.33 to March 31, 1998 Form 10-Q and
incorporated by reference herein)
10.34 Asset Purchase Agreement dated April 30, 1998, among
Crescent Operating, Inc., Central Texas Equipment
Company, and certain individual Central Texas
shareholders (filed as Exhibit 10.34 to March 31, 1998
Form 10-Q and incorporated by reference herein)
10.35 Credit Agreement dated August 29, 1997 between Crescent
Real Estate Equities Limited Partnership, as lender, and
Desert Mountain Properties Limited Partnership, as
borrower, together with related Senior Note, Junior Note
and deed of trust (filed as Exhibit 10.35 to March 31,
1998 Form 10-Q and incorporated by reference herein)
10.36 Buy-Out Agreement dated April 24, 1998, between Crescent
Operating, Inc. and Crescent Real Estate Equities
Limited Partnership (filed as Exhibit 10.36 to March 31,
1998 Form 10-Q and incorporated by reference herein)
10.37 Stock Acquisition Agreement and Plan of Merger dated
June 4, 1998, among Machinery, Inc., Oklahoma Machinery,
Inc., Crescent Machinery Company, Crescent Operating,
Inc. and certain individual Machinery shareholders
(filed as Exhibit 10.37 to June 30, 1998 Form 10-Q and
incorporated by reference herein)
10.38 Master Revolving Line of Credit Loan Agreement
(Borrowing Base and Warehouse) dated May 14, 1998,
between Desert Mountain Properties Limited Partnership
and National Bank of Arizona (filed as Exhibit 10.38 to
June 30, 1998 Form 10-Q and incorporated by reference
herein)
10.39 1997 Management Stock Incentive Plan (filed as Exhibit
10.39 to June 30, 1998 Form 10-Q and incorporated by
reference herein)
10.40 Credit and Security Agreement, dated as of September 21,
1998, between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc., together with
related Note (filed as Exhibit 10.40 to September 30,
1998 Form 10-Q and incorporated by reference herein)
40
<PAGE> 41
10.41 First Amendment to Amended and Restated Pledge
Agreement, dated as of September 21, 1998, between
Crescent Real Estate Equities Limited Partnership and
Crescent Operating, Inc. (filed as Exhibit 10.41 to
September 30, 1998 Form 10-Q and incorporated by
reference herein)
10.42 First Amendment to Line of Credit and Security
Agreement, dated as of August 11, 1998, between Crescent
Real Estate Equities Limited Partnership and Crescent
Operating, Inc., together with related Note (filed as
Exhibit 10.42 to September 30, 1998 Form 10-Q and
incorporated by reference herein)
10.43 First Amendment to Amended and Restated Credit and
Security Agreement, dated as of August 11, 1998, between
Crescent Real Estate Equities Limited Partnership and
Crescent Operating, Inc. (filed as Exhibit 10.43 to
September 30, 1998 Form 10-Q and incorporated by
reference herein)
10.44 Second Amendment to Amended and Restated Credit and
Security Agreement, dated as of September 21, 1998,
between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc. (filed as
Exhibit 10.44 to September 30, 1998 Form 10-Q and
incorporated by reference herein)
10.45 Second Amendment to Line of Credit and Security
Agreement, dated as of September 21, 1998, between
Crescent Real Estate Equities Limited Partnership and
Crescent Operating, Inc. (filed as Exhibit 10.45 to
September 30, 1998 Form 10-Q and incorporated by
reference herein)
10.46 Agreement of Limited Partnership of COPI Colorado, L.P.
(filed as Exhibit 10.1 to that Schedule 13D Statement
dated September 28, 1998, filed by COPI Colorado, L.P.,
Crescent Operating, Inc., Gerald W. Haddock, John C.
Goff and Harry H. Frampton, III, and incorporated by
reference herein)
10.47 Contribution Agreement effective as of September 11,
1998, by and among Crescent Operating, Inc., Gerald W.
Haddock, John C. Goff and Harry H. Frampton, III (filed
as Exhibit 10.2 to that Schedule 13D Statement dated
September 28, 1998, filed by COPI Colorado, L.P.,
Crescent Operating, Inc., Gerald W. Haddock, John C.
Goff and Harry H. Frampton, III, and incorporated by
reference herein)
10.48 Agreement Regarding Schedules and Other Matters made as
of September 11, 1998, by and among Crescent Operating,
Inc., Gerald W. Haddock, John C. Goff and Harry H.
Frampton, III (filed as Exhibit 10.3 to that Schedule
13D Statement dated September 28, 1998, filed by COPI
Colorado, L.P., Crescent Operating Inc., Gerald W.
Haddock, John C. Goff and Harry H. Frampton, III, and
incorporated by reference herein)
10.49 Stock Purchase Agreement dated as of August 7, 1998 by
and among Western Traction Company, The Carlston Family
Trust, Ronald D. Carlston and Crescent Operating, Inc.
(filed as Exhibit 10.49 to September 30, 1998 Form 10-Q
and incorporated by reference herein)
10.50 Stock Purchase Agreement dated as of July 31, 1998 by
and among Harvey Equipment Center, Inc., L and H Leasing
Company, William J. Harvey, Roy E. Harvey, Jr., Betty J.
Harvey and Crescent Operating, Inc. (filed as Exhibit
10.50 to September 30, 1998 Form 10-Q and incorporated
by reference herein)
10.51 Credit Agreement dated as of July 28, 1998, between
Crescent Real Estate Equities Limited Partnership and
CRL Investments, Inc., together with the related Note
(filed as Exhibit 10.51 to September 30, 1998 Form 10-Q
and incorporated by reference herein)
10.52 Security Agreement dated as of July 28, 1998, between
Crescent Real Estate Equities Limited Partnership and
CRL Investments, Inc. (filed as Exhibit 10.52 to
September 30, 1998 Form 10-Q and incorporated by
reference herein)
41
<PAGE> 42
10.53 First Amendment to Credit Agreement effective as of
August 27, 1998, among Crescent Operating, Inc.,
NationsBank, N. A., and the Support Parties identified
therein (filed as Exhibit 10.53 to September 30, 1998
Form 10-Q and incorporated by reference herein)
10.54 Lease Agreement dated as of October 13, 1998, between
Crescent Real Estate Equities Limited Partnership and
Wine Country Golf Club, Inc., relating to Sonoma Golf
Club (filed as Exhibit 10.54 to September 30, 1998 Form
10-Q and incorporated by reference herein)
10.55 First Amendment to Lease Agreement effective December
31, 1998, between Canyon Ranch Leasing, L.L.C., and
Crescent Real Estate Equities Limited Partnership,
relating to Canyon Ranch - Tucson (filed as Exhibit
10.55 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998 ("December 31, 1998
Form 10-K") and incorporated by reference herein)
10.56 First Amendment to Lease Agreement effective April 1,
1996; Second Amendment to Lease Agreement effective
November 22, 1996; Third Amendment to Lease Agreement
effective August 12, 1998; and Fourth Amendment to Lease
Agreement effective December 31, 1998 between RoseStar
Southwest, LLC, and Crescent Real Estate Funding II
L.P., relating to Hyatt Regency Albuquerque (filed as
Exhibit 10.56 to December 31, 1998 Form 10-K and
incorporated by reference herein)
10.57 First Amendment to Lease Agreement effective December
31, 1998, between Wine Country Hotel, LLC, and Crescent
Real Estate Equities Limited Partnership, relating to
Sonoma Mission Inn & Spa (filed as Exhibit 10.57 to
December 31, 1998 Form 10-K and incorporated by
reference herein)
10.58 First Amendment to Amended and Restated Lease Agreement
effective December 31, 1998, between RoseStar
Management, LLC, and Crescent Real Estate Equities
Limited Partnership, relating to Marriott City Center,
Denver (filed as Exhibit 10.58 to December 31, 1998 Form
10-K and incorporated by reference herein)
10.59 First Amendment to Lease Agreement effective December
31, 1998, between Wine Country Hotel, LLC, and Crescent
Real Estate Equities Limited Partnership, relating to
Ventana Inn (filed as Exhibit 10.59 to December 31, 1998
Form 10-K and incorporated by reference herein)
10.60 First Amendment to Amended and Restated Lease Agreement
effective April 1, 1996 and Second Amendment to Amended
and Restated Lease Agreement effective December 31,
1998, between RoseStar Southwest, LLC, and Crescent Real
Estate Funding II, L.P., relating to Hyatt Regency
Beaver Creek (filed as Exhibit 10.60 to December 31,
1998 Form 10-K and incorporated by reference herein)
10.61 First Amendment to Lease Agreement effective December
31, 1998, between COI Hotel Group, Inc. and Crescent
Real Estate Equities Limited Partnership, relating to
Four Seasons - Houston (filed as Exhibit 10.61 to
December 31, 1998 Form 10-K and incorporated by
reference herein)
10.62 First Amendment to Lease Agreement effective December
31, 1998, between Wine Country Hotel, LLC and Crescent
Real Estate Funding VI, L.P., relating to Canyon Ranch -
Lenox (filed as Exhibit 10.62 to March 31, 1999 Form
10-Q and incorporated by reference herein)
10.63 Master Guaranty effective December 31, 1998, by Crescent
Operating, Inc. for the benefit of Crescent Real Estate
Equities Limited Partnership, Crescent Real Estate
Funding II, L.P., and Crescent Real Estate Funding VI,
L.P., relating to leases for Hyatt Regency Albuquerque,
Hyatt Regency Beaver Creek, Canyon Ranch-Lenox, Sonoma
Mission Inn & Spa, Canyon Ranch - Tucson, and Marriott
City Center Denver (filed as Exhibit 10.63 to December
31, 1998 Form 10-K and incorporated by reference herein)
42
<PAGE> 43
10.64 Guaranty of Lease effective December 19, 1997, by
Crescent Operating, Inc. for the benefit of Crescent
Real Estate Equities Limited Partnership, relating to
Ventana Inn (filed as Exhibit 10.64 to December 31, 1998
Form 10-K and incorporated by reference herein)
10.65 Amended and Restated Guaranty of Lease effective
December 31, 1998, by Crescent Operating, Inc. for the
benefit of Crescent Real Estate Equities Limited
Partnership, relating to Four Seasons Hotel - Houston
(filed as Exhibit 10.65 to December 31, 1998 Form 10-K
and incorporated by reference herein)
10.66 Amended and Restated Guaranty of Lease effective
December 31, 1998, by Crescent Operating, Inc. for the
benefit of Crescent Real Estate Equities Limited
Partnership, relating to Sonoma Golf Club (filed as
Exhibit 10.66 to December 31, 1998 Form 10-K and
incorporated by reference herein)
10.67 Credit Agreement dated August 11, 1995, between Crescent
Development Management Corp., as borrower, and Crescent
Real Estate Equities Limited Partnership, as lender;
First Amendment to Credit Agreement dated as of April
15, 1997; Second Amendment to Credit Agreement dated as
of May 8, 1998; and related Note and Security Agreement
(filed as Exhibit 10.67 to December 31, 1998 Form 10-K
and incorporated by reference herein)
10.68 Credit Agreement dated January 1, 1998, between Crescent
Development Management Corp., as borrower, and Crescent
Real Estate Equities Limited Partnership, as lender, and
related Note and Security Agreement (filed as Exhibit
10.68 to December 31, 1998 Form 10-K and incorporated by
reference herein)
10.69 $3,100,000 Note dated February 29, 1996, made by
Crescent Development Management Corp. payable to
Crescent Real Estate Equities Limited Partnership (filed
as Exhibit 10.69 to December 31, 1998 Form 10-K and
incorporated by reference herein)
10.70 Credit Agreement dated January 1, 1999, between Crescent
Development Management Corp., as borrower, and Crescent
Real Estate Equities Limited Partnership, as lender, and
related Line of Credit Note and Security Agreement
(filed as Exhibit 10.70 to March 31, 1999 Form 10-Q and
incorporated by reference herein)
10.71 Amended and Restated Credit Agreement dated January 1,
1999, between Crescent Development Management Corp., as
borrower, and Crescent Real Estate Equities Limited
Partnership, as lender, and related Line of Credit Note
and Amended and Restated Security Agreement (filed as
Exhibit 10.71 to March 31, 1999 Form 10-Q and
incorporated by reference herein)
10.72 Purchase Agreement dated March 12, 1999, between
Crescent Operating, Inc. and Crescent Real Estate
Equities Limited Partnership, relating to sale of
interests in Crescent CS Holdings Corp., and Crescent CS
Holdings II Corp., and related Put Agreement of same
date (filed as Exhibit 10.72 to March 31, 1999 Form 10-Q
and incorporated by reference herein)
10.73 Second Amendment to Lease Agreement effective April 1,
1999, between Wine Country Hotel, LLC, and Crescent Real
Estate Funding VI, L.P., relating to Canyon Ranch-Lenox
(filed as Exhibit 10.73 to March 31, 1999 Form 10-Q and
incorporated by reference herein)
10.74 Master Revolving Line of Credit Loan Agreement
(Borrowing Base and Warehouse) dated May 14, 1998,
between Desert Mountain Properties Limited Partnership,
as borrower, and National Bank of Arizona, as lender;
Modification Agreement dated December 30, 1998; second
Modification Agreement dated March 31, 1999; and related
Promissory Note (Borrowing Base), Promissory Note
(Warehouse), Pledge Agreement, Deed of Trust, and
Amendment to Deed of Trust (filed as Exhibit 10.74 to
March 31, 1999 Form 10-Q and incorporated by reference
herein)
43
<PAGE> 44
10.75 Lease Agreement dated as of June 15, 1999, between
Crescent Real Estate Funding III, L.P. and COI Hotel
Group, Inc., relating to the Renaissance Houston Hotel
(filed as Exhibit 10.75 to June 30, 1999 Form 10-Q and
incorporated by reference herein)
10.76 Guaranty of Lease dated June 15, 1999, by Crescent
Operating, Inc. for the benefit of Crescent Real Estate
Funding III, L.P., relating to Renaissance Houston Hotel
(filed as Exhibit 10.76 to June 30, 1999 Form 10-Q and
incorporated by reference herein)
10.77 Asset Management Agreement dated as of January 1, 1999,
between Crescent Real Estate Equities Limited
Partnership and COI Hotel Group, Inc., relating to the
Omni Austin Hotel (filed as Exhibit 10.77 to June 30,
1999 Form 10-Q and incorporated by reference herein)
10.78 Agreement dated June 11, 1999, by and between Gerald W.
Haddock and Crescent Operating, Inc. and its
subsidiaries and affiliates (filed as Exhibit 10.78 to
June 30, 1999 Form 10-Q and incorporated by reference
herein)
10.79 Stock Purchase Agreement dated as of July 15, 1999, by
and among E. L. Lester & Company, Incorporated, E. L.
Lester, Jr., Howard T. Tellepsen II, Karen Tellepsen,
Tom Tellepsen II, Linda Lester Griffen, Crescent
Operating, Inc. and Crescent Machinery Company (filed as
Exhibit 10.79 to the Company's September 30, 1999 Form
10-Q ("September 30, 1999 Form 10-Q") and incorporated
by reference herein)
10.80 Stock Purchase Agreement dated as of July 8, 1999, by
and among Solveson Crane Rental, Inc., Solveson Family
Revocable Trust, and Crescent Machinery Company (filed
as Exhibit 10.80 to September 30, 1999 Form 10-Q and
incorporated by reference herein)
10.81 Second Amendment to Credit Agreement effective as of
August 27, 1999, among Crescent Operating, Inc., Bank of
America, N. A. (formerly NationsBank, N. A.), and the
Support Parties identified therein (filed as Exhibit
10.81 to September 30, 1999 Form 10-Q and incorporated
by reference herein)
10.82 First Amendment to 1997 Crescent Operating, Inc.
Management Stock Incentive Plan (filed herewith)
10.83 Form of Sales and Service Agreement between BLAW KNOX
Construction Equipment Corporation and certain of
Crescent Machinery Company and its subsidiaries (filed
herewith)
10.84 Form of Heavy Equipment Distributor Agreement between
Compaction America, Inc. and certain of Crescent
Machinery Company and its subsidiaries (filed herewith)
10.85 Form of Gradall Equipment Distributor Agreement between
The Gradall Company and certain of Crescent Machinery
Company and its subsidiaries (filed herewith)
10.86 Form of Distributor Selling Agreement between
Ingersoll-Rand Company and certain of Crescent Machinery
Company and its subsidiaries (filed herewith)
10.87 Form of JCB Dealership Agreement between JCB Inc. and
certain of Crescent Machinery Company and its
subsidiaries (filed herewith)
10.88 Form of Distributor Agreement between LBX Company, LLC,
and certain of Crescent Machinery Company and its
subsidiaries (filed herewith)
10.89 Form of Distributor Agreement between Liebherr
Construction Equipment Co. and certain of Crescent
Machinery Company and its subsidiaries (filed herewith)
10.90 Form of Distributor Agreement between Link-Belt
Construction Equipment Company and certain of Crescent
Machinery Company and its subsidiaries (filed herewith)
10.91 Form of Dealer Floor Plan Financing and Security
Agreement between General Electric Capital Corporation
and certain of Crescent Machinery Company and its
subsidiaries (filed herewith)
10.92 Taxable REIT Subsidiary Election Agreement dated
December 17, 1999, among Crescent Real Estate Equities
Company, Crescent Real Estate Equities Limited
Partnership, Crescent Operating, Inc. and Crescent
Development Management Corp. (filed herewith)
10.93 Taxable REIT Subsidiary Election Agreement dated
December 17, 1999, among Crescent Real Estate Equities
Company, Crescent Real Estate Equities Limited
Partnership, Crescent Operating, Inc. and Crescent CS
Holdings II Corp. (filed herewith)
10.94 Taxable REIT Subsidiary Election Agreement dated
December 17, 1999, among Crescent Real Estate Equities
Company, Crescent Real Estate Equities Limited
Partnership, Crescent Operating, Inc. and Crescent CS
Holdings Corp. (filed herewith)
10.95 Taxable REIT Subsidiary Election Agreement dated
December 17, 1999, among Crescent Real Estate Equities
Company, Crescent Real Estate Equities Limited
Partnership, Crescent Operating, Inc. and Desert
Mountain Development Corp. (filed herewith)
10.96 Taxable REIT Subsidiary Election Agreement dated
December 17, 1999, among Crescent Real Estate Equities
Company, Crescent Real Estate Equities Limited
Partnership, Crescent Operating, Inc. and The Woodlands
Land Company, Inc. (filed herewith)
10.97 $19.5 Million Credit and Security Agreement effective as
of March 11, 1999, between Crescent Real Estate Equities
Limited Partnership and Crescent Operating, Inc. with
related Promissory Note (filed herewith)
10.98 First Amendment to Credit and Security Agreement
effective as of March 11, 1999, between Crescent Real
Estate Equities Limited Partnership and Crescent
Operating, Inc. (filed herewith)
10.99 Third Amendment to Amended and Restated Credit and
Security Agreement effective as of March 11, 1999,
between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc. (filed
herewith)
10.100 Third Amendment to Line of Credit Credit and Security
Agreement effective as of March 11, 1999, between
Crescent Real Estate Equities Limited Partnership and
Crescent Operating, Inc. (filed herewith)
10.101 Agreements for Wholesale Financing (with Addendum)
between Deutsche Financial Services Corporation and,
respectively, Western Traction Company, Machinery Inc.,
Solveson Crane Rentals Inc., Harvey Equipment Center
Inc., and Crescent Machinery Company, with Guarantees
(filed herewith)
10.102 Master Security Agreements between Associates Commercial
Corporation and, respectively, Crescent Machinery
Company and Western Traction Company; Security Agreement
between Associates Commercial Corporation and Western
Traction Company; Addendum; and Continuing Guaranty by
Crescent Machinery Company (filed herewith)
10.103 First Amendment to Amended and Restated Credit Agreement
dated as of December 20, 1999, between Crescent Real
Estate Equities Limited Partnership and Crescent
Development Management Corp. with related Line of Credit
Note and letter amendment to related security agreement
(filed herewith)
21 List of Subsidiaries of Crescent Operating, Inc.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Arthur Andersen LLP - Denver
23.4 Consent of Arthur Andersen LLP - Atlanta
23.5 Consent of Arthur Andersen LLP - Houston
27 Financial Data Schedule
44
<PAGE> 45
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the last quarter of the year ended
December 31, 1999.
(c) Exhibits Required by Item 601 of Regulation S-K:
Exhibits required are listed under Item 14(a)(3).
(d) Financial Statement Schedules Required by Regulation S-X:
Information with respect to this Item is contained on Pages F-1 to F-82 of
this Annual Report on Form 10-K.
45
<PAGE> 46
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 30th day of March,
2000.
CRESCENT OPERATING, INC.
(Registrant)
By /s/ John C. Goff
-------------------------------------
John C. Goff
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934 as amended,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Richard E. Rainwater
- ------------------------------------------- Chairman of the Board of Directors March 30, 2000
Richard E. Rainwater
/s/ John C. Goff
- ------------------------------------------- President, Chief Executive Officer, Vice March 30, 2000
John C. Goff Chairman of the Board of Directors
(Principal Executive Officer)
/s/ Jeffrey L. Stevens
- ------------------------------------------- Executive Vice President, Chief Operating March 30, 2000
Jeffrey L. Stevens Officer and Director
/s/ Richard P. Knight
- ------------------------------------------- Vice President, Chief Financial Officer March 30, 2000
Richard P. Knight (Principal Financial and Accounting Officer)
/s/ William A. Abney
- ------------------------------------------- Director March 30, 2000
William A. Abney
/s/ Anthony M. Frank
- ------------------------------------------- Director March 30, 2000
Anthony M. Frank
/s/ Paul E. Rowsey, III
- ------------------------------------------- Director March 30, 2000
Paul E. Rowsey, III
/s/ Carl F. Thorne
- ------------------------------------------- Director March 30, 2000
Carl F. Thorne
</TABLE>
46
<PAGE> 47
CRESCENT OPERATING, INC.
INDEX TO FINANCIAL STATEMENTS
The following Consolidated Financial Statements of the Registrant are submitted
herewith in response to Item 8 and Item 14(a)1:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CRESCENT OPERATING, INC.
Reports of Independent Auditors..................................................................... F-2
Consolidated Balance Sheets......................................................................... F-7
Consolidated Statements of Operations............................................................... F-8
Consolidated Statements of Changes in Shareholders' Equity (Deficit)................................ F-9
Consolidated Statements of Cash Flows............................................................... F-10
Notes to Consolidated Financial Statements.......................................................... F-11
The following Consolidated Financial Statements are submitted herewith in
response to Rule 3-09 of Regulation S-X:
VORNADO CRESCENT LOGISTICS OPERATING PARTNERSHIP
Report of Independent Auditors..................................................................... F-35
Consolidated Balance Sheet......................................................................... F-36
Consolidated Statement of Operations............................................................... F-37
Consolidated Statement of Partners' Capital........................................................ F-38
Consolidated Statement of Cash Flows............................................................... F-39
Notes to Consolidated Financial Statements......................................................... F-40
CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC
Report of Independent Public Accountants........................................................... F-46
Consolidated Balance Sheets........................................................................ F-47
Consolidated Statements of Operations.............................................................. F-49
Consolidated Statements of Changes in Members' Capital (Deficit)................................... F-50
Consolidated Statements of Cash Flows.............................................................. F-51
Notes to Consolidated Financial Statements......................................................... F-52
The following financial statement schedule for Charter Behavioral Health
Systems, LLC and its subsidiaries is submitted herewith in response to
Item 14(a)2:
Schedule II - Valuation and Qualifying Accounts - CBHS............................................. F-62
THE WOODLANDS OPERATING COMPANY, L.P.
Report of Independent Public Accountants............................................................ F-63
Consolidated Balance Sheets......................................................................... F-64
Consolidated Statements of Earnings................................................................. F-65
Consolidated Statements of Changes in Partners' Equity.............................................. F-66
Consolidated Statements of Cash Flows............................................................... F-67
Notes to Consolidated Financial Statements.......................................................... F-68
THE WOODLANDS LAND DEVELOPMENT COMPANY, L.P.
Report of Independent Public Accountants............................................................ F-71
Consolidated Balance Sheets......................................................................... F-72
Consolidated Statements of Earnings................................................................. F-73
Consolidated Statements of Changes in Partners' Equity.............................................. F-74
Consolidated Statements of Cash Flows............................................................... F-75
Notes to Consolidated Financial Statements.......................................................... F-76
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
F-1
<PAGE> 48
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Crescent Operating, Inc.
We have audited the accompanying consolidated balance sheets of Crescent
Operating, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of operations, shareholders' equity (deficit),
and cash flows for the years then ended and the period from May 9, 1997 through
December 31, 1997. 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 did not audit the financial
statements of The Woodlands Land Development Company, L.P., The Woodlands
Operating Company, L.P., Crescent Development Management Corporation or
Vornado Crescent Logistics Operating Partnership, which statements reflect total
assets constituting 34.9%, and total revenues constituting 19.2%, of the related
consolidated totals in 1999. Those statements were audited by other auditors
whose reports have been furnished to us, and our opinion, insofar as it relates
to data included for The Woodlands Land Development Company, L.P., The Woodlands
Operating Company, L.P., Crescent Development Management Corporation and Vornado
Crescent Logistics Operating Partnership, is based solely on the reports of the
other auditors.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 and the reports of other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and, for 1999, the reports of other
auditors, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Crescent Operating,
Inc. and subsidiaries at December 31, 1999 and 1998, and the consolidated
results of their operations and their cash flows for the years ended December
31, 1999 and 1998 and the period from May 9, 1997 through December 31, 1997, in
conformity with accounting principles generally accepted in the United States.
Ernst & Young LLP
Dallas, Texas
March 22, 2000
F-2
<PAGE> 49
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Crescent Operating, Inc.
We have audited the accompanying combined statements of operations, changes in
shareholder's equity, and cash flows of Carter-Crowley Asset Group as described
in Note 2 for the period from January 1, 1997 through May 8, 1997. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined results of operations and cash flows for the
period from January 1, 1997 through May 8, 1997 of Carter-Crowley Asset Group in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
March 2, 1998
F-3
<PAGE> 50
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Executive Committee of
The Woodlands Land Development Company, L.P.:
We have audited the accompanying balance sheets of The Woodlands Land
Development Company, L.P. as of December 31, 1999 and 1998 and the related
statements of earnings, changes in partners' equity and cash flows for the years
then ended (not included herein). These financial statements are the
responsibility of The Woodlands Land Development Company, L.P.'s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Woodlands Land Development
Company, L.P. as of December 31, 1999 and 1998 and the results of its operations
and cash flows for the years then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
January 14, 2000
F-4
<PAGE> 51
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Executive Committee of
The Woodlands Operating Company, L.P.:
We have audited the accompanying consolidated balance sheets of The Woodlands
Operating Company, L.P. and subsidiary as of December 31, 1999 and 1998 and the
related consolidated statements of earnings, changes in partners' equity
(deficit) and cash flows for the years then ended (not included herein). These
financial statements are the responsibility of The Woodlands Operating Company,
L.P.'s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Woodlands Operating
Company, L.P. and subsidiary as of December 31, 1999 and 1998 and the results of
its operations and cash flows for the years then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
January 14, 2000
F-5
<PAGE> 52
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Crescent Development Management Corp.:
We have audited the accompanying consolidated balance sheets of CRESCENT
DEVELOPMENT MANAGEMENT CORP. (a Delaware corporation) AND SUBSIDIARIES as of
December 31, 1999 and 1998 and the related consolidated statements of
operations, shareholders' equity and cash flows for the years then ended (not
included herein). These financial statements and the schedules referred to below
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 auditing standards generally accepted
in the United States. 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 the Crescent
Development Management Corp. and Subsidiaries at December 31, 1999 and 1998, and
the results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. Schedules I through VII are presented for
purposes of additional analysis and are not a required part of the basic
financial statements. This information has been subjected to the auditing
procedures applied in our audit of the basic consolidated financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Denver, Colorado
January 28, 2000.
F-6
<PAGE> 53
CRESCENT OPERATING, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 39,017 $ 42,810
Accounts receivable, net 51,638 35,544
Inventories 47,442 34,203
Notes receivable 6,329 1,671
Real estate 121,412 109,301
Prepaid expenses and other current assets 8,385 5,837
----------------- -----------------
Total current assets 274,223 229,366
----------------- -----------------
PROPERTY AND EQUIPMENT, NET 215,764 162,181
----------------- -----------------
INVESTMENTS 80,470 367,105
----------------- -----------------
OTHER ASSETS
Real estate 83,147 68,809
Notes receivable 16,838 18,332
Intangible assets, net 92,077 82,513
Deferred tax assets 21,371 1,163
Other assets 11,763 7,864
----------------- -----------------
Total other assets 225,196 178,681
----------------- -----------------
TOTAL ASSETS $ 795,653 $ 937,333
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 80,396 $ 64,749
Accounts payable - CEI 9,250 7,731
Current portion of long-term debt - CEI 8,000 7,668
Current portion of long-term debt 69,459 84,539
Deferred revenue 62,864 46,998
----------------- -----------------
Total current liabilities 229,969 211,685
LONG-TERM DEBT - CEI, NET OF CURRENT PORTION 208,744 220,944
LONG-TERM DEBT, NET OF CURRENT PORTION 135,671 57,988
OTHER LIABILITIES 59,837 34,578
----------------- -----------------
Total liabilities 634,221 525,195
----------------- -----------------
MINORITY INTERESTS 181,954 428,206
----------------- -----------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.01 par value, 10,000 shares authorized,
no shares issued or outstanding -- --
Common stock, $.01 par value, 22,500 shares authorized,
11,415 and 11,402 shares issued, respectively 114 114
Additional paid-in capital 17,714 17,667
Deferred compensation on restricted shares (198) (210)
Accumulated comprehensive income (loss) (10,127) (9,763)
Retained deficit (23,719) (21,024)
Treasury stock at cost, 1,103 and 700 shares, respectively (4,306) (2,852)
----------------- -----------------
Total shareholders' equity (deficit) (20,522) (16,068)
----------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 795,653 $ 937,333
================= =================
</TABLE>
See accompanying notes to the consolidated financial statements.
F-7
<PAGE> 54
CRESCENT OPERATING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Carter-Crowley Asset
Crescent Operating, Inc. Group (Predecessor)
----------------------------------------------------------- --------------------
For the For the For the period from For the period from
Year Ended Year Ended May 9, 1997 to January 1, 1997
December 31, 1999 December 31, 1998 December 31, 1997 to May 8, 1997
------------------ ------------------ ------------------- --------------------
<S> <C> <C> <C> <C>
REVENUES
Equipment sales & leasing $ 136,343 $ 85,365 $ 10,518 $ 4,657
Hospitality 246,763 229,491 79,468 --
Land development 334,881 178,392 66,896 --
------------------ ------------------ ------------------- --------------------
Total revenues 717,987 493,248 156,882 4,657
------------------ ------------------ ------------------- --------------------
OPERATING EXPENSES
Equipment sales & leasing 131,606 79,011 9,783 4,499
Hospitality 191,465 170,556 62,542 --
Hospitality properties rent - CEI 54,012 52,276 16,694 --
Land development 324,432 178,372 67,095 --
Corporate general and administrative 2,605 3,147 1,761 --
------------------ ------------------ ------------------- --------------------
Total operating expenses 704,120 483,362 157,875 4,499
------------------ ------------------ ------------------- --------------------
INCOME (LOSS) FROM OPERATIONS 13,867 9,886 (993) 158
------------------ ------------------ ------------------- --------------------
INVESTMENT INCOME (LOSS) 20,939 27,684 (16,423) --
------------------ ------------------ ------------------- --------------------
OTHER (INCOME) EXPENSE
Interest expense 30,775 18,262 5,481 135
Interest income (4,046) (3,876) (1,751) (13)
Other 131 182 (159) (3)
------------------ ------------------ ------------------- --------------------
Total other (income) expense 26,860 14,568 3,571 119
------------------ ------------------ ------------------- --------------------
INCOME (LOSS) BEFORE INCOME TAXES
AND MINORITY INTERESTS 7,946 23,002 (20,987) 39
INCOME TAX PROVISION (BENEFIT) (3,471) 5,521 612 14
------------------ ------------------ ------------------- --------------------
INCOME (LOSS) BEFORE MINORITY INTERESTS 11,417 17,481 (21,599) 25
MINORITY INTERESTS (14,112) (16,340) (566) --
------------------ ------------------ ------------------- --------------------
NET INCOME (LOSS) $ (2,695) $ 1,141 $ (22,165) $ 25
================== ================== =================== ====================
EARNINGS (LOSS) PER SHARE
Basic $ (0.26) $ 0.10 $ (2.00)
================== ================== ==================
Diluted $ (0.26) $ 0.10 $ (2.00)
================== ================== ==================
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 10,363 11,206 11,073
================== ================== ==================
Diluted 10,363 11,943 11,073
================== ================== ==================
</TABLE>
See accompanying notes to the consolidated financial statements.
F-8
<PAGE> 55
CRESCENT OPERATING, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(Amounts in thousands)
<TABLE>
<CAPTION>
Deferred
Common stock Treasury stock compensation
---------------------- ---------------------- Additional on restricted
Shares Amount Shares Amount paid-in capital shares
--------- ---------- --------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE at December 31, 1996, (Predecessor) 13 $ 13 -- $ -- $ 14,550 $ --
Contributed capital -- -- -- -- 6,023 --
Net income -- -- -- -- -- --
--------- ---------- --------- ---------- --------------- -------------
BALANCE at May 8, 1997, (Predecessor) 13 13 -- -- 20,573 --
Formation transactions 11,013 97 -- -- (8,963) --
Stock options exercised 45 1 -- -- 44 --
Common stock issued for acquisitions 130 1 -- -- 2,339 --
Issuance of restricted common stock 10 -- -- -- 262 (262)
Net loss -- -- -- -- -- --
--------- ---------- --------- ---------- --------------- -------------
BALANCE at December 31, 1997 11,211 112 -- -- 14,255 (262)
Comprehensive income (loss):
Net income -- -- -- -- -- --
Unrealized loss on Magellan warrants -- -- -- -- -- --
Comprehensive income (loss)
Stock options exercised 24 -- -- -- 23 --
Common stock issued for acquisitions 167 2 -- -- 3,389 --
Amortization of restricted common stock -- -- -- -- -- 52
Purchase of treasury stock -- -- (700) (2,852) -- --
--------- ---------- --------- ---------- --------------- -------------
BALANCE at December 31, 1998 11,402 114 (700) (2,852) 17,667 (210)
Comprehensive income (loss):
Net loss -- -- -- -- -- --
Unrealized loss on Magellan warrants -- -- -- -- -- --
Comprehensive income (loss)
Stock options exercised 7 -- -- -- 7 --
Issuance of restricted common stock 6 -- -- -- 40 (40)
Amortization of restricted common stock -- -- -- -- -- 52
Purchase of treasury stock -- -- (403) (1,454) -- --
--------- ---------- --------- ---------- --------------- -------------
BALANCE at December 31, 1999 11,415 $ 114 (1,103) $ (4,306) $ 17,714 $ (198)
========= ========== ========= ========== =============== =============
<CAPTION>
Accumulated
comprehensive Retained
income (loss) deficit Total
--------------- ---------- ---------
BALANCE at December 31, 1996, (Predecessor) $ -- $ (3,637) $ 10,926
Contributed capital -- -- 6,023
Net income -- 25 25
--------------- ---------- ---------
BALANCE at May 8, 1997, (Predecessor) -- (3,612) 16,974
Formation transactions -- 3,612 (5,254)
Stock options exercised -- -- 45
Common stock issued for acquisitions -- -- 2,340
Issuance of restricted common stock -- -- --
Net loss -- (22,165) (22,165)
--------------- ---------- ---------
BALANCE at December 31, 1997 -- (22,165) (8,060)
---------
Comprehensive income (loss):
Net income -- 1,141 1,141
Unrealized loss on Magellan warrants (9,763) -- (9,763)
---------
Comprehensive income (loss) (8,622)
Stock options exercised -- -- 23
Common stock issued for acquisitions -- -- 3,391
Amortization of restricted common stock -- -- 52
Purchase of treasury stock -- -- (2,852)
--------------- ---------- ---------
BALANCE at December 31, 1998 (9,763) (21,024) (16,068)
---------
Comprehensive income (loss):
Net loss -- (2,695) (2,695)
Unrealized loss on Magellan warrants (364) -- (364)
---------
Comprehensive income (loss) (3,059)
Stock options exercised -- -- 7
Issuance of restricted common stock -- -- --
Amortization of restricted common stock -- -- 52
Purchase of treasury stock -- -- (1,454)
--------------- ---------- ---------
BALANCE at December 31, 1999 $ (10,127) $ (23,719) $ (20,522)
=============== ========== =========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-9
<PAGE> 56
CRESCENT OPERATING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Crescent Operating, Inc.
-----------------------------------------------------------
For the For the For the period from
Year Ended Year Ended May 9, 1997 to
December 31, 1999 December 31, 1998 December 31, 1997
------------------ ------------------ -------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (2,695) $ 1,141 $ (22,165)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activities:
Depreciation 21,388 13,675 3,575
Amortization 12,354 1,072 83
Provision for deferred income taxes (24,636) (2,916) 523
Equity in (income) losses of unconsolidated subsidiaries (18,963) (27,684) 17,011
Minority interests in net losses 14,113 16,340 566
Gain on sale of property and equipment (4,491) (2,887) (161)
Gain on sale of investments (2,308) -- (110)
Changes in assets and liabilities, net of
effects from acquisitions:
Accounts receivable (13,075) (4,684) (2,219)
Inventories (9,049) (6,519) (1,334)
Prepaid expenses and current assets (1,610) (1,821) (3,508)
Real estate (40,646) (4,272) 21,630
Other assets 2,451 1,781 --
Accounts payable and accrued expenses 17,908 (847) 14,671
Accounts payable - CEI 2,631 800 3,980
Deferred revenue, current and noncurrent 36,452 49,093 10,050
Other liabilities 794 3,823 2,819
------------------ ------------------ -------------------
Net cash (used in) provided by operating activities (9,382) 36,095 45,411
------------------ ------------------ -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business interests, net of cash acquired (28,511) (15,826) (63,759)
Acquisition of business interests by Controlled Subsidiaries,
net of cash acquired (3,782) (121,076) --
Purchases of property and equipment (79,476) (43,471) (13,951)
Proceeds from sale of investments 23,540 -- 1,022
Proceeds from sale of property and equipment 30,500 4,129 12,550
Net proceeds from sale and collection of notes receivable 8,322 30,602 --
Net distributions from investments 1,640 5,985 --
Distributions from investments of Controlled Subsidiaries 23,962 17,915 --
Contributions to investments of Controlled Subsidiaries (11,851) -- --
Other 1,139 -- (1,670)
------------------ ------------------ -------------------
Net cash used in investing activities (34,517) (121,742) (65,808)
------------------ ------------------ -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of long-term debt 248,392 133,070 22,462
Payments on long-term debt (206,173) (89,772) (920)
Proceeds of long-term debt - CEI 95,033 44,259 65,058
Payments on long-term debt - CEI (107,321) (99,962) (34,568)
Capital contributions by minority interests 35,517 120,430 14,100
Distributions to minority interests (20,759) (20,666) (2,380)
Purchase of treasury stock (1,455) (2,852) --
Other (3,128) 549 45
------------------ ------------------ -------------------
Net cash provided by financing activities 40,106 85,056 63,797
------------------ ------------------ -------------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (3,793) (591) 43,400
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 42,810 43,401 1
------------------ ------------------ -------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 39,017 $ 42,810 $ 43,401
================== ================== ===================
<CAPTION>
Carter-Crowley Asset
Group (Predecessor)
--------------------
For the period from
January 1, 1997
to May 8, 1997
--------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 25
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 494
Amortization --
Provision for deferred income taxes 14
Equity in (income) losses of unconsolidated subsidiaries --
Minority interests in net losses --
Gain on sale of property and equipment --
Gain on sale of investments --
Changes in assets and liabilities, net of
effects from acquisitions:
Accounts receivable 22
Inventories (562)
Prepaid expenses and current assets (47)
Real estate --
Other assets --
Accounts payable and accrued expenses 129
Accounts payable - CEI 212
Deferred revenue, current and noncurrent --
Other liabilities (105)
--------------------
Net cash (used in) provided by operating activities 182
--------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business interests, net of cash acquired --
Acquisition of business interests by Controlled Subsidiaries --
Purchases of property and equipment (1,067)
Proceeds from sale of investments --
Proceeds from sale of property and equipment --
Net proceeds from sale and collection of notes receivable --
Net distributions from investments --
Distributions from investments of Controlled Subsidiaries --
Contributions to investments of Controlled Subsidiaries --
Other 146
--------------------
Net cash used in investing activities (921)
--------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of long-term debt --
Payments on long-term debt (5,140)
Proceeds of long-term debt - CEI --
Payments on long-term debt - CEI --
Capital contributions by minority interests 6,023
Distributions to minority interests --
Purchase of treasury stock --
Other --
--------------------
Net cash provided by financing activities 883
--------------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS 144
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 22
--------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 166
====================
</TABLE>
See accompanying notes to the consolidated financial statements.
F-10
<PAGE> 57
CRESCENT OPERATING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS:
Crescent Operating, Inc. ("Crescent Operating" or "COPI") was formed on
April 1, 1997, by Crescent Real Estate Equities Company ("Crescent
Equities" or "CEI") and its subsidiary Crescent Real Estate Equities
Limited Partnership ("Crescent Partnership") to be the lessee and operator
of certain assets owned or to be acquired by Crescent Partnership and
perform an agreement ("Intercompany Agreement") between Crescent Operating
and Crescent Partnership, pursuant to which each has agreed to provide the
other with rights to participate in certain transactions. On May 8, 1997,
Crescent Partnership contributed $14.1 million in cash to Crescent
Operating. Effective June 12, 1997, Crescent Equities distributed shares of
Crescent Operating common stock to shareholders of Crescent Equities and
unit holders of Crescent Partnership of record on May 30, 1997.
Crescent Operating is a diversified management company that, through
various subsidiaries and affiliates (collectively with Crescent Operating,
the "Company"), currently operates primarily in four business segments:
Equipment Sales and Leasing, Hospitality, Temperature Controlled Logistics
(formerly Refrigerated Warehousing) and Land Development. Through these
segments, Crescent Operating does business throughout the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements of Crescent Operating
include the accounts of the Company and all subsidiaries controlled by the
Company after elimination of material intercompany accounts and minority
interests. Subsidiaries not controlled by the Company, but for which the
Company has the ability to exercise significant influence, are accounted
for on the equity method.
The financial results of the Company include the following:
o Subsidiaries which are wholly owned and consolidated:
o Crescent Machinery Company ("Crescent Machinery");
o Rosestar Management LLC ("Rosestar"); and
o COI Hotel Group, Inc. ("COI Hotel").
o Subsidiaries which are not wholly owned but the Company controls and
therefore consolidates ("Controlled Subsidiaries"):
o A 5% economic interest in:
- The Woodlands Land Company, Inc. ("LandCo") which has a 42.5%
general partner interest in The Woodlands Land Development
Company, L.P. ("Landevco");
- Desert Mountain Development Corporation ("Desert Mountain
Development") which consolidates its 93% general partner interest
in Desert Mountain Properties Limited Partnership ("DMPLP"); and
- CRL Investments, Inc. ("CRL"), which beneficially owns 60% of CR
Las Vegas, LLC ("CR Las Vegas") and 20% of CR License, LLC ("CR
License").
o A 50% general partner interest in COPI Colorado, L.P. ("COPI
Colorado") which owns 10% of Crescent Development Management Corp.
("CDMC"). The 10% interest in CDMC represents 100% of the voting
stock, and therefore, CDMC is consolidated into COPI Colorado.
F-11
<PAGE> 58
o Subsidiaries which the Company reports on the equity method of accounting:
o A 42.5% interest in the Woodlands Operating Company, L.P. ("TWOC");
o A 40% interest in Vornado Crescent Logistics Operating Partnership
("AmeriCold Logistics");
o A direct 25% common membership interest in Charter Behavioral Health
Systems, LLC ("CBHS");
o An indirect 65% common membership interest in CBHS held through a
limited partner interest in COPI CBHS Holdings, L.P.; and
o A 1% interest in each of Crescent CS Holdings Corporation ("CS I") and
Crescent CS Holdings II Corporation ("CS II"), (collectively,
"Temperature Controlled Logistics Partnerships").
The combined financial statements of the "Predecessor" include Moody-Day and
Hicks-Muse (collectively, the "Carter-Crowley Asset Group"). As the Company did
not have any activity prior to May 9, 1997, the data included relating to the
period in 1997 prior to May 9, 1997 is only with regard to the Predecessor.
USE OF ESTIMATES
The financial statements include estimates and assumptions made by management
that affect the carrying amounts of assets and liabilities, reported amounts of
revenues and expenses and the disclosure of contingent assets and liabilities.
Actual results may differ from these estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less to be cash equivalents. Cash of $12.1 million resides with
certain subsidiaries and restrictions limit transfers to the parent company.
INVENTORIES
Inventories consist of new and used equipment held for sale, equipment parts,
food, beverages and supplies, all of which are stated at the lower of cost or
market using the first-in, first-out (FIFO) or specific identification methods.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. The Company uses the straight-line
method of depreciation for financial statement purposes. The estimated useful
lives used in computing depreciation are as follows:
<TABLE>
<S> <C>
Land improvements............................... 10-15 years
Rental equipment................................ 2-10 years
Building and improvements....................... 30 years
Transportation equipment........................ 3-5 years
Furniture, fixtures, and other equipment........ 5-10 years
</TABLE>
Expenditures for maintenance and repairs are charged to expense as incurred.
Expenditures for renewals or betterments are capitalized. The cost of property
replaced, retired, or otherwise disposed of is removed from the asset account
along with the related accumulated depreciation.
Long-lived assets are evaluated when indications of impairment are present, and
provisions for possible losses are recorded when undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
value. The Company did not recognize any losses from impairment during 1997,
1998 or 1999.
REAL ESTATE
Real estate represents raw land, developed land, homes constructed or under
construction, repurchased lots, applicable capitalized interest, and applicable
capitalized general and administrative costs. Real estate is recorded at cost.
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Interest is capitalized based on the average yearly interest rate applied
to cumulative capital expenditures for property under development.
Approximately $13.7 million and $13.2 million of interest was capitalized
for the years ended December 31, 1999 and 1998, respectively. Payroll and
related costs associated with the development of a specific subdivision of
land are capitalized. Once sales of property begin in a specific
subdivision, capitalized costs are expensed as cost of sales.
INTANGIBLE ASSETS
Intangible assets consist of goodwill and membership intangibles. Goodwill
represents the excess of the acquisition costs over the fair value of net
identifiable assets of businesses acquired and is amortized on a
straight-line basis over 6-30 years. Membership intangibles represent the
purchase price values allocated to club memberships to be sold. Intangibles
are evaluated periodically as events or circumstances indicate a possible
inability to recover their carrying amounts. Such evaluation is based on
various analyses, including cash flow and profitability projections. The
analyses involve significant management judgment to evaluate the capacity
of an acquired operation to perform within projections. Management believes
that no significant impairment of goodwill or membership intangibles has
occurred.
DEFERRED COMPENSATION ON RESTRICTED SHARES
Deferred compensation on restricted shares issued to employees is being
amortized to expense over the vesting period.
REVENUE RECOGNITION
Revenues from equipment rentals under operating leases are recognized as
the revenue becomes receivable according to the provisions of the lease.
Revenues from full-service hotels and luxury health resorts are recognized
as services are provided. Club initiation fees and membership conversion
fees at Desert Mountain Development are deferred and recognized on a
straight-line basis over the expected life of the membership. Deposits for
future services are deferred and recognized as revenue in the period
services are provided.
MINORITY INTERESTS
Minority Interests represent the non-voting common stock interests owned by
shareholders in LandCo, Desert Mountain Development, COPI Colorado and
CRL.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the treatment of certain
items for financial statement purposes and the treatment of those items for
tax purposes. The deferred tax assets and liabilities represent the future
tax return consequences of those differences, which will either be taxable
or deductible when the assets and liabilities are recovered or settled.
RECLASSIFICATIONS
Certain prior year information has been reclassified to conform to current
year presentation.
STOCK BASED COMPENSATION
The Company measures compensation costs associated with the issue of share
options using the intrinsic method under which compensation costs related
to share options issued pursuant to compensatory plans are measured based
on the difference between the quoted market price of the shares at the
measurement date (originally the date of grant) and the exercise price and
charged to expense over the periods during which the grantee performs the
related services. All share options issued to date by the Company have
exercise prices equal to the market price of the shares at the dates of
grant.
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RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
provides that all derivative instruments be recognized as either assets or
liabilities depending on the rights or obligations under the contract and
that all derivative instruments be measured at fair value. This
pronouncement is effective for fiscal quarters and fiscal years beginning
after June 15, 2000, and will require the Company to record the net
comprehensive income or loss related to the Magellan warrants in the
statement of operations as a reduction or addition to net income for the
year ended December 31, 2001.
3. ACQUISITIONS AND DISPOSITIONS:
Initial Capitalization
On May 9, 1997, the Company acquired (i) all of the stock of Moody-Day, a
construction equipment sales, leasing and servicing company located in
Dallas, Texas, (ii) a 1.21% interest in Hicks-Muse Tate & Furst II, LP
("Hicks-Muse"), a private venture capital fund and (iii) a 12.38% interest
in Dallas Basketball Limited, a partnership that holds the National
Basketball Association franchise for the Dallas Mavericks. The allocation
of purchase price was approximately $4.1 million for Moody-Day,
approximately $9.6 million for the Hicks-Muse interest and approximately
$12.4 million for the interest in the Dallas Basketball partnership. The
interest in the Dallas Basketball partnership was subsequently sold to
Crescent Partnership for approximately $12.5 million.
Equipment Sales & Leasing
Effective December 1, 1997, Crescent Operating acquired certain assets of
Preco Machinery Sales, Inc. ("Preco"), a company that is engaged in
equipment sales, leasing and servicing, located in Houston, Texas. The
purchase price of Preco was approximately $4 million and consisted of a
cash payment of approximately $1.7 million and the issuance of 130,000
restricted shares of Crescent Operating common stock. The transaction was
structured such that Preco became a division of Crescent Machinery.
Effective April 30, 1998, the Company acquired certain assets of Central
Texas Equipment Co. ("Central Texas"), a company which is engaged in
equipment sales, leasing and servicing, located in Austin, Texas. The
purchase price of approximately $9.7 million was comprised of $3.0 million
in cash, 128,551 shares of Crescent Operating common stock and the
assumption of $4.1 million of liabilities.
Effective June 8, 1998, the Company acquired all of the stock of Machinery,
Inc., a company that is engaged in equipment sales, leasing and servicing,
with locations in Tulsa and Oklahoma City, Oklahoma. The purchase price of
approximately $2.8 million was comprised of $0.6 million in cash, 38,170
shares of Crescent Operating common stock and the assumption of $1.5
million of liabilities.
Effective July 1, 1998, the Company acquired all of the stock of Western
Traction Company ("Western Traction"), a company that is engaged in
equipment sales, leasing and servicing, with locations in Sacramento,
California, Union City, California, Fresno, California, Sparks, Nevada and
Honolulu, Hawaii. The purchase price of approximately $52.0 million was
comprised of $6.5 million in cash, a note payable of $7.5 million and the
assumption of liabilities of $38.0 million.
Effective July 31, 1998, the Company acquired all of the stock of Harvey
Equipment Center, Inc. ("Harvey"), a company which is engaged in equipment
sales, leasing and servicing, located in Van Wert, Ohio. The purchase price
of approximately $8.4 million was comprised of $2.7 million in cash, notes
payable of $1.2 million and the assumption of $4.5 million of liabilities.
Effective July 31, 1998, the Company acquired certain assets of 4-K
Equipment Company ("4-K"), a company which is engaged in equipment sales,
leasing and servicing, located in Franklin, Indiana. The purchase price of
$0.2 million was comprised of $0.1 million in cash and the assumption of
$0.1 million of liabilities.
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<PAGE> 61
Effective March 4, 1999, the Company acquired certain assets of Westco
Tractor & Equipment, Inc. ("Westco"), a company engaged in equipment sales,
leasing and servicing, located in Santa Rosa, California. The purchase
price of approximately $2.6 million was comprised of $0.5 million cash and
the assumption of liabilities of $2.1 million.
Effective July 1, 1999, the Company acquired all of the stock of E. L.
Lester and Company ("Lester"), a company engaged in equipment sales,
leasing and servicing, located in Houston, Texas. The purchase price of
approximately $17.2 million was comprised of $8.9 million cash, the
issuance of notes payable by Crescent Operating in the amount of $6.0
million and the assumption of liabilities of $2.3 million.
Effective July 1, 1999, the Company acquired all of the stock of Solveson
Crane Rental, Inc. ("Solveson"), a company engaged in equipment sales,
leasing and servicing, located in Tracy, California. The purchase price of
approximately $7.3 million was comprised of $3.0 million cash and the
assumption of liabilities of $4.3 million.
Hospitality
Effective July 31, 1997, Crescent Operating acquired for $2.0 million in
cash the following assets: (i) 100% of the membership interests in Rosestar
and (ii) all of the common stock, $.01 par value, of each of RSSW Corp. and
RSCR Arizona Corp., affiliates of RoseStar. RoseStar and its subsidiaries
are the lessees of 6 hotels owned by Crescent Equities or its affiliates.
These hotels are the Denver Marriott City Center and the Hyatt Regency
Beaver Creek in Colorado, the Hyatt Regency in Albuquerque, New Mexico,
Canyon Ranch in Tucson, Arizona, Canyon Ranch in Lenox, Massachusetts and
The Sonoma Mission Inn & Spa in California.
On September 22, 1997, COI Hotel, became the lessee of the Four Seasons
Hotel in Houston, Texas, which is owned by Crescent Equities. The lease is
for a term of 10 years and provides for base rent and percentage rent.
Additionally, on September 22, 1997, COI Hotel acquired for $2.4 million
(i) a two-thirds interest in the Houston Center Athletic Club Venture
("HCAC"), a joint venture that owns the HCAC and (ii) a $5.0 million note
receivable executed by the Houston Center Athletic Club Venture. The note
bears interest at LIBOR plus one percent and interest is payable in arrears
at the end of each twenty-eight (28) day period. The Company partially
financed these transactions with proceeds of $1.8 million in loans from
Crescent Partnership. The Company recorded the note on its books at its
estimated fair value of $5.0 million. The note was collected during 1998.
On January 23, 1998, a subsidiary of the Company signed a 10-year lease
agreement with Crescent Partnership for the Austin Omni Hotel. The Austin
Omni Hotel is a 314-room full-service hotel located approximately four
blocks from the state capitol building in Austin, Texas. A subsidiary of
the company and Crescent Partnership mutually agreed to terminate the
Austin Omni Hotel lease effective December 31, 1998, and the Company
received a $75,000 break-up fee in accordance with the terms of the lease.
Effective January 1, 1999, the Company began providing limited asset
management services related to the Austin Omni Hotel for $50,000 per year.
Effective October 13, 1998, Wine Country Golf Club, Inc., a wholly-owned
subsidiary of the Company, became the lessee of the Sonoma Golf Course in
California, which is owned by Crescent Equities. This 18-hole championship
golf course is a strategic amenity to the Sonoma Mission Inn and Spa, which
will allow the Company to expand its marketing focus to the golf-oriented
guest. The lease is for a term of 10 years and provides for base rent and
percentage rent.
Effective June 19, 1999, the Company entered into a lease with Crescent
Real Estate Funding III, L.P. ("Funding III") for the 389-room Renaissance
Hotel located in Houston, Texas. The lease is for a term of 10 years and
provides for base rent and percentage rent. Under the lease, Funding III
may terminate the lease, at its option, for a period of one year under
certain conditions. The other terms of the lease are generally consistent
with those in hospitality leases with Crescent Partnership.
Effective July 27, 1998, to enable the Company to invest in the future use
of the "Canyon Ranch" name, the Company contributed $50,500 to obtain a 5%
economic interest, representing all of the voting stock, of CRL.
Immediately following such contribution, CRL exercised its purchase option
by
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<PAGE> 62
paying $1 million to obtain a 10% economic interest in CR License.
Contemporaneously, CRL acquired a 50% interest in CR Las Vegas LLC, an
entity that built a Canyon Ranch day spa in the Venetian Hotel in Las Vegas
which opened on June 20, 1999. On July 23, 1999, CRL exercised its option
to purchase an additional 10% economic interest in CR License by paying
$2.0 million, bringing CRL's total economic interest in CR License to 20%.
CR License is the entity which owns the rights to the future use of the
"Canyon Ranch" name. CRL has the opportunity prior to July 2000 to pay an
additional $3.0 million to obtain an additional 10% interest in CR License.
Through CRL and CR License, the Company has an effective 3.0% economic
interest in the Canyon Ranch day spa project.
Temperature Controlled Logistics
Effective October 31, 1997, Crescent Operating acquired, from Crescent
Partnership, for approximately $8.0 million, 100% of the voting stock,
representing a 5% equity interest, of CS I and CS II. CS I holds a 40%
general partner interest in Vornado Crescent Atlanta Partnership ("Atlanta
Partnership"), which owns URS Logistics, Inc., a company that operates and
manages public refrigerated warehouses in the continental United States. CS
II holds a 40% general partner interest in Vornado Crescent Portland
Partnership ("Portland Partnership"), which owns AmeriCold Corporation, a
company providing integrated logistics services for the frozen food
industry, consisting of warehousing and transportation. The Atlanta
Partnership and the Portland Partnership represent the business venture
among Crescent Operating, Crescent Equities and Vornado Realty Trust
("Vornado") which owns and operates public refrigerated warehouses.
On June 1, 1998, the Temperature Controlled Logistics Partnerships,
acquired nine refrigerated storage properties from Freezer Services, Inc.
for approximately $134 million, which required a capital contribution from
Crescent Operating of $2.3 million. On July 1, 1998, the Temperature
Controlled Logistics Partnerships acquired five refrigerated storage
properties from Carmar Group, Inc. for approximately $158 million, which
required a capital contribution from Crescent Operating of $2.7 million.
These properties contain approximately 90 million cubic feet of
refrigerated storage space.
Effective March 12, 1999, the Company sold 80% of its 5% interest in the
Temperature Controlled Logistics Partnerships to Crescent Partnership for
$13.2 million and received the right to require Crescent Partnership to
purchase the remaining 20% for approximately $3.4 million at any time
during the next two years, subject to compliance with certain regulatory
matters. This 5% interest represented a 2% interest in various corporations
and limited liability companies owned by the Temperature Controlled
Logistics Partnerships. Crescent Operating, through a wholly owned limited
liability company, then became a 40% partner of AmeriCold Logistics, a
newly formed partnership, the remaining 60% of which is owned by Vornado
Operating, Inc. ("Vornado Operating"). This transaction required a capital
contribution of approximately $15.5 million from Crescent Operating. As a
result of the restructuring transaction, the operations formerly associated
with the Temperature Controlled Logistics Partnerships are now conducted by
AmeriCold Logistics. Also a result of the transaction, Crescent Operating
no longer consolidates, for financial reporting purposes, the Temperature
Controlled Logistics Partnerships, which has resulted in a decrease for
accounting purposes in the investment in the Temperature Controlled
Logistics Partnerships of approximately $291 million.
AmeriCold Logistics entered into leases covering the refrigerated storage
facilities used in its business. The leases, which commenced in March 1999,
generally have a 15-year term with two five-year renewal options and
provide for the payment of fixed base rent and percentage rent based on
revenues AmeriCold Logistics receives from its customers. Fixed base rent
is approximately $130 million per annum through 2003, $132.0 million per
annum from 2004 through 2008 and $133.0 million per annum from 2009 through
2014. Percentage rent for each lease is based on a specified percentage of
revenues in excess of a specified base amount. The aggregate base revenue
amount under five of the six leases is approximately $321.0 million and the
weighted average percentage rate is approximately 36% for the initial
five-year period, approximately 39% for the period from 2004 through 2008
and approximately 41% for the period from 2009 through February 28, 2014.
The aggregate base revenue amount under the sixth lease is approximately
$32.0 million and the percentage rate is 24% for the initial two-year
period, 37.5% for the period from 2002 through 2006, 40% from 2007 through
2011 and 41% from 2012 through February 28, 2014. AmeriCold Logistics
recognized $135.8 million of rent expense from March 11, 1999 (acquisition
date) through December 31, 1999. AmeriCold Logistics is required to pay for
all costs arising from the operation, maintenance and repair of the
properties, including all real estate taxes and
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<PAGE> 63
assessments, utility charges, permit fees and insurance premiums, as well
as property capital expenditures in excess of $5.0 million annually.
AmeriCold Logistics has the right to defer the payment of 15% of the fixed
base rent and all percentage rent for up to three years beginning on March
11, 1999 to the extent that available cash, as defined in the leases, is
insufficient to pay such rent. AmeriCold Logistics deferred
$5.4 million of rent payments for the period ending December 31, 1999.
Under the terms of the partnership agreement for AmeriCold Logistics,
Vornado Operating has the right to make all decisions relating to the
management and operations of AmeriCold Logistics other than certain major
decisions that require the approval of both the Company and Vornado
Operating. Vornado Operating must obtain Crescent Operating's approval for
specified matters involving AmeriCold Logistics, including approval of the
annual budget, requiring specified capital contributions, entering into
specified new leases or amending existing leases, selling or acquiring
specified assets and any sale, liquidation or merger of AmeriCold
Logistics. If the partners fail to reach agreement on certain matters prior
to October 30, 2000, Vornado Operating will be entitled to buy Crescent
Operating's interest in the partnership at cost plus 10% per annum return.
If the partners fail to reach an agreement on such matters during the
period from November 1, 2000 through October 30, 2007, Vornado Operating
may set a price at which it commits to either buy Crescent Operating's
investment, or sell its own, and Crescent Operating will decide whether to
buy or sell at that price. If the partners fail to reach agreement on such
matters after October 30, 2007, either party may set a price at which it
commits to either buy the other party's investment, or sell its own, and
the other party will decide whether to buy or sell at that price. Neither
partner may transfer its rights or interest in the partnership without the
consent of the other partner. The partnership will continue for a term
through October 30, 2027, except as the partners may otherwise agree.
The Company expects to form a new business venture with Vornado Operating
on terms and conditions similar to the Company's existing partnership
arrangements with Vornado Operating. The venture, which is to be named
Transportal Network ("Transportal"), would pursue a business-to-business
internet opportunity relating to the Temperature Controlled Logistics
business. The Company expects Transportal to provide routing and load
management services and to facilitate related purchases over the internet
to independent truckers, shippers and receivers to enable them to increase
efficiency. The Company's share of start-up costs for Transportal, which
relate to market research, creating a business plan and related matters,
was $0.4 million for the year ended December 31, 1999. These costs are
included in the Company's consolidated statement of operations as
"Investment Income (Loss)" for the year ended December 31, 1999. Although
Transportal has not commenced operations or finalized its business plan,
the Company expects Transportal to incur significant future losses and to
require significant equity investments. The Company anticipates that it may
have to dilute its ownership in Transportal to fund its share of
Transportal's cash needs, which may be in excess of $2.0 million.
Transportal is actively seeking additional equity investments from third
parties, including venture capital firms. Early stage internet companies,
such as Transportal, with new and unproven business models frequently
encounter financial and other significant business risks and there can be
no assurance that Transportal will be a successful business venture.
Land Development
On July 31, 1997, Crescent Operating, through its newly-formed subsidiary,
WOCOI, acquired for $0.4 million, a 42.5% general partner interest in The
Woodlands Operating Company, L.P. ("Woodlands Operating"). Woodlands
Operating was formed to provide management, advisory, landscaping and
maintenance services to entities affiliated with the Company and Crescent
Equities. Woodlands Operating is reimbursed for the costs it incurs plus a
3% or 5% management fee, depending on the type of service provided. The
acquisition of Woodlands Operating was part of a larger transaction
pursuant to which Crescent Equities and Crescent Partnership, together with
certain Morgan Stanley funds, acquired The Woodlands Corporation. The
Woodlands Corporation is the principal owner, developer and operator of The
Woodlands, an approximately 27,000-acre master-planned residential and
commercial community located approximately 27 miles north of Houston,
Texas. The Woodlands includes a shopping mall, retail centers, office
buildings, conference center and country club and other amenities. WOCOI
serves as the managing general partner of Woodlands Operating.
On September 29, 1997, Crescent Operating acquired 100% of the voting
stock, representing a 5% equity interest, of Desert Mountain Development
for $2.2 million. Desert Mountain Development is the sole general
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<PAGE> 64
partner of Desert Mountain Properties Limited Partnership ("DMPLP"). DMPLP
owns Desert Mountain, a master planned, luxury residential and recreational
community in northern Scottsdale, Arizona. DMPLP also owns and operates The
Desert Mountain Club that offers five Jack Nicklaus signature 18 hole golf
courses, including Cochise, site of the Senior PGA Tour's The Tradition
tournament.
On September 29, 1997, Crescent Operating acquired 100% of the voting
stock, representing a 5% equity interest, of LandCo, for approximately $1.9
million. LandCo is a residential development corporation which formerly was
owned by Crescent Equities. LandCo holds a 42.5% general partner interest
in, and is the managing general partner of, The Woodlands Land Development
Company, L.P. ("Landevco"), which owns approximately 9,000 acres for
commercial and residential development, a realty office, an athletic
center, and interests in a title company and a mortgage company.
Effective September 11, 1998, the Company and Gerald W. Haddock, John C.
Goff and Harry H. Frampton, III (collectively, the "CDMC Sellers") entered
into a partnership agreement (the "Partnership Agreement") to form COPI
Colorado. COPI Colorado's purpose is to hold and manage the voting stock of
CDMC (and, consequently, to manage CDMC) and to invest in shares of
Crescent Operating common stock. In September, 1998, the Company
contributed to COPI Colorado $9.0 million in cash in exchange for a 50%
general partner interest in COPI Colorado, and each CDMC Seller contributed
to COPI Colorado approximately 667 shares of CDMC voting stock, which the
CDMC Sellers owned individually, in exchange for an approximately 16.67%
limited partner interest in COPI Colorado; as a result and until January
2000, the Company owned a 50% managing interest in COPI Colorado and the
CDMC Sellers collectively owned a 50% investment interest in COPI Colorado.
The operating results of CDMC since September 30, 1998 have been included
in the consolidated results of the Company. CDMC's investments include
direct and indirect economic interests that vary from 18% to 70% in the
following: (i) two residential and commercial developments and eight
residential developments in Colorado; (ii) a Texaco gasoline station and
ancillary auto repair facility, car wash and convenience store in Colorado;
(iii) a timeshare development in Colorado; (iv) a real estate company that
markets and sells timeshare interests; (v) a real estate company that
specializes in the management of resort properties in Colorado, Utah, South
Carolina and Montana; (vi) two transportation companies that provide
approximately 80% of the airport shuttle service to Colorado resort areas;
and (vii) an interest in a partnership that owns an interest in the Ritz
Carlton Hotel in Palm Beach, Florida. The operating results of CDMC from
September 30, 1998 to December 31, 1999 have been included in the
consolidated results of the Company.
On April 29, 1999, a partnership in which CDMC has a 64% economic interest
finalized the purchase of Riverfront Park (previously known as "The
Commons"), a master planned residential development on 23 acres in the
Central Platte Valley near downtown Denver, Colorado, for approximately
$25.0 million. The development of Riverfront Park is expected to begin in
the spring of 2000. The first phase will consist of condominiums and lofts
with prices ranging from $0.2 million to $2.5 million. The acreage is in
close proximity to several major entertainment and recreational facilities,
including, Coors Field (home to the Major League Baseball's Colorado
Rockies), Elitch Gardens (an amusement park), the new Pepsi Center (home to
the National Hockey League's Colorado Avalanche and the National Basketball
Association's Denver Nuggets) and the new downtown Commons Park. An
adjacent 28 acres is expected to be commercially developed by another
company, thus providing a major mixed-use community adjacent to the lower
downtown area of Denver.
On August 27, 1999 and October 27, 1999, the Company sold its investments
in Hillwood and Corporate Arena, respectively, for an aggregate sales price
of approximately $1.4 million. Together, the sales resulted in an
approximate $0.2 million gain in 1999.
Healthcare
On June 17, 1997, Crescent Operating acquired, for $5.0 million, a 50%
member interest in CBHS and issued warrants to acquire 282,508 shares of
Crescent Operating common stock with an exercise price of $18.29 per share
to Magellan Health Services, Inc. ("Magellan"). As required by CBHS'
operating agreement, the Company contributed an additional $2.5 million to
CBHS. CBHS operates approximately 90 behavioral healthcare facilities
throughout the United States. Crescent Operating also purchased as part of
this acquisition warrants to acquire 1,283,311 shares of Magellan common
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stock for $12.5 million. The exercise price of the Magellan warrants is $30
per share, exercisable in varying increments beginning on May 31, 1998 and
ending on May 31, 2009. In August and September of 1997, Crescent Operating
made loans (evidenced by promissory notes) to CBHS in the aggregate
principal amount of $17.5 million (the "Initial Amount"). On November 16,
1997, effective September 30, 1997, each of the promissory notes was
exchanged for cumulative redeemable preferred interests (the "Redeemable
Preferred Interests") in CBHS. The Redeemable Preferred Interest entitles
its holder to a preferred return on the profits of CBHS, which is to be
calculated at the rate of 10% per annum of the Initial Amount, compounded
monthly. CBHS, upon approval of at least 80% of the members of its
Governing Board, may redeem all, but not less than all, of the Redeemable
Preferred Interests, at its option, on or after April 1, 1998, for cash or
promissory notes, or a combination thereof.
On September 9, 1999, Crescent Operating, Magellan, Crescent Partnership
and CBHS completed a recapitalization of CBHS and restructuring of the
relationships among the parties. In connection with the restructuring,
Magellan transferred its remaining hospital-based assets (including Charter
Advantage, Charter Franchise Services, LLC, the call center assets, the
Charter name and related intellectual property and certain other assets) to
CBHS, and released CBHS from all accrued and future franchise fees. As a
result of the transfer, Magellan is no longer obligated to provide
franchise services to CBHS. Magellan also transferred 80% of its CBHS
common membership interest and all of its CBHS preferred membership
interest to CBHS, leaving Magellan with a 10% common membership interest.
Simultaneously, Crescent Operating reorganized its holdings leaving
Crescent Operating with a 25% common membership interest and 100% of the
preferred membership interest in CBHS, and a limited partnership controlled
by individual officers of Crescent Operating and in which Crescent
Operating owns 100% of the economic interests, with a 65% common membership
interest in CBHS. Prior to the restructuring, Crescent Operating and
Magellan each held a 50% common membership interest, and a 50% preferred
membership interest in CBHS.
Other
On March 31, 1999, the Company sold its investment in Hicks-Muse for $8.1
million to an unrelated party. The sale resulted in a $0.3 million gain
which was recognized in the first quarter of 1999. All of the sales
proceeds were applied against the Company's indebtedness to Crescent
Partnership.
All of the acquisitions during 1998 and 1999 were accounted for as
purchases and operations have been included in the consolidated financial
statements of the Company from the date that management took over the
operational control of the acquired entity.
4. PROPERTY & EQUIPMENT, NET:
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Rental equipment (Crescent Machinery)......... $ 115,022 $ 71,409
Land and improvements......................... 64,291 47,651
Buildings and improvements.................... 31,729 23,902
Construction in progress (DMPLP).............. 9,231 15,997
Furniture, fixtures, and other equipment...... 20,421 14,201
Transportation equipment...................... 7,113 3,383
----------------- -----------------
247,807 176,543
Less accumulated depreciation................. (32,043) (14,362)
----------------- -----------------
$ 215,764 $ 162,181
================= =================
</TABLE>
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5. INVESTMENTS:
Investments consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Investment in Landevco...................... $ 41,186 $ 37,880
Investment in AmeriCold Logistics........... 11,791 --
Investment in CDMC projects................. 11,254 22,737
Investment in CR Las Vegas.................. 8,356 --
Investment in Temperature Controlled
Logistics Partnerships................... 3,068 293,868
Investment in CR License.................... 2,797 1,000
Investment in Magellan warrants............. 2,374 2,737
Investment in HCAC.......................... 864 1,011
Investment in Hicks-Muse.................... -- 7,802
Investment in Corporate Arena .............. -- 901
Investment in TWOC.......................... (1,220) (831)
------------------- -----------------
$ 80,470 $ 367,105
=================== =================
</TABLE>
Investment income (loss) consisted of the following (in thousands):
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1999 December 31, 1998 December 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Equity in income of Landevco................ $ 19,351 $ 19,200 $ 2,398
Equity in income of CDMC Projects........... 3,431 5,537 --
Gain on sale of CSI and CSII................ 1,493 -- --
Equity in income of TWOC.................... 886 1,121 155
Equity in income of Temperature
Controlled Logistics Partnerships........ 325 3,961 36
Equity in income of HCAC.................... 296 130 9
Hicks-Muse income........................... 239 3,125 589
Gain on sale of Corporate Arena............. 158 -- --
Equity in loss of CBHS...................... -- (5,390) (19,610)
Equity in loss of CR License................ (203) -- --
Equity in loss of Transportal Network....... (395) -- --
Equity in loss of CR Las Vegas, LLC......... (944) -- --
Equity in loss of AmeriCold Logistics....... (3,698) -- --
----------------- ----------------- -----------------
$ 20,939 $ 27,684 $ 16,423
================= ================= =================
</TABLE>
A summary of financial information for the Company's investments in TWOC and
Landevco, each of which represents a significant unconsolidated investment, is
presented below (amounts in thousands).
<TABLE>
<CAPTION>
TWOC Landevco
----------------- -----------------
Year Ended Year Ended
December 31, 1999 December 31, 1999
----------------- -----------------
<S> <C> <C>
Revenues .............................. $ 74,635 $ 130,859
Gross profit .......................... $ 1,916 $ 50,025
Net income ............................ $ 1,944 $ 45,531
Crescent Operating's share of
equity in income of subsidiary..... $ 886 $ 968
</TABLE>
<TABLE>
<CAPTION>
TWOC Landevco
----------------- -----------------
December 31, 1999 December 31, 1999
----------------- -----------------
<S> <C> <C>
Current assets........................... $ 9,826 $ 1,714
Property and equipment, net.............. 2,109 --
Real estate.............................. -- 375,663
Other noncurrent assets.................. 1,200 40,178
----------------- -----------------
Total assets........................... $ 13,135 $ 417,555
================= =================
Current liabilities...................... $ 10,386 $ 22,412
Long-term debt........................... -- 288,588
Other noncurrent liabilities............. 5,768 9,853
Partners' equity (deficit)............... (3,019) 96,702
----------------- -----------------
Total liabilities and member/stock-
holders equity......................... $ 13,135 $ 417,555
================= =================
</TABLE>
F-20
<PAGE> 67
6. INTANGIBLE ASSETS:
Intangible assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Goodwill, net - Crescent Machinery....... $ 13,925 $ 7,757
Goodwill, net - RoseStar................. 1,417 1,632
Goodwill, net - COPI Colorado............ 41,798 31,016
Membership intangible, net - DMPLP....... 34,937 42,108
----------------- -----------------
$ 92,077 $ 82,513
================= =================
Accumulated amortization as of December 31, 1999 and 1998 was $30,151 and
$17,386, respectively.
</TABLE>
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consisted of the following (in
thousands):
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Accounts payable......................... $ 36,141 $ 26,225
Accrued salaries and bonuses............. 8,752 9,088
Accrued taxes............................ 10,567 9,390
Land development construction accrual.... 6,966 6,526
Accrued interest......................... 5,441 2,276
Accrued transaction costs................ 419 2,189
Deferred liabilities..................... 5,788 4,141
Other accrued expenses................... 6,322 4,914
----------------- -----------------
$ 80,396 $ 64,749
================= =================
</TABLE>
8. OTHER LIABILITIES:
Other liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Deferred revenue......................... $ 50,964 $ 29,477
Deferred hospitality rent................ 4,698 3,808
Other.................................... 4,175 1,293
----------------- -----------------
$ 59,837 $ 34,578
================= =================
</TABLE>
9. LONG-TERM DEBT:
The Company's long-term debt facilities are composed of (i) corporate and
wholly owned debt, and (ii) non wholly owned debt. Corporate and
wholly owned debt relates to debt facilities at the Crescent Operating
level or owed by entities which are owned 100% by Crescent Operating. Non
wholly owned debt represents non-recourse debt owed by entities which are
consolidated in the Company's financial statements but are not 100% owned
by the Company; the Company's economic investment in these entities is 5%
or less. Following is a summary of the Company's debt financing (amounts in
thousands):
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
LONG-TERM DEBT - CORPORATE AND WHOLLY OWNED SUBSIDIARIES
Equipment notes payable to finance companies due 2000 through 2007,
payments of principal and interest due monthly, bear interest from 6.0% to
10.9%, collateralized by equipment
(Crescent Machinery) .................................................................. $ 102,539 $ 70,074
</TABLE>
F-21
<PAGE> 68
<TABLE>
<S> <C> <C>
Floor plan debt payable, three to twelve month terms at 0%
interest (Crescent Machinery) ......................................................... 21,556 7,958
Line of credit in the amount of $19.5 million payable to Crescent
Partnership due May 2002, bears interest at 9%, payments of interest only
due quarterly, cross collateralized and cross-defaulted with the Company's
other borrowing from Crescent Partnership (Crescent Operating) ........................ 19,500 --
Line of credit in the amount of $17.2 million payable to Crescent
Partnership due the later of May 2002 or five years after the last draw
(in no event shall the maturity date be later than June 2007), bears
interest at 12%, payments of interest only due quarterly, collateralized,
to the extent not prohibited by pre-existing arrangements, by a first lien
on the assets which the Company now owns or may acquire in the future
(Crescent Operating) .................................................................. 17,200 27,733
Note payable to Crescent Partnership due May 2002, bears interest at 12%,
payments of principal and interest due quarterly, collateralized, to the
extent not prohibited by pre-existing arrangements, by a first lien on the
assets which the Company now owns or may acquire in the future (Crescent
Operating) ............................................................................ 13,824 24,223
Line of credit in the amount of $15.0 million payable to Bank of America due
August 2001, bears interest at LIBOR plus 1% (7.5% and 6.06% at December
31, 1999 and December 31, 1998, respectively), payments of interest only
due monthly (Crescent Operating) ...................................................... 15,000 15,000
Note payable to Crescent Partnership due May 2002, bears interest at 12%,
payments of interest only due quarterly, collateralized by a first lien on
the assets which the Company now owns or may acquire in the future
(Crescent Operating) .................................................................. 9,000 9,000
Notes payable to the sellers of E. L. Lester and Company due July 1, 2003,
bear interest at 7.5%, payments of principal and interest due semi-annually,
collateralized by stock of Lester (Crescent Operating) ................................ 5,345 --
Note payable to the sellers of Western Traction due March 31, 2000, bears
interest at 8.5%, payments of principal and interest due monthly,
collateralized by stock of Western Traction (Crescent Operating) ...................... 1,008 5,511
Note payable to Crescent Partnership maturing August 2003, bears interest
at 10.75%, payments of principal and interest due monthly, collateralized
by a deed of trust for certain personal property and certain real property
(RoseStar) ............................................................................ 1,483 1,770
Notes payable to the sellers of Harvey Equipment due July 31, 2002, bear
interest at 8%, payments of principal and interest due semi-annually
(Crescent Operating) .................................................................. 902 1,159
</TABLE>
F-22
<PAGE> 69
<TABLE>
<S> <C> <C>
Note payable to Crescent Partnership maturing September 2002, bears
interest at 8.5%, payments of principal and interest due monthly,
collateralized by the Company's 2/3 interest in HCAC (COI Hotel) ...................... 496 632
Note payable to Crescent Partnership maturing August 2003, bears interest
at 10.75%, payments of principal and interest due monthly, collateralized
by a deed of trust in certain real property and certain personal property
(RoseStar) ............................................................................. 401 479
Note payable to Crescent Partnership due November 2006, bears interest at
7.5%, payments of interest only due annually (RoseStar) ............................... 191 197
----------- -----------
Total debt - corporate and wholly owned subsidiaries ............................. 208,445 163,736
----------- -----------
LONG-TERM DEBT - NON WHOLLY OWNED SUBSIDIARIES
Senior note payable to Crescent Partnership maturing December 2005, bears
interest at 10%, payments of principal and interest due quarterly based on
sales proceeds from DMPLP, collateralized by land, improvements and
equipment owned by DMPLP (DMPLP) ....................................................... 6,100 50,717
Junior note payable to Crescent Partnership maturing December 2010, bears
interest at 14%, payments of principal and interest due quarterly based on
sales proceeds from DMPLP, collateralized by land, improvements and
equipment owned by DMPLP (DMPLP) ....................................................... 60,000 60,000
Line of credit in the amount of $56.2 million payable to Crescent
Partnership due August 2004, bears interest at 11.5% with principal and
interest payments due as distributions from projects are received, as
defined by the applicable credit agreement, collateralized by CDMC's
interests in East West Resort Development partnerships, East West Resorts,
LLC, and other CDMC property (CDMC)..................................................... 49,357 35,976
Construction loans for various East West Resort Development partnership
projects, maturing through 2005, bear interest from 7.75% to 13.9%, payments
of principal and interest or interest only payable monthly, collateralized by
deeds of trust, security agreements and a first lien on the related assets (CDMC)....... 45,024 32,825
Line of credit in the amount of $22.9 million payable to Crescent
Partnership due January 2003, bears interest at 12%, principal and interest
payments due as distributions from projects are received, as defined by the
applicable credit agreement, collateralized by CDMC's interests in East
West Resort Development partnerships, East West Resorts LLC, and
other CDMC property (CDMC) ............................................................. 16,418 15,035
</TABLE>
F-23
<PAGE> 70
<TABLE>
<S> <C> <C>
Line of credit in the amount of $40.0 million payable to Crescent
Partnership due December 2006, bears interest at 11.5% with principal
and interest payments due as distributions from projects are received, as
defined by the applicable credit agreement, collateralized by CDMC's
interests in East West Resort Development partnerships, East West Resorts
LLC, and other CDMC property (CDMC) .................................................... 14,459 --
Line of credit in the amount of $45.0 million payable to National Bank of
Arizona due June 2000, bears interest at rates from prime to prime plus 1%
(8.5% to 9.5% and 7.75% to 8.75% at December 31, 1999 and 1998,
respectively), payments of interest only due monthly, collateralized by
certain land owned by DMPLP, deeds of trusts on lots sold and home
construction (DMPLP) ................................................................... 13,756 10,000
Line of credit in the amount of $7.0 million payable to Crescent
Partnership due August 2003, bears interest at 12% with principal and
interest payments due as distributions are received, collateralized by a
first lien on the assets which the Company now owns or may acquire in the
future (CRL)............................................................................ 5,666 --
Note payable to Crescent Partnership maturing June 2005, bears interest at
12%, with payments of interest only due quarterly and payments of principal
payable annually in accordance with an increasing amortization schedule,
collateralized by CDMC's interests in East West Resort Development
partnerships, East West Resorts LLC and other CDMC property (CDMC) ..................... 2,649 2,850
----------- -----------
Total debt - non wholly owned subsidiaries ................................... 213,429 207,403
----------- -----------
Total long-term debt ......................................................... $ 421,874 $ 371,139
=========== ===========
Current portion of long-term debt - CEI ................................................ $ 8,000 $ 7,668
Current portion of long-term debt ...................................................... 69,459 84,539
Long-term debt - CEI, net of current portion ........................................... 208,744 220,944
Long-term debt, net of current portion ................................................. 135,671 57,988
----------- -----------
Total long-term debt ......................................................... $ 421,874 $ 371,139
=========== ===========
</TABLE>
The weighted average interest rate on long-term debt at December 31, 1999
was approximately 10.0%. Substantially all of the Company's assets are
pledged as collateral under various debt agreements. Payment of dividends on
Crescent Operating common stock is prohibited under certain of the debt
agreements. The debt agreements contain certain reporting requirements and
financial covenants, including requirements that the Company maintain
certain financial ratios. As of December 31, 1999, the Company had complied
with all debt covenants. In February 2000, the Company modified certain debt
agreements with Crescent Equities extending the timing of principal and
interest payments by one year.
F-24
<PAGE> 71
As of December 31, 1999, combined aggregate principal maturities of all
long-term debt were as follows (in thousands):
<TABLE>
<S> <C>
2000........................... $ 77,459
2001........................... 69,008
2002........................... 84,858
2003........................... 42,187
2004........................... 73,062
Thereafter..................... 75,300
----------
Total $ 421,874
==========
</TABLE>
10. SHAREHOLDERS' EQUITY:
Common Stock
The Company's authorized capital stock consists of 10 million shares of
preferred stock, par value $0.01 per share and 22.5 million shares of
common stock, par value $0.01 per share. At December 31, 1999, there were
11,414,963 shares of common stock issued and no shares of preferred stock
issued.
Preferred Share Purchase Rights
The Board of Directors has adopted a rights plan that provides that each
holder of Crescent Operating common stock also receives a right to purchase
from the Company one-hundredth of a share of Series A Junior Preferred
Stock, par value $0.01, at a price of $5 per share, subject to adjustment.
These rights can only be exercised in certain events and are intended to
provide the Company certain anti-takeover protection. The Company had
reserved 225,000 shares of Series A Junior Preferred Stock for this plan.
Warrants
In conjunction with the acquisition of a 50% member interest in CBHS, the
Company issued warrants to acquire 282,508 shares of Crescent Operating
common stock at an exercise price of $18.29 per share.
Treasury Stock
As of December 31, 1999, COPI Colorado had purchased 1,102,530 shares of
Crescent Operating common stock, which has been recorded as treasury stock,
at a total purchase price of $4.3 million. The average price paid,
including broker commissions, was $3.88 per share.
11. STOCK OPTION PLANS:
The Company has two stock incentive plans, the 1997 Amended Stock Incentive
Plan (the "Amended Plan") and the 1997 Management Stock Incentive Plan (the
"Management Plan").
The Amended Plan, effective May 8, 1997, initially established the maximum
number of options and/or shares of restricted stock that the Company may
grant at 1.0 million shares. The maximum aggregate number of shares
issuable under the Amended Plan shall increase automatically on January 1
of each year by an amount equal to 8.5% of the increase in the number of
shares of common stock outstanding since January 1 of the preceding year,
subject to certain adjustment provisions. As of December 31, 1999, the
number of shares the Company may have outstanding under the Amended Plan is
1,016,183.
On May 13, 1997, each holder of shares of restricted stock in Crescent
Equities or options in Crescent Equities or Crescent Partnership was
granted an equivalent number of shares of restricted stock or options in
Crescent Operating, based on a ratio of one share of restricted stock or
option to purchase Crescent Operating common stock for each 10 shares of
restricted stock in Crescent Equities or options for Crescent Equities
common shares, and one option to purchase Crescent Operating common stock
for each 5 options for
F-25
<PAGE> 72
units in Crescent Partnership. Under the Amended Plan, the Company has
granted 867,153 options and 10,000 restricted shares, net of forfeitures,
through December 31, 1999.
The Management Plan provides that the maximum number of options and/or
shares of restricted stock that the Company may grant to employees,
officers, directors or consultants is 1.0 million shares. Under the
Management Plan, the Company has granted 554,000 options and 6,276
restricted shares, net of forfeitures, through December 31, 1999.
Under both Plans, options are granted at a price no less than the market
value of the shares on the date of grant, vest over a period determined by
the Board of Directors, and expire ten years from the date of grant. The
Company has reserved 578,754 shares for future options, warrants and
restricted shares.
A summary of the stock option status of the Company's Amended and
Management Plans as of December 31, 1999 and changes during the periods
then ended is presented in the table below:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
------------ ----------------
<S> <C> <C>
Outstanding as of May 8, 1997 .......... -- --
Granted ............................. 893,567 $ 1.15
Exercised ........................... (45,489) $ 0.99
Forfeited ........................... (499) $ 0.99
Expired ............................. -- --
------------ ----------------
Outstanding as of December 31, 1997 .... 847,579 $ 1.16
Granted ............................. 60,600 $ 20.42
Exercised ........................... (23,662) $ 0.99
Forfeited ........................... (20,173) $ 0.99
Expired ............................. -- --
------------ ----------------
Outstanding as of December 31, 1998 .... 864,344 $ 2.52
Granted ............................. 614,000 $ 3.12
Exercised ........................... (7,210) $ .99
Forfeited ........................... (126,342) $ 2.20
Expired ............................. -- --
------------ ----------------
Outstanding as of December 31, 1999 .... 1,344,792 $ 2.83
============ ================
Exercisable as of December 31, 1999 .... 629,433 $ 1.81
</TABLE>
Exercise prices, number of shares and the weighted-average remaining
contractual life ("Average Life") at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Shares Outstanding Shares Exercisable
----------------------------- -----------------------
Exercise Price Number Average Life Number Average Life
- ---------------- --------- ------------ ------- ------------
<S> <C> <C> <C> <C>
$ 0.99 - 5.44 1,274,192 7 years 613,313 5 years
$ 15.50 - 20.50 70,600 8 years 16,120 8 years
</TABLE>
The Company applies APB No. 25 in accounting for options granted pursuant
to the Amended Plan and the Management Plan (collectively, the "Plans").
Accordingly, no compensation cost has been recognized for the Plans. Had
compensation cost for the Plans been determined based on the fair market
value at the grant dates for awards under the Plans consistent with SFAS
No. 123, the Company's net income (loss) and earnings (loss) per share
would have been the following pro forma amounts. The following pro forma
amounts may not be representative of the effects on reported net income for
future years.
F-26
<PAGE> 73
<TABLE>
<CAPTION>
As Reported Proforma
----------- ------------------------------------
1999 1999 1998 1997
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income (loss) (in thousands).... $ (2,695) $ (3,004) $ 837 $ (22,258)
Earnings (loss) per share........... $ (0.26) $ (0.29) $ 0.07 $ (2.01)
</TABLE>
For the years ended December 31, 1999 and 1998, and the period ended
December 31, 1997, the weighted average grant date fair value of each
option granted was $2.29, $14.66 and $0.87, respectively.
The fair value of each option was estimated at the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions for 1999, 1998 and 1997, respectively: risk-free interest rates
of 5.6%, 5.4% and 6.7%; expected volatility of 91.6%, 88.3% and 94.7%;
expected dividend yields of 0%; expected lives of 5 years.
12. EARNINGS PER SHARE:
Earnings per share ("EPS") is calculated as follows (in thousands, except
per share data):
<TABLE>
<CAPTION>
For the period from
Year ended Year ended May 9, 1997
December 31, 1999 December 31, 1998 to December 31, 1997
------------------------------ ------------------------------ ------------------------------
Net Wtd. avg. Per share Net Wtd. avg. Per share Net Wtd. avg. Per share
Income shares amount Income shares Amount Income Shares Amount
-------- --------- --------- -------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS............. $ (2,695) 10,363 $ (0.26) $ 1,141 11,206 $ 0.10 $(22,165) 11,073 $ (2.00)
Effect of Dilutive
Securities:
Stock Options......... -- -- -- 737 -- --
-------- --------- -------- --------- -------- ---------
Diluted EPS........... $ (2,695) 10,363 $ (0.26) $ 1,141 11,943 $ 0.10 $(22,165) 11,073 $ (2.00)
======== ========= ========= ======== ========= ========= ======== ========= =========
</TABLE>
The Company had 1,344,792, 70,600 and 847,579 options in 1999, 1998 and
1997, respectively, which were not included in the calculation of diluted
EPS as they were anti-dilutive. Earnings per share for the Predecessor is
not meaningful as the capital structure of the Predecessor was not
comparable to that of the Company.
13. INCOME TAXES:
The components of the Company's income tax provision (benefit) were as
follows (in thousands):
<TABLE>
<CAPTION>
For the Period For the Period
From From
Year Ended Year Ended May 9, 1997 to January 1, 1997
December 31, 1999 December 31, 1998 December 31, 1997 To May 8, 1997
----------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Current:
Federal....................... $ 18,706 $ 6,543 $ 79 $ --
State......................... 2,459 935 10 --
---------- ------------ --------- ---------
21,165 7,478 89 --
---------- ------------ --------- ---------
Deferred:
Federal....................... (21,556) (1,712) 483 14
State......................... (3,080) (245) 40 --
---------- ------------ --------- ---------
(24,636) (1,957) 523 14
---------- ------------ --------- ---------
Total income tax
provision (benefit)........ $ (3,471) $ 5,521 $ 612 $ 14
========== ============ ========= =========
</TABLE>
F-27
<PAGE> 74
Reconciliations of the federal statutory income tax rate to the effective
tax rate were as follows:
<TABLE>
<CAPTION>
For the Period For the Period
From From
Year Ended Year Ended May 9, 1997 to January 1, 1997
December 31, 1999 December 31, 1998 December 31, 1997 To May 8, 1997
----------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% (35.0%) 35.0%
State income taxes, net of
federal tax benefit........... 5.0 5.0 (2.9) --
Minority interests............... (23.1) (12.1) -- --
Change in valuation allowance.... (47.1) (6.5) 40.3 --
Net operating loss benefit....... (8.5) -- -- --
Other, net....................... (5.0) 2.6 0.5 --
----------------- ----------------- ----------------- ---------------
Effective tax rate.......... (43.7)% 24.0% 2.9% 35.0%
================= ================= ================= ===============
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
were as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax assets:
Equity in losses of subsidiaries ...... $ 8,936 $ --
Deferred revenue/rentals .............. 25,926 10,709
Accrued expenses ...................... 814 561
Inventories ........................... 794 241
Loss credit carryforwards ............. 4,049 10,104
Other .................................. 132 340
------------ ------------
Deferred tax assets ................ 40,651 21,955
------------ ------------
Deferred tax liabilities:
Equity in earnings of subsidiaries .... -- (2,264)
Prepaid expenses ...................... (1,048) (1,073)
Depreciable property and equipment .... (8,326) (3,643)
Real estate ........................... (9,086) (8,956)
------------ ------------
Deferred tax liabilities ........... (18,460) (15,936)
------------ ------------
Valuation allowance ...................... (406) (4,156)
------------ ------------
Net deferred tax assets ............ $ 21,785 $ 1,863
============ ============
Current deferred tax assets .............. $ 414 $ 700
Noncurrent deferred tax assets ........... 21,371 1,163
------------ ------------
Net deferred tax assets ............ $ 21,785 $ 1,863
============ ============
</TABLE>
At December 31, 1999, the Company had net operating loss carryforwards ("NOL")
of approximately $9.6 million, which will expire in years 2003 through 2019. A
portion of this NOL was acquired subject to restrictive tax limitations. In
1999, a tax law change occurred which allowed the company to realize a tax
benefit of $0.7 million associated with this NOL. The Company has reserved $0.4
million of the future available NOL due to the tax law limitations still in
effect. The Company also has a minimum tax credit of $0.3 million, which does
not expire. The Company released $4.2 million of its net deferred tax asset
valuation allowance, based on 1999 transactions and expected future taxable
income. In December 1999, the investments held by the Company that are
considered to be Controlled Subsidiary Transactions entered into agreements to
elect to become Taxable REIT Subsidiaries ("TRS") of Crescent Equities for
federal income tax reporting purposes effective January 1, 2001.
F-28
<PAGE> 75
14. MAGELLAN WARRANTS:
In connection with the transaction in which Crescent Operating acquired its
50% membership interest in CBHS, the Company purchased, for $12.5 million,
warrants to acquire 1,283,311 shares of Magellan common stock for an
exercise price of $30 per share. The Magellan warrants are exercisable in
varying increments over the period which began on May 31, 1998 and ends on
May 31, 2009. Management estimates the fair value of the warrants, using
the Black-Scholes pricing model, to be $2.4 million at December 31, 1999.
As a result, the $10.1 million difference between the cost and the
estimated fair value of the warrants has been included in the consolidated
financial statements as other comprehensive income (loss).
15. COMMITMENTS AND CONTINGENCIES:
Lease Commitments
The Hospitality segment leases nine hotel and resort properties (the
"Hospitality Properties") from Crescent Equities. Generally, the leases are
on a triple net basis during 120-month terms and expire from December 2004
to October 2008. The leases provide for the payment to Crescent Partnership
or its subsidiaries of (i) base rent, with periodic rent increases, (ii)
percentage rent based on a percentage of gross room revenues above a
specified amount, and (iii) a percentage of gross food and beverage
revenues above a specified amount. Base rental expense under the leases is
recognized on a straight-line basis over the terms of the respective
leases. The Land Development segment leases office space, model homes,
housekeeping and laundry facilities and certain equipment. The Equipment
Sales and Leasing segment leases rental delivery and service trucks and
land and buildings at various locations.
Total lease expense for all segments during the periods ended December 31,
1999, 1998 and 1997 was approximately $62.5 million, $55.4 million and
$16.7 million, respectively. Included in lease expense was percentage rent
for the Hospitality Properties for the periods ended December 31, 1999,
1998 and 1997 of $14.7 million, $13.8 million and $4.6 million,
respectively. Future minimum lease payments due under such leases as of
December 31, 1999, were as follows (in thousands):
<TABLE>
<S> <C>
2000.................... $ 51,778
2001.................... 52,557
2002.................... 52,226
2003.................... 52,440
2004.................... 52,965
Thereafter.............. 120,966
-----------
$ 382,932
===========
</TABLE>
Contingencies
CBHS became the subject of Chapter 11 bankruptcy proceedings by filing a
voluntary petition on February 16, 2000, in United States Bankruptcy Court
for the District of Delaware. Although CBHS is not a subsidiary of Crescent
Operating, Crescent Operating does own a majority (90%) economic interest
in CBHS. Crescent Operating's claims against the estate of CBHS include (i)
its interests as a direct and indirect equity holder of CBHS and (ii) its
claim for indemnification or contribution against third party lawsuits and
claims where Crescent Operating is a named defendant with CBHS, such as
lawsuits based upon alleged WARN Act violations purported to have been
committed by CBHS and/or its subsidiaries in closing behavioral health care
facilities in 1999 and 2000. To date Crescent Operating has not filed a
proof of claim against CBHS with regard to any of these claims but would
expect to file proofs of claim prior to the bar date.
F-29
<PAGE> 76
To date, four lawsuits, all of which seek class action certification, have
been filed against CBHS alleging violations of the WARN Act in the closing
of certain healthcare facilities. All of those lawsuits also name Crescent
Operating as a defendant. Under the automatic stay provisions of federal
bankruptcy law, lawsuits against CBHS or its subsidiaries would be stayed
unless otherwise directed by the bankruptcy court, but the lawsuits against
other defendants, including Crescent Operating, would not be stayed
automatically. It is anticipated that those suits may be stayed because
CBHS and its subsidiaries are indispensable parties. The Company
anticipates that other similar lawsuits may be filed due to the closing of
other facilities. With respect to the pending suits and possible future
claims against Crescent Operating based on the closure by CBHS of
facilities in 1999 and 2000, the Company believes that such actions are
without basis under the WARN Act and should be dismissed; however, no
assurance can be given that Crescent Operating will prevail.
16. SUPPLEMENTAL CASH FLOW INFORMATION:
Supplemental cash flow information is summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1999 1998 1997
-------- ----------- ----------
<S> <C> <C> <C>
Interest paid, net of amounts capitalized........... $ 27,422 $ 23,360 $ 2,574
======== =========== ==========
Taxes paid (refunded)............................... $ 24,755 $ 4,345 $ 4
======== =========== ==========
Non-cash investing and financing activities:
In conjunction with the acquisitions by the
Company, liabilities were assumed as follows:
Fair value of assets acquired.............. $ 43,178 $ 84,892 $ 597,075
Stock issued for the acquisitions.......... -- (3,391) (2,340)
Notes payable issued for acquisitions...... (6,000) (8,659) --
Cash paid for the acquisitions............. (28,511) (26,300) (82,694)
-------- ----------- ----------
Liabilities assumed.................... $ 8,667 $ 46,542 $ 512,041
======== =========== ==========
Decrease in intangible and deferred income for
amount associated with sales of club
memberships.................................. $ 7,172 $ 11,084 $ 3,889
======== =========== ==========
</TABLE>
17. FAIR VALUES OF FINANCIAL INSTRUMENTS:
The carrying amount of cash and cash equivalents, accounts receivable,
inventories, notes receivable, prepaid expenses and other current assets,
and accounts payable and accrued expenses approximates fair value as of
December 31, 1999 because of the short maturity of these instruments.
Similarly, the carrying value of line of credit borrowings approximates
fair value as of that date because the applicable interest rates fluctuate
based on published market rates. In the opinion of management, the interest
rates associated with the long-term debt approximates the market interest
rates for this type of instrument, and as such, the carrying values
approximate fair value at December 31, 1999.
F-30
<PAGE> 77
18. BUSINESS SEGMENT INFORMATION:
Crescent Operating's assets and operations are located entirely within the
United States and are comprised of four business segments: (i) Equipment
Sales and Leasing, (ii) Hospitality, (iii) Temperature Controlled Logistics
and (iv) Land Development. In addition to these four business segments, the
Company has grouped its investment in Magellan warrants, investment in
Hicks-Muse (sold in March 1999), investment in CBHS, interest expense on
corporate debt and general corporate overhead costs such as legal and
accounting costs, insurance costs and corporate salaries as "Other" for
segment reporting purposes. The Company has written-off its entire
investment and has no obligation or commitment to fund CBHS' ongoing
operations. As a result of the write-off, and irrespective of the
transactions described in Note 3 to the Company's financial statements, the
Company does not anticipate that it will recognize any additional CBHS
losses for accounting purposes. The Company does incur costs of ownership
related to the CBHS investment, such as legal and accounting costs, and
COPI Healthcare incurs costs related to due diligence on the assets it has
offered to purchase out of bankruptcy. Because the Company has written-off
its CBHS investment and did not recognize income or loss from CBHS in 1999,
the Company no longer reports its operations related to CBHS as a separate
segment. The Company uses net income as the measure of segment profit or
loss.
The Equipment Sales and Leasing segment is engaged in the sale, leasing and
service of construction equipment and accessories to the construction and
utility industries located primarily in seven states. Crescent Machinery's
leasing activities consist principally of leasing construction equipment
and accessories under various leases, which are primarily short-term
operating leases.
The Hospitality segment generally consists of the operations of the
Hospitality Properties. Each of such properties is owned by Crescent
Partnership or its affiliates and all are leased to subsidiaries of the
Company under long term leases. In addition to these properties, the
Company also has other investments in the HCAC and in CRL.
The Temperature Controlled Logistics segment consists primarily of a 40%
interest in the operations of Vornado Crescent Operations, LP. Prior to
reorganization of this segment effective March 12, 1999, this segment
consisted of a 2% economic interest in the operations of The Temperature
Controlled Logistics Partnerships. The Temperature Controlled Logistics
Partnerships are the largest operators of public refrigerated storage space
in the country in terms of public storage space operated.
The Land Development segment consists of (i) a 4.65% economic interest in
Desert Mountain, a master planned, luxury residential and recreational
community in northern Scottsdale, Arizona, (ii) a 42.5% general partner
interest in Woodlands Operating, which provides management, advisory,
landscaping and maintenance services to entities affiliated with Crescent
Operating and Crescent Equities, (iii) a 2.125% economic interest in
Landevco, which owns approximately 7,500 acres for commercial and
residential development as well as a realty office, an athletic center, and
interests in both a title company and a mortgage company and (iv) a 5%
economic interest in CDMC, whose operations consist principally of
investing in partnerships and other entities that directly or indirectly
develop and manage residential and resort properties (primarily in
Colorado) or provide services to such properties.
Business segment information is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Crescent Operating, Inc. Carter-Crowley Asset Group (Predecessor)
-------------------------------------- -----------------------------------------
For the For the For the Period from For the Period from
Year Ended Year Ended May 9, 1997 to January 1, 1997 to
December 31, 1999 December 31, 1998 December 31, 1997 May 8, 1997
----------------- ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Equipment Sales and Leasing....... $ 136,343 $ 85,365 $ 10,518 $ 4,657
Hospitality....................... 246,763 229,491 79,468 --
Land Development.................. 334,881 178,392 66,896 --
Temperature Controlled Logistics.. -- -- -- --
Other............................. -- -- -- --
----------------- ----------------- ------------------- -------------------
Total revenues.................... $ 717,987 $ 493,248 $ 156,882 $ 4,657
================= ================= =================== ===================
</TABLE>
F-31
<PAGE> 78
<TABLE>
<S> <C> <C> <C> <C>
Income (loss) from operations:
Equipment Sales and Leasing........... $ 4,737 $ 6,354 $ 735 $ 158
Hospitality........................... 1,286 6,659 232 --
Land Development...................... 10,449 20 (199) --
Temperature Controlled Logistics...... (2) (88) -- --
Other................................. (2,603) (3,059) (1,761) --
----------------- ----------------- ------------------- -------------------
Total income (loss) from operations... $ 13,867 $ 9,886 $ (993) $ 158
================= ================= =================== ===================
Depreciation and amortization:
Equipment Sales and Leasing........... $ 15,041 $ 8,222 $ 1,892 $ 494
Hospitality........................... 1,023 802 347 --
Land Development...................... 17,811 5,695 1,419 --
Temperature Controlled Logistics...... -- 10 -- --
Other................................. (133) 18 -- --
----------------- ----------------- ------------------- -------------------
Total depreciation and amortization... $ 33,742 $ 14,747 $ 3,658 $ 494
================= ================= =================== ===================
Investment income (loss)
Equipment Sales and Leasing........... $ -- $ -- $ -- $ --
Hospitality........................... (851) 130 9 --
Land Development...................... 23,825 25,858 2,553 --
Temperature Controlled Logistics...... (2,275) 3,961 36 --
Other................................. 240 (2,265) (19,021) --
----------------- ----------------- ------------------- -------------------
Total investment income (loss)........ $ 20,939 $ 27,684 $ (16,423) $ --
================= ================= =================== ===================
Interest expense, net:
Equipment Sales and Leasing........... $ 6,747 $ 2,942 $ 155 $ 122
Hospitality........................... 618 54 12 --
Land Development...................... 11,326 4,335 1,020 --
Temperature Controlled Logistics...... -- -- -- --
Other................................. 8,038 7,055 2,543 --
----------------- ----------------- ------------------- -------------------
Total interest expense, net........... $ 26,729 $ 14,386 $ 3,730 $ 122
================= ================= =================== ===================
Income tax expense (benefit)
Equipment Sales and Leasing........... $ (1,081) $ 1,539 $ 65 $ 14
Hospitality........................... (50) 2,724 91 --
Land Development...................... 7,293 7,465 675 --
Temperature Controlled Logistics...... (911) -- -- --
Other................................. (8,722) (6,207) (219) --
----------------- ----------------- ------------------- -------------------
Total income tax expense (benefit).... $ (3,471) $ 5,521 $ 612 $ 14
================= ================= =================== ===================
Capital expenditures:
Equipment Sales and Leasing........... $ 58,107 $ 28,607 $ 8,645 $ 1,067
Hospitality........................... 2,388 1,635 1,376 --
Land Development...................... 18,930 13,183 3,930 --
Temperature Controlled Logistics...... -- -- -- --
Other................................. 51 46 -- --
----------------- ----------------- ------------------- -------------------
Total capital expenditures............ $ 79,476 $ 43,471 $ 13,951 $ 1,067
================= ================= =================== ===================
Investment in unconsolidated
subsidiaries:
Equipment Sales and Leasing........... $ -- $ -- $ --
Hospitality........................... 12,017 2,011 (2,561)
Land Development...................... 51,220 60,687 32,001
Temperature Controlled Logistics...... 14,859 293,868 161,851
Other................................. 2,374 10,539 27,337
----------------- ----------------- -------------------
Total investment in
unconsolidated subsidiaries.... $ 80,470 $ 367,105 $ 218,628
================= ================= ===================
Identifiable assets:
Equipment Sales and Leasing........... $ 184,964 $ 127,215 $ 27,843
Hospitality........................... 44,805 38,536 37,552
Land Development...................... 535,911 464,634 345,979
Temperature Controlled Logistics...... 16,337 293,780 161,851
Other................................. 13,636 13,168 28,858
----------------- ----------------- -------------------
Total identifiable assets............. $ 795,653 $ 937,333 $ 602,083
================= ================= ===================
</TABLE>
F-32
<PAGE> 79
19. RELATED PARTY TRANSACTIONS:
INTERCOMPANY AGREEMENT
Generally, Crescent Operating is involved with Crescent Equities in two
types of transactions: "Lessee Transactions" and "Controlled Subsidiary
Transactions". Lessee Transactions are those in which Crescent Operating
enters into a transaction to lease and operate real property that is owned
by Crescent Partnership but which cannot be operated by Crescent
Partnership due to Crescent Equities status as a REIT. Controlled
Subsidiary Transactions are those in which Crescent Operating invests
alongside Crescent Partnership in acquisitions where Crescent Operating
owns all of the voting stock, and Crescent Partnership owns all of the
non-voting stock of a corporate acquisition vehicle which in turn acquires
a target business which cannot be operated by Crescent Partnership due to
Crescent Equities' status as a REIT. The voting stock represents the
control of the entity being purchased and due to its status as a REIT,
Crescent Equities cannot have such ownership.
Crescent Operating and Crescent Partnership have entered into the
Intercompany Agreement to provide each other with rights to participate in
the types of transactions mentioned above. The Intercompany Agreement
provides, subject to certain terms, that Crescent Partnership will provide
Crescent Operating with a right of first refusal to become the lessee of
any real property acquired by Crescent Partnership if Crescent Partnership
determines that, consistent with Crescent Equities' status as a REIT, it is
required to enter into a "master" lease arrangement. Crescent Operating's
right of first refusal under the Intercompany Agreement is conditioned upon
the ability of Crescent Operating and Crescent Partnership to negotiate a
mutually satisfactory lease arrangement and the determination of Crescent
Partnership, in its sole discretion, that Crescent Operating is qualified
to be the lessee. In general, a master lease arrangement is an arrangement
pursuant to which an entire property or project (or a group of related
properties or projects) is leased to a single lessee. If a mutually
satisfactory agreement cannot be reached within a 30-day period (or such
longer period to which Crescent Operating and Crescent Partnership may
agree), Crescent Partnership may offer the opportunity to others.
Under the Intercompany Agreement, Crescent Operating has agreed not to
acquire or make (i) investments in real estate which, for purposes of the
Intercompany Agreement, includes the provision of services related to real
estate and investment in hotel properties, real estate mortgages, real
estate derivatives or entities that invest in real estate assets or (ii)
any other investments that may be structured in a manner that qualifies
under the federal income tax requirements applicable to REITs. Crescent
Operating has agreed to notify Crescent Partnership of, and make available
to Crescent Partnership, investment opportunities developed by Crescent
Operating, or of which Crescent Operating becomes aware but is unable or
unwilling to pursue.
OTHER TRANSACTIONS
The Company leases full service hotels and destination health and fitness
resorts from Crescent Partnership, or other subsidiaries of Crescent
Equities, under operating leases. Crescent Partnership has agreed to fund
all capital expenditures relating to furniture, fixtures and equipment
reserves required under applicable management agreements on all properties
except for Canyon Ranch-Tucson. Total rent expense related to these leases
totaled approximately $54.0 million for the year ended December 31, 1999.
The Company has various debt instruments payable to Crescent Partnership
with an aggregate amount outstanding at December 31, 1999 of $216.7
million. See Note 9 for additional information.
Included in notes receivable is a note from Landevco payable to Landco in
the amount of $10.6 million as of December 31, 1999. The note bears
interest at 15.0% per annum with quarterly interest payments and principal
due upon maturity of July 2007. Interest income recognized for the year
ended December 31, 1999 was $1.7 million.
20. SUBSEQUENT EVENTS:
Effective January 31, 2000, HCAC sold substantially all of its assets to an
unrelated party. Through a wholly owned subsidiary, the Company received
proceeds from the sale of $2.4 million resulting in an approximate $1.5
million gain which will be recognized by Crescent Operating in the first
quarter of 2000.
In accordance with an agreement between Gerald Haddock and the Company, Mr.
Haddock, the Company's former Chief Executive Officer and President, had
his limited partnership interest in COPI Colorado redeemed
F-33
<PAGE> 80
by COPI Colorado in January 2000. COPI Colorado paid Mr. Haddock
approximately $2.6 million for his approximate 16.67% limited partner
interest (determined from an independent appraisal of the value of COPI
Colorado). Mr. Haddock reserved the right to challenge the valuation
performed by the independent appraiser. As a result of the redemption of
Mr. Haddock's interest, the Company has an approximate 58% interest in COPI
Colorado.
In February 2000, Crescent Operating and its hospitality subsidiaries
entered into a Master Asset Management and Administrative Services
Agreement and property management agreements with Sonoma Management Company
("SMC") to manage the Company's hotel properties (excluding Canyon Ranch -
Lenox, Canyon Ranch - Tucson and the Hyatt Regency Beaver Creek). At the
same time, the Company's hospitality subsidiaries accepted assignment from
the owners of the Sonoma Mission Inn and Spa, the Sonoma Mission Inn Golf
and Country Club and the Ventana Inn and Spa of its property management
agreements with Sonoma Management Company. The principles of Sonoma
Management Company are Sanjay and Johanna Varma and Crescent Equities is an
equity owner in Sonoma Management Company.
On February 16, 2000, CBHS petitioned for relief under Chapter 11, of the
United States Bankruptcy Code. Under the protection of the bankruptcy
court, CBHS intends to sell and liquidate, in a controlled fashion, all of
its ongoing business. In conjunction with the filing by CBHS of the
bankruptcy petition, COPI Healthcare, Inc. ("COPI Healthcare"), a wholly
owned subsidiary of Crescent Operating, entered into an agreement with CBHS
for the acquisition by COPI Healthcare of CBHS' core business ("Asset
Purchase Agreement"), which consists of the assets used in the operation of
37 behavioral healthcare facilities for, $24.5 million. The bankruptcy
court could seek other bids for these assets from other interested parties
and there is no assurance that COPI Healthcare's bid will be successful or
that the conditions contained in its offer can be satisfied.
On March 27, 2000, COPI Healthcare notified CBHS that because it appears
that not all of the conditions to its obligation to consummate the
acquisition under the Asset Purchase Agreement appear likely to be met
before the agreement terminates by its own terms on April 16, 2000, COPI
Healthcare does not expect to close the acquisition under the Asset
Purchase Agreement.
21. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
Amounts in thousands, except per share amounts:
<TABLE>
<CAPTION>
Year Ended December 31, 1999
-----------------------------------------------------
First Second Third Fourth
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues .................................................... $ 136,748 $ 173,393 $ 175,602 $ 232,244
Income (loss) from operations ............................... 4,295 8,751 2,946 (2,125)
Income (loss) before minority interests and income taxes .... 9,001 6,293 (2,282) (5,066)
Minority interests .......................................... (5,215) (5,167) (1,465) (2,265)
Income tax provision (benefit) .............................. 372 972 (1,284) (3,531)
Net income (loss) ........................................... 3,414 154 (2,463) (3,800)
Basic income (loss) per share ............................... .32 .01 (.24) (.35)
Diluted income (loss) per share ............................. .31 .01 (.24) (.34)
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1998
-----------------------------------------------------
First Second Third Fourth
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues .................................................... $ 97,377 $ 106,809 $ 111,826 $ 177,236
Income (loss) from operations ............................... 3,941 3,405 (2,695) 5,235
Income (loss) before minority interests and income taxes .... (620) 9,544 (210) 14,288
Minority interests .......................................... (487) (3,404) (1,021) (11,428)
Income tax provision (benefit) .............................. 71 4,198 (1,321) 2,573
Net income (loss) ........................................... (1,178) 1,942 90 287
Basic income (loss) per share ............................... (.11) .17 .01 .03
Diluted income (loss) per share ............................. (.11) .16 .01 .04
</TABLE>
F-34
<PAGE> 81
INDEPENDENT AUDITORS' REPORT
To the Partners
Vornado Crescent Logistics Operating Partnership and Subsidiary:
We have audited the accompanying consolidated balance sheet of Vornado Crescent
Logistics Operating Partnership and Subsidiary (the "Partnership") as of
December 31, 1999, and the related consolidated statements of operations,
partners' capital, and cash flows for the period from March 11, 1999 (date of
inception) to December 31, 1999. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of Vornado Crescent Logistics
Operating Partnership and Subsidiary at December 31, 1999, and its consolidated
results of operations and cash flows for the period from March 11, 1999 (date of
inception) to December 31, 1999 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
March 2, 2000
(March 8, 2000 as to Note 6)
F-35
<PAGE> 82
VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
(amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,988
Restricted cash 16,887
Trade accounts receivable, net of allowance for doubtful
accounts of $2,036 77,010
Other current assets 7,891
Working capital to be collected on behalf of Real Estate Companies (12,951)
---------
96,825
PROPERTY, PLANT, AND EQUIPMENT:
Land 18,442
Buildings and improvements 1,517
Machinery and equipment 33,127
---------
53,086
Less accumulated depreciation (4,230)
---------
Property, plant, and equipment, net 48,856
OTHER ASSETS 7,831
---------
$ 153,512
=========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 28,350
Accrued expenses 44,570
Unearned revenue 9,630
Due to Real Estate Companies 29,232
---------
Total current liabilities 111,782
DEFERRED RENT OBLIGATIONS TO REAL ESTATE COMPANIES 5,400
OTHER LIABILITIES 6,851
---------
Total liabilities 124,033
COMMITMENTS
PARTNERS' CAPITAL 29,479
---------
$ 153,512
=========
</TABLE>
See notes to consolidated financial statements.
F-36
<PAGE> 83
VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MARCH 11, 1999
(DATE OF INCEPTION) TO DECEMBER 31, 1999
(amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
REVENUES $ 557,708
OPERATING EXPENSES:
Cost of operations 399,615
Rent expense on leases with Real Estate Companies 135,811
General and administrative 26,542
Depreciation and amortization 4,789
---------
Total operating expenses 566,757
---------
OPERATING LOSS (9,049)
OTHER INCOME (EXPENSE):
Interest expense (534)
Other income 339
---------
NET LOSS $ (9,244)
=========
</TABLE>
See notes to consolidated financial statements.
F-37
<PAGE> 84
VORNADO CRESCENT LOGISTICS OPERATING PARTNERSHIP
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE PERIOD FROM MARCH 11, 1999
(DATE OF INCEPTION) TO DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PARTNERS' ACCUMULATED
CAPITAL DEFICIT TOTAL
<S> <C> <C> <C>
Capital contribution $ 38,723 $ -- $ 38,723
Net loss -- (9,244) (9,244)
----------- ----------- -----------
BALANCE - December 31, 1999 $ 38,723 $ (9,244) $ 29,479
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-38
<PAGE> 85
VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 11, 1999
(DATE OF INCEPTION) TO DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net loss $ (9,244)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Provision for bad debts 1,685
Depreciation and amortization 4,789
Deferral of rent expense 5,400
Gain on settlement and curtailment of benefit plan (1,363)
Changes in assets and liabilities, net of acquisitions:
Trade accounts receivable 239
Other assets (6,420)
Accounts payable and accrued expenses (1,493)
Due to Real Estate Companies 29,232
Other liabilities 3,078
--------
Net cash provided by operating activities 25,903
INVESTING ACTIVITIES:
Purchase of non-real estate assets (38,723)
Additions to property, plant, and equipment (9,666)
--------
Net cash used in investing activities (48,389)
FINANCING ACTIVITIES:
Repayment of due to Real Estate Companies (8,249)
Capital contributions 38,723
--------
Net cash provided by financing activities 30,474
--------
NET CHANGE IN CASH AND CASH EQUIVALENTS 7,988
CASH AND CASH EQUIVALENTS:
Beginning of period --
--------
End of period $ 7,988
========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 331
========
SUPPLEMENTAL INFORMATION ABOUT NONCASH
ACTIVITIES:
Liabilities assumed in connection with acquisition of
non-real estate assets $ 13,198
========
Initial working capital to be collected on behalf of
Real Estate Companies $ 21,200
========
</TABLE>
See notes to consolidated financial statements.
F-39
<PAGE> 86
VORNADO CRESCENT LOGISTICS OPERATING
PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND FOR THE PERIOD FROM
MARCH 11, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND BUSINESS
Vornado Crescent Logistics Operating Partnership (the "Partnership") was
formed on March 11, 1999. The Partnership holds its assets and conducts
its business through its wholly owned subsidiary AmeriCold Logistics, LLC
(collectively "AmeriCold Logistics"). AmeriCold Logistics, headquartered
in Atlanta, Georgia, has 6,900 employees and operates 104 temperature
controlled warehouse facilities nationwide with an aggregate of
approximately 519 million cubic feet of refrigerated, frozen, and dry
storage space. Of the 104 warehouses, AmeriCold Logistics leases 89
temperature controlled warehouses with an aggregate of approximately 428
million cubic feet and manages 15 additional warehouses containing
approximately 91 million cubic feet of space. AmeriCold Logistics provides
the frozen food industry with refrigerated warehousing and transportation
management services. Refrigerated warehouses are comprised of production
and distribution facilities. Production facilities typically serve one or
a small number of customers, generally food processors, located nearby.
These customers store large quantities of processed or partially processed
products in the facility until they are shipped to the next stage of
production or distribution. Distribution facilities primarily warehouse a
wide variety of customers' finished products until future shipment to
end-users. Each distribution facility primarily services the surrounding
regional market. AmeriCold Logistics offers transportation management
services including freight routing, dispatching, freight rate negotiation,
backhaul coordination, and distribution channel assessment. AmeriCold
Logistics temperature controlled logistics expertise and access to both
frozen food warehouses and distribution channels enable its customers to
respond quickly and efficiently to time-sensitive orders from distributors
and retailers. Additionally, AmeriCold Logistics mines limestone at two of
its locations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The consolidated financial statements of the
Partnership include the accounts of the Partnership and its subsidiary.
The Partnership is owned 60% by Vornado Operating L.P. and 40% by COPI
Cold Storage L.L.C. The partnership agreement provides that net income and
losses are allocated to each partner's account in relation to their
ownership interests. Subject to certain provisions, the Partnership
continues for a term through October 2027. Management has made estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents - Cash and cash equivalents consist of highly
liquid investments purchased with original maturities of three months or
less.
Restricted Cash - Cash restricted for uses related to payment of rent
($7,229 at December 31, 1999) and settlement of certain self-insured
liabilities ($9,658 at December 31, 1999) is classified as restricted
cash.
Property, Plant, and Equipment - Depreciation and amortization are
computed on the straight-line method over the estimated useful lives of
the respective assets. Depreciation and amortization begin the month in
which the asset is placed into service.
F-40
<PAGE> 87
Properties are reviewed for impairment if events or changes in
circumstances indicate that the carrying amount of the property may not be
recoverable. In such an event, a comparison is made of the current and
projected operating cash flows of each such property into the foreseeable
future on an undiscounted basis to the carrying amount of such property.
Such carrying amount would be adjusted, if necessary, to estimated fair
value to reflect an impairment in the value of the asset.
Revenue Recognition - Revenues include storage, transportation and
handling fees, and management fees for locations managed on behalf of
third parties. Storage revenues are generally invoiced daily and are
recognized as billed. Transportation fees and expenses are recognized upon
tender of product to common carriers, which is not materially different
than if such revenues and expenses were recognized upon delivery.
Management fees are recognized at the conclusion of each period in which
the Company is contractually entitled to such fees. Costs related to
managed facilities are included in operating expenses. AmeriCold Logistics
charges customers for both inbound and outbound handling in advance but
defers the outbound handling revenue until the product has been shipped.
Revenues from the sale of limestone are recognized upon delivery to
customers.
Income Taxes - AmeriCold Logistics has elected to be treated as a
partnership for income tax purposes. Taxable income or loss of AmeriCold
Logistics is reported in the income tax returns of the partners.
Accordingly, no provision for income taxes is made in the financial
statements of AmeriCold Logistics.
Recently Issued Accounting Standards - In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities. This statement establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000.
Because the Company does not currently utilize derivatives or engage in
significant hedging activities, management does not anticipate that
implementation of this statement will have a material effect on the
Company's financial statements.
3. ACQUISITION
In March 1999, AmeriCold Logistics purchased all of the non-real estate
assets of a group of companies owned by Vornado Realty Trust and
subsidiaries of Crescent Real Estate Equities Company and Crescent
Operating, Inc. (the "Real Estate Companies").
The purchase price of the non-real estate assets was $48.7 million
including the assumption of approximately $10 million of liabilities
assumed in connection with the closure of one of the warehouse facilities.
In addition, the Company acquired capitalized leased assets and assumed
$3.2 million of capitalized lease obligations as a result of the purchase.
The purchase method of accounting was applied to this acquisition.
Approximate fair values assigned to assets and liabilities acquired were
as follows:
<TABLE>
<S> <C>
(amounts in thousands)
Property, plant, and equipment $ 43,421
Other assets 8,500
---------
51,921
Other liabilities (13,198)
---------
$ 38,723
=========
</TABLE>
Results of operations are presented from the date of acquisition.
F-41
<PAGE> 88
4. ACCRUED EXPENSES
Detail of accrued expense as of December 31, 1999 is as follows:
(amounts in thousands)
<TABLE>
<S> <C>
Accrued payroll and related expense $ 8,855
Accrued employee retirement and other benefits 8,521
Accrued workers' compensation 7,961
Other accrued expenses 19,233
-------
$44,570
=======
</TABLE>
5. TRANSACTIONS WITH REAL ESTATE COMPANIES AND OWNERS
Amounts due to Real Estate Companies at December 31, 1999 consist of
current rent payable of $19,232,000 and current portion of deferred rent
of $10,000,000 (of which $6,000,000 was paid in March 2000). Working
capital to be collected on behalf of Real Estate Companies of $12,951,000
has been classified as a reduction of these assets.
During 1999, AmeriCold Logistics received a management fee of $201,000
from the Real Estate Companies for administrative services performed.
Included in other assets is a $952,000 receivable from the Partnership's
owners for expenditures made on their behalf for a new business venture.
6. LEASE COMMITMENTS
AmeriCold Logistics entered into leases with the Real Estate Companies
covering the warehouses used in this business. The leases, which commenced
in March 1999, generally have a 15-year term with two five-year renewal
options and provide for the payment of fixed base rent and percentage rent
based on revenues AmeriCold Logistics receives from its customers. Fixed
base rent is approximately $130 million per annum through 2003, $132
million per annum from 2004 through 2008, and $133 million per annum from
2009 through 2014. Percentage rent for each lease is based on a specified
percentage of revenues in excess of a specified base amount. The aggregate
base revenue amount under five of the six leases is approximately $321
million, and the weighted average percentage rate is approximately 36% for
the initial five-year period, approximately 39% for the period from 2004
through 2008, and approximately 41% for the period from 2009 through
February 28, 2014. The aggregate base revenue amount under the sixth lease
is approximately $32 million, and the percentage rate is 24% for the
initial two-year period, 37.5% for the period from 2002 through 2006, 40%
from 2007 through 2011, and 41% from 2012 through February 28, 2014.
AmeriCold Logistics has negotiated amendments to add four new properties,
or expansions to existing properties, which were developed by the lessor
during 1999. The aggregate rentals of the four new properties in the
initial lease year is expected to be approximately $9,400,000.
The fixed base rent for each of the two five-year renewal options is
equal, generally, to the greater of the then fair market value rent and
the fixed base rent for the immediately preceding lease year plus 5%.
AmeriCold Logistics has the right to defer the payment of 15% of fixed
base rent and all percentage rent for up to three years beginning in March
1999 to the extent that available cash, as defined in the leases, is
insufficient to pay such rent. Pursuant to the agreement, AmeriCold
Logistics exercised its deferral rights and deferred approximately $15.4
million in fixed and percentage rent. In March 2000, AmeriCold Logistics
expects to pay $10.0 million of its deferred rent obligation (of which
$6,000,000 was paid in March 2000).
F-42
<PAGE> 89
Accordingly, at December 31, 1999, AmeriCold Logistics has $10.0 million
classified as current deferred rent payable and $5.4 million classified as
deferred rent obligation.
AmeriCold Logistics is also required to pay for all costs arising from the
operation, maintenance and repair of the properties, including all real
estate taxes and assessments, utility charges, permit fees, and insurance
premiums, as well as property capital expenditures in excess of $5,000,000
annually.
AmeriCold Logistics also has operating lease agreements for equipment and
other facilities. AmeriCold Logistics pays taxes, insurance, and
maintenance costs on substantially all of the leased property. Lease terms
generally range from 5 to 20 years with renewal or purchase options.
At December 31, 1999, future minimum fixed lease payments under these
leases with the Real Estate Companies and future minimum lease payments
under operating leases other than leases with the Real Estate Companies
are as follows:
(amounts in thousands)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
REAL ESTATE OTHER
COMPANIES LESSORS TOTAL
<S> <C> <C> <C>
2000 $ 129,275 $ 6,354 $ 135,629
2001 129,277 5,870 135,147
2002 129,417 4,846 134,263
2003 129,403 3,958 133,361
2004 131,562 3,158 134,720
Thereafter 1,220,488 3,684 1,224,172
----------- --------- -----------
$ 1,869,422 $ 27,870 $ 1,897,292
=========== ========= ===========
</TABLE>
Rent expense under all lease obligations for the period was $113,899,000
for fixed rent and $26,780,000 for percentage rent.
7. EMPLOYEE BENEFIT PLANS
Defined Benefit Pension Plans - AmeriCold Logistics has defined benefit
pension plans that cover substantially all employees, other than union
employees covered by union pension plans under collective bargaining
agreements. Benefits under AmeriCold Logistics' plans are based on years
of credited service and compensation during the years preceding
retirement, or on years of credited service and established monthly
benefit levels.
Postretirement Benefits Other Than Pensions - During 1999, AmeriCold
Logistics settled and curtailed postretirement healthcare and life
insurance benefits for a substantial portion of its employees. As a
result, AmeriCold Logistics recorded a gain of approximately $1,363.
Actuarial information regarding the defined benefit pension plans and
postretirement benefits other than pensions as of December 31, 1999 is as
follows:
F-43
<PAGE> 90
<TABLE>
<CAPTION>
PENSION BENEFITS
---------------------------------
NATIONAL OTHER
RETIREMENT SERVICE POSTRETIREMENT
(amounts in thousands) INCOME PLAN RELATED PLAN BENEFITS
<S> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of period $ 33,052 $ 11,653 $ 7,150
Service cost 1,297 254 147
Interest cost 2,461 576 346
Actuarial (gain) loss (3,903) 404 (320)
Curtailments -- -- (2,735)
Settlements -- -- (1,940)
Plan transfers 2,930 (2,930) --
Plan amendments -- -- (664)
Benefits paid (2,127) (606) (64)
------------ ------------ ------------
Benefit obligation at end of year $ 33,710 $ 9,351 $ 1,920
============ ============ ============
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of period $ 25,693 $ 10,058 $ --
Actual return on plan assets 3,364 1,060 --
Employer contributions -- 967 64
Plan transfers 1,844 (1,844) --
Benefits paid (2,127) (606) (64)
------------ ------------ ------------
Fair value of plan assets at end of year $ 28,774 $ 9,635 $ --
============ ============ ============
Funded status $ (4,936) 285 $ (1,920)
Unrecognized actuarial (gain) loss (1,809) 1,409 (2)
Unrecognized prior service cost 1,338 157 (648)
------------ ------------ ------------
(Accrued) prepaid benefit cost $ (5,407) $ 1,851 $ (2,570)
============ ============ ============
Amounts recognized in the combined balance sheet consist of:
Accrued benefit liability $ (5,407) $ -- $ (2,570)
Prepaid asset -- 1,851 --
------------ ------------ ------------
Net amount recognized $ (5,407) $ 1,851 $ (2,570)
============ ============ ============
Weighted-average assumptions as of December 31, 1999:
Discount rate 7.75% 7.75% 7.75%
Expected return 9.50% 9.50% N/A
Rate of compensation increase 4.00% N/A N/A
</TABLE>
F-44
<PAGE> 91
<TABLE>
<CAPTION>
PENSION BENEFITS
---------------------------------
NATIONAL OTHER
RETIREMENT SERVICE POSTRETIREMENT
(amounts in thousands) INCOME PLAN RELATED PLAN BENEFITS
<S> <C> <C> <C>
COMPONENTS OF NET PERIODIC
BENEFIT COST:
Service cost $ 1,297 $ 254 $ 147
Interest cost 2,461 576 346
Expected return on plan assets (2,531) (820) --
Recognized net actuarial loss 338 18 67
Amortization of prior service cost 104 5 (56)
----------- ------------ -------
$ 1,669 $ 33 $ 504
=========== ============ =======
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage point change
in assumed health care cost-trend rates would have the following effects
(amounts in thousands):
<TABLE>
<CAPTION>
ONE-PERCENTAGE ONE-PERCENTAGE
POINT INCREASE POINT DECREASE
--------------- ----------------
<S> <C> <C>
Effect on total of service and interest cost components $ 25 $ (23)
</TABLE>
Profit Sharing - AmeriCold Logistics has defined contribution employee
benefit plans which cover all eligible employees. The plans also allow
contributions by plan participants in accordance with Section 401(k) of
the Internal Revenue Code. Profit sharing expense for the period ended
December 31, 1999 was approximately $4,060,000.
Deferred Compensation - AmeriCold Logistics has deferred compensation and
supplemental retirement plan agreements with certain of its executives.
The agreements provide for certain benefits at retirement or disability,
and also provide for survivor benefits in the event of death of the
employee. AmeriCold Logistics charges expense for the accretion of the
liability each year.
The net expense for all deferred compensation and supplemental retirement
plans for the period was approximately $164,000.
F-45
<PAGE> 92
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE MEMBERS OF
CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC:
We have audited the accompanying consolidated balance sheets of Charter
Behavioral Health Systems, LLC (a Delaware limited liability corporation) and
subsidiaries as of September 30, 1997 and 1998, and the related consolidated
statements of operations, changes in members' capital (deficit) and cash flows
for the period June 17, 1997 to September 30, 1997 and for the year ended
September 30, 1998. These consolidated financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Charter Behavioral Health
Systems, LLC and subsidiaries as of September 30, 1997 and 1998, and the results
of their operations and their cash flows for the period June 17, 1997 to
September 30, 1997 and for the year ended September 30, 1998, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred recurring losses from operations
and has a net capital deficiency that raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index to the
consolidated financial statements is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not a required part of the
basic financial statements. The schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states, in all material respects, the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
ATLANTA, GEORGIA
DECEMBER 3, 1998
(except with respect to
the matters discussed in Note 13,
as to which date is March 30, 2000)
F-46
<PAGE> 93
CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30,
------------------------
1997 1998
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash, including cash equivalents of $15,477 in 1997 and $9,117 in 1998, at cost,
which approximates market value ............................................. $ 23,443 $ 13,493
Accounts receivable, less allowance for doubtful accounts
of $17,605 in 1997 and $33,548 in 1998 ...................................... 107,961 120,187
Accounts receivable from Magellan ................................................ 5,090 --
Supplies ......................................................................... 2,313 2,665
Prepaid expenses ................................................................. 9,385 10,538
Other current assets ............................................................. 345 236
--------- ---------
Total Current Assets ........................................................ 148,537 147,119
Property and Equipment:
Buildings and improvements ....................................................... 11,879 9,616
Equipment ........................................................................ 7,121 11,924
--------- ---------
19,000 21,540
Accumulated depreciation ......................................................... (662) (2,916)
--------- ---------
18,338 18,624
Construction in progress ......................................................... 86 2,524
--------- ---------
Total Property and Equipment ................................................ 18,424 21,148
Other Long-Term Assets .................................................................. 6,471 6,699
Goodwill, net of accumulated amortization of $3 in 1997 and $17 in 1998 ................. 286 294
Deferred Financing Fees, net of accumulated amortization of $115 in 1997 and $513 in 1998 1,876 1,878
--------- ---------
$ 175,594 $ 177,138
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these consolidated balance sheets.
F-47
<PAGE> 94
CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30,
------------------------
1997 1998
--------- ---------
<S> <C> <C>
LIABILITIES AND MEMBERS' CAPITAL (DEFICIT)
Current Liabilities:
Accounts payable ................................................. $ 34,864 $ 54,443
Accounts payable to Magellan ..................................... -- 36,857
Accrued liabilities .............................................. 33,578 47,279
Current maturities of long-term debt and capital lease obligations 55 2,800
--------- ---------
Total Current Liabilities ................................... 68,497 141,379
Long-Term Debt and Capital Lease Obligations ............................ 65,860 67,200
Reserve for Unpaid Claims ............................................... 2,686 10,812
Deferred Rent ........................................................... 3,956 17,054
Long-Term Obligations to Lessor ......................................... 803 3,803
Minority Interest and Other Long-Term Liabilities ....................... 36 3,768
Members' Capital (Deficit):
Preferred interests .............................................. 35,000 35,000
Common interests ................................................. 15,000 15,000
Accumulated deficit ............................................. (16,244) (116,878)
--------- ---------
Total Members' Capital (Deficit) ............................ 33,756 (66,878)
--------- ---------
$ 175,594 $ 177,138
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these consolidated balance sheets.
F-48
<PAGE> 95
CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
106 Days Ended Year Ended
September 30, September 30,
1997 1998
------------- -------------
<S> <C> <C>
Net revenue .......................................... $ 213,730 $ 730,447
------------- -------------
Costs and expenses:
Salaries, supplies and other operating expenses 170,619 606,628
Franchise fees - Magellan ..................... 22,739 78,584
Crescent Lease expense ........................ 16,919 56,133
Bad debt expense .............................. 17,437 63,895
Depreciation and amortization ................. 668 5,693
Interest, net ................................. 1,592 5,263
Unusual items ................................. -- 11,125
------------- -------------
229,974 827,321
------------- -------------
Loss before minority interest ........................ (16,244) (96,874)
Minority interest .................................... -- 41
------------- -------------
Net loss ............................................. (16,244) (96,915)
Preferred dividend requirement ....................... -- 3,719
------------- -------------
Net loss applicable to common members ................ $ (16,244) $ 100,634)
============= =============
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these consolidated statements.
F-49
<PAGE> 96
CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' CAPITAL (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
106 DAYS ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
------------- -------------
<S> <C> <C>
Preferred Interests:
Balance, beginning of period ...................................... $ -- $ 35,000
Issuance of cumulative redeemable preferred interests - Magellan .. 17,500 --
Issuance of cumulative redeemable preferred interests - COI ....... 17,500 --
------------- -------------
Balance, end of period ............................................ 35,000 35,000
------------- -------------
Common Interests:
Balance, beginning of period ...................................... -- 15,000
Capital contribution - Magellan ................................... 7,500 --
Capital contribution - COI ........................................ 7,500 --
------------- -------------
Balance, end of period ............................................ 15,000 15,000
------------- -------------
Accumulated Deficit:
Balance, beginning of period ...................................... -- (16,244)
Net loss applicable to common members ............................. (16,244) (100,634)
------------- -------------
Balance, end of period ............................................ (16,244) (116,878)
------------- -------------
Total Members' Capital (Deficit) ...................................... $ 33,756 $ (66,878)
============= =============
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these consolidated statements.
F-50
<PAGE> 97
CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
106 Days Ended Year Ended
September 30, September 30,
1997 1998
-------------- --------------
<S> <C> <C>
Cash Flows From Operating Activities
Net loss ............................................................... $ (16,244) $ (96,915)
------------- -------------
Adjustments to reconcile net loss to net cash used in operating
activities:
(Gain) loss on sale of businesses .................................... (355) 2,688
Depreciation and amortization ........................................ 668 5,693
Non-cash interest expense ............................................ 115 398
Cash flows from changes in assets and liabilities, net of effects from
sales and acquisitions of businesses:
Accounts receivable, net ..................................... (98,504) (5,318)
Accounts receivable/payable to Magellan ...................... (5,090) 41,947
Other current assets ......................................... (5,089) (1,096)
Other long-term assets ....................................... (4,565) (275)
Accounts payable and accrued liabilities ..................... 53,791 30,848
Reserve for unpaid claims .................................... 2,686 8,126
Deferred rent ................................................ 3,956 13,098
Minority interest, net of dividends paid ..................... -- (25)
Other liabilities ............................................ 800 43
------------- -------------
Total adjustments ............................................ (51,587) 96,127
------------- -------------
Net cash used in operating activities ................... (67,831) (788)
------------- -------------
Cash Flows From Investing Activities
Capital expenditures ................................................... (149) (9,549)
Purchase of information systems equipment from Magellan ................ (5,000) --
Purchase of net assets from Magellan ................................... (11,288) --
Proceeds from sale of businesses, net of transaction costs ............. -- 1,160
Acquisition of businesses, net of cash acquired ........................ -- (5,327)
------------- -------------
Net cash used in investing activities ................... (16,437) (13,716)
------------- -------------
Cash Flows From Financing Activities
Payments on debt and capital lease obligations ......................... (16) (46)
Proceeds from issuance of debt, net of issuance costs .................. 98,009 4,600
Proceeds from capital contributions - Magellan ......................... 2,218 --
Proceeds from capital contributions - COI .............................. 7,500 --
------------- -------------
Net cash provided by financing activities ............... 107,711 4,554
------------- -------------
Net increase(decrease) in cash and cash equivalents ........................... 23,443 (9,950)
Cash and cash equivalents at beginning of period .............................. -- 23,443
------------- -------------
Cash and cash equivalents at end of period .................................... $ 23,443 $ 13,493
============= =============
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these consolidated statements.
F-51
<PAGE> 98
CHARTER BEHAVIORAL HEALTH SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1998
1. ORGANIZATION AND BASIS OF PRESENTATION
The consolidated financial statements of Charter Behavioral Health Systems, LLC
("CBHS" or the "Company"), a Delaware limited liability corporation, include the
accounts of the Company and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
The Company provides behavioral healthcare services in the United States. The
Company's principal services include group and individual inpatient treatment,
day and partial hospitalization services, group and individual outpatient
treatment and residential services.
On June 17, 1997 the Company began operations pursuant to a series of
transactions (the "Crescent Transactions") between Magellan Health Services,
Inc. ("Magellan"), Crescent Real Estate Equities Limited Partnership
("Crescent") and Crescent Operating, Inc. ("COI"). The Crescent Transactions
provided for the following:
o Magellan sold to Crescent 80 behavioral healthcare facilities (76 operating
and four held for sale) ("Purchased Facilities") and related medical office
buildings formerly operated by Magellan.
o The Company operates the Purchased Facilities and the Contributed
Facilities (defined below) (together the "Facilities"). The Company is
owned equally by Magellan and COI.
o Magellan contributed to the Company certain property and intangible rights
used in connection with the Facilities with a net book value of
approximately $5.0 million in exchange for its equity interest in CBHS. The
property that was contributed by Magellan included five acute care
psychiatric hospitals and other ancillary facilities that Magellan leased
from third parties (together the "Contributed Facilities"). The Company
also purchased certain assets from Magellan relating to Magellan's
information systems subsidiary for $5.0 million.
o COI contributed $5.0 million of cash as its initial equity investment in
the Company.
o CBHS entered into a service agreement with Magellan pursuant to which the
Company manages Magellan's interest in certain joint ventures with
unaffiliated third parties, including joint ventures that operate or manage
ten behavioral healthcare facilities. Magellan is the general partner or
managing entity of such joint ventures.
o CBHS leased the Purchased Facilities from Crescent under an initial 12-year
lease term with four renewal terms of five years each ("Crescent Lease").
CBHS pays annual base rent to Crescent, which was initially $41.7 million
and increases at 5% compounded annually (See Note 5).
o CBHS and certain of its subsidiaries entered into franchise agreements with
Magellan (the "Franchise Agreements") pursuant to which CBHS and such
subsidiaries operate using the "CHARTER' name, services and protocols and
pay Magellan annual franchise fees, subject to increase, of approximately
$78.3 million (See Note 6). The franchise fees due Magellan are subordinate
to the payment of rent due Crescent.
o Both Magellan and COI contributed an additional $2.5 million in cash to the
capital of CBHS. In addition, each made a commitment to loan CBHS up to
$17.5 million each, for a period of five years. Such loans were made to
CBHS by each for $17.5 million ("Member Loans") and, effective September
30, 1997, were converted to cumulative redeemable preferred interests (See
Note 8).
F-52
<PAGE> 99
The Company's financial statements have been prepared assuming that the Company
will continue as a going concern. As shown in the financial statements during
the 106 days ended September 30, 1997 and the year ended September 30, 1998, the
Company has incurred losses from operations, and therefore, the Company has a
significant accumulated deficit at September 30, 1998. The financial statements
do not include any adjustments relating to the recoverability and classification
of liabilities that might be necessary should the Company be unable to continue
as a going concern.
The Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flows to meet its obligations on a timely basis. The
Company believes its cash flows and profitability are influenced by the cyclical
nature of the behavioral healthcare provider business, with a reduced demand for
certain services generally occurring during the first fiscal quarter around
major holidays and during the summer months comprising the fourth fiscal
quarter. Management has formulated and implemented a business plan to reduce
overhead and add new lines of business to improve the cash flows and the
profitability of the Company. Additionally, the Company is actively pursuing
additional sources of capital and/or borrowings.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
NET REVENUE
Net revenue is based on established billing rates, less estimated allowances for
patients covered by Medicare and other contractual reimbursement programs, and
discounts from established billing rates. Amounts received by the Company for
treatment of patients covered by Medicare and other contractual reimbursement
programs, which may be based on cost of services provided or predetermined
rates, are generally less than the established billing rates of the Company's
hospitals. Final determination of amounts earned under contractual reimbursement
programs is subject to review and audit by the applicable agencies. Net revenue
in fiscal 1998 included a charge of $0.7 million for the settlement and
adjustment of reimbursement issues related to the previous fiscal period.
Management believes that adequate provision has been made for any adjustments
that may result from such reviews.
ADVERTISING COSTS
The production costs of advertising are expensed as incurred. The Company does
not consider any of its advertising costs to be direct-response and,
accordingly, does not capitalize such costs. Advertising costs consist primarily
of radio and television air time, which is amortized as utilized, and printed
media services. Advertising expense was approximately $6.4 million and $20.3
million for the 106 days ended September 30,1997 and for the year ended
September 30, 1998, respectively.
CHARITY CARE
The Company provides healthcare services without charge or at amounts less than
its established rates to patients who meet certain criteria under its charity
care policies. Because the Company does not pursue collection of amounts
determined to be charity care, they are not reported as revenue. For the 106
days ended September 30, 1997 and for the year ended September 30, 1998, the
Company provided, at its established billing rates, approximately $5.3 million
and $28.4 million, respectively, of such care.
F-53
<PAGE> 100
INTEREST, NET
The Company records interest expense net of interest income. Interest income for
the 106 days ended September 30, 1997 and for the year ended September 30, 1998
was approximately $0.2 million and $0.3 million, respectively.
CASH AND CASH EQUIVALENTS
Cash equivalents are short-term, highly liquid interest-bearing investments with
a maturity of three months or less when purchased, consisting primarily of money
market instruments.
CONCENTRATION OF CREDIT RISK
Accounts receivable from patient revenue subject the Company to a concentration
of credit risk with third-party payors that include insurance companies, managed
healthcare organizations and governmental entities. The Company establishes an
allowance for doubtful accounts based upon factors surrounding the credit risk
of specific payors, historical trends and other information. Management believes
the allowance for doubtful accounts is adequate to provide for normal credit
losses.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Expenditures for renewals and
improvements are charged to the property accounts. Replacements and maintenance
and repairs that do not improve or extend the lives of the respective assets are
expensed as incurred. Amortization of capital lease assets is included in
depreciation expense. Depreciation is provided on a straight-line basis over the
estimated useful lives of the assets, which is generally three to ten years for
equipment. Leasehold improvements are amortized over the useful lives of the
related assets or the terms of the leases, whichever is shorter. Depreciation
and amortization expense was $0.7 million and $5.7 million for the 106 days
ended September 30, 1997 and for the year ended September 30, 1998,
respectively.
INTANGIBLE ASSETS
Intangible assets are composed principally of goodwill and deferred financing
costs. Goodwill represents the excess of the cost of businesses acquired over
the fair value of the net identifiable assets at the date of acquisition and is
amortized using the straight-line method over 25 years. Deferred financing costs
are the costs incurred by the Company to obtain and amend its credit agreement
(See Note 5) and are amortized over the term of the related agreement (five
years).
The Company continually monitors events and changes in circumstances which could
indicate that carrying amounts of intangible assets may not be recoverable. When
events or changes in circumstances are present that indicate that the carrying
amount of intangible assets may not be recoverable, the Company assesses the
recoverability of intangible assets by determining whether the carrying value of
such intangible assets will be recovered through the future cash flows expected
from the use of the asset and its eventual disposition. No impairment losses on
intangible assets were recorded by the Company for the 106 days ended September
30, 1997 or for the year ended September 30, 1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates that the carrying amounts of financial instruments
including cash and cash equivalents, accounts receivable and accounts payable
approximated their fair values as of the date of the balance sheets due to the
relatively short maturity of these instruments.
F-54
<PAGE> 101
3. ACQUISITIONS, JOINT VENTURES AND DIVESTITURES
ACQUISITIONS
On September 28, 1998, the Company acquired four inpatient behavioral healthcare
facilities, two related transitional care businesses and a behavioral healthcare
contract management business (collectively "Acquired Hospitals") from Ramsay
Health Care, Inc. The purchase price for the Acquired Hospitals was
approximately $5.3 million. The Company accounted for the acquisition using the
purchase method of accounting. The operating results of the Acquired Hospitals
are included in the Company's Consolidated Statements of Operations since the
date of acquisition.
JOINT VENTURES
Effective September 2, 1998, the Company entered into a hospital-based
behavioral healthcare joint venture ("Brentwood JV") with Brentwood Behavioral
Healthcare, LLC. The Company contributed certain assets from an existing
behavioral healthcare facility in Shreveport, Louisiana, to the joint venture in
exchange for its 50% interest in the Brentwood JV. The Company subsequently
closed its Shreveport, Louisiana, facility. The Company accounts for its
investment in the Brentwood JV using the equity method.
DIVESTITURES
On September 30, 1997, the Company sold the operations of a 60-bed behavioral
healthcare hospital in Sioux Falls, South Dakota, for $422,000. Proceeds from
the sale were not received until October 2, 1997. The transaction resulted in a
gain of $355,000.
4. UNUSUAL ITEMS
The following table summarizes the unusual items recorded during the year ended
September 30, 1998 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1998
--------------------
<S> <C>
Purchase Terminations........................... $ 4,450
Severance....................................... 3,002
Divestitures.................................... 2,688
Other........................................... 985
--------------------
$ 11,125
====================
</TABLE>
PURCHASE TERMINATIONS
In the first quarter of fiscal 1998, the Company recorded a charge of
approximately $2.1 million related to expenses incurred in connection with a
terminated acquisition of an unrelated entity. In the fourth quarter of fiscal
1998, the Company recorded a charge of approximately $2.3 million related to
expenses incurred in connection with terminated transactions with Magellan and
COI that included (i) the purchase of Magellan's franchise operations relating
to the "CHARTER" system and certain other assets, (ii) termination of the
Franchise Agreements, (iii) the sale of Magellan's equity interest in CBHS to
COI and (iv) review of the potential to obtain new capital for the Company
(collectively the "Magellan Buyout"). See Note 12.
SEVERANCE
The Company recorded charges of approximately $3.0 million during fiscal 1998
related to severance and related benefits for employees who were terminated
during fiscal 1998 pursuant to planned overhead reductions.
F-55
<PAGE> 102
DIVESTITURES
In June 1998, the Company sold a 77-bed behavioral healthcare facility in
Virginia for approximately $0.8 million which resulted in a loss of
approximately $2.7 million.
OTHER
In the fourth quarter of fiscal 1998, the Company accrued approximately $0.8
million for estimated expenses incurred in connection with the settlement of
various litigation matters. Also in the fourth quarter of fiscal 1998, the
Company closed and consolidated one behavioral health care operation in Texas
and recorded charges of approximately $0.2 million related to severance and
related benefits and closure costs.
5. LONG-TERM DEBT AND LEASE OBLIGATIONS
Information with regard to the Company's long-term debt and capital lease
obligations at September 30, 1997 and 1998 is as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------------------------
1997 1998
--------------------- --------------------
Revolving Credit Agreement due through 2002
<S> <C> <C>
(6.90234 % to 7.59375 %)...................... $ 65,000 $ 70,000
10.5% Capital lease obligations.................... 915 --
--------------------- --------------------
65,915 70,000
Less amounts due within one year.............. 55 2,800
--------------------- --------------------
$ 65,860 $ 67,200
===================== ====================
</TABLE>
The aggregate scheduled maturities of long-term debt during the five years
subsequent to September 30, 1998 are as follows (in thousands): 1999--$2,800;
2000--$0; 2001--$0, 2002--$67,200; 2003--$0.
The Company's debt is carried at cost which approximates fair market value.
REVOLVING CREDIT AGREEMENTS
On June 17, 1997, the Company entered into a credit agreement (the "Revolving
Credit Agreement") with certain financial institutions for a five-year senior
secured revolving credit facility in an aggregate committed amount of $100
million. Effective September 30, 1998, the Revolving Credit Agreement was
amended to provide for, among other things, modification of financial covenant
levels and increases in interest rates.
The maximum amount allowed to be borrowed under the Revolving Credit Agreement
is based on a working capital calculation. At September 30, 1998, the Company
did not have any amounts available for borrowing under the Revolving Credit
Agreement. The Revolving Credit Agreement is secured by the tangible and
intangible personal property, including accounts receivable, owned by the
Company.
The loans outstanding under the Revolving Credit Agreement bear interest
(subject to certain potential adjustments) at a rate per annum equal to one,
two, three or six-month LIBOR plus 2.75% or the Alternative Base Rate ("ABR"),
as defined, plus 1.75%. Interest on ABR loans is payable at the end of each
fiscal quarter. Interest on LIBOR-based loans is payable at the end of their
respective terms, but at a minimum of every three months.
F-56
<PAGE> 103
COVENANTS
The Revolving Credit Agreement contains a number of restrictive covenants which,
among other things, limit the ability of the Company and certain of its
subsidiaries to incur other indebtedness, engage in transactions with
affiliates, incur liens, make certain restricted payments, and enter into
certain business combinations. The Revolving Credit Agreement also requires the
Company to maintain certain specified financial ratios. The Company was in
compliance with all debt covenants under the Revolving Credit Agreement, as
amended, at September 30, 1998. Budget projections prepared by management for
the fiscal year ending September 30, 1999 estimate that the Company will be in
compliance with all debt covenants under the Revolving Credit Agreement, as
amended, during fiscal 1999. Management believes that its budget projections for
fiscal 1999 are reasonable and achievable, however, there can be no assurances
that such projections will be achieved. If the Company were to fail to achieve
such budget projections during fiscal 1999, the Company could become in
noncompliance with certain debt covenants resulting in an event of default under
the Revolving Credit Agreement.
CRESCENT LEASE
Effective June 17, 1997, the Company entered into an agreement to lease the
Purchased Facilities from Crescent under an initial 12-year lease term with four
renewal terms of five years each. The Crescent Lease requires the Company to pay
all maintenance, property tax and insurance costs.
The base rent for the first year of the initial term was $41.7 million and
increases at 5% compounded annually. The Company accounts for the Crescent Lease
as an operating lease and accordingly, records base rent expense on a
straight-line basis over the lease term. Effective December 1, 1997, Crescent
and the Company amended the Crescent Lease to delete the requirement for the
Company to pay an additional annual rent of $20.0 million. This amendment has no
impact on future commitments for the Company as it remains directly liable for
the capital expenditures and other obligations under the Crescent Lease which
were to be funded by the additional annual rent.
OTHER LEASES
The Company also leases certain of its operating facilities other than the
Purchased Facilities. The leases, which expire at various dates through 2027,
generally require the Company to pay all maintenance, property tax and insurance
costs.
In connection with the purchase of the Acquired Hospitals, CBHS entered into an
agreement to lease a behavioral healthcare facility under an initial eight-year
lease term with two renewal terms of four years each. The lease requires the
Company to pay all maintenance, property tax and insurance costs. The base rent
is $270,000, subject to increases for inflation. The Company accounts for the
lease as an operating lease.
At September 30, 1998, aggregate amounts of future minimum payments under
operating leases were as follows (in thousands): 1999-$49,225; 2000-$49,719;
2001-$50,562; 2002-$52,597; 2003-$54,972; subsequent to 2003-$367,948.
Rent expense for the 106 days ended September 30, 1997 and for the year ended
September 30, 1998 was $20.0 million and $67.4 million, respectively.
6. FRANCHISE FEES - MAGELLAN
Effective June 17, 1997, the Company and certain of its subsidiaries entered
into franchise agreements with Magellan, pursuant to which CBHS and such
subsidiaries operate using the "CHARTER" name, services and protocols.
The franchise agreements provide, among other things, that:
o Magellan agrees to use its commercially reasonable best efforts, subject to
applicable law, to cause CBHS and such subsidiaries to have "preferred
provider" status in connection with Magellan's managed behavioral
healthcare business on a basis substantially consistent with existing
agreements for such business.
F-57
<PAGE> 104
o Magellan agrees to operate or provide a toll free "800" telephone number
and call center as a means of assisting customers to locate the places of
business of franchisees.
o Franchisees were granted a right to a defined territory to engage in the
business of providing behavioral healthcare business, as defined.
o Magellan will provide franchisees with the following assistance: (i)
advertising and marketing assistance including consultation, access to
media buying programs and access to broadcast and other advertising
materials produced by Magellan from time to time for franchisees; (ii) risk
management services, including risk financial planning, loss control and
claims management; (iii) outcomes monitoring; (iv) national and regional
contracting services; and (v) consultation by telephone or at the Magellan
offices with respect to matters relating to the franchisee's business in
which Magellan has expertise, including reimbursement, government
relations, clinical strategies, regulatory matters, strategic planning and
business development.
Franchise fees payable by the Company are the greater of (i) 78.3 million,
subject to increases for inflation; or (ii) $78.3 million, plus 3% of gross
revenues over $1 billion and not exceeding $1.2 billion and 5% of gross revenues
over $1.2 billion. Pursuant to a subordination agreement, franchise fees
generally are subordinated to base rent under the Crescent Lease and the 5%
annual increase.
The initial term of the franchise agreements is 12 years with four renewal terms
of five years each.
Pursuant to the provisions of the Franchise Agreements, the Company must pay
additional franchise fees to Magellan on management contract agreements entered
into during the term of the Franchise Agreements ("Managed Business"). Managed
Business franchise fees payable by the Company are 15% or 30% of the Managed
Business total fees less total direct costs for contract locations within or
outside of the Company's existing franchise territories, respectively. Managed
Business franchise fees expense was $0 and $0.3 million for the 106 days ended
September 30, 1997 and for the year ended September 30, 1998, respectively.
On December 22, 1997, Magellan and the Company entered into a management
agreement relating to the operation of the "call centers" formerly operated by
Magellan. The Company received $5.9 million as consideration for performing the
various obligations relating to the "call centers" for the 18-month period ended
June 21, 1999.
The Company has not made total monthly franchise fee payments to Magellan since
February 1998, and, as a result, is in default under the Franchise Agreements.
Franchise fee arrearages are approximately $38.0 million at September 30, 1998.
In addition to other remedies, whenever franchise fees are past due for any
reason in the amount of $6.0 million or more, Magellan has the right to prohibit
any incentive compensation to CBHS management and prohibit any vesting of CBHS
management equity. Whenever fees are past due in the amount of $18.0 million or
more, Magellan has the right to prohibit any salary increases for key personnel
of CBHS, prohibit any additional hiring by CBHS, and prohibit any new direct or
indirect hospital acquisitions or joint ventures participation. If franchise
fees are past due in an amount greater than $24.0 million, Magellan has the
right to require a 5% cutback on budgeted expenses under the then-current
approved CBHS annual budget, require monthly approval of expenditures of CBHS,
including capital and operating expenditures, and require the transfer of
control and management of CBHS and CBHS franchisees to Magellan.
During the fourth quarter of fiscal 1998, due to the franchise fee arrearages,
Magellan exercised its limited management rights under the franchise agreements
and, with CBHS's board of directors' support, made operational and management
changes at CBHS. Subsequent to September 30, 1998, Magellan notified the CBHS
board of directors that it was relinquishing its exercise of limited management
rights of CBHS.
7. BENEFIT PLAN
The Company has a defined contribution retirement plan (the "401(k) Plan").
Employee participants can elect to voluntarily contribute up to 15% of their
compensation to the 401(k) Plan. The Company makes contributions to the 401(k)
Plan based on employee compensation and contributions. The Company makes a
discretionary contribution of 2% of each employee's compensation and matches 50%
of each employee's contribution up to 3% of their compensation.
F-58
<PAGE> 105
During the year ended September 30, 1998, the Company made contributions of
approximately $2.7 million to the 401(k) Plan.
8. CUMULATIVE REDEEMABLE PREFERRED INTERESTS
Effective September 30, 1997, Magellan and COI each agreed to exchange their
respective Member Loans for cumulative redeemable preferred interest ("Preferred
Interests") in the Company. The Preferred Interests are callable in whole at the
Company's option on or after April 1, 1998, at an amount equal to the initial
amount plus all accrued dividends thereon. Each holder of Preferred Interests
receives preferential allocation of the Company's profits computed at 10% per
annum on a cumulative basis, compounded monthly. In addition, each Preferred
Interests has a similar preferred position in the event of dissolution of the
Company. The Company recorded approximately $3.7 million in fiscal 1998 relating
to this dividend requirement, which is all unpaid and included in Other
Long-Term Liabilities at September 30, 1998.
9. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------------------
1997 1998
----------------- ----------------
<S> <C> <C>
Salaries and wages............................... $ 18,220 $ 20,334
Property taxes................................... 4,874 5,157
Interest......................................... 333 105
Other............................................ 10,151 21,683
----------------- ----------------
$ 33,578 $ 47,279
================= ================
</TABLE>
10. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information for the 106 days ended September 30, 1997 and
for the year ended September 30, 1998 is as follows (in thousands):
<TABLE>
<CAPTION>
106 DAYS ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
------------------- -----------------
<S> <C> <C>
Interest paid........................................................ $ 1,291 $ 5,561
Exchange of debt for cumulative preferred interest - COI............. 17,500 --
Exchange of debt for cumulative preferred interest - Magellan........ 17,500 --
Initial capital contribution from Magellan, primarily property and
equipment less assumed liabilities ............................. 5,282 --
Account receivable for the sale of facility.......................... 386 --
Accrued dividend requirement on cumulative redeemable
preferred interests............................................. -- 3,719
Capital lease obligation assigned with sale of facility.............. -- 874
</TABLE>
11. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As part of the Crescent Transactions, (i) certain items of working capital were
purchased from Magellan, (ii) the Company agreed to collect Magellan's patient
accounts receivable outstanding as of the closing date for a fee of 5% of cash
collections and (iii) the Company agreed to manage Magellan's interest in
certain joint ventures for a management fee. Included in net revenues for the
106 days ended September 30, 1997 and for the year ended
F-59
<PAGE> 106
September 30, 1998 are approximately $5.0 million and $2.0 million,
respectively, of these collection fee revenues and approximately $2.1 million
and $5.5 million, respectively, of these joint venture management fees.
The Company had a net receivable from Magellan as of September 30, 1997 of
approximately $5.1 million and a net payable to Magellan as of September 30,
1998 of approximately $36.9 million. This receivable/payable results from (i)
amounts due for the management of Magellan's joint ventures as of September 30,
1997 and 1998, (ii) amounts due for the collection fees on Magellan's patient
account receivable as of September 30, 1997 and 1998, (iii) receivable for the
settlement of working capital related matters as of September 30, 1997 and 1998,
(iv) receivable for the reimbursement effect associated with the collection fees
as of September 30, 1997 and 1998 and (v) payable for the franchise fees as of
September 30, 1998.
Effective April 1, 1998, the Company entered into an agreement with Green Spring
Health Services, Inc. ("Green Spring"), a wholly-owned subsidiary of Magellan,
for managed mental health, substance abuse and employee assistance plan services
for the Company's employees. During fiscal 1998, the Company paid approximately
$0.1 million to Green Spring for these services.
John C. Goff was the Chairman of CBHS and the Vice Chairman of both Crescent and
COI. During fiscal 1998, the Company paid approximately $0.4 million to John
Goff for salary and related benefits. In November 1998, Mr. Goff resigned his
position on the CBHS board. Richard P. Knight, the Chief Financial Officer of
COI, was appointed to fill the vacancy on the CBHS board left by Mr. Goff's
resignation. Jeffrey L. Stevens of COI was subsequently elected Chairman of
CBHS.
12. COMMITMENTS AND CONTINGENCIES
The Company carries general and professional liability insurance from an
unrelated commercial insurance carrier with a self insured retention of $1.5
million per occurrence and $8.0 million in the aggregate, on a claim made basis.
In addition, the Company has an umbrella policy with coverage up to $75.0
million per occurrence and in the aggregate.
Magellan and the predecessor to the Company's Orlando, Florida facility (the
"Orlando Facility") were named as defendants in a complaint entitled United
States of America ex rel. Francine M. Mettevis and Rhea Rowan v. Charter
Hospital of St. Louis, Inc. et al. The action was filed on November 6, 1994 as a
qui tam action in the United States District court for the Middle District of
Florida. Magellan, the Department of Justice, and the Company entered into a
settlement of the action in August 1998. Pursuant to the settlement agreement,
Magellan paid the government $4.75 million and the Company entered into a
Corporate Integrity Agreement for the Orlando Facility whereby the Orlando
Facility will be monitored for five years by the Department of Health and Human
Services ("HHS) and the Office of the Inspector General ("OIG") as well as a
concurrent reviewer. In the settlement agreement, the Company also agreed that
the Orlando Facility would not bill Medicare for the treatment of Medicare
patients for a period of 12 to 15 months beginning August 1, 1998 (the
"Non-Billing Period"). The Company intends to seek indemnification from Magellan
under the Crescent Transactions for all of the fees, costs, expenses and losses
it incurs in connection with the settlement agreement and the Corporate
Integrity Agreement. The Company has been reimbursed by Magellan for losses and
costs it has incurred through October 1998 which relate to the services provided
by the Orlando Facility to Medicare beneficiaries.
In connection with the Magellan Buyout, Magellan and COI entered into a Support
Agreement pursuant to which COI agreed, under certain conditions, to assist the
Company in obtaining the funds required to consummate the contemplated
transactions and to pay expenses incurred in obtaining such funds. On August 19,
1998, Magellan and COI each announced the termination of negotiations regarding
the Magellan Buyout. On November 5, 1998, Magellan notified COI that Magellan
believes COI owes CBHS $2.3 million for the reimbursement of expenses incurred
by the Company in connection with attempts to obtain financing for the
contemplated transactions. COI disputes this matter which will be sent to
arbitration. See Note 4.
In April 1998, following the death of a patient at the Company's Greensboro,
North Carolina facility ("Greensboro Facility"), the North Carolina Department
of Health and Human Services ("NC HHS") conducted a survey of that facility. On
April 14, 1998, the Greensboro Facility received notice that as a result of the
survey, NC HHS was recommending to the Health Care Financing Administration
("HCFA") that the Greensboro Facility be excluded
F-60
<PAGE> 107
from participation in Medicare within 23 days. Similarly, on April 14, 1998,
the Greensboro Facility received notice that as a result of the survey, NC HHS
intended to revoke the Greensboro Facility's state license. In response to such
notices, the Company submitted a plan of correction and refutation of
deficiencies with HCFA and NC HHS, and NC HHS conducted a subsequent visit on
May 4 through May 6, 1998. On May 7, 1998, the Greensboro Facility received
notice from HCFA that based on the findings in the second visit, the date
scheduled for involuntary termination was extended to July 7, 1998. On June 5,
1998, the Greensboro Facility entered into a settlement agreement with NC HHS
which resolved all outstanding regulatory and operational issues with NC HHS
and HCFA arising from the patient's death. The local District Attorney's office
and the North Carolina Board of Nursing ("NCBN") have continued their separate
investigations into this incident. An indictment of one of the Greensboro
Facility's employees has been returned while the NCBN continues its
investigation. At this stage, it is not possible to predict whether any future
action will be taken against the Greensboro Facility or any of its other
employees involved in the patient's death, the likelihood of an unfavorable
outcome, or the amount of any potential loss associated with any such action.
The healthcare industry is subject to numerous laws and regulations. The
subjects of such laws and regulations include, but are not limited to, matters
such as licensure, accreditation, government healthcare program participation
requirements, reimbursement for patient services, and Medicare and Medicaid
fraud and abuse. Recently, government activity has increased with respect to
investigations and / or allegations concerning possible violations of fraud and
abuse and false claims statutes and regulations by healthcare providers.
Entities that are found to have violated these laws and regulations may be
excluded from participating in government healthcare programs, subjected to
fines or penalties or required to repay amounts received from the government for
previously billed patient services. The Office of the Inspector General of the
Department of Health and Human Services and the United States Department of
Justice and certain other governmental agencies are currently conducting
inquiries and / or investigations regarding the compliance by the Company and
certain of its subsidiaries with such laws and regulations. In addition, the
Company is also subject to or party to litigation, claims and civil suits
relating to its operations and business practices. In the opinion of management,
the Company has recorded reserves that are adequate to cover litigation, claims
or assessments that have been or may be asserted against the Company arising out
of such litigation, civil suits and governmental inquires. Furthermore,
management believes that the resolution of such litigation, civil suits and
governmental inquiries will not have a material adverse effect on the Company's
financial position or results of operations; however, there can be no assurance
in this regard.
13. SUBSEQUENT EVENT
Subsequent to September 30, 1998, the Company has continued to incur significant
losses from operations, is in default of its revolving credit and lease
agreements, and has a significant accumulated deficit. The Company has announced
plans to cease operations at a significant number of its facilities and to
reduce its personnel levels. On February 16, 2000, the Company filed a voluntary
bankruptcy petition in U.S. Bankruptcy Court in Wilmington, Delaware. These
financial statements do not reflect any activities since September 30, 1998,
including the impact relating to the bankruptcy filing.
Additionally, the United States Department of Justice has indicated that certain
of its ongoing inquiries are based on its belief that the federal government has
certain civil and administrative causes of action under the Civil False Claims
Act, the Civil Monetary Penalties Law, other federal statutes, and the common
law arising from the participation in federal health benefit programs of the
Company's psychiatric facilities nationwide. Although the ultimate outcome of
these inquiries cannot be determined, a material unfavorable outcome may have a
material adverse effect on the financial position or future operating results of
the Company.
F-61
<PAGE> 108
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS- DEDUCTIONS- END
CLASSIFICATION OF PERIOD EXPENSE DESCRIBE DESCRIBE OF PERIOD
-------------- --------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
106 days ended September 30, 1997:
Allowance for doubtful accounts $ -- $17,437 $ 39(A) $ 843(B) $17,605
972(C)
------- ------- ------- ------- -------
$ -- $17,437 $ 1,011 $ 843 $17,605
======= ======= ======= ======= =======
Year ended September 30, 1998:
Allowance for doubtful accounts $17,605 $63,895 $ 4,035(A) $51,987(B) $33,548
------- ------- ------- ------- -------
$17,605 $63,895 $ 4,035 $51,987 $33,548
======= ======= ======= ======= =======
</TABLE>
- -------------------
(A) Recoveries of amounts previously charged to income.
(B) Accounts written off.
(C) Allowance for doubtful accounts assumed in purchase of net assets from
Magellan.
F-62
<PAGE> 109
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Executive Committee of
The Woodlands Operating Company, L.P.:
We have audited the accompanying consolidated balance sheets of The Woodlands
Operating Company, L.P. and subsidiary as of December 31, 1998 and 1997, and the
related consolidated statements of earnings, changes in partners' equity and
cash flows for the year ended December 31, 1998, and the period from July 31,
1997 (inception) to December 31, 1997. These financial statements are the
responsibility of The Woodlands Operating Company, L.P.'s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Woodlands Operating
Company, L.P. and subsidiary as of December 31, 1998 and 1997, and the results
of its operations and its cash flows for the year ended December 31, 1998, and
the period from July 31, 1997 (inception), to December 31, 1997, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
HOUSTON, TEXAS
JANUARY 15, 1999
F-63
<PAGE> 110
THE WOODLANDS OPERATING COMPANY, L.P. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
-------- --------
ASSETS
Current assets
<S> <C> <C>
Cash and cash equivalents ............... $ 6,231 $ 4,034
Trade receivables ....................... 4,713 5,084
Inventory ............................... 933 1,213
Other ................................... 336 341
-------- --------
12,213 10,672
Property and equipment, at cost less
accumulated depreciation of $331 and $105 1,362 2,638
Other assets ................................ 1,722 35
-------- --------
$ 15,297 $ 13,345
======== ========
LIABILITIES AND EQUITY
Current liabilities
Accounts payable ........................ $ 12,320 $ 5,551
Accrued liabilities ..................... 1,815 4,175
-------- --------
14,135 9,726
Other liabilities ........................... 3,125 2,220
-------- --------
Total liabilities ....................... 17,260 11,946
Commitments and contingencies (Note 2)
Partners' equity (deficit) (Note 3) ......... (1,963) 1,399
-------- --------
$ 15,297 $ 13,345
======== ========
</TABLE>
See accompanying Notes
F-64
<PAGE> 111
THE WOODLANDS OPERATING COMPANY, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM JULY 31, 1997 (INCEPTION) TO DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
REVENUES
Conference Center and Country Club operations $ 47,609 $ 18,169
Management fees and other ................... 27,151 11,476
-------- --------
74,760 29,645
-------- --------
OPERATING EXPENSES
Conference Center and Country Club operations 46,162 18,121
Operating, general and administrative ....... 25,246 11,034
Depreciation and amortization ................... 751 105
-------- --------
72,159 29,260
-------- --------
OPERATING EARNINGS .............................. 2,601 385
OTHER (INCOME) EXPENSE .......................... (37) 20
-------- --------
NET EARNINGS .................................... $ 2,638 $ 365
======== ========
</TABLE>
See accompanying Notes
F-65
<PAGE> 112
THE WOODLANDS OPERATING COMPANY, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM JULY 31, 1997
(INCEPTION) TO DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WOCOI MS/TWC
Investment Joint MS/TWC,
Company Venture Inc. Total
------- ------- ------- -------
<S> <C> <C> <C> <C>
Balance, July 31, 1997 (Inception) $ 425 $ 558 $ 10 $ 993
Contributions .................... 14 26 1 41
Net earnings ..................... 155 206 4 365
------- ------- ------- -------
Balance, December 31, 1997 ....... 594 790 15 1,399
Distributions .................... (2,550) (3,390) (60) (6,000)
Net earnings ..................... 1,121 1,491 26 2,638
------- ------- ------- -------
Balance, December 31, 1998 ....... $ (835) $(1,109) $ (19) $(1,963)
======= ======= ======= =======
</TABLE>
See accompanying Notes
F-66
<PAGE> 113
THE WOODLANDS OPERATING COMPANY, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM JULY 31, 1997 (INCEPTION) TO
DECEMBER 31, 1997 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings .................................... $ 2,638 $ 365
Adjustments to reconcile net earnings to
cash provided by operating activities
Depreciation and amortization ............. 751 105
Deferred Country Club initiation fees ..... 2,062 776
Other ..................................... (113) (895)
5,338 351
Changes in operating assets and liabilities
Current assets .......................... 656 (1,190)
Accounts payable ........................ 6,769 4,216
Accrued liabilities ..................... (2,360) 562
Other assets ............................ (1,687) (35)
------- -------
Cash provided by operating activities ........... 8,716 3,904
------- -------
INVESTING ACTIVITIES
Capital expenditures ............................ (519) (148)
------- -------
FINANCING ACTIVITIES
Contribution from partners ...................... -- 41
Distributions to partners ....................... (6,000) --
------- -------
Cash provided by (used for) financing activities (6,000) 41
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS ........... 2,197 3,797
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .. 4,034 237
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD ........ $ 6,231 $ 4,034
======= =======
</TABLE>
See accompanying Notes
F-67
<PAGE> 114
THE WOODLANDS OPERATING COMPANY, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONTROL. The Woodlands Operating Company, L.P. ("Woodlands Operating"), The
Woodlands Land Development Company, L.P. ("Woodlands Development") and The
Woodlands Commercial Properties Company, L.P. ("Woodlands Commercial") are owned
by entities controlled by Crescent Real Estate Equities Limited Partnership or
Crescent Operating, Inc. (together "Crescent") and Morgan Stanley Real Estate
Fund II, L.P. ("Morgan Stanley"). Woodlands Development and Woodlands Commercial
are successors to The Woodlands Corporation. Prior to July 31, 1997, The
Woodlands Corporation was a wholly owned subsidiary of Mitchell Energy &
Development Corp. On July 31, 1997 The Woodlands Corporation was acquired by
Crescent and Morgan Stanley and merged into Woodlands Commercial, a Texas
limited partnership. Woodlands Commercial was then divided into two
partnerships: Woodlands Commercial and Woodlands Development. WECCR General
Partnership ("WECCR GP") is a subsidiary of Woodlands Operating. Woodlands
Operating manages assets owned by Woodlands Commercial and Woodlands
Development.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of Woodlands Operating and WECCR GP. All significant transactions and
accounts are eliminated in consolidation.
BUSINESS. Woodlands Operating's activities are concentrated in The Woodlands, a
planned community located north of Houston, Texas. Consequently, these
operations and the associated credit risks may be affected, either positively or
negatively, by changes in economic conditions in this geographical area.
Woodlands Operating provides services to Woodlands Development and Woodlands
Commercial under management and advisory services agreements. These agreements
have an initial term ending December 31, 1998 and are automatically renewable on
an annual basis. Woodlands Development and Woodlands Commercial pay Woodlands
Operating an advisory fee equal 3% above cost. In addition, they reimburse
Woodlands Operating for all cost and expenses incurred on their behalf. For the
year ended December 31, 1998 and the period from July 31, 1997 (inception) to
December 31, 1997, Woodlands Operating recorded revenues of $11,050,000 and
$4,598,000 for services provided to Woodlands Development and $7,343,000 and
$4,235,000 for services provided to Woodlands Commercial.
WECCR GP leases The Woodlands Conference Center, Resort and Country Club ("the
Facilities") from Woodlands Commercial. This agreement has an eight-year term
ending July 31, 2005. WECCR GP operates the Facilities and pays Woodlands
Commercial a base rent of $750,000 per month and a quarterly percentage rent
based on the gross receipts of the Facilities. For the year ended December 31,
1998 and the period from July 31, 1997 (inception) to December 31, 1997, rent
under the lease agreement totaled $12,799,000 and $5,063,000.
DEPRECIATION. Depreciation of operating assets is provided on the straight-line
method over the estimated useful lives of the assets, which range from three to
ten years.
INCOME TAXES. No liability for Federal income taxes is included in the
accompanying financial statements since Woodlands Operating is not a tax-paying
entity and all income and expenses are reported by the partners for tax
reporting purposes.
The tax returns, the qualification of Woodlands Operating for tax purposes and
the amount of distributable partnership income or loss are subject to
examination by Federal taxing authorities. If such examinations result in
changes with respect to partnership qualification or in changes to distributable
partnership income or loss, the tax liability of the partners could be changed
accordingly.
STATEMENTS OF CASH FLOWS. Short-term investments with maturities of three months
or less are considered to be cash equivalents. There were no significant
non-cash investing or financing activities for the year ended December 31, 1998
or for the period from July 31, 1997 (inception) to December 31, 1997.
F-68
<PAGE> 115
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
2. COMMITMENTS AND CONTINGENCIES
LEGAL ACTIONS. Woodlands Operating is a party to claims and legal actions
arising in the ordinary course of business and to recurring examinations by the
Internal Revenue Service and other regulatory agencies. Management believes,
after consultation with outside counsel, that adequate financial statement
accruals have been provided for all known litigation contingencies where losses
are deemed probable. Since the ultimate cost will depend on the outcomes of
these uncertainties, it is possible that additional future charges might be
required that would be significant to the operating results of a particular
period. Based on the status of the cases, Woodlands Operating is unable to
determine a range of such possible additional losses, if any, that might be
incurred in connection with this litigation. Woodlands Operating believes it is
not probable that the ultimate resolution of this litigation will have a
material adverse effect on its financial position and results of operations.
LEASES. Woodlands Operating has various facility and equipment lease agreements.
Rental expenses for operating leases for the year ended December 31, 1998 and
the period from July 31, 1997 (inception) to December 31, 1997 total $1,099,000
and $313,000. Minimum rentals for the five years subsequent to December 31, 1998
total approximately $724,000; $775,000; $756,000; $456,000 and $456,000.
INCENTIVE PLAN. Woodlands Operating instituted an incentive compensation plan
for certain employees effective January 1, 1998. The plan is unfunded and while
certain payments are made currently, a portion of the payment is deferred and
paid only upon the occurrence of certain future events. Woodlands Development
and Woodlands Commercial will reimburse any incentive plan payments made in the
future.
3. PARTNERS' EQUITY
Crescent's entity in Woodlands Operating is WOCOI Investment Company. Morgan
Stanley's entities are MS/TWC Joint Venture and MS TWC, Inc. The partners'
percentage interests are summarized below:
<TABLE>
<CAPTION>
General Limited
Partner Partner
Interest Interest
-------- --------
<S> <C> <C>
WOCOI Investment Company ......................... 42.5%
MS/TWC Joint Venture ............................. 56.5%
MS TWC, Inc ...................................... 1.0%
</TABLE>
The partnership agreement provides, among other things, the following:
(i) Woodlands Operating is governed by an Executive Committee composed of equal
representation from its respective general partners.
(ii) Net income and losses from operations are currently allocated so that
partners' capital accounts stand in the ratio of the percentage interest listed
above.
(iii) Distributions are made to partners based on specified payout percentages
and include cumulative preferred returns to Morgan Stanley's affiliates. The
payout percentage to Morgan Stanley's affiliates is 57.5% until the affiliates
receive distributions equal to their capital contributions and a 12% cumulative
preferred return compounded quarterly. Then, the payout percentage to Morgan
Stanley's affiliates is 50.5% until the affiliates receive distributions equal
to their capital contributions and an 18% cumulative preferred return compounded
quarterly. Thereafter the payout percentage to Morgan Stanley's affiliates is
47.5%.
F-69
<PAGE> 116
(iv) Woodlands Operating will continue to exist until December 31, 2040 unless
terminated earlier due to specified events.
(v) No additional partners may be admitted to Woodlands Operating unless
specific conditions in the partnership agreements are met. Partnership interests
may be transferred to affiliates of Crescent or Morgan Stanley. Crescent has the
right of first refusal to buy the partnership interests of the Morgan Stanley
affiliates at the same terms and conditions offered to a third party purchaser,
or sell its affiliates' interests to the same third party purchaser.
(vi) Crescent and Morgan Stanley have the right to offer to purchase the other
partner's affiliates' partnership interests in the event of failure to make
specified capital contributions or a specified default by the other. Specified
defaults include bankruptcy, breach of partnership covenants, transfer of
partnership interests except as permitted by the partnership agreements, and
fraud or gross negligence.
4. EMPLOYEE SAVINGS PLAN
Woodlands Operating has a 401(k) defined contribution plan that is available to
all full-time employees who meet specified service requirements. The plan is
administered by a third party. Contributions to the plan are based on a match of
employee contributions up to a certain limit. For the year ended December 31,
1998 and the period from July 31, 1997 (inception) to December 31, 1997
Woodlands Operating contributions totaled $582,000 and $240,000.
5. YEAR 2000 COMPLIANCE (UNAUDITED)
Woodlands Operating utilizes and is dependent on computer systems to conduct its
business. These systems include hardware and software developed and maintained
by third parties and purchased software run on in-house networks. A third party
manages the in-house systems under a contractual arrangement. Woodlands
Operating is undertaking a project to determine whether its computer systems are
year 2000 compliant. The project plan has been reviewed by senior management and
involves an assessment of each software application and related hardware.
Vendors will be contacted to assess year 2000 compliance and determine what
corrective measures, if any, are needed. A plan has been developed to make the
necessary corrections, or take some alternative action. The plan is being
implemented and tested to ensure compliance. Systems that have the greatest
impact will be given a higher priority.
Management has not determined the final cost of its year 2000 readiness efforts
or the related potential impact on Woodlands Operating's results of operations.
There can be no assurance that there will not be an adverse impact on Woodlands
Operating's financial position or results of operations if Woodlands Operating's
systems or the systems of other companies on which Woodlands Operating relies
are not compliant in time. However, based on preliminary assessments management
believes the risk of such adverse impact is low.
F-70
<PAGE> 117
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Executive Committee of
The Woodlands Land Development Company, L.P.:
We have audited the accompanying balance sheets of The Woodlands Land
Development Company, L.P., as of December 31, 1998 and 1997, and the related
statements of earnings, changes in partners' equity and cash flows for the year
ended December 31, 1998, and the period from July 31, 1997 (inception), to
December 31, 1997. These financial statements are the responsibility of The
Woodlands Operating Company, L.P.'s management as manager for The Woodlands Land
Development Company, L.P. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Woodlands Land Development
Company, L.P., as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the year ended December 31, 1998, and the
period from July 31, 1997 (inception), to December 31, 1997, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
HOUSTON, TEXAS
JANUARY 15, 1999
F-71
<PAGE> 118
THE WOODLANDS LAND DEVELOPMENT COMPANY, L.P.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ................. $ 2,785 $ 17,791
Trade receivables ......................... 147 117
Other ..................................... 6 37
-------- --------
2,938 17,945
Notes and contracts receivable (Notes 2 and 10) 30,040 20,932
Real estate (Notes 3 and 4) ................... 345,082 345,907
Other assets, net ............................. 2,008 3,863
-------- --------
$380,068 $388,647
======== ========
LIABILITIES AND EQUITY
Liabilities
Current liabilities
Accounts payable ........................ $ 13,367 $ 10,157
Accrued liabilities ..................... 4,580 6,220
-------- --------
17,947 16,377
Acquisition debt (Notes 5 and 10) ......... 235,750 266,000
Notes payable to partners (Notes 6 and 10) 25,000 25,000
Other debt (Notes 5 and 10) ............... 3,405 892
Other liabilities ......................... 8,838 6,486
-------- --------
290,940 314,755
Commitments and contingencies (Notes 4 and 7)
Partners' equity (Note 9) ..................... 89,128 73,892
-------- --------
$380,068 $388,647
======== ========
</TABLE>
See accompanying Notes
F-72
<PAGE> 119
THE WOODLANDS LAND DEVELOPMENT COMPANY, L.P.
STATEMENTS OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM JULY 31, 1997 (INCEPTION) TO
DECEMBER 31, 1997 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
REVENUES
Residential lot sales ...................... $ 77,824 $ 25,532
Commercial land sales ...................... 43,778 8,697
Other (Notes 3 and 4) ...................... 10,349 3,322
--------- ---------
131,951 37,551
--------- ---------
COST AND EXPENSES
Residential lot cost of sales .............. 45,203 17,791
Commercial land cost of sales .............. 17,533 4,361
Operating expenses (Notes 8 and 11) ........ 19,471 6,387
Depreciation and amortization .............. 464 85
--------- ---------
82,671 28,624
--------- ---------
OPERATING EARNINGS .......................... 49,280 8,927
--------- ---------
OTHER (INCOME) EXPENSE
Interest expense (Notes 5 and 6) ........... 24,000 10,696
Interest capitalized ....................... (22,106) (9,170)
Amortization of debt costs ................. 1,243 575
Other ...................................... 329 (187)
--------- ---------
3,466 1,914
--------- ---------
EARNINGS BEFORE THE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE .......... 45,814 7,013
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE (Note 12) ......... 639 --
--------- ---------
NET EARNINGS ................................ $ 45,175 $ 7,013
========= =========
</TABLE>
See accompanying Notes
F-73
<PAGE> 120
THE WOODLANDS LAND DEVELOPMENT COMPANY, L.P.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM JULY 31, 1997 (INCEPTION) TO
DECEMBER 31, 1997 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
The
Woodlands MS/TWC
Land Joint MS/TWC,
Company, Inc. Venture Inc. Total
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance, July 31, 1997 (Inception) ... $ 30,825 $ 40,353 $ 714 $ 71,892
Contributions ........................ 1,424 2,518 45 3,987
Distributions ........................ (3,825) (5,085) (90) (9,000)
Net earnings ......................... 2,981 3,962 70 7,013
-------- -------- -------- --------
Balance, December 31, 1997 ........... 31,405 41,748 739 73,892
Contributions ........................ 2,575 3,423 60 6,058
Distributions ........................ (15,299) (20,338) (360) (35,997)
Net earnings ......................... 19,199 25,524 452 45,175
-------- -------- -------- --------
Balance, December 31, 1998 ........... $ 37,880 $ 50,357 $ 891 $ 89,128
======== ======== ======== ========
</TABLE>
See accompanying Notes
F-74
<PAGE> 121
THE WOODLANDS LAND DEVELOPMENT COMPANY, L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM JULY 31, 1997 (INCEPTION) TO
DECEMBER 31, 1997 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings .............................................. $ 45,175 $ 7,013
Adjustments to reconcile net earnings to
cash provided by operating activities
Cost of land sold ................................... 62,736 22,152
Depreciation and amortization ....................... 464 85
Gain on sale of property ............................ (699) --
Partnership distributions less than earnings ........ (61) (106)
(Increase) decrease in notes and contracts receivable (9,108) 3,371
Other ............................................... (4,697) (3,074)
-------- --------
93,810 29,441
Land development capital expenditures ............... (50,035) (14,098)
Changes in operating assets and liabilities
Current assets .................................... 1 319
Accounts payable and accrued liabilities .......... 1,570 6,155
Other assets ...................................... 1,855 (413)
-------- --------
Cash provided by operating activities ..................... 47,201 21,404
-------- --------
INVESTING ACTIVITIES
Acquisition of commercial property ........................ (10,100) --
Proceeds from sale of property ............................ 4,819 --
-------- --------
Cash used for investing activities ........................ (5,281) --
-------- --------
FINANCING ACTIVITIES
Contributions from partners ............................... 6,058 3,987
Distributions to partners ................................. (35,997) (9,000)
Debt borrowings ........................................... 3,263 --
Debt repayments ........................................... (30,250) --
-------- --------
Cash used for financing activities ........................ (56,926) (5,013)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........... (15,006) 16,391
CASH AND CASH EQUIVALENTS, beginning of period ............. 17,791 1,400
-------- --------
CASH AND CASH EQUIVALENTS, end of period ................... $ 2,785 $ 17,791
======== ========
</TABLE>
See accompanying Notes
F-75
<PAGE> 122
THE WOODLANDS OPERATING COMPANY, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONTROL. The Woodlands Land Development Company, L.P. ("Woodlands Development"),
The Woodlands Commercial Properties Company, L.P. ("Woodlands Commercial"),
WECCR General Partnership ("WECCR GP"), and The Woodlands Operating Company,
L.P. ("Woodlands Operating") are owned by entities controlled by Crescent Real
Estate Equities Limited Partnership or Crescent Operating, Inc. (together
"Crescent") and Morgan Stanley Real Estate Fund II, L.P. ("Morgan Stanley").
Woodlands Development and Woodlands Commercial are successors to The Woodlands
Corporation. Prior to July 31, 1997, The Woodlands Corporation was a wholly
owned subsidiary of Mitchell Energy & Development Corp. On July 31, 1997 The
Woodlands Corporation was acquired by Crescent and Morgan Stanley and merged
into Woodlands Commercial, a Texas limited partnership. Woodlands Commercial was
then divided into two partnerships: Woodlands Commercial and Woodlands
Development. Woodlands Operating manages assets owned by Woodlands Development
as described in Note 8.
The following is a summary of the acquisition transaction on July 31, 1997 (in
thousands):
<TABLE>
<CAPTION>
Woodlands Woodlands WECCR Woodlands (memo only)
Development Commercial GP Operating Combined
-------- -------- ----- -------- --------
<S> <C> <C> <C> <C> <C>
Initial capital contributions ............... $ 71,892 $ 90,073 $ -- $ 993 $162,958
Bank credit agreement borrowings (Note 5).... 266,000 103,000 -- -- 369,000
Notes payable to partners (Note 6) .......... 25,000 -- -- -- 25,000
-------- -------- ----- -------- --------
Acquisition funding sources ................. $362,892 $193,073 $ -- $ 993 $556,958
======== ======== ===== ======== ========
</TABLE>
BUSINESS. Woodlands Development's real estate activities are concentrated in The
Woodlands, a planned community located north of Houston, Texas. Consequently,
these operations and the associated credit risks may be affected, either
positively or negatively, by changes in economic conditions in this geographical
area. Activities associated with The Woodlands include residential and
commercial land sales and the construction of commercial buildings.
REAL ESTATE. Costs associated with the acquisition and development of real
estate, including holding costs consisting principally of interest and ad
valorem taxes, are capitalized as incurred. Capitalization of such holding costs
is limited to properties for which active development continues. Capitalization
ceases upon completion of a property or cessation of development activities.
Where practicable, capitalized costs are specifically assigned to individual
assets; otherwise, costs are allocated based on estimated values of the affected
assets.
LAND SALES. Earnings from sales of real estate are recognized when a third-party
buyer has made an adequate cash down payment and has attained the attributes of
ownership. Notes received in connection with land sales are discounted when the
stated purchase prices are significantly different from those that would have
resulted from similar cash transactions. The cost of land sold is generally
determined as a specific percentage of the sales revenues recognized for each
land development project. These percentages are based on total estimated
development costs and sales revenues for each project.
DEPRECIATION. Depreciation of operating assets is provided on the straight-line
method over the estimated useful lives of the assets, which range from three to
fifty years.
F-76
<PAGE> 123
INCOME TAXES. No liability for Federal income taxes is included in the
accompanying financial statements since the Woodlands Development is not a
tax-paying entity and all income and expenses are reported by the partners for
tax reporting purposes.
The tax returns, the qualification of Woodlands Development for tax purposes and
the amount of distributable partnership income or loss are subject to
examination by Federal taxing authorities. If such examinations result in
changes with respect to partnership qualification or in changes to distributable
partnership income or loss, the tax liability of the partners could be changed
accordingly.
STATEMENTS OF CASH FLOWS. Short-term investments with maturities of three months
or less are considered to be cash equivalents. The reported amounts for proceeds
from issuance of debt and debt repayments exclude the impact of borrowings with
initial terms of three months or less. For the year ended December 31, 1998 and
for the period from July 31, 1997 (inception) to December 31, 1997, Woodlands
Development paid interest totaling $25,361,000 and $7,375,000 related to debt
described in Note 5.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
2. NOTES AND CONTRACTS RECEIVABLE
Notes receivable are carried at cost, net of discounts. At December 31, 1998,
Woodlands Development had one note receivable with an outstanding balance of
$1,453,000 and utility district receivables totaling $28,587,000. The note
receivable has an 8.0% rate. Utility district receivables, the collection of
which is dependent on the ability of utility districts in The Woodlands to sell
bonds, have a market interest rate of approximately 5.0% at December 31, 1998.
3. REAL ESTATE
The following is a summary of real estate at December 31, 1998 and 1997 (in
thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Land ...................................... $329,398 $338,856
Commercial properties ..................... 12,670 4,247
Equity investments (Note 4) ............... 2,641 2,634
Other assets .............................. 728 233
-------- --------
345,437 345,970
Accumulated depreciation .................. (355) (63)
-------- --------
$345,082 $345,907
======== ========
</TABLE>
LAND. The principal land development is The Woodlands, a mixed-use,
master-planned community located north of Houston, Texas. Residential land is
divided into seven villages in various stages of development. Each village has
or is planned to contain a variety of housing, neighborhood retail centers,
schools, parks and other amenities. Woodlands Development controls the
development of the residential communities and produces finished lots for sale
to qualified builders. Housing is constructed in a wide choice of pricing and
product styles.
Commercial land is divided into distinct centers that serve or are planned to
serve as locations for office buildings, retail and entertainment facilities,
industrial and warehouse facilities, research and technology facilities, and
college and training facilities. Woodlands Development produces finished sites
for third parties and uses land for its own building development activities.
F-77
<PAGE> 124
COMMERCIAL PROPERTIES. A commercial property owned by Woodlands Development is
leased to a third-party tenant. The lease term is five years. The lease is
accounted for under the operating method. Minimum future lease revenues from the
operating lease excludes contingent rentals that may be received. Tenant rents
include rent for noncancelable operating leases. Contingent rents include
pass-throughs of incremental operating costs. Other commercial properties are
under development at December 31, 1998. Summarized financial information for
commercial properties as of December 31, 1998 and for the year then ended
follows (in thousands):
<TABLE>
<S> <C>
Net book value of assets under operating leases .... $12,327
=======
Revenue from tenants
Tenant rent ..................................... $ 1,470
Contingent rent ................................. 155
-------
$ 1,625
=======
Minimum future lease revenues
1999 ........................................... $ 1,373
2000 ........................................... 1,373
2001 ........................................... 1,373
2002 ........................................... 1,373
2003 ........................................... 229
</TABLE>
4. JOINT VENTURES AND PARTNERSHIPS
During 1998, Woodlands Development's principal partnership interests included
the following:
<TABLE>
<CAPTION>
Ownership Nature of Operations
------------- --------------------
<S> <C> <C>
Mitchell Mortgage Company, LLC................. 49% Mortgage lending
Stewart Title of Montgomery County, Inc. ...... 50% Title company
</TABLE>
Woodlands Development's net investment in each of these entities is included in
the real estate caption on the balance sheets and their share of these entities'
pretax earnings is included in revenues on the statements of earnings. A summary
of their net investment as of December 31, 1998 and their share of pre-tax
earnings for the year then ended follows (in thousands):
<TABLE>
<CAPTION>
Equity in
Net Pre-tax
Investment Earnings
-------------- ------------
<S> <C> <C>
Mitchell Mortgage Company, LLC .................... $ 1,261 $ 472
Stewart Title of Montgomery County, Inc. .......... 1,380 583
------------- ------------
$ 2,641 $ 1,055
</TABLE> ============= ============
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<PAGE> 125
Summarized financial statement information for partnerships in which Woodlands
Development has an ownership interest at December 31, 1998 and for the year then
ended follows (in thousands):
<TABLE>
<S> <C>
Assets ........................................................... $66,730
Debt payable to third parties
Woodlands Development's proportionate share (nonrecourse) .... 29,291
Other parties' proportionate share ............................ 30,487
Accounts payable and deferred credits ........................... 1,312
Owners' equity .................................................. 5,640
Revenues ......................................................... 10,368
Operating earnings ............................................... 2,364
Pre-tax earnings ................................................. 2,364
Woodlands Development's proportionate share
of pre-tax earnings ....................................... 1,055
</TABLE>
5. DEBT
A summary of Woodlands Development's outstanding debt at December 31, 1998 and
1997 follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Bank credit agreement ...................... $ 235,750 $ 266,000
Mortgages payable, at an average
interest rate of 7.8% ..................... 3,405 892
-------------- --------------
$ 239,155 $ 266,892
============== ==============
</TABLE>
The bank credit agreement has a three year term expiring July 31, 2000 with two,
one-year extension options. The interest rate is based on the London Interbank
Offered Rate and averaged 8.1% for the year ended December 31, 1998. Interest is
paid monthly. The credit agreement contains certain restrictions which, among
other things, require the maintenance of specified financial ratios, restrict
indebtedness and sale, lease or transfer of assets, and limit the right of
Woodlands Development to merge with other companies and make distributions to
its partners. Certain assets of Woodlands Development including cash and
receivables secure the credit agreement. Mandatory debt maturities are
$11,875,000 in 1999 and $326,875,000 in 2000. They may be made by Woodlands
Development or Woodlands Commercial or both at their option. Additional
principal payments may be required if sufficient cash is available, and
additional prepayments can also be made at the discretion of Woodlands
Development.
The mortgages payable have debt maturities for the five years subsequent to
December 31, 1998 totaling $109,000; $140,000; $140,000; $151,000 and
$2,723,000.
6. NOTES PAYABLE TO PARTNERS
Woodlands Development has notes payable to its partners totaling $25,000,000.
The notes bear interest at 15%. Interest is payable beginning in October 1998
and quarterly thereafter. All outstanding balances are due in 2007. These notes
are subordinate to the bank credit agreement and mortgages payable described
above.
7. COMMITMENTS AND CONTINGENCIES
CONTINGENT LIABILITIES. At December 31, 1998, Woodlands Development had a
contingent liability of $2,086,000, consisting of a letter of credit.
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<PAGE> 126
LEASES. Rental expense for operating leases for the year ended December 31, 1998
and the period from July 31, 1997 (inception) to December 31, 1997 totaled
$14,000 and $4,000.
LEGAL ACTIONS. Legal actions have been brought or threatened against Woodlands
Development and third parties by various homeowners in The Woodlands related to
flooding in the North Houston area in October 1994. These claimants generally
are seeking reimbursements for property damages, but some are making claims for
deceptive trade practices or mental anguish. Woodlands Development contends that
it was not responsible for these damages, which it believes resulted from a
record, near 500-year flood and were not preventable with the exercise of
ordinary care and generally accepted drainage design, development and
maintenance.
Woodlands Development is also a party to other claims and legal actions arising
in the ordinary course of their business and to recurring examinations by the
Internal Revenue Service and other regulatory agencies.
Management believes, after consultation with outside counsel, that adequate
financial statement accruals have been provided for all known litigation
contingencies where losses are deemed probable. Since the ultimate cost will
depend on the outcomes of the uncertainties discussed in this note, it is
possible, however, that additional future charges might be required that would
be significant to the operating results of a particular period. Based on the
status of the cases, Woodlands Development is unable to determine a range of
such possible additional losses, if any, that might be incurred in connection
with this litigation. Woodlands Development believes it is not probable that the
ultimate resolution of this litigation will have a material adverse effect on
its financial position.
COUNTRY CLUB MEMBERSHIP. As of December 31, 1998, the Woodlands Development had
collected $765,000 for memberships to a new country club, which began
construction at the end of 1998. Because of certain conditions that had to be
satisfied, these funds were being held by Woodlands Development at the end of
the year. Subsequent to year-end, these conditions were satisfied and the funds
were recorded.
8. RELATED PARTY TRANSACTIONS
Woodlands Operating provides services to Woodlands Development under management
and advisory services agreements. These agreements have an initial term ending
December 31, 1998 and are automatically renewable on an annual basis. Woodlands
Development pays Woodlands Operating an advisory fee equal to cost plus 3%. In
addition, Woodlands Development reimburses Woodlands Operating for all cost and
expenses incurred on their behalf. For the year ended December 31, 1998 and the
period from July 31, 1997 (inception) to December 31, 1997, Woodlands
Development recorded expenses of $11,050,000 and $4,598,000 for services
provided by Woodlands Operating.
9. PARTNERS' EQUITY
Crescent's entity in Woodlands Development is The Woodlands Land Company, Inc.
Morgan Stanley's entities are MS/TWC Joint Venture and MS TWC, Inc. The
partners' percentage interests are summarized below:
<TABLE>
<CAPTION>
General Limited
Partner Partner
Interest Interest
-------- --------
<S> <C> <C>
The Woodlands Land Company, Inc. ... 42.5%
MS/TWC Joint Venture ............... 56.5%
MS TWC, Inc ........................ 1.0%
</TABLE>
The partnership agreement provides, among other things, the following:
(i) Woodlands Development is governed by an Executive Committee composed of
equal representation from their respective general partners.
(ii) Net income and losses from operations are currently allocated so that
partners' capital accounts stand in the ratio of the percentage interest listed
above.
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<PAGE> 127
(iii) Distributions are made to partners based on specified payout percentages
and include cumulative preferred returns to Morgan Stanley's affiliates. The
payout percentage to Morgan Stanley's affiliates is 57.5% until the affiliates
receive distributions equal to their capital contributions and a 12% cumulative
preferred return compounded quarterly. Then, the payout percentage to Morgan
Stanley's affiliates is 50.5% until the affiliates receive distributions equal
to their capital contributions and an 18% cumulative preferred return compounded
quarterly. Thereafter the payout percentage to Morgan Stanley's affiliates is
47.5%.
(iv) Woodlands Development will continue to exist until December 31, 2040 unless
terminated earlier due to specified events.
(v) No additional partners may be admitted to Woodlands Development unless
specific conditions in the partnership agreements are met. Partnership interests
may be transferred to affiliates of Crescent or Morgan Stanley. Crescent has the
right of first refusal to buy the partnership interests of the Morgan Stanley
affiliates at the same terms and conditions offered to a third party purchaser,
or sell its affiliates' interests to the same third party purchaser.
(vi) Crescent and Morgan Stanley have the right to offer to purchase the other
partner's affiliates' partnership interests in the event of failure to make
specified capital contributions or a specified default by the other. Specified
defaults include bankruptcy, breach of partnership covenants, transfer of
partnership interests except as permitted by the partnership agreements, and
fraud or gross negligence.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of Woodlands Development's
financial instruments as of December 31, 1998 follows (in thousands):
<TABLE>
<CAPTION>
Carrying Estimated Fair
Amounts Values
-------- ----------
<S> <C> <C>
Notes and contracts receivable............................. $ 30,040 $ 30,040
Debt....................................................... 239,155 238,961
Notes payable to partners.................................. 25,000 33,280
</TABLE>
Fair values of notes and contracts receivable were estimated by discounting
future cash flows using interest rates at which similar loans currently could be
made for similar maturities to borrowers with comparable credit ratings. Fair
values of fixed-rate, long-term debt were based on current interest rates
offered to Woodlands Development for debt with similar remaining maturities. For
floating-rate debt obligations, carrying amounts and fair values were assumed to
be equal because of the nature of these obligations. The carrying amounts of
Woodlands Development's other financial instruments approximate their fair
values.
11. YEAR 2000 COMPLIANCE (UNAUDITED)
Woodlands Development utilizes and is dependent on computer systems to conduct
its business. These systems include hardware and software developed and
maintained by third parties and purchased software run on in-house networks. A
third party manages the in-house systems under a contractual arrangement.
Woodlands Development is undertaking a project to determine whether their
computer systems are year 2000 compliant. The project plan has been reviewed by
Woodlands Development's senior management and involves an assessment of each
software application and related hardware. Vendors will be contacted to assess
year 2000 compliance and determine what corrective measures, if any, are needed.
A plan has been developed to make the necessary corrections, or take some
alternative action. The plan is being implemented and tested to ensure
compliance. Systems that have the greatest impact will be given a higher
priority.
Management has not determined the final cost of its year 2000 readiness efforts
or the related potential impact on Woodlands Development's results of
operations. There can be no assurance that there will not be an adverse impact
on Woodlands Development's financial position or results of operations if
Woodlands Development's systems or
F-81
<PAGE> 128
the systems of other companies on which the Woodlands Development relies are not
compliant in time. However, based on preliminary assessments management believes
the risk of such adverse impact is low.
12. CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1998 Woodlands Development changed its method of accounting
for organization costs to conform to Statement of Position 98-5 "Reporting on
the Costs of Start-Up Activities." In 1998 Woodlands Development expensed
previously capitalized costs that totaled $639,000.
F-82
<PAGE> 129
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
<S> <C>
3.1 First Amended and Restated Certificate of Incorporation
(filed as Exhibit 3.3 to the Company's registration
statement on Form S-1 dated July 12, 1997 ("Form S-1")
and incorporated by reference herein)
3.2 First Amended and Restated Bylaws (filed as Exhibit 3.4
to Form S-1 and incorporated by reference herein)
3.3 Amendment of Article V of First Amended and Restated
Bylaws (filed as Exhibit 3.3 to the Company's June 30,
1998 Form 10-Q ("June 30, 1998 Form 10-Q") and
incorporated by reference herein)
3.4 Repeal of Amendment of Article V of First Amended and
Restated Bylaws (filed as Exhibit 3.4 to the Company's
September 30, 1998 Form 10-Q ("September 30, 1998 Form
10-Q") and incorporated by reference herein)
4.1 Specimen stock certificate (filed as Exhibit 4.1 to Form
S-1 and incorporated by reference herein)
4.2 Preferred Share Purchase Rights Plan (filed as Exhibit
4.2 to Form S-1 and incorporated by reference herein)
4.3 First Amendment to Preferred Share Purchase Rights
Agreement dated as of September 25, 1998, between
Crescent Operating, Inc. and Bank Boston, N.A., as
Rights Agent (filed as Exhibit 4.3 to September 30, 1998
Form 10-Q and incorporated by reference herein)
4.4 Second Amendment to Preferred Share Purchase Rights
Agreement dated as of March 4, 1999, between Crescent
Operating, Inc. and Bank Boston, N.A., as Rights Agent
(filed as Exhibit 4.4 to March 31, 1999 Form 10-Q
("March 31, 1999 Form 10-Q") and incorporated by
reference herein)
10.1 Amended Stock Incentive Plan (filed as Exhibit 10.1 to
Form S-1 and incorporated by reference herein)
</TABLE>
<PAGE> 130
<TABLE>
<S> <C>
10.2 Intercompany Agreement between Crescent Operating, Inc.
and Crescent Real Estate Equities Limited Partnership
(filed as Exhibit 10.2 to the Company's Quarterly Report
on Form 10-Q for the Quarter Ended June 30, 1997 ("June
30, 1997 Form 10-Q") and incorporated by reference
herein)
10.3 Amended and Restated Operating Agreement of Charter
Behavioral Health Systems, LLC (filed as Exhibit 10.3 to
June 30, 1997 Form 10-Q and incorporated by reference
herein)
10.5 Amended and Restated Credit and Security Agreement,
dated as of May 30, 1997, between Crescent Real Estate
Equities Limited Partnership and Crescent Operating,
Inc., together with related Note (filed as Exhibit 10.5
to the Company's September 30, 1997 Form 10-Q
("September 30, 1997 Form 10-Q") and incorporated by
reference herein)
10.6 Line of Credit and Security Agreement, dated as of May
21, 1997, between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc., together with
related Line of Credit Note (filed as Exhibit 10.6 to
September 30, 1997 Form 10-Q and incorporated by
reference herein)
10.7 Acquisition Agreement, dated as of February 10, 1997,
between Crescent Real Estate Equities Limited
Partnership and Carter-Crowley Properties, Inc. (filed
as Exhibit 10.7 to Form S-1 and incorporated by
reference herein)
10.10 Security Agreement dated September 22, 1997 between COI
Hotel Group, Inc., as debtor, and Crescent Real Estate
Equities Limited Partnership, as lender, together with
related $1 million promissory note (filed as Exhibit
10.10 to September 30, 1997 Form 10-Q and incorporated
by reference herein)
10.11 Security Agreement dated September 22, 1997 between COI
Hotel Group, Inc., as debtor, and Crescent Real Estate
Equities Limited Partnership, as lender, together with
related $800,000 promissory note (filed as Exhibit 10.11
to September 30, 1997 Form 10-Q and incorporated by
reference herein)
10.12 Amended and Restated Asset Management dated August 31,
1997, to be effective July 31, 1997, between Wine
Country Hotel, LLC and The Varma Group, Inc. (filed as
Exhibit 10.12 to September 30, 1997 Form 10-Q and
incorporated by reference herein)
10.13 Amended and Restated Asset Management Agreement dated
August 31, 1997, to be effective July 31, 1997, between
RoseStar Southwest, LLC and The Varma Group, Inc. (filed
as Exhibit 10.13 to September 30, 1997 Form 10-Q and
incorporated by reference herein)
10.14 Amended and Restated Asset Management Agreement dated
August 31, 1997, to be effective July 31, 1997, between
RoseStar Management LLC and The Varma Group, Inc. (filed
as Exhibit 10.14 to September 30, 1997 Form 10-Q and
incorporated by reference herein)
10.15 Agreement for Financial Services dated July 1, 1997,
between Crescent Real Estate Equities Company and
Petroleum Financial, Inc. (filed as Exhibit 10.15 to
September 30, 1997 Form 10-Q and incorporated by
reference herein)
10.16 Credit Agreement dated August 27, 1997, between Crescent
Operating, Inc. and NationsBank of Texas, N.A. together
with related $15.0 million promissory note (filed as
Exhibit 10.16 to September 30, 1997 Form 10-Q and
incorporated by reference herein)
</TABLE>
<PAGE> 131
<TABLE>
<S> <C>
10.17 Support Agreement dated August 27, 1997, between Richard
E. Rainwater, John Goff and Gerald Haddock in favor of
Crescent Real Estate Equities Company and NationsBank of
Texas, N.A. (filed as Exhibit 10.17 to September 30,
1997 Form 10-Q and incorporated by reference herein)
10.18 1997 Crescent Operating, Inc. Management Stock Incentive
Plan (filed as Exhibit 10.18 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997
("December 31, 1997 Form 10-K") and incorporated by
reference herein)
10.19 Memorandum of Agreement executed November 16, 1997,
among Charter Behavioral Health Systems, LLC, Charter
Behavioral Health Systems, Inc. and Crescent Operating,
Inc. (filed as Exhibit 10.19 to December 31, 1997 Form
10-K and incorporated by reference herein)
10.20 Purchase Agreement dated August 31, 1997, by and among
Crescent Operating, Inc., RoseStar Management LLC,
Gerald W. Haddock, John C. Goff and Sanjay Varma (filed
as Exhibit 10.20 to December 31, 1997 Form 10-K and
incorporated by reference herein)
10.21 Stock Purchase Agreement dated August 31, 1997, by and
among Crescent Operating, Inc., Gerald W. Haddock, John
C. Goff and Sanjay Varma (filed as Exhibit 10.21 to
December 31, 1997 Form 10-K and incorporated by
reference herein)
10.22 Amended and Restated Lease Agreement, dated June 30,
1995 between Crescent Real Estate Equities Limited
Partnership and RoseStar Management LLC, relating to the
Denver Marriott City Center (filed as Exhibit 10.17 to
the Annual Report on Form 10-K of Crescent Real Estate
Equities Company for the Fiscal Year Ended December 31,
1995 (the "1995 CEI 10-K") and incorporated by reference
herein)
10.23 Lease Agreement, dated December 19, 1995 between
Crescent Real Estate Equities Limited Partnership and
RoseStar Management LLC, relating to the Hyatt Regency
Albuquerque (filed as Exhibit 10.16 to the 1995 CEI 10-K
and incorporated by reference herein)
10.24 Form of Amended and Restated Lease Agreement, dated
January 1, 1996, among Crescent Real Estate Equities
Limited Partnership, Mogul Management, LLC and RoseStar
Management LLC, relating to the Hyatt Regency Beaver
Creek (filed as Exhibit 10.12 to the 1995 CEI 10-K and
incorporated by reference herein)
10.25 Lease Agreement, dated July 26, 1996, between Canyon
Ranch, Inc. and Canyon Ranch Leasing, L.L.C., assigned
by Canyon Ranch, Inc. to Crescent Real Estate Equities
Limited Partnership pursuant to the Assignment and
Assumption Agreement of Master Lease, dated July 26,
1996 (filed as Exhibit 10.24 to the Quarterly Report on
Form 10-Q/A of Crescent Real Estate Equities Company for
the Quarter Ended June 30, 1997 (the "1997 CEI 10-Q")
and incorporated by reference herein)
10.26 Lease Agreement, dated November 18, 1996 between
Crescent Real Estate Equities Limited Partnership and
Wine Country Hotel, LLC (filed as Exhibit 10.25 to the
Annual Report on Form 10-K of Crescent Real Estate
Equities Company for the Fiscal Year Ended December 31,
1996 and incorporated by reference herein)
10.27 Lease Agreement, dated December 11, 1996, between Canyon
Ranch-Bellefontaine Associates, L.P. and Vintage
Resorts, L.L.C., as assigned by Canyon
Ranch-Bellefontaine Associates, L.P. to Crescent Real
Estate Funding VI, L.P. pursuant to the Assignment and
Assumption Agreement of Master Lease, dated December 11,
1996 (filed as Exhibit 10.26 to the 1997 CEI 10-Q and
incorporated by reference herein)
</TABLE>
<PAGE> 132
<TABLE>
<S> <C>
10.28 Master Lease Agreement, dated June 16, 1997, between
Crescent Real Estate Funding VII, L.P. and Charter
Behavioral Health Systems, LLC and its subsidiaries,
relating to the Facilities (filed as Exhibit 10.27 to
the 1997 CEI 10-Q and incorporated by reference herein)
10.29 Form of Indemnification Agreement (filed as Exhibit
10.29 to December 31, 1997 Form 10-K and incorporated by
reference herein)
10.30 Purchase Agreement, dated as of September 29, 1997,
between Crescent Operating, Inc. and Crescent Real
Estate Equities Limited Partnership, relating to the
purchase of Desert Mountain Development Corporation
(filed as Exhibit 10.30 to December 31, 1997 Form 10-K
and incorporated by reference herein)
10.31 Lease Agreement dated December 19, 1997, between
Crescent Real Estate Equities Limited Partnership, as
Lessor, and Wine Country Hotel, as Lessee, for lease of
Ventana Inn (filed as Exhibit 10.31 to the Company's
March 31, 1998 Form 10-Q ("March 31, 1998 Form 10-Q")
and incorporated by reference herein)
10.32 Lease Agreement dated September 22, 1997, between
Crescent Real Estate Equities Limited Partnership, as
Lessor, and COI Hotel Group, Inc., as lessee, for lease
of Four Seasons Hotel, Houston (filed as Exhibit 10.32
to March 31, 1998 Form 10-Q and incorporated by
reference herein)
10.33 Asset Purchase Agreement dated December 19, 1997, among
Crescent Operating, Inc., Preco Machinery Sales, Inc.,
and certain individual Preco shareholders (filed as
Exhibit 10.33 to March 31, 1998 Form 10-Q and
incorporated by reference herein)
10.34 Asset Purchase Agreement dated April 30, 1998, among
Crescent Operating, Inc., Central Texas Equipment
Company, and certain individual Central Texas
shareholders (filed as Exhibit 10.34 to March 31, 1998
Form 10-Q and incorporated by reference herein)
10.35 Credit Agreement dated August 29, 1997 between Crescent
Real Estate Equities Limited Partnership, as lender, and
Desert Mountain Properties Limited Partnership, as
borrower, together with related Senior Note, Junior Note
and deed of trust (filed as Exhibit 10.35 to March 31,
1998 Form 10-Q and incorporated by reference herein)
10.36 Buy-Out Agreement dated April 24, 1998, between Crescent
Operating, Inc. and Crescent Real Estate Equities
Limited Partnership (filed as Exhibit 10.36 to March 31,
1998 Form 10-Q and incorporated by reference herein)
10.37 Stock Acquisition Agreement and Plan of Merger dated
June 4, 1998, among Machinery, Inc., Oklahoma Machinery,
Inc., Crescent Machinery Company, Crescent Operating,
Inc. and certain individual Machinery shareholders
(filed as Exhibit 10.37 to June 30, 1998 Form 10-Q and
incorporated by reference herein)
10.38 Master Revolving Line of Credit Loan Agreement
(Borrowing Base and Warehouse) dated May 14, 1998,
between Desert Mountain Properties Limited Partnership
and National Bank of Arizona (filed as Exhibit 10.38 to
June 30, 1998 Form 10-Q and incorporated by reference
herein)
10.39 1997 Management Stock Incentive Plan (filed as Exhibit
10.39 to June 30, 1998 Form 10-Q and incorporated by
reference herein)
10.40 Credit and Security Agreement, dated as of September 21,
1998, between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc., together with
related Note (filed as Exhibit 10.40 to September 30,
1998 Form 10-Q and incorporated by reference herein)
</TABLE>
<PAGE> 133
<TABLE>
<S> <C>
10.41 First Amendment to Amended and Restated Pledge
Agreement, dated as of September 21, 1998, between
Crescent Real Estate Equities Limited Partnership and
Crescent Operating, Inc. (filed as Exhibit 10.41 to
September 30, 1998 Form 10-Q and incorporated by
reference herein)
10.42 First Amendment to Line of Credit and Security
Agreement, dated as of August 11, 1998, between Crescent
Real Estate Equities Limited Partnership and Crescent
Operating, Inc., together with related Note (filed as
Exhibit 10.42 to September 30, 1998 Form 10-Q and
incorporated by reference herein)
10.43 First Amendment to Amended and Restated Credit and
Security Agreement, dated as of August 11, 1998, between
Crescent Real Estate Equities Limited Partnership and
Crescent Operating, Inc. (filed as Exhibit 10.43 to
September 30, 1998 Form 10-Q and incorporated by
reference herein)
10.44 Second Amendment to Amended and Restated Credit and
Security Agreement, dated as of September 21, 1998,
between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc. (filed as
Exhibit 10.44 to September 30, 1998 Form 10-Q and
incorporated by reference herein)
10.45 Second Amendment to Line of Credit and Security
Agreement, dated as of September 21, 1998, between
Crescent Real Estate Equities Limited Partnership and
Crescent Operating, Inc. (filed as Exhibit 10.45 to
September 30, 1998 Form 10-Q and incorporated by
reference herein)
10.46 Agreement of Limited Partnership of COPI Colorado, L.P.
(filed as Exhibit 10.1 to that Schedule 13D Statement
dated September 28, 1998, filed by COPI Colorado, L.P.,
Crescent Operating, Inc., Gerald W. Haddock, John C.
Goff and Harry H. Frampton, III, and incorporated by
reference herein)
10.47 Contribution Agreement effective as of September 11,
1998, by and among Crescent Operating, Inc., Gerald W.
Haddock, John C. Goff and Harry H. Frampton, III (filed
as Exhibit 10.2 to that Schedule 13D Statement dated
September 28, 1998, filed by COPI Colorado, L.P.,
Crescent Operating, Inc., Gerald W. Haddock, John C.
Goff and Harry H. Frampton, III, and incorporated by
reference herein)
10.48 Agreement Regarding Schedules and Other Matters made as
of September 11, 1998, by and among Crescent Operating,
Inc., Gerald W. Haddock, John C. Goff and Harry H.
Frampton, III (filed as Exhibit 10.3 to that Schedule
13D Statement dated September 28, 1998, filed by COPI
Colorado, L.P., Crescent Operating Inc., Gerald W.
Haddock, John C. Goff and Harry H. Frampton, III, and
incorporated by reference herein)
10.49 Stock Purchase Agreement dated as of August 7, 1998 by
and among Western Traction Company, The Carlston Family
Trust, Ronald D. Carlston and Crescent Operating, Inc.
(filed as Exhibit 10.49 to September 30, 1998 Form 10-Q
and incorporated by reference herein)
10.50 Stock Purchase Agreement dated as of July 31, 1998 by
and among Harvey Equipment Center, Inc., L and H Leasing
Company, William J. Harvey, Roy E. Harvey, Jr., Betty J.
Harvey and Crescent Operating, Inc. (filed as Exhibit
10.50 to September 30, 1998 Form 10-Q and incorporated
by reference herein)
10.51 Credit Agreement dated as of July 28, 1998, between
Crescent Real Estate Equities Limited Partnership and
CRL Investments, Inc., together with the related Note
(filed as Exhibit 10.51 to September 30, 1998 Form 10-Q
and incorporated by reference herein)
10.52 Security Agreement dated as of July 28, 1998, between
Crescent Real Estate Equities Limited Partnership and
CRL Investments, Inc. (filed as Exhibit 10.52 to
September 30, 1998 Form 10-Q and incorporated by
reference herein)
</TABLE>
<PAGE> 134
<TABLE>
<S> <C>
10.53 First Amendment to Credit Agreement effective as of
August 27, 1998, among Crescent Operating, Inc.,
NationsBank, N. A., and the Support Parties identified
therein (filed as Exhibit 10.53 to September 30, 1998
Form 10-Q and incorporated by reference herein)
10.54 Lease Agreement dated as of October 13, 1998, between
Crescent Real Estate Equities Limited Partnership and
Wine Country Golf Club, Inc., relating to Sonoma Golf
Club (filed as Exhibit 10.54 to September 30, 1998 Form
10-Q and incorporated by reference herein)
10.55 First Amendment to Lease Agreement effective December
31, 1998, between Canyon Ranch Leasing, L.L.C., and
Crescent Real Estate Equities Limited Partnership,
relating to Canyon Ranch - Tucson (filed as Exhibit
10.55 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998 ("December 31, 1998
Form 10-K") and incorporated by reference herein)
10.56 First Amendment to Lease Agreement effective April 1,
1996; Second Amendment to Lease Agreement effective
November 22, 1996; Third Amendment to Lease Agreement
effective August 12, 1998; and Fourth Amendment to Lease
Agreement effective December 31, 1998 between RoseStar
Southwest, LLC, and Crescent Real Estate Funding II
L.P., relating to Hyatt Regency Albuquerque (filed as
Exhibit 10.56 to December 31, 1998 Form 10-K and
incorporated by reference herein)
10.57 First Amendment to Lease Agreement effective December
31, 1998, between Wine Country Hotel, LLC, and Crescent
Real Estate Equities Limited Partnership, relating to
Sonoma Mission Inn & Spa (filed as Exhibit 10.57 to
December 31, 1998 Form 10-K and incorporated by
reference herein)
10.58 First Amendment to Amended and Restated Lease Agreement
effective December 31, 1998, between RoseStar
Management, LLC, and Crescent Real Estate Equities
Limited Partnership, relating to Marriott City Center,
Denver (filed as Exhibit 10.58 to December 31, 1998 Form
10-K and incorporated by reference herein)
10.59 First Amendment to Lease Agreement effective December
31, 1998, between Wine Country Hotel, LLC, and Crescent
Real Estate Equities Limited Partnership, relating to
Ventana Inn (filed as Exhibit 10.59 to December 31, 1998
Form 10-K and incorporated by reference herein)
10.60 First Amendment to Amended and Restated Lease Agreement
effective April 1, 1996 and Second Amendment to Amended
and Restated Lease Agreement effective December 31,
1998, between RoseStar Southwest, LLC, and Crescent Real
Estate Funding II, L.P., relating to Hyatt Regency
Beaver Creek (filed as Exhibit 10.60 to December 31,
1998 Form 10-K and incorporated by reference herein)
10.61 First Amendment to Lease Agreement effective December
31, 1998, between COI Hotel Group, Inc. and Crescent
Real Estate Equities Limited Partnership, relating to
Four Seasons - Houston (filed as Exhibit 10.61 to
December 31, 1998 Form 10-K and incorporated by
reference herein)
10.62 First Amendment to Lease Agreement effective December
31, 1998, between Wine Country Hotel, LLC and Crescent
Real Estate Funding VI, L.P., relating to Canyon Ranch -
Lenox (filed as Exhibit 10.62 to March 31, 1999 Form
10-Q and incorporated by reference herein)
10.63 Master Guaranty effective December 31, 1998, by Crescent
Operating, Inc. for the benefit of Crescent Real Estate
Equities Limited Partnership, Crescent Real Estate
Funding II, L.P., and Crescent Real Estate Funding VI,
L.P., relating to leases for Hyatt Regency Albuquerque,
Hyatt Regency Beaver Creek, Canyon Ranch-Lenox, Sonoma
Mission Inn & Spa, Canyon Ranch - Tucson, and Marriott
City Center Denver (filed as Exhibit 10.63 to December
31, 1998 Form 10-K and incorporated by reference herein)
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10.64 Guaranty of Lease effective December 19, 1997, by
Crescent Operating, Inc. for the benefit of Crescent
Real Estate Equities Limited Partnership, relating to
Ventana Inn (filed as Exhibit 10.64 to December 31, 1998
Form 10-K and incorporated by reference herein)
10.65 Amended and Restated Guaranty of Lease effective
December 31, 1998, by Crescent Operating, Inc. for the
benefit of Crescent Real Estate Equities Limited
Partnership, relating to Four Seasons Hotel - Houston
(filed as Exhibit 10.65 to December 31, 1998 Form 10-K
and incorporated by reference herein)
10.66 Amended and Restated Guaranty of Lease effective
December 31, 1998, by Crescent Operating, Inc. for the
benefit of Crescent Real Estate Equities Limited
Partnership, relating to Sonoma Golf Club (filed as
Exhibit 10.66 to December 31, 1998 Form 10-K and
incorporated by reference herein)
10.67 Credit Agreement dated August 11, 1995, between Crescent
Development Management Corp., as borrower, and Crescent
Real Estate Equities Limited Partnership, as lender;
First Amendment to Credit Agreement dated as of April
15, 1997; Second Amendment to Credit Agreement dated as
of May 8, 1998; and related Note and Security Agreement
(filed as Exhibit 10.67 to December 31, 1998 Form 10-K
and incorporated by reference herein)
10.68 Credit Agreement dated January 1, 1998, between Crescent
Development Management Corp., as borrower, and Crescent
Real Estate Equities Limited Partnership, as lender, and
related Note and Security Agreement (filed as Exhibit
10.68 to December 31, 1998 Form 10-K and incorporated by
reference herein)
10.69 $3,100,000 Note dated February 29, 1996, made by
Crescent Development Management Corp. payable to
Crescent Real Estate Equities Limited Partnership (filed
as Exhibit 10.69 to December 31, 1998 Form 10-K and
incorporated by reference herein)
10.70 Credit Agreement dated January 1, 1999, between Crescent
Development Management Corp., as borrower, and Crescent
Real Estate Equities Limited Partnership, as lender, and
related Line of Credit Note and Security Agreement
(filed as Exhibit 10.70 to March 31, 1999 Form 10-Q and
incorporated by reference herein)
10.71 Amended and Restated Credit Agreement dated January 1,
1999, between Crescent Development Management Corp., as
borrower, and Crescent Real Estate Equities Limited
Partnership, as lender, and related Line of Credit Note
and Amended and Restated Security Agreement (filed as
Exhibit 10.71 to March 31, 1999 Form 10-Q and
incorporated by reference herein)
10.72 Purchase Agreement dated March 12, 1999, between
Crescent Operating, Inc. and Crescent Real Estate
Equities Limited Partnership, relating to sale of
interests in Crescent CS Holdings Corp., and Crescent CS
Holdings II Corp., and related Put Agreement of same
date (filed as Exhibit 10.72 to March 31, 1999 Form 10-Q
and incorporated by reference herein)
10.73 Second Amendment to Lease Agreement effective April 1,
1999, between Wine Country Hotel, LLC, and Crescent Real
Estate Funding VI, L.P., relating to Canyon Ranch-Lenox
(filed as Exhibit 10.73 to March 31, 1999 Form 10-Q and
incorporated by reference herein)
10.74 Master Revolving Line of Credit Loan Agreement
(Borrowing Base and Warehouse) dated May 14, 1998,
between Desert Mountain Properties Limited Partnership,
as borrower, and National Bank of Arizona, as lender;
Modification Agreement dated December 30, 1998; second
Modification Agreement dated March 31, 1999; and related
Promissory Note (Borrowing Base), Promissory Note
(Warehouse), Pledge Agreement, Deed of Trust, and
Amendment to Deed of Trust (filed as Exhibit 10.74 to
March 31, 1999 Form 10-Q and incorporated by reference
herein)
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10.75 Lease Agreement dated as of June 15, 1999, between
Crescent Real Estate Funding III, L.P. and COI Hotel
Group, Inc., relating to the Renaissance Houston Hotel
(filed as Exhibit 10.75 to June 30, 1999 Form 10-Q and
incorporated by reference herein)
10.76 Guaranty of Lease dated June 15, 1999, by Crescent
Operating, Inc. for the benefit of Crescent Real Estate
Funding III, L.P., relating to Renaissance Houston Hotel
(filed as Exhibit 10.76 to June 30, 1999 Form 10-Q and
incorporated by reference herein)
10.77 Asset Management Agreement dated as of January 1, 1999,
between Crescent Real Estate Equities Limited
Partnership and COI Hotel Group, Inc., relating to the
Omni Austin Hotel (filed as Exhibit 10.77 to June 30,
1999 Form 10-Q and incorporated by reference herein)
10.78 Agreement dated June 11, 1999, by and between Gerald W.
Haddock and Crescent Operating, Inc. and its
subsidiaries and affiliates (filed as Exhibit 10.78 to
June 30, 1999 Form 10-Q and incorporated by reference
herein)
10.79 Stock Purchase Agreement dated as of July 15, 1999, by
and among E. L. Lester & Company, Incorporated, E. L.
Lester, Jr., Howard T. Tellepsen II, Karen Tellepsen,
Tom Tellepsen II, Linda Lester Griffen, Crescent
Operating, Inc. and Crescent Machinery Company (filed as
Exhibit 10.79 to the Company's September 30, 1999 Form
10-Q ("September 30, 1999 Form 10-Q") and incorporated
by reference herein)
10.80 Stock Purchase Agreement dated as of July 8, 1999, by
and among Solveson Crane Rental, Inc., Solveson Family
Revocable Trust, and Crescent Machinery Company (filed
as Exhibit 10.80 to September 30, 1999 Form 10-Q and
incorporated by reference herein)
10.81 Second Amendment to Credit Agreement effective as of
August 27, 1999, among Crescent Operating, Inc., Bank of
America, N. A. (formerly NationsBank, N. A.), and the
Support Parties identified therein (filed as Exhibit
10.81 to September 30, 1999 Form 10-Q and incorporated
by reference herein)
10.82 First Amendment to 1997 Crescent Operating, Inc.
Management Stock Incentive Plan (filed herewith)
10.83 Form of Sales and Service Agreement between BLAW KNOX
Construction Equipment Corporation and certain of
Crescent Machinery Company and its subsidiaries (filed
herewith)
10.84 Form of Heavy Equipment Distributor Agreement between
Compaction America, Inc. and certain of Crescent
Machinery Company and its subsidiaries (filed herewith)
10.85 Form of Gradall Equipment Distributor Agreement between
The Gradall Company and certain of Crescent Machinery
Company and its subsidiaries (filed herewith)
10.86 Form of Distributor Selling Agreement between
Ingersoll-Rand Company and certain of Crescent Machinery
Company and its subsidiaries (filed herewith)
10.87 Form of JCB Dealership Agreement between JCB Inc. and
certain of Crescent Machinery Company and its
subsidiaries (filed herewith)
10.88 Form of Distributor Agreement between LBX Company, LLC,
and certain of Crescent Machinery Company and its
subsidiaries (filed herewith)
10.89 Form of Distributor Agreement between Liebherr
Construction Equipment Co. and certain of Crescent
Machinery Company and its subsidiaries (filed herewith)
10.90 Form of Distributor Agreement between Link-Belt
Construction Equipment Company and certain of Crescent
Machinery Company and its subsidiaries (filed herewith)
10.91 Form of Dealer Floor Plan Financing and Security
Agreement between General Electric Capital Corporation
and certain of Crescent Machinery Company and its
subsidiaries (filed herewith)
10.92 Taxable REIT Subsidiary Election Agreement dated
December 17, 1999, among Crescent Real Estate Equities
Company, Crescent Real Estate Equities Limited
Partnership, Crescent Operating, Inc. and Crescent
Development Management Corp. (filed herewith)
10.93 Taxable REIT Subsidiary Election Agreement dated
December 17, 1999, among Crescent Real Estate Equities
Company, Crescent Real Estate Equities Limited
Partnership, Crescent Operating, Inc. and Crescent CS
Holdings II Corp. (filed herewith)
10.94 Taxable REIT Subsidiary Election Agreement dated
December 17, 1999, among Crescent Real Estate Equities
Company, Crescent Real Estate Equities Limited
Partnership, Crescent Operating, Inc. and Crescent CS
Holdings Corp. (filed herewith)
10.95 Taxable REIT Subsidiary Election Agreement dated
December 17, 1999, among Crescent Real Estate Equities
Company, Crescent Real Estate Equities Limited
Partnership, Crescent Operating, Inc. and Desert
Mountain Development Corp. (filed herewith)
10.96 Taxable REIT Subsidiary Election Agreement dated
December 17, 1999, among Crescent Real Estate Equities
Company, Crescent Real Estate Equities Limited
Partnership, Crescent Operating, Inc. and The Woodlands
Land Company, Inc. (filed herewith)
10.97 $19.5 Million Credit and Security Agreement effective as
of March 11, 1999, between Crescent Real Estate Equities
Limited Partnership and Crescent Operating, Inc. with
related Promissory Note (filed herewith)
10.98 First Amendment to Credit and Security Agreement
effective as of March 11, 1999, between Crescent Real
Estate Equities Limited Partnership and Crescent
Operating, Inc. (filed herewith)
10.99 Third Amendment to Amended and Restated Credit and
Security Agreement effective as of March 11, 1999,
between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc. (filed
herewith)
10.100 Third Amendment to Line of Credit Credit and Security
Agreement effective as of March 11, 1999, between
Crescent Real Estate Equities Limited Partnership and
Crescent Operating, Inc. (filed herewith)
10.101 Agreements for Wholesale Financing (with Addendum)
between Deutsche Financial Services Corporation and,
respectively, Western Traction Company, Machinery Inc.,
Solveson Crane Rentals Inc., Harvey Equipment Center
Inc., and Crescent Machinery Company, with Guarantees
(filed herewith)
10.102 Master Security Agreements between Associates Commercial
Corporation and, respectively, Crescent Machinery
Company and Western Traction Company; Security Agreement
between Associates Commercial Corporation and Western
Traction Company; Addendum; and Continuing Guaranty by
Crescent Machinery Company (filed herewith)
10.103 First Amendment to Amended and Restated Credit Agreement
dated as of December 20, 1999, between Crescent Real
Estate Equities Limited Partnership and Crescent
Development Management Corp. with related Line of Credit
Note and letter amendment to related security agreement
(filed herewith)
21 List of Subsidiaries of Crescent Operating, Inc.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Arthur Andersen LLP - Denver
23.4 Consent of Arthur Andersen LLP - Atlanta
23.5 Consent of Arthur Andersen LLP - Houston
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.82
FIRST AMENDMENT
TO
1997 CRESCENT OPERATING, INC.
MANAGEMENT STOCK INCENTIVE PLAN
ARTICLE I
PLAN AMENDMENTS
1.1. Name. This amendment will be known as the "First Amendment to 1997
Crescent Operating, Inc. Management Stock Incentive Plan," and shall be referred
to herein as the "Amendment." Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in the 1997 Crescent Operating, Inc.
Management Stock Incentive Plan.
1.2. Purpose. The purpose of the Amendment is to alter certain provisions
of the Plan governing the delivery and possession of certificates representing
Restricted Stock, thereby allowing Participants to take possession of and hold
such certificates prior to the lapse of any applicable restriction periods, if
permitted by the Board or the Committee, in their discretion, under the terms of
the Restricted Stock Agreement between the Participant and the Company.
1.3. Effective Date. The Amendment will become effective on July 1, 1999.
1.4. Amendments to Section 6.1 of the Plan. Sections 6.1(e), (f) and g) of
the Plan are amended and restated in their entireties as follows:
"(e) Stock certificates issued with respect to awards of Restricted
Stock made under the Plan shall be registered in the name of the
Participant. Each such certificate shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE,
RESTRICTIONS ON TRANSFER AND CERTAIN OTHER TERMS AND CONDITIONS SET
FORTH IN THE 1997 CRESCENT OPERATING, INC. MANAGEMENT STOCK INCENTIVE
PLAN, AS AMENDED FROM TIME TO TIME, AND THE AGREEMENT BETWEEN THE
REGISTERED OWNER OF THE SHARES REPRESENTED BY THIS CERTIFICATE AND
CRESCENT OPERATING, INC. ENTERED INTO PURSUANT TO SUCH PLAN."
(f) Upon the lapse of a restriction period as determined pursuant to
subparagraph (a), the Company, pursuant to the instruction of the
Participant or his or her legal representative, shall issue a certificate
for such shares which does not bear the legend set forth in subparagraph
(e).
<PAGE> 2
(g) Any other securities or assets (other than ordinary cash
dividends) which are received by a Participant with respect to Restricted
Stock awarded to him, which is still subject to restrictions provided for
in subparagraph (a), will be subject to the same restrictions."
1.5. Amendment to Section 6.2 of the Plan. Section 6.2 of the Plan is
amended and restated in its entirety as follows:
"62 Individual Agreements. Each Participant receiving an Award of
Restricted Stock under this Article will be required to enter into a
written Restricted Stock Agreement with the Company. In such Restricted
Stock Agreement, the Participant will agree to be bound by the terms and
conditions of the Plan and such other matters as the Board or the Committee
deems appropriate; without limiting the foregoing, the Board or the
Committee may require a Participant to deliver to the Company all stock
certificates issued with respect to awards of Restricted Stock to such
Participant, together with a stock power endorsed in blank, and may also
require that all securities and assets (other than ordinary cash dividends)
received by such a Participant with respect to Restricted Stock awarded him
likewise be delivered to the Company, to be held by the Company until such
time or times as the restrictions with respect to such Restricted Stock
shall lapse."
ARTICLE II
MISCELLANEOUS
2.1. Authority for Amendment. The Amendment is being adopted by the
Committee, pursuant to its authorization under Section 8.1 of the Plan, by
unanimous consent of its members as of the date reflected in Section 1.3 of the
Amendment.
2.2. Amendment Supersedes. Except as specifically modified and amended
hereby, the Plan remains in full force and effect, and shall operate in
accordance with its provisions without any other modification, except that if
any conflict should arise between any provisions of the Amendment and the Plan,
the provisions hereof shall supersede any such conflicting provisions of the
Plan, but only to the extent of such conflict, and all the provisions of the
Plan are hereby modified as necessary so as to be consistent with the provisions
of the Amendment.
2.3. Amendment Binding on Successors. The Amendment will be binding upon
the successors and assigns of the Company and any of its Subsidiaries that adopt
the Plan.
2.4. Number and Gender. Whenever used herein, nouns in the singular will
include the plural where appropriate, and the masculine pronoun will include the
feminine gender.
2.5. Headings. Headings of articles and sections hereof are inserted for
convenience of reference and constitute no part of the Amendment.
<PAGE> 1
EXHIBIT 10.83
BLAW-KNOX
CONSTRUCTION EQUIPMENT CORPORATION
Mattoon, Illinois, U.S.A.
SALES & SERVICE AGREEMENT
THIS AGREEMENT made the 1st day of April, 1996, between BLAW KNOX CONSTRUCTION
EQUIPMENT CORPORATION, with offices at Mattoon, Illinois, U.S.A. ("BLAW-KNOX,
and Western Traction Company, Inc. with offices at 1195 E. Glendale, Sparks NV
89431 (" DISTRIBUTOR").
WITNESSETH:
That in consideration of the mutual promises herein made, BLAW-KNOX and
DISTRIBUTOR agree as follows:
1. APPOINTMENT
BLAW-KNOX hereby appoints DISTRIBUTOR as a distributor for the sale of
the "BLAW-KNOX" branded equipment specified in Schedule A (the "EQUIPMENT") and
service and replacement parts offered for sale by BLAW-KNOX ("PARTS") with the
right to purchase and to resell the EQUIPMENT and PARTS throughout the
geographical area specified in Schedule A (the "TERRITORY") upon the terms and
conditions hereinafter set forth. DISTRIBUTOR shall not appoint subdealers for
sales, service or rental of EQUIPMENT or PARTS or for any other activities
normally performed by a distributor without BLAW-KNOX's prior written consent.
DISTRIBUTOR shall not sell EQUIPMENT or PARTS to any buyer who engages in
EQUIPMENT and PARTS resale activities normally performed by a distributor
without BLAW-KNOX's prior written consent.
2. SALES PERFORMANCE
DISTRIBUTOR will use its continuing best efforts to develop the sale of
EQUIPMENT and PARTS within the TERRITORY to the satisfaction of BLAW-KNOX In
determining whether DISTRIBUTOR's level of sales and other aspects of
performance have been satisfactory in any period, BLAW-KNOX may consider
DISTRIBUTOR's performance in meeting the sales, market penetration and other
goals set forth in Schedule A attached hereto.
3. PROMOTIONAL, ADVERTISING AND SERVICE OBLIGATIONS
(a) DISTRIBUTOR shall use its best efforts to promote the sales of
EQUIPMENT and PARTS in the TERRITORY. In order to give adequate representation
in the TERRITORY, DISTRIBUTOR shall:
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(i) advertise the EQUIPMENT and PARTS in the Press and Trade Journals in the
TERRITORY.
(ii) issue and distribute suitable product and other promotional literature in
the TERRITORY.
(iii) display the EQUIPMENT in the most suitable exhibitions in the TERRITORY,
subject to BLAW-KNOX's approval.
(iv) employ suitable sales, office and service staff in the TERRITORY.
(v) maintain offices, showrooms, sales and service facilities and workshops in
the TERRITORY which are adequate in the opinion of BLAW-KNOX, and display
photographs of the EQUIPMENT together with suitable literature.
(vi) state in its advertisements, literature and on all other suitable occasions
that it is the distributor for BLAW-KNOX for the TERRITORY.
(b) BLAW-KNOX shall:
(i) have the right to advertise the name and address of DISTRIBUTOR in the
advertisements and literature of BLAW-KNOX.
(ii) provide to DISTRIBUTOR reasonable quantities of literature deemed necessary
or appropriate by BLAW-KNOX.
(c) DISTRIBUTOR shall provide prompt, competent and efficient service at a
reasonable cost on all EQUIPMENT located in the TERRITORY as required by and in
accordance with the instructions and/or service policies of BLAW-KNOX as amended
from time to time which are included herein by reference thereto. DISTRIBUTOR
shall carry at all times a stock of PARTS adequate to render such service.
4. RIGHT OF BLAW-KNOX TO SELL EQUIPMENT AND PARTS
BLAW-KNOX reserves to itself the right to negotiate with and sell the EQUIPMENT
and PARTS directly to any customer in the TERRITORY. In the event of any such
sale of EQUIPMENT, BLAW-KNOX will pay to DISTRIBUTOR a commission to be
determined by BLAW-KNOX at the time; however, in no event shall such commission
exceed the difference between the net f.o.b. factory price normally paid by the
DISTRIBUTOR and the f.o.b. selling price to the customer. Payment of any such
commission will be contingent upon BLAW-KNOX's receiving payment from the
customer.
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<PAGE> 3
5. PRICES AND TERMS
(a) BLAW-KNOX will from time to time supply DISTRIBUTOR with its currently
effective price lists for the EQUIPMENT and PARTS f.o.b. factory or other point
of origin. BLAW-KNOX reserves the right to change its prices, terms and
conditions of sale upon thirty (30) days notice to DISTRIBUTOR by mail or
otherwise.
(b) BLAW-KNOX will sell the EQUIPMENT to DISTRIBUTOR at the list price in effect
at the time of shipment of DISTRIBUTOR's order less a distributor discount as
provided in Subparagraph 7(c) below upon the terms and conditions applicable to
such sales as established by BLAW-KNOX from time to time. Any provision of any
purchase order used by DISTRIBUTOR which is inconsistent with or in addition to
such standard terms shall be null and void. All sales, use, gross receipts or
similar taxes arising out of such transaction shall be for DISTRIBUTOR's account
(c) Orders accepted by BLAW-KNOX from DISTRIBUTOR shall be f.o.b. factory or
other point of origin and shall provide for payment as agreed by BLAW-KNOX If
for any reason shipment cannot be made upon completion of manufacturing,
BLAW-KNOX may arrange for storage at DISTRIBUTOR's risk and for DISTRIBUTOR's
account and disposal.
(d) In the event of any conflict between the provisions of this Agreement and
BLAW-KNOX terms and conditions of sale, from time to time in force, the
provisions of this Agreement shall prevail.
6. ACCEPTANCE OF ORDERS AND SHIPMENTS
(a) All orders by DISTRIBUTOR for EQUIPMENT and PARTS are subject to
acceptance by BLAWKNOX at its place of business and any such acceptance shall be
subject to such reasonable allocation, as in the sole judgment of BLAW-KNOX, may
be necessary or equitable in the event of any shortages.
(b) All shipments shall be made f.o.b. factory or other shipping point
designated by BLAW-KNOX, and BLAW-KNOX shall not be liable for any loss or
damage in transit. Claims for shortages, losses or damages to shipments shall be
made against carrier by DISTRIBUTOR.
(c) BLAW-KNOX shall attempt to meet its shipping estimate but shall not
be responsible in any manner for damage or loss due to delays caused by any
condition arising from war, the acts or demands of any Government or any other
delays beyond the reasonable control of BLAW-KNOX (including without limitation
strikes, lockouts, accidents, freight embargoes, fires, floods or inability of
BLAW-KNOX to obtain the necessary material, labor or energy from customary
sources of supply for any reason).
7. DISCOUNTS
(a) BLAW-KNOX will from time to time supply the DISTRIBUTOR with its
currently effective distributor discount sheets for the EQUIPMENT, which
discounts can be changed by BLAW-KNOX immediately upon notice to DISTRIBUTOR
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<PAGE> 4
(b) Distributor discounts are computed on currently effective list
prices f.o.b. factory or other point of origin excluding special packing or
preparation. Export preparation charges are net charges.
(c) The applicable distributor discount will be deducted from the then
current list price in computing the amount billed to DISTRIBUTOR.
8. DISTRIBUTOR'S ACCOUNT
Any sum owed by BLAW-KNOX to DISTRIBUTOR or otherwise accruing to the
credit of DISTRIBUTOR may be applied against any indebtedness of DISTRIBUTOR to
BLAW-KNOX.
9. CHANGES IN DESIGN
(a) BLAW-KNOX reserves the right to discontinue the manufacture of any
EQUIPMENT or PARTS, to make changes in design, and to add improvements to
EQUIPMENT or PARTS at any time without obligation to change EQUIPMENT or PARTS
previously sold by BLAW-KNOX
(b) DISTRIBUTOR shall not make any modifications to EQUIPMENT or PARTS
and will not apply or use attachments, accessories or parts on EQUIPMENT or
PARTS unless such modification, application or use has been approved in writing
by BLAW-KNOX.
10. WARRANTY
(a) BLAW-KNOX warrants all new EQUIPMENT to be free from defects in
materials and workmanship (when subjected to normal and proper usage) for a
period of six (6) months from the "In Service Date" established by the "New
Machine Delivery Report" completed, signed and filed with BLAW-KNOX when the
unit is initially placed in service. FAILURE to transmit to BLAW-KNOX the
completed and signed "New Machine Delivery Report" within 15 days of placing the
EQUIPMENT in service will void this warranty on the EQUIPMENT. Written notice
must be given to BLAW-KNOX upon discovery of such defects, and parts must be
returned for inspection.
Parts found defective by BLAW-KNOX'S inspection, will be repaired or replaced
without cost f.o.b. point of manufacture. The foregoing shall be the limit of
BLAW-KNOX's liability for such defects. No warranty is extended on components
and accessories not manufactured by BLAW-KNOX, and these items are subject to
the warranties, if any, of their respective manufacturers.
(b) EXCEPT AS SET FORTH HEREIN, THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF
ANY KIND WHATSOEVER, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OF
FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL BLAW-KNOX BE LIABLE FOR
SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, NOR FOR ANY DELAY IN
PERFORMANCE OF THIS WARRANTY.
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II. LEGAL STATUS OF DISTRIBUTOR
DISTRIBUTOR is not hereby constituted an agent or legal representative of
BLAW-KNOX for any purpose whatsoever, and DISTRIBUTOR is granted no right or
authority to assume or create any obligation, express or implied, or to make any
representations, warranties, or guarantees on behalf or in the name of
BLAW-KNOX.
12. TERM AND TERMINATION
(a) This Agreement shall become effective on the Effective Date specified in
Schedule A and shall continue in effect unless sooner terminated in accordance
with this Agreement) until the Expiration Date specified in Schedule A. This
Agreement may be extended thereafter only by the execution and delivery of a new
Schedule A by each of the parties.
(b) DISTRIBUTOR may at any time terminate this Agreement by sixty (60) days
written notice to BLAW-KNOX.
(c) BLAW-KNOX may terminate the Agreement immediately by notice to DISTRIBUTOR
in case of (i) an assignment by DISTRIBUTOR for the benefit of all or any part
of its creditors; (ii) an appointment of a receiver or other custodian for
DISTRIBUTOR's business or the control thereof by parties other than those now in
control thereof; (iii) the insolvency of DISTRIBUTOR or the filing of a petition
in bankruptcy or for reorganization, whether voluntary or involuntary, by or
against DISTRIBUTOR; (iv) the failure by DISTRIBUTOR to pay any amount owed to
BLAW-KNOX when due or the failure by DISTRIBUTOR to account to BLAW-KNOX for the
proceeds from the sale of EQUIPMENT for which DISTRIBUTOR is indebted to
BLAW-KNOX; or (v) abandonment of operations or suspension of business by
DISTRIBUTOR.
(d) BLAW-KNOX may terminate this Agreement by giving DISTRIBUTOR at least sixty
(60) days prior written notice in the event that (i) DISTRIBUTOR falls to
satisfy or perform any of its obligations set forth in this Agreement or (ii)
there is any dispute, disagreement or controversy between or among the
principals, parties, managers, officers or stockholders of DISTRIBUTOR or any
loss of managers, officers or key employees through termination of employment or
otherwise which in the judgment of BLAW-KNOX may adversely affect the business
of DISTRIBUTOR or BLAW-KNOX; provided, however, that if the foregoing failure or
condition is something which may be cured then DISTRIBUTOR shall have 60 days to
effect such cure.
(e) The termination of this Agreement by either party shall not entitle
DISTRIBUTOR to any termination or severance compensation or to any payment in
respect to any goodwill established by DISTRIBUTOR during the term of this
Agreement or render BLAW-KNOX liable for damages on account of the loss of
prospective profits or on account of any expenditure, investment or obligation
incurred or made by DISTRIBUTOR. IN NO EVENT SHALL BLAW-KNOX BE LIABLE FOR
SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES.
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13. CERTAIN POST-TERMINATION OBLIGATIONS
(a) In the event of a termination of this Agreement, all obligations
owed by DISTRIBUTOR to BLAWKNOX shall become immediately due and payable on the
effective date of termination, whether otherwise then due or not.
(b) Upon termination of this Agreement, DISTRIBUTOR shall remain
obligated with respect to all unfilled orders previously submitted to BLAW-KNOX;
however, BLAW-KNOX may, at its option, cancel all unfilled orders except those
for EQUIPMENT and PARTS which are subject to binding signed orders received by
DISTRIBUTOR from a customer.
(c) Upon termination of this Agreement, DISTRIBUTOR shall immediately
discontinue the use of all BLAW-KNOX trademarks and trade names, including
removing from its salesrooms, service facilities, buildings, vehicles, signs,
letterheads, business cards, telephone directory advertising and other
advertising and promotional materials all references to BLAW-KNOX trademarks and
trade names, and DISTRIBUTOR shall not thereafter use any deceptively similar
name or trademark tending to give the impression that the relationship between
BLAWKNOX and DISTRIBUTOR still exists.
(d) Upon termination of this Agreement, DISTRIBUTOR shall return to
BLAW-KNOX all literature, price lists, catalogs, models, engineering data and
other items supplied to DISTRIBUTOR by BLAW-KNOX.
14. GENERAL PROVISIONS
(a) This Agreement contains the complete understanding between
BLAW-KNOX and DISTRIBUTOR in relation to the EQUIPMENT and PARTS and supersedes
any prior or contemporaneous agreements, promises and representations, whether
written, oral or created through custom, usage or course of dealing. This
Agreement may not be amended, modified or varied except by written agreement
signed by DISTRIBUTOR and by a duly authorized officer of BLAW-KNOX No departure
from this agreement shall permit any subsequent departure, and no waiver by
either party of any terms of this Agreement or of any breach shall obligate such
party thereafter to waive the same terms or any subsequent similar breach.
(b) This Agreement shall be binding upon and inure to the benefit of
BLAW-KNOX, its successors and assigns, but may not be assigned by DISTRIBUTOR
without the prior written consent of BLAW-KNOX. Any merger, consolidation,
transfer of assets, event or transaction which results (whether by operation of
law or otherwise) in a change of ownership or control of DISTRIBUTOR or
DISTRIBUTOR's business shall be deemed an assignment by DISTRIBUTOR for purposes
of this Agreement.
(c) Within 120 days after the end of each fiscal year, DISTRIBUTOR
shall furnish BLAW-KNOX with its audited financial statements for such fiscal
year. DISTRIBUTOR shall also
<PAGE> 7
furnish any other information regarding DISTRIBUTOR's business or finances which
may be reasonably required by BLAW-KNOX. BLAWKNOX will use this information
exclusively for its own purposes and will treat it as confidential.
(d) if any portion of this Agreement is held to be illegal, invalid or
unenforceable under any applicable law, such illegality, invalidity or
unenforceability shall not affect any other provisions of this Agreement.
(e) Any controversy or claim (whether contract, tort, statutory or
other) under federal, state or local law between BLAW-KNOX and DISTRIBUTOR
arising from any aspect of the commercial relationship between BLAW-KNOX and
DISTRIBUTOR, including without limitation the construction or application of any
of the terms, provisions or conditions of this Agreement, shall, on written
request of either patty served upon the other, be submitted to final and binding
arbitration Such arbitration shall be compelled and enforced according to the
Illinois Uniform Arbitration Act, and shall be conducted according to the
applicable procedures of the American Arbitration Association, except as
otherwise provided herein. The arbitration shall be conducted before the
American Arbitration Association or such other arbitration service as the
parties may, by mutual agreement, select. The arbitrator shall be appointed by
agreement of the parties or, if no agreement on appointment can be reached
within 30 days of the giving of the written request for arbitration noted above,
then by the American Arbitration Association pursuant to its rules. Judgment on
the award the arbitrator renders may be entered in any court having jurisdiction
over the parties. The arbitration shall be conducted in Mattoon, Illinois. This
arbitration provision shall survive the expiration or termination of this
Agreement. If any part of this arbitration provision is found to be void or
unenforceable, the remainder of the arbitration provision will continue in full
force and effect.
(f) This Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois. This Agreement shall be deemed to have been
entered into at Mattoon, Illinois, regardless of the places of signing by the
parties hereto or the order of their signing.
Witness the due execution as of the day and year first above written:
Page 7
<PAGE> 8
SCHEDULE A
BLAW-KNOX CONSTRUCTION EQUIPMENT CORPORATION
Attached to and made a part of the Sales & Service Agreement dated April 1, 1996
between BLAW-KNOX and DISTRIBUTOR.
BLAW-KNOX: Blaw-Knox Construction Equipment Corporation
750 Broadway Avenue East
Mattoon, Illinois, U.S.A. 61938-4600
Attention: President
Fax No: 217-234-7154
TWX No: 910-247-3928 BLAW-KNOX MT
DISTRIBUTOR: Western Traction Company, INc.
1195 E. Glendale
Sparks, NV 89431
Attention:
Fax No:
EFFECTIVE DATE: April 1, 1996
EXPIRATION DATE: April 1, 1997
EQUIPMENT: TYPE MODEL
---- -----
all asphalt paving equipment and road
wideners see attached counties
TERRITORY:
ANNUAL TARGET SALES VOLUME:
ACTION PLAN: DEALER SALES AND MARKETING ACTION PLAN DATED___________ attached
hereto as Exhibit 1.
Executed as of the 24th day of June 1996.
Page 8
<PAGE> 9
BLAW-KNOX CONSTRUCTION EQUIPMENT CORPORATION
REFERENCE: Schedule A
Item: Territory
The following counties in the state of Nevada:
Churchill, Douglas, Elko, Eureka, Humboldt, Lander, Lyon, Mineral, Pershing,
Storey, Washoe, White Pine, Carson City and that portion of Nye county north of
Interstate 6 including the city of Tonapah.
The following counties in the state of California:
Alpine, Inyo, Lassen, Modoc and Muno; and those portions which lie East of
Sierra-Nevada Summit of Eldorado, Nevada, Placer, Plumas and Sierra.
Page 9
<PAGE> 1
EXHIBIT 10.84
COMPACTION AMERICA
HEAVY EQUIPMENT
DISTRIBUTOR AGREEMENT
CONTRACT FOR CALIFORNIA
WESTERN TRACTION COMPANY
--------------------------
DISTRIBUTOR (FIRM NAME)
1333 ATLANTIC STREET
ADDRESS
P.O. BOX 1649
P.O. BOX
UNION CITY, CALIFORNIA 94587
CITY, STATE, ZIP CODE
(510) 487-3100
AREA CODE TELEPHONE
ALAMEDA
COUNTY
<PAGE> 2
COMPACTION AMERICA, INC., whose principal place of business is at 2000 Kentville
Road, Kewanee, Illinois 61443 (hereinafter called "COMPANY"), and the
undersigned distributor (hereinafter called "Distributor") hereby agree as
follows:
Distributor Appointment Sales and Service Area
1. Company hereby appoints Distributor as its heavy distributor and grants the
non-exclusive right to sell and service Products (as hereinafter defined) in the
territory specified on Exhibit A which is hereinafter referred to as the "Area
of Primary Sales and Service Responsibility." Distributor acknowledges and
agrees that Company may, upon ninety (90) days written notice to Distributor,
enlarge, reduce or otherwise change the Area of Primary Sales and Service
Responsibility. Distributor agrees that this Agreement applies only to the
authorized locations specified on Exhibit B.
Term
2. Unless earlier terminated as herein provided, this Agreement shall expire on
the 31st day of December, 1994. Company may choose to renew this Agreement for
an additional term by sending a renewal notice to Distributor. This Agreement
shall no longer be in force or effect if Distributor fails to execute and return
to Company said renewal notice within sixty (60) days after receipt thereof.
Products
3. The products to which this Agreement applies are the complete machines
(wholegoods) specified on Exhibit C, together with the attachments, accessories
and service parts therefor, all of which are hereinafter collectively referred
to as the "Products."
Sales and Service Responsibilities
4. Distributor hereby agrees as follows:
A. To adequately capitalize the distributorship and to maintain it on a
financially sound basis, and to maintain an adequate source of inventory
financing.
B. To promote and sell Products sufficient to achieve sales objectives and
market share satisfactory to the Company.
C. To employ, develop, train and maintain a competent marketing organization for
the purpose of selling, leasing, renting and servicing Products.
D. To maintain an inventory of Products that is adequate for the sales and
service potential in the Area of Primary Sales and Service Responsibility.
E. To report operating results if and when requested to do so, including without
limitation annual financial statements which have been reviewed by an
independent accountant and quarterly inventory status reports.
F. To carry a minimum of One Million Dollars ($1,000,000) of comprehensive
general liability coverage and to submit to Company, upon request, evidence of
such insurance and its effective term.
G. To meet the Company's service policy standards including pre-delivery,
delivery and after delivery requirements for all Products.
H. To render and provide sufficient, prompt and satisfactory service of said
Products and to fulfill Product warranty obligations in accordance with
Company's service policies, terms and conditions.
I. To meet such other reasonable standards of performance as may be established
from time to time by the Company.
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<PAGE> 3
Sales and Service Fee
5. If Distributor sells Products (other than attachments, accessories and
service parts sold separately) outside the Area of Primary Sales and Service
Responsibility, Company may assess a sales and service fee not to exceed five
percent (5%) of the list price of such Products.
Planning Conferences
6. In the interest of reviewing performance and developing future plans to
maximize market share and profits, Company shall conduct periodic performance
reviews in cooperation with Distributor.
Orders, Delivery
7. A. No order submitted to Company by Distributor shall become effective unless
and until it shall be formally accepted by written acknowledgment to Distributor
from Company, and Company, in its sole discretion, may refuse to accept any
order. Once an order has been accepted by Company, the Distributor shall not
cancel said order without the prior written consent of Company. The Company, in
its sole discretion may deem it necessary to ship Products on a COD basis, and
in such event, Distributor agrees to pay all such charges.
B. Upon termination of this Agreement, all orders submitted hereunder to Company
by Distributor shall be cancelled, except orders accepted by Company prior to
the effective date of termination.
C. Delivery of Products by Company to any carrier for transportation to
Distributor shall constitute delivery to Distributor and Distributor shall bear
all risk of loss or damage thereafter.
Liability for Delays
8. No liability shall attach to Company for direct, indirect, incidental, or
consequential damages or expenses due to loss, damage or delay in delivery of
Products resulting from or caused by acts of God, strikes, riots, fires,
insurrection, war, sabotage, floods, explosions, order of government, other
catastrophe or other acts or delays beyond Company's control, and Distributor
shall not make any claim of loss or damage against Company which may be
occasioned by any such delay in delivery.
Price
9.A. Company has issued and will continue to issue to Distributor price lists,
sales and service bulletins and finance plans which state Company's sales and
service policies with respect to Products which may include suggested list
prices, Distributor cash, net and floor plan prices, and terms of sale. Any
price, discount or terms which deviate from the price sheets, programs and
finance plans published by Company from time to time shall require the prior
written approval by an officer of Company
B. Distributor agrees to pay Company for Products in accordance with the prices
and terms of sale specified by Company from time to time.
Sale, Rental, Lease or Direct Bid by Company
10.A. Company may sell, rent or lease any Products to such major accounts and
rental yards in Distributor's Area of Primary Sales and Service Responsibility
as Company may, from time to time identify, as well as governmental agencies and
sub-divisions thereof.
B. In addition, Company, may from time to time, sell, rent or lease discontinued
or used Products wherever and to whomever Company chooses.
3
<PAGE> 4
C. Company further may sell, rent or lease any Products to such other customers
located within the Area of Primary Sales and Service Responsibility as Company
and Distributor may deem necessary.
Warranty
11.A. Distributor shall abide by Company's warranties and warranty instructions
as modified from time to time by Company. COMPANY MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED (INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR PARTICULAR PURPOSE), EXCEPT THOSE SET FORTH
IN COMPANY'S CURRENT, APPLICABLE PUBLISHED WARRANTY POLICIES.
B. During normal business hours, Company may inspect Distributor's warranty
records and Distributor shall furnish copies thereof to Company upon request.
C. In the event Distributor extends any additional warranty (such as by
enlarging the scope or period of warranty or undertaking a warranty of
merchantability or fitness for any particular purpose) or any other obligation
whatsoever, Distributor shall: (i) be solely responsible therefor; (ii) have no
recourse against Company; and (iii) defend, indemnify and hold Company harmless
against any claim or cause of action whatsoever arising out of, or occasioned
by, the Distributor's extension of said additional warranty or obligation.
D. Distributor is not authorized to change the Company's warranty in any way or
grant any other warranty unless such change is authorized in writing by an
officer of Company.
Termination
12.A. The parties to this Agreement may by mutual consent terminate this
Agreement at any time.
B. Unless Company after discovery of relevant facts, promptly notifies
Distributor to the contrary (in accord with Section 27), this Agreement will
terminate immediately for any one of the following causes: (i) insolvency or
bankruptcy of Distributor, (ii) assignment or attempted assignment of
Distributor's assets for the benefit of creditors, (iii) sale of secured
property out of trust or any fraudulent transfer of secured property, (iv)
change in control or ownership of Distributor, (v) default in payment of moneys
due Company, or (vi) Distributor's falsification of any records or reports
required by Company under this Agreement.
C. Company may, at its option, terminate this Agreement by written notice to
Distributor if: (i) Distributor is in default under any security agreement or
any other agreement with Company, or (ii) Distributor breaches any material
provision of this Agreement, including specifically the requirement to maintain
a source of inventory financing.
D. If either party hereto is dissatisfied with the other party's performance
under this Agreement and wishes to terminate this Agreement (for reasons other
than those causes enumerated in Sections 12B and 12C), the party wishing to
terminate this Agreement (the "Terminating Party") may initiate the following
termination procedure: (i) The Terminating Party shall notify the other party
hereto in accordance with Section 27 of its intent to terminate this Agreement
stating the reasons for dissatisfaction with the other party's performance under
this Agreement (said notice shall hereinafter be referred to as the "Termination
Notice");
4
<PAGE> 5
Effect of Expiration or Termination
D. (ii) Within the thirty (30) day period after the Termination Notice (unless
such period is extended by Company), the alleged deficiently performing party
shall meet with the Terminating Party to discuss the areas of alleged deficiency
and ways to cure any such deficiency;
(iii) The Terminating Party shall give the other party hereto not less than an
additional ninety (90) days (the "Cure Period") to correct, to the satisfaction
of the Terminating Party, any deficiency alleged in the Termination Notice; and
(iv) If the Terminating Party decides, in its sole discretion, after the
termination of the Cure Period that the deficiencies alleged in the Termination
Notice have not been cured to the Terminating Party's complete satisfaction,
Terminating Party may notify the other party hereto in accord with Section 27
hereof of the termination of this Agreement effective not less than thirty (30)
days from the giving of such notice.
Effect of Expiration of Termination
13.A. Upon expiration or termination of this Agreement, Distributor shall
promptly return all remaining promotional material, catalogs, price lists,
service manuals, bulletins, owner's manuals and current advertising material,
and any other literature which was furnished to Distributor by Company.
B. Distributor shall deliver to Company copies of all sales records, ownership
lists, service history records and any other material of any kind relating to
the sale, operation or servicing of Products.
C. Expiration or termination of this Agreement shall not release either party
from the payment of any sum then owing to the other.
D. The provisions of 'Sections 21 and 22 shall survive the expiration or
termination of this Agreement.
F. The Company, after notifying Distributor of termination as provided in
Section 12, shall have the right to consummate arrangements with a replacement
distributor.
Return of Products on Expiration or Termination of Agreement
14.A. Company shall, if notified in writing by Distributor within thirty (30)
days after the expiration of termination of this Agreement by Company,
repurchase within ninety (90) days after such notice from Distributor new,
current, unused, undamaged, and saleable Products purchased by Distributor from
Company, it being expressly understood that the Company does not undertake to
repurchase any other asset, tangible or
intangible, from Distributor.
B. If Company notifies Distributor within thirty (30) days of the expiration or
effective date of termination of this Agreement of Company's desire to
repurchase Products referred to in Subsection
C. The purchase price paid by Company to Distributor for Products repurchased
from the Distributor under this Section 14 shall not exceed the price paid to
Company by Distributor. All amounts owed by Distributor to Company will be
netted against any repurchase of the Products. Distributor shall return Products
to be repurchased within thirty (30) days after Company notifies Distributor of
the exercise of its intent to repurchase Products.
Credit for Returned Products
15.A. Products returned pursuant to Section 14 hereof shall be subject to
inspection by Company and if Company shall find such Products to have been
returned in compliance with this Agreement, the same shall be credited to
Distributor at the prices described in Section 14.
5
<PAGE> 6
B. If Company shall find, in its sole discretion, Products returned by
Distributor not to be in conformity with Section 14 hereof, such Products will
be held for a period of thirty (30) days for disposition as Distributor may
direct for Distributor's account. If Distributor fails to give Company such
direction within said thirty (30) day period, Company may thereafter dispose of
such Products at its discretion without liability to Company and Distributor
hereby waives any rights or interest in such Products.
C. Distributor shall be responsible for proper identification of all repair
parts to be repurchased by Company.
D. Distributor shall not be entitled to payment or credit for returned Products
until Distributor has provided Company with satisfactory evidence that
Distributor has complied with all applicable laws and that such returned
Products are free and clear of all claims, liens and encumbrances except those
existing in Company's favor.
E. Notwithstanding any other provision contained in Sections 14 and 15 hereof,
all indebtedness of Distributor to Company covering Products not returned and
accepted for credit shall become immediately due and payable on the expiration
or effective date of termination of this Agreement.
Application of Distributor's Credit
16. While this Agreement is in effect or following its expiration or
termination, Company may apply any amount which it or its divisions,
subsidiaries or affiliates owes Distributor to any obligations of Distributor to
Company or to any division, subsidiary or affiliate thereof.
Transactions After Expiration or Termination
17. In the event the parties hereto have any dealings after expiration or
termination of this Agreement, such dealings shall not be construed as a renewal
of this Agreement nor as a waiver of such termination.
Taxes and Liens
18. All taxes, liens and assessments against Products in the hands of, or
enroute to, Distributor are for Distributor's account and not for the account of
Company.
Product Changes/Discontinuance
19. A Company may change the design or specifications of any Product at any time
and from time to time, without notice and without incurring any obligation to
Distributor.
B. Company shall not be obligated to make the same or a similar change to any
Product previously purchased by or shipped to Distributor.
C. Company may at any time, and from time to time, discontinue the manufacture
or sale of any Product, with or without substituting another in its place.
D. Products changed or improved will be accepted by Distributor in fulfillment
of existing orders.
Use of Name, Trade Names and Trademarks
20.A. The Distributor agrees that Company is and shall be the exclusive owner of
all trademarks and trade names now or hereafter used by Company in connection
with the sale and servicing of its Products and the conduct of its business.
6
<PAGE> 7
B. Distributor may use the trademarks or trade names associated with the
Products and any other trademarks and trade names owned by Company only in a
manner approved by Company and only in relation to the Products, accessories and
services.
C. Upon the expiration or termination of this Agreement, Distributor will
promptly discontinue the use of the Company's trademarks and tradenames on any
signs, displays, or advertising material and will promptly remove all signs and
other advertising material or identifying marks.
Limitation of Liability
21 .A. Except as otherwise specified in this Agreement. Company shall have no
liability for any expenditure made, or loss of income incurred, by the
Distributor in preparation for performance or in the performance of the
Distributor's obligations under this Agreement.
B. Neither Company nor Distributor shall by reason of the termination or
non-renewal of this Agreement be liable for the other for compensation,
reimbursement or damages on account of the loss of prospective profits or
anticipated sales and rentals, or on account of expenditures, investments,
leases, property improvements or commitments in connection with the business or
goodwill of the Company, of the Distributor or otherwise.
C. In no event shall Company be liable for indirect, special, incidental or
consequential damages.
Indemnification
22.Company and Distributor shall defend, indemnify and hold each other harmless
from and against any and all claims, actions, losses, damages and expenses
(including reasonable attorney's fees and expenses) arising out of or related to
the indemnifying party's performance or failure to perform under this Agreement.
Company/Distributor Relationship
23.A. The appointment of the Distributor by Company under this Agreement does
not constitute Distributor as the legal representative of Company for any
purpose except as specifically set forth herein.
B. It is expressly understood that, in performing as a distributor hereunder,
Distributor is acting solely as an independent business enterprise and nothing
herein contained shall be construed to create, nor does it create, a
relationship or employer and employee, principal and agent, partnership, joint
venture or the like between Company and Distributor.
Performance
24. No failure of Company to insist upon strict compliance with any provision of
this Distributor Agreement shall constitute a waiver thereof for the future.
Applicable Law, Invalidity and Jurisdiction
25.A. This Agreement shall be construed, enforced and performed in accordance
with the laws of the State of Illinois.
B. All provisions of this Agreement are severable and any provision determined
to be invalid shall be deemed inoperative without invalidating any of the other
provisions of this Agreement.
C. The parties agree that neither shall commence any litigation against the
other arising out of this Agreement or the termination or non-renewal of this
Agreement except in a court located in the State of Illinois. Each party
consents to jurisdiction over it by such a court.
7
<PAGE> 8
Complete Agreement and Modifications
26.A. This Agreement supersedes any prior or contemporaneous agreements between
the parties and, excepting prior security agreements, there are no agreements or
understandings, either oral or written, which conflict with, alter or enlarge
it, and the express terms hereof control both course of dealing and usage of
trade.
B. Any modification of this Agreement must be in writing and approved by
Company.
Notices
27. Any notice or other communication required or that may be given pursuant to
this Agreement shall be in writing and shall be delivered personally, or sent to
the address set forth above via facsimile or via registered or certified mail,
return receipt requested. Any such notice or communication shall be deemed given
when so delivered personally, faxed, or if mailed, on the earlier of the date of
receipt or two days after the date of mailing.
Assignment
28. Distributor may not assign, delegate or otherwise transfer this Agreement or
Distributor's rights and obligations hereunder without Company's prior written
consent.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
dates set forth below.
COMPACTION AMERICA, INC.
Dated: 4/4/94
By:
Title: President
And By:
Title: Vice-President/Marketing & Sales
Distributor: WESTERN TRACTION COMPANY
Dated:
By:
Title:
Attest:
8
<PAGE> 9
EXHIBIT A
DISTRIBUTOR'S AREA OF PRIMARY SALES AND SERVICE:
IN THE STATE OF CALIFORNIA: That portion of the State of California
bounded on the north by and including the counties of Mendocino, Glenn,
Butte, Plumas, and Sierra; bounded on the south by and including the
counties of Monterey, Fresno, Kings, Tulare, and Mono.
9
<PAGE> 10
EXHIBIT B
Distributor's authorized locations:
1333 Atlantic Street, Union City, California 94587
2330 East Date Avenue, Fresno, California 93706
10
<PAGE> 11
EXHIBIT C
Distributor is authorized to sell the following Products:
HYPAC HEAVY COMPACTION EQUIPMENT.
11
<PAGE> 12
DISTRIBUTOR SECURITY AGREEMENT
This Agreement is made as of the 1st day of January, 1994, by and between
Compaction America, Inc. a Delaware Corporation, having its principal place of
business at 2000 Kentville Road, Kewanee, Illinois 61443 (hereinafter "COMPANY"
or "Secured Party"), and Western Traction Company a corporation/limited
partnership/partnership, organized under the laws of the State of California and
having its principal place of business at 1333 Atlantic Stree Union City,
California 94587 (hereinafter referred to as "Debtor").
CREATION OF SECURITY INTEREST:
1. For valuable consideration received, Debtor grants to COMPANY a security
interest in the Collateral, as hereinafter described and defined, to secure the
payment, performance and/or fulfillment of any and all existing and future
Obligations, as hereinafter described
and defined, of Debtor to Company.
COLLATERAL: OBLIGATIONS
2.a The "Collateral" consists of Debtor's present and hereafter acquired
inventory obtained by Debtor from the COMPANY, any related Division and/or
subsidiary or affiliated company including new and used compaction equipment,
parts and machinery, together with all present and future attachments,
accessions, exchanges, replacement parts, repairs, and additions thereto,
whether held by Debtor for sale, lease or consignment, and all chattel paper,
documents, general intangibles, instruments, accounts and contract rights now
existing or hereafter arising with respect thereto, and all cash and non-cash
proceeds (including insurance proceeds) of any of the foregoing. With respect to
any Collateral other than parts inventory owned by the Debtor and held for sale
or lease, the security interest created pursuant to Section 1 above shall be
released as to specific items of Collateral when Debtor has fully satisfied all
outstanding Obligations related to such specific item.
b. Collateral may be more specifically described in Rental Agreements, and
Consignment Agreements executed by the parties from time to time hereafter,
Debtor's purchase orders, invoices, and in periodic inventory reports submitted
by Debtor. For the purpose of identification, such Rental Agreements,
Consignment Agreements, purchase orders, invoices and inventories as and when
executed are incorporated herein by reference.
c. The "Obligations" consist of all obligations, indebtedness and liabilities
for the payment of monies (including applicable finance charges, late payment
charges and interest) owed for goods now or hereafter sold by COMPANY to Debtor,
including without limitation, all costs and expenses incurred by COMPANY
(including reasonable attorneys' fees) to (i) preserve and enforce this security
interest, (ii) collect monies owed, and (iii) maintain and preserve the
Collateral.
WARRANTIES: REPRESENTATIONS
3. Debtor warrants and represents:
a. Ownership. Debtor is the owner of the Collateral free of all encumbrances and
security interests (except COMPANY's security interest).
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<PAGE> 13
b. Location of Collateral. The Collateral will be kept and maintained at
Debtor's place(s) of business at the address(es) shown on Schedule 3.b to this
Agreement, and Debtor will not remove the same from such premises, without the
prior written consent of COMPANY except for sales made in the ordinary course of
Debtor's business (accompanied by payment or other arrangement in accordance
with the finance plans published by COMPANY and in effect at the date of
shipment).
c. Name, Change of Name. Except as shown on Schedule 3.c to this Agreement,
Debtor is not conducting business at any place where the Collateral will be
located under any trade name or any other name other than Debtor's own name.
Debtor will give COMPANY prior written notice of any change in Debtor's name,
any trade name identified on Schedule 3.c, or of Debtor's beginning to use any
trade name at any place where the Collateral will be located.
d. Change of Address. Debtor shall immediately advise COMPANY in writing of any
change in address of Debtor's principal place of business, of any other place of
business where the Collateral is located, or of any address set forth in the
Schedules to Section 3 of this Agreement.
PARTIES BOUND
4. Each party signing this Agreement is a Debtor and the Obligations hereunder
of all Debtors are joint and several. This Agreement benefits COMPANY, its
successors and assigns, and binds the Debtor and its heirs, legal
representatives, successors and assigns.
PAYMENT
5. Payment of all Obligations, including interest and delinquency charges, shall
be made in accordance with the Rental Agreements, and consignment Agreements
executed by the hereto from time to time hereafter, COMPANY's invoices and the
finance plans published by COMPANY and in effect at the date of shipment.
Interest on all Obligations shall accrue after maturity at the rate of 18% per
year or at the highest legal contract rate, whichever is lower.
MAINTENANCE OF COLLATERAL
6. Debtor shall: maintain the Collateral in good condition and repair and not
permit its value to be impaired; keep it free from all liens, encumbrances and
security interests (other than COMPANY's security interest); defend it against
all claims and legal proceedings by persons other than COMPANY; not sell, lease
or otherwise dispose of it or permit it to become an accession or attachment to
other goods except as specifically authorized by Distributor Agreement or in
writing by COMPANY; not permit it to be used or operated in violation of any
applicable law, regulation or policy of insurance; pay and discharge when due
all taxes (including but not limited to ad valorem, sales and use taxes),
assessments, license fees, freight, insurance premiums, storage and handling
charges, and all other expenses and charges in connection with the sale, use,
handling, storage possession, collection or transfer of Collateral. Loss of or
damage to the Collateral shall not release Debtor from any of the Obligations.
INSPECTION OF COLLATERAL
7. Debtor shall keep accurate records and accounts with respect to the
Collateral at Debtor's place of business where the Collateral is located, or if
Debtor has more than one such place of business in a state, at Debtor's
principal place of business in that state. COMPANY shall have the right to
inspect the Collateral, records and accounts at any and all reasonable time or
times; and Debtor shall assist COMPANY in making all inspections.
13
<PAGE> 14
MAINTENANCE OF SECURITY INTEREST
8. Debtor shall sign all financing statements, pay all expenses and, upon
request, take any action reasonably deemed advisable by COMPANY (including
without limitation conducting searches of the public record for filed financing
statements) to preserve the Collateral or to establish, determine priority of,
perfect, continue perfected, terminate or enforce COMPANY's security interest
therein or rights under this Agreement.
AUTHORITY OF COMPANY TO PERFORM FOR DEBTOR
9. If Debtor breaches or fails to perform any provisions of this Agreement or
the Obligations as and when requested or required, COMPANY may take such actions
as it deems necessary to enforce its security interest in the Collateral, and
the cost of taking such actions shall be one of the Obligations secured by this
Agreement and shall be payable by Debtor upon demand with interest from the date
of payment by COMPANY at the rate of 18% per year or the highest legal contract
rate, whichever is lower.
DEFAULT
10. Upon default of any provision hereof or in the payment or performance of any
of the Obligations secured hereby, the termination of the Distributor Agreement
between the parties, or the default of any provision thereof, or the default of
any provision of any Rental Agreement, or Consignment Agreement executed by the
parties hereto from time to time hereafter, as default is defined in any such
agreements, all the Obligations shall at the option of COMPANY and without any
notice or demand, become immediately due and payable; and COMPANY shall have all
the rights and remedies for default provided by said Sales Agreements, the
Uniform Commercial Code (including without limitation the right to enter upon
Debtor's premises and repossess the Collateral), as well as any other applicable
law and the Obligations. With respect to such rights and remedies:
a. Assembling Collateral. COMPANY may require Debtor to assemble the Collateral
and to make it available to COMPANY at Debtor's principal place of business or
any other location mutually agreeable to both parties.
b. Notice of Disposition. Written notice, when required by law, sent to any
address of Debtor in this Agreement at least ten calendar days (counting the day
of sending) before the date of a proposed disposition of the Collateral is
reasonable notice.
c. Expenses and Application of Proceeds. Debtor shall reimburse COMPANY for any
expense incurred by COMPANY in protecting or enforcing its rights under this
Agreement, including without limitation reasonable attorneys' fees and legal
expenses and all expenses of taking possession, holding, preparing for
disposition, and disposing of the Collateral. After deduction of such expenses,
COMPANY may apply the proceeds of disposition to the Obligations in such order
and amounts as it elects.
INSURANCE
11. Unless agreed to in writing signed by both parties, the Debtor shall fully
insure the Collateral at its expense against loss in an amount not less than the
unpaid balance of the purchase price therefor, with insurers and under policies
satisfactory to COMPANY, with such policies made payable to
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<PAGE> 15
COMPANY, its successors and assigns, as its interests may appear. Debtor shall
promptly furnish to COMPANY certificates of such insurance, and upon demand of
COMPANY, the original policies of such insurance. All of such insurance policies
shall provide for a minimum of ten days written notice to COMPANY prior to any
cancellation thereof. Debtor shall promptly notify COMPANY of any loss to, or
destruction of, the Collateral. All insurance proceeds shall, at the option of
COMPANY, be applied toward the repair or replacement of the damaged Collateral
or to the payment of the Debtor's Obligations hereunder. All risk of loss shall
be on Debtor and no loss or damage to the Collateral shall release the Debtor
from the Obligations hereunder.
WAIVER
12. No delay or omission of the exercise of any rights, powers or remedies
accruing to COMPANY upon any breach or default by Debtor under this or any other
Agreement shall impair any such right, power or remedy, or be construed as a
waiver of any such breach or default. No waiver of any rights, powers or
remedies of COMPANY or consent by it shall be valid unless in writing and signed
by COMPANY, and no waiver or consent by COMPANY to any act or omission of Debtor
shall operate as a waiver of, or consent to, any other act or omission.
ASSIGNMENT
13. Debtor understands and agrees that COMPANY may assign its rights and
interest in this Agreement or any of the Collateral under this Agreement, any
Rental Agreement, Consignment Agreement, or any other document covering the
Collateral to Associates or other assignee. Debtor hereby consents to any such
assignment and Debtor agrees that any reference to COMPANY as secured party
shall include any assignee of COMPANY.
DISTRIBUTOR AGREEMENT
14. The terms of the Distributor Agreement between the parties are hereby
incorporated by reference. No provision herein shall amend the Distributor
Agreement or guarantee its continuance or renewal.
NOTICE
15. Any written notice required or permitted by this Agreement may be given by
(i) delivery by hand during usual business hours at the addresses set forth at
the beginning of this Agreement, or (ii) by depositing it in the United States
mail, postage prepaid and return receipt requested, or (iii) by telecopy or
telex, receipt acknowledged, or (iv) by depositing it with Federal Express or
other recognized overnight courier, charges prepaid, in each instance addressed
to COMPANY or Debtor at the respective addresses set forth at the beginning of
this Agreement or at such other address as either party may designate by written
notice to the other.
IN WITNESS WHEREOF, the parties have caused this Distributor Security Agreement
to be executed on their behalf by their respective duly authorized officers,
agents or representatives.
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<PAGE> 16
SCHEDULES TO
DISTRIBUTOR SECURITY AGREEMENT
SECURED PARTY: COMPACTION AMERICA, INC.
DEBTOR: Western Traction Company
SCHEDULE 3.b. LOCATION OF COLLATERAL.
1333 Atlantic Street Union City Alameda California 94587
Street Address City County State Zip Code
Debtor has/does not have more than one (1) place of business in this state. If
so, the address of Debtor's principal place of business in this state is:
1333 Atlantic Street Union City Alameda California 94587
Street/P.O. Address City County State Zip Code
2330 East Date Avenue Fresno Fresno California 93706
Street Address City County State Zip Code
Debtor has/does not have more than one (1) place of business in this state. If
so, the address of Debtor's principal place of business in this state is:
1333 Atlantic Street Union City Alameda California 94587
Street/P.O. Address City County State Zip Code
Street/P.O. Address City County State Zip Code
Debtor has/does not have more than one (1) place of business in this state. If
so, the address of Debtor's principal place of business in this state is:
Street/P.O. Address City County State Zip Code
Debtor has/does not have more than one (1) place of business in this state. If
so, the address of Debtor's principal place of business in this state is:
Street/P.O. Address City County State Zip Code
SCHEDULE 3.c. TRADE NAMES.
Debtor uses the following trade names at the following locations:
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<PAGE> 17
WARRANTY
CERTIFICATE OF GENERAL EQUIPMENT WARRANTY
Compaction America, Inc. warrants new compaction equipment products sold by it
to be free of defects in materials or workmanship is subject to the following
conditions:
A. The warranty period for all ride-on compaction and stabilization products is
twelve (12) consecutive months covering parts from the date of delivery for
initial use and six (6) consecutive months covering labor from the date of
delivery for initial use.
B. The warranty period for all walk-behind compaction products is six (6)
consecutive months covering parts and labor from the date of delivery for
initial use.
C. The warranty period for the refuse compactor and skid steer trench compactor
is twelve (12) consecutive months or 2000 hours, whichever comes first, covering
parts and labor from the date of delivery for initial use.
Compaction America's obligation and liability under this warranty is expressly
limited to the cost, exclusive of freight, duty, taxes, handling charges, of,
during normal working hours, replacing or, at the sole option of Compaction
America, Inc., repairing by an authorized Compaction America equipment
distributor, parts determined, upon inspection to have been defective in
material or workmanship within the applicable period, to be not as warranted.
D. The warranty for replacement or repair parts installed in the product shall
be six (6) months from the date of installation. This warranty is limited to
providing a replacement part; not including freight, duty, taxes, handling
charges or cost of installation; to replace that part found not to be as
warranted or, in the alternative, at the sole option of Compaction America,
Inc., the cost, excluding travel and freight, of repairs, during normal working
hours, to that part found to be not as warranted.
This warranty covers only defects in materials and workmanship or noncompliance
in products sold by Compaction America, Inc.
Warranty coverage is not extended to repairs or parts and services required as a
result of:
<TABLE>
<S> <C>
1. Normal or accelerated wear and tear. 4. Lack of Maintenance.
Specific items might include, but are not Including:
limited to: A. Failure to inspect and maintain in accordance
A. Brakes D. Seals and Packings with published schedules.
B. Belts E. Tires B. Improper Repair
C. Hoses C. Use of "unapproved' parts
2. Alterations, not approved by Compaction 5. Periodic maintenance which is performed in
America, Inc. Including installation of accessories. in accordance with published schedules.
Specific items might include, but not limited to:
3. Abuse. A. Tune-up Parts
Specific examples might include, but are B. Filters
not limited to: C. Spark Plugs
A. Overloading D. Oil/Grease, Lube/Fuel
B. Misapplication Certain products manufactured by others are also
C. Improper Operation and Storage covered by warranties extended by the
D. Neglect original manufacturers.
Examples include:
A. Batteries
B. Tires
C. Engines
D. Attachments and Trade Accessories
</TABLE>
THIS WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS AND
WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. COMPACTION
AMERICA'S OBLIGATION
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<PAGE> 18
SHALL NOT INCLUDE ANY LIABILITY FOR DIRECT, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGE OF DELAY.
COMPACTION AMERICA, INC.
TERMS AND CONDITIONS OF SALE
ALL SALES BY SELLER TO DISTRIBUTOR ARE MADE SUBJECT TO THESE TERMS AND
CONDITIONS. As used herein. the term Seller means Compaction America. Inc. or
any affiliate or subsidiary of Compaction America, Inc. from which products
bearing the "HYPAC" name or "BOMAG" name are ordered. "Distributor" means an
authorized Distributor of a Seller.
1. GOVERNING PROVISION; ORDERS, MODIFICATIONS, AND CANCELLATIONS.
Unless otherwise provided on the face thereof, each order or offer shall be
deemed to be open for acceptance for a period of 30 days. With respect to all
orders and offers (whether submitted in writing, sent by telecopy, entered by
computer, or otherwise), no terms or conditions other than or in addition to
those contained herein will be binding upon Seller unless specifically agreed to
in writing signed by Seller: failure of Seller to object to any additional or
inconsistent provisions contained in any purchase order or other communication
from Distributor shall not be construed as a waiver of these terms and
conditions nor an acceptance of any such provisions. Orders may not be cancelled
or altered by Distributor except upon terms and conditions acceptable to Seller,
as evidenced by Seller's written consent. In the event of such an approved
cancellation by Distributor, Seller shall be entitled to payment of the full
price, less the amount of any expenses saved by Seller by reason of the
cancellation.
2. PRICES.
All prices quoted are subject to change without notice. The price of products on
order but not yet shipped may, at Seller's option. be the price in effect at the
time of shipment. Prices quoted are net f.o.b. the point designated in writing
by Seller. When no f.o.b. point is designated in writing by Seller, prices
quoted for new products shall be deemed to be f.o.b. point of manufacture and
prices for all other articles shall be deemed to be f.o.b. Seller's place of
business at which the order for products is accepted. When transportation is
payable by Seller, the price charged may be increased to reflect the lowest
transportation rates in effect at the time of shipment, even though such rates
may differ from those quoted by Seller.
3. PAYMENT.
Unless otherwise provided in writing, payment is due in accordance with the
terms of Seller's invoice in the case of cash sales or, in the case of purchases
financed by Seller or an affiliate of Seller, as specified in the writing
containing the terms and conditions of such financing. Unless otherwise provided
in writing, interest will be charged on accounts more than 30 days past due at
the rate of 2 percent per month, or the highest rate permitted by applicable
law, whichever is lower.
4. MINIMUM CHARGE
A minimum charge of $50.00 will be made on each order other than literature.
5. TAXES AND OTHER CHARGES
Any tax, duty, custom, fee or other charge of any nature whatsoever imposed by
any governmental authority, on or measured by the transaction between Seller and
Distributor shall be paid by Distributor in addition to the prices quoted or
invoiced. In the event the Seller is required to pay any such tax, fee or
charge, Distributor shall reimburse Seller therefor; or, in lieu of such
payment. Distributor shall provide Seller at the time the order is submitted
with an exemption certificate or other document acceptable to the authority
imposing same.
6. DELIVERY, TRANSPORTATION AND CLAIMS.
All delivery dates are approximate. Seller shall not be liable for any damage as
a result of any delay or failure to deliver due to any cause beyond Seller's
reasonable control, including, without limitation, any act of God, act of
Distributor, embargo or other governmental act, regulation or request, fire,
accident, strike, slowdown, war, riot, delay in transportation, or inability to
obtain necessary labor. materials or manufacturing facilities. In the event of
any such delay. the date of delivery shall be extended for a period equal to the
time lost because of the delay. Distributor's exclusive remedy for any delays
and for Seller's inability to deliver for any reason shall be rescission of the
agreement to purchase.
Delivery of products to a carrier at Seller's plant or other loading point shall
constitute delivery to Distributor; and regardless of shipping terms or payment
of freight charges, all risks of loss or damage in transit shall be borne by
Distributor. Seller reserves the right to make delivery in installments, and
unless otherwise expressly stipulated, all such installments are to be
separately invoiced and paid for when due per invoice, without regard to
subsequent deliveries. Delay in delivery of any installment shall not relieve
Distributor of its obligations to accept remaining deliveries.
Claims for shortages or other errors in delivery must be made in writing to
Seller within 15 days after receipt of shipment, and failure to give such notice
shall constitute unqualified acceptance and a waiver of all such claims by
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<PAGE> 19
Distributor. Claims for loss of or damage to goods in transit should be made to
the carrier and not to Seller.
7. STORAGE.
If the products are not shipped within 15 days after notification to Distributor
that they are ready for shipping, for any reason beyond Seller's reasonable
control, including Distributor's failure to give shipping instructions, Seller
may store such products at Distributor's risk in a warehouse or yard or upon
Seller's premises. and Distributor shall pay all handling transportation and
storage costs at the prevailing commercial rates upon submission of invoices
therefor.
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<PAGE> 1
EXHIBIT 10.85
GRADALL EQUIPMENT
DISTRIBUTOR AGREEMENT
AGREEMENT between THE GRADALL COMPANY of New Philadelphia, Ohio (hereinafter
called "The Company") and:
Western Traction Company
1333 Atlantic Street
Union City, California 94587
(hereinafter called 'The Distributor") covering the sale of Gradall EXCAVATOR
equipment. including superstructure. wheel undercarriage, crawler, attachments
and parts set forth in Annex "A" and/or Annex "A-1" attached hereto (hereinafter
sometimes referred to as "products"):
Territory: The Distributor's territory shall consist of the following area:
In the State of California, all counties North of, but excluding San Luis
Obispo, Kern, Inyo and the Eastern slope of the Sierra Nevada Mountains in Mono
County.
A. Transactions Covered: The Distributor shall have the privilege of purchasing
such products and reselling the same as an authorized Distributor for the
Company. No sales of used, repaired, rebuilt or second-hand products are covered
by this Agreement, nor other new products unless specifically listed in Annex
"A" and/or Annex "A-1.
B. Sales Activities: The Distributor shall use his best efforts in promoting.
maintaining and increasing the sale and use of said products in the territory.
He agrees to carry in stock within his territory certain of the products covered
hereby of a type and quantity to be mutually agreed on. He shall maintain within
his territory an organization and facilities adequate and appropriate for his
territory. for the solicitation of business. and the storage. installation. and
servicing of said products.
The Company shall provide the Distributor with such quantities of its sales
literature, including price lists, catalogs, photographs and circulars, at are
regularly furnished to its Distributors; and the Distributor shall be
responsible for regular distribution of such sales literature. Additional
quantities of the literature shall be requested regularly to insure an adequate
supply on hand at all times.
C. Prices: The Company will furnish the Distributor with the Company's suggested
prices for the products These prices are subject to change upon notice to the
Distributor.
D. Discount: On all products purchased by the Distributor under this Agreement,
the price to him shall be the Company's price less the applicable base discount
stated in Annex "A" and/or Annex "A-1," which shall be applicable subject to
modification from time to time at the Company's discretion. That discount shall
be allowed in full on all orders received from the Distributor and accepted by
the Company where the underlying orders to the Distributor arise from sources
within his designated territory and which require and are completed by shipment
to and original use in his designated territory; in other cases the discount
shall be adjusted as provided in paragraph E.
E. Adjustments of Discounts: (a) Where the Company accepts an order from a
Federal Government, or any agencies thereof, no compensation shall be due the
Distributor unless the Distributor has been requested by the Company to
participate in the transaction in which event the compensation will be adjusted
in accordance with paragraph (b) below.
(b) Where the Company accepts an order from any source outside the Distributor's
designated territory requiring shipment to and original use and delivery in the
Distributor's territory, or where a customer located within the Distributor's
territory prefers to deal with, and place orders directly with the Company
requiring shipment to and
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<PAGE> 2
original use and delivery in the Distributor's territory, or where orders
originate in the Distributor's territory but the completion thereof requires
shipment, original use and delivery outside the designated territory,
compensation to the Distributor shall be adjusted on the basis of the extent of
the Distributor's participation in the transaction, if any. Generally,
three-quarters of the base discount will be considered to be fair for securing
and financing an order, and one-quarter for pre-delivery, delivery, and
servicing of equipment after shipment. The decision of the Company in all cases
shall be final and binding upon the Distributor.
F. Terms of Sales: All orders are subject to approval or modification by the
Company's main office. The terms of sale shall be Net 30 days, f.o.b. factory. A
special cash discount of 2% of the net f.o.b. factory price will be allowed on
the purchase of any machine superstructure, undercarriage or boom attachment,
provided the Distributor's account is not past due, and provided that full
payment is made within 15 days from date of shipment from the factory. No cash
discount will be allowed on payment for parts. All payments shall be made in
United States funds free of exchange and collection charges. Overdue accounts
are subject to a charge of 1-1/2% per month or the maximum legal contractual
rate between corporations, whichever is the lesser. If, in the sole discretion
of the Company, terms of payment other than those stipulated above appear
advisable, the Distributor shall agree to an equitable revision of such terms.
"Volume Discounts", Cancellation Charges, "Floor Plan" and "Rental Terms" are
set forth in Annex "B."
G. Forcemajeure: The fulfillment of accepted orders is contingent on accidents,
fires, strikes, or other causes beyond the Company's control.
H. Termination: (1) The parties to the Agreement may by mutual consent terminate
the Agreement any time.
(2) Either party to the Agreement may terminate the Agreement immediately by
telegraphic or written notice to the other party for any one of the following
causes: (a) insolvency. (b) bankruptcy, (c) assignment of property for the
benefit of creditors, (d) re-organization and/or changes in ownership,(e)
default in payment of monies due the terminating party and (f) breach of
covenants or failure to perform under provisions of this Agreement.
2
<PAGE> 3
GRADALL EQUIPMENT
DISTRIBUTOR AGREEMENT
AGREEMENT between THE GRADALL COMPANY of New Philadelphia, Ohio (hereinafter
called "The Company") and:
Western Traction Company
1333 Atlantic Street
Union City, California 94587
(hereinafter called "The Distributor") covering the sale of Gradall EXCAVATOR
equipment, including superstructure, wheel undercarriage, crawler, attachments
and parts set forth in Annex "A" and/or Annex "A-1" attached hereto (hereinafter
sometimes referred to as "products"):
Territory: The Distributor's territory shall consist of the following area:
In the State of Nevada, all counties West of and including Humboldt, Lander and
Nye.
A. Transactions Covered: The Distributor shall have the privilege of purchasing
such products and reselling the same as an authorized Distributor for the
Company. No sales of used, repaired, rebuilt or second-hand products are covered
by this Agreement, nor other new products unless specifically fisted in Annex
"A" and/or Annex "A-1."
B. Sales Activities: The Distributor shall use his best efforts in promoting,
maintaining and increasing the sale and use of said products in the territory.
He agrees to carry in stock within his territory certain of the products covered
hereby of a type and quantity to be mutually agreed on. He shall maintain within
his territory an organization and facilities. adequate and appropriate for his
territory, for the solicitation of business, and the storage, installation, and
servicing of said products.
The Company shall provide the Distributor with such quantities of its sales
literature, including price lists, catalogs, photographs and circulars, as are
regularly furnished to its Distributors; and the Distributor shall be
responsible for regular distribution of such sales literature. Additional
quantities of the literature shall be requested regularly to insure an adequate
supply on hand at all times.
C. Prices: The Company will furnish the Distributor with the Company's suggested
prices for the products. These prices are subject to change upon notice to the
Distributor.
D. Discount: On all products purchased by the Distributor under this Agreement,
the price to him shall be the Company's price less the applicable base discount
stated in Annex "A" and/or Annex "A-1," which shall be applicable subject to
modification from time to time at the Company's discretion. That discount shall
be allowed in full on all orders received from the Distributor and accepted by
the Company where the underlying orders to the Distributor arise from sources
within his designated territory and which require and are completed by shipment
to and original use in his designated territory; in other cases the discount
shall be adjusted as provided in paragraph E.
E. Adjustments of Discounts: (a) Where the Company accepts an order from a
Federal Government, or any agencies thereof, no compensation shall be due the
Distributor unless the Distributor has been requested by the Company to
participate in the transaction, in which event the compensation will be adjusted
in accordance with paragraph (b) below
3
<PAGE> 4
(b) Where the Company accepts an order from any source outside the Distributor's
designated territory requiring shipment to and original use and delivery in the
Distributor's territory, or where a customer located within the Distributor's
territory prefers to deal with, and places orders directly with the Company
requiring shipment to and original use and delivery in the Distributor's
territory, or where orders originate in the Distributor's territory but the
completion thereof requires shipment, original use and delivery outside the
designated territory, compensation to the Distributor shall be adjusted on the
basis of the extent of the Distributor's participation in the transaction, if
any. Generally, three-quarters of the base discount will be considered to be
fair for securing and financing an order, and one-quarter for pre-delivery,
delivery, and servicing of equipment after shipment. The decision of the Company
in all cases shall be final and binding upon the Distributor.
F. Terms of Sales: All orders are subject to approval or modification by the
Company's main office. The terms of sale shall be Net 30 days, f.o.b. factory. A
special cash discount of 2% of the net f.o.b. factory price will be allowed on
the purchase of any machine superstructure, undercarriage or boom attachment,
provided the Distributor's account is not past due, and provided that full
payment is made within 15 days from date of shipment from the factory. No cash
discount will be allowed on payment for parts. All payments shall be made in
United States funds free of exchange and collection charges. Overdue accounts
are subject to a charge of 1-1/2% per month or the maximum legal contractual
rate between corporations, whichever is the lesser. If, in the sole discretion
of the Company, terms of payment other than those stipulated above appear
advisable, the Distributor shall agree to an equitable revision of such terms.
"Volume Discounts", "Cancellation Charges", "Floor Plan" and "Rental Terms" are
set forth in Annex "B."
G. Forcemajeure: The fulfilment of accepted orders is contingent on accidents,
fires, strikes, or other causes beyond the Company's control.
H. Termination: (1) The parties to the Agreement may by mutual consent terminate
the Agreement any time.
(2) Either party to the Agreement may terminate the Agreement immediately by
telegraphic or written notice to the other party for any one of the following
causes: (a) insolvency, (b) bankruptcy, (c) assignment of property for the
benefit of creditors, (d) re-organization and/or changes in ownership, (e)
default in payment of monies due the terminating party and (f) breach of
covenants or failure to perform under provisions of this Agreement.
(3) If either party is dissatisfied with the other party's performance under the
Agreement and wishes to terminate the Agreement (for reasons other than the
causes in paragraph 2 above) the complaining party may initiate a termination
procedure in the following manner: (a) The party wishing to terminate the
Agreement shall mail a notice to the other party stating his reasons for
dissatisfaction with the other party's performance under the contract. (b) The
party initiating the termination procedure shall give the other party a thirty
day period after the above notice to personally discuss the areas of differences
with a top official of the party initiating the termination procedure. (c) The
initiating party shall give the other party an additional 30 days to correct, to
the satisfaction of the initiating party, any alleged deficiencies in the other
party's performance under the Agreement, (d) If the initiating party decides 60
days following the issuance of his original notice that the other party's
performance under the Agreement is still not satisfactory, the initiating party
may notify the other party by registered mail of the termination Agreement 30
days from the date of the mailing of this notice.
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<PAGE> 5
(4) Every liability and obligation of either party to the other accrued at the
time of expiration or termination of this Agreement shall continue and be
payable not withstanding such expiration or termination. Upon breach of, or
termination of this Agreement by the Distributor the Company may at its option
cancel any or all unfilled orders. Upon breach of or termination of this
Agreement by the Company, all unfilled orders shall be automatically canceled
without notice except those covering products already contracted to be sold by
the Distributor.
I. Return of Products: (a) With the written consent of the Company. except as
provided below, the Distributor may return unused new products for credit
provided that such products ware originally purchased from the Company and have
appeared on all inventory lists supplied the Company. Credit will be allowed to
the Distributor at the net price originally received by the Company, less any
transportation expense paid by the Company, handling, inspection, painting and
other restocking charges necessary to recondition product to make it saleable as
new material, See Annex "C" for Annual Return and errors in shipment.
(b) The Company, at any time by written notice to the Distributor, may designate
products as non-returnable. Within a period of 30 days after the giving of such
notice, the Distributor may without further consent of the Company return
products to designated upon the terms stated in (a) above. If the Distributor
fails to do so within this period, the Company need not consent to the return of
any such product, (c) Upon termination by the Distributor of this Agreement, the
Company may, at its option, require the return of any or all of the
Distributor's stock for credit in accordance with (a) and (b) above. (d) Upon
termination of this Agreement by the Company, with the exception of such
products as may have been previously contracted to be told by the Distributor
and excepting such products as may have become non-returnable for credit in
accordance with (b) above, the Distributor may return promptly to the Company,
in accordance with its shipping instructions, all unused new products which were
originally purchased from the Company and which have appeared in all inventory
lists supplied to the Company. Credit will be allowed to the Distributor in
accordance with (a) above except that the Company will bear the transportation
costs from the Distributor.
J. Warranty: The Company's warranty is set forth in the Warranty Policy and
Instruction Manual attached as Annex "D",
THAT WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES WHETHER WRITTEN,
ORAL OR IMPLIED (INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE).
K. Reports: The Distributor shall forward for the Company's confidential use
such balance sheets, earnings statements or other financial information
pertaining to his business at such time or times as may reasonably be requested
by the Company. The Distributor shall keep the Company continually informed as
to the description, serial number, machine application and place of delivery of
all products sold, together with the names and addresses of purchasers. The
Distributor will furnish the Company on the 25th of each month, detailed reports
as to the Distributor's inventory.
L. Discontinuance Of And Changes in Products: The Company shall have the right
at any time to discontinue the manufacture or sale of any of its products, to
make changes in design and to add, modify or delete features of its products,
without incurring any obligation to install or provide the same on any products
previously manufactured or told by the Company.
M. Amendments: Annexes are subject to change upon notice to the Distributor by
the Company; otherwise
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<PAGE> 6
no change or modification of the Agreement shall be effective unless it is
reduced to writing and signed by both parties.
N. Applicable Laws: This Agreement is to be construed under and in accordance
with the laws of Ohio, It is subject to such modifications as may be reasonably
necessary as a result of changes in state or federal laws or regulations, If any
provision of this Agreement is prohibited by law or regulation of federal or
state government or any political subdivision thereof, it shall be ineffective
to the extent of such prohibition without invalidating the remaining provisions
of this Agreement,
0. General: The full cost, responsibility, and duty for or in connection with
acquiring or renting, and for or in connection with operating and maintaining
the Distributor's place of business and all other property and facilities used
by the Distributor, shall rest upon the Distributor. Nothing herein or otherwise
is intended or shall be construed to constitute the Distributor an agent,
servant, or employee of the Company, and the Distributor has and shall have no
power or authority whatever to make any agreement, incur any liability,
obligation, or indebtedness whatever, for or on behalf of or in any way binding
upon the Company. The Distributor will not use directly or indirectly, in whole
or in part the trademarks or name of the Company as a part of the corporate or
business name of the Distributor. The Distributor shall not assign nor transfer
this Agreement, either in whole or in part, to any other party without written
content of the Company.
SIGNED ON 4-30-84 but effective as of October 28, 1983.
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ANNEX - TABLE OF CONTENTS
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Page
<S> <C>
BASE DISCOUNT RATES (Annex A) .......................................... Page 4
BASE DISCOUNT RATES (Annex A-1) ........................................ Page 4-A
SPECIAL "VOLUME DISCOUNT" (Annex B1) ................................... Page 5
CANCELLATION CHARGE SCHEDULE (Annex B2) ................................ Page 6
"FLOOR PLAN" TERMS (Annex B3) .......................................... Page 7
RENTAL PLAN (Annex B4) ................................................. Page 8
CONVERSION from "FLOOR PLAN" to RENTAL PLAN (Annex B5) ................. Page 9
SERVICE PARTS RETURN POLICY (Annex C) .................................. Page 10
WARRANTY POLICY (Annex D) ............................................... Page 11
</TABLE>
7
<PAGE> 8
GRADALL EXCAVATOR EQUIPMENT
ANNEX "A"
BASE DISCOUNT RATES:
The following discount rates shall be applicable:
<TABLE>
<S> <C>
G-1000 Gradall Excavator complete with standard wheel undercarriage or crawler ... 17.5%
G-1000 Gradall Excavator upperstructure only ..................................... 17.5%
G-880 Gradall Excavator complete with standard wheel undercarriage or crawler .... 20%
G-880 Gradall Excavator upperstructure only ...................................... 20%
G-660 Gradall Excavator complete with standard wheel undercarriage or crawler .... 20%
G-660 Gradall Excavator upperstructure only ...................................... 20%
G-660 Gradall Excavator complete with railroad wheel undercarriage ............... 20%
G-3W Gradall Excavator complete w/standard wheel undercarriage or crawler ........ 20%
G-3W Gradall Excavator upperstructure only ....................................... 20%
G-3R Gradall Excavator rough terrain excavator ................................... 20%
G-3XR Gradall Excavator with or without railroad wheel undercarriage ............. 20%
Standard attachments for Qradall Excavator upperstructure ........................ 20%
Wheel undercarriage or Crawler only and their attachments ........................ 10%
Gradall Excavator Repair Parts purchased for Stock (single order value $3,000 or
more) ............................................................................ 32%
Gradall Excavator Repair Parts purchased for Stock
(single order value less than $3,000) ............................................ 30%
Gradall Excavator Repair Parts not purchased
on allotted stock orders (emergency) ............................................. 20%
Gradall Excavator Repair Parts considered non-factory stock or obsolete .......... 15%
</TABLE>
8
<PAGE> 9
It is understood that some items of a special or semi-special nature
manufactured by the Company, as well as certain items not manufactured by the
Company, will not carry the usual Base Discount Rate. If any such items are
quoted to the Distributor, the Company may quote them at a discount different
than the usual base rates or on a net price basis.
9
<PAGE> 10
GRADALL EQUIPMENT
ANNEX "B"
B1 - GRADALL "VOLUME DISCOUNT":
All models of Gradall are subject to "Volume Discount" when an order meets the
following eligibility requirements:
1. Order is for two or more machines with number of "Floor Plan" orders limited
to normal stocking levels, the remainder ordered, shipped and paid for on
"Open Account" terms.
2. Order is for machines identical in model and machine options.
3. Machines are shipped when ready.
Suggested list prices and distributor base discount will be adjusted as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Quantity of Machines Ordered 2 3 4 5 6 or More
% Suggested List Price is Lowered 2 3 4 5 6
% Distributor Discount is Lowered
against Original Suggested List
Price. 1 1 1/2 2 2 1/2 3
</TABLE>
Cash Discount or 2% applies to the Net F.O.B. factory price.
10
<PAGE> 11
GRADALL EQUIPMENT
ANNEX "B"
B2 - CANCELLATION CHARGE SCHEDULE:
1. Special machines and Special Attachments: Special machines and special
attachments will be subject to the following cancellation charge schedule or
additional costs incurred by the company such as but not limited to material,
labor, overhead and engineering of special items, whichever is the greater.
Cancellation Charge Schedule if cancelled within:
90 to 60 days from promised shipment date -- 2%*
59 to 30 days from promised shipment date -- 3%*
29 days from promised shipment date -- 4%*
* of machine order net invoice price
2. A cancellation charge of $600.00 will be billed to the distributor if a
confirmed order for a standard machine is cancelled prior to shipment. On models
with extended delivery promise (excess of 90 days) the distributor may cancel
his order within the first thirty days from date of confirmed order without any
cancellation charge.
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<PAGE> 12
GRADALL EQUIPMENT
ANNEX "B"
B3 - GRADALL "FLOOR PLAN":
Amount to be Financed: 100% of Distributor's net invoice price.
Term: 9 Months.
Payment:
10% of contract amount due 6 months from contract date, plus accrued interest on
the unpaid balance. 10% of contract amount due 7 months from contract date, plus
accrued interest on the unpaid balance. 10% of contract amount due 8 months from
contract date, plus accrued interest on the unpaid balance. Balance of contract
amount due 9 months from contract date, plus accrued interest on the unpaid
balance.
Interest Rate: Citibank, New York Prime Rate floating monthly at the rate in
effect on the 25th day of the previous month, commencing 3 months from contract
date.
Documentation Charge: $25.00 on each transaction. Should the transaction be
discounted in accordance with the Distributor's Agreement or paid in full within
90 days of the contract date, full refund of the documentation charge will be
made.
Cash Discount: 2% 15 days.
1% 45 days.
Short-term, unpaid-for demonstrations are permitted. If equipment is placed on
rental, the obligation must be paid in full or converted to the Rental Plan. If
equipment is sold, the obligation must be paid in full immediately.
The Warner & Swasey Company reserves the right to finance any transactions
itself or to assign all documents for financing by others.
The balloon note may be refinanced if necessary, but only at the discretion of
the Division and financing company, upon terms and conditions which they deem
acceptable.
In order to finance equipment, the Distributor must execute the appropriate
U.C.C.-1 forms, a Sale and Security Agreement, and promissory notes.
12
<PAGE> 13
GRADALL EQUIPMENT
ANNEX "B"
B4 - GRADALL "RENTAL PLAN":
Amount to be Financed: 100% of Distributor's Net Invoice Price
Term: 36 months from date of shipment.
Payment:
1% of contract amount, plus interest on the unpaid balance in each of the first
12 months from date of shipment. 2% of contract amount, plus interest on the
unpaid balance in each of the 13th thru 24th month from date of shipment.
3% of contract amount, plus interest on the unpaid balance in each of the 25th
thru 35th month from date of shipment. Balance due in the 36th month from date
of shipment plus interest.
Interest Rate: Citibank, New York, prime rate floating monthly at the rate in
effect on the 25th day of the previous month, commencing from shipment date.
Relief Provision: Skip payments will be granted provided 1 monthly payment has
been made, the equipment has been returned to the distributor, notification is
given prior to the start of the contract month and the OFF-RENTAL report form
#7943 has been received. Skip payments may be arranged as follows:
During the first 6 months from date of shipment arrangements may be made for
skip payments of principal and interest for a maximum of 5 skip payments. During
the 7th thru 12th month from date of shipment skip payments of principal only
will be granted for a maximum of 3 skip payments during this period.
During the 2nd and 3rd year from date of shipment skip payments of principal
only will be granted with a maximum of 3 skip payments within each 12 month
period.
Documentation Charge:
$25.00 on each transaction. Should the transaction be discounted in accordance
with the distributor agreement, full refund of this amount will be made.
Cash Discount: 2% 15 days.
If the equipment is sold, the obligation must be paid in full immediately. The
Warner & Swasey Company reserves the right to finance all transactions itself or
to assign the documents for financing by others.
The contract balance amount note may be refinanced if necessary, but only at the
discretion of Gradall and BWSFC upon terms and conditions which they deem
acceptable.
In order to finance any machine the distributor must execute the appropriate
U.C.C.-1 forms,. a Sale and Security Agreement and Promissory Notes.
13
<PAGE> 14
GRADALL EQUIPMENT
ANNEX "B"
B5 - CONVERSION FROM "FLOOR PLAN" TO "RENTAL PLAN":
Amount to be Financed: 100% of the net unpaid balance.
Terms: 36 months from date of the "Floor Plan" contract.
Payment: 1% of the original contract amount, plus interest on the unpaid
balance, in each of the first 12 months from date of the Floor Plan contract. 2%
a of the original contract amount, plus interest on the unpaid balance in each
of the 13th thru 24th month from date of the Floor Plan contract. 3% of the
original contract amount, plus interest on the unpaid balance in each of the
25th thru 35th month from date of the Floor Plan contract. Balance due in the
36th month from date of the Floor Plan contract plus interest. First payment is
due 1 month from conversion date. In all cases the monthly period includes the
period of time the equipment was on Floor Plan.
Interest Rate:
Citibank, New York Prime Rate floating monthly at the rate in effect on the 25th
day of the previous month, commencing from conversion date.
Relief Provisions:
Skip payments will be granted provided 1 monthly payment has been made, the
equipment has been returned to the distributor, notification is given prior to
the start of the contract month and the OFF-RENTAL report form #7943 has been
received.
Skip payments may be arranged as follows:
During the first 6 months from date of the Floor Plan contract arrangements may
be made for skip payments of principal and interest for a maximum of 5 skip
payments.
During the 7th thru 12th month from date of the Floor Plan contract skip
payments of principal only will be granted for maximum of 3 skip payments during
third period.
During the 2nd and 3rd year from date of the Floor Plan contract skip payments
of principal only will be granted with a maximum of 3 skip payments within each
12 month period.
Documentation Charge: None, since the charge was made on the "Floor Plan"
contract.
If the equipment is sold, the obligation must be paid in full immediately.
The Warner & Swasey Company reserves the right to finance all transactions
itself or to assign the documents for financing by others.
The contract balance amount note may be refinanced but only at the discretion of
Gradall and BWSFC upon terms and conditions which they deem acceptable.
In order to convert the financing of any machine from Floor Plan to Rental Plan,
the Distributor must execute the appropriate Extension Agreement and Promissory
Notes.
14
<PAGE> 15
GRADALL EQUIPMENT
ANNEX "C"
SERVICE PARTS RETURN POLICY:
Annual Parts Return - Each distributor will be allowed one annual return, month
to be determined by The Gradall Company. Maximize value of parts return limited
to 7-1/2% of previous year's total stock orders purchased. Return net credit to
dealer to be computed using current list prices less 32% discount less 10%
handling charge, dealer pays return freight.
Parts shipped in error -- can be returned within 60 days, credit computed on net
price a time of The Gradall Company shipment, with The Gradall Company paying
freight, and no handling charge. A copy of the invoice must be included with
return.
Parts ordered in error - can be returned within 60 days, credit computed on net
price at time of The Gradall Company shipment less 10%, with dealer paying
freight. A copy of The Gradall Company invoice must be included with return.
15
<PAGE> 16
GRADALL
WARRANTY POLICY
AND
INSTRUCTION MANUAL
(Annex D to Gradall Equipment Distributor Agreement)
The Gradall Company
406 Mill Ave. S.W.
New Philadelphia, Ohio 44663
16
<PAGE> 17
<TABLE>
<S> <C>
Introduction .......................................................... D-1
New Equipment Warranty ................................................ D-1
Warranty Period ....................................................... D-2
Owner Responsibility .................................................. D-2
Areas not Covered by Warranty ......................................... D-3
Reports Required ...................................................... D-3
Replacement & Repair Parts ............................................ D-4
Parts Inventory ....................................................... D-4
Parts Freight ......................................................... D-4
Parts (Miscellaneous) ................................................. D-4
Labor ................................................................. D-4
Diagnostic Calls ...................................................... D-5
Out-of-Territory Service .............................................. D-5
Factory Initiated Field Campaigns ..................................... D-5
Off Rental Machines ................................................... D-5
</TABLE>
17
<PAGE> 18
INTRODUCTION
This warranty is between The Gradall Company and its distributors. All customer
warranties shall be provided by the selling distributor.
The Gradall Company equipment is warranted to be free of defects in material and
workmanship. If a defect should exist, replacement of the defective part and
reimbursement for the distributor's expenses are provided for as set forth
herein.
It is important to remember that the final decision to accept or reject a claim
is based on the information presented for each situation. Some details may seem
obvious or trivial to the person preparing the claim. However, the manufacturer
may not have this same firsthand information. A properly prepared claim,
therefore, will contain all information necessary for a just and prompt
decision. Additional correspondence to obtain more information only delays
settlement.
Throughout this manual The Gradall Company and the Gradall factory will be used
interchangeably.
NEW EQUIPMENT WARRANTY
The Gradall Company warrants each new product made by it to be free from defects
in material and workmanship, its liability under this warranty being limited to
furnish free of charge F.0.B. distributors yard any part proving defective under
normal use and service within 6 months or 1200 hours (whichever comes first)
from the date of initial sale providing the equipment is on record with the
Company as being delivered by the distributor and all required reports current.
Distributor mileage and labor charges for warranty work will be at the rates set
by the Company. The Company shall have the opportunity to inspect all material
in question, and have it returned to the Company if it so desires. This warranty
does not cover bucket teeth, buckets or boom attachments. This warranty shall
not include any liability for direct, indirect or consequential damages or delay
resulting from the defect. Any operation beyond rated capacity or the improper
use or antlication of the product or the substitution of parts not approved by
the Company or the failure to release the machine for warranty work will void
this warranty. This warranty covers only the products of The Gradall Company.
The products of other manufacturers are covered only by such warranties as are
made by their manufactures.
THIS WARRANTY IS EXPRESSLY IN LIEU OF OTHER WARRANTIES EXPRESS OR IMPLIED,
INCLUDING ANY IMPLIED WARRANTY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
WARRANTY PERIOD
The Gradall Company warranty is for 6 months or 1200 hours, whichever comes
first, from date of delivery. The distributor must:
1. Supply qualified servicing.
2. Use trained and experienced service personnel to do all work.
3. Equip service personnel with adequate tools to perform the required work in a
minimum amount of time.
4. Provide adequate parts inventory to support machine population in his
territory.
5. Educate all his personnel in all aspects of the Gradall product line.
6. Properly maintain the condition of parts and machines in his inventory to
"like-new" quality standards as received from The Gradall Company.
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<PAGE> 19
OWNER RESPONSIBILITY
The Gradall owner is responsible for all normal preventive maintenance. This
includes:
1. Lubricate machine.
2. Keep bolts torqued to specifications.
3. Keep all safety items working.
4. Keep all filters clean.
5. Repair minor hydraulic leaks.
6. Repair minor air system leaks.
7. Use only clean hydraulic, engine and gearbox oil.
8. Perform all other preventive maintenance and safety procedures described in
the operator's manual.
The Gradall owner is also responsible for:
1. Using the machine only on safe, approved applications.
2. Using qualified operators who have read and thoroughly understand machine
manuals.
3. Releasing machine for warranty work or follow-up inspections. (Failure to
release machine for inspections can void warranty.)
4. Reporting accidents to distributor or Gradall factory if distributor is not
available.
5. Operating within machine design specifications only. (Example: do not raise
hydraulic pressure above specified limits.)
AREA NOT COVERED BY WARRANTY
1. Buckets, bucket teeth or other boom attachments are not covered by warranty.
2. Any abuse, neglect, misapplication or overloading of the machine, accessory
or part can void warranty. (Example: raising hydraulic pressure over
specified limits, using oversized bucket with boom extension, using
unapproved attachment, etc.)
3. Any component of another manufacturer sold by The Gradall Company is not
covered by this warranty, but only by such warranty as is made by its
manufacturer. These will be handled by The Gradall Company through normal
warranty procedures except in the case of those items which the Gradall
Service department indicates should be handled by the local representative
of the manufacturer.
4. Customer installed parts carry no warranty as The Gradall Company has no
way of knowing the condition of the machine or the ability of the
technician who made the installation.
5. Altering original machine design without written authorization by The
Gradall Company will void machine warranty.
6. Failure to shut down machine for repair after problem is pointed out will
make owner responsible for cost of repair.
REPORTS REQUIRED (see separate form-completion instructions)
All required reports must be on record at The Gradall Company branch office and
factor. These include:
1. Receiving Form 7936
2. Inspection Form 7938
Pre-Delivery -- 30, 90, 180 days (1200 Hrs.)
Follow-up Inspection
3. Delivery & Warranty Registration Form 7937
4. On-Off Rental Report Form 7943
Failure to file any of these reports could void warranty consideration. All
reports must be typewritten, submitted on time, complete and signed.
Receiving report..................within 10 days of machine receipt.
Pre-Delivery......................within 10 days of pre-delivery inspection.
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<PAGE> 20
Delivery..........................within 10 days of machine delivery.
Followup inspection (3)...........within 10 days of inspection.
Warranty..........................within 45 days of repair.
Service ..........................as soon as possible (only required if no
warranty claim submitted.)
Off-rental .......................10 days of machine return.
A warranty claim must be submitted for each repair. The Gradal Company has final
authorization regarding approval or denial of a warranty claim against or one of
its products. Do not hold a warranty claim open if the machine is returned to
work.
(Example:
Problem: frayed tool hose and boom roller seized.
Solution: Roller replaced and new hose ordered on 15th of month. Machine
returned to work. Hose backordered and not installed until 15th of following
month. A separate warranty claim should be submitted for the roller replacement
and hose replacement.
REPLACEMENT & REPAIR PARTS
All parts are warranted for 6 months or 1200 hours, whichever comes first, from
date of installation. Parts must be installed by a Gradall distributor and
Service Report Form 7939 must be submitted to The Gradall Company documenting
replacement. The replacement parts warranty does not include labor, mileage or
freight.
Parts will be discounted at the standard rate unless a supporting invoice is
supplied which shows purchase of the original part underalternate discount
rates. All parts claimed must have been purchased new from The Gradall Company
and not altered in any way.
It may be requested that parts be returned for diagnosis before credit is
issued. If so, parts must be tagged using Form 7942 and must arrive at The
Gradall Company within 60 days of date of claim approval by The Gradall Company
field service representative. Parts should be sent prepaid or collect as
determined by the Gradall field service representative.
PARTS INVENTORY
It will be the responsibility of the distributor to maintain sufficient service
parts inventory to properly support the machine population in his territory.
PARTS FREIGHT
The Gradall Company will pay freight, F.0.B. distributor's yard, to rep lace a
failed part. Freight will be paid at surface delivery rates only.
If a part is received damaged in shipment, a claim should be entered with the
freight line. Any parts received that are unordered, incorrect, or damaged by
The Gradall Company may be returned for credit. Customs charges, etc., may be
claimed on The Gradall Company caused errors. Lost parts shipments may be
claimed from The Gradall Company. All freight claims must be accompanied by a
supporting invoice.
PARTS (MISCELLANEOUS)
1. Local purchases will be accepted only if pre-authorized by your Gradall field
service representative.
2. Purchases over $15.OO must be accompanied by an invoice.
3. Local purchases must not exceed the cost of the replaced Gradall parts.
4. Hydraulic oil can be claimed only if The Gradall Company has preauthorized.
All miscellaneous expenses must be thoroughly explained.
20
<PAGE> 21
LABOR
The Gradail Company will pay labor at 75% of the distributor charge-out rate.
This rate must be approved by The Gradall Company before being considered
official. Daily work performed must be fully documented with labor hours for
each repair.
a. If multiple repairs are made, time must be submitted for each.
b. If repairs extend beyond one day, each day's work must be documented.
c. Repair should be made immediately after diagnosing p problem. If parts must
be ordered, repair must commence immediately upon receipt of parts.
d. A service report must be submitted immediately explaining why repair work is
delayed.
Excessive labor to perform a repair may be rejected by The Gradall Company based
on past job experience and records. Excessive time resulting from work being
performed by unqualified personnel will be rejected. Repair jobs that exceed 20
hours must be called to the attention of your Gradall field service
representative or the Gradall factory.
No dealer overtime premiums are allowed.
Distributor rework due to faulty repair work will not be covered. Customer labor
will not qualify for warranty. Inspections are the distributor's responsibility
and are not covered by Warranty. No meals and lodging will be paid.
DIAGNOSTIC CALLS
These trips to the machine to determine the problem, with no repairs performed,
are not covered by warranty.
MILEAGE
Mileage charges will be allowed at 75% of distributor charge-out rate not to
exceed 35 cents per mile. This rate must be approved by The Gradall Company
before being considered official. Mileage will be calculated from the nearest
distributor location. Mileage allowances for other than a service car or truck
must be pre-authorized.
OUT OF TERRITORY SERVICE
When a machine is delivered outside the selling distributor's designated
territory, 1/4 of the base discount will be held to insure proper follow up
service through out the warranty period. This service fee will be credited to
the servicing distributor as the delivery and followup inspections are
completed. 20% each for delivery, 30 day inspection and 90 day inspection and
40% following the 180 day inspection at the end of the warranty period.
The selling distributor is required to support the machine. It is permissable
for him to contract service with the Gradall distributor nearest the machine.
However, written notification must be given the Gradall factory when this is
done. Warranty and other reports will then be accepted from the contracted
servicing dealer.
FACTORY INITIATED FIELD CAMPAIGNS
These campaigns will pay labor and mileage at full charge-out rate and utilize
pre-determined time allowances. The Warranty claim form should be used. All
instructions will be detailed in an explanatory letter prior to the start of any
campaign.
OFF-RENTAL MACHINES
Warranty coverage for on/off rental machines is 1200 hours or 6 months of
operation time, whichever comes first, not to exceed 12 months from date of
initial delivery. Each time a machine comes off rental, an Off-Rental Form (No.
7943) must be sent to your local Gradall field service representative and the
Gradall factory. When the machine is returned to rental service, a new delivery
inspection must be performed and copies of the report sent to your local Gradall
field service representative and the Gradall factory. Indicate in remarks
section that machine is back on rental.
All questions relating to this warranty should be directed to The Gradall
Company.
21
<PAGE> 1
EXHIBIT 10.86
INGERSOLL-RAND DISTRIBUTOR SELLING AGREEMENT
AGREEMENT, is made this 1st day of July, 1998, by and between
INGERSOLL-RAND COMPANY, a New Jersey corporation, through its Construction &
Mining Group, having offices at 1495 Valley Center Parkway, Bethlehem, PA
18017-2293 (hereinafter called "Ingersoll-Rand"), and Crescent Machinery
Company, a Corporation, organized under the laws of the State of Texas, having
offices at 2323 Irving Boulevard, Dallas, Texas 75207 (hereinafter called
"Distributor").
WHEREAS, the Construction & Mining group of I-R is engaged in the
manufacture, distribution and sale of various items of equipment, and
WHEREAS, Ingersoll-Rand wishes to enter into a non-exclusive agreement
for the promotion, sale and servicing of Equipment, as defined herein, within
the Area of Primary Sales Responsibility, as defined herein, and
WHEREAS, Distributor wishes to act as a non-exclusive distributor for
Ingersoll-Rand for the promotion, sale and servicing of Equipment within the
Area of Primary Sales Responsibility, in accordance with the terms and
conditions of this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. SCOPE
A. The term "Equipment" as used in this Agreement refers to new
equipment or parts and/or accessories manufactured or sold by Ingersoll-Rand as
specifically identified within the Discount Schedule comprising Attachment 1 of
this Agreement. Ingersoll-Rand may, with or without advance notice and without
liability to the Distributor, (1) withdraw or supersede any one or more of the
items of Equipment, and/or (2) change prices, discounts, and terms and
conditions applicable to the purchase of Equipment. Equipment not listed in
Attachment 1 is not available for purchase by the Distributor under this
Agreement.
B. Ingersoll-Rand hereby extends to the Distributor the non-exclusive
rights to stock, sell and service Equipment within the following "Area of
Primary Sales Responsibility":
State of Texas - Counties of Anderson, Bastrop, Bell, Blanco, Bosque,
Brazos, Brown, Burleson, Burnet, Caldwell, Collin, Comanche, Cooke, Coryell,
Dallas, Denton, Eastland, Ellis, Erath, Fannin, Fayette, Freestone, Gillespie,
Grayson, Hamilton, Hays, Henderson, Hill, Hood, Hunt, Jack, Johnson, Kaufman,
Lampasas, Lee, Llano, Milam, Mills, Navarro, Palo Pinto, Parker, Rains,
Robertson, Rockwall, Somervell, Stephens, Tarrant, Throckmorton, Travis, Van
Zandt, Washington, Williamson, Wise, and Young.
2. INGERSOLL-RAND BASIC RESPONSIBILITIES
A. Ingersoll-Rand shall advertise Equipment in various advertising media.
B. Ingersoll-Rand shall provide sales assistance, engineering and application
advice, reasonable quantities of advertising materials, campaigns and
instruction in sales and service.
C. Ingersoll-Rand shall provide Equipment in quantities necessary to meet
Distributor's reasonable requirements.
1
<PAGE> 2
3. DISTRIBUTOR BASIC RESPONSIBILITIES
A. Distributor shall conduct its business and shall maintain business
hours customary in the trade from its offices and facilities located at 2323
Irving Boulevard, Dallas, Texas 75207 and 127 East Riverside Drive, Austin,
Texas 78704. Any change in such location shall not be undertaken without the
prior written consent of Ingersoll-Rand.
B. Distributor shall use its best efforts to develop business, to
promote the sale of and to sell Equipment covered by this Agreement within its
Area of Primary Sales Responsibility and shall furnish prompt, efficient, and
courteous service.
C. Distributor shall pay promptly for Equipment in accordance with the
Terms of Payment as set forth within Attachment 2 of this Agreement.
D. Distributor shall maintain a record, which Ingersoll-Rand may
examine at any time, relating to Equipment sold, showing the serial number (if
applicable) of the unit sold, the date of delivery thereof, and the name and
address of the buyer, and shall otherwise provide a summary of marketing/sales
data to Ingersoll-Rand in a form furnished by or acceptable to Ingersoll-Rand.
E. Distributor shall maintain stocking levels in sufficient quantities
to satisfy customer requirements and shall otherwise provide inventory reports
to Ingersoll-Rand in a form furnished by or acceptable to Ingersoll-Rand.
F. Distributor shall not sell, offer for sale, or use in the repair of
Equipment, as new Ingersoll-Rand parts, any part or parts which are not in fact
genuine Ingersoll-Rand parts.
G. Distributor shall receive, investigate and handle all complaints
received from users of Equipment. All complaints received by Distributor which
cannot be readily remedied shall be promptly reported in detail to
Ingersoll-Rand.
H. Distributor shall provide financial reports in a form and substance
acceptable to Ingersoll-Rand within a reasonable period of time after requested
by Ingersoll-Rand.
4. SALES OBJECTIVE AND SERVICE OBLIGATIONS
As of the date of entering into this Agreement and at least on an
annual basis, the parties shall mutually agree and specifically identify in
writing sales objectives to be met by the Distributor over a prescribed period
of time. Failure of Distributor to satisfy these sales objectives shall be
grounds for termination of this Agreement, or at the discretion of
Ingersoll-Rand to reduce the Area of Primary Sales Responsibility.
5. USE OF TRADEMARKS AND SIGNS
The Distributor shall not use, directly or indirectly, in whole or in
part, Ingersoll-Rand's name, or "I-R," or any other trademark or name that is
now or may hereafter be owned by Ingersoll-Rand, as part of the Distributor's
corporate or business name, or in any way in connection with the Distributor's
business, except in the manner and to the extent that Ingersoll-Rand may
specifically consent in writing. If any such trademarks or names are used in any
way by the Distributor with the express written approval of Ingersoll-Rand, the
Distributor on the termination of this Agreement shall delete and discontinue
all such use and shall not thereafter use any name, title, or expression in
connection with any business in which the Distributor may thereafter be engaged
which, in the judgment of Ingersoll-Rand, so nearly resembles any trademark or
name or part thereof owned by Ingersoll-Rand, as may be likely to lead to
confusion or uncertainty on the part of users of the manufactures of
Ingersoll-Rand.
6. WARRANTY AND LIMITATION OF LIABILITY--CONDITIONS OF SALE
A. Attached to this Agreement is a form entitled Warranty and
Limitation of Liability, identified as Attachment 3. In accordance with such
form Ingersoll-Rand extends a warranty (with certain limitations and exclusions)
to the initial user, through the Distributor. Ingersoll-Rand will satisfy its
warranty obligations, provided that the provisions of Attachment 3 are part of
Distributor's conditions of sale to the initial user of Equipment. Should the
Distributor fail to incorporate the provisions of Attachment 3 as a basis of
sale to the initial user, the Distributor assumes all responsibility and
liability associated with the sale of such Equipment.
B. Ingersoll-Rand reserves the right to modify the Warranty and
Limitation of Liability, comprising Attachment 3, upon written notice to
Distributor.
2
<PAGE> 3
7. PAYMENT OF TAXES
Unless otherwise stated, Ingersoll-Rand's prices do not include sales,
use, excise or similar taxes. Consequently, in addition to the prices in effect
at the time of sale, the amount of any present or future sales, use, privilege,
excise or similar tax, local, state or federal, applicable to sale of the
Equipment hereunder shall be paid by the Distributor. In lieu thereof, the
Distributor shall provide Ingersoll-Rand with a tax-exemption certificate
acceptable to the taxing authorities.
8. TERMS AND SHIPMENTS
All shipments shall be made F.O.B. Ingersoll-Rand factories, or F.O.B.
other shipping points if specified by Ingersoll-Rand, at which point title and
risk of loss of Equipment shall pass to Distributor. Distributor shall be
responsible for the preparation or submission of claims against carriers for
damage to or loss of Equipment in transit. Ingersoll-Rand reserves the right to
accept or reject any order received under this Agreement.
9. DELIVERY
Ingersoll-Rand shall not be liable for loss, damage, detention or delay
due to acts of God, war, riots, strikes, work stoppages, fires, accidents, acts
of civil or military authority including governmental laws, orders, priorities,
or regulations, delay in transportation, car shortages, delay by suppliers of
materials, acts of Distributor, or other causes beyond the reasonable control of
Ingersoll-Rand. If shipment or any other act or condition affecting payment for
the Equipment or any part thereof shall be delayed on account of the
Distributor, payment shall become due when Distributor is notified that the
Equipment is ready for shipment, and Equipment shall be held at Distributor's
risk and expense. Shipments are contingent upon Distributor's maintaining a
financial condition satisfactory to Ingersoll-Rand.
10. UNIFORM COMMERCIAL CODE FINANCING STATEMENTS
At the request of Ingersoll-Rand, Distributor shall join Ingersoll-Rand
in executing security agreements and financing statements pursuant to the
Uniform Commercial Code and Distributor authorizes Ingersoll-Rand to file a
financing statement signed only by Ingersoll-Rand in all places where necessary
to perfect Ingersoll-Rand's security interest in all jurisdictions where such
authorization is permitted by law. In such jurisdiction where the applicable
processes of the Uniform Commercial Code have not become effective and
enforceable, Distributor shall at the request of Ingersoll-Rand execute such
documents and forms and authorize Ingersoll-Rand to file and record such
documents and forms in such places as may be necessary in Ingersoll-Rand's sole
judgment to perfect a security interest and/or lien in favor of Ingersoll-Rand.
11. RELATIONSHIP BETWEEN PARTIES
The relationship between the Distributor and Ingersoll-Rand under this
Agreement is intended to be that of buyer and seller. The Distributor is an
independent contractor and neither it nor its employees, shall under any
circumstances, be considered to be agents or employees of Ingersoll-Rand. Except
as Ingersoll-Rand may specifically authorize in writing signed by one of its
officers, the Distributor shall have no right and shall not attempt to enter
into contracts or commitments in the name of or on behalf of Ingersoll-Rand or
to bind Ingersoll-Rand in any respect whatsoever.
12. REMEDIES
A. The remedies of the parties are as set forth under this Agreement.
B. With respect to the Distributor's sale of Equipment to users, or
with respect to the Distributor's own use of such Equipment, the liability of
Ingersoll-Rand to the user or Distributor shall not exceed the purchase price of
the Equipment upon which such liability arises, whether the claim is based on
contract, warranty, negligence, indemnity, strict liability or otherwise.
C. Except for claims by third parties, in no event shall either party
to this Agreement be liable to the other for any consequential, incidental,
indirect, special or punitive loss or damage arising out of this Agreement,
whether or not such loss or damage is based on contract, warranty, negligence,
indemnity, strict liability or otherwise.
D. The provisions of this Article shall survive the termination of this
Agreement.
3
<PAGE> 4
13. DURATION AND TERMINATION OF AGREEMENT
A. This Agreement, unless terminated as hereinafter provided, shall
continue in full force and effect until terminated by either party, without
cause, on sixty (60) days written notice to such effect given to the other
party.
B. This Agreement may be terminated by Ingersoll-Rand on thirty (30)
days written notice to Distributor, should the Distributor fail to satisfy the
sales objectives as prescribed by this Agreement.
C. This Agreement may be terminated by either party on one (1) day
written notice to the other party, upon the occurrence of any other breach of
this Agreement, including, without limitation; the insolvency or bankruptcy of
the other party, the breach of any collateral agreements entered into in
connection with this Agreement, or if the financial condition or either party
becomes so impaired in the opinion of the other party as to endanger its ability
to perform its obligations in accordance with this Agreement.
D. This Agreement may be terminated by Ingersoll-Rand on one (1) day
written notice to Distributors, if the Distributor assigns this Agreement, or
any rights hereunder, without Ingersoll-Rand's prior written consent; if there
is a change in the control or management of the Distributor which is
unacceptable to Ingersoll-Rand; or if the Distributor ceases to function as a
going concern or to conduct its operations in the normal course of business.
E. In the event of termination of this Agreement, the return of
Equipment, if any, shall be in accordance with Ingersoll-Rand, Construction
Equipment Group returns policy in effect on the date of such termination.
F. Upon termination, the Distributor will immediately return to
Ingersoll-Rand all price books, manuals, catalogs, literature, forms and any
other sales and administrative aids supplied by Ingersoll-Rand. In addition, all
record cards and sales data provided by Ingersoll-Rand shall be returned.
14. MISCELLANEOUS PROVISIONS
A. Any notice to be given pursuant to this Agreement shall be addressed
to the respective parties at the address set forth in the preamble of this
Agreement.
B. This Agreement including its attachments contains the entire and
only agreement between the parties respecting the sale to and the purchase by
the Distributor of the Equipment referred to herein, and any representation,
promise or condition not incorporated herein shall not be binding on either
party.
C. Ingersoll-Rand and Distributor shall mutually treat as confidential
and safeguard all information,.reports and record pertaining to this Agreement.
D. Distributor shall not transfer or assign the Agreement, or any part
thereof, or any rights thereunder without the written consent of Ingersoll-Rand.
E Either parties failure to enforce, or waiver of, any rights or terms
of this Agreement, shall not be considered a waiver of its future rights to
strictly enforce the terms of this Agreement.
F. This Agreement is deemed executed and delivered in the State of New
Jersey and all questions arising out of or under this Agreement shall be
governed by the laws of the State of New Jersey.
IN WITNESS WHERE OF the parties have executed this Agreement effective as of the
date set forth above.
Attachments:
1--Discount Schedule
2--Terms of Payment
3-Warranty and Limitation of Liability
4
<PAGE> 5
INGERSOLL-RAND COMPANY
INGERSOLL-RAND COMPANY
CONSTRUCTION & MINING GROUP
DISTRIBUTOR AGREEMENT
PORTABLE COMPRESSORS
DOMESTIC DISCOUNT SCHEDULE
STOCKING DISTRIBUTOR
Date: _____________
<TABLE>
<CAPTION>
Discount from
Complete Compressors Published List Prices
<S> <C>
100 CFM through 1600 .........................................................25%
Spare Parts ...........................................................See Note A
</TABLE>
Prices for Complete Compressors are F.O.B. Factory
Discounts apply only for U.S.A. destinations, including Alaska and Hawaii.
Note "A":
NORMAL STOCK - Normal Stock orders for parts -30% Discount.
Freight:
Transportation is allowed cheapest way (TACW). I-R determines mode of
transportation. Distributor may specify mode but freight charges will be collect
or billed to distributor if carrier refuses collect shipment.
Alaska and Hawaii: TACW to port of exit Continental United States.
EMERGENCY -
Emergency orders for parts - 20% Discount.
Freight: Freight collect or billable to Distributor if carrier refuses collect
shipment. Distributor may specify mode of transportation.
5
<PAGE> 6
INGERSOLL-RAND COMPANY
CONSTRUCTION & MINING GROUP
DISTRIBUTOR AGREEMENT
PORTABLE LIGHT TOWERS
DOMESTIC DISCOUNT SCHEDULE
STOCKING DISTRIBUTOR
Date: _____________
<TABLE>
<CAPTION>
Complete Light Towers Discount from
Published List Prices
<S> <C>
L6 and LS Series ............................................1-5 (units) - 30%
.............................................................6 or more - 30+5%
</TABLE>
Prices for Complete Light Towers are F.O.B Factory.
Discounts apply only for U.S.A. destinations, including Alaska and Hawaii.
6
<PAGE> 7
INGERSOLL-RAND COMPANY
CONSTRUCTION & MINING GROUP
DISTRIBUTOR AGREEMENT
PORTABLE LIGHT TOWERS
DOMESTIC DISCOUNT SCHEDULE
STOCKING DISTRIBUTOR
Date: _____________
Discount from
Complete GENSETS Published List Prices
<TABLE>
<CAPTION>
Complete GENSETS Published List Prices
<S> <C>
30 and 50 kw ...............................................................40%
SpareParts ..........................................................See Note A
</TABLE>
Prices for Complete Compressors are F.O.B. Factory
Discounts apply only for U.S.A. destinations, including Alaska and Hawaii.
Note "A":
NORMAL STOCK - Normal Stock orders for parts - 30% Discount.
Freight: Transportation is allowed cheapest way (TACW). I-R determines mode of
transportation. Distributor may specify mode but freight charges will be collect
or billed to distributor if carrier refuses collect shipment.
Alaska and Hawaii: TACW to port of exit Continental United States.
EMERGENCY -
Emergency orders for parts - 20% Discount.
Freight: Freight collect or billable to Distributor if carrier refuses collect
shipment. Distributor may specify mode of transportation.
7
<PAGE> 8
INGERSOLL-RAND COMPANY
CONSTRUCTION & MINING GROUP
DISTRIBUTOR SELLING AGREEMENT
TERMS OF PAYMENT SCHEDULE
Terms of Payment described herein supersede all prior Terms of Payment
Schedules.
All terms not defined herein shall have the meaning set forth in the
Ingersoll-Rand Company Construction & Mining Group Distributor Selling Agreement
Form LD-131, November 1990.
Distributor shall pay I-R on the following terms:
A. Equipment, Parts and Pre-Paid Freight.
On Equipment, parts and pre-paid freight payment in full shall be made within 30
days from the date of invoice of the respective purchase. Any sums not paid
within such time shall accrue a service charge of 1 % per month for each month
or any part thereof upon such unpaid amount.
B. Special Terms.
At the time of entry of an order with I-R, and acceptance of that order by I-R
for Equipment, the Distributor may elect the following Special Terms of Payment
for Equipment for Stock or for inclusion in the Distributor's Rental Fleet.
I-R shall deliver to the Distributor a Schedule of Payment which shall reflect
the Distributor's payment obligations to I-R pursuant to the terms hereinafter
set forth.
NOTE: DISTRIBUTOR WILL DEEM TO HAVE ACCEPTED SUCH PAYMENT SCHEDULE UNLESS
WRITTEN NOTICE IS RECEIVED WITHIN 30 DAYS OF THE DATE OF SAID SCHEDULE.
Amortization shall be reflected based on the following percentages:
Group -2.778% of net purchase price of equipment (freight excluded) per month
for 36 months.
Group -2.381% of net purchase price of equipment (freight excluded) per month
for 42 months.
Group -2.083% of net purchase price of equipment (freight excluded) per month
for 48 months.
On equipment invoiced under the standard floor plan program, payment of each
principal curtailment and interest, as hereinafter provided, shall commence on
the earlier of the happening of the following events:
1) Thirty (30) days after the equipment has been placed in service or in the
Distributor's Rental Fleet.
2) Thirty (30) days after the termination of the floor plan, and on the same day
of each month thereafter until the entire balance is paid.
When a rental split floor plan is offered, distributor will remit a
pre-specified percentage of all distributors rental revenue invoiced or
collected during the floor plan period. Payment of each principal curtailment
and interest, as hereinafter provided shall commence thirty (30) days after the
termination of the floor plan, and on the same day of each month thereafter
until the entire balance is paid.
8
<PAGE> 9
IN THE EVENT THAT ANY TIME THE EQUIPMENT IS SOLD, OR DISPOSED OF, DISTRIBUTOR
SHALL PAY IMMEDIATELY THE OUTSTANDING UNPAID AMOUNT OF THE PURCHASE PRICE OF THE
EQUIPMENT TOGETHER WITH ALL THE INTEREST ACCRUED.
Interest on the principal balance shall be calculated monthly at a rate equal to
the prime rate (in effect at Chase Manhattan Bank in New York as of the 25th day
of the preceding month) plus or minus a predetermined number of basis points for
each month there remains outstanding a portion of the principal amount.
9
<PAGE> 10
INGERSOLL-RAND CONSTRUCTION & MINING EQUIPMENT
CONSTRUCTION & MINING SOLD BY DISTRIBUTORS
Warranty
Ingersoll-Rand, though its distributor, warrants that each item of equipment
manufactured by it and delivered hereunder to the initial user to be free of
defects in material and workmanship for a periods of three (3) months from
initial operation or six (6) months from the sate of shipment to the initial
user, whichever first occurs.
With respect to the following types of equipment, the warranty period enumerated
will apply in lieu of the foregoing warranty period.
A. Aftercoolers, Drill Moutnings and Klemm Rotary Heads - the earlier of six (6)
months from initial operation or nine (9) month from date of shipment to the
initial user.
B. Portable Compressors, Portable Generator Sets (GENSETS), Portable Light
Towers, and Abrasive Blasting Equipment - the earlier of twelve (12) months from
shipment to, or the accumulation of 2,000 hours of service by the initial user.
C. All Compressor Air Ends, GENSET Generators and Paving Brakers - The earlier
of twenty-four (24) months from shipment to, or the accumulation of 4,000 hours
of service by, the initial user. For Air Ends, the warranty against defects will
include replacement of the complete Air End, provided the original Air End is
returned assembles and unopened.
D. Pavers, Forklifts, Milling Machines, Pedestrian Compactors (including
baseplates, upright and walk behinds) and Rotary Drills - the earlier of six (6)
months from shipment to, or the accumulation of 1,000 hours of service by, the
initial user.
E. Jackhammers and Self-Propelled Compactors --The earlier of twelve (12) months
from shipment to or accumulation of 1,000 hours of service by the initial user.
F. Downhole Drills - In lieu of the repair or replacement of defective parts,
Ingersoll-Rand may elect to issue fill or partial credit toward the purchase of
a new part. The extent of credit issued will be determined by pro rating against
the normal service life of the part in question.
G. Spare Parts (excluding Downhole Drills) - Three (3) months from the date of
shipment.
Ingersoll-Rand will provide a new part or repaired part, at its election, in
place of any part which is found upon its inspection to be defective in material
and workmanship during the period prescribed above. Such part will be repaired
or replaced without charge to the initial user during normal working hours at
the place of business of an Ingersoll-Rand distributor authorized to sell the
type of equipment involved or other establishment authorized by Ingersoll-Rand.
User must present proof of purchase and date at the time of exercising warranty.
This warranty does not apply to failures occurring as a result of abuse, misuse,
negligent repairs, corrosion, erosion and normal wear and tear, alterations or
modification made to the product without express written consent of
Ingersoll-Rand; or the failure to follow the recommended operating practices in
the product's operating and maintenance publications.
Accessories or equipment furnished by Ingersoll-Rand, but manufactured by
others, including, but not limited to, engines, tires, batteries, engine
electrical equipment, hydraulic transmissions, carriers, shall carry whatever
warranty the manufactures have conveyed to Ingersoll-Rand and which can be
passes into the initial user.
THIS WARRANTS IS IN LIEU OF ALL OTHER WARRANTIES (EXCEPT OF TITLE), EXPRESSED OR
IMPLIED, AND THERE ARE NO WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A
PARTICULAR PURPOSE.
Limitation of Liability
THE REMEDIES OF THE USER SET FORTH UNDER THE PROVISIONS OF WARRANTY OUTLINED
ABOVE ARE EXCLUSIVE AND THE TOTAL LIABILITY OF INGERSOLL-RAND OR ITS
DISTRIBUTORS WITH RESPECT TO THIS SALE OR THE EQUIPMENT AND SERVICE FURNISHED
HEREUNDER, IN CONNECTION WITH THE PERFORMANCE OR BREACH THEREOF, OR FROM THIS
SALE DELIVERY, INSTALLATION, REPAIR OR TECHNICAL DIRECTION COVERED
10
<PAGE> 11
BY OR FURNISHED UNDER THIS SALE WHETHER BASED ON CONTRACT, WARRANT, NEGLIGENCE,
INDEMNITY, STRICT LIABILITY OR OTHERWISE SHALL NOT EXCEED THE PURCHASE PRICE OF
THE UNIT IF EQUIPMENT UPON WHICH SUCH LIABILITY IS BASED.
INGERSOLL-RAND, ITS SUPPLIER(S) AND ITS DISTRIBUTORS IN NO EVENT SHALL BE LIABLE
TO THE USER, ANY SUCCESSORS IN INTEREST OR ANY BENEFICIARY OR ASSIGNEE RELATING
TO THIS SALE FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL OR PUNITIVE
DAMAGES ARISING OUT OF THIS SALE OR ANY BREACH THEREOF, OR ANY DEFECTS IN, OR
FAILURE OF, OR MALFUNCTION OF THE EQUIPMENT UNDER THIS SALE WHETHER BASED UPON
LOSS OF USE, LOST PROFITS OR REVENUE, INTEREST, LOST GOODWILL, WORK STOPPAGE,
IMPAIRMENT OF OTHER GOODS, LOSS BY REASON OF SHUTDOWN OR NON-OPERATION,
INCREASED EXPENSES OF OPERATION OF THE EQUIPMENT. COST OF PURCHASED OF
REPLACEMENT POWER OR CLAIMS OF USERS OR CUSTOMERS OF THE USER FOR SERVICE
INTERRUPTION WHETHER OR NOT SUCH LOSS OR DAMAGE IS BASED ON CONTRACT, WARRANTY,
NEGLIGENCE, INDEMNITY, STRICT LIABILITY OR OTHERWISE.
11
<PAGE> 1
EXHIBIT 10.87
JCB INC.
JCB DEALERSHIP AGREEMENT
AN AGREEMENT made this 12th day of October 1999, between JCB Inc., a Maryland
corporation, with its principal place of business at 10939 Philadelphia Road,
White Marsh, Maryland 21162 ("JCB") and, CRESCENT MACHINERY COMPANY D/B/A MOODY
DAY, INC. a TEXAS corporation, with its principal place of business at 2323
IRVING BOULEVARD, DALLAS, TEXAS 75207 (the "Dealer").
WITNESSETH:
1. DEFINITIONS
The following words and expressions as used in this Agreement are defined as
indicated.
1.1 "Buyer" - the end user of a JCB Product by way of purchase, lease, or
rental.
1.2 "JCB Products" - the Machines, Equipment and Parts included within the JCB
Product Groups designated below, and marketed by JCB from time to time, as
described and further defined in JCB's Machine and Equipment Price List and
JCB's Parts Catalog, as amended from time to time by JCB.
A. HEAVY LINE
Al Industrial Wheel Tractors
A2 Wheel Loaders
A3 210SL/210SU/212SU
B. MATERIALS HANDLING LINE
B1 Materials Handling Loadall Range
B2 Fixed Mast Rough Terrain Forklifts
C. COMPACT LINE
Cl Tracked Mini Excavators
C2 Skid Steer Loaders (Robot)
C3 Skid Steer Backhoe Loader (208S MiniMaster
1.3 The "Area of Primary Responsibility" -
In the State of Texas, the Counties of:
COLLIN COOKE DALLAS DENTON
ELLIS ERATH FANNIN GRAYSON
HOOD HUNT JACK JOHNSON
KAUFMAN MONTAGUE PALO PINTO PARKER
ROCKWALL SOMERVELL TARRANT WISE
1.4 "Customers of Primary Responsibility" - End users whose intended use falls
into one or more of the categories designated below and who are purchasing,
leasing or renting the JCB Products designated below for that intended use.
1
<PAGE> 2
Customers of Primary Responsibility Designated JCB Product Groups
Governmental Use A(l,2,3):B(l,2):C(l,2,3)
-----------------------
(Federal, State/Provincial, County,Local/City/Town/Village)
General Excavating and Construction Use A (1,2, 3): B (1,2): C (1,2, 3)
------------------------------
(Construction, Excavation, Landscaping, Mining/Quarrying, Infrastructure)
General Industrial Manufacturing Use A (1,2,3): B (1,2): C (1,2,3)
----------------------------
(Industrial, Manufacturing, Recycling, Utilities, Equipment Services, Forestry)
General Agricultural Use
(Crop/Specialty Crop/Livestock Production, Dairy, Nurseries)
Other (specify)
Dealer represents and warrants to JCB that it has expertise and experience in
dealing with end users falling into the categories of Customers of Primary
Responsibility designated above. Dealer shall be permitted to sell, rent or
lease JCB Products to any customer of its choosing, but JCB reserves the right
to in part or in whole measure the adequacy of Dealer's performance by the
market penetration which Dealer achieves with Customers of Primary
Responsibility located within the Area of Primary Responsibility.
2. PURCHASE AND SALE OF JCB PRODUCTS, TERMS, PRICES.
JCB agrees to sell and the Dealer agrees to purchase JCB Products under the
terms of this Agreement. The required terms of payment with respect to all
purchases by the Dealer and the finance plans made available at the discretion
of JCB to qualified dealers shall be those specified on the invoice at the time
of shipment or in the applicable Schedule of Payment Terms and Finance Plans, as
published by JCB from time to time. The prices which the Dealer shall pay for
JCB Products shall be those specified at the time of shipment in the applicable
Price List and Schedule of Terms and Discounts, as published by JCB from time to
time. JCB may in its sole discretion amend the Schedule of Payment Terms and
Finance Plans, Price Lists and/or Schedule 2
2
<PAGE> 3
of Terms and Discounts, and any such amendment shall be effective on the date
specified therein, or if no date is specified, upon delivery to the Dealer, and
shall apply to all unshipped orders other than orders accepted in writing by JCB
prior to the effective date.
3. COVENANTS OF THE DEALER WITH RESPECT TO SALES, PRODUCT SUPPORT AND
PERFORMANCE.
The Dealer shall: (a) employ and maintain competent sales, product support and
other personnel adequately trained on JCB Products to carry out the Dealer's
responsibilities under this Agreement; (b) purchase, display and demonstrate JCB
Products and take such other actions as may be necessary or appropriate to
vigorously pursue the sale and product support of JCB Products to Customers of
Primary Responsibility located in the Area of Primary Responsibility; (c) carry
out free of charge to its Buyers and JCB, for each JCB Product sold, leased or
rented, the routine pre-delivery and follow-up service specified in the JCB
North American Warranty Policy and Procedures Manual in effect at the date of
delivery of the JCB Product to the Buyer; (d) provide prompt, expert and
courteous product support, including follow-up maintenance, warranty and
non-warranty service, with respect to all JCB Products located in the Area of
Primary Responsibility, regardless of when, where, or by whom sold, and subject
to Section 4 of this Agreement, during the one year following the date of sale,
give the same product support to Buyers of all JCB Products sold by the Dealer
which are located outside the Area of Primary Responsibility; (e) carry out
without charge to the owners of JCB Products such modifications to JCB Products
located in the Area of Primary Responsibility as may be required by JCB (JCB
being responsible for reimbursement of reasonable costs incurred by the Dealer
in connection therewith); (f) not deliver any JCB Product until it has been
correctly assembled, adjusted and inspected, copies of operator's and/or product
support manuals for that JCB Product have been furnished to the Buyer, and the
Buyer or anyone he designates has been instructed as to the safe and proper
operation and maintenance of the JCB Product; (g) submit to the Buyer all
pertinent information furnished by JCB for delivery with the JCB Product; (h)
maintain a sufficient supply of current JCB sales and product support
publications, parts catalogs and related items which may be supplied by JCB (all
such items being initially supplied by JCB in reasonable quantity free of any
charge to the Dealer); and (i) forward to JCB within fourteen days of the
delivery of a JCB Product to a Buyer a copy for the JCB Delivery Report in
respect of such JCB Product.
The Dealer's method of operation in complying with the foregoing, including its
form of organization, management responsibilities, promotional activities,
marketing plan, sales efforts and business affairs, are solely under the control
of, and the responsibility of the Dealer. However, JCB may from time to time
conduct performance reviews of Dealer's market penetration with Customers of
Primary Responsibility located in the Area of Primary Responsibility, overall
sales achievement, product support performance and customer satisfaction in the
Area of Primary Responsibility, and in connection therewith, may inspect and
review the Dealer's premises and operations, including all records relating to
the purchase, sale and product support of JCB Products. JCB may report and
discuss with the Dealer any observed deficiencies and related recommendations
for improvement.
4. SALES OUTSIDE AREA OF PRIMARY RESPONSIBILITY.
Pursuant to the provisions of Sections 3(d) and 3(e) of this Agreement, the
Dealer is obligated to provide follow-up maintenance, warranty and non-warranty
service with respect to all JCB Products sold by the Dealer, wherever located,
and all JCB Products located in the Area of Primary Responsibility. In
furtherance of this obligation, and in order to insure that all JCB Products are
provided with prompt and effective maintenance service, the Dealer agrees that
in the event of a sale or rental of a JCB Product (other than replacement or
3
<PAGE> 4
repair parts) involving an expected initial substantial use (defined as use for
200 hours or more) outside of the Area of Primary Responsibility the following
provisions shall be applicable.
4.1 Sales In Continental United States. In the event of a sale involving an
expected initial substantial use outside of the Area of Primary Responsibility
but within the continental United States, the Dealer will notify JCB of the
location of such expected initial substantial use. A JCB dealer having an area
of primary responsibility including the location of such expected initial
substantial use and that sells such JCB Product (the "Servicing Dealer") shall
be jointly responsible with the Dealer for providing the follow-up maintenance,
warranty and non-warranty service with respect to such JCB Product. JCB shall
assess the Dealer a fee of five percent (5%) of the standard dealer net price of
such JCB Product as set forth in the Price List (the "Servicing Fee") in order
to arrange for the follow-up maintenance, warranty and non-warranty service by
the Servicing Dealer. JCB shall compensate the Servicing Dealer for agreeing to
be jointly responsible with the Dealer for the follow-up maintenance, warranty
and non-warranty service by crediting to the Servicing Dealer's account an
amount equal to the Servicing Fee collected from the Dealer. The Dealer's
payment of the Servicing Fee shall not release the Dealer of its obligations to
provide the follow-up maintenance, warranty and non-warranty service with
respect to such JCB Product. In the event that there is no JCB dealer with an
area of primary responsibility including the location of such expected initial
substantial use and/or that carries such JCB Product, the Dealer shall, in all
cases, be solely responsible for the follow-up maintenance, warranty and
non-warranty service and shall arrange with the Buyer to have such product
support provided on a reasonable and efficient basis.
4.2 Exceptions to Servicing Fee. Notwithstanding the provisions of Section 4.1,
the Dealer shall not be obligated to pay, and the Servicing Dealer shall not be
entitled to a credit, for Servicing Fees with regard to any of the following
transactions: (i) if the Dealer sells, rents, or leases to a Buyer and the
Dealer's Area of Primary Responsibility includes the Buyer's regular place of
business; or, (ii) if the Dealer sells or leases to a Buyer primarily engaged in
equipment rental or equipment leasing that is owned by or affiliated with the
Dealer; or, (iii) if with the prior written consent of JCB, the Dealer sells or
leases a JCB Product in circumstances where a written contractual obligation
exists between the Dealer and Buyer whereby the Dealer is obligated to provide
product support.
4.3 Sales Outside Continental United States. In the event of a sale involving an
expected initial substantial use outside of the continental United States, the
Dealer will so notify JCB, and JCB may assess the Dealer a servicing fee of up
to 10 percent (10%) of the standard dealer net price of such JCB Product as set
forth in the Price List in order to arrange for the follow-up maintenance,
warranty and non-warranty service to be provided at the place of initial
substantial use.
5. LOCATION OF THE DEALER.
The Dealer shall maintain offices at the Dealer's principal place of business
and the additional places of business described in Exhibit B attached hereto (if
any). If permitted by applicable law, the Dealer may at any time establish
additional places of business for the sale of JCB Products in the Area of
Primary Responsibility, and each such place of business shall be governed by the
terms of this Agreement. The Dealer shall provide JCB with written notice of its
intention to establish additional places of business in the Area of Primary
Responsibility at least thirty (30) days prior to commencing operations at any
such locations. The Dealer may not, without the written consent of JCB,
establish places of business for the sale and product support of JCB Products
outside of the Area of Primary Responsibility.
4
<PAGE> 5
6. SALES BY JCB.
JCB reserves the right to sell, lease or rent JCB products directly to any
federal governmental entity, or to any other purchaser for use outside of the
United States. JCB shall not be responsible for the payment to any dealer of any
commission with respect to any such sale lease or rental; however, unless
otherwise agreed in writing, JCB shall compensate the Dealer on a reasonable
basis for delivery, installation, follow-up and warranty service actually
provided for any such JCB Product which is located in its Area of Primary
Responsibility.
7. REPORTS OF INVENTORY AND FINANCIAL STATUS.
The Dealer shall furnish at the close of its fiscal year and at such other times
as JCB from time to time may designate, reports summarizing the JCB Products on
hand and the sales activity of JCB Products during the period covered by the
report, and financial statements showing the financial condition and operating
progress of the Dealer (including a yearly balance sheet and income statement
prepared in accordance with generally accepted accounting principles).
8. WARRANTY BY JCB.
OTHER THAN THE EXPRESS WARRANTY CONTAINED IN SECTION 8.1, NEITHER JCB NOR ANY
AFFILIATED ENTITY MAKES TO THE DEALER ANY EXPRESS OR IMPLIED WARRANTY, CONDITION
OR GUARANTEE, WHETHER STATUTORY OR OTHERWISE, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. EXCEPT FOR THE EXPRESS
LIABILITY OF JCB UNDER THIS EXPRESS WARRANTY, THE DEALER SHALL HAVE NO RIGHT TO
ANY INCIDENTAL, CONSEQUENTIAL OR OTHER LOSS, DAMAGE OR INJURY BASED UPON A CLAIM
OF BREACH OF WARRANTY, STRICT LIABILITY OR NEGLIGENCE, ARISING OUT OF THE SALE,
LEASE, RENTAL, USE OR LOSS OF USE OF ANY JCB PRODUCT.
8.1 Compensation for fulfilling Standard Warranty. As its sole warranty to the
Dealer, and as further specified in the JCB North American Warranty Policy and
Procedures Manual (the "Warranty Manual") published by JCB from time to time,
JCB shall provide repair and replacement materials free of charge and make
reasonable labor allowances as may be prescribed by JCB from time to time, and
thereby reimburse the Dealer for repair and replacement costs incurred in JCB's
opinion in the fulfillment of the standard warranty specified in the Certificate
of Warranty attached hereto as Exhibit A (the "Certificate of Warranty"),
provided that the Dealer has complied with each of the following:
(a) The Dealer shall have given or caused to be given immediate written notice
to JCB of any claim under the Certificate of Warranty specifying full
particulars of the alleged defect, the machine number, the hours worked, the
date the machine was delivered to the Buyer and the date the alleged defect
became apparent, and if JCB shall so request, the Dealer shall return all
defective parts to JCB at the cost of the Dealer.
(b) The Dealer shall have sent to JCB a copy of the JCB Delivery Report within
fourteen (14) days from the date of delivery of the JCB Product to the Buyer.
(c) Where applicable, the Dealer shall have performed the pre-delivery and
follow-up maintenance services specified in the Warranty Manual and shall have
promptly returned to JCB the reports relating to such services.
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(d) The Dealer shall have complied with all other procedures and directives
outlined in the Warranty Manual.
JCB shall in no event have any responsibility to the Dealer other than as
specifically provided above. The Warranty Manual provided to the Dealer is
intended as a guide with respect to the policies and procedures concerning the
warranty expressed herein and in the Certificate of Warranty, and shall in no
event be construed as an enlargement or extension of the warranty expressed
herein and in the Certificate of Warranty.
8.2 Warranty to Buyer; Enlargement by the Dealer. The Dealer understands and
agrees that JCB extends to the Buyer, and authorizes the Dealer to extend to the
Buyer, only the standard warranty specified in the Certificate of Warranty. In
the event the Dealer extends any warranty in addition to the warranty specified
in the Certificate of Warranty (such as enlarging the scope or period of
warranty or undertaking a warranty of merchantability or fitness for any
particular purpose) or assumes any other obligation whatsoever, the Dealer
shall: (a) be solely responsible therefor; (b) have no recourse against JCB
therefor; and (c) defend, indemnify and hold JCB harmless against any claim or
cause of action whatsoever arising out of, or occasioned by, the Dealer's
extension of such additional warranty or obligation.
8.3. Returned Parts. In the event of the rejection by JCB of any claim or claims
under its warranty to the Dealer, any part or parts returned to JCB pursuant to
Section 8.1(a) may be disposed of by JCB upon forty-five (45) days' written
notice to the Dealer of JCB's intent to make such a disposal, provided that the
Dealer may at any time prior to the expiration of such forty-five (45) days
request return of any such part or parts at the Dealer's cost and expense.
8.4 Alteration or Amendment of Certificate of Warranty. NO EMPLOYEE OR
REPRESENTATIVE OF JCB IS AUTHORIZED TO CHANGE THE CERTIFICATE OF WARRANTY IN ANY
WAY OR GRANT ANY OTHER WARRANTY OTHER THAN THAT SPECIFIED IN THE CERTIFICATE OF
WARRANTY AND THIS SECTION 8 UNLESS SUCH CHANGE IS MADE IN WRITING AND SIGNED BY
AN OFFICER OF JCB. JCB may from time to time change the standard warranty
specified in the Certificate of Warranty and this Section 8, and upon any such
change, JCB shall deliver to the Dealer a new Certificate of Warranty signed by
an authorized representative of JCB which shall be attached by the Dealer to
this Agreement as Exhibit A and shall be made a part of this Agreement in the
same manner as if originally incorporated herein as Exhibit A. Such new
Certificate of Warranty shall take effect upon the date specified therein, or if
no date is specified, upon delivery to the Dealer, and shall apply to all JCB
Products thereafter delivered to the Dealer by JCB.
9. DEALER NOT AGENT.
The Dealer is in no way the legal agent of JCB or any of JCB's affiliates
(including J C Bamford Excavators Limited), and the Dealer has no right or
authority from JCB or any of JCB's affiliates to create or assume on behalf of
JCB or such affiliates any obligations of any kind, expressed or implied. The
Dealer shall not represent itself or hold itself out either directly or
indirectly through its representatives, servants or otherwise to be the agent of
JCB or any of JCB's affiliates. The Dealer agrees that without the written
consent of JCB it will not use any JCB names, including the name "JCB", JCB
Inc., or any corporate names of JCB affiliates, or any trademarks used in
connection with JCB Products, as part of the corporate or business name of the
Dealer, or in any other manner which JCB considers improper, misleading or
detrimental to JCB's interest or the interest of any affiliated company.
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10. EXPIRATION AND TERMINATION.
Unless terminated according to the termination procedures described below, this
Agreement shall be for an initial term of three years from the effective date
hereof and shall automatically renew for successive one-year terms unless either
the Dealer or JCB gives the other party written notice at least 180 days prior
to the end of the then current term of its election to terminate this Agreement
at the end of such term.
10.1 Mutual Consent. JCB and the Dealer may by mutual consent terminate part or
all of this Agreement at any time.
10.2 Default. Written notice of termination may be given by JCB to the Dealer,
or by the Dealer to JCB (except with respect to (i)), upon the occurrence of any
one of the following events with respect to the party not giving such notice:
(a) insolvency; (b) filing of a voluntary petition in bankruptcy, or the filing
of any involuntary petition in bankruptcy which is not terminated within sixty
days of its commencement; (c) appointment of a receiver or a trustee for all or
a substantial part of its property; (d) sale of all or substantially all of its
assets; (e) assignment of its property for the benefit of creditors; (f) sales
of secured property out of trust or any fraudulent transfer of secured property;
(g) failure to pay monies due the terminating party within twenty days after
written notice of default; (h) any fraudulent conduct or material
misrepresentation in connection with the transactions contemplated by this
Agreement; and (i) any material change in the management or ownership of the
Dealer, or any assignment in violation of Section 17 of this Agreement.
10.3 Dissatisfaction. Termination of this Agreement may occur upon the
dissatisfaction of either party with the other party's performance under this
Agreement (for reasons other than the causes stated in Section 10.2) through the
initiation by the dissatisfied party of the following termination procedures:
(a) The party wishing to terminate this Agreement shall mail a notice to the
other party (the "original notice") stating the reasons for dissatisfaction with
the other party's performance under this Agreement.
(b) The party initiating the termination procedure shall specify a date not more
than thirty (30) days after the issuance of the original notice for the other
party to meet and discuss with the initiating party the area of dissatisfaction.
(c) The initiating party shall give the other party not less than one hundred
fifty (150) days after the issuance of the original notice to correct, to the
satisfaction of the initiating party, any alleged deficiencies in the other
party's performance under this Agreement.
(d) If the initiating party decides after one hundred fifty (150) days following
the issuance of the original notice that the other party's performance under
this Agreement is still not satisfactory, the initiating party may notify the
other party of the termination of this Agreement effective not less than thirty
(30) days from the date of the mailing thereof.
11. EFFECT OF EXPIRATION OR TERMINATION.
Upon complete termination of this Agreement pursuant to Section 10 hereof:
11.1 No releases, Indebtedness. Neither JCB nor the Dealer shall be released of
any payment then owing to the other. All indebtedness and any other obligations
of the Dealer to JCB shall become immediately due and payable.
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11.2 Cancellation of Orders. In the event of expiration or termination of the
agreement, JCB agrees to complete shipment of any outstanding unshipped orders
for JCB products provided satisfactory payment arrangements are in place.
11.3 Return of Catalogs and Other Materials. As reasonably requested by JCB, the
Dealer shall promptly return all remaining promotional material, catalogs, price
lists, product support manuals, bulletins, owner's manuals and current
advertising material and other literature which was furnished to the Dealer by
JCB. The Dealer shall deliver to JCB copies of all sales, warranty and ownership
lists, product support history records and other material of any kind related to
the sale and servicing of JCB Products.
11.4 No Association. The Dealer shall cease to operate as or represent that the
Dealer is an authorized dealer of JCB and will refrain from any and all actions
which will associate the Dealer with JCB. In addition, the Dealer will promptly
remove from the Dealer's place(s) of business all signs and all advertising
material or identifying marks that bear the name "JCB" or any names or
trademarks of JCB Inc. or any of JCB's affiliates, and the Dealer shall not
thereafter use such names and trademarks in any manner whatsoever.
11.5 Repurchase by JCB of JCB Products.
If the Dealer within thirty (30) days of the effective date of termination of
this Agreement notifies JCB in writing that it desires to resell to JCB any JCB
Products purchased by the Dealer from JCB, or if JCB gives similar notice to the
Dealer of JCB's desire to repurchase any such JCB Products, JCB will purchase
and the Dealer will sell at the prices specified below the following JCB
Products:
(a) All new, current, undamaged, salable and unused Machines and Equipment which
were delivered to the Dealer during the one year immediately preceding the
effective date of termination. The price to be paid by JCB shall be the net
price charged to the Dealer (but not more than the current net price), less cash
or any other discounts which may have been granted by JCB.
(b) All Parts which are subject to repurchase pursuant to the JCB Parts Return
Policy as in effect from time to time; provided, however, that JCB shall not be
obligated to repurchase any Parts originally purchased by the Dealer more than
thirty-six (36) months prior to the effective date of termination of this
Agreement. The price to be paid by JCB for each Part will be the price specified
by the JCB Parts Return Policy as in effect from time to time.
In the case of a termination pursuant to Section 10.2 caused by action or
inaction on the part of the Dealer, a termination by the Dealer pursuant to
Section 10.3, or the failure of the Dealer to agree to a renewal of this
Agreement without material change or modification, the repurchase prices as
specified above shall be original invoice charges. The Dealer shall return such
JCB Products within thirty (30) days after notification to return is given by
JCB. All items returned to JCB shall be packed and loaded by the Dealer, at no
cost to JCB, and shipped at the Dealer's risk and expense to JCB's principal
place of business as specified in this Agreement or such other place as may be
reasonably designated by JCB. Upon receipt of such items JCB shall inspect the
same and shall as soon as practicable issue credit for all such JCB Products
returned which, in JCB's judgment, meet the requirements specified herein,
subject to deduction and set-off for all indebtedness and other obligations of
any kind due and owing from the Dealer to JCB or its affiliates or subsidiaries.
The Dealer shall not be entitled to any payment or credit pursuant to this
Section 11.5 until the Dealer supplies satisfactory evidence to JCB that the
Dealer has complied with the Bulk Sales Act and other applicable laws and that
such JCB Products are free and clear of all claims, liens and encumbrances,
except those which may exist in favor of JCB. The Dealer agrees to indemnify and
hold JCB harmless with respect to any expense or loss arising from any such
claim, lien or encumbrance or failure to comply with applicable law.
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11.6 Limitation of Liability. Neither JCB nor the Dealer shall be liable to the
other for any damages caused by the termination of this Agreement, whether based
upon loss of anticipated sales, prospective profits, expenditures, investments,
leases, property improvements or other matters related to the business of the
parties.
12. TRANSACTIONS AFTER EXPIRATION OR TERMINATION.
In the event that JCB and the Dealer have any dealings after termination of this
Agreement, such dealings shall not be construed as a renewal of this Agreement
nor as a waiver of such termination, but such dealings shall be construed
according to terms identical to the provisions of this Agreement. JCB agrees to
supply promptly at published dealer net emergency order prices, for a period not
to exceed one year from the effective date of termination, parts and product
support tools necessary to allow the Dealer to meet any product support contract
commitments entered into prior to the effective date of termination which are
specified and described in a schedule given to JCB prior to the effective date
of such termination. If the Dealer sells or uses any JCB Products supplied under
this Section 12 in any way other than as set forth herein, this provision shall
be deemed null and void and JCB shall have no further obligation hereunder.
13. GENERAL TERMS OF SALE.
13.1 Acceptance of Order. No order submitted to JCB by the Dealer shall become
effective unless and until it shall be accepted in writing by JCB. JCB may at
any time refuse to accept orders and make shipment unless satisfactory
arrangements and/or security for payment are made by the Dealer. Notwithstanding
the terms expressed in any purchase order which may be accepted by JCB, the
Dealer agrees that all purchases of JCB Products are made pursuant to this
Agreement, and any terms and conditions in any purchase order not in compliance
with or in addition to this Agreement shall not be a part of the contract of
sale and shall not be binding upon JCB.
13.2 Delivery; Risk of Loss. Unless otherwise expressly agreed in writing, all
prices are quoted "F.O.B." port of entry or "F.O.B." ex-White Marsh, Maryland
(or such other location designated by JCB), and all costs and risk of loss from
such point onward shall be borne by the Dealer. JCB shall not be liable for any
loss or damage whatsoever arising in shipment. Any times quoted for delivery are
to be computed from the date of acceptance by JCB of an order. All such times
are estimates only and while every reasonable endeavor will be made to observe
these times, JCB WILL NOT BE LIABLE FOR ANY LOSS, DAMAGE OR EXPENSE ARISING FROM
FAILURE TO DELIVER WITHIN THE TIME QUOTED OR ANY AGREED EXTENSION THEREOF. Where
a time for delivery is quoted such time for delivery shall be extended for a
reasonable period and the order shall not be subject to cancellation if the
delay is caused by industrial dispute, nonavailability of materials, fire,
strike, labor dispute or any cause whatsoever beyond JCB's control.
13.3 Taxes. The Dealer shall pay all license fees, sales, privilege, use,
personal property, and excise taxes, duties, and other fees, assessments or
liens which may be assessed or levied by any governmental authority against any
JCB Product in the possession of or in transit to, the Dealer, or which may
arise from the sale or delivery of JCB Products. The Dealer agrees to indemnify
and hold JCB harmless with respect to any such fee, tax, charge, assessment or
lien.
13.4 Discontinuance of Sale. JCB may at any time and without prior notice
discontinue the marketing of any JCB Product and make changes and improvements
to the specifications, construction or design of JCB Products
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without incurring any obligation or liability to the Dealer or customers of the
Dealer. JCB Products so changed or improved shall be accepted by the Dealer in
fulfillment of existing orders.
14. NO WAIVERS.
Any indulgence granted by JCB or the Dealer to the other and any neglect or
failure by JCB or the Dealer to enforce any of the terms of this Agreement shall
not be construed as a waiver of or prejudice any of the rights of JCB or the
Dealer hereunder.
15. NOTICE.
Any notice required or permitted by this Agreement shall be sent by certified
mail, return receipt requested, to the chief place of business of JCB or the
Dealer as set forth at the beginning of this Agreement (unless sender shall have
received ten (10) days' prior written notice of any change in address).
16. APPLICABLE LAW; INVALIDITY.
This Agreement shall in all respects be construed and interpreted in accordance
with the laws of the state in which the Dealer's principal place of business is
located as set forth in the first paragraph of this Agreement. Notwithstanding
any other provision of this Agreement, if any provision of this Agreement, or
the application of any provision to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement, and the
application of such provision to any other persons or circumstances, shall not
be affected thereby. Each provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
17. ARBITRATION.
Except for matters relating to collection of amounts due under this Agreement,
all disputes, controversies or differences arising in connection with or related
to this Agreement or the validity, execution, performance, breach or termination
of this Agreement shall be finally settled in an arbitration proceeding under
the Rules of the American Arbitration Association by three arbitrators in
accordance with the Commercial Arbitration Rules then in effect of the American
Arbitration Association, such Commercial Arbitration Rules forming part of this
Agreement. Selection of Arbitrators shall be as follows: each party shall
appoint one Arbitrator within twenty (20) days after the initial demand for
arbitration, and the two Arbitrators so appointed shall appoint a third
Arbitrator, who shall act as Chairman, within a further twenty (20) day period.
If the parties fail to appoint the Chairman within said period, the parties will
apply to the American Arbitration Association for appointment of the third
Arbitrator. Any such arbitration shall be held in Baltimore, Maryland, unless
the parties hereto agree in writing upon some other location for arbitration.
The parties agree to be bound by the findings of the arbitration.
Notwithstanding the foregoing, the courts shall have jurisdiction over
injunctive or provisional relief pending arbitration. The Arbitrators shall not
be empowered to award punitive damages to any party. All expenses of arbitration
shall be allocated in accordance with the findings of the Arbitrators.
18. ASSIGNMENTS.
This Agreement may not be assigned by JCB or the Dealer without the other
party's express written consent. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, personal
representatives, successors and assigns.
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19. ENTIRE AGREEMENT; AMENDMENT.
This Agreement (including all Exhibits and the related documents delivered
pursuant hereto and referred to herein) is intended by the parties and does
constitute the entire agreement between JCB and the Dealer with respect to the
subject matter hereto. All previous arrangements, agreements or contracts (if
any) between JCB and the Dealer relating to JCB Products (as defined herein) are
hereby revoked and superseded by this Agreement. EXCEPT AS PROVIDED IN SECTION
8.4 OF THIS AGREEMENT, NO VARIATION OF THE TERMS OF THIS AGREEMENT SHALL HAVE
ANY EFFECT UNLESS EVIDENCED IN WRITING AND SIGNED BY OR ON BEHALF OF THE DEALER
AND JCB.
20. GENERAL.
The paragraph headings contained in this Agreement are for reference only and
shall not affect in any way the meanings or interpretations of this Agreement.
IN WITNESS WHEREOF, JCB and the Dealer have caused this Agreement to be duly
executed as of the date and year indicated below, effective as of the date and
year first above written.
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EXHIBIT B
ADDITIONAL PLACES OF BUSINESS
None.
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JCB INC.
JCB DEALERSHIP AGREEMENT
TABLE OF CONTENTS
JCB DEALERSHIP AGREEMENT
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
1. Definitions .......................................................... 1
2. Purchase and Sale of JCB Products, Terms, Prices ..................... 2
3. Covenants of the Dealer With Respect to Sales, Product Support
and Performance ...................................................... 3
4. Sales Outside Area of Responsibility ................................. 4
5. Location of the Dealer ............................................... 5
6. Sales by JCB ......................................................... 5
7. Reports of Inventory and Financial Status ............................ 5
8. Warranty by JCB ...................................................... 5
9. Dealer Not Agent ..................................................... 7
10. Expiration and Termination ........................................... 7
11. Effect of Expiration or Termination .................................. 8*
12. Transactions After Expiration or Termination ......................... 10
13. General Terms of Sale ................................................ 10
14. No Waivers ........................................................... 11
15. Notice ............................................................... 11
16. Applicable Law; Invalidity ........................................... 11
17. Arbitration .......................................................... 11
18. Assignments .......................................................... 12
19. Entire Agreement; Amendment .......................................... 12
20. General .............................................................. 12
</TABLE>
EXHIBIT A: JCB CERTIFICATE OF WARRANTY
EXHIBIT B: ADDITIONAL PLACES OF BUSINESS
* Amended
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AMENDMENT TO JCB DEALERSHIP AGREEMENT
DATE: July 7, 19998
JCB INC., 10939 Philadelphia Road, P.O. Box 209, White Marsh, Maryland 21162
("JCB") and CRESCENT MACHINERY COMPANY DBA MOODY-DAY. INC. a TEXAS corporation,
with its principal place of business at 2323 IRVING BOULEVARD. DALLAS, TEXAS
75207 (The "Dealer") agree to the following amendment to the JCB Dealership
Agreement entered into on May 22, 1998.
Add to:
1.2 JCB Products
AGRICULTURAL LINE
Dl Fastrac High Speed Agricultural Tractor
D2 Materials Handling Agricultural Range
D3 Agricultural Wheel Loaders
D4 Agricultural Skid Steer Loaders
1.3 Area of Primary Responsibility:
In the State of Texas, the Counties of:
Dallas Tarrant Denton Collins Rockwall
Kaufman Ellis Johnson Parker Wise
Hood
Witness: JCB INC.
By
Title President
Date July 14, 1998
Witness: Distributor: CRESCENT MACHINERY COMPANY DBA MOODY DAY, INC.
By
Title Division Manager
Date July 7, 1998
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AMENDMENT TO JCB DEALERSHIP AGREEMENT
DATE: 8/20/99
JCB INC., 10939 Philadelphia Road, P.O. Box 209, White Marsh, Maryland 21162
("JCB") and CRESCENT MACHINERY COMPANY DBA MOODY-DAY. INC. a TEXAS corporation,
with its principal place of business at 2323 IRVING BOULEVARD DALLAS. TEXAS
75207 (The "Dealer") agree to the following amendment to the JCB Dealership
Agreement entered into on May 22, 1998.
Add to Exhibit B:
Crescent Machinery Company dba Moody Day, Inc.
1120 Blue Mound Road
Fort Worth, Texas 76131
Witness: JCB INC.
Joan Collison By
Title President
Date August 20, 1999
Witness: Distributor:
CRESCENT MACHINERY COMPANY DBA MOODY DAY, INC.
By
Title President
Date August 16, 1999
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EXHIBIT 10.88
DISTRIBUTOR AGREEMENT (EXCAVATORS)
1999
Parties Involved
The parties to this Agreement are LBX Company, LLC, a Delaware corporation, 2651
Palumbo Drive, Lexington, Kentucky 40509-1267 (herein the "Company"), and
Name: Western Traction Company
Business Address: 1333 Atlantic Street
City: Union City State: California Zip: 94587 which is a (check one):
X corporation, incorporated in the State of California
__ division of
a corporation incorporated in the State of
__ partnership (list all partners and, if a limited partnership, indicate
which are the limited partners)
__ sole proprietorship (individual proprietor is (herein "Distributor").
In consideration of the mutual covenants and promises contained herein, the
parties hereby agree as follows:
I Distributor Appointment
1.1 Subject to the terms and conditions contained herein, the Company grants to
Distributor the non-exclusive right to purchase and resell those products listed
on the attached Schedule A (herein the "Products") in the Territory. The Company
may revise the list of Products from time to time without liability to
Distributor. Nothing herein shall be construed to prohibit Distributor from
selling at any price.
1.2 The Company may discontinue the production or sale of or modify the design
or material specifications of any Product therefore without any liability or
obligation to Distributor or its customers, including, without limitation, any
obligation to modify any Product previously ordered by Distributor.
1.3 Nothing in this Agreement shall constitute Distributor an agent of the
Company. Distributor is an independent contractor and has control of the details
of the performance of its obligations hereunder. Distributor shall not impose or
create any obligation or responsibility, express or implied, or make any
promises, representations, or warranties on behalf of the Company, other than as
provided in Section 6.1 hereof.
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II Territory
2.1 The Company designates as Distributor's Territory the geographic area
described on the attached Schedule A (herein the '"Territory"). Marketing
responsibility encompasses both sales and service of the Products. The Company
may revise Distributor's Territory from time to time without the Company
incurring any liability to the Distributor. The Company may refuse to ship a
Product to a location other than the Distributor's Territory. Distributor shall
not sell for delivery or shipment or otherwise transfer any of the Products
listed on Schedule G outside the United States and Canada, and shall not sell
such Products to those who, directly or indirectly, sell for delivery or
shipment or otherwise transfer such Products outside the United States and
Canada, provided that Distributor may sell such Products to customers in the
United States and Canada who themselves use the Products outside the United
States and Canada or who transfer the Products to affiliates for use (but not
resale) by those affiliates outside the United States and Canada.
2.2 Distributor shall use its best efforts to promote, sell, and service each of
the Products in its Territory and shall maintain a staff of trained sales and
service personnel adequate to cover Distributor's Territory properly. The
Company will evaluate Distributor's performance primarily on the basis of
Distributor's sales volume and promotional effort in the Territory. The Company
may, in its sole discretion, establish reasonable sales objectives for
Distributor and may consider those objectives, among other factors, in
evaluating Distributor's performance.
2.3 At its election, the Company may from time to time directly sell or solicit
the sale of the Products to any customers or prospective customers. Direct sales
or other transactions between the Company and any customer shall not create any
liability on the part of the Company to the Distributor.
III Distributor Facilities and Inventory
3.1 Distributor shall maintain a suitable place of business within the Territory
that is sufficient, in the Company's judgment, to display, store, and service
the Products.
3.2 Distributor shall maintain such inventory of the Products as is sufficient,
in the Company's judgment, reasonably to meet the sales potential and product
support requirements in Distributor's Territory. Distributor shall comply with
any instructions issued by the Company regarding the storage, handling, and
maintenance of the Products.
IV Prices and Terms of Sales and Delivery
4.1 All sales of the Products to Distributor shall be governed by the Company's
written pricing and security documentation policies, credit policy, price lists,
discount schedules, and terms and conditions of sale (including, without
limitation, payment therefore by Distributor) upon acceptance of order. The
Company may change said policies, price lists, discount schedules, and terms and
conditions at any time and, when notice of said changes has been given, all
earlier inconsistent
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policies, prices, discount schedules, and terms and conditions shall
automatically be superseded from and after the effective date stated in such
notices.
4.2 The Company reserves the right, in its sole discretion, to apply special
discounting on a case by case basis to an individual product or sale within the
Distributor's assigned territory in order to promote that Distributor's
development of that territory.
4.3 Prices stated in the Company's price lists shall apply only to Products with
standard specifications. At Distributor's request, the Company at its option may
provide Distributor with price quotations on Products having special or modified
specifications.
4.4 No purchase order shall be binding on the Company until accepted in writing
by a duly authorized officer or employee of the Company. Unless otherwise agreed
in writing in specific transactions, the Company may refuse to issue a quotation
or to accept any purchase order for any reason. Any provision contained in any
purchase order issued by Distributor to the Company which is additional to, or
inconsistent or conflicting with, any provision of this Agreement, or any of the
Company's then current standard terms and conditions of sale, shall not be
binding on the Company unless the Company assents to such provision in writing.
4.5 This Agreement applies only to Distributor's outlet or branch listed on the
first page hereof and such additional outlets, if any, listed on Schedule A.
Although Distributor may now have or hereafter acquire other outlets or
branches, or change the location of any of them, nothing herein shall obligate
the Company to sell or ship the Products on orders accepted by the Company to
any location not listed herein. The Company's responsibility for shipments shall
cease upon delivery to the transportation company, and any claim for shortages,
losses or damage occurring thereafter shall be made by Distributor directly to
the transportation company. A copy of any claims against the transportation
company for shortages shall be mailed to the Company for information purposes
within five (5) days after the arrival of the shipment at destination.
4.6 In addition to punctual payment for the Products, Distributor shall pay to
the Company on demand all expenses and charges caused by Distributor for
demurrage, reshipment, rerouting, storage and other similar charges with respect
to the Products ordered by Distributor, including without limitation expenses
resulting from Distributor's failure promptly to accept delivery of or pay for
such Products.
4.7 The Company shall not be liable to Distributor for any injury, loss, damage
or expense, whether direct, indirect or consequential, resulting from or arising
out of delays in delivery resulting from fires, strikes, lockouts, delays in
manufacture, transportation or delivery of materials, embargoes, insurrections
or riots, civil or military authority, car shortages, acts of God, acts of
government or any other causes beyond its reasonable control. The time for
delivery specified in any quotation or contract shall be extended during the
continuance of such conditions and for a reasonable time thereafter.
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<PAGE> 4
4.8 If shortages of the Products occur because of economic, manufacturing, or
other conditions, including shortages of materials, the Company may allocate the
Products among its distributors and other customers on any basis that, in the
Company's sole judgment, shall be fair and reasonable. The Company shall not be
liable to Distributor by virtue of such shortage or allocation.
V Reports and Inspections
5.1 Distributor shall deliver annually to the Company on a confidential basis a
copy of such financial statements as are satisfactory in form and certification
to the Company, within ninety (90) days after the close of Distributor's fiscal
year. Additionally, but only upon the Company's written request, Distributor
shall furnish such financial information at more frequent intervals. Such
statements and information may be used by assignees and agents of the Company.
5.2 A Credit Application is to be completed and returned, when requested, as
part of a periodic review of the Distributor's account.
5.3 If requested, at least once each fiscal year, Distributor shall provide the
Company with a report of inventory of the Company Products on forms satisfactory
to the Company. At its request the Company may observe the taking of
Distributor's physical inventory.
5.4 The Company may inspect Distributor's facilities, operations, and records as
related to Distributor's performance under this Agreement during normal business
hours.
VI Warranty and Safety
6.1 The Company warrants the Products in accordance with its Warranty attached
hereto as Schedule B, as the same may be modified by the Company from time to
time and makes no other warranty, express or implied. Distributor shall make no
other warranty with respect to the Products on behalf of the Company.
6.2 Distributor represents that it is familiar with the Products, including (if
applicable to the Products covered herein) their safety features and safe
functional application, and that it is familiar with the requirements of the
safety codes and laws of the states in Distributor's Territory. Distributor
shall notify the Company promptly of any changes in such codes and laws which
become known to it and which would require changes in the safety features or
devices of the Products and shall not knowingly solicit orders for any Product
which would not comply with such codes and laws in the Distributor's Territory.
VII Advertising and Promotion
7.1 The Company may, in its sole discretion, directly advertise and promote the
Products. To assist Distributor in promoting sales, the Company may furnish such
promotional literature and other advertising aids as the Company deems
necessary. Such material shall remain the property of the Company.
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<PAGE> 5
7.2 In order that the Company may protect all trademarks, trade names, corporate
slogans, goodwill and product designations that the Company owns or uses
pursuant to license, Distributor shall not use any such marks, names, slogans,
or designations in any advertising copy, promotional material, signs, exhibits
or other written or printed material except in a form specifically approved in
writing by the Company.
7.3 The Products shall be resold by Distributor in Distributor's name, but shall
be advertised by Distributor as being furnished by the Company.
VIII Training
8.1 From time to time the Company may, at its sole discretion, offer training in
the selling and servicing of the Products, which training shall be available to
Distributor's personnel at such locations as the Company may specify. If such
training is necessary in order for Distributor to fulfill its sales and service
obligations, Distributor's personnel shall participate in said training.
Distributor shall bear that portion of the expenses of its personnel in
attending such training as is deemed appropriate by the Company. The payment of
such training costs and microfiche maintenance costs shall not be considered as,
nor constitute a "Franchise Fee" as that term is used in any Franchise
Protection Act enacted by any state. This Agreement is not to be construed as a
Franchise Agreement.
IX Taxes and Insurance
9.1 Distributor shall pay all license fees, sales, use, service use, occupation,
retailer's occupation, service occupation, personal property, and excise taxes
and any other fees, assessments, or taxes which may be assessed or levied by any
national, state, or local government and any departments and subdivisions
thereof, as a result of the performance of this Agreement or against any of the
Products ordered by the Distributor.
9.2 At its own expense, Distributor shall purchase from and maintain policies of
liability insurance and property damage insurance with insurance companies
satisfactory to the Company as follows:
(a) Comprehensive General Liability and Products Liability, covering
Distributor, its employees, and agents, in minimum coverage amount of
$1,500,000.00 combined single limit for personal injury and property damage; and
(b) All Risks of Physical Loss or Damage to the Products under Distributor's
direct or indirect control, with the Company named as a payee as its Interest
may appear. Coverage shall be in an amount sufficient to prevent the Company
from sustaining any loss of amounts due or to become due to the Company on
Distributor's inventory and equipment.
Such policies shall not be cancellable prior to ten (10) days written notice to
the Company.
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<PAGE> 6
Distributor shall furnish the Company with satisfactory evidence of such
policies of insurance prior to the effective date of this Agreement.
X Patents, Trademarks, Confidential Information and Product Modification
10.1 Distributor shall not use any trademark or trade names, whether or not
registered, now or hereafter owned or used pursuant to license by the Company or
any mark or name similar thereto except in the manner and to the extend that the
Company may specifically consent in writing, except that Distributor may refer
to the Products by the trademarks which the Company uses in connection
therewith. Such trademarks may be changed at the sole discretion of the Company.
Distributor is permitted only to use such trademarks or trade names in
connection with its performance under this agreement and, despite such use,
Distributor shall not acquire any rights or interest thereto.
10.2 Distributor shall not remove from the Products any identifying marks placed
thereon by the Company and shall not add any identifying marks without the prior
written approval of the Company.
10.3 Distributor shall not alter, modify or add attachments to any Product that
do not meet the Company's specifications, without the written consent of the
Company. In no event shall Distributor alter or modify any Product purchased
hereunder, or the trademarks or trade names used in connection therewith by the
Company, in such a manner as will in any way infringe, impair or lessen the
validity of the patents, trademarks or trade names under which the Products are
made or sold, or as will cause the Products to infringe the patents, trademarks,
or trade names of any third party.
10.4 As to any alteration, modification or attachment to the Products which is
approved by the Company, the Company shall have a perpetual non-exclusive
royalty-free right to make, have made, use, sell, and lease goods embodying any
improvements to the Products, including attachments to and components thereof,
made or acquired by Distributor.
10.5 Without limiting the generality of Distributor's obligations under Section
11.5 hereof, if Distributor alters, modifies, or adds attachments to any
Products that do not meet the Company's specifications, and/or uses trademarks
or trade names in connection therewith other than those adopted and used by the
Company, Distributor will indemnify the Company and hold the Company completely
harmless from and against any patent infringement, unfair competition or
products liability claims brought against the Company by any third party on
account of such activities.
10.6 In the course of the performance of this Agreement, the Company may furnish
Distributor with technical information, manuals relating to the Products, list
of customers, information regarding the Company's methods of doing business and
other confidential business information and trade secrets. Both during and after
the term of this Agreement, Distributor shall not disclose such confidential
business information and trade secrets to any person other than its employees
and shall keep it in strict confidence and not use it for any purpose other than
Distributor's performance under this Agreement.
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<PAGE> 7
XI Remedies and Indemnity
11.1 Except for any Indebtedness of Distributor or security related thereto, any
action by the Company or Distributor pertaining to this Agreement must be
instituted within one year after the accrual of the claim upon which such action
is based.
11.2 Failure of either party at any time to require performance of any
provisions hereof shall not affect its right to require full performance thereof
at any time thereafter. The waiver by either party of a breach of any such
provision shall not constitute a waiver of any subsequent breach thereof or
nullify the effect of such provision.
11.3 In the event that Distributor is in default with respect to any of the
terms or conditions of or referred to in this Agreement, for seven (7) days
after receipt of written notice from the Company, the Company may, without
incurring liability to Distributor or its customers and without prejudice to any
other remedy of the Company, defer further shipments of the Products to
Distributor (whether or not the Company has accepted purchase orders from
Distributor with respect to unshipped Products) until such default is remedied.
The rights and remedies granted the Company herein are in addition to and not
exclusive of any other rights or remedies under any other agreement or any law.
The exercise by the Company of any of its rights hereunder or otherwise shall
not constitute an election of remedies or a waiver of any other right or remedy.
11.4 Distributor shall pay interest on all amounts due the Company which are in
default, as may be provided in the Company's then current terms and conditions
of sale to Distributor. The Company may apply any outstanding amount due to
Distributor against indebtedness owed by Distributor to the Company, whether due
or to become due.
11.5 As to acts or omissions of Distributor, its employees and agents,
Distributor shall indemnify and hold the Company harmless from and against any
and all claims, losses, obligations, liabilities, costs, and expenses (including
without limitation legal and other fees) arising from such acts or omissions,
including without limitations any such claims, losses, obligations, liabilities,
costs and expenses arising out of any breach of or failure to perform any of
Distributor's representations, warranties, covenants and agreements herein, or
arising out of claims of negligence or strict liability of the Distributor or
Product defects caused by Distributor.
11.6 As to acts or omissions of the Company, its employees and agents, the
Company shall indemnify and hold the Distributor harmless from and against any
and all claims, losses, obligations, liabilities, costs and expenses (including
without limitation legal and other fees) arising from such acts or omissions, or
arising out of claims of negligence or strict liability of the Company or
Product defects caused by the Company.
XII Term and Termination
12.1 This Agreement shall become effective on the date of its signature by the
Company for a term
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<PAGE> 8
expiring at 11:59 p.m. on the expiration date set forth on
the signature page hereof, unless sooner terminated as hereafter provided.
12.2 This Agreement may be terminated at any time by the mutual consent of the
parties.
12.3 This Agreement shall automatically terminate upon the happening of any of
the following:
(a) The expiration of the term hereof.
(b) The discovery of an untrue statement of a material fact, or omission to
state a material fact necessary to make the statements contained therein not
misleading, in any written information or statement furnished by Distributor to
the Company in connection with Distributor's application for appointment as the
Company's distributor or the negotiation or performance of this Agreement.
(c) The death, incapacity, removal or withdrawal from the management of
Distributor of any principal owner/operator or the voluntary or involuntary
transfer of any substantial ownership interest in Distributor.
(d) The conviction of Distributor or of any principal owner/operator of any
crime which, in the opinion of the Company, may adversely affect the goodwill of
Distributor or the Company or the operation of the business to be carried on by
Distributor pursuant to this Agreement.
12.4 This Agreement also may be terminated upon the happening of any of the
following:
(a) A change in the management, operation, personnel, or credit standing of
Distributor or the Company which the other party, in its sole discretion, deems
adverse to its interest.
(b) Breach of or failure to perform any of the obligations hereunder or referred
to herein by either party, including but not limited to Distributor's failure to
develop the sales and services of the Company's Products in the Territory to the
Company's expectation, maintain a proper inventory, or to conduct its business
in accordance with any requirements set forth herein to be performed by
Distributor, or Distributor's export of Products or sale for export in violation
of the requirements of this Agreement.
12.5 Method of Termination:
(a) If termination is instituted under the provisions of Section 12.3(b), (c) or
(d) above, a registered or certified letter or telegram confirmed by letter will
constitute sufficient notice that the Agreement is terminated immediately on the
date of notice.
(b) If termination is instituted under the provisions of Section 12.4 hereof,
the following steps will be taken:
(i) The party wishing to terminate shall notify the other party in writing
stating the reasons for dissatisfaction. A thirty-day period shall be given the
other party to answer and discuss the areas of difference. If the parties do not
resolve their differences within the thirty- day period, the agreement will
terminate 30 days thereafter.
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<PAGE> 9
(ii) Nothing in the foregoing is meant to prevent the parties at any time by
mutual consent from terminating the agreement without going through the
prescribed steps and waiting period.
(c) If the Agreement is not renewed under the provisions of Section 12.3(a)
above, a registered or certified letter, or telegram confirmed by letter, shall
be sent no less than sixty (60) days prior to the expiration of the Agreement by
the party that intends not to renew the Agreement.
12.6 Nothing contained herein shall be deemed to create any express or implied
obligation on either party to renew or extend this Agreement or, if Distributor
is continued as the Company's distributor, to create any right to continue such
relationship on the same terms and conditions contained herein. Each party, in
its sole discretion, may determine, for any reason whatsoever, not to renew or
extend this Agreement or to continue such relationship on the terms and
conditions contained herein. The Company may, in its sole discretion, continue
to deal with the Distributor after the termination date of this Agreement. Such
continued dealing, without the execution of a new Agreement, will not create any
obligation to extend or renew this Agreement. Such continued dealings shall be
terminable at the will of either party.
XIII Effect of Termination
13.1 Neither party, by reason of the termination or nonrenewal of this
Agreement, shall be liable to the other for compensation, reimbursement, or
damages because of the loss of anticipated sales or prospective profits or
because of expenditures, investments, leases, property improvements or other
matters related to the business or goodwill of the parties.
13.2 All sums owed by either party to the other shall become due and payable
immediately upon termination. Either party, at its option, may offset any sums
due or to become due to it against any sums owed by it.
13.3 Upon termination of this Agreement, Distributor shall immediately
discontinue use of any and all trademarks and trade names owned or used pursuant
to license by the Company, including without limitation use in Distributor's
letterheads, advertising, and name. Distributor shall not thereafter use any
such mark or name or any mark or name tending to give the impression that any
relation between the Company and Distributor still exists, and Distributor shall
immediately deliver to such address as the Company specifies all technical
information, price lists, catalogs, drawings, designs, engineering photographs,
samples, literature, sales aids, customer lists and other confidential business
information and trade secrets of the Company in Distributor's possession.
13.4 Upon termination, the Company shall be relieved of any obligation to accept
any new orders or make further releases on existing blanket orders, and may at
its option cancel all of Distributor's unshipped orders for the Products,
irrespective of previous acceptance by the Company, except those which are
proved to the Company's satisfaction to have been sold by Distributor to
customers prior to giving of notice of termination or those as to which
Distributor has posted bid bonds prior to such notice. The Company shall have no
obligation or liability to Distributor or its prospective customers
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<PAGE> 10
in connection with any such cancellations. If the Company accepts such an order
for Products which ordinarily require delivery and service by Distributor and
for which Distributor is separately compensated by the Company, the latter at
its option may make other arrangements for such delivery and service and, if so,
will reduce the normal discount by that portion as may be specifically provided
for such delivery and service. Upon termination by Distributor, if Distributor
also seeks to cancel unshipped orders in process, Distributor shall pay the
normal cancellation charge which may be set forth in the sales documents
relating to such orders.
13.5 The Company's acceptance of any order by Distributor for the Products after
the termination of this Agreement shall not be construed as a renewal or
extension of this Agreement, nor as a waiver of termination, but in the absence
of a new written agreement executed by the Company, all such transactions shall
be governed by the terms and provisions of this Agreement.
13.6 Upon termination, the disposition of the Products purchased by Distributor
from the Company and in Distributor's possession, shall be governed by the
Company's then current written policy relating to returned Products. A copy of
the Company's now current policy, marked Schedule C, is attached hereto for
informational purposes only.
XIV Application and Construction of Agreement
14.1 This Agreement is binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, executors, legal representatives,
successors and assigns, except that Distributor shall not assign this Agreement,
or any interest herein including rights and duties of performance, without the
written consent of the Company. No assignment made without the Company's consent
shall relieve Distributor from any of its obligations under this Agreement.
14.2 This Agreement shall not be binding upon the Company until signed for the
Company by its duly authorized officer or employee. No agent or representative
of the Company has any authority to vary the terms and conditions contained
herein or to make any representation, statement, warranty, or agreement not
expressed herein.
14.3 Laws of the Commonwealth of Kentucky shall govern the construction of this
Agreement and the rights, remedies and duties of the parties hereto. In the
event of any litigation arising out of this Agreement or the transactions
contemplated thereby, the parties agree that any action or suit shall be brought
In a court of record in the County of Fayette, Commonwealth of Kentucky, or in
the United States District Court for the Eastern District of Kentucky, and the
parties hereby consent to the venue and jurisdiction of such courts.
14.4 Except for changes by the Company permitted under the Agreement, including
changes in the various Schedules attached hereto or in the price, discount
schedules, design, terms of sale, or specifications of the Products, no
amendment or modification of this Agreement or any portion thereof shall be
valid unless executed in writing by both parties. Any written amendment or
modification which is executed by both parties shall be binding upon them
notwithstanding any lack of consideration.
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<PAGE> 11
14.5 All understandings and agreements, written or oral, heretofore had or made
between the parties with respect to any of the subject matters herein, are
merged into this Agreement which alone fully and completely expresses their
agreement.
14.6 The descriptive headings in the Agreement are inserted for convenience only
and do not constitute a part of this Agreement.
XV NOTICE
15.1 Any notice required or permitted herein shall be in writing and shall be
hand delivered or mailed, postage fully prepaid, properly addressed to the party
to be notified at the address shown above or the last know address given by such
party to the other. Any such notice shall be considered to have been given when
hand delivered or on the second business day after it has been deposited in the
mails in the manner herein provided.
XVI Distributor Service Obligations
16.1 Some of the products furnished by the Company are of such nature, size,
and/or complexity that sales and goodwill depend upon prompt and competent (a)
delivery, installation, and start-up field services, (b) in-warranty services,
and (c) post-warranty services, of a type or extent which may not be required by
other of the Company's products. If the Products covered by this Agreement are
of the former type, then the parties hereto further agree that the nature and
extent of such services, and the means of compensating Distributor therefore,
are set forth in the attached Schedule D, as it may hereafter be amended by the
Company from time to time.
XVII Schedules
17.1 The following Schedules are attached hereto and made a part hereof, subject
to the right of the Company unilaterally to amend them from time to time:
SCHEDULE A ADDITIONAL DISTRIBUTOR LOCATIONS COVERED BY THIS AGREEMENT
PRODUCTS AND DISCOUNTS
TERRITORY
SCHEDULE B MACHINE WARRANTY AND LIMITATION OF LIABILITY
SCHEDULE C RETURN OF PRODUCTS
SCHEDULE D DISTRIBUTOR MACHINE DELIVERY SERVICE AND WARRANTY SERVICE
SCHEDULE E PRICES AND TERMS
SCHEDULE F MACHINE CANCELLATION POLICY
SCHEDULE G MACHINE EXPORT RESTRICTION
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<PAGE> 12
IN WITNESS WHEREOF the parties have executed this Agreement including attached
Schedules intending to be bound thereby:
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<PAGE> 13
SCHEDULE A
I. ADDITIONAL DISTRIBUTOR LOCATIONS COVERED BY THIS AGREEMENT:
Fresno, California
Pleasant Grove, California
Sparks, Nevada
II. PRODUCTS AND DISCOUNTS: Subject to the Company's unilateral right to amend,
add to, delete from, and otherwise alter this Schedule in the future, the
products covered by this agreement and the discounts from the suggested list
prices applicable to items purchased are as follows:
<TABLE>
<CAPTION>
PRODUCTS DISCOUNTS
<S> <C>
1. Hydraulic Excavators, Logmasters, Scrapmasters 25%
2. Parts: Repair parts for all above products, all prior
production versions of the same and all obsolete products
of the same type in the Distributor's "Territory". Varies
</TABLE>
In all cases, the selling Distributor shall be responsible for delivery and
service of the machine unless the Company, at its sole discretion, determines
otherwise. If, at the discretion of the Company, it is determined that the
selling Distributor shall not deliver and service the machine, the Company will
make arrangements to have this service performed. In this event, the Company
will withhold, at the time of invoicing a percentage in accordance with the
Service Policy and Procedure Manual.
III. TERRITORY:
In the State of California, all counties north of and including Santa Barbara,
Kern and lnyo with the exception of Del-Norte, Siskiyou and Modoc.
The entire State of Nevada except Lincoln and Clark counties and except the
south half of Nye County per the attached map.
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SCHEDULE B
MACHINE WARRANTY AND LIMITATION OF LIABILITY:
The products furnished by the Company, exclusive of used or rebuilt machinery or
equipment, are subject to the following warranty:
(A) Warranty.
All of the Company's products are of high quality and are manufactured in
conformity with the best commercial practices in the various lines. The Company
warrants all hydraulic excavators, scrapmasters and logmasters furnished by it
to be free from defects in material and manufacture at the time of shipment for
twelve (12) months from date of shipment or 1500 hours of operation, whichever
shall occur first. The Company will furnish without charge, F.O.B. point of
shipment, replacements for such parts as the Company finds to have been
defective at the time of shipment, or at the Company's option, will make or
authorize repairs to such parts, provided that, upon request, such parts are
returned, transportation prepaid, to the point of shipment.
This warranty shall not apply to any product which has been subjected to misuse;
misapplication; neglect (including, but not limited to, improper maintenance);
accident; or improper installation, modification (including, but not limited to,
use of unauthorized parts or attachments), adjustment, or repair. Engines,
motors, and accessories furnished with the Company's products, but which are not
manufactured by the Company or any affiliated companies, are not warranted by
the Company but are sold only with the express warranty, if any, of the
manufacturers thereof. THE FOREGOING IS IN LIEU OF ALL OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED (INCLUDING THOSE OF MERCHANTABILITY AND FITNESS OF ANY
PRODUCT FOR A PARTICULAR PURPOSE), AND OF ANY OTHER OBLIGATION OR LIABILITY ON
THE PART OF THE COMPANY.
(B) Limitation of Liability.
IT IS EXPRESSLY UNDERSTOOD THAT THE COMPANY'S LIABILITY FOR ITS PRODUCTS,
WHETHER DUE TO BREACH OF WARRANTY, NEGLIGENCE, STRICT LIABILITY, OR OTHERWISE,
IS LIMITED TO THE FURNISHING OF SUCH REPLACEMENT PARTS, AND THE COMPANY WILL NOT
BE LIABLE FOR ANY OTHER INJURY, LOSS, DAMAGE, OR EXPENSE, WHETHER DIRECT OR
CONSEQUENTIAL, INCLUDING BUT NOT LIMITED TO LOSS OF USE, INCOME, PROFIT, OR
PRODUCTION, OR INCREASED COST OF OPERATION, OR SPOILAGE OF OR DAMAGE TO
MATERIAL, ARISING IN CONNECTION WITH THE SALE, INSTALLATION, USE OF, INABILITY
TO USE, OR THE REPAIR OR REPLACEMENT OF, THE COMPANY'S PRODUCTS.
The Company reserves the right to make alterations or modifications in their
equipment at any time, which, in their opinion, may improve the performance and
efficiency of the Product. They shall not be obliged to make such alterations or
modifications to Products already in service.
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<PAGE> 15
Any operation beyond rated capacity expressly prohibited in the operating
instructions or safety manual furnished with the machine, or any adjustment, or
assembly procedures not recommended or authorized in the operating or service
instructions shall void such warranty.
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SCHEDULE C
RETURN OF PRODUCTS
New, unused machines of standard manufacture purchased by the Distributor from
the Company, may be repurchased at the sole discretion of the Company. Further,
the Company may, in its sole discretion, elect to accept a return of such
machine for credit. All such returns or repurchases shall require the prior
written approval of the Company. In addition, the following terms and conditions
shall apply to a return or repurchase of parts.
(A) In the event of termination of the Agreement under any of the provisions of
Article XII, the Company agrees, subject to the above, to purchase from the
Distributor such parts in the Distributor's stock which the Distributor
previously has purchased from the Company. Also subject to the above, if the
return of such parts is made while this Agreement remains in effect, such return
shall be for credit to be applied on future purchases. The purchase price or
credit shall be made in accordance with the Parts Policy and Procedure Manual.
(B) All repurchased or returned parts must be in accordance with the Parts
Policy and Procedure Manual.
(C) If the returned or repurchased parts require reconditioning, the cost of
such reconditioning will be deducted from the price paid or credit issued.
(D) All returned or repurchased parts must be shipped and delivered by
Distributor F.O.B. to the site specified by the Company.
(E) If requested by the Company, the Distributor shall furnish the invoice or
order number on which parts were originally purchased.
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<PAGE> 17
SCHEDULE D
DISTRIBUTOR MACHINE DEUVERY SERVICE AND WARRANTY SERVICE
The company and distributor recognize that the products are of such a
specialized technical character that sales thereof and customer goodwill depend
upon follow-up services by trained parts and service personnel. This applies to
all sales of products by Distributor irrespective of place of delivery or use of
the products. Accordingly, Distributor agrees as follows:
(1) In all cases the selling Distributor will provide adequate delivery service
and warranty service on all products unless the Company in its sole discretion
determines otherwise. In the later event, the Company will arrange for these
services to be performed and a percentage in accordance with the Service Policy
and Procedure Manual will be withheld at time of invoicing. "Delivery service
and warranty service" includes but is not limited to performing all service
necessary at the time of delivery of products to Distributor's customers, and
servicing all warranty claims on products sold by Distributor. A Pre Delivery
Inspection Report (Product Evaluation), Delivery Report, follow-up inspection at
approximately six (6) months or 1000 hours of operation and a final inspection
at twelve (12) months or 1500 hours of operation are required.
(2) When the Company requests Distributor to perform within Distributor's
Territory delivery service and/or warranty service on a product not sold by
Distributor, Distributor will do so.
(3) The Company will reimburse the Distributor for warranty labor and costs as
specified in the Company's Service Policy and Procedure Manual.
(4) The Distributor shall promptly furnish all reports required with regard to
deliveries, service and warranties.
(5) If Distributor fails to perform the obligations required of it in this
Schedule D, the Company, in its sole discretion, may perform, or cause to be
performed, such obligations.
(6) In all cases where the machine is for delivery outside the contiguous United
States and Canada, a percentage in accordance with the Service Policy and
Procedure Manual will be withheld (with the exception of delivery within the
selling Distributor's Territory) and the Company will arrange for delivery and
service to be performed.
(7) The Distributor accepts the responsibility of providing machine campaign
support on all units located within its Territory, whether sold under this
Agreement or otherwise
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<PAGE> 18
SCHEDULE E
PRICES AND TERMS
(A) Machines. Prices to the Distributor for machines shall be determined from
(1) the Company's suggested price lists (as changed by the Company from time to
time) in effect at time of order; or billing F.O.B. point of shipment, prepared
for domestic shipment, less (2) the applicable discounts that may be in effect
at time of order.
(B) Terms-Machine. Terms of payment for machines are net thirty (30) days.
(C) Parts. Prices to the Distributor for parts shall be the net price determined
from the Company's published parts price lists, as changed by the Company from
time to time, in effect at the time and place of order. Such lists, and the
schedule and conditions accompanying them, shall be considered a part of this
agreement.
(D) Terms-Parts. Terms of payment for parts are net 30 days from date of
invoice.
(E) Distributor shall be entitled to no discount for parts furnished for
warranty adjustments.
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<PAGE> 19
SCHEDULE F
MACHINE CANCELLATION POLICY
The following constitutes the Company's policy regarding cancellation of orders
for machines manufactured or offered by it.
All machine orders placed with the Company are accepted as firm orders.
Order acceptance occurs when the sales order is issued by the Company confirming
to the Distributor entry of the order, sales order number, a price and a
shipping date.
Orders for machines which are special in nature, which require special
engineering and include nonstandard items are non-cancellable at the time of
order acceptance and will be so noted on our sales order acknowledgment.
In the case of all other machines offered for sale by the Company, cancellation
will be accepted if the Company is notified by the 15th day of the month two
months prior to the month of scheduled shipment. For example, for machines
scheduled for shipment in September, the Company must be notified no later than
July 15th. In the absence of notification in accordance with the above schedule,
machines on order will be shipped and invoiced to the ordering Distributor
during the month originally scheduled.
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<PAGE> 20
SCHEDULE G
MACHINE EXPORT RESTRICTION
The following Products have export restrictions as outlined in "II Territory"
paragraph 2.1:
1600Q
2650Q
2700Q
2800Q
2800QLF
3400Q
3400QLF
3900Q
4300Q
5800Q
6000Q
20
<PAGE> 21
INVENTORY SECURITY AGREEMENT
Western Traction Company a (sole proprietorship) (partnership) (corporation) of
the State of ___________________ ("Distributor") having a place(s) of business
at:
P.O. Box 1649 Union City, CA 94587
2330 East Date, Fresno, CA 93706
7518 Pacific Avenue, Pleasant Grove, CA 95668
as debtor, and LBX COMPANY LLC (the "Company"), as secured panty, hereby agree
as follows:
1. Definitions. As used herein:
(a) All terms defined in Articles 1 or 9 of the California Uniform Commercial
Code shall have the meanings given therein unless otherwise defined herein:
(b) The term "Property" shall mean Distributor's entire inventory of products,
parts and all other items (including all additions or accessions thereto and
substitutions therefor), heretofore or which may hereafter be acquired by
Distributor from the Company and the purchase price of which shall not have been
paid in full, and any items taken in trade for any of the foregoing;
(c) The term "Collateral" shall mean and include all of the following, whether
now owned or hereafter created or acquired by Distributor: (i) all Property,
(ii) all accounts, chattel paper, instruments, documents, contract rights,
general intangibles and leases arising, in whole or in part, from the sale or
lease of any Property, including without limitation any and all reversionary
rights to Property under any of foregoing, and (iii) all proceeds of, accessions
to and products of any of the foregoing in whatever form, including without
limitation cash, checks, drafts and other instruments for the payment of money,
chattel paper, trade-ins, security agreements and other documents; and
(d) The term "Obligations" shall mean and include any and all of Distributor's
indebtedness and/or liabilities to the Company of every kind, nature and
description, direct or indirect, secured or unsecured, joint or several,
absolute or contingent, due or to become due, now existing or hereafter arising,
regardless of how they arise or by what agreement or instrument they may be
evidenced or whether evidenced by any agreement or instrument, including but not
limited to all amounts owing by Distributor to the Company by reason of
purchases made by Distributor from the Company or any affiliate thereof, and all
obligations to perform acts or refrain from taking action.
2. To secure the payment and performance of all of the Obligations, Distributor
hereby pledges and assigns to the Company and grants to the Company a continuing
general security interest in all of Distributor's Collateral and all of
Distributor's ledger sheets, files, records and documents relating to the
Collateral which shall, until delivered to or removed by the Company, be kept by
the Distributor in trust for the Company and without cost to the Company in
appropriate containers and safe places, bearing suitable legends disclosing the
Company's interest. With respect to any chattel
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<PAGE> 22
paper or lease comprising a portion of the Collateral, immediately upon
formation of same Distributor agrees to place a legend on the face thereof
disclosing the Company's interest therein. Upon the request of the Company,
Distributor shall assign and deliver physical possession of any such chattel
paper or lease to the Company.
3. Except as otherwise specifically authorized in any other written agreement
between the Distributor and the Company, the Distributor shall not use, sell,
lease, assign, pledge, hypothecate, factor or otherwise dispose of any
Collateral or create a security interest therein, or otherwise encumber any of
the Collateral or suffer to exist any lien, charge, or encumbrance on any of the
Collateral except for any security interest granted to the Company. Upon any
sale or lease of any Collateral the Distributor shall (unless otherwise
specifically authorized in any written agreement between the parties hereto,)
pay to the Company the full amount of any indebtedness owing to the Company for
the items sold or leased.
4. The acceptance of a note or notes and renewals thereof for the whole or any
part of any Obligation, or the institution of legal action or the recovery of a
judgment for the whole or any part thereof or on any note given therefor, shall
not constitute payment of any such Obligation nor shall it in any way divest the
Company, or be deemed a waiver, of any part of the security interest granted
thereby.
5. The following shall constitute events of default ("default") by Distributor:
(i) Default by Distributor in the payment or performance of any Obligation; (ii)
Failure by Distributor upon request to turn over proceeds or provide information
in accordance with any of the provisions hereof; (iii) Distributor in violation
of Section 3 shall sell, lease, or dispose of any Collateral or allow any lien,
charge or encumbrance to be created or remain thereon; (iv) Distributor (or any
member of the Distributor's firm if a partnership) shall become insolvent, make
an assignment for the benefit of creditors, institute or have instituted against
it proceedings under any bankruptcy or insolvency law, or Distributor's stock in
trade or any part thereof shall become levied upon or attached; (v) Distributor
shall make any misrepresentation, orally or in writing, to the Company for the
purpose of obtaining credit or an extension of credit; (vi) Distributor shall
breach any representation, warranty, covenant or agreement herein contained or
contained in any other agreement or arrangement now or hereafter entered into,
to which Distributor and the Company are parties; or (vii) any change in
Distributor's condition or affairs (financial or otherwise) or of any endorser,
guarantor or surety for any of the Obligations, including but not limited to any
dispute, disagreement or controversy between or among principals, partners,
managers, officers or stockholders of Distributor, any change in the ownership
or management of Distributor, or any personal conduct of Distributor or of a
partner, officer or key employee of Distributor, or the revocation or
discontinuation of any such guaranty, that in the Company's sole opinion impairs
its security or increases its risk.
6. Upon the occurrence of any default and at any time there after (such default
not having been previously cured), the Company shall have, in addition to all
other rights and remedies at law or in equity, the right to:
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<PAGE> 23
(a) Declare immediately due and payable all Obligations and collect the same
together with all costs of collection, including but not limited to court costs
and reasonable attorneys' fees paid or incurred by the Company in enforcing its
rights hereunder:
(b) Discontinue or withhold the delivery of any and all Property to the
Distributor, or make further deliveries only on a cash or C.O.D. basis; and
(c) Take possession of any or all Collateral.
Distributor hereby waives notice of any acceleration hereunder of any maturity
of any Obligation and, except for the notice required pursuant to Section 7(a)
hereof, waives any and all other notices of any action taken or which may be
taken by the Company hereunder.
7. If the Company elects to take possession of any Collateral, it shall have the
right, to full extent and in addition to any other rights allowed by law, to
enter upon any premises occupied by or under the control of Distributor for that
purpose Distributor shall, when requested to do so by the Company, gather at its
principal place of business, or at any other place designated by the Company,
any and all Collateral which is not already located there. After taking
possession the Company shall have, in addition to all other rights and remedies
at law or in equity the right to:
(a) Sell all or any part of the Collateral at one or more public and/or private
sales on written notice. Such notice shall be deemed to be reasonable notice of
such sale if mailed, postage prepaid, or delivered to the Distributor at the
address shown herein at least 5 days before such sale; or
(b) Determine, in its sole discretion, which rights, security, liens, security
interests or remedies it shall at any time pursue, relinquish, subordinate,
modify or take any other action with respect to, without in any way modifying or
affecting any of them or any of its rights hereunder. Any monies, deposits,
receivables, balances or other property of Distributor (including any
Collateral) which may come into the Company's hands at any time or in any
manner, may be retained by the Company and applied to any of the Obligations.
Distributor hereby waives any right it may have to require or request the
Company to proceed against any Collateral or to proceed against any other
security the Company may bold, and hereby waives any right it may have to
require or request the Company to pursue any other remedy for the benefit of
Distributor and agrees that the Company may proceed against Distributor for the
full amount of any liability or Obligation of Distributor to the company without
taking any action against any other panty and without selling or otherwise
proceeding against or applying any security the Company may hold, including but
not limited to the Collateral.
8. The proceeds of sales of any Collateral pursuant to Section 7 shall be
applied first to all costs of collection, including but not limited to Court
costs and reasonable attorneys' fees paid or incurred by the Company in
enforcing its rights hereunder, and then to the satisfaction of any and all
Obligations. Any proceeds then remaining will be paid over to the Distributor as
provided by law, and the Distributor shall be liable for any deficiencies.
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<PAGE> 24
9. Without suggesting that any other procedures may not also be commercially
reasonable, or that any of the following procedures are mandatory in any
particular case, it is agreed that the following are all commercially reasonable
methods of disposing of any Collateral should the Company decide to follow one
or more of them as to all or any part of the Collateral:
(a) Private sale of complete machines (equivalent to new or unused machines of
current production) and all attachments thereto to another dealer or dealers at
current dealer prices in effect at the time of such disposition;
(b) Sale of any Property by units or in one or more parcels at private sale at
the best price submitted in sealed bids taken from three or more dealers,
provided that in the Company's sole discretion such best bid represents a
reasonable price;
(c) Sale of parts and attachments in good condition for which there is a ready
market to dealers through the Company's regular parts distribution facilities at
prices and terms prevailing at the time of such disposition. The Company may
commingle such parts with its regular inventory of parts and account for the
sale of any parts constituting a portion of the Collateral upon the assumption
that such parts are the first parts sold after such commingling. The Company's
expenses of reinventorying and merchandising returned and repossessed parts
(exclusive of costs incurred in sorting the parts for listing, loading them at
Distributor's place of business, and of transportation expense from
Distributor's place of business to the Company's parts distribution facility)
are in excess of 10% of the invoice price, and it is agreed that a 10% charge
for such services may be made without further itemization or analysis of such
expenses: and
(d) Public sale at auction of all Collateral or any portion thereof not disposed
of by some other method.
10. The Distributor shall keep accurate books and records of account in
accordance with generally accepted accounting principals applied on a consistent
basis, including stock, sales and lease records of machines and repair parts. At
the end of Distributor's fiscal year, and at such other times as the Company may
request, Distributor shall furnish the Company with full and complete financial
and operating statements in a form acceptable to the Company. Distributor shall
also furnish the Company, at any time upon request, full information regarding
all Collateral, including but not limited to inventory on hand, inventory sold
or leased, the proceeds thereof, and any agreements affecting such inventory.
11. The Distributor shall:
(a) Properly store all Collateral in its possession and protect the same from
injury or damage of any kind;
(b) Continuously keep all Collateral insured with all-risk type coverage
satisfactory to the Company and with insurers satisfactory to the Company, in an
amount equal to the invoice price
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<PAGE> 25
thereof. Such insurance may be issued in the name of Distributor who may retain
possession of the policies, but each policy shall be in form satisfactory to the
Company with loss payable to the Company as its interest may appear and shall
provide for 10 days minimum written cancellation notice to the Company.
Distributor shall immediately furnish the Company with a certificate of
insurance issued by the insurer on each policy;
(c) Keep all Collateral free and clear of all liens, charges and encumbrances
however arising, except for any security interest granted to the Company;
(d) Simultaneously with the execution and delivery of this Agreement, provide
the Company with a written list of the addresses of all locations where any
Collateral is now located, any probable location where any of the Collateral may
be moved to or used by any lessee thereof, and Distributor agrees that
immediately upon any change in the location of any of the Collateral it will
notify the Company in writing setting forth the description of the Collateral so
moved and the address of its new location;
(e) From time to time do whatever the Company may request by way of obtaining,
executing, delivery and/or filing financing statements, landlord's or
mortgagee's waivers, and other notices, and amendments and renewals thereof, and
Distributor shall take any and all steps and observe such formalities as the
Company may request, in order to create and maintain a valid first lien upon,
pledge of and/or paramount security interest in, any and all of the Collateral.
The Company is authorized to file financing statements without Distributor's
signature as specified by the Uniform Commercial Code to perfect or maintain the
Company's security interest in all of the Collateral. All charges, expenses and
fees which the Company may incur in filing any of the foregoing and any local
taxes relating thereto, may be charged to the Distributor's account and added to
the obligations; and
(f) Pay promptly on demand therefor, any and all costs and expenses of
collection, including court costs and reasonable attorney's fees, paid or
incurred by the Company in enforcing any of the Company's rights hereunder or
effectuating collection of any of the Obligations.
If Distributor shall fail to insure or to pay the fees, taxes, assessments or
charges as required herein or by the Distributor Agreement (including any
amendments thereto) between the parties hereto, or shall allow any lien, charge
or encumbrance to attach to any of the Collateral, the Company, without
obligation to do so, may obtain such insurance, pay such fees, taxes,
assessments or charges, or discharge such lien, charge or encumbrance and
Distributor shall reimburse the Company promptly for all monies so paid out and
shall pay the Company interest thereon at the highest lawful contract rate under
applicable law. The amounts so paid by the Company shall be deemed conclusive as
to the amounts properly payable, and such amounts shall be secured hereunder.
12. Distributor shall at any time upon request immediately deliver to the
Company all proceeds of Property which are in its possession in the form of
customer's notes (for the purpose of this Section 12 and of Section 13 hereof
"notes" shall include without limitation instruments, documents, chattel paper
and leases) together with appropriate endorsement and/or assignment thereof to
the Company,
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<PAGE> 26
and will provide the Company with information concerning proceeds in the form of
customer's accounts (for purpose of this Section 12 and of Section 13 hereof
"accounts" shall include without limitation all contract rights) sufficient to
enable the Company to collect such accounts directly and the Company may collect
such notes and accounts directly.
13. The provisions of the Section 13 and all references herein to "notes" and
"accounts" shall apply to any notes and accounts, respectively, delivered to,
pledged with or as to which information is furnished to the Company, pursuant to
Section 12 hereof.
At any time regardless of whether Distributor is in default, the Company is
authorized to reduce open accounts to notes, to renew or extend time of payment
of any note or account or any securities securing the same, any such renewal to
be in its own or Distributor's name as the Company may elect, to take, waive,
release or exchange any security therefor, to make such compromise or settlement
therefor as it deems advisable in its sole discretion, and to take such steps
for the enforcement, collection, securing, renewing, extending or compromising
of any note or account, or any part thereof, or any security therefor, as it
deems advisable in its sole discretion. Any proceeds realized from the
collection or enforcement of said notes and accounts or any security therefor
shall be applied as provided In Section 8 hereof.
14. The invalidity or unenforceability of any provision hereof, in whole or in
part, shall not affect the validity or enforceability of the remainder of such
provision or of any other provision or provisions hereof, the provisions hereof
being severable.
15. This Agreement, which shall inure to the benefit of and be binding upon the
respective successors, assigns, heirs and personal representatives, as the case
may be, of each of the parties hereto, shall be governed, construed and
interpreted in all respects in accordance with the laws of the State of
California.
16. No delay or omission on the Company's part in exercising any right, remedy
or option shall operate as a waiver of such or any other right, remedy or option
or of any default. Waiver by the Company of any default hereunder of Distributor
shall not be construed as a waiver of any prior or subsequent default. Action
against any guarantor or surety is not an election or waiver of the right to
proceed against the Distributor. Whenever the pronoun "it" is used in this
Agreement with reference to the Distributor, said pronoun shall mean "his" or
"her", as the case may be, if the Distributor is an individual or sole
proprietorship.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
_______________, 19__.
Address of Distributor P.O. Box 1649 Union City, CA 94587
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<PAGE> 27
INVENTORY SECURITY AGREEMENT
Western Traction Company a (sole proprietorship) (partnership) (corporation) of
the State of ("Distributor") having a place(s) of business at: 1195 East
Glendale Avenue, Sparks, NV 89431, as debtor, and LBX COMPANY LLC (the
"Company"), as secured party, hereby agree as follows:
1. Definitions. As used herein:
(a) All terms defined in Articles 1 or 9 of the Nevada Uniform Commercial Code
shall have the meanings given therein unless otherwise defined herein:
(b) The term "Property" shall mean Distributor's entire inventory of products,
parts and all other items (including all additions or accessions thereto and
substitutions therefor), heretofore or which may hereafter be acquired by
Distributor from the Company and the purchase price of which shall not have been
paid in full, and any items taken in trade for any of the foregoing;
(c) The term "Collateral" shall mean and include all of the following, whether
now owned or hereafter created or acquired by Distributor: (i) all Property,
(ii) all accounts, chattel paper, instruments, documents, contract rights,
general intangibles and leases arising, in whole or in part, from the sale or
lease of any Property, including without limitation any and all reversionary
rights to Property under any of foregoing, and (iii) all proceeds of, accessions
to and products of any of the foregoing in whatever form, including without
limitation cash, checks, drafts and other instruments for the payment of money,
chattel paper, trade-ins, security agreements and other documents; and
(d) The term "Obligations" shall mean and include any and all of Distributor's
indebtedness and/or liabilities to the Company of every kind, nature and
description, direct or indirect, secured or unsecured, joint or several,
absolute or contingent, due or to become due, now existing or hereafter arising,
regardless of how they arise or by what agreement or instrument they may be
evidenced or whether evidenced by any agreement or instrument, including but not
limited to all amounts owing by Distributor to the Company by reason of
purchases made by Distributor from the Company or any affiliate thereof, and all
obligations to perform acts or refrain from taking action.
2. To secure the payment and performance of all of the Obligations, Distributor
hereby pledges and assigns to the Company and grants to the Company a continuing
general security interest in all of Distributor's Collateral and all of
Distributor's ledger sheets, files, records and documents relating to the
Collateral which shall, until delivered to or removed by the Company, be kept by
the Distributor in trust for the Company and without cost to the Company in
appropriate containers and safe places, bearing suitable legends disclosing the
Company's interest. With respect to any chattel paper or lease comprising a
portion of the Collateral, immediately upon formation of same Distributor agrees
to place a legend on the face thereof disclosing the Company's interest therein.
Upon the request of the Company, Distributor shall assign and deliver physical
possession of any such chattel paper or lease to the Company.
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<PAGE> 28
3. Except as otherwise specifically authorized in any other written agreement
between the Distributor and the Company, the Distributor shall not use, sell,
lease, assign, pledge, hypothecate, factor or otherwise dispose of any
Collateral or create a security interest therein, or otherwise encumber any of
the Collateral or suffer to exist any lien, charge, or encumbrance on any of the
Collateral except for any security interest granted to the Company. Upon any
sale or lease of any Collateral the Distributor shall (unless otherwise
specifically authorized in any written agreement between the parties hereto,)
pay to the Company the full amount of any indebtedness owing to the Company for
the items sold or leased.
4. The acceptance of a note or notes and renewals thereof for the whole or any
part of any Obligation, or the institution of legal action or the recovery of a
judgment for the whole or any part thereof or on any note given therefor, shall
not constitute payment of any such Obligation nor shall it in any way divest the
Company, or be deemed a waiver, of any part of the security interest granted
thereby.
5. The following shall constitute events of default ("default") by Distributor:
(i) Default by Distributor in the payment or performance of any Obligation; (ii)
Failure by Distributor upon request to turn over proceeds or provide information
in accordance with any of the provisions hereof; (iii) Distributor in violation
of Section 3 shall sell, lease, or dispose of any Collateral or allow any lien,
charge or encumbrance to be created or remain thereon; (iv) Distributor (or any
member of the Distributor's firm if a partnership) shall become insolvent, make
an assignment for the benefit of creditors, institute or have instituted against
it proceedings under any bankruptcy or insolvency law, or Distributor's stock in
trade or any part thereof shall become levied upon or attached; (v) Distributor
shall make any misrepresentation, orally or in writing, to the Company for the
purpose of obtaining credit or an extension of credit; (vi) Distributor shall
breach any representation, warranty, covenant or agreement herein contained or
contained in any other agreement or arrangement now or hereafter entered into,
to which Distributor and the Company are parties; or (vii) any change in
Distributor's condition or affairs (financial or otherwise) or of any endorser,
guarantor or surety for any of the Obligations, including but not limited to any
dispute, disagreement or controversy between or among principals, partners,
managers, officers or stockholders of Distributor, any change in the ownership
or management of Distributor, or any personal conduct of Distributor or of a
partner, officer or key employee of Distributor, or the revocation or
discontinuation of any such guaranty, that in the Company's sole opinion impairs
its security or increases its risk.
6. Upon the occurrence of any default and at any time thereafter (such default
not having been previously cured), the Company shall have, in addition to all
other rights and remedies at law or in equity, the right to:
(a) Declare immediately due and payable all Obligations and collect the same
together with all costs of collection, including but not limited to court costs
and reasonable attorneys' fees paid or incurred by the Company in enforcing its
rights hereunder:
(b) Discontinue or withhold the delivery of any and all Property to the
Distributor, or make further deliveries only on a cash or C.O.D. basis; and
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<PAGE> 29
(c) Take possession of any or all Collateral.
Distributor hereby waives notice of any acceleration hereunder of any maturity
of any Obligation and, except for the notice required pursuant to Section 7(a)
hereof, waives any and all other notices of any action taken or which may be
taken by the Company hereunder.
7. If the Company elects to take possession of any Collateral, it shall have the
right, to full extent and in addition to any other rights allowed by law, to
enter upon any premises occupied by or under the control of Distributor for that
purpose. Distributor shall, when requested to do so by the Company, gather at
its principal place of business, or at any other place designated by the
Company, any and all Collateral which is not already located there. After taking
possession, the Company shall have, in addition to all other rights and remedies
at law or in equity the right to:
(a) Sell all or any part of the Collateral at one or more public and/or private
sales on written notice. Such notice shall be deemed to be reasonable notice of
such sale if mailed, postage prepaid, or delivered to the Distributor at the
address shown herein at least 5 days before such sale; or
(b) Determine, in its sole discretion, which rights, security, liens, security
interests or remedies it shall at any time pursue, relinquish, subordinate,
modify or take any other action with respect to, without in any way modifying or
affecting any of them or any of its rights hereunder. Any monies, deposits,
receivables, balances or other property of Distributor (including any
Collateral) which may come into the Company's hands at any time or in any
manner, may be retained by the Company and applied to any of the Obligations.
Distributor hereby waives any right it may have to require or request the
Company to proceed against any Collateral or to proceed against any other
security the Company may hold, and hereby waives any right it may have to
require or request the Company to pursue any other remedy for the benefit of
Distributor and agrees that the Company may proceed against Distributor for the
full amount of any liability or Obligation of Distributor to the company without
taking any action against any other party and without selling or otherwise
proceeding against or applying any security the Company may hold, including but
not limited to the Collateral.
8. The proceeds of sales of any Collateral pursuant to Section 7 shall be
applied first to all costs of collection, including but not limited to Court
costs and reasonable attorneys' fees paid or incurred by the Company in
enforcing its rights hereunder, and then to the satisfaction of any and all
Obligations. Any proceeds then remaining will be paid over to the Distributor as
provided by law, and the Distributor shall be liable for any deficiencies.
9. Without suggesting that any other procedures may not also be commercially
reasonable, or that any of the following procedures are mandatory in any
particular case, it is agreed that the following are all commercially reasonable
methods of disposing of any Collateral should the Company decide to follow one
or more of them as to all or any part of the Collateral:
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<PAGE> 30
(a) Private sale of complete machines (equivalent to new or unused machines of
current production) and all attachments thereto to another dealer or dealers at
current dealer prices in effect at the time of such disposition;
(b) Sale of any Property by units or in one or more parcels at private sale at
the best price submitted in sealed bids taken from three or more dealers,
provided that in the Company's sole discretion such best bid represents a
reasonable price;
(c) Sale of parts and attachments in good condition for which there is a ready
market to dealers through the Company's regular parts distribution facilities at
prices and terms prevailing at the time of such disposition. The Company may
commingle such parts with its regular inventory of parts and account for the
sale of any parts constituting a portion of the Collateral upon the assumption
that such parts are the first parts sold after such commingling. The Company's
expenses of reinventorying and merchandising returned and repossessed parts
(exclusive of costs incurred in sorting the parts for listing, loading them at
Distributor's place of business, and of transportation expense from
Distributor's place of business to the Company's parts distribution facility)
are in excess of 10% of the invoice price, and it is agreed that a 10% charge
for such services may be made without further itemization or analysis of such
expenses: and
(d) Public sale at auction of all Collateral or any portion thereof not disposed
of by some other method.
10. The Distributor shall keep accurate books and records of account in
accordance with generally accepted accounting principals applied on a consistent
basis, including stock, sales and lease records of machines and repair parts. At
the end of Distributor's fiscal year, and at such other times as the Company may
request, Distributor shall furnish the Company with full and complete financial
and operating statements in a form acceptable to the Company. Distributor shall
also furnish the Company, at any time upon request, full information regarding
all Collateral, including but not limited to inventory on hand, inventory sold
or leased, the proceeds thereof, and any agreements affecting such inventory.
11. The Distributor shall:
(a) Properly store all Collateral in its possession and protect the same from
injury or damage of any kind;
(b) Continuously keep all Collateral insured with all-risk type coverage
satisfactory to the Company and with insurers satisfactory to the Company, in an
amount equal to the invoice price thereof. Such insurance may be issued in the
name of Distributor who may retain possession of the policies, but each policy
shall be in form satisfactory to the Company with loss payable to the Company as
its interest may appear and shall provide for 10 days minimum written
cancellation notice to the Company. Distributor shall immediately furnish the
Company with a certificate of insurance issued by the insurer on each policy;
30
<PAGE> 31
(c) keep all Collateral free and clear of all liens, charges and encumbrances
however arising, except for any security interest granted to the Company;
(d) Simultaneously with the execution and delivery of this Agreement, provide
the Company with a written list of the addresses of all locations where any
Collateral is now located, any probable location where any of the Collateral may
be moved to or used by any lessee thereof, and Distributor agrees that
immediately upon any change in the location of any of the Collateral it will
notify the Company in writing setting forth the description of the Collateral so
moved and the address of its new location;
(e) From time to time do whatever the Company may request by way of obtaining,
executing, delivery and/or filing financing statements, landlord's or
mortgagee's waivers, and other notices, and amendments and renewals thereof, and
Distributor shall take any and all steps and observe such formalities as the
Company may request, in order to create and maintain a valid first lien upon,
pledge of and/or paramount security interest in, any and all of the Collateral.
The Company is authorized to file financing statements without Distributor's
signature as specified by the Uniform Commercial Code to perfect or maintain the
Company's security interest in all of the Collateral. All charges, expenses and
fees which the Company may incur in filing any of the foregoing and any local
taxes relating thereto, may be charged to the Distributor's account and added to
the obligations; and
(f) Pay promptly on demand therefor, any and all costs and expenses of
collection, including court costs and reasonable attorney's fees, paid or
incurred by the Company in enforcing any of the Company's rights hereunder or
effectuating collection of any of the Obligations.
If Distributor shall fail to insure or to pay the fees, taxes, assessments or
charges as required herein or by the Distributor Agreement (including any
amendments thereto) between the parties hereto, or shall allow any lien, charge
or encumbrance to attach to any of the Collateral, the Company, without
obligation to do so, may obtain such insurance, pay such fees, taxes,
assessments or charges, or discharge such lien, charge or encumbrance and
Distributor shall reimburse the Company promptly for all monies so paid out and
shall pay the Company interest thereon at the highest lawful contract rate under
applicable law. The amounts so paid by the Company shall be deemed conclusive as
to the amounts properly payable, and such amounts shall be secured hereunder.
12. Distributor shall at any time upon request immediately deliver to the
Company all proceeds of Property which are in its possession in the form of
customer's notes (for the purpose of this Section 12 and of Section 13 hereof
"notes" shall include without limitation instruments, documents, chattel paper
and leases) together with appropriate endorsement and/or assignment thereof to
the Company, and will provide the Company with information concerning proceeds
in the form of customer's accounts (for purpose of this Section 12 and of
Section 13 hereof "accounts" shall include without limitation all contract
rights) sufficient to enable the Company to collect such accounts directly and
the Company may collect such notes and accounts directly.
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13. The provisions of the Section 13 and all references herein to "notes" and
"accounts" shall apply to any notes and accounts, respectively, delivered to,
pledged with or as to which information is furnished to the Company, pursuant to
Section 12 hereof.
At any time regardless of whether Distributor is in default, the Company is
authorized to reduce open accounts to notes, to renew or extend time of payment
of any note or account or any securities securing the same, any such renewal to
be in its own or Distributor's name as the Company may elect, to take, waive,
release or exchange any security therefor, to make such compromise or settlement
therefor as it deems advisable in its sole discretion, and to take such steps
for the enforcement, collection, securing, renewing, extending or compromising
of any note or account, or any part thereof, or any security therefor, as it
deems advisable in its sole discretion. Any proceeds realized from the
collection or enforcement of said notes and accounts or any security therefor
shall be applied as provided In Section 8 hereof.
14. The invalidity or unenforceability of any provision hereof, in whole or in
part, shall not affect the validity or enforceability of the remainder of such
provision or of any other provision or provisions hereof, the provisions hereof
being severable.
15. This Agreement, which shall inure to the benefit of and be binding upon the
respective successors, assigns, heirs and personal representatives, as the case
may be, of each of the parties hereto, shall be governed, construed and
interpreted in all respects in accordance with the laws of the State of Nevada.
16. No delay or omission on the Company's part in exercising any right, remedy
or option shall operate as a waiver of such or any other right, remedy or option
or of any default. Waiver by the Company of any default hereunder of Distributor
shall not be construed as a waiver of any prior or subsequent default. Action
against any guarantor or surety is not an election or waiver of the right to
proceed against the Distributor. Whenever the pronoun "it" is used in this
Agreement with reference to the Distributor, said pronoun shall mean "his" or
"her", as the case may be, if the Distributor is an individual or sole
proprietorship.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
___________, 19__.
Address of Distributor: 1195 East Glendale Avenue, Sparks, NV 89431
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EXHIBIT 10.89
LIEBHERR CONSTRUCTION EQUIPMENT CO.
DISTRIBUTOR AGREEMENT
THIS DISTRIBUTOR AGREEMENT is made as of this 29th day of January, 1999, between
LIEBHERR CONSTRUCTION EQUIPMENT CO. ("Liebherr"), with offices at 4100 Chestnut
Avenue, Newport News, Virginia 23607, and WESTERN TRACTION COMPANY
("Distributor"), with offices at:
1333 Atlantic Street
Union City, CA 94587
7518 Pacific Ave.
Pleasant Grove, CA 95668
2330 East Date Ave.
Fresno, CA 93706
1195 East Glendale Ave.
Sparks, NV 89431
1. APPOINTMENT
Subject to the terms of this Agreement, Liebherr hereby authorizes Distributor
to distribute, sell, lease and service, and Distributor hereby accepts such
authorization to distribute, sell, lease and service, the Liebherr machine
models listed on Exhibit A attached hereto ("Machines"), all optional devices
and attachments offered for use with the Machines and all repair parts for the
aforesaid items (all of which are hereinafter referred to collectively as the
"Products"), directly to customers located in the "Primary Area" described
below.
2. AREA OF PRIMARY RESPONSIBILITY
(a) The area of primary responsibility of Distributor is:
California: All Counties North of and including Monterey, Kings, Tulare and
lnyo.
Nevada: the Counties of Churchill, Douglas, Esmeralda, Humboldt, Lyon, Mineral,
Pershing, Storey and Washoe
(the "Primary Area").
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3. RESERVATIONS AND RESTRICTIONS ON SALES
(a) Reservations. Liebherr reserves the right to sell or lease Products to the
following:
(i) Any national, state or local government or agency, or subdivision thereof;
(ii) Any national user with multiple state operations throughout the United
States or Canada;
(iii) Purchasers, lessees or other users of used or demonstrated Products;
(iv) Any customer engaged in, or any Liebherr distributor serving customers
engaged in, the extraction of minerals or ores, excluding the quarrying of
aggregates (the "Mining Industry") or the dredging, scrap handling or
logging/forestry industries;
(v) Any entity pursuant to an order accepted by Liebherr prior to the effective
date of this Agreement; and
(vi) Any entity for export from the Primary Area.
(b) Restrictions. Distributor shall not sell or lease Products to the following
without the prior written consent of Liebherr:
(i) Any customer engaged in the Mining Industry or the dredging, scrap handling
or logging/forestry industries; or
(ii) Any entity for export from the Primary Area.
4. DISTRIBUTOR ORGANIZATION AND FACILITIES
Distributor shall, to the satisfaction of Liebherr, maintain or cause to be
maintained within the Primary Area a well-trained organization with adequate
facilities and capabilities for the stocking, selling, leasing, delivery,
installation and service of Products to purchasers, lessees and other users (the
"Customers") who are located in the Primary Area. Distributor shall use its best
efforts to achieve optimum sales and profits for Distributor and Liebherr from
the sale, lease and service of Products to Customers in the Primary Area.
5. SALES, DELIVERY AND SERVICE RESPONSIBILITIES
(a) Sales and Service in Primary Area. Distributor shall be responsible for
soliciting business from Customers and potential Customers of the Products who
operate or maintain buying offices in the Primary Area. Distributor shall be
responsible for delivery, installation and service, including warranty service,
of Products sold or leased by Distributor in the Primary Area, and for stocking
repair parts in number and type sufficient to serve adequately the needs of
Customers in the Primary Area who have purchased Products. Distributor also
shall be responsible for furnishing any warranty or repair service for Products
of Customers located within the Primary Area, whether or not such Product was
sold by Distributor, on the same terms and at the customary rates charged by
Distributor for similar service to Customers who have purchased their Product
from Distributor.
(b) Sales and Service Outside Primary Area. If the Distributor sells or leases
to a Customer located outside of the Primary Area a Product that is still
covered under the Liebherr Warranty, Distributor shall furnish or cause to be
furnished, to the satisfaction of Liebherr, the same delivery, installation and
service, including warranty service for such Product, as Distributor is
obligated to furnish for
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Products sold or leased in the primary area. If Liebherr determines in its sole
discretion that the Distributor is not furnishing the aforesaid services
satisfactorily, Distributor shall pay to Liebherr, or Liebherr shall withhold
from Distributor, a percentage of the applicable discount to defray the cost of
providing to said user the aforesaid services, which percentage shall be
specified from time to time in the service policies of Liebherr.
(c) Products Sold by Other Distributors. If a Liebherr distributor other than
Distributor sells or leases to a Customer located within the Primary Area a
Product that is still covered under the Liebherr Warranty and Liebherr shall
have determined that the selling distributor is not furnishing satisfactory
service to such Customer, Liebherr may request that Distributor furnish service,
including warranty service, with respect to such Customer's Product the same as
if it had been sold by Distributor. If Distributor accepts such request within
thirty (30) days from the date of such request, Liebherr shall pay to
Distributor an amount that Liebherr determines Distributor has earned or will
earn by reason of services that have been or will be rendered, and Distributor
shall be obligated to furnish service, including warranty service, with respect
to such Customer's Product the same as if it had been sold by Distributor.
Determinations by Liebherr as to amount to be paid to Distributor, if any, are
final.
6. SALES BY MANUFACTURER
If Liebherr sells or leases to a Customer located in the Primary Area a Product
that is still covered under the Liebherr Warranty, and requests Distributor to
furnish service, including warranty service, for such Product, Liebherr will pay
to Distributor an amount specified from time to time in the service policies of
Liebherr if Distributor agrees to furnish such service. If Distributor accepts
such payment, Distributor shall be obligated to furnish service, including
warranty service, for such Product in the same manner as if such Product were
sold by Distributor.
7. PRICES, DISCOUNTS, TERMS, POLICIES, TITLE
Prices, discounts, terms and conditions of sale, finance plans, and sales,
service and parts policies are subject to change by Liebherr without prior
notice, and shall be as specified in price lists, discount schedules, order
confirmations, and terms of sale, sales, service and parts policies issued by
Liebherr from time to time. Liebherr will endeavor to give Distributor notice of
all such changes as soon as is reasonably possible. Distributor agrees to pay
for Products in accordance with the terms specified by Liebherr. Distributor
agrees to abide by the terms and conditions of sale and the sales, service,
parts and warranty policies of Liebherr as published and amended from time to
time by Liebherr. Title to Products delivered to Distributor shall remain with
Liebherr until the full purchase price thereof has been paid.
8. ORDERS; CANCELLATION OF ORDERS
(a) Orders. All orders placed hereunder shall be in writing, or if placed by
telephone or wire, shall be promptly confirmed in writing. No order submitted to
Liebherr by Distributor shall become effective unless and until it shall be
formally accepted by written notice to Distributor from Liebherr, and
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Liebherr, in its discretion, need not accept any order. Distributor may cancel
an accepted order only with written approval of Liebherr.
(b) Cancellation. Upon termination of this Agreement by Liebherr, all orders
hereunder to Liebherr by Distributor shall be canceled, except orders previously
accepted by Liebherr for Products sold by Distributor prior to receipt of
termination. Upon termination of this Agreement by Distributor or upon automatic
termination as provided in Section 16, Liebherr may cancel such unfilled orders
hereunder as may be specified by Liebherr.
9. RETURN OF SPARE PARTS
Distributor may return spare parts for Machines in accordance with the Liebherr
Parts Policy then in effect, transportation prepaid at Distributor's expense, to
Liebherr's Newport News, Virginia, warehouse or other nearer destination
specified by Liebherr.
10. RETURN OF PRODUCTS UPON TERMINATION
Upon termination of this Agreement, Distributor may within thirty (30) days
return to Liebherr F.O.B. Newport News, Virginia, at such time and by such
common carrier as Liebherr may designate, all Products returnable under Section
9, as well as all new Machines, new optional devices and new attachments for
Machines, all in good resalable condition and not previously sold, leased or
used.
11. CREDIT FOR RETURNED PRODUCT
(a) Inspection. Each Product returned under Section 9 or 10 of this Agreement
shall be subject to inspection by Liebherr. If Liebherr shall find such Product
to have been returned in compliance with the requirements of this Agreement, it
shall be credited to Distributor (i) in accordance with the Liebherr Parts
Policy then in effect, if such returned item is a spare part for a Machine, or
(ii) for all other Products, at the price paid to Liebherr or at the current
list price less the standard discount as published by Liebherr, whichever is
less.
(b) Return. If Liebherr shall find any returned Product not to have been
returned in compliance with the requirements of this Agreement, Distributor will
be so informed and such Product will be held for a period of thirty (30) days
for disposition as Distributor may direct for its account, and thereafter may be
disposed of at Liebherr's direction.
(c) Restocking Charge. Restocking charges for returned spare parts shall be in
accordance with the Liebherr Parts Policy then in effect.
12. REPORTS OF INVENTORY; FINANCIAL STATUS
Distributor shall furnish Liebherr, at the close of each fiscal year and at such
other times and as of such dates as may be reasonably specified by Liebherr,
reports as to Products on hand and statements
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showing the financial condition and operating progress of Distributor.
13. WARRANTY BY LIEBHERR
(a) Liebherr Warranty. Distributor understands and agrees that Liebherr extends
only the warranty attached as Exhibit B hereto (the "Liebherr Warranty") to
Customers of the Products. Replacement of defective parts directly to the
Customer shall be the obligation of the Distributor. The sole and exclusive
remedy of Distributor under the Liebherr Warranty shall be (i) the repair or
replacement of, or allowance of credit for, at Liebherr's option, any product
acknowledged by Liebherr to be defective which is returned to Liebherr in
accordance with Liebherr Warranty Policy then in effect, and (ii) the allowance
of a credit for Distributor's time reasonably required, as determined by
Liebherr, to repair or replace such defective parts, in accordance with the
Liebherr Warranty Policy then in effect.
(b) No Modifications. Distributor shall not extend or otherwise modify the
Liebherr Warranty or any limitations thereof with respect to any retail
purchaser, lessee or other user. In the event Distributor extends any additional
warranty, such as enlarging the scope or period of warranty or undertaking a
warranty of fitness for any particular purpose, or any other obligation not
encompassed in the Liebherr Warranty, Distributor shall be solely responsible
therefor and shall have no recourse against Liebherr with respect thereto.
Liebherr reserves the right to alter the Liebherr Warranty from time to time and
such changes shall be effective when published in the Liebherr Warranty Policy.
Distributor agrees to deliver a copy of Liebherr's then-current Liebherr
Warranty to each Customer of Products prior to or at the time of purchase or
lease of such product by the Customer.
(c) No Implied Warranty. THE LIEBHERR WARRANTY IS THE ONLY WARRANTY APPLICABLE
TO THE PRODUCTS AND IS EXPRESSLY IN LIEU OF ANY WARRANTIES OR CONDITIONS
OTHERWISE IMPLIED BY LAW, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE REMEDIES UNDER THE
LIEBHERR WARRANTY SHALL BE THE ONLY REMEDIES AVAILABLE TO THE OWNER OF PRODUCTS
OR ANY OTHER PERSON, AND LIEBHERR DOES NOT ASSUME ANY OTHER OBLIGATION OR
RESPONSIBILITY WITH RESPECT TO THE CONDITION OF PRODUCTS, NOR AUTHORIZE ANY
OTHER PERSON TO ASSUME FOR LIEBHERR ANY OTHER OBLIGATION OR LIABILITY.
14. NO LIABILITY FOR DELAY
No liability shall attach to Liebherr for direct, indirect or consequential
damages or expenses due to loss, damage, detention or delay in delivery of
Products resulting from acts or delays beyond its control.
15. USE OF NAMES
Distributor agrees: (i) not to use the Liebherr name, including the word
"Liebherr," or any trademarks used in connection with Products, as part of the
corporate or business name of
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Distributor, or in any manner which Liebherr considers improper, misleading or
detrimental to Liebherr's interest; and (ii) to cease, upon termination of this
Agreement, all use of the trade names and trademarks of Liebherr used in
connection with Products, or any simulations thereof, including any use that may
have been authorized by Liebherr.
16. TERM AND TERMINATION
(a) Term. This Agreement shall become effective immediately on the date of
execution by Liebherr as shown below, and shall remain in effect unless and
until terminated as hereinafter provided.
(b) Voluntary Termination. Either party hereto may terminate this Agreement,
without cause, by giving thirty (30) days' written notice thereof to the other
party, which notice shall be directed to the address of such party as set forth
herein, and shall be deemed given when deposited in the United States mail,
postage prepaid.
(c) Immediate Termination. Should either party hereto, either voluntarily or
involuntarily, be the subject of receivership, reorganization, bankruptcy or
insolvency proceedings, this Agreement may be terminated immediately by the
other party for cause, without notice. In the event that Distributor becomes
overdue in making payments for Products or otherwise violates any other term of
this Agreement, Liebherr may, at its option, terminate this Agreement for cause,
without notice.
17. DISTRIBUTOR NOT AGENT
Nothing in this Agreement shall be construed as appointing Distributor an agent
or legal representative of Liebherr. Distributor is not granted any authority to
create any obligation or responsibility on behalf of Liebherr, or to bind
Liebherr in any manner whatsoever.
18. ASSIGNMENT
Distributor may not assign or transfer this Agreement or any of the rights or
obligations hereunder without the prior written consent of Liebherr. Any merger,
consolidation, transfer of assets, event or transaction resulting (by operation
of law or otherwise) in a change of ownership or control of Distributor or
Distributor's business shall be deemed to be an assignment for purposes of this
Agreement. Liebherr may assign this Agreement to any affiliate of Liebherr in
the event of a reorganization or restructuring of Liebherr's business.
19. MISCELLANEOUS
This Agreement embodies all of the agreements and understandings between the
parties hereto, and cancels and supersedes all prior agreements in existence
between the parties. No course of prior dealings between the parties and no
usage of the trade shall be relevant to supplement or explain any terms used in
this Agreement. There are no oral or collateral agreements of any kind, and no
representative of Liebherr has any authority to waive any of the provisions of
this Agreement. The
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provisions of this Agreement may not be altered, modified, waived or
supplemented except by a written instrument or consent letter executed by a duly
authorized representative of each party. No delay or failure on the part of
Liebherr to exercise any right or remedy shall operate as a waiver thereof, and
no single or partial exercise by Liebherr of any right or remedy shall preclude
other or further exercise thereof or the exercise of any other right or remedy.
The section headings appearing herein are for convenience only, and shall not be
deemed to limit or modify the terms hereof. The copy of this Agreement retained
by Liebherr shall be considered the original and shall control in case of any
variation between it and the duplicate retained by Distributor. This Agreement
shall be governed by and construed under the laws of the Commonwealth of
Virginia, without reference to the laws of any other jurisdiction. If any
provision of this Agreement or its performance shall be held to be illegal or
unenforceable, such provision shall be suspended accordingly, and all other
provisions of this Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
dates hereinafter set forth.
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EXHIBIT A
MACHINE MODELS
EARTHMOVING
CRAWLER EXCAVATORS: Excavators with bucket, weighing 40,000 lbs. up to and
including 252,000 lbs. (Liebherr's current models R904 through R984B).
RUBBER TIRED EXCAVATORS: Excavators with bucket, weighing from 36,000 lbs. to
48,600 lbs. (Liebherr's current models A904 through A924).
CRAWLER LOADERS: 90 hp through 219 hp (Liebherr's current models LR611 through
LR641).
CRAWLER TRACTORS: 105 hp through 234 hp (Liebherr's current models PR7I2B
through PR742B).
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EXHIBIT B
WARRANTY
Liebherr Construction Equipment Co.(Liebherr) and the selling Distributor
warrant their product to be free from defects in material and workmanship under
normal use and service for a period of 1 year following delivery to the original
purchaser-user, or 2000 hours of use by all persons, whichever event first
occurs.
Liebherr's and the selling Distributor's sole obligation and the exclusive
remedy under this warranty shall be the repair or replacement, at Liebherr's
option, of any warrantable part acknowledged by Liebherr to be defective when
returned to the selling Distributor of Liebherr, transportation charges prepaid,
within the warranty period. Repairs to, or replacement of, warrantable parts
found by Liebherr to be defective shall be made by Liebherr or the selling
Distributor at no charge to the customer for the labor and warranted parts
required to make such repairs or replacements.
This warranty shall not apply to normal maintenance service, including, but not
limited to, oil changes, lubrications, hydraulic and fuel systems inspections,
cleaning or adjustment, brake inspections or adjustments, nor to the replacement
of service items, including, but not limited to, filters or filter elements,
brake linings, fuses, glow plugs, or V-belts, nor to any product which has been
damaged in any accident or by fire, flood or any Act of God, abused or misused,
or altered or repaired by anyone other than an authorized Liebherr Distributor.
IN NO EVENT SHALL LIEBHERR OR THE SELLING DISTRIBUTOR BE LIABLE FOR ANY
DELAY, WORK STOPPAGE, LOSS OF USE OF EQUIPMENT, LOSS OF TIME, INCONVENIENCE,
LOSS OF PROFITS, OR ANY INDIRECT, INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES
RESULTING FROM OR ATTRIBUTABLE TO, DEFECTS IN LIEBHERR PRODUCTS OR SERVICES,
WHETHER RESULTING FROM NEGLIGENCE, BREACH OF THE PROMISE TO REPAIR OR REPLACE
CONTINUED HEREIN, OR OTHERWISE.
THIS WARRANTY IS THE ONLY WARRANTY APPLICABLE TO LIEBHERR PRODUCTS AND IS
EXPRESSLY IN LIEU OF ANY WARRANTIES OR CONDITIONS OTHERWISE IMPLIED BY LAW,
INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE. THE REMEDIES UNDER THIS WARRANTY SHALL BE THE ONLY
REMEDIES AVAILABLE TO THE OWNER OF LIEBHERR PRODUCTS OR ANY OTHER PERSON, AND
NEITHER LIEBHERR NOR THE SELLING DISTRIBUTOR ASSUMES ANY OTHER OBLIGATION OR
RESPONSIBILITY WITH RESPECT TO THE CONDITION OF LIEBHERR PRODUCTS, NOR
AUTHORIZES ANY OTHER PERSON TO ASSUME FOR EITHER OF THEM, ANY OTHER OBLIGATION
OR LIABILITY.
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THE SELLING DISTRIBUTOR IS NOT AUTHORIZED TO MAKE ANY MODIFICATIONS OR CHANGES
TO THIS WARRANTY OR TO OTHERWISE MODIFY, ALTER OR CHANGE LIEBHERR'S OBLIGATIONS
HEREUNDER.
Liebherr reserves the right to make changes in design or add any improvement on
its products at any time without incurring any obligation to install same on
units previously delivered.
MODEL PIN (Product Identification No.)
Distributor Customer
Date
LIEBHERR CONSTRUCTION EQUIPMENT CO.
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EXHIBIT 10.90
Distributor Agreement (Cranes)
2000
Parties Involved
The parties to this Agreement are Link-Belt Construction Equipment Company,
L.P., LLLP, a Delaware limited liability limited partnership, 2651 Palumbo
Drive, Lexington, Kentucky 40509-1267 (herein the Company"), and
Name: Western Traction Company
Business Address: 1333 Atlantic Street
City: Union City State: CA Zip: 94587 which is a (check one):
X corporation, incorporated in the State of California
__ division of
a corporation incorporated in the State of
__ partnership (list all partners and, if a limited partnership, indicate which
are the limited partners)
__ sole proprietorship (individual proprietor is (herein "Distributor").
In consideration of the mutual covenants and promises contained herein, the
parties hereby agree as follows:
I. Distributor Appointment
1.1 Subject to the terms and conditions contained herein, the Company grants to
Distributor the non-exclusive right to purchase and resell those products listed
on the attached Schedule A (herein the "Products") in the Territory. The Company
may revise the list of Products from time to time without liability to
Distributor. Nothing herein shall be construed to prohibit Distributor from
selling at any price.
1.2 The Company may discontinue the production or sale of or modify the design
or material specifications of any Product therefore without any liability or
obligation to Distributor or its customers, including, without limitation, any
obligation to modify any Product previously ordered by Distributor.
1.3 Nothing in this Agreement shall constitute Distributor an agent of the
Company. Distributor is an independent contractor and has control of the details
of the performance of its obligations hereunder. Distributor shall not impose or
create any obligation or responsibility, express or implied,
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or make any promises, representations, or warranties on behalf of the Company,
other than as provided in Section 6.1 hereof.
II. Territory
2.1 The Company designates as Distributor's Territory the geographic area
described on the attached Schedule A (herein the "Territory"). Marketing
responsibility encompasses both sales and service of the Products. The Company
may revise Distributor's Territory from time to time without the Company
incurring any liability to the Distributor. The Company may refuse to ship a
Product to a location other than the Distributor's Territory. Distributor shall
not sell for delivery or shipment or otherwise transfer any of the Products
listed on Schedule G outside the United States and Canada, and shall not sell
such Products to those who, directly or indirectly, sell for delivery or
shipment or otherwise transfer such Products outside the United States and
Canada; provided that Distributor may sell such Products to customers in the
United States and Canada who themselves use the Products outside the United
States and Canada or who transfer the Products to affiliates for use (but not
resale) by those affiliates outside the United States and Canada.
2.2 Distributor shall use its best efforts to promote, sell, and service each of
the Products in its Territory and shall maintain a staff of trained sales and
service personnel adequate to cover Distributor's Territory properly. The
Company will evaluate Distributor's performance primarily on the basis of
Distributor's sales volume and promotional effort in the Territory. The Company
may, in its sole discretion, establish reasonable sales objectives for
Distributor and may consider those objectives, among other factors, in
evaluating Distributor's performance.
2.3 At its election, the Company may from time to time directly sell or solicit
the sale of the Products to any customers or prospective customers. Direct sales
or other transactions between the Company and any customer shall not create any
liability on the part of the Company to the Distributor.
III. Distributor Facilities and Inventory
3.1 Distributor shall maintain a suitable place of business within the Territory
that is sufficient, in the Company's judgment, to display, store, and service
the Products.
3.2 Distributor shall maintain such inventory of the Products as is sufficient,
in the Company's judgment, reasonably to meet the sales potential and product
support requirements in Distributor's Territory. Distributor shall comply with
any instructions issued by the Company regarding the storage, handling, and
maintenance of the Products.
IV. Prices and Terms of Sales and Delivery
4.1 All sales of the Products to Distributor shall be governed by the Company's
written pricing and security documentation policies, credit policy, price lists,
discount schedules, and terms and conditions of sale (including, without
limitation, payment therefore by Distributor) upon acceptance
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of order. The Company may change said policies, price lists, discount schedules,
and terms and conditions at any time and, when notice of said changes has been
given, all earlier inconsistent policies, price lists, discount schedules, and
terms and conditions shall automatically be superseded from and after the
effective date stated in such notices.
4.2 The Company reserves the right, in its sole discretion, to apply special
discounting on a case by case basis to an individual product or sale within the
Distributor's assigned territory in order to promote that Distributor's
development of that territory.
4.3 Prices stated in the Company's price lists shall apply only to Products with
standard specifications. At Distributor's request, the Company at its option may
provide Distributor with price quotations on Products having special or modified
specifications.
4.4 No purchase order shall be binding on the Company until accepted in writing
by a duly authorized officer or employee of the Company. Unless otherwise agreed
in writing in specific transactions, the Company may refuse to issue a quotation
or to accept any purchase order for any reason. Any provision contained in any
purchase order issued by Distributor to the Company which is additional to, or
inconsistent or conflicting with, any provision of this Agreement, or any of the
Company's then current standard terms and conditions of sale, shall not be
binding on the Company unless the Company assents to such provision in writing.
4.5 This Agreement applies only to Distributor's outlet or branch listed on the
first page hereof and such additional outlets, if any, listed on Schedule A.
Although Distributor may now have or hereafter acquire other outlets or
branches, or change the location of any of them, nothing herein shall obligate
the Company to sell or ship the Products on orders accepted by the Company to
any location not listed herein. The Company's responsibility for shipments shall
cease upon delivery to the transportation company, and any claim for shortages,
losses or damage occurring thereafter shall be made by Distributor directly to
the transportation company. A copy of any claims against the transportation
company for shortages shall be mailed to the Company for information purposes
within five (5) days after the arrival of the shipment at destination.
4.6 In addition to punctual payment for the Products, Distributor shall pay to
the Company on demand all expenses and charges caused by Distributor for
demurrage, reshipment, rerouting, storage and other similar charges with respect
to the Products ordered by Distributor, including without limitation expenses
resulting from Distributor's failure promptly to accept delivery of or pay for
such Products.
4.7 The Company shall not be liable to Distributor for any injury, loss, damage
or expense, whether direct, indirect or consequential, resulting from or arising
out of delays in delivery resulting from fires, strikes, lockouts, delays in
manufacture, transportation or delivery of materials, embargoes, insurrections
or riots, civil or military authority, car shortages, acts of God, acts of
government or any other causes beyond its reasonable control. The time for
delivery specified in any quotation or contract shall be extended during the
continuance of such conditions and for a reasonable time thereafter.
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4.8 If shortages of the Products occur because of economic, manufacturing, or
other conditions, including shortages of materials, the Company may allocate the
Products among its distributors and other customers on any basis that, in the
Company's sole judgment, shall be fair and reasonable. The Company shall not be
liable to Distributor by virtue of such shortage or allocation.
V. Reports and Inspections
5.1 Distributor shall deliver annually to the Company on a confidential basis a
copy of such financial statements as are satisfactory in form and certification
to the Company, within ninety (90) days after the close of Distributor's fiscal
year. Additionally, but only upon the Company's written request, Distributor
shall furnish such financial information at more frequent intervals. Such
statements and information may be used by assignees and agents of the Company.
5.2 A Credit Application is to be completed and returned, when requested, as
part of a periodic review of the Distributor's account.
5.3 If requested, at least once each fiscal year, Distributor shall provide the
Company with a report of inventory of the Company Products on forms satisfactory
to the Company. At its request the Company may observe the taking of
Distributor's physical inventory.
5.4 The Company may inspect Distributor's facilities, operations, and records as
related to Distributor's performance under this Agreement during normal business
hours.
VI. Warranty and Safety
6.1 The Company warrants the Products in accordance with its Warranty attached
hereto as Schedule B, as the same may be modified by the Company from time to
time and makes no other warranty, express or implied. Distributor shall make no
other warranty with respect to the Products on behalf of the Company.
6.2 Distributor represents that it is familiar with the Products, including (if
applicable to the Products covered herein) their safety features and safe
functional application, and that it is familiar with the requirements of the
safety codes and laws of the provinces in Distributor's Territory. Distributor
shall notify the Company promptly of any changes in such codes and laws which
become known to it and which would require changes in the safety features or
devices of the Products and shall not knowingly solicit orders for any Product
which would not comply with such codes and laws in the Distributor's Territory.
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<PAGE> 5
VII. Advertising and Promotion
7.1 The Company may, in its sole discretion, directly advertise and promote the
Products. To assist Distributor in promoting sales, the Company may furnish such
promotional literature and other advertising aids as the Company deems
necessary. Such material shall remain the property of the Company.
7.2 In order that the Company may protect all trademarks, trade names, corporate
slogans, goodwill and product designations that the Company owns or uses
pursuant to license, Distributor shall not use any such marks, names, slogans,
or designations in any advertising copy, promotional material, signs, exhibits
or other written or printed material except in a form specifically approved in
writing by the Company.
7.3 The Products shall be resold by Distributor in Distributor's name, but shall
be advertised by Distributor as being furnished by the Company.
VIII. Training
8.1 From time to time the Company may, at its sole discretion, offer training in
the selling and servicing of the Products, which training shall be available to
Distributor's personnel at such locations as the Company may specify. If such
training is necessary in order for Distributor to fulfill its sales and service
obligations, Distributor's personnel shall participate in said training.
Distributor shall bear that portion of the expenses of its personnel in
attending such training as is deemed appropriate by the Company. The payment of
such training costs and microfiche maintenance costs shall not be considered as,
nor constitute a "Franchise Fee" as that term is used in any Franchise
Protection Act enacted by any province. This Agreement is not to be construed as
a Franchise Agreement.
IX. Taxes and Insurance
9.1 Distributor shall pay all license fees, sales, use, service use, occupation,
retailer's occupation, service occupation, personal property, and excise taxes
and any other fees, assessments, or taxes which may be assessed or levied by any
national, federal, provincial or local government and any departments and
subdivisions thereof, as a result of the performance of this Agreement or
against any of the Products ordered by the Distributor.
9.2 At its own expense, Distributor shall purchase from and maintain policies of
liability insurance and property damage insurance with insurance companies
satisfactory to the Company as follows:
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<PAGE> 6
(a) Comprehensive General Liability and Products Liability, covering
Distributor, its employees, and agents, in minimum coverage amount of
$1,500,000.00 combined single limit for personal injury and property damage; and
(b) All Risks of Physical Loss or Damage to the Products under Distributor's
direct or indirect control, with the Company named as a payee as its interest
may appear. Coverage shall be in an amount sufficient to prevent the Company
from sustaining any loss of amounts due or to become due to the Company on
Distributor's inventory and equipment.
Such policies shall not be cancelable prior to ten (10) days written notice to
the Company. Distributor shall furnish the Company with satisfactory evidence of
such policies of insurance prior to the effective date of this Agreement.
X. Patents, Trademarks, Confidential Information and Product Modification
10.1 Distributor shall not use any trademark or trade names, whether or not
registered, now or hereafter owned or used pursuant to license by the Company or
any mark or name similar thereto except in the manner and to the extend that the
Company may specifically consent in writing, except that Distributor may refer
to the Products by the trademarks which the Company uses in connection
therewith. Such trademarks may be changed at the sole discretion of the Company.
Distributor is permitted only to use such trademarks or trade names in
connection with its performance under this agreement and, despite such use,
Distributor shall not acquire any rights or interest thereto.
10.2 Distributor shall not remove from the Products any identifying marks placed
thereon by the Company and shall not add any identifying marks without the prior
written approval of the Company.
10.3 Distributor shall not alter, modify or add attachments to any Product that
do not meet the Company's specifications, without the written consent of the
Company. In no event shall Distributor alter or modify any Product purchased
hereunder, or the trademarks or trade names used in connection therewith by the
Company, in such a manner as will in any way infringe, impair or lessen the
validity of the patents, trademarks or trade names under which the Products are
made or sold, or as will cause the Products to infringe the patents, trademarks,
or trade names of any third party.
10.4 As to any alteration, modification or attachment to the Products which is
approved by the Company, the Company shall have a perpetual non-exclusive
royalty-free right to make, have made, use, sell, and lease goods embodying any
improvements to the Products, including attachments to and components thereof,
made or acquired by Distributor.
10.5 Without limiting the generality of Distributor's obligations under Section
11.5 hereof, if Distributor alters, modifies, or adds attachments to any
Products that do not meet the Company's specifications, and/or uses trademarks
or trade names in connection therewith other than those adopted and used by the
Company, Distributor will indemnify the Company and hold the Company completely
harmless from and against any patent infringement, unfair competition or
products liability claims brought against the Company by any third party on
account of such activities.
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<PAGE> 7
10.6 In the course of the performance of this Agreement, the Company may furnish
Distributor with technical information, manuals relating to the Products, list
of customers, information regarding the Company's methods of doing business and
other confidential business information and trade secrets. Both during and after
the term of this Agreement, Distributor shall not disclose such confidential
business information and trade secrets to any person other than its employees
and shall keep it in strict confidence and not use it for any purpose other than
Distributor's performance under this Agreement.
XI. Remedies and Indemnity
11.1 Except for any indebtedness of Distributor or security related thereto, any
action by the Company or Distributor pertaining to this Agreement must be
instituted within one year after the accrual of the claim upon which such action
is based.
11.2 Failure of either party at any time to require performance of any
provisions hereof shall not affect its right to require full performance thereof
at any time thereafter. The waiver by either party of a breach of any such
provision shall not constitute a waiver of any subsequent breach thereof or
nullify the effect of such provision.
11.3 In the event that Distributor is in default with respect to any of the
terms or conditions of or referred to in this Agreement, for seven (7) days
after receipt of written notice from the Company, the Company may, without
incurring liability to Distributor or its customers and without prejudice to any
other remedy of the Company, defer further shipments of the Products to
Distributor (whether or not the Company has accepted purchase orders from
Distributor with respect to unshipped Products) until such default is remedied.
The rights and remedies granted the Company herein are in addition to and not
exclusive of any other rights or remedies under any other agreement or any law.
The exercise by the Company of any of its rights hereunder or otherwise shall
not constitute an election of remedies or a waiver of any other right or remedy.
11.4 Distributor shall pay interest on all amounts due the Company which are in
default, as may be provided in the Company's then current terms and conditions
of sale to Distributor. The Company may apply any outstanding amount due to
Distributor against indebtedness owed by Distributor to the Company, whether due
or to become due.
11.5 As to acts or omissions of Distributor, its employees and agents,
Distributor shall indemnify and hold the Company harmless from and against any
and all claims, losses, obligations, liabilities, costs, and expenses (including
without limitation legal and other fees) arising from such acts or omissions,
including without limitations any such claims, losses, obligations, liabilities,
costs and expenses arising out of any breach of or failure to perform any of
Distributor's representations, warranties, covenants and agreements herein, or
arising out of claims of negligence or strict liability of the Distributor or
Product defects caused by Distributor.
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<PAGE> 8
11.6 As to acts or omissions of the Company, its employees and agents, the
Company shall indemnify and hold the Distributor harmless from and against any
and all claims, losses, obligations, liabilities, costs and expenses (including
without limitation legal and other fees) arising from such acts or omissions, or
arising out of claims of negligence or strict liability of the Company or
Product defects caused by the Company.
XII. Term and Termination
12.1 This Agreement shall become effective on the date of its signature by the
Company for a term expiring at 11:59 p.m. on the expiration date set forth on
the signature page hereof, unless sooner terminated as hereafter provided.
12.2 This Agreement may be terminated at any time by the mutual consent of the
parties.
12.3 This Agreement shall automatically terminate upon the happening of any of
the following:
(a) The expiration of the term hereof.
(b) The discovery of an untrue statement of a material fact, or omission to
state a material fact necessary to make the statements contained therein not
misleading, in any written information or statement furnished by Distributor to
the Company in connection with Distributor's application for appointment as the
Company's distributor or the negotiation or performance of this Agreement.
(c) The death, incapacity, removal or withdrawal from the management of
Distributor of any principal owner/operator or the voluntary or involuntary
transfer of any substantial ownership interest in Distributor.
(d) The conviction of Distributor or of any principal owner/operator of any
crime which, in the opinion of the Company, may adversely affect the goodwill of
Distributor or the Company or the operation of the business to be carried on by
Distributor pursuant to this Agreement.
12.4 This Agreement also may be terminated upon the happening of any of the
following:
(a) A change in the management, operation, personnel, or credit standing of
Distributor or the Company which the other party, in its sole discretion, deems
adverse to its interest.
(b) Breach of or failure to perform any of the obligations hereunder or referred
to herein by either party, including but not limited to Distributor's failure to
develop the sales and services of the Company's Products in the Territory to the
Company's expectation, maintain a proper inventory, or to conduct its business
in accordance with any requirements set forth herein to be performed by
Distributor, or Distributor's export of Products or sale for export in violation
of the requirements of this Agreement.
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<PAGE> 9
12.5 Method of Termination:
(a) If termination is instituted under the provisions of Section 12.3(b), (c) or
(d) above, a registered or certified letter or telegram confirmed by letter,
will constitute sufficient notice that the Agreement is terminated immediately
on the date of notice.
(b) If termination is instituted under the provisions of Section 12.4 hereof,
the following steps will be taken:
(i) The party wishing to terminate shall notify the other party in writing
stating the reasons for dissatisfaction. A thirty-day period shall be given the
other party to answer and discuss the areas of difference. If the parties do not
resolve their differences within the thirty-day period, the agreement will
terminate 30 days thereafter.
(ii) Nothing in the foregoing is meant to prevent the parties at any time by
mutual consent from terminating the agreement without going through the
prescribed steps and waiting period.
(c) If the Agreement is not renewed under the provisions of Section 12.3(a)
above, a registered or certified letter, or telegram confirmed by letter, shall
be sent no less than sixty (60) days prior to the expiration of the Agreement by
the party that intends not to renew the Agreement.
12.6 Nothing contained herein shall be deemed to create any express or implied
obligation on either party to renew or extend this Agreement or, if Distributor
is continued as the Company's distributor, to create any right to continue such
relationship on the same terms and conditions contained herein. Each party, in
its sole discretion, may determine, for any reason whatsoever, not to renew or
extend this Agreement or to continue such relationship on the terms and
conditions contained herein. The Company may, in its sole discretion, continue
to deal with the Distributor after the termination date of this Agreement. Such
continued dealing, without the execution of a new Agreement, will not create any
obligation to extend or renew this Agreement. Such continued dealings shall be
terminable at the will of either party.
XIII. Effect of Termination
13.1 Neither party, by reason of the termination or nonrenewal of this
Agreement, shall be liable to the other for compensation, reimbursement, or
damages because of the loss of anticipated sales or prospective profits or
because of expenditures, investments, leases, property improvements or other
matters related to the business or goodwill of the parties.
13.2 All sums owed by either party to the other shall become due and payable
immediately upon termination. Either party, at its option, may offset any sums
due or to become due to it against any sums owed by it.
13.3 Upon termination of this Agreement, Distributor shall immediately
discontinue use of any and all trademarks and trade names owned or used pursuant
to license by the Company, including without limitation use in Distributor's
letterheads, advertising, and name. Distributor shall not thereafter use
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<PAGE> 10
any such mark or name or any mark or name tending to give the impression that
any relation between the Company and Distributor still exists, and Distributor
shall immediately deliver to such address as the Company specifies all technical
information, price lists, catalogs, drawings, designs, engineering photographs,
samples, literature, sales aids, customer lists and other confidential business
information and trade secrets of the Company in Distributor's possession.
13.4 Upon termination, the Company shall be relieved of any obligation to accept
any new orders or make further releases on existing blanket orders, and may at
its option cancel all of Distributor's unshipped orders for the Products,
irrespective of previous acceptance by the Company, except those which are
proved to the Company's satisfaction to have been sold by Distributor to
customers prior to giving of notice of termination or those as to which
Distributor has posted bid bonds prior to such notice. The Company shall have no
obligation or liability to Distributor or its prospective customers in
connection with any such cancellations. If the Company accepts such an order for
Products which ordinarily require delivery and service by Distributor and for
which distributor is separately compensated by the Company, the latter at its
option may make other arrangements for such delivery and service and, if so,
will reduce the normal discount by that portion as may be specifically provided
for such delivery and service. Upon termination by Distributor, if Distributor
also seeks to cancel unshipped orders in process, Distributor shall pay the
normal cancellation charge which may be set forth in the sales documents
relating to such orders.
13.5 The Company's acceptance of any order by Distributor for the Products after
the termination of this Agreement shall not be construed as a renewal or
extension of this Agreement, nor as a waiver of termination, but in the absence
of a new written agreement executed by the Company, all such transactions shall
be governed by the terms and provisions of this Agreement.
13.6 Upon termination, the disposition of the Products purchased by Distributor
from the Company and in Distributor's possession, shall be governed by the
Company's then current written policy relating to returned Products. A copy of
the Company's now current policy, marked Schedule C, is attached hereto for
informational purposes only.
XIV. Application and Construction of Agreement
14.1 This Agreement is binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, executors, legal representatives,
successors and assigns, except that Distributor shall not assign this Agreement,
or any interest herein including rights and duties of performance, without the
written consent of the Company. No assignment made without the Company's consent
shall relieve Distributor from any of its obligations under this Agreement.
14.2 This Agreement shall not be binding upon the Company until signed for the
Company by its duly authorized officer or employee. No agent or representative
of the Company has any authority to vary the terms and conditions contained
herein or to make any representation, statement, warranty, or agreement not
expressed herein.
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14.3 Laws of the Commonwealth of Kentucky shall govern the construction of this
Agreement and the rights, remedies and duties of the parties hereto. In the
event of any litigation arising out of this Agreement or the transactions
contemplated thereby, the parties agree that any action or suit shall be brought
in a court of record in the County of Fayette, Commonwealth of Kentucky, or in
the United States District Court of the Eastern District of Kentucky, and the
parties hereby consent to the venue and jurisdiction of such courts.
14.4 Except for changes by the Company permitted under the Agreement, including
changes in the various Schedules attached hereto or in the price, discount
schedules, design, terms of sale, or specifications of the Products, no
amendment or modification of this Agreement or any portion thereof shall be
valid unless executed in writing by both parties. Any written amendment or
modification which is executed by both parties shall be binding upon them
notwithstanding any lack of consideration.
14.5 All understandings and agreements, written or oral, heretofore had or made
between the parties with respect to any of the subject matters herein, are
merged into this Agreement which alone fully and completely expresses their
agreement.
14.6 The descriptive headings in the Agreement are inserted for convenience only
and do not constitute a part of this Agreement.
XV. Notice
15.1 Any notice required or permitted herein shall be in writing and shall be
hand delivered or mailed, postage fully prepaid, properly addressed to the party
to be notified at the address shown above or the last know address given by such
party to the other. Any such notice shall be considered to have been given when
hand delivered or on the second business day after it has been deposited in the
mails in the manner herein provided.
XVI. Distributor Service Obligations
16.1 Some of the products furnished by the Company are of such nature, size,
and/or complexity that sales and goodwill depend upon prompt and competent (a)
delivery, installation, and start-up field services, (b) in-warranty services,
and (c) post-warranty services, of a type or extent which may not be required by
other of the Company's products. If the Products covered by this Agreement are
of the former type, then the parties hereto further agree that the nature and
extent of such services, and the means of compensating Distributor therefore,
are set forth in the attached Schedule D, as it may hereafter be amended by the
Company from time to time.
XVII. Schedules
17.1 The following Schedules are attached hereto and made a part hereof, subject
to the right of the Company unilaterally to amend them from time to time:
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SCHEDULE A ADDITIONAL DISTRIBUTOR LOCATIONS COVERED BY THIS AGREEMENT
PRODUCTS AND DISCOUNTS
TERRITORY
SCHEDULE B MACHINE WARRANTY AND LIMITATION OF LIABILITY
SCHEDULE C RETURN OF PRODUCTS
SCHEDULE D DISTRIBUTOR MACHINE DELIVERY SERVICE AND WARRANTY SERVICE
SCHEDULE E PRICES AND TERMS
SCHEDULE F MACHINE CANCELLATION POLICY
SCHEDULE G MACHINE EXPORT RESTRICTION
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IN WITNESS WHEREOF the parties have executed this Agreement including attached
Schedules intending to be bound thereby:
13
<PAGE> 14
SCHEDULE A
I. ADDITIONAL DISTRIBUTOR LOCATIONS COVERED BY THIS AGREEMENT:
Fresno, California
Pleasant Grove, California
Sparks, Nevada
II. PRODUCTS AND DISCOUNTS: Subject to the Company's unilateral right to amend,
add to, delete from, and otherwise alter this Schedule in the future, the
products covered by this agreement and the discounts from the suggested list
prices applicable to items purchased are as follows:
<TABLE>
<CAPTION>
PRODUCTS DISCOUNTS
<S> <C>
1. Hydraulic Truck Cranes 20%
Hydraulic Rough Terrain Cranes 20%
Hydraulic All-Terrain Cranes 20%
Lattice Boom Crawler Cranes 20%
Lattice Boom Truck Cranes 20%
2. Parts: Repair parts for all above products, all prior production
versions of the same and all obsolete products of the same type
in the Distributor's "Territory". Varies
</TABLE>
In all cases, the selling Distributor shall be responsible for delivery and
service of the machine unless the Company, at its sole discretion, determines
otherwise. If, at the discretion of the Company, it is determined that the
selling Distributor shall not deliver and service the machine, the Company will
make arrangements to have this service performed. In this event, the Company
will withhold, at the time of invoicing a percentage in accordance with the
Service Policy and Procedure Manual.
III. TERRITORY:
In the state of California, all counties north of and including Monterey, Kings,
Tulare and Inyo. The entire state of Nevada except Lincoln and Clark counties
and except the south half of Nye County.
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SCHEDULE B
MACHINE WARRANTY AND LIMITATION OF LIABILITY
The products furnished by the Company, exclusive of used or rebuilt machinery or
equipment, are subject to the following warranty:
(A) Warranty.
All of the Company's products are of high quality and are manufactured in
conformity with the best commercial practices in the various lines. The Company
warrants all hydraulic cranes and lattice boom cranes furnished by it to be free
from defects in material and manufacture at the time of shipment for twelve (12)
months from date of shipment or 1500 hours of operation, whichever shall occur
first. The Company will furnish without charge, F.O.B. point of shipment,
replacements for such parts as the Company finds to have been defective at the
time of shipment, or at the Company's option, will make or authorize repairs to
such parts, provided that, upon request, such parts are returned, transportation
prepaid, to the point of shipment.
This warranty shall not apply to any product which has been subjected to misuse;
misapplication; neglect (including, but not limited to, improper maintenance);
accident; or improper installation, modification (including, but not limited to,
use of unauthorized parts or attachments), adjustment, or repair. Engines,
motors, and accessories furnished with the Company's products, but which are not
manufactured by the Company or any affiliated companies, are not warranted by
the Company but are sold only with the express warranty, if any, of the
manufacturers thereof. THE FOREGOING IS IN LIEU OF ALL OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED (INCLUDING THOSE OF MERCHANTABILITY AND FITNESS OF ANY
PRODUCT FOR A PARTICULAR PURPOSE), AND OF ANY OTHER OBLIGATION OR LIABILITY ON
THE PART OF THE COMPANY.
(B) Limitation of Liability.
IT IS EXPRESSLY UNDERSTOOD THAT THE COMPANY'S LIABILITY FOR ITS PRODUCTS,
WHETHER DUE TO BREACH OF WARRANTY, NEGLIGENCE, STRICT LIABILITY, OR OTHERWISE,
IS LIMITED TO THE FURNISHING OF SUCH REPLACEMENT PARTS, AND THE COMPANY WILL NOT
BE LIABLE FOR ANY OTHER INJURY, LOSS, DAMAGE, OR EXPENSE, WHETHER DIRECT OR
CONSEQUENTIAL, INCLUDING BUT NOT LIMITED TO LOSS OF USE, INCOME, PROFIT, OR
PRODUCTION, OR INCREASED COST OF OPERATION, OR SPOILAGE OF OR DAMAGE TO
MATERIAL, ARISING IN CONNECTION WITH THE SALE, INSTALLATION, USE OF, INABILITY
TO USE, OR THE REPAIR OR REPLACEMENT OF, THE COMPANY'S PRODUCTS.
The Company reserves the right to make alterations or modifications in their
equipment at any time, which, in their opinion, may improve the performance and
efficiency of the Product. They shall not be obliged to make such alterations or
modifications to Products already in service.
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<PAGE> 16
Any operation beyond rated capacity expressly prohibited in the operating
instructions or safety manual furnished with the machine, or any adjustment, or
assembly procedures not recommended or authorized in the operating or service
instructions shall void such warranty.
SCHEDULE C
RETURN OF PRODUCTS
New, unused machines of standard manufacture purchased by the Distributor from
the Company, may be repurchased at the sole discretion of the Company. Further,
the Company may, in its sole discretion, elect to accept a return of such
machine for credit. All such returns or repurchases shall require the prior
written approval of the Company. In addition, the following terms and conditions
shall apply to a return or repurchase of parts.
(A) In the event of termination of the Agreement under any of the provisions of
Article XII, the Company agrees, subject to the above, to purchase from the
Distributor such parts in the Distributor's stock which the Distributor
previously has purchased from the Company. Also subject to the above, if the
return of such parts is made while this Agreement remains in effect, such return
shall be for credit to be applied on future purchases. The purchase price or
credit shall be made in accordance with the Parts Policy and Procedure Manual.
(B) All repurchased or returned parts must be in accordance with the Parts
Policy and Procedure Manual.
(C) If the returned or repurchased parts require reconditioning, the cost of
such reconditioning will be deducted from the price paid or credit issued.
(D) All returned or repurchased parts must be shipped and delivered by
Distributor F.O.B. to the site specified by the Company.
(E) If requested by the Company, the Distributor shall furnish the invoice or
order number on which parts were originally purchased.
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<PAGE> 17
SCHEDULE D
DISTRIBUTOR MACHINE DELIVERY SERVICE AND WARRANTY SERVICE
The company and distributor recognize that the products are of such a
specialized technical character that sales thereof and customer goodwill depend
upon follow-up services by trained parts and service personnel. This applies to
all sales of products by Distributor irrespective of place of delivery or use of
the products. Accordingly, Distributor agrees as follows:
(1) In all cases the selling Distributor will provide adequate delivery service
and warranty service on all products unless the Company in its sole discretion
determines otherwise. In the later event, the Company will arrange for these
services to be performed and a percentage in accordance with the Service Policy
and Procedure Manual will be withheld at time of invoicing. "Delivery service
and warranty service" includes but is not limited to performing all service
necessary at the time of delivery of products to Distributor's customers, and
servicing all warranty claims on products sold by Distributor. A Pre-Delivery
Inspection Report (Product Evaluation), Delivery Report, follow-up inspection at
approximately six (6) months or 1000 hours of operation and a final inspection
at twelve (12) months or 1500 hours of operation are required.
(2) When the Company requests Distributor to perform within Distributor's
Territory delivery service and/or warranty service on a product not sold by
Distributor, Distributor will do so.
(3) The Company will reimburse the Distributor for warranty labor and costs as
specified in the Company's Service Policy and Procedure Manual.
(4) The Distributor shall promptly furnish all reports required with regard to
deliveries, service and warranties.
(5) If Distributor fails to perform the obligations required of it in this
Schedule D, the Company, in its sole discretion, may perform, or cause to be
performed, such obligations.
(6) In all cases where the machine is for delivery outside the contiguous United
States and Canada, a percentage in accordance with the Service Policy and
Procedure Manual will be withheld (with the exception of delivery within the
selling Distributor's Territory) and the Company will arrange for delivery and
service to be performed.
(7) The Distributor accepts the responsibility of providing machine campaign
support on all units located within its Territory, whether sold under this
Agreement or otherwise.
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SCHEDULE E
PRICES AND TERMS
(A) Machines. Prices to the Distributor for machines shall be determined from
(1) the Company's suggested price lists (as changed by the Company from time to
time) in effect at the time of order; or billing F.O.B. point of shipment,
prepared for domestic shipment, less (2) the applicable discounts that may be in
effect at time of order.
(B) Terms - Machines. Terms of payment for machines are net thirty (30) days.
(C) Parts. Prices to the Distributor for parts shall be the net price determined
from the Company's published parts price lists, as changed by the Company from
time to time, in effect at the time and place of order. Such lists, and the
schedule and conditions accompanying them, shall be considered a part of this
agreement.
(D) Terms - Parts. Terms of payment for parts are net 30 days from date of
invoice.
(E) Distributor shall be entitled to no discount for parts furnished warranty
adjustments
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<PAGE> 19
SCHEDULE F
MACHINE CANCELLATION POLICY
The following constitutes the Company's policy regarding cancellation of orders
for machines manufactured or offered by it.
All machine orders placed with the Company are accepted as firm orders.
Order acceptance occurs when the sales order is issued by the Company confirming
to the Distributor entry of the order, sales order number, a price and a
shipping date.
Orders for machines which are special in nature, which require special
engineering and include nonstandard items are non-cancelable at the time of
order acceptance and will be so noted on our sales order acknowledgment.
In the case of all other machines offered for sale by the Company, cancellation
will be accepted if the Company is notified by the 15th day of the month two
months prior to the month of scheduled shipment. For example, for machines
scheduled for shipment in September, the Company must be notified no later than
July 15th. In the absence of notification in accordance with the above schedule,
machines on order will be shipped and invoiced to the ordering Distributor
during the month originally scheduled.
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<PAGE> 20
SCHEDULE G
MACHINE EXPORT RESTRICTION
The following Products have export restrictions as outlined in "II Territory"
paragraph 2.1:
LS-138H11 HC-238H
LS-208H11 HC-248H
LS-218H HC-278H
LS-238H
LS-248H11
LS278H
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<PAGE> 1
EXHIBIT 10.91
DEALER FLOOR PLAN
FINANCING & SECURITY AGREEMENT
This Dealer Floor Plan Financing & Security Agreement, made April 6, 1998 by and
between General Electric Capital Corporation ("Lender") having a place of
business at 44 Old Ridgebury Rd. Danbury, CT 06810 and Moody-Day, Inc., a Texas
Corporation, having its principal place of business at 2323 Irving Blvd, Dallas,
TX 75207 ("Borrower") and other locations from which it conducts its business.
WITNESSETH
WHEREAS, Borrower engages in the business of buying, selling and generally
dealing in movable equipment (including without limitation, construction,
materials handling and other types of related equipment), at retail or
otherwise. Borrower hereby requests Lender to make extensions of credit as
Lender may deem advisable to make from time to time to enable Borrower to
finance the acquisition of such equipment.
NOW, THEREFORE, in consideration of mutual promises, and of the covenants and
conditions of this Agreement, the parties, intending to be legally bound, hereto
agree as follows:
1. Extension of Credit:
(a) Borrower hereby requests Lender, and Lender hereby agrees pursuant to
the terms and conditions hereof, to extend credit to Borrower (each an
"Extension of Credit"; collectively, "Extensions of Credit") from time to time,
the proceeds of which will be used by Borrower for the purchase of all or part
of the Borrower's Inventory (as that term is hereinafter defined). Any
Extensions of Credit shall be made in amounts to be determined by Lender, in
Lender's sole discretion, and shall be conditioned upon Borrower's delivery of
such documents, agreements and instruments as Lender may require in its sole
discretion, all in the form and substance satisfactory to Lender. Borrower
acknowledges that no Extension of Credit previously made shall require Lender to
make any future Extensions of Credit.
(b) Pursuant to paragraph (a) above, Lender is hereby authorized and
directed to pay on Borrower's behalf, the amount of any invoice for any item of
Borrower's Inventory (as that term is defined below) submitted to Lender by
Borrower or by any other manufacturer or distributor for an item of Borrower's
Inventory upon receipt by Lender of such invoice and other instruments required
by Lender to evidence the Extensions of Credit and the Collateral (as that term
is defined below) securing such Extensions of Credit. LENDER, IN ITS SOLE
DISCRETION, SHALL DETERMINE THE ELIGIBILITY OF ANY SUCH INVOICES FOR ADVANCES
PURSUANT TO THIS AGREEMENT, AND SHALL BE ENTITLED TO ASSUME THAT ALL SUCH
INVOICES ARE GENUINE AND CORRECT AND THAT ALL INVENTORY HAS BEEN DELIVERED TO
BORROWER IN SATISFACTORY CONDITION AND HAS BEEN UNCONDITIONALLY AND IRREVOCABLY
ACCEPTED BY BORROWER. Payments, when so made by Lender for an item
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of Borrower's Inventory, shall be deemed to be an Extension of Credit to
Borrower and shall become due and payable by Borrower pursuant to the terms of
this Agreement. Unless otherwise specified by Lender, in writing, all Extensions
of Credit shall be evidenced solely by entries on the books and records of
Lender and Lender shall provide Borrower, on a monthly or other periodic basis,
an invoice or statement of Borrower's account prepared from Lender's records
(each, a "Periodic Statement"). Each such invoice or statement of account shall
be considered to be true and correct and to have been unconditionally and
irrevocably accepted by Borrower and shall be conclusively binding on Borrower
with respect to all mailers contained therein, unless Borrower notifies Lender
in writing of any errors therein within seven (7) days after the date of such
invoice or other statement. Without limiting the foregoing, Lender may, upon
written notice to Borrower, also require any or all Extensions of Credit to be
evidenced by one or more promissory notes issued by Borrower to the order of
Lender.
(c) Lender shall, in its sole discretion, from time to time establish the
maximum amount which may be borrowed by Borrower in connection with this
Agreement for each type of equipment which is to be acquired by Borrower (each,
a "Maximum Borrowing Amount") which amount shall initially be set forth on the
Schedule attached hereto which is applicable to such equipment. BORROWER
UNDERSTANDS AND AGREES THAT LENDER MAY, IN ITS SOLE DISCRETION, INCREASE,
DECREASE, TERMINATE OR OTHERWISE MODIFY SUCH MAXIMUM BORROWING AMOUNT, AT ANY
TIME AND FROM TIME TO TIME, UPON seven (7) DAYS PRIOR WRITTEN NOTICE TO
BORROWER. In the event that the amount owed by Borrower under, or in connection
with, this Agreement should ever exceed the then applicable Maximum Borrowing
Amount, then Borrower shall promptly pay to Lender the full amount of any such
excess indebtedness.
2. Collateral:
(a) The term "Collateral" as used herein shall include all of the
following: (i) All inventory which is financed by Lender consisting of all goods
(including without limitation, construction, materials handling and other types
of related equipment) and related trade-ins, now or hereafter owned or in the
possession, custody or control of Borrower, wherever located, together with all
attachments, accessories, additions, accessions and substitutions, including all
returns and repossessions thereof (collectively, the "Inventory"); (ii) All
leases, accounts, contracts rights, chattel paper and rental instruments with
respect to the Inventory, now owned or hereafter existing in favor of, or
acquired by, Borrower (collectively, the "Contracts"); (iii) All reserves or
credits, however created, and any other property of, or belonging to, Borrower
now or hereafter in the possession or control of Lender and all of Borrower's
rights to any rebates, discounts, prepayments, credits, factory holdbacks and
incentive payments which may become due to Borrower by any supplier, distributor
or manufacturer of Inventory with respect to any of the Inventory (collectively,
"Credits"); (iv) and all cash, rents and non-cash proceeds of the above
described Inventory, Contracts or Credits, including but not limited to
insurance payable by reason of loss or damage to any of the Inventory.
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(b) Borrower hereby specifically mortgages and hypothecates to and in
favor of Lender, and otherwise grants to Lender, a security interest in the
Collateral. The security interest granted hereunder shall secure the payment and
performance of all Extensions of Credit and all other advances, debts,
liabilities and obligations owed by the Borrower to Lender, incurred directly or
contingently, which are presently existing or hereafter arising whether under
this Agreement or any other agreement between Borrower and Lender (collectively,
the "Obligations").
3. Conditions to Extensions of Credit: The obligation of Lender to make any
Extension of Credit under this Agreement shall be subject to all of the
following conditions precedent: (a) at the time of such Extension of Credit,
this Agreement is in full force and effect and has not been terminated for any
reason whatsoever; (b) the amount of such Extension of Credit, when added to the
amount of all other indebtedness owed by Borrower to Lender in connection with
this Agreement, does not exceed the Maximum Borrowing Amount then in effect; (c)
such Extension of Credit is solely for the purpose of financing Inventory being
acquired by Borrower or, if for any other purpose, such Extension of Credit has
been approved in writing by Lender in its sole discretion; (d) Borrower has
paid-in-full the amount of any down-payment that may be required by Lender in
connection with such Extension of Credit; (e) at the time of such Extension of
Credit, there is no Event of Default (as defined herein below) or event which
with notice and/or lapse of time would constitute an Event of Default; (f) at
the time of such Extension of Credit, all representations and warranties of
Borrower contained in this Agreement are true and correct in all respects; (g)
there has not been, as determined in the sole judgment of Lender, any material
adverse change in the financial or operating condition of Borrower or any
guarantor or other obligor (collectively "Guarantor") of the obligations of
Borrower under this Agreement or any related agreement, document, instrument or
schedule (this Agreement and all such other related agreements, documents,
instruments or schedules being hereinafter collectively referred to as "Debt
Documents"); (h) there has not been, as determined in the sole judgment of
Lender, any impairment in the prospect of payment or performance by Borrower or
any Guarantor under this Agreement or any of the other Debt Documents; and (i)
Lender has received, in form and substance satisfactory to Lender in its sole
discretion, all documents, certificates, opinions, guaranties, subordinations
and other instruments of any kind or nature requested by Lender. BORROWER
UNDERSTANDS AND AGREES THAT LENDER SHALL NOT HAVE ANY OBLIGATION TO MAKE ANY
EXTENSION OF CREDIT UNLESS AND UNTIL ALL SUCH CONDITIONS PRECEDENT HAVE BEEN
FULLY SATISFIED IN THE SOLE OPINION OF LENDER AND THAT NO CONDITION SHALL BE
WAIVED EXCEPT PURSUANT TO A WRITTEN INSTRUMENT EXECUTED BY LENDER. BORROWER
FURTHER UNDERSTANDS AND AGREES THAT THE WAIVER OF ANY CONDITION BY LENDER SHALL
NOT BE DEEMED A WAIVER OF SUCH CONDITION AS TO ANY FUTURE EXTENSION OF CREDIT OR
A WAIVER OF ANY OTHER CONDITION.
4. Payments:
(a) Subject to the other terms and hereof, Borrower shall repay, and does
hereby promise to pay to the order of Lender, all Extensions of Credit,
,together with interest thereon, in accordance with the terms set forth in this
Agreement and in any Periodic Statement. Except as otherwise specified in any
Schedule attached hereto, interest (pursuant to the terms of Paragraph (b)
below)
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shall accrue on any Extension of Credit from the date of disbursement by Lender
("Extension Date") and shall be computed on the basis of the actual days elapsed
over a year of 365 days. All payments of principal and interest on any Extension
of Credit shall be due and payable in lawful money of the United States on the
date stated in any Periodic Statement applicable to such Extension of Credit,
and the term of such Extension of Credit shall additionally be stated in any
such Periodic Statement. All payments shall be applied first to interest and
then to principal. Each payment may, at the option of the Lender, be calculated
and applied on an assumption that such payment would be made on its due date.
The acceptance by Lender of any payment which is less than payment in full of
all amounts due and owing at time shall not constitute a waiver of Lender's
right to receive payment in full at such time or at any prior or subsequent
time.
(i) For all Extensions of Credit related to the purchase of New Inventory,
Borrower shall be required to reduce the principal amount in accordance with the
Payment Terms for New Inventory set forth on the Schedule attached hereto which
is applicable to such New Inventory, and (ii) for all Extensions of Credit
related to the purchase of Used Inventory, Borrower shall be required to reduce
the principal amount of any such Extension of Credit in accordance with the
Payment Terms for Used Inventory set forth on the Schedule attached hereto which
is applicable to such Used Inventory. As used in this Agreement, New Inventory
shall mean any Inventory which has not been sold, leased or otherwise disposed
of since its original shipment from the manufacturer to Borrower or any other
party. Used Inventory shall mean Inventory which has been sold, leased or
otherwise disposed of since its original shipment from the manufacturer to
Borrower or any other party (including, without limitation, Inventory taken as a
trade-in by Borrower).
(b) Interest shall be charged on all Extensions of Credit and Borrower
agrees to pay such interest charges promptly as billed and upon such terms as
Lender shall require in this Agreement and in accordance with the applicable
Periodic Statement. Interest charges for each Extension of Credit outstanding
during the prior month shall be computed and accrued at the Applicable Wholesale
Rate as set forth on the Schedule attached hereto which is applicable to
Inventory related to such Extension of Credit.
(c) Borrower's obligation to pay Lender the entire amount of each Extension
of Credit, together with any and all interest thereon, shall be absolute and
unconditional and shall not be subject to any offset, recoupment or other
reduction. All payments by Borrower shall be in immediately available funds in
U.S. Dollars, and shall be applied first to interest and then to principal. All
amounts payable pursuant hereto are payable at Lender's address set forth above
or at such other address as Lender may specify from time to time in writing.
5. Covenants: Borrower hereby covenants and agrees on the date of this Agreement
and on the date of each Extension of Credit hereunder; (a) to maintain the
tangible Collateral in good repair, working order and condition, make all
necessary or appropriate repairs, restorations, replacements and renewals
thereto, and not permit its value to be impaired; (b) not to grant, and there
will not exist, any security interest, mortgage, attachment, lien or other
encumbrance of any sort, without Lender's prior written consent; (c) to notify
Lender in advance of any change in, addition or discontinuation
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<PAGE> 5
of such place of business, and any change in the name, identity, or form of
Borrower; (d) to defend the Collateral against all claims and legal proceedings
by persons or entities other than Lender; (e) to pay and discharge when due all
taxes, fees, levies or other charges of any sort upon the Collateral; (f) not to
permit any tangible Collateral to become an accession or fixture to any other
property; (g) as to any Collateral consisting of contract rights, rental
instruments, documents, money, or chattel paper, not to deliver possession
thereof to anyone other than Lender or Lender's designee(s); (h) not to permit
any Collateral to be used in violation of any applicable law, rule, regulation
or policy of insurance; (i) to conduct its business in an efficient manner, only
use its property in the regular and ordinary course of business, solely for
business purposes, and comply with all laws, rules and regulations applicable in
any way to Borrower; (j) not to remove or allow the removal of any Collateral
from its present location(s) except in the regular and ordinary course of
business; and (k) as to all of the Collateral and the records relating thereto,
Borrower will make such records and Collateral available for inspection by
Lender, or its designee, upon request, at reasonable places and times.
6. Risk of Loss: The Collateral shall at all times be held at Borrower's risk of
loss or damage. In the event that any item of Inventory suffers reparable
damage, then Borrower shall promptly repair and restore such item to good
condition and good working order. In the event that any item of Inventory is
lost, stolen, confiscated, destroyed, irreparably damaged or otherwise rendered
unfit for its originally intended use, then the amount of the Extension of
Credit attributable to such item, together with any and all accrued and unpaid
interest thereon, shall be accelerated and become immediately due and payable,
without notice or demand by Lender.
7. Insurance: Borrower shall keep all Collateral insured against risks covered
by standard forms of fire, theft, and extended coverage insurance and such other
risks as may be required by Lender, in amounts, and having such deductibles
under polices issued by such insurance companies as are satisfactory to Lender.
Borrower agrees to deliver promptly to Lender certificates, or if Lender
requests, policies of insurance, satisfactory to Lender, each with an
endorsement naming Lender or its assigns as loss-payee as their interests may
appear. Each policy shall provide that Lender's interest therein will not be
invalidated by the acts, omissions or negligence of anyone other than Lender,
and will contain insurer's agreement to give thirty (30) days prior written
notice to Lender before the cancellation of, or any material change, in the
policy will be effective as to Lender, whether such cancellation or change is at
the direction of Borrower or insurer. Borrower assigns to Lender all proceeds of
such insurance, including without limitation, returned and unearned premiums,
not to exceed the Obligations hereunder. Borrower shall direct all insurers to
pay such proceeds directly to Lender, and Borrower shall promptly remit to
Lender, in the form received with all necessary endorsements, any proceeds of
such insurance which Borrower may receive. Lender shall apply any proceeds of
insurance which may be received by it toward payment of the Obligations to which
such insurance proceeds relate, such proceeds to be applied first to interest
and then to principal. Excess insurance proceeds, if any, shall be returned to
the Borrower or applied to any other Obligations, should such other Obligations
be then due and unpaid.
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8. Sale of Inventory: So long as Borrower is not in default under this
Agreement, Borrower may sell any item of Inventory in the regular course of
Borrower's business. All such sales of Inventory shall be for cash, for cash
with trade-in or on such other terms and conditions as Lender may approve in
writing. Unless otherwise agreed in writing by Lender, in the event of any sale
or other disposition of any item of Inventory (with or without the consent of
Lender), the amount of the Extension of Credit attributable to such item of
Inventory, together with any and all accrued and unpaid interest thereon, shall
be accelerated and become due and payable, without notice or demand by Lender,
immediately upon receipt of payment from the respective purchaser or three (3)
days from the date of sale, whichever occurs earlier. All proceeds resulting
from any sale or other disposition of any Inventory or other Collateral shall be
held by Borrower in trust for Lender, and accounted for on a basis which is
separate from all other funds and assets of Borrower.
9. Rental of Inventory: So long as Borrower is not in default under this
Agreement, Borrower may rent or lease any item of Inventory to retail customers
in normal course of Borrower's business as a part of Borrower's short-term
rental fleet ("Rental Fleet"), so long as: (a) the rental or lease arrangement
is for a term (including any options to extend or renew) of not more than one
(1) year; (b) that arrangement is evidenced by a written, fully-executed
agreement in form and substance satisfactory to Lender; and (c) Borrower files
and/or records financing statements against the lessee in all appropriate
offices with respect to such Inventory. Borrower shall continue to repay any
Extension of Credit (including, without limitation, any interest accrued
thereon) applicable to any such item(s) of Inventory in Borrower's Rental Fleet
pursuant to Section 4 above. Until Lender notifies Borrower to the contrary,
Borrower may collect the rents and monies owing under any lease or rental
contract as the same become due but not otherwise. Borrower agrees to promptly
render monthly billings to all lessees of the Inventory. If an Event of Default
exists hereunder, Borrower agrees, upon request of Lender, to notify the lessees
and all other obligors under any lease or rental of the interest of Lender and
to direct such lessees and other obligors to pay all rentals and other proceeds
directly to Lender. On a monthly basis, Borrower shall provide a written report
to Lender which (i) identifies all Inventory which was part of Borrower's Rental
Fleet during the preceding month, (ii) sets forth the name and address of each
lessee thereunder, and (iii) includes an accounting of all rents and other
proceeds received by Borrower in connection with any such lease or rental
contract during such preceding month.
10. Default: The occurrence of any of the following events shall be deemed to
constitute an Event of Default under this Agreement: (a) if Borrower shall fail
to pay, when due, any amount owed by it to Lender or to any parent, subsidiary
or affiliate of Lender, whether hereunder or under any other instrument or
agreement; (b) if Borrower shall fail to perform or observe any other covenant,
or term to be performed or observed by it hereunder or under any other
instrument or agreement between, or furnished by Borrower to, Lender or any
parent or affiliate of Lender; (c) if Borrower or any guarantor or surety for
the Obligations shall die, become insolvent or cease to do business as a going
concern, or any guarantor or surety terminates such guaranty or suretyship with
respect to the Borrower; (d) if the Collateral shall suffer a reduction in
value, other than any reduction in value from ordinary wear and tear resulting
from any of the Collateral being leased or rented by Borrower to third parties
under the terms of this Agreement; (e) if Borrower or any guarantor of, or
surety for, the Obligations shall make an assignment for the benefit of
creditors, file a petition in bankruptcy,
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apply to or petition any tribunal for the appointment of a custodian, receiver
or trustee for itself or for any substantial part of its property, or shall
commence any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, or if there shall have been filed any such petition or
application, or any such proceeding shall have been commenced against any such
person or entity, or any such person or entity, by any act or omission, shall
indicate its consent to , approval of or acquiescence in any such petition,
application, proceeding, order for relief or such appointment of a custodian,
receiver or trustee; and (f) if Borrower shall have removed, or permitted to be
concealed or removed, any part of its assets, so as to hinder, delay or defraud
any of its creditors, or made or suffered a transfer of any of its assets which
transfer would be fraudulent under any bankruptcy, insolvency, fraudulent
conveyance or similar law or shall have made any transfer of its assets to or
for the benefit of a creditor at a time when other creditors similarly situated
have not been paid or shall have suffered or permitted, while insolvent, any
creditor to obtain a lien upon any of its property through legal proceedings or
otherwise.
11. Remedies of Lender
(a) Immediately upon the occurrence of any Event of Default, Lender may
immediately, upon declaration thereof and at any time thereafter, at its option,
immediately exercise one or more of the following remedies: (i) refuse to extend
any further credit to Borrower and terminate this Agreement immediately without
notice; (ii) declare immediately due and payable all sums and other Obligations
then owing by Borrower to Lender, whether pursuant hereto, under any other
document, instrument or agreement, or otherwise, notwithstanding the provisions
of any writings evidencing the same; (iii) exercise any and all rights it may
have under the Uniform Commercial Code; (iv) take immediate and exclusive
possession of any or all Collateral, wherever it may be found, and enter any of
the premises of the Borrower, with or without process of law, wherever said
Collateral may be, or is supposed to be, and search for the same, and if found,
to take possession of, and remove, sell and dispose of, said Collateral, or any
part, at public auction or private sale, for cash or on credit, as the Lender
may elect, at its option, and Lender reserves the right to bid and become the
purchaser at any such sale; (v) notify, in Lender's own name, or in the name of
the Borrower, all obligors of Borrower and demand, collect, receive, receipt
for, sue, compromise and give acquittance for any and all amounts due on
Contracts and Credits, and endorse the name of the Borrower on any commercial
paper or instrument given as full or partial payment thereon; (vi) direct the
Borrower to assemble the Collateral and deliver to Lender, at Borrower's
expense, at a place designated by Lender which is reasonably convenient to
Lender and Borrower; (vii) and/or hold, appropriate, apply or set-off any and
all moneys, credits, indebtedness due from Lender, its affiliates, parents or
subsidiaries to Borrower or any manufacturers, suppliers or distributors of any
item of Inventory or other property of Borrower which is or comes into
possession of Lender, its affiliates, parents or subsidiaries.
(b) Borrower shall pay all reasonable costs of Lender incurred in the
collection of any of the Obligations and for the enforcement of any Obligations,
including, without limitation, reasonable attorney's fees and legal expenses.
The foregoing remedies shall not be deemed exclusive or alternative, but shall
be cumulative, and in addition to, all other remedies in favor of Lender
existing
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at law or in equity. Notwithstanding the foregoing: (i) if Borrower fails to
perform any of its duties and/or obligations hereunder, Lender may perform the
same, but shall not be obligated to do so, for the account of Borrower, and
Borrower shall immediately repay to Lender any amounts paid by Lender in such
performance together with interest thereon at the Default Rate (as that term is
defined below) or ('i) if any payment of any obligations due from Borrower
hereunder shall not be paid when due, interest shall continue to accrue thereon
at the Applicable Wholesale Rate plus the Default Rate. The Default Rate shall
be equal to one and one-half percent (1.50%) per month; provided, however, that
at no time shall this rate after maturity exceed the Maximum Legal Rate.
(c) Any notification required pursuant to this Agreement or otherwise shall
be deemed reasonably and properly given if mailed at least ten (10) days before
the disposition of the subject matter of such notification, postage prepaid,
addressed to the Borrower. Any proceeds realized by Lender upon the sale or
other disposition of the Collateral pursuant to this Section 11 may be applied
by the Lender to the payment of the reasonable expenses of retaking, holding,
preparing for sale, selling and the like, including reasonable attorney's fees
and legal expenses and any balance of such proceeds may be applied by the Lender
toward the satisfaction of Borrower's Obligations in such order of application
as the Lender may, in its sole discretion, determine. Any surplus shall be paid
to Borrower. Borrower shall be liable for, and shall promptly pay on demand, any
deficiency resulting from any such disposition of Collateral.
12. Termination: Either party may, on thirty (30) days prior written notice to
the other party, terminate this Agreement with respect to future transactions.
Termination of this Agreement shall not relieve Borrower of any of its
Obligations to Lender incurred prior to the date of termination. Upon
termination, Borrower shall pay Lender; (i) all of Borrower's Obligations; (ii)
all accrued interest arising hereunder, and (iii) any and all other amounts
Borrower shall owe Lender under and pursuant to this Agreement. Provided that
all of Borrower's Obligations to Lender are paid in full, Lender will, upon
Borrower's written request made after the effective date of termination, release
or terminate any and all financing statements filed by Lender against Borrower.
13. Representations and Warranties: Borrower hereby represents, warrants and
covenants that on the date hereof and on the date of each Extension of Credit
hereunder:
(a) Borrower is, and will remain, duly organized, existing and in good
standing under the laws of the State set forth in the first paragraph of this
Agreement, has its principal place of business at the location set forth in such
paragraph, and is, and will remain, duly qualified and licensed in every
jurisdiction wherever necessary to carry on its business and operations;
(b) Borrower has adequate power and capacity to enter into, and to perform
its obligations, under this Agreement or any other Debt Documents;
(c) this Agreement and the other Debt Documents have been duly authorized,
executed and delivered by Borrower and constitute legal, valid and binding
agreements enforceable under all applicable laws in accordance with their terms,
except to the extent that the enforcement of remedies
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<PAGE> 9
may be limited under applicable bankruptcy and insolvency laws;
(d) no approval, consent or withholding of objections is required from any
governmental authority or instrumentality with respect to the entry into, or
performance by, Borrower of this Agreement or any of the other Debt Documents,
except such as may have already been obtained;
(e) the entry into, and performance by, Borrower of this Agreement and the
other Debt Documents will not (i) violate any of the organizational documents of
Borrower or any judgment, order, law or regulation applicable to Borrower, or
(ii) result in any breach of, constitute a default under, or result in the
creation of any lien, claim or encumbrance on any of Borrower's property (except
for liens in favor of Lender) pursuant to, any indenture mortgage, deed of
trust, bank loan, credit agreement, or other agreement or instrument to which
Borrower is a party;
(f) there are no suits or proceedings pending or threatened in court or
before any commission, board or other administrative agency against or affecting
Borrower which could, in the aggregate, have a material adverse effect on
Borrower, its business or operations, or its ability to perform its obligations
under this Agreement or any of the other the Debt Documents;
(g) all financial statements of Borrower, and of any Guarantor hereof,
delivered to Lender, heretofore or hereafter, in connection with the Obligations
have been, prepared in accordance with generally accepted accounting principles,
fairly present the financial condition of Borrower and of any Guarantor and
since the date of the most recent financial statement, there has been no
material adverse change in the financial or operating condition of Borrower or
any Guarantor;
(h) Borrower is engaged in the business of buying, selling and generally
dealing in the equipment described as Inventory in this Agreement at retail or
otherwise;
(i) The possession of Inventory is solely for the purpose of procuring the
sale or exchange thereof to a retail buyer in the ordinary course of Borrower's
business; and
(j) Borrower shall not permit any material change in the legal or equitable
ownership of Borrower without thirty (30) days prior written notification to
Lender and, at Lender's option, this Agreement may be terminated upon such
change in ownership.
14. General Provisions:
(a) The validity, enforceability and interpretation this Agreement and any
promissory notes taken, charges made and sums paid in connection therewith shall
be governed by the laws of the State of New York. This Agreement may be executed
in multiple counterparts which together shall constitute but one and the same
instrument. This Agreement shall be binding on the parties, their heirs,
executors, administrators, successors and assigns, provided, however, Borrower
may not assign this Agreement without the prior written consent of the Lender.
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(b) It is understood and agreed that Lender shall have the right, at all
times, to enforce the covenants and provisions of this Agreement in strict
accordance with the terms thereof, notwithstanding any conduct or custom on the
part of the Lender in refraining from so doing at any time; and further, that
the failure of the Lender at any time to enforce its rights under this Agreement
strictly in accordance with its provisions shall not be construed as having
created, in any way or manner contrary to the specific terms and provisions of
this Agreement, or as having in any way or manner modified, altered or waived
such provisions.
(c) Lender may hold any sums of monies belonging to Borrower which come
into the possession of the Lender and may apply all or a portion of said sums of
monies to any of the Obligations which are then due and payable, or to any other
claims that the Lender or any of its affiliates or subsidiaries may have against
Borrower.
(d) Borrower shall not assert against Lender any claim or defense Borrower
may have against any third party with respect to the Collateral.
(e) Time is of the essence of this Agreement. Lender's failure at any time
to require strict performance by Borrower of any of the provisions hereof shall
not waive or diminish Lender's right thereafter to demand strict compliance
therewith. Borrower agrees, upon Lender's request, to execute any instrument
necessary or expedient for filing, recording or perfecting the interest of
Lender. All notices required to be given hereunder shall be deemed adequately
given if sent by registered or certified mail to the addressee at its address
stated herein, or at such other place as such addressee may have designated in
writing. This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof. NO VARIATION OR MODIFICATION OF THIS
AGREEMENT OR ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID
UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE PARTIES
HERETO.
(f) Section headings contained in this Agreement have been included for
convenience only, and shall not affect the construction or interpretation
hereof.
(g) This Agreement, and the security interest granted hereunder, shall
automatically be reinstated in the event that Lender is ever required to return
or restore the payment of all or any portion of the Obligations (all as though
such payment had never been made).
(h) Lender may, without the consent of Borrower, assign this Agreement.
Borrower agrees that if Borrower receives written notice of an assignment from
Lender, Borrower will pay all rent and all other amounts payable hereunder to
such assignee or as instructed by Lender. Borrower further agrees to confirm in
writing receipt of the notice of assignment as may be reasonably requested by
assignee. Borrower hereby waives and agrees not to assert against any such
assignee any defense, set-off, recoupment claim or counterclaim which Lessee has
or may at any time have against Lender for any reason whatsoever.
10
<PAGE> 11
(i) Borrower may not assign any of its rights or obligations under this
Agreement without the express written consent of Lender.
(j) Waiver of any particular default shall not be a waiver of any other
default. All of Lender's rights are cumulative and not alternative. The term
"Lender" shall include any assignee of Lender who is the holder of this
Agreement. Any provision of this Agreement found by judicial interpretation or
construction to be prohibited by law shall be ineffective to the extent of such
prohibition, without invalidating the provisions hereof. All words used shall be
understood and construed to be of such number, tense and gender as the
circumstances may require.
(k) Lender may (i) insert dates, amounts and Inventory serial numbers and
descriptions when known in any promissory notes taken or documents related
hereto, and (ii) correct any patent errors or omissions therein or in this
Agreement.
(l) THE BORROWER AND LENDER UNCONDITIONALLY WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT,
DIRECTLY OR INDIRECTLY OF THIS AGREEMENT, ANY OF THE OTHER DEBT DOCUMENTS OR
OTHER RELATED DOCUMENTS, ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT
MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS AND/OR THE RELATIONSHIP
THAT IS BEING ESTABLISHED BETWEEN THEM. The scope of this waiver is intended to
be all-encompassing of any and all disputes that may be filed in any court
(including without limitation, contract claims, tort claims, breach of duty
claims and all other common law and statutory claims). THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT, THE DEBT DOCUMENTS, OR TO ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THIS AGREEMENT OR ANY RELATED TRANSACTION.
In the event of litigation, this Agreement may be filed as a written consent to
a trial by the court.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed on the
day, month and year herein above written.
11
<PAGE> 12
SCHEDULE A
TO THE
DEALER FLOOR PLAN
FINANCING & SECURITY AGREEMENT
DATED APRIL 6, 1998
Capitalized terms not herein shall have the meanings assigned to them in the
Dealer Floor Plan Financing and Security Agreement identified above
(hereinafter, the "Agreement").
1. Maximum Borrowing Amount: $25,000,000.00 for all Inventory financed by
General Electric Capital Corporation.
2. Request for Extension of Credit: Any Extension of Credit made by Lender
pursuant to the Agreement must be requested by an approved manufacturer or
Borrower in writing, pursuant to a Request For Extension of Credit (the
'Request') in the form of Exhibit A attached hereto.
3. Payment Terms for New Inventory: The Payment Terms for New Inventory shall
be:
(a) Cranes: Those items of Inventory with a lifting capacity of fifteen(15)
or more tons. The principal amount of any Extension of Credit related to the
purchase. of new item(s) of Crane Inventory shall be reduced by the percentages
set forth below every month following the applicable for Extension Date until a
date which is sixty (60) months after the shipment date of such (5) of
Inventory, at which time the unpaid balance outstanding for such Extension of
Credit shall be immediately due and payable by Borrower.
<TABLE>
<CAPTION>
Months Since Disbursement Principal Reduction
------------------------- -------------------
<S> <C> <C>
1-6 (curtailment-free period) 0.00%
7-59 1.20%
60 Balance Due
</TABLE>
During any curtailment-free period, any unit of Inventory placed in rental
service will be billed at a 1.20% per month principal reduction for the
remainder of the curtailment-free period.
(b) All other Inventory: The principal amount of any Extension of Credit
related to the purchase of new item(s) of Inventory (other than Crane Inventory)
shall be reduced by the percentages set forth below every month following the
applicable for Extension Date until a date which is forty eight (48) months
after the shipment date of such (s) of Inventory, at which time the unpaid
balance outstanding for such Extension of Credit shall be immediately due and
payable by Borrower.
<TABLE>
<CAPTION>
Months Since Disbursement Principal Reduction
------------------------- -------------------
<S> <C>
1-6 (curtailment-free period) 0.00%
747 2.00%
48 Balance Due
</TABLE>
12
<PAGE> 13
During any curtailment-free period, any unit of Inventory placed in rental
service will be billed at a 2.00% per month principal reduction for the
remainder of the curtailment-free period.
5. Applicable Wholesale Rate: The sum of the Applicable Margin (as that term is
defined below) plus the Index Rate (as that term is defined below) applicable to
such period. The Applicable Wholesale Rate for any Extension of Credit will be
increased or decreased at the beginning of each month when there has been a
change in the Index Rate used to determine the Applicable Wholesale Rate for the
previous month. The term "Index Rate" as used herein shall mean An interest rate
per annum equal to the London Interbank Offered Rate for one month dollar
deposits as published in the "Money Rates" section of the Wall Street Journal,
Eastern Edition on the first Business Day of the immediately preceding calendar
month As used herein "Business " shall mean and include any day other than a
Saturday; Sunday or other day on which all commercial banks in the City of New
York, New York are required or authorized to be closed. Notwithstanding any
other provision to the contrary set forth herein, if at any time, implementation
of any provision hereof shall raise the interest or other charges of Lender
herein above the highest rate of interest that Borrower can legally obligate
itself to pay and/or Lender can legally collect under applicable law ("Maximum
Legal Rate") then such interest or other charges shall be limited to the Maximum
Legal Rate and any excess interest or other charges inadvertently collected
shall be deemed to be a partial prepayment of an Extension of Credit and so
applied.
The Applicable Margin for any Extension of Credit shall be determined as
follows:
(a) For all Inventory
<TABLE>
<CAPTION>
Months Since Disbursement Applicable Margin
------------------------- -----------------
<S> <C>
1-6 2.65%
7-24 2.65%
25-48 2.65%
</TABLE>
IN WITNESS WHEREOF, Borrower and Lender have caused this Schedule to be executed
by their duly authorized representatives as of April 6,1998.
13
<PAGE> 14
July 30, 1999
Ms. Patricia Calloway
Moody-Day, Inc.
2323 Irving Blvd
Dallas, TX 75207
Re: Amendment to Dealer Floor Plan Financing & Security Agreement dated
April 6, 1998
Dear Ms. Calloway:
Reference is made to that certain Dealer Floor Plan Financing & Security
Agreement (the "Agreement") dated April 6, 1998 by and between Moody-Day, Inc.
and General Electric Capital Corporation.
The following amendments have been made to the above referenced document:
Section 5 of the Agreement Reads:
Covenants: Borrower hereby covenants and agrees on the date of this
Agreement and on the date of each Extension of Credit hereunder; (a) to maintain
the tangible Collateral in good repair, working order and condition, make all
necessary or appropriate repairs, restorations, replacements and renewals
thereto, and not permit its value to be impaired; (b) not to grant, and there
will not exist, any security interest, mortgage, attachment, lien or other
encumbrance of any sort, without Lender's prior written consent; (c) to notify
Lender in advance of any change in, addition or discontinuation of such place of
business, and any change in the name, identity, or form of Borrower; (d) to
defend the Collateral against all claims and legal proceedings by persons or
entities other than Lender; (e) to pay and discharge when due all taxes, fees,
levies or other charges of any sort upon the Collateral; (f) not to permit any
tangible Collateral to become an accession or fixture to any other property; (g)
as to any Collateral consisting of contract rights, rental instruments,
documents, money, or chattel paper, not to deliver possession thereof to anyone
other than Lender or Lender's designee(s); (h) not to permit any Collateral to
be used in violation of any applicable law, rule, regulation or policy of
insurance; (i) to conduct its business in an efficient manner, only use its
property in the regular and ordinary course of business, solely for business
purposes, and comply with all laws, rules and regulations applicable in any way
to Borrower; (j) not to remove or allow the removal of any Collateral from its
present location(s) except in the regular and ordinary course of business; and
(k) as to all of the Collateral and the records relating thereto, Borrower will
make such records and Collateral available for inspection by Lender, or its
designee, upon request, at reasonable places and times.
1
<PAGE> 15
Section 5 of the Agreement Amended to Read:
Covenants: Borrower hereby covenants and agrees on the date of this
Agreement and on the date of each Extension of Credit hereunder; (a) to maintain
the tangible Collateral in good repair, working order and condition, make all
necessary or appropriate repairs, restorations, replacements and renewals
thereto, and not permit its value to be impaired; (b) not to grant, and there
will not exist, any security interest, mortgage, attachment, lien or other
encumbrance of any sort, without Lender's prior written consent; (c) to notify
Lender in advance of any change in, addition or discontinuation of such place of
business, and any change in the name, identity, or form of Borrower; (d) to
defend the Collateral against all claims and legal proceeding by persons or
entities other than Lender; (e) to pay and discharge when due all taxes, fees,
levies or other charges of any sort upon the Collateral; (f) not to permit any
tangible Collateral to become an accession or fixture to any other property; (g)
as to any Collateral consisting of contract rights, rental instruments,
documents, money, or chattel paper, not to deliver possession thereof to anyone
other than Lender or Lender's designee(s); (h) not to permit any Collateral to
be used in violation of any applicable law, rule, regulation or policy of
insurance; (i) to conduct its business in an efficient manner, only use its
property in the regular and ordinary course of business, solely for business
purposes, and comply with all laws, rules and regulations applicable in any way
to Borrower; (j) not to remove or allow the removal of any Collateral from its
present location(s) except in the regular and ordinary course of business; (k)
as to all of the Collateral and the records relating thereto, Borrower will make
such records and Collateral available for inspection by Lender, or its designee,
upon request, at reasonable places and times; (l) to provide monthly internal
financial statements in a form acceptable to Lender; and (m) to maintain a ratio
of total debt to tangible net worth of 5:1.
Please indicate your agreement to this amendment by signing this letter and
kindly returning it to me. If you have any questions or comments, please feel
free to contact me at 203-796-2389.
GENERAL ELECTRIC CAPITAL CORPORATION
2
<PAGE> 1
EXHIBIT 10.92
AGREEMENT
This AGREEMENT dated as of December ____, 1999 (this "Agreement") is
entered into by and among CRESCENT REAL ESTATE EQUITIES COMPANY, a Delaware
corporation ("Crescent"), CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a
Delaware limited partnership ("CREELP"), CRESCENT OPERATING, INC., a Delaware
corporation ("COPI"), and CRESCENT DEVELOPMENT MANAGEMENT CORP., a Delaware
corporation ("Subsidiary").
R E C I T A L S:
WHEREAS, on November 18, 1999 the United States House of
Representatives approved H.R. 1180, the Work Incentives Improvement Act of 1999
(the "1999 Legislation");
WHEREAS, on November 19, 1999 the United States Senate approved the
1999 Legislation;
WHEREAS, President Clinton has signed, or it is anticipated that he
will sign, the 1999 Legislation into law;
WHEREAS, the 1999 Legislation could adversely impact Crescent's status
as a real estate investment trust ("REIT") unless Crescent and Subsidiary
jointly elect that Subsidiary be treated as a taxable REIT subsidiary ("TRS"),
as that term is defined in the 1999 Legislation;
WHEREAS, CREELP and COPI (together, the "Stockholders") currently are
the owners of 100% of the issued and outstanding shares of Subsidiary, and
unless Crescent and Subsidiary jointly elect TRS status for Subsidiary, CREELP
may ultimately be prohibited from making any further equity contributions to
Subsidiary without negatively impacting Crescent's status as a REIT;
WHEREAS, the Stockholders and Subsidiary are desirous that CREELP be
permitted to make such further equity contributions;
WHEREAS, if Subsidiary is denied certain interest deductions solely as
a result of making a TRS election, CREELP has agreed to pay to COPI certain
amounts as described below to offset the indirect economic loss to COPI
resulting from the unavailability of such interest deductions to Subsidiary; and
WHEREAS, the Stockholders, along with Crescent and Subsidiary, desire
that Crescent and Subsidiary make such joint TRS election.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, covenants and agreements set forth herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
-1-
<PAGE> 2
1. Agreement. Crescent and Subsidiary will make a joint election to
cause Subsidiary to be treated as a TRS of Crescent for federal income tax
purposes. Subsidiary and the Stockholders will take all other actions reasonably
requested by Crescent that Crescent believes are prudent in connection with such
election and in light of Crescent's status as a REIT. Such election will be made
on a timely basis so that it is effective on the first day that the 1999
Legislation is effective. The parties to this Agreement agree that they will not
take any action or omit to take any action that would cause the Subsidiary to
fail to qualify as a TRS of Crescent. In furtherance of such covenants
Subsidiary will make available to Crescent and its representatives for
inspection and copying all records and information relevant to qualify and
continue Subsidiary as a TRS, and the officers and employees of Subsidiary and
COPI will make themselves available for meetings and consultations at such
reasonable times and places as may be requested by Crescent to discuss the
status of Subsidiary's businesses and operations, and any plans they may have
for future activities of Subsidiary. In addition, within ten days of Crescent's
request therefor, COPI and Subsidiary shall cause the corporate charter of
Subsidiary to be amended (in form and substance reasonably satisfactory to
Crescent) to prohibit Subsidiary from taking actions that could adversely impact
Subsidiary's status as a TRS of Crescent and/or Crescent's status as a REIT.
2. Power of Attorney.
(a) Subsidiary and each Stockholder does irrevocably constitute and
appoint Crescent with full power of substitution, as its true and lawful
attorney, in its name, place and stead, to execute, acknowledge, swear to,
deliver, record and file, as appropriate and in accordance with this Agreement
(i) all forms and other instruments required to qualify Subsidiary as a TRS of
Crescent and all amendments thereto required or permitted by law or the
provisions of this Agreement, and (ii) all certificates and other instruments
requiring execution by Subsidiary or any Stockholder and deemed necessary or
advisable by Crescent to qualify or continue Subsidiary as a TRS of Crescent.
(b) The power of attorney granted pursuant to Section 2(a) is
coupled with an interest and shall be irrevocable and survive and not be
affected by the subsequent bankruptcy or dissolution of Subsidiary or any
Stockholder; may be exercised by Crescent either by signing separately as
attorney-in-fact for Subsidiary or any Stockholder or by Crescent acting as
attorneys-in-fact for all of them; and shall survive the delivery of an
assignment by any Stockholder of the whole or any fraction of its interest in
Subsidiary.
(c) Subsidiary and each Stockholder shall execute and deliver to
Crescent, within a reasonable time after the receipt of Crescent's request
therefor, such further designations, powers of attorney and other instruments as
may be necessary or appropriate to carry out the provisions of this Agreement.
3. Protection of COPI Parties.
(a) If Subsidiary is denied an interest deduction for a taxable
year pursuant to Section 163(j) of the Internal Revenue Code of 1986, as
amended, solely because of Subsidiary's status as a TRS, CREELP shall pay to
COPI within 30 days after the filing of Subsidiary's federal tax return for such
taxable year an amount equal to the product of (i) the amount of the denied
-2-
<PAGE> 3
interest deduction to the extent such deduction otherwise would have offset
taxable income of the Subsidiary for such taxable year, (ii) the maximum
corporate tax rate (currently 35%), (iii) the percentage of the value of the
stock of Subsidiary owned by COPI, without taking into account any premium or
discount for the voting or non-voting rights associated with the stock of
Subsidiary) (currently 90%) at the end of such taxable year and (iv) 10%.
(b) Notwithstanding any provision herein to the contrary, if COPI
and Subsidiary have timely and fully disclosed to Crescent all information
regarding Subsidiary's business operations relevant to maintaining its TRS
status, and COPI and Subsidiary have fully and timely implemented all actions
suggested by Crescent relative to preserving Subsidiary's TRS status, then in no
event and under no circumstances shall COPI, Subsidiary or any of their
directors, managers, officers, employees, agents or representatives
(collectively, the "COPI Parties"), have any liability whatsoever for any
failure of Subsidiary to qualify or continue to qualify as a TRS of Crescent, or
any adverse consequence to Crescent or CREELP in any way related to any such
failure. Provided such conditions are satisfied, such COPI Parties are hereby
fully and forever released by Crescent and CREELP from any and all liability,
claims and costs related to or associated with any failure of Subsidiary to
qualify or continue as a TRS of Crescent.
(c) Notwithstanding any provision herein to the contrary, in no
event and under no circumstances, shall COPI be required to, in any way,
diminish its economic interests in, or diminish or surrender any stockholder
voting rights with respect to, Subsidiary.
4. Representations of Parties. Each of the parties hereto severally
represents, each with respect only to itself, as of the date hereof, as follows:
(a) It is duly organized and existing under the laws of the
jurisdiction of its organization, with full power and authority to execute and
deliver this Agreement, to enter into the transactions contemplated hereby and
to perform all the duties and obligations to be performed by it hereunder;
(b) It has duly authorized this Agreement and the transactions
contemplated hereby and the performance of all the duties and obligations to be
performed hereunder by all necessary corporate action; and
(c) It has duly executed and delivered this Agreement and this
Agreement constitutes its valid, legal and binding obligation.
5. Specific Performance. Subsidiary and each Stockholder acknowledges
that any failure to comply with the requirements of this Agreement would result
in irreparable injury to Crescent for which no adequate remedy at law may be
available. Accordingly, Subsidiary and each Stockholder consents to an
injunction requiring specific performance by them for their respective
obligations under this Agreement, without the necessity of showing actual or
threatened harm and without requiring to furnish a bond or other security.
-3-
<PAGE> 4
6. Miscellaneous.
(a) Modifications and Amendments. This Agreement may only be
modified, altered or amended by an agreement in writing executed by each of the
parties hereto.
(b) Headings. The headings of the sections and subsections of this
Agreement are for convenience and reference only and shall not be considered a
part hereof nor shall they be deemed to limit or otherwise affect any of the
terms or provisions hereof.
(c) Construction. This Agreement shall be construed in accordance
with the laws of the State of Texas without regard to the principles of
conflicts of laws.
(d) Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one agreement. It shall not be necessary for the same counterpart to
be signed by all of the parties in order for this instrument to be fully binding
upon any party signing at least one counterpart.
[The balance of this page is intentionally left blank.]
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives all as of the date
and year first above written.
CRESCENT:
CRESCENT REAL ESTATE EQUITIES COMPANY,
a Delaware corporation,
By:
-----------------------------------------
Name:
------------------------------------
Title:
------------------------------------
CREELP:
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP,
a Delaware limited partnership,
By: CRESCENT REAL ESTATE EQUITIES, LTD.,
a Delaware corporation, its general partner,
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
COPI:
CRESCENT OPERATING, INC.,
a Delaware corporation,
By:
-----------------------------------------
Name:
------------------------------------
Title:
------------------------------------
SUBSIDIARY:
CRESCENT DEVELOPMENT MANAGEMENT CORP.,
a Delaware corporation,
By:
-----------------------------------------
Name:
------------------------------------
Title:
------------------------------------
-5-
<PAGE> 1
EXHIBIT 10.93
AGREEMENT
This AGREEMENT dated as of December ____, 1999 (this "Agreement") is
entered into by and among CRESCENT REAL ESTATE EQUITIES COMPANY, a Delaware
corporation ("Crescent"), CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a
Delaware limited partnership ("CREELP"), CRESCENT OPERATING, INC., a Delaware
corporation ("COPI"), and CRESCENT CS HOLDINGS II CORP., a Delaware corporation
("Subsidiary").
R E C I T A L S:
WHEREAS, on November 18, 1999 the United States House of
Representatives approved H.R. 1180, the Work Incentives Improvement Act of 1999
(the "1999 Legislation");
WHEREAS, on November 19, 1999 the United States Senate approved the
1999 Legislation;
WHEREAS, President Clinton has signed, or it is anticipated that he
will sign, the 1999 Legislation into law;
WHEREAS, the 1999 Legislation could adversely impact Crescent's status
as a real estate investment trust ("REIT") unless Crescent and Subsidiary
jointly elect that Subsidiary be treated as a taxable REIT subsidiary ("TRS"),
as that term is defined in the 1999 Legislation;
WHEREAS, CREELP and COPI (together, the "Stockholders") currently are
the owners of 100% of the issued and outstanding shares of Subsidiary, and
unless Crescent and Subsidiary jointly elect TRS status for Subsidiary, CREELP
may ultimately be prohibited from making any further equity contributions to
Subsidiary without negatively impacting Crescent's status as a REIT;
WHEREAS, the Stockholders and Subsidiary are desirous that CREELP be
permitted to make such further equity contributions;
WHEREAS, if Subsidiary is denied certain interest deductions solely as
a result of making a TRS election, CREELP has agreed to pay to COPI certain
amounts as described below to offset the indirect economic loss to COPI
resulting from the unavailability of such interest deductions to Subsidiary; and
WHEREAS, the Stockholders, along with Crescent and Subsidiary, desire
that Crescent and Subsidiary make such joint TRS election.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, covenants and agreements set forth herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
1. Agreement. Crescent and Subsidiary will make a joint election to cause
Subsidiary to be treated as a TRS of Crescent for federal income tax purposes.
Subsidiary and the Stockholders
-1-
<PAGE> 2
will take all other actions reasonably requested by Crescent that Crescent
believes are prudent in connection with such election and in light of Crescent's
status as a REIT. Such election will be made on a timely basis so that it is
effective on the first day that the 1999 Legislation is effective. The parties
to this Agreement agree that they will not take any action or omit to take any
action that would cause the Subsidiary to fail to qualify as a TRS of Crescent.
In furtherance of such covenants Subsidiary will make available to Crescent and
its representatives for inspection and copying all records and information
relevant to qualify and continue Subsidiary as a TRS, and the officers and
employees of Subsidiary and COPI will make themselves available for meetings and
consultations at such reasonable times and places as may be requested by
Crescent to discuss the status of Subsidiary's businesses and operations, and
any plans they may have for future activities of Subsidiary. In addition, within
ten days of Crescent's request therefor, COPI and Subsidiary shall cause the
corporate charter of Subsidiary to be amended (in form and substance reasonably
satisfactory to Crescent) to prohibit Subsidiary from taking actions that could
adversely impact Subsidiary's status as a TRS of Crescent and/or Crescent's
status as a REIT.
2. Power of Attorney.
(a) Subsidiary and each Stockholder does irrevocably constitute and
appoint Crescent with full power of substitution, as its true and lawful
attorney, in its name, place and stead, to execute, acknowledge, swear to,
deliver, record and file, as appropriate and in accordance with this Agreement
(i) all forms and other instruments required to qualify Subsidiary as a TRS of
Crescent and all amendments thereto required or permitted by law or the
provisions of this Agreement, and (ii) all certificates and other instruments
requiring execution by Subsidiary or any Stockholder and deemed necessary or
advisable by Crescent to qualify or continue Subsidiary as a TRS of Crescent.
(b) The power of attorney granted pursuant to Section 2(a) is
coupled with an interest and shall be irrevocable and survive and not be
affected by the subsequent bankruptcy or dissolution of Subsidiary or any
Stockholder; may be exercised by Crescent either by signing separately as
attorney-in-fact for Subsidiary or any Stockholder or by Crescent acting as
attorneys-in-fact for all of them; and shall survive the delivery of an
assignment by any Stockholder of the whole or any fraction of its interest in
Subsidiary.
(c) Subsidiary and each Stockholder shall execute and deliver to
Crescent, within a reasonable time after the receipt of Crescent's request
therefor, such further designations, powers of attorney and other instruments as
may be necessary or appropriate to carry out the provisions of this Agreement.
3. Protection of COPI Parties.
(a) If Subsidiary is denied an interest deduction for a taxable
year pursuant to Section 163(j) of the Internal Revenue Code of 1986, as
amended, solely because of Subsidiary's status as a TRS, CREELP shall pay to
COPI within 30 days after the filing of Subsidiary's federal tax return for such
taxable year an amount equal to the product of (i) the amount of the denied
interest deduction to the extent such deduction otherwise would have offset
taxable income of the Subsidiary for such taxable year, (ii) the maximum
corporate tax rate (currently 35%), (iii) the
-2-
<PAGE> 3
percentage of the value of the stock of Subsidiary owned by COPI, without taking
into account any premium or discount for the voting or non-voting rights
associated with the stock of Subsidiary) (currently 95%) at the end of such
taxable year and (iv) 10%.
(b) Notwithstanding any provision herein to the contrary, if COPI
and Subsidiary have timely and fully disclosed to Crescent all information
regarding Subsidiary's business operations relevant to maintaining its TRS
status, and COPI and Subsidiary have fully and timely implemented all actions
suggested by Crescent relative to preserving Subsidiary's TRS status, then in no
event and under no circumstances shall COPI, Subsidiary or any of their
directors, managers, officers, employees, agents or representatives
(collectively, the "COPI Parties"), have any liability whatsoever for any
failure of Subsidiary to qualify or continue to qualify as a TRS of Crescent, or
any adverse consequence to Crescent or CREELP in any way related to any such
failure. Provided such conditions are satisfied, such COPI Parties are hereby
fully and forever released by Crescent and CREELP from any and all liability,
claims and costs related to or associated with any failure of Subsidiary to
qualify or continue as a TRS of Crescent.
(c) Notwithstanding any provision herein to the contrary, in no
event and under no circumstances, shall COPI be required to, in any way,
diminish its economic interests in, or diminish or surrender any stockholder
voting rights with respect to, Subsidiary.
4. Representations of Parties. Each of the parties hereto severally
represents, each with respect only to itself, as of the date hereof, as follows:
(a) It is duly organized and existing under the laws of the
jurisdiction of its organization, with full power and authority to execute and
deliver this Agreement, to enter into the transactions contemplated hereby and
to perform all the duties and obligations to be performed by it hereunder;
(b) It has duly authorized this Agreement and the transactions
contemplated hereby and the performance of all the duties and obligations to be
performed hereunder by all necessary corporate action; and
(c) It has duly executed and delivered this Agreement and this
Agreement constitutes its valid, legal and binding obligation.
5. Specific Performance. Subsidiary and each Stockholder acknowledges
that any failure to comply with the requirements of this Agreement would result
in irreparable injury to Crescent for which no adequate remedy at law may be
available. Accordingly, Subsidiary and each Stockholder consents to an
injunction requiring specific performance by them for their respective
obligations under this Agreement, without the necessity of showing actual or
threatened harm and without requiring to furnish a bond or other security.
-3-
<PAGE> 4
6. Miscellaneous.
(a) Modifications and Amendments. This Agreement may only be
modified, altered or amended by an agreement in writing executed by each of the
parties hereto.
(b) Headings. The headings of the sections and subsections of this
Agreement are for convenience and reference only and shall not be considered a
part hereof nor shall they be deemed to limit or otherwise affect any of the
terms or provisions hereof.
(c) Construction. This Agreement shall be construed in accordance
with the laws of the State of Texas without regard to the principles of
conflicts of laws.
(d) Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one agreement. It shall not be necessary for the same counterpart to
be signed by all of the parties in order for this instrument to be fully binding
upon any party signing at least one counterpart.
[The balance of this page is intentionally left blank.]
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives all as of the date
and year first above written.
CRESCENT:
CRESCENT REAL ESTATE EQUITIES COMPANY,
a Delaware corporation,
By:
------------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
CREELP:
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP,
a Delaware limited partnership,
By: CRESCENT REAL ESTATE EQUITIES, LTD.,
a Delaware corporation, its general partner,
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
COPI:
CRESCENT OPERATING, INC.,
a Delaware corporation,
By:
------------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
SUBSIDIARY:
CRESCENT CS HOLDINGS II CORP.,
a Delaware corporation,
By:
------------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
-5-
<PAGE> 1
EXHIBIT 10.94
AGREEMENT
This AGREEMENT dated as of December ____, 1999 (this "Agreement") is
entered into by and among CRESCENT REAL ESTATE EQUITIES COMPANY, a Delaware
corporation ("Crescent"), CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a
Delaware limited partnership ("CREELP"), CRESCENT OPERATING, INC., a Delaware
corporation ("COPI"), and CRESCENT CS HOLDINGS CORP., a Delaware corporation
("Subsidiary").
R E C I T A L S:
WHEREAS, on November 18, 1999 the United States House of
Representatives approved H.R. 1180, the Work Incentives Improvement Act of 1999
(the "1999 Legislation");
WHEREAS, on November 19, 1999 the United States Senate approved the
1999 Legislation;
WHEREAS, President Clinton has signed, or it is anticipated that he
will sign, the 1999 Legislation into law;
WHEREAS, the 1999 Legislation could adversely impact Crescent's status
as a real estate investment trust ("REIT") unless Crescent and Subsidiary
jointly elect that Subsidiary be treated as a taxable REIT subsidiary ("TRS"),
as that term is defined in the 1999 Legislation;
WHEREAS, CREELP and COPI (together, the "Stockholders") currently are
the owners of 100% of the issued and outstanding shares of Subsidiary, and
unless Crescent and Subsidiary jointly elect TRS status for Subsidiary, CREELP
may ultimately be prohibited from making any further equity contributions to
Subsidiary without negatively impacting Crescent's status as a REIT;
WHEREAS, the Stockholders and Subsidiary are desirous that CREELP be
permitted to make such further equity contributions;
WHEREAS, if Subsidiary is denied certain interest deductions solely as
a result of making a TRS election, CREELP has agreed to pay to COPI certain
amounts as described below to offset the indirect economic loss to COPI
resulting from the unavailability of such interest deductions to Subsidiary; and
WHEREAS, the Stockholders, along with Crescent and Subsidiary, desire
that Crescent and Subsidiary make such joint TRS election.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, covenants and agreements set forth herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
1. Agreement. Crescent and Subsidiary will make a joint election to
cause Subsidiary to be treated as a TRS of Crescent for federal income tax
purposes. Subsidiary and the Stockholders
-1-
<PAGE> 2
will take all other actions reasonably requested by Crescent that Crescent
believes are prudent in connection with such election and in light of Crescent's
status as a REIT. Such election will be made on a timely basis so that it is
effective on the first day that the 1999 Legislation is effective. The parties
to this Agreement agree that they will not take any action or omit to take any
action that would cause the Subsidiary to fail to qualify as a TRS of Crescent.
In furtherance of such covenants Subsidiary will make available to Crescent and
its representatives for inspection and copying all records and information
relevant to qualify and continue Subsidiary as a TRS, and the officers and
employees of Subsidiary and COPI will make themselves available for meetings and
consultations at such reasonable times and places as may be requested by
Crescent to discuss the status of Subsidiary's businesses and operations, and
any plans they may have for future activities of Subsidiary. In addition, within
ten days of Crescent's request therefor, COPI and Subsidiary shall cause the
corporate charter of Subsidiary to be amended (in form and substance reasonably
satisfactory to Crescent) to prohibit Subsidiary from taking actions that could
adversely impact Subsidiary's status as a TRS of Crescent and/or Crescent's
status as a REIT.
2. Power of Attorney.
(a) Subsidiary and each Stockholder does irrevocably constitute and
appoint Crescent with full power of substitution, as its true and lawful
attorney, in its name, place and stead, to execute, acknowledge, swear to,
deliver, record and file, as appropriate and in accordance with this Agreement
(i) all forms and other instruments required to qualify Subsidiary as a TRS of
Crescent and all amendments thereto required or permitted by law or the
provisions of this Agreement, and (ii) all certificates and other instruments
requiring execution by Subsidiary or any Stockholder and deemed necessary or
advisable by Crescent to qualify or continue Subsidiary as a TRS of Crescent.
(b) The power of attorney granted pursuant to Section 2(a) is
coupled with an interest and shall be irrevocable and survive and not be
affected by the subsequent bankruptcy or dissolution of Subsidiary or any
Stockholder; may be exercised by Crescent either by signing separately as
attorney-in-fact for Subsidiary or any Stockholder or by Crescent acting as
attorneys-in-fact for all of them; and shall survive the delivery of an
assignment by any Stockholder of the whole or any fraction of its interest in
Subsidiary.
(c) Subsidiary and each Stockholder shall execute and deliver to
Crescent, within a reasonable time after the receipt of Crescent's request
therefor, such further designations, powers of attorney and other instruments as
may be necessary or appropriate to carry out the provisions of this Agreement.
3. Protection of COPI Parties.
(a) If Subsidiary is denied an interest deduction for a taxable
year pursuant to Section 163(j) of the Internal Revenue Code of 1986, as
amended, solely because of Subsidiary's status as a TRS, CREELP shall pay to
COPI within 30 days after the filing of Subsidiary's federal tax return for such
taxable year an amount equal to the product of (i) the amount of the denied
interest deduction to the extent such deduction otherwise would have offset
taxable income of the Subsidiary for such taxable year, (ii) the maximum
corporate tax rate (currently 35%), (iii) the
-2-
<PAGE> 3
percentage of the value of the stock of Subsidiary owned by COPI, without taking
into account any premium or discount for the voting or non-voting rights
associated with the stock of Subsidiary) (currently 95%) at the end of such
taxable year and (iv) 10%.
(b) Notwithstanding any provision herein to the contrary, if COPI
and Subsidiary have timely and fully disclosed to Crescent all information
regarding Subsidiary's business operations relevant to maintaining its TRS
status, and COPI and Subsidiary have fully and timely implemented all actions
suggested by Crescent relative to preserving Subsidiary's TRS status, then in no
event and under no circumstances shall COPI, Subsidiary or any of their
directors, managers, officers, employees, agents or representatives
(collectively, the "COPI Parties"), have any liability whatsoever for any
failure of Subsidiary to qualify or continue to qualify as a TRS of Crescent, or
any adverse consequence to Crescent or CREELP in any way related to any such
failure. Provided such conditions are satisfied, such COPI Parties are hereby
fully and forever released by Crescent and CREELP from any and all liability,
claims and costs related to or associated with any failure of Subsidiary to
qualify or continue as a TRS of Crescent.
(c) Notwithstanding any provision herein to the contrary, in no
event and under no circumstances, shall COPI be required to, in any way,
diminish its economic interests in, or diminish or surrender any stockholder
voting rights with respect to, Subsidiary.
4. Representations of Parties. Each of the parties hereto severally
represents, each with respect only to itself, as of the date hereof, as follows:
(a) It is duly organized and existing under the laws of the
jurisdiction of its organization, with full power and authority to execute and
deliver this Agreement, to enter into the transactions contemplated hereby and
to perform all the duties and obligations to be performed by it hereunder;
(b) It has duly authorized this Agreement and the transactions
contemplated hereby and the performance of all the duties and obligations to be
performed hereunder by all necessary corporate action; and
(c) It has duly executed and delivered this Agreement and this
Agreement constitutes its valid, legal and binding obligation.
5. Specific Performance. Subsidiary and each Stockholder acknowledges
that any failure to comply with the requirements of this Agreement would result
in irreparable injury to Crescent for which no adequate remedy at law may be
available. Accordingly, Subsidiary and each Stockholder consents to an
injunction requiring specific performance by them for their respective
obligations under this Agreement, without the necessity of showing actual or
threatened harm and without requiring to furnish a bond or other security.
-3-
<PAGE> 4
6. Miscellaneous.
(a) Modifications and Amendments. This Agreement may only be
modified, altered or amended by an agreement in writing executed by each of the
parties hereto.
(b) Headings. The headings of the sections and subsections of this
Agreement are for convenience and reference only and shall not be considered a
part hereof nor shall they be deemed to limit or otherwise affect any of the
terms or provisions hereof.
(c) Construction. This Agreement shall be construed in accordance
with the laws of the State of Texas without regard to the principles of
conflicts of laws.
(d) Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one agreement. It shall not be necessary for the same counterpart to
be signed by all of the parties in order for this instrument to be fully binding
upon any party signing at least one counterpart.
[The balance of this page is intentionally left blank.]
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives all as of the date
and year first above written.
CRESCENT:
CRESCENT REAL ESTATE EQUITIES COMPANY,
a Delaware corporation,
By:
-----------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
CREELP:
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP,
a Delaware limited partnership,
By: CRESCENT REAL ESTATE EQUITIES, LTD.,
a Delaware corporation, its general partner,
By:
---------------------------------------
Name:
-----------------------------------
Title:
---------------------------------
COPI:
CRESCENT OPERATING, INC.,
a Delaware corporation,
By:
-----------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
SUBSIDIARY:
CRESCENT CS HOLDINGS CORP.,
a Delaware corporation,
By:
-----------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
-5-
<PAGE> 1
EXHIBIT 10.95
AGREEMENT
This AGREEMENT dated as of December ____, 1999 (this "Agreement") is
entered into by and among CRESCENT REAL ESTATE EQUITIES COMPANY, a Delaware
corporation ("Crescent"), CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a
Delaware limited partnership ("CREELP"), CRESCENT OPERATING, INC., a Delaware
corporation ("COPI"), and DESERT MOUNTAIN DEVELOPMENT COMPANY, a Delaware
corporation ("Subsidiary").
R E C I T A L S:
WHEREAS, on November 18, 1999 the United States House of
Representatives approved H.R. 1180, the Work Incentives Improvement Act of 1999
(the "1999 Legislation");
WHEREAS, on November 19, 1999 the United States Senate approved the
1999 Legislation;
WHEREAS, President Clinton has signed, or it is anticipated that he
will sign, the 1999 Legislation into law;
WHEREAS, the 1999 Legislation could adversely impact Crescent's status
as a real estate investment trust ("REIT") unless Crescent and Subsidiary
jointly elect that Subsidiary be treated as a taxable REIT subsidiary ("TRS"),
as that term is defined in the 1999 Legislation;
WHEREAS, CREELP and COPI (together, the "Stockholders") currently are
the owners of 100% of the issued and outstanding shares of Subsidiary, and
unless Crescent and Subsidiary jointly elect TRS status for Subsidiary, CREELP
may ultimately be prohibited from making any further equity contributions to
Subsidiary without negatively impacting Crescent's status as a REIT;
WHEREAS, the Stockholders and Subsidiary are desirous that CREELP be
permitted to make such further equity contributions;
WHEREAS, if Subsidiary is denied certain interest deductions solely as
a result of making a TRS election, CREELP has agreed to pay to COPI certain
amounts as described below to offset the indirect economic loss to COPI
resulting from the unavailability of such interest deductions to Subsidiary; and
WHEREAS, the Stockholders, along with Crescent and Subsidiary, desire
that Crescent and Subsidiary make such joint TRS election.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, covenants and agreements set forth herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
-1-
<PAGE> 2
1. Agreement. Crescent and Subsidiary will make a joint election to
cause Subsidiary to be treated as a TRS of Crescent for federal income tax
purposes. Subsidiary and the Stockholders will take all other actions reasonably
requested by Crescent that Crescent believes are prudent in connection with such
election and in light of Crescent's status as a REIT. Such election will be made
on a timely basis so that it is effective on the first day that the 1999
Legislation is effective. The parties to this Agreement agree that they will not
take any action or omit to take any action that would cause the Subsidiary to
fail to qualify as a TRS of Crescent. In furtherance of such covenants
Subsidiary will make available to Crescent and its representatives for
inspection and copying all records and information relevant to qualify and
continue Subsidiary as a TRS, and the officers and employees of Subsidiary and
COPI will make themselves available for meetings and consultations at such
reasonable times and places as may be requested by Crescent to discuss the
status of Subsidiary's businesses and operations, and any plans they may have
for future activities of Subsidiary. In addition, within ten days of Crescent's
request therefor, COPI and Subsidiary shall cause the corporate charter of
Subsidiary to be amended (in form and substance reasonably satisfactory to
Crescent) to prohibit Subsidiary from taking actions that could adversely impact
Subsidiary's status as a TRS of Crescent and/or Crescent's status as a REIT.
2. Power of Attorney.
(a) Subsidiary and each Stockholder does irrevocably constitute and
appoint Crescent with full power of substitution, as its true and lawful
attorney, in its name, place and stead, to execute, acknowledge, swear to,
deliver, record and file, as appropriate and in accordance with this Agreement
(i) all forms and other instruments required to qualify Subsidiary as a TRS of
Crescent and all amendments thereto required or permitted by law or the
provisions of this Agreement, and (ii) all certificates and other instruments
requiring execution by Subsidiary or any Stockholder and deemed necessary or
advisable by Crescent to qualify or continue Subsidiary as a TRS of Crescent.
(b) The power of attorney granted pursuant to Section 2(a) is
coupled with an interest and shall be irrevocable and survive and not be
affected by the subsequent bankruptcy or dissolution of Subsidiary or any
Stockholder; may be exercised by Crescent either by signing separately as
attorney-in-fact for Subsidiary or any Stockholder or by Crescent acting as
attorneys-in-fact for all of them; and shall survive the delivery of an
assignment by any Stockholder of the whole or any fraction of its interest in
Subsidiary.
(c) Subsidiary and each Stockholder shall execute and deliver to
Crescent, within a reasonable time after the receipt of Crescent's request
therefor, such further designations, powers of attorney and other instruments as
may be necessary or appropriate to carry out the provisions of this Agreement.
3. Protection of COPI Parties.
(a) If Subsidiary is denied an interest deduction for a taxable
year pursuant to Section 163(j) of the Internal Revenue Code of 1986, as
amended, solely because of Subsidiary's status as a TRS, CREELP shall pay to
COPI within 30 days after the filing of Subsidiary's federal tax return for such
taxable year an amount equal to the product of (i) the amount of the denied
-2-
<PAGE> 3
interest deduction to the extent such deduction otherwise would have offset
taxable income of the Subsidiary for such taxable year, (ii) the maximum
corporate tax rate (currently 35%), (iii) the percentage of the value of the
stock of Subsidiary owned by COPI, without taking into account any premium or
discount for the voting or non-voting rights associated with the stock of
Subsidiary) (currently 95%) at the end of such taxable year and (iv) 10%.
(b) Notwithstanding any provision herein to the contrary, if COPI
and Subsidiary have timely and fully disclosed to Crescent all information
regarding Subsidiary's business operations relevant to maintaining its TRS
status, and COPI and Subsidiary have fully and timely implemented all actions
suggested by Crescent relative to preserving Subsidiary's TRS status, then in no
event and under no circumstances shall COPI, Subsidiary or any of their
directors, managers, officers, employees, agents or representatives
(collectively, the "COPI Parties"), have any liability whatsoever for any
failure of Subsidiary to qualify or continue to qualify as a TRS of Crescent, or
any adverse consequence to Crescent or CREELP in any way related to any such
failure. Provided such conditions are satisfied, such COPI Parties are hereby
fully and forever released by Crescent and CREELP from any and all liability,
claims and costs related to or associated with any failure of Subsidiary to
qualify or continue as a TRS of Crescent.
(c) Notwithstanding any provision herein to the contrary, in no
event and under no circumstances, shall COPI be required to, in any way,
diminish its economic interests in, or diminish or surrender any stockholder
voting rights with respect to, Subsidiary.
4. Representations of Parties. Each of the parties hereto severally
represents, each with respect only to itself, as of the date hereof, as follows:
(a) It is duly organized and existing under the laws of the
jurisdiction of its organization, with full power and authority to execute and
deliver this Agreement, to enter into the transactions contemplated hereby and
to perform all the duties and obligations to be performed by it hereunder;
(b) It has duly authorized this Agreement and the transactions
contemplated hereby and the performance of all the duties and obligations to be
performed hereunder by all necessary corporate action; and
(c) It has duly executed and delivered this Agreement and this
Agreement constitutes its valid, legal and binding obligation.
5. Specific Performance. Subsidiary and each Stockholder acknowledges
that any failure to comply with the requirements of this Agreement would result
in irreparable injury to Crescent for which no adequate remedy at law may be
available. Accordingly, Subsidiary and each Stockholder consents to an
injunction requiring specific performance by them for their respective
obligations under this Agreement, without the necessity of showing actual or
threatened harm and without requiring to furnish a bond or other security.
-3-
<PAGE> 4
6. Miscellaneous.
(a) Modifications and Amendments. This Agreement may only be
modified, altered or amended by an agreement in writing executed by each of the
parties hereto.
(b) Headings. The headings of the sections and subsections of this
Agreement are for convenience and reference only and shall not be considered a
part hereof nor shall they be deemed to limit or otherwise affect any of the
terms or provisions hereof.
(c) Construction. This Agreement shall be construed in accordance
with the laws of the State of Texas without regard to the principles of
conflicts of laws.
(d) Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one agreement. It shall not be necessary for the same counterpart to
be signed by all of the parties in order for this instrument to be fully binding
upon any party signing at least one counterpart.
[The balance of this page is intentionally left blank.]
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives all as of the date
and year first above written.
CRESCENT:
CRESCENT REAL ESTATE EQUITIES COMPANY,
a Delaware corporation,
By:
---------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
CREELP:
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP,
a Delaware limited partnership,
By: CRESCENT REAL ESTATE EQUITIES, LTD.,
a Delaware corporation, its general partner,
By:
--------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
COPI:
CRESCENT OPERATING, INC.,
a Delaware corporation,
By:
---------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
SUBSIDIARY:
DESERT MOUNTAIN DEVELOPMENT COMPANY,
a Delaware corporation,
By:
---------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
-5-
<PAGE> 1
EXHIBIT 10.96
AGREEMENT
This AGREEMENT dated as of December ____, 1999 (this "Agreement") is
entered into by and among CRESCENT REAL ESTATE EQUITIES COMPANY, a Delaware
corporation ("Crescent"), CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a
Delaware limited partnership ("CREELP"), CRESCENT OPERATING, INC., a Delaware
corporation ("COPI"), and THE WOODLANDS LAND COMPANY, INC., a Texas corporation
("Subsidiary").
R E C I T A L S:
WHEREAS, on November 18, 1999 the United States House of
Representatives approved H.R. 1180, the Work Incentives Improvement Act of 1999
(the "1999 Legislation");
WHEREAS, on November 19, 1999 the United States Senate approved the
1999 Legislation;
WHEREAS, President Clinton has signed, or it is anticipated that he
will sign, the 1999 Legislation into law;
WHEREAS, the 1999 Legislation could adversely impact Crescent's status
as a real estate investment trust ("REIT") unless Crescent and Subsidiary
jointly elect that Subsidiary be treated as a taxable REIT subsidiary ("TRS"),
as that term is defined in the 1999 Legislation;
WHEREAS, CREELP and COPI (together, the "Stockholders") currently are
the owners of 100% of the issued and outstanding shares of Subsidiary, and
unless Crescent and Subsidiary jointly elect TRS status for Subsidiary, CREELP
may ultimately be prohibited from making any further equity contributions to
Subsidiary without negatively impacting Crescent's status as a REIT;
WHEREAS, the Stockholders and Subsidiary are desirous that CREELP be
permitted to make such further equity contributions;
WHEREAS, if Subsidiary is denied certain interest deductions solely as
a result of making a TRS election, CREELP has agreed to pay to COPI certain
amounts as described below to offset the indirect economic loss to COPI
resulting from the unavailability of such interest deductions to Subsidiary; and
WHEREAS, the Stockholders, along with Crescent and Subsidiary, desire
that Crescent and Subsidiary make such joint TRS election.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, covenants and agreements set forth herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
-1-
<PAGE> 2
1. Agreement. Crescent and Subsidiary will make a joint election to
cause Subsidiary to be treated as a TRS of Crescent for federal income tax
purposes. Subsidiary and the Stockholders will take all other actions reasonably
requested by Crescent that Crescent believes are prudent in connection with such
election and in light of Crescent's status as a REIT. Such election will be made
on a timely basis so that it is effective on the first day that the 1999
Legislation is effective. The parties to this Agreement agree that they will not
take any action or omit to take any action that would cause the Subsidiary to
fail to qualify as a TRS of Crescent. In furtherance of such covenants
Subsidiary will make available to Crescent and its representatives for
inspection and copying all records and information relevant to qualify and
continue Subsidiary as a TRS, and the officers and employees of Subsidiary and
COPI will make themselves available for meetings and consultations at such
reasonable times and places as may be requested by Crescent to discuss the
status of Subsidiary's businesses and operations, and any plans they may have
for future activities of Subsidiary. In addition, within ten days of Crescent's
request therefor, COPI and Subsidiary shall cause the corporate charter of
Subsidiary to be amended (in form and substance reasonably satisfactory to
Crescent) to prohibit Subsidiary from taking actions that could adversely impact
Subsidiary's status as a TRS of Crescent and/or Crescent's status as a REIT.
2. Power of Attorney.
(a) Subsidiary and each Stockholder does irrevocably constitute and
appoint Crescent with full power of substitution, as its true and lawful
attorney, in its name, place and stead, to execute, acknowledge, swear to,
deliver, record and file, as appropriate and in accordance with this Agreement
(i) all forms and other instruments required to qualify Subsidiary as a TRS of
Crescent and all amendments thereto required or permitted by law or the
provisions of this Agreement, and (ii) all certificates and other instruments
requiring execution by Subsidiary or any Stockholder and deemed necessary or
advisable by Crescent to qualify or continue Subsidiary as a TRS of Crescent.
(b) The power of attorney granted pursuant to Section 2(a) is
coupled with an interest and shall be irrevocable and survive and not be
affected by the subsequent bankruptcy or dissolution of Subsidiary or any
Stockholder; may be exercised by Crescent either by signing separately as
attorney-in-fact for Subsidiary or any Stockholder or by Crescent acting as
attorneys-in-fact for all of them; and shall survive the delivery of an
assignment by any Stockholder of the whole or any fraction of its interest in
Subsidiary.
(c) Subsidiary and each Stockholder shall execute and deliver to
Crescent, within a reasonable time after the receipt of Crescent's request
therefor, such further designations, powers of attorney and other instruments as
may be necessary or appropriate to carry out the provisions of this Agreement.
3. Protection of COPI Parties.
(a) If Subsidiary is denied an interest deduction for a taxable
year pursuant to Section 163(j) of the Internal Revenue Code of 1986, as
amended, solely because of Subsidiary's status as a TRS, CREELP shall pay to
COPI within 30 days after the filing of Subsidiary's federal tax return for such
taxable year an amount equal to the product of (i) the amount of the denied
-2-
<PAGE> 3
interest deduction to the extent such deduction otherwise would have offset
taxable income of the Subsidiary for such taxable year, (ii) the maximum
corporate tax rate (currently 35%), (iii) the percentage of the value of the
stock of Subsidiary owned by COPI, without taking into account any premium or
discount for the voting or non-voting rights associated with the stock of
Subsidiary) (currently 95%) at the end of such taxable year and (iv) 10%.
(b) Notwithstanding any provision herein to the contrary, if COPI
and Subsidiary have timely and fully disclosed to Crescent all information
regarding Subsidiary's business operations relevant to maintaining its TRS
status, and COPI and Subsidiary have fully and timely implemented all actions
suggested by Crescent relative to preserving Subsidiary's TRS status, then in no
event and under no circumstances shall COPI, Subsidiary or any of their
directors, managers, officers, employees, agents or representatives
(collectively, the "COPI Parties"), have any liability whatsoever for any
failure of Subsidiary to qualify or continue to qualify as a TRS of Crescent, or
any adverse consequence to Crescent or CREELP in any way related to any such
failure. Provided such conditions are satisfied, such COPI Parties are hereby
fully and forever released by Crescent and CREELP from any and all liability,
claims and costs related to or associated with any failure of Subsidiary to
qualify or continue as a TRS of Crescent.
(c) Notwithstanding any provision herein to the contrary, in no
event and under no circumstances, shall COPI be required to, in any way,
diminish its economic interests in, or diminish or surrender any stockholder
voting rights with respect to, Subsidiary.
4. Representations of Parties. Each of the parties hereto severally
represents, each with respect only to itself, as of the date hereof, as follows:
(a) It is duly organized and existing under the laws of the
jurisdiction of its organization, with full power and authority to execute and
deliver this Agreement, to enter into the transactions contemplated hereby and
to perform all the duties and obligations to be performed by it hereunder;
(b) It has duly authorized this Agreement and the transactions
contemplated hereby and the performance of all the duties and obligations to be
performed hereunder by all necessary corporate action; and
(c) It has duly executed and delivered this Agreement and this
Agreement constitutes its valid, legal and binding obligation.
5. Specific Performance. Subsidiary and each Stockholder acknowledges
that any failure to comply with the requirements of this Agreement would result
in irreparable injury to Crescent for which no adequate remedy at law may be
available. Accordingly, Subsidiary and each Stockholder consents to an
injunction requiring specific performance by them for their respective
obligations under this Agreement, without the necessity of showing actual or
threatened harm and without requiring to furnish a bond or other security.
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<PAGE> 4
6. Miscellaneous.
(a) Modifications and Amendments. This Agreement may only be
modified, altered or amended by an agreement in writing executed by each of the
parties hereto.
(b) Headings. The headings of the sections and subsections of this
Agreement are for convenience and reference only and shall not be considered a
part hereof nor shall they be deemed to limit or otherwise affect any of the
terms or provisions hereof.
(c) Construction. This Agreement shall be construed in accordance
with the laws of the State of Texas without regard to the principles of
conflicts of laws.
(d) Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one agreement. It shall not be necessary for the same counterpart to
be signed by all of the parties in order for this instrument to be fully binding
upon any party signing at least one counterpart.
[The balance of this page is intentionally left blank.]
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<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives all as of the date
and year first above written.
CRESCENT:
CRESCENT REAL ESTATE EQUITIES COMPANY,
a Delaware corporation,
By:
---------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
CREELP:
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP,
a Delaware limited partnership,
By: CRESCENT REAL ESTATE EQUITIES, LTD.,
a Delaware corporation, its general partner,
By:
-------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
COPI:
CRESCENT OPERATING, INC.,
a Delaware corporation,
By:
---------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
SUBSIDIARY:
THE WOODLANDS LAND COMPANY, INC.,
a Texas corporation,
By:
---------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
-5-
<PAGE> 1
EXHIBIT 10.97
CREDIT AND SECURITY AGREEMENT
THIS CREDIT AND SECURITY AGREEMENT (as it may be modified, supplemented or
amended from time to time, this "Agreement") is made and entered into as of
March 11, 1999 between CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a
Delaware limited partnership (the "Lender"), and CRESCENT OPERATING, INC., a
Delaware corporation (the "Borrower").
RECITALS
WHEREAS, the Borrower has requested that the Lender extend a credit
facility (the "Loan") in the maximum aggregate principal amount of $19,500,000
for the purpose of permitting the Borrower to make certain investments
identified herein;
WHEREAS, the Lender is willing to extend the Loan for such purpose on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the agreements,
covenants and conditions contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions.
(a) The following terms which are defined in the Uniform Commercial Code
in effect in the State of Texas on the date hereof are used herein as
so defined: Accounts, Chattel Paper, Documents, Equipment, Farm
Products, General Intangibles, Instruments, Inventory and Proceeds.
(b) The following terms, as used herein, have the following meanings:
"Agreement" has the meaning set forth in the initial paragraph hereof.
"Americold Assets" has the meaning set forth in Section 2.6.
"Americold Transaction" has the meaning set forth in Section 2.6.
"Bankruptcy Event of Default" has the meaning set forth in Section 7.1.
"Borrower" means Crescent Operating, Inc., a Delaware corporation, and its
permitted successors and assigns.
"Business Day" means any day except a Saturday, Sunday, or other day on
which commercial banks in Texas are authorized by law to close.
<PAGE> 2
"Cash Equivalents" means (a) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed or insured by the United
States Government or any agency thereof, (b) certificates of deposit and
eurodollar time deposits with maturities of one year or less from the date of
acquisition and overnight bank deposits of any commercial bank having capital
and surplus in excess of $500,000,000, (c) repurchase obligations of any
commercial bank or investment bank satisfying the requirements of clause (b) of
this definition, having a term of not more than 30 days with respect to
securities issued or fully guaranteed or insured by the United States Government
or any agency thereof, (d) commercial paper issued in the United States which is
rated at least A-2 by Standard and Poor's Services or P-2 by Moody's Investors
Service, (e) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, by any political subdivision or taxing authority of any
such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government are rated at least A by Standard and
Poor's Services or A by Moody's Investors Service, (f) securities with
maturities of one year or less from the date of acquisition backed by standby
letters of credit issued by any commercial bank satisfying the requirements of
clause (b) of this definition, or (g) shares of money market mutual or similar
funds which invest substantially exclusively in assets satisfying the
requirements of clauses (a) through (f) of this definition.
"Closing Date" means the date this Agreement becomes effective in
accordance with Section 3.1.
"Code" means the Uniform Commercial Code as from time to time in effect in
the State of Texas.
"Collateral" has the meaning set forth in Section 4.1.
"Collateral Account" has the meaning set forth in Section 4.2.
"Consolidated Net Income" or "Consolidated Net Loss" for any fiscal period,
means the amount which, in conformity with GAAP, would be set forth opposite the
caption "net income" (or any like caption), as the case may be, on a
consolidated statement of earnings of the Borrower and its Subsidiaries, if any,
for such fiscal period.
"COPI Credit Agreement" means the Credit and Security Agreement dated as of
September 21, 1998 between the Borrower and the Lender, as amended by the First
Amendment to Credit and Security Agreement dated as of March 11, 1999, as such
agreement may be further amended, supplemented or otherwise modified from time
to time.
"COPI Note" means the promissory note of the Borrower payable to the order
of the Lender under the terms of the COPI Credit Agreement, as the same may be
modified, supplemented or amended from time to time, and any note or notes
issued in substitution or replacement therefor or in addition thereto.
"Debt" of any Person means at any date, (i) all obligations of such Person
which in accordance with GAAP would be classified on a balance sheet of such
Person as liabilities of such Person ("debt"), (ii) all debt of others secured
by a Lien on any asset of such Person,
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<PAGE> 3
whether or not such debt is assumed by such Person, and (iii) all debt of others
guaranteed by such Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Default Rate" has the meaning set forth in Section 2.3(b).
"EBITDA" means for any fiscal period, the Consolidated Net Income or
Consolidated Net Loss, as the case may be, for such fiscal period, after
restoring thereto amounts deducted for (a) extraordinary losses (or deducting
therefrom any amounts included therein on account of extraordinary gains) and
special charges, (b) depreciation and amortization (including write-offs or
write-downs) and special charges, (c) the amount of interest expense of the
Borrower and its Subsidiaries, if any, determined on a consolidated basis in
accordance with GAAP, for such period on the aggregate principal amount of their
consolidated indebtedness, (d) the amount of tax expense of the Borrower and its
Subsidiaries, if any, determined on a consolidated basis in accordance with
GAAP, for such period and (e) the aggregate amount of fixed and contingent
rentals payable by the Borrower and its Subsidiaries, if any, determined on a
consolidated basis in accordance with GAAP, for such period with respect to
leases of real and personal property.
"Event of Default" has the meaning set forth in Section 7.1.
"GAAP" means generally accepted accounting principles in effect from time
to time.
"Interest Rate" has the meaning set forth in Section 2.3(a).
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Lender" means Crescent Real Estate Equities Limited Partnership, a
Delaware limited partnership, and its successors and assigns.
"Lien" means, with respect to any asset, any mortgage, deed of trust, lien,
pledge, charge, security interest, or encumbrance of any kind in respect of such
asset.
"Line of Credit Credit Agreement" means the Line of Credit Credit and
Security Agreement dated as of May 21, 1997 between the Borrower and the Lender,
as amended by the First Amendment to Line of Credit Credit and Security
Agreement dated as of August 11, 1998, as further amended by the Second
Amendment to Line of Credit Credit and Security Agreement dated as of September
21, 1998, as further amended by the Third Amendment to Line of Credit Credit and
Security Agreement as of March 11,1999, as such agreement may be further
modified, supplemented or amended from time to time.
"Line of Credit Note" means the Amended and Restated Line of Credit Note of
the Borrower payable to the order of Lender dated August 11, 1998, evidencing
the obligation of the Borrower to repay the loan under the Line of Credit Credit
Agreement, as such note may be
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<PAGE> 4
modified, supplemented or amended from time to time, and any note or notes
issued in substitution or replacement therefor or in addition thereto.
"Loan" has the meaning set forth in the recitals hereto.
"Loan Commitment" has the meaning set forth in Section 2.1.
"Loan Documents" means this Agreement, the Note, the Pledge Agreement and
all other documents, agreements, and instruments referred to in or required to
be delivered or actually delivered in connection herewith or therewith, as any
of them may be modified, supplemented, or amended from time to time.
"Material Debt" means Debt (other than the Note) of the Borrower, arising
in one or more related or unrelated transactions, in an aggregate principal
amount exceeding $50,000.
"Maturity Date" means May 21, 2007.
"Note" means the promissory note of the Borrower payable to the order of
the Lender under the terms of this Agreement dated as of March 11, 1999, as the
same may be modified, supplemented, or amended from time to time, and any note
or notes issued in substitution or replacement therefor or in addition thereto,
substantially in the form of Exhibit A hereto, in the original principal amount
of Nineteen Million Five Hundred Thousand Dollars ($19,500,000.00), evidencing
the obligation of the Borrower to repay the Loan, as modified, supplemented or
amended from time to time.
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof.
"Pledge Agreement" means the Amended and Restated Pledge Agreement made by
Borrower in favor of the Lender dated as of June 16, 1997, as amended by the
First Amendment to Amended and Restated Pledge Agreement dated as of September
21, 1998, as the same may be further amended, supplemented or otherwise modified
from time to time.
"Secured Obligations" means the collective reference to the unpaid
principal of and interest on the Note, the Term Note, the Line of Credit Note,
the COPI Note and all other obligations and liabilities of the Borrower to the
Lender whether direct or indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, that may arise under, out of, or
connection with, this Agreement, the Term Loan Credit and Security Agreement,
the Line of Credit Credit Agreement, the COPI Credit Agreement, the Note, the
Term Note, the Line of Credit Note, the COPI Note, the Pledge Agreement, or any
other document, made, delivered or given in connection therewith, in each case
whether on account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership or other business entity of which such Person owns
directly or indirectly through one or more intermediaries 50% or more of the
voting stock, partnership interests or other interests
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<PAGE> 5
thereof or which is controlled or capable of being controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof.
"Term Loan Credit and Security Agreement" means the Amended and Restated
Credit and Security Agreement dated as of May 21, 1997 between the Borrower and
the Lender, as amended by the First Amendment to Amended and Restated Credit and
Security Agreement dated as of August 11, 1998, as further amended by the Second
Amendment to Amended and Restated Credit and Security Agreement dated as of
September 21, 1998, as further amended by the Third Amendment to Amended and
Restated Credit and Security Agreement dated as of March 11, 1999, as such
agreement may be further modified, supplemented or amended from time to time.
"Term Note" means the Amended and Restated Promissory Note of the Borrower
payable to the order of the Lender dated as of May 21, 1997, evidencing the
obligation of the Borrower to repay the loan under the Term Loan Credit and
Security Agreement, as such note may be modified, supplemented, or amended from
time to time, and any note or notes issued in substitution or replacement
therefor or in addition thereto.
"Termination Date" shall mean the date 95 days from the date upon which the
Loan has been satisfied in full.
SECTION 1.2. Rules of Construction.
(a) Words of the masculine gender shall be deemed and construed to include
correlative words of the feminine and neuter genders. Unless the
context shall otherwise indicate, words importing the singular number
shall include the plural and vice versa.
(b) Reference to a section number, such as this Section 1.2, shall mean
and include all provisions within that section of this Agreement,
unless a particular subsection, paragraph or subparagraph is
specified.
(c) Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered hereunder
shall be prepared in accordance with GAAP as in effect from time to
time, except as otherwise specified herein, applied on a basis
consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited
consolidated financial statements of the Borrower delivered to the
Lender.
ARTICLE 2
COMMITMENT AND NOTE
SECTION 2.1. Commitment.
The Lender agrees, on and subject to the terms and conditions set forth in
this Agreement, to advance to the Borrower the principal amount of Nineteen
Million Five Hundred Thousand Dollars ($19,500,000.00) (the "Loan
Commitment").
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<PAGE> 6
SECTION 2.2. The Note.
(a) The Loan will be evidenced by the Note. Payments under the Note shall
be applied first to any fees, costs or expenses due under the Note or
hereunder, then to interest, and then to principal.
(b) Notwithstanding any other provision of this Agreement, all outstanding
principal and interest of the Loan and all other amounts payable
hereunder, if not sooner paid, shall be due and payable on the
Maturity Date.
SECTION 2.3. Interest Rate and Payments.
(a) Unless an Event of Default shall have occurred and be continuing, the
Loan shall bear interest on the outstanding principal amount thereof
until paid in full, at a rate per annum equal to Nine Percent (9%)
(the "Interest Rate").
(b) Upon and during an Event of Default, the Loan shall accrue interest on
the outstanding principal balance of the Loan and, to the extent
permitted by applicable law, on the unpaid interest, at a rate per
annum equal to the Interest Rate plus an additional 5.0% per annum
(the "Default Rate"), provided that in no event shall the Default Rate
exceed the maximum rate of interest permitted by applicable law.
(c) Interest shall be due during the term hereof on the first Business Day
of each August, November, February and May, or such other date as the
Borrower and the Lender may mutually agree in writing.
(d) Notwithstanding Section 2.3(c), if the sum of (i) the amount of
interest to be paid by the Borrower to the Lender pursuant to this
Agreement and (ii) the amount of principal and interest to be paid by
the Borrower to the Lender pursuant to the Term Loan Credit and
Security Agreement, the Line of Credit Credit Agreement, and the COPI
Credit Agreement, exceeds the amount of EBITDA of the Borrower for the
immediately preceding calendar quarter (ending the last day of
September, December, March, or June), the Borrower shall not be
obligated to repay the amount of interest otherwise due pursuant to
the terms hereof in excess of the amount of EBITDA of the Borrower for
the immediately preceding calendar quarter.
(e) Accrued interest not paid when due shall be compounded quarterly and
added to the outstanding principal amount of the Loan.
(f) On the Maturity Date, the Borrower shall repay in full all accrued but
unpaid interest and the entire unpaid principal amount of the Loan.
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<PAGE> 7
SECTION 2.4. General Provisions as to Payments.
The Borrower shall make each payment of principal of, and interest on, the
Loan not later than 11:00 A.M. Fort Worth, Texas time on the date when due, to
the Lender at the Lender's office at 777 Main Street, Suite 2100, Fort Worth,
Texas 76102 in same day or other immediately available funds. Whenever any
payment of principal of, or interest on, any Loan shall be due on a day which is
not a Business Day, the date for payment thereof shall be extended to the next
succeeding Business Day. If the date for any payment of principal is extended by
operation of law or otherwise, interest thereon shall be payable for such
extended time. All such payments shall be made without setoff or counterclaim
and without reduction for, and free from, any and all present or future taxes,
levies, imposts, duties, fees, charges, deductions, withholdings, restrictions
or conditions of any nature imposed by any government or political subdivision
or taking authority thereof (but excluding any taxes imposed on or measured by
the overall net income of the Lender).
SECTION 2.5. Computation of Interest.
All interest shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day, but excluding
the last day).
SECTION 2.6. Use of Proceeds.
The proceeds of the Loan shall be used solely to enable the Borrower (i) to
accomplish the acquisition of various assets (the "Americold Assets") associated
with the cold storage business through a joint venture entity to be established
and funded together with Vornado Operating Company (the "Americold
Transaction"), (ii) to make payments to Lender under the Line of Credit Note to
the extent any proceeds of the Loan are not used to accomplish the Americold
Transaction, and (iii) to make such other investments as the Lender may consent
to in writing, which consent may be withheld in the Lender's sole discretion.
SECTION 2.7. Evidence of Debt.
(a) The Lender shall record (i) the amount of the advance made hereunder,
(ii) the amount of any principal or interest due and payable or to
become due and payable from the Borrower to the Lender hereunder, and
(iii) the amount of any sum received by the Lender hereunder from the
Borrower.
(b) The entries recorded by the Lender shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts
of the obligations of the Borrower therein recorded; provided,
however, that the failure of the Lender to record or any error in any
record shall not in any manner affect the obligation of the Borrower
to repay (with applicable interest) the Loans made to such Borrower in
accordance with the terms of this Agreement.
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<PAGE> 8
ARTICLE 3
EFFECTIVENESS AND CONDITIONS TO BORROWING
This Agreement shall become effective on the date hereof; provided that
each of the conditions set forth below shall have been satisfied (or waived
in accordance with Section 8.3):
(i) The Lender shall have received this Agreement, duly executed by
the Borrower;
(ii) The Lender shall have received from the Borrower a certificate
that each of the representations and warranties of the Borrower
contained in this Agreement is true, correct, and complete as of
the Closing Date;
(iii) The Lender shall have received a duly executed Note dated as of
the Closing Date; and
(iv) No event, which, after execution of this Agreement, would
constitute an Event of Default hereunder shall have occurred and
be continuing.
ARTICLE 4
SECURITY INTEREST
SECTION 4.1. Grant of Security Interest.
As security for the prompt payment, performance, and observance in full of
the Secured Obligations, the Borrower hereby pledges and assigns to the
Lender, and grants to the Lender a continuing security interest in and lien
on all of the following property now owned or at any time hereafter
acquired by the Borrower or in which the Borrower now has or at any time in
the future may acquire any right, title or interest including, without
limitation, all Americold Assets (the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Documents;
(iv) all Equipment;
(v) all General Intangibles;
(vi) all Instruments;
(vii) all Inventory;
(viii) all books and recordings pertaining to the Collateral; and
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<PAGE> 9
(ix) to the extent not otherwise included, all Proceeds and products
of any of the foregoing, in any form (whether cash or non-cash)
and all collateral security and guarantees given by any Person
with respect to any of the foregoing.
SECTION 4.2. Collateral Account
(a) Establishment of Collateral Account. Upon a request from the Lender or
upon the occurrence of an Event of Default, there shall be established
and at all times thereafter there shall be maintained by the Borrower,
a non-interest bearing cash collateral account with a financial
institution approved by the Lender (the "Collateral Account") subject
to the terms of this Agreement.
(b) Rights, Title and Interest of Collateral Account. All right, title and
interest in and to the Collateral Account shall vest exclusively in
the Lender. The Borrower shall have no rights with respect to the
Collateral Account and the Lender shall have sole dominion and control
over the Collateral Account and the monies deposited therein. Monies
deposited in the Collateral Account shall constitute security for the
Secured Obligations. The Borrower hereby pledges and assigns to the
Lender and hereby grants to the Lender a security interest in, all
right, title or interest (if any) which the Borrower now has or may
hereafter have or purport or claim to have in or to the Collateral
Account and all monies held therein, any investments made with such
monies and any and all certificates or instruments from time to time
representing or evidencing such investments (and all proceeds
thereof).
(c) Maintaining the Collateral Account. If a Collateral Account is
established hereunder, until the Termination Date of this Agreement:
(i) The Borrower will maintain the Collateral Account with a
financial institution approved by the Lender.
(ii) All monies received by the Lender while a Default or an Event of
Default has occurred and is continuing, and any monies received
as a result of investments made as contemplated by subsection
4.2(c)(iii) hereof, shall be deposited in the Collateral
Account.
(iii) Pending the disbursement thereof pursuant to the terms of this
Agreement, all monies in the Collateral Account shall (to the
extent it is practical to do so) be invested by the Lender in
Cash Equivalents. All such investments shall be evidenced either
(a) by negotiable certificates or instruments which are held by
or for the account of the Lender or (b) by book entries
maintained in a State in which the Lender may be granted by book
entries a security interest in the securities relating thereto.
In the absence of its gross negligence or willful misconduct,
the Lender shall not have any liability out of or in connection
with any investment made in accordance with the provisions
herein or for any loss or decline in value of any
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<PAGE> 10
investment or from any loss resulting directly or indirectly
from any investment made pursuant to and in accordance with the
provisions hereof.
SECTION 4.3. Remedies.
(a) Proceeds to be Turned Over to the Lender. When a Default or an Event
of Default has occurred and is continuing all Proceeds (as defined in
the Code) of the Collateral received by the Borrower consisting of
cash, checks and other near-cash items shall be held by the Borrower
in trust for the Lender, segregated from other funds of the Borrower,
and shall, forthwith upon receipt by the Borrower, be turned over to
the Lender in the exact form received by the Borrower (duly indorsed
by the Borrower to the Lender, if required) and held by the Lender in
the Collateral Account. All Proceeds while held by the Lender in the
Collateral Account (or by the Borrower in trust for the Lender) shall
continue to be held as collateral security for all the Secured
Obligations and shall not constitute payment thereof until applied as
provided in subsection 4.3(b).
(b) Application of Proceeds. At such intervals as may be agreed upon by
the Borrower and the Lender, or, if an Event of Default has occurred
and is continuing at any time at the Lender's election, the Lender may
apply all or any part of Proceeds held by it in payment of the Secured
Obligations in such order as the Lender may elect, and any part of
such funds which the Lender elects not so to apply and deems not
required as collateral security for the Secured Obligations shall be
paid over from time to time by the Lender to the Borrower or to
whomsoever may be lawfully entitled to receive the same. Any balance
of such Proceeds remaining after the Secured Obligations shall have
been paid in full and the Commitment shall have expired or otherwise
been terminated shall be paid over to the Borrower or to whomsoever
may be lawfully entitled to receive the same.
(c) Code Remedies. If an Event of Default has occurred and is continuing,
the Lender may exercise, in addition to all other rights and remedies
granted to it in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Secured Obligations,
all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Lender, without demand
of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to
below) to or upon the Borrower or any other Person (all and each of
which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give option or options to
purchase, or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more
parcels at public or private sale or sales, at any exchange, broker's
board or office of the Lender or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption
of any credit risk. The Lender shall have the right upon any
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such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of
the Collateral so sold, free of any right or equity of redemption in
the Borrower, which right or equity is hereby waived or released. The
Borrower further agrees, at the Lender's request, to assemble the
Collateral and make it available to the Lender at places which the
Lender shall reasonably select, whether at the Borrower's premises or
elsewhere. To the extent permitted by applicable law, the Borrower
waives all claims, damages and demands it may acquire against the
Lender arising out of the exercise by them of any rights hereunder. If
any notice of a proposed sale or other disposition of Collateral shall
be required by law, such notice shall be deemed reasonable and proper
if given at least 10 days before such sale or other disposition.
(d) The exercise by the Lender of or failure or refusal to so exercise any
right, remedy or power granted under this Agreement or available to
the Lender at law or in equity or under statute shall in no manner
affect the Borrower's liability to the Lender, and the Lender shall be
under no obligation or duty to exercise any of the rights, remedies or
powers conferred upon it hereby or by applicable law, and it shall
incur no liability for any act or failure to act in connection with
the collection of, or the preservation of any rights under, any of the
Collateral.
SECTION 4.4. Lender Appointment as Attorney-in-Fact; Lender Performance of
Borrower's Obligations.
(a) Powers. The Borrower hereby irrevocably constitutes and appoints the
Lender and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Borrower
and in the name of the Borrower or in its own name, for the purpose of
carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the
purposes of this Agreement, and, without limiting the generality of
the foregoing, the Borrower hereby gives the Lender the power and
right, on behalf of the Borrower, without notice to or assent by the
Borrower, to do any or all of the following:
(i) at any time when an Event of Default has occurred and is
continuing in the name of the Borrower or its own name, or
otherwise, take possession of and indorse and collect any
checks, drafts, notes, acceptances or other instruments for the
payment of moneys due with respect to any Collateral and file
any claim or take any other action or proceeding in any court of
law or equity or otherwise deemed appropriate by the Lender for
the purpose of collecting any and all such moneys due with
respect to any Collateral whenever payable;
(ii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any
insurance called for by the terms
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of this Agreement and pay all or any part of the premiums
therefor and the costs thereof;
(iii) execute, in connection with any sale provided for in subsection
4.3(c), any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral; and
(iv) at any time when an Event of Default has occurred and is
continuing (1) direct any party liable for any payment under any
of the Collateral to make payment of any and all moneys due or
to become due thereunder directly to the Lender or as the Lender
shall direct; (2) ask or demand for, collect, receive payment of
and receipt for, any and all moneys, claims and other amounts
due or to become due at any time in respect of or arising out of
any Collateral; (3) sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications, notices and
other documents in connection with any of the Collateral; (4)
commence and prosecute any suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect
the Collateral or any thereof and to enforce any other right in
respect of any Collateral; (5) defend any suit, action or
proceeding brought against the Borrower with respect to any
Collateral (other than any such suit, action or proceeding
brought by the Lender); (6) settle, compromise or adjust any
such suit, action or proceeding (other than any such suit,
action or proceeding brought by the Lender) and, in connection
therewith, to give such discharges or releases as the Lender may
deem appropriate; (7) generally, sell, transfer, pledge and make
any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Lender were the
absolute owner thereof for all purposes, and do, at the Lender's
option and the Borrower's expense, at any time, or from time to
time, all acts and things which the Lender deems necessary to
protect, preserve or realize upon the Collateral and the
Lender's security interests therein and to effect the intent of
this Agreement, all as fully and effectively as the Borrower
might do.
(b) Ratification; Power Coupled With An Interest. The Borrower hereby
ratifies all that said attorneys shall lawfully do or cause to be done
by virtue hereof in accordance with the terms of this Agreement,
absent gross negligence or willful misconduct on the part of the
Lender. All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and are irrevocable until this
Agreement is terminated and the security interests created hereby are
released.
SECTION 4.5. Performance by Lender of Borrower's Obligations.
If the Borrower fails to perform or comply with any of its agreements
contained in this Article 4, the Lender, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.
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SECTION 4.6. Borrower's Reimbursement Obligation.
The expenses of the Lender incurred in connection with actions undertaken
as provided in this Article 4, together with interest thereon at a rate equal to
the rate per annum at which interest would then be payable on past due Loans
under this Agreement, from the date of payment by the Lender to the date
reimbursed by the Borrower, shall be payable by the Borrower to the Lender on
demand.
SECTION 4.7. Duty of the Lender.
The Lender's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Code or otherwise, shall be to deal with it in the same manner as the
Lender deals with similar property for its own account. Neither the Lender, nor
any of its respective officers, directors, employees or agents shall be liable
for failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Borrower or any other Person or to
take any other action whatsoever with regard to the Collateral or any part
thereof. The powers conferred on the Lender hereunder are solely to protect the
Lender's interests in the Collateral and shall not impose any duty upon the
Lender to exercise any such powers. The Lender shall be accountable only for
amounts that its actually receives as a result of the exercise of such powers,
and neither it nor any of its officers, directors, employees or agents shall be
responsible to the Borrower for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct.
SECTION 4.8. Execution of Financing Statements.
Pursuant to Section 9-402 of the Code, the Borrower authorizes the Lender
to file financing statements with respect to the Collateral without the
signature of the Borrower in such form and in such filing offices as the Lender
reasonably determines appropriate to perfect the security interests of the
Lender under this Agreement. The Lender shall provide the Borrower with copies
of any such financing statements. A carbon, photographic or other reproduction
of this Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
SECTION 4.9. The Pledge Agreement.
In addition to the security interest granted hereunder, the Borrower shall
grant to the Lender a security interest in the Pledged Partnership Interests and
the Pledged Stock (as those terms are defined in the Pledge Agreement) pursuant
to the Pledge Agreement.
SECTION 4.10. Pledged Notes.
With respect to any promissory notes now or hereinafter owned or owing to
the Borrower, including, without limitation, the promissory note from Charter
Behavioral Health Systems, LLC, such notes shall be promptly endorsed in blank
and delivered to the Lender.
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SECTION 4.11. Release of Collateral.
In the event that the Borrower desires to have any Collateral released in
connection with the sale, assignment, transfer or other conveyance of such
Collateral (including the release of any promissory note in connection with the
repayment thereof), the Borrower shall obtain the prior written consent of the
Lender to the release of such Collateral and the repayment of the portion of the
Loan which is allocable to such Collateral, which consent (of both the release
and the amount to be repaid) may be withheld in the Lender's sole and absolute
discretion. Any request by the Borrower for release of Collateral shall be in
writing and shall state that portion of the Loan which is allocable to such
Collateral. Provided that the Lender consents to any such release, the Lender
agrees to release such Collateral promptly following receipt by the Lender of
the allocable portion of the Loan attributable to such Collateral.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 5.1. Existence and Power.
The Borrower is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware, and has all corporate power
and authority, and all material governmental licenses, authorizations, consents,
and approvals required to carry on its business as now conducted.
SECTION 5.2. Corporate and Government Authorization; No Contravention.
The execution, delivery, and performance by the Borrower of this Agreement,
the Pledge Agreement and the Note are within the scope of the Borrower's power
and authority, have been duly authorized by all necessary corporate action of
the Borrower, require no action by or in respect of, or filing with any
governmental body, agency, or official and do not contravene, or constitute a
default under, the Certificate of Incorporation or By-Laws of the Borrower or
under any provision of applicable law or regulation to which the Borrower is
subject, or of any judgment, injunction, order, or decree, binding upon the
Borrower, except for such contraventions as will not, singly or in the
aggregate, have a material adverse effect on the ability of the Borrower to
perform its obligations under this Agreement, the Pledge Agreement or the Note.
SECTION 5.3. Binding Effect.
This Agreement constitutes the legal, valid, binding, and enforceable
agreement of the Borrower, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability.
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SECTION 5.4. Litigation.
There is no action, suit or proceeding pending against, or to the knowledge
of the Borrower, threatened against or affecting the Borrower before any court
or arbitrator or any governmental body, agency or official which could
materially adversely affect the business, financial position, results of
operations, or prospects of the Borrower or which could materially adversely
affect the ability of the Borrower to perform its obligations under this
Agreement, the Pledge Agreement or the Note or which in any manner draws into
question the validity of this Agreement, the Pledge Agreement or the Note.
SECTION 5.5. Taxes.
The Borrower has filed all material tax returns and reports required by law
to have been filed and has paid all taxes and governmental charges thereby shown
to be due and payable.
SECTION 5.6. Debt.
Except as set forth in the financial statements delivered to the Lender
pursuant to Section 5.10, the Borrower has and will have no Debt outstanding on
a Closing Date other than (i) the Debt outstanding hereunder, (ii) Debt that has
previously been disclosed to the Lender in writing, and (iii) Debt that will
not, in the aggregate, have a material adverse effect on the business,
operations, or prospects of the Borrower.
SECTION 5.7. Title to Assets.
(a) The Borrower has legal title to or a legal and valid leasehold
interest in all property and assets owned by it on the date hereof,
and will have legal title to all property and assets acquired by it at
any time subsequent to the date hereof, free and clear of all Liens,
except Liens in favor of the Lender.
(b) Except for the security interest granted to the Lender pursuant to
this Agreement and except for Liens in favor of the Lender, the
Borrower owns each item of the Collateral free and clear of any and
all Liens or claims of others. No financing statement or other public
notice with respect to all or any part of the Collateral is on file or
of record in any public office, except such as have been filed in
favor of the Lender pursuant to this Agreement, the Pledge Agreement,
the COPI Credit Agreement, the Line of Credit Credit Agreement or the
Term Loan Credit and Security Agreement.
SECTION 5.8. Perfected First Priority Liens.
The security interests granted pursuant to this Agreement (a) constitute
perfected security interests in the Collateral in favor of the Lender, as
collateral security for the Secured Obligations and (b) are prior to all other
Liens on the Collateral in existence on the date hereof.
SECTION 5.9. Inventory and Equipment.
The Inventory and the Equipment are kept at the Borrower's principal
office.
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SECTION 5.10. Chief Executive Office.
The Borrower's principal office is located at 306 W. 7th St., Fort Worth,
Texas 76102.
SECTION 5.11. Farm Products.
None of the Collateral constitutes, or is the Proceeds of, Farm Products.
SECTION 5.12. Subsidiaries.
Upon request, the Borrower will provide to Lender a list of all of
Borrower's Subsidiaries.
SECTION 5.13. Financial Information.
All financial information which has been or shall hereafter be furnished by
or on behalf of the Borrower or by any other Person at the Borrower's direction
to the Lender for the purposes of or in connection with this Agreement present
fairly the financial condition as at the dates thereof (subject to normal year
end adjustments in the case of unaudited financial statements).
SECTION 5.14. No Material Adverse Change.
There has been no material adverse change in the business, financial
condition, operations, assets, revenues, properties, or prospects of the
Borrower taken as a whole from the financial information previously provided to
Lender.
ARTICLE 6
COVENANTS
The Borrower agrees that, so long as any amount payable hereunder remains
unpaid:
SECTION 6.1. Conduct of Business and Maintenance of Existence.
The Borrower will perform the intercompany agreement between the Lender and
the Borrower and such activities as are necessary or incidental thereto, and
will preserve, renew and keep in full force and effect its existence.
SECTION 6.2. Financial Information.
The Borrower will deliver to the Lender:
(a) as soon as available, either (i) for the applicable quarters, the Form
10-Q filed by the Borrower with the United States Securities and
Exchange Commission (the "SEC") but in no event more than forty-five
(45) days after the end of each fiscal quarter of the Borrower in
which a Form 10-Q is filed (unless the SEC has approved an extension
in which event the Borrower will deliver such copies of the Form 10-Q
simultaneously with delivery to the SEC), or (ii) for the applicable
quarter, the Form 10-K filed by the Borrower with the SEC but in no
event more than ninety (90) days after the end of the fiscal quarter
of the Borrower in which a
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Form 10-K is filed (unless the SEC has approved an extension in which
event the Borrower will deliver such copies of the Form 10-K
simultaneously with delivery to the SEC), or (iii) if Borrower does
not or is not required to file Forms 10-Q or 10-K with the SEC, copies
of the unaudited consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarter, and the related unaudited
consolidated statements of income, change in capital and cash flows
for the portion of the Borrower's fiscal year then elapsed, all in
reasonable detail and prepared in accordance with GAAP but in no event
more than forty-five (45) days after the end of each fiscal quarter;
and
(b) as soon as available, but in no event more than sixty (60) days after
the end of each of the first three quarters of each fiscal year of the
Borrower, financial statements of the Borrower, containing a balance
sheet and the related statements of income prepared on a cash basis,
showing the financial condition of the Borrower at the close of and
for such period.
The financial statements delivered pursuant to subsections (a) and (b) of
this Section 6.2 shall be certified by the president or chief financial officer
of the Borrower as true, complete, and correct and, as to the financial
statements delivered pursuant to subsection (a) of this Section 6.2, as having
been prepared in accordance with GAAP.
SECTION 6.3. Compliance with Laws.
The Borrower will comply with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities except where the
necessity of compliance therewith is contested in good faith by appropriate
proceedings or where the failure to comply therewith will not materially
adversely affect the business, operations, or financial condition of the
Borrower or the ability of the Borrower to perform its obligations under this
Agreement, the Pledge Agreement or the Note.
SECTION 6.4. Incurrence of Debt.
The Borrower will not issue, assume, guarantee, incur, or otherwise be or
become liable in respect of Debt, other than (i) Debt expressly approved by the
Lender in writing, which approval may be withheld in the Lender's sole
discretion, or (ii) non-recourse Debt financing secured by property of the
Borrower not constituting Collateral prior to or as of June 30, 1997 (the Lender
hereby agreeing to cooperate with the Borrower to subordinate or release its
Lien on such property to permit any lender of such financing to obtain a first
lien thereon).
SECTION 6.5. Limitation on Liens.
The Borrower will not create, incur, assume or suffer to exist any Lien
upon or with respect to any of its assets, whether now or hereafter acquired, or
assign or otherwise convey any right to receive income, except (i) Liens in
favor of the Lender; (ii) Liens expressly approved by the Lender, which approval
shall not be unreasonably withheld; (iii) Liens imposed by any governmental
authority for taxes, assessments or charges not yet due or which are being
contested in good faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on the books of the Borrower in accordance with
GAAP, and (iv) Liens disclosed
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to the Lender on or before the Closing Date that would not, in the aggregate,
have a material adverse effect on the business, operations, or prospects of the
Borrower.
SECTION 6.6. Consolidations, Mergers, and Sales of Assets.
The Borrower will not wind up, liquidate or dissolve its affairs or convey,
sell, lease or otherwise dispose of (or agree to do any of the foregoing at any
future time), whether in one or a series of transactions, all or any substantial
part of its assets, unless such transaction or series of transactions are
expressly approved by the Lender, which approval shall not be unreasonably
withheld.
SECTION 6.7. Books and Records.
The Borrower will keep books and records which accurately reflect all of
its business affairs and transactions in all material respects. The Borrower
will permit the Lender at reasonable times and intervals during normal business
hours to examine and photocopy extracts from any of its books or other corporate
records.
SECTION 6.8. Lien on Collateral.
The Borrower shall, at its sole cost and expense, perform all acts and
execute all documents requested by the Lender at any time to evidence, perfect,
maintain and enforce the Lender's security interest and the first priority
thereof in the Collateral. Upon the Lender's request, at any time and from time
to time, the Borrower shall, at its sole cost and expense, execute and deliver
to the Lender one or more financing statements (in form and substance
satisfactory to the Lender) pursuant to the Code and, where permitted by law,
the Borrower hereby authorizes the Lender to execute and file one or more
financing statements signed only by the Lender or to file a copy of this
Agreement as a financing statement.
SECTION 6.9. Restriction on Dividends.
The Borrower will not make dividend distributions to its shareholders at
any time when there exists an outstanding balance on the Loan.
SECTION 6.10. Restriction on Certain Amendments.
The Borrower will not amend its organizational documents without the prior
written consent of the Lender, which consent shall not be unreasonably withheld.
SECTION 6.11. Delivery of Instruments and Chattel Paper.
If any amount payable under or in connection with any of the Collateral
shall be or become evidenced by any Instrument or Chattel Paper, such Instrument
or Chattel Paper shall be immediately delivered to the Lender, duly indorsed in
a manner satisfactory to the Lender, to be held as Collateral pursuant to this
Agreement.
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SECTION 6.12. Maintenance of Insurance.
The Borrower will maintain, with financially sound and reputable companies,
insurance policies insuring the Inventory and Equipment, including the Americold
Assets, against loss by fire, explosion, theft and such other casualties as may
be reasonably satisfactory to the Lender, such policies to be in such form and
amounts and having such coverage as may be reasonably satisfactory to the
Lender, with losses payable to the Borrower and the Lender as their respective
interests may appear.
(a) All such insurance shall (1) provide that no cancellation, material
reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Lender of
written notice thereof, (2) name the Lender as an insured party and
(3) be reasonably satisfactory in all other respects to the Lender.
(b) The Borrower shall deliver to the Lender a report of a reputable
insurance broker with respect to such insurance in each calendar year
and such supplemental reports with respect thereto as the Lender may
from time to time reasonably request.
SECTION 6.13. Changes in Locations, Name, etc.
The Borrower will not unless it shall have given the Lender at least 30
days prior written notice of such change (or, in the case of Inventory and
Equipment, at least 10 days prior written notice, to the extent that the
Borrower has taken such action as reasonably may be required of it to maintain
the continuous perfection of the Lender's security interest in such Inventory or
Equipment, as the case may be):
(a) permit any of the Inventory (other than goods-in-transit and
immaterial amounts of goods in temporary locations in the ordinary
course of business) or Equipment to be kept at a location other than
Borrower's principal office;
(b) change the location of its principal office from that specified in
subsection 5.10; or
(c) change its name, identity or corporate structure to such an extent
that any financing statement filed by the Lender in connection with
this Agreement would become seriously misleading.
SECTION 6.14. Further Identification of Collateral.
The Borrower will furnish to the Lender from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Lender may reasonably request,
all in reasonable detail.
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SECTION 6.15. Notices.
The Borrower will advise the Lender promptly, in reasonable detail, of (a)
any Lien (other than security interests created hereby or Liens permitted under
this Agreement) on any of the Collateral and (b) the occurrence of any other
event which could reasonably be expected to have a material adverse effect on
the aggregate value of the Collateral or on the security interests created
hereby.
SECTION 6.16. Additional Collateral.
With respect to any Person other than Charter Behavioral Health Systems,
LLC and COPI Colorado, L.P. (being specifically excluded) that, subsequent to
the Closing Date, becomes a Subsidiary, the Borrower will promptly cause such
new Subsidiary to (i) execute and deliver to the Lender a guaranty of the Loan
in form and substance satisfactory to the Lender, and a new pledge agreement or
such amendments to the existing Pledge Agreement as the Lender shall deem
necessary or reasonably advisable to grant to the Lender, for the benefit of the
Lender, a Lien on the capital stock of such Subsidiary which is owned by the
Borrower or any of its Subsidiaries, (ii) deliver to the Lender the certificates
representing such capital stock, together with undated stock powers executed and
delivered in blank by a duly authorized officer of the Borrower or such
Subsidiary, as the case may be, (iii) take all actions necessary or advisable to
grant a security interest to the Lender in the property and assets of such
Subsidiary, including, without limitation, the filing of financing statements in
such jurisdictions as may be requested by the Lender and the execution and
delivery by such Subsidiary of a security agreement in a form acceptable to the
Lender.
SECTION 6.17. Deliveries of Borrower.
Upon request, the Borrower will deliver to Lender:
(i) proper financing statements (Forms UCC-1 or the appropriate
equivalent) necessary to perfect the security interest in the
Borrower's interest in the Collateral (or such part thereof in
which a security interest can be perfected thereby); and
(ii) (A) the articles of incorporation of the Borrower as in effect on
the Closing Date, certified as of a recent date by the Secretary
of State of Delaware, (B) the bylaws of the Borrower as in effect
on the Closing Date, certified as of a recent date by the
Secretary of the Borrower, (C) resolutions of the board of
directors of the Borrower authorizing the execution, delivery and
performance of this Agreement, certified as of the Closing Date
by its corporate secretary, (D) certificates as to the incumbency
of the officers of the Borrower, certified by its corporate
secretary, and (E) certificates of good standing of the Borrower
issued as of a recent date by the Secretary of State of Delaware.
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SECTION 6.18. Asset Distributions.
The Borrower will not sell, transfer, lease, contribute, convey or
otherwise dispose of all or any part of its assets to any Person, unless such
transfer, lease or other disposition is previously approved in writing by
Lender.
ARTICLE 7
DEFAULTS
SECTION 7.1. Events of Default.
If one or more of the following events ("Events of Default") shall have
occurred and be continuing:
(a) except as permitted pursuant to Section 2.2(b), the Borrower shall
fail to pay within five Business Days of the due date any principal or
interest on the Loan;
(b) any representation or warranty made by the Borrower hereunder or in
any certificate furnished by or on behalf of the Borrower shall be
incorrect when made in any material respect;
(c) the Borrower shall fail to observe or perform the provisions of
Section 6.9 hereof for five Business Days;
(d) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement, the Pledge Agreement, the Note
(other than those covered by clause (a), (b) or (c) above), or any
other Loan Document for 30 days (or, with respect to Section 6.2 of
this Agreement, for 30 days after written notice thereof has been
given to the Borrower by the Lender); provided however, if such
default is capable of cure and the Borrower is diligently proceeding
to cure such default, the cure period in this subsection (d) shall be
extended for such additional time, not to exceed 30 days, as is
reasonably necessary to complete such cure;
(e) the Borrower shall fail to make any payment in respect of any Material
Debt other than the Debt of the Borrower under this Agreement and the
Note when due or within any applicable grace period;
(f) any Default or Event of Default shall have occurred and be continuing
under the Term Loan Credit and Security Agreement, the COPI Credit
Agreement or the Line of Credit Credit Agreement.
(g) the Borrower shall commence a voluntary case or other proceeding
seeking liquidation, reorganization, or other relief with respect to
itself or its debts under any bankruptcy, insolvency, or other similar
law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian, or other similar official of
it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a
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general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any
action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against the
Borrower seeking liquidation, reorganization, rehabilitation,
conservation, or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian, rehabilitator, conservator, or other similar official of it
or any substantial part of its property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period of
120 days; or an order for relief shall be entered against the Borrower
under the federal bankruptcy laws or any state insolvency laws as now
or hereafter in effect;
(i) a judgment or order for the payment of money in excess of $500,000
shall be rendered against the Borrower and such judgment or order
shall continue unsatisfied, unstayed and unbonded for a period of 30
days; provided, however that a judgment or order fully covered by
insurance, which coverage has not been disputed by the insurer, shall
not be considered a Default;
then, and in every such event, the Lender may, by notice to the Borrower
declare the Note (together with accrued interest thereon) to be, and the
Note shall thereupon become, immediately due and payable without
presentment, demand, protest, or other notice of any kind, all of which are
hereby waived by the Borrower; provided that in the case of any of the
Events of Default specified in clause (g) or (h) above (each, a "Bankruptcy
Event of Default"), without any notice to the Borrower or any other act by
the Lender, the Note (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest, or other
notice of any kind, all of which are hereby waived by the Borrower.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1. Notices.
All notices, requests and other communications to any party hereunder shall
be in writing (including bank wire, telex, facsimile transmission or similar
writing) and shall be given to such party: (i) in the case of the Borrower or
the Lender at their respective addresses, telex numbers or facsimile numbers set
forth on the signature pages hereof or (ii) in the case of any party, such other
address, telex number or facsimile number as such party may hereafter specify
for the purpose by notice to the other party in accordance with this Section.
All notices shall be effective when received.
SECTION 8.2. Expenses; Indemnification.
(a) The Borrower shall pay (i) all out-of-pocket expenses reasonably
incurred by the Lender, including reasonable fees and disbursements of
counsel in connection with any waiver or consent hereunder or any
amendment hereof or any Default or
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alleged Default hereunder, and (ii) if an Event of Default occurs, all
out-of-pocket expenses incurred by the Lender, including reasonable
fees and disbursements of counsel in connection with such Event of
Default and collection, bankruptcy, insolvency, and other enforcement
proceedings resulting therefrom. The Borrower shall indemnify the
Lender against any transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by reason of the execution
and delivery of this Agreement, the Pledge Agreement or the Note.
(b) The Borrower agrees to indemnify the Lender and hold the Lender
harmless from and against any and all liabilities, losses, damages,
costs and expenses of any kind (other than general overhead and
administrative expenses), including, without limitation, the
reasonable fees and disbursements of counsel, which may be incurred by
the Lender in connection with any investigative, administrative, or
judicial proceeding (whether or not the Lender shall be designated a
party thereto) relating to or arising out of this Agreement, the
Pledge Agreement or the Note or any actual or proposed use of proceeds
of the Loan hereunder; provided that the Lender shall not have the
right to be indemnified hereunder for (i) any proceeding against the
Lender by any governmental authority charged with the supervision of
the Lender or (ii) its own gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
SECTION 8.3. Amendments and Waivers.
Any provision of this Agreement, the Pledge Agreement, the Note or any
other Loan Document may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Lender and the Borrower.
SECTION 8.4. Successors and Assigns.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that the Borrower may not assign or otherwise transfer any of its rights
under this Agreement without the prior written consent of the Lender. The
purchaser, assignee, transferee, or pledgee of any of the Lender's rights under
the Lender's security interest hereunder shall forthwith become vested with and
entitled to exercise all the rights, powers, and remedies given under this
Agreement to the Lender, as if said purchaser, assignee, transferee, or pledgee
were originally named as secured party herein.
SECTION 8.5. Governing Law; Submission to Jurisdiction.
THIS AGREEMENT, THE PLEDGE AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF TEXAS WITHOUT
GIVING EFFECT TO THE CHOICE OF LAW RULES THEREOF. The Borrower hereby submits to
the nonexclusive jurisdiction of the United States District Court for the
Northern District of Texas and of any Texas state court for purposes of all
legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. The Borrower irrevocably waives, to the
fullest extent permitted by law,
23
<PAGE> 24
any objection which it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
SECTION 8.6. Counterparts; Integration.
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement constitutes the entire
agreement and understanding among the parties hereto and supersedes any and all
prior agreements and understandings, oral or written, relating to the subject
matter hereof.
SECTION 8.7. WAIVER OF JURY TRIAL.
THE BORROWER AND THE LENDER HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. This waiver of right to a
trial by jury is separately given, knowingly and voluntarily, by the Borrower
and the Lender, and this waiver is intended to encompass individually each
instance and each issue as to which the right to a trial by jury would otherwise
accrue. The Borrower and the Lender are hereby authorized and requested to
submit this Agreement to any court having jurisdiction over the subject matters
and the parties hereto, so as to serve as conclusive evidence of the parties'
herein contained waiver of the right to trial by jury. Further, the Borrower and
the Lender hereby certify that no representative, attorney or agent of any other
party has represented, expressly or otherwise, to the Borrower, or the Lender
that any other party will not seek to enforce this waiver of right to trial by
jury provision.
SECTION 8.8. Termination; Release.
Until the Termination Date, this Agreement shall be a continuing agreement,
shall remain in full force and effect. After the Termination Date, this
Agreement shall terminate, and the Lender, at the request and expense of the
Borrower, will execute and deliver to Borrower a proper instrument or
instruments acknowledging the satisfaction and termination of this Agreement,
and will duly assign, transfer and deliver to the Borrower (without recourse and
without any representation or warranty) at the expense of the Lender the
Collateral if in the possession of the Lender or its agents and not theretofore
sold or otherwise applied or released pursuant to this Agreement.
SECTION 8.9. Effect of Headings.
The Article and Section headings herein are for convenience of reference
only and shall not affect the construction hereof.
24
<PAGE> 25
SECTION 8.10. Severability of Provisions.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall not invalidate the remaining provisions hereof or affect the
validity or enforceability of such provisions in any other jurisdiction.
SECTION 8.11. Application of Proceeds.
The parties agree that the Lender shall have the right to apply the
proceeds of any Collateral under this Agreement, the Term Loan Credit and
Security Agreement, the Line of Credit Credit Agreement, or the COPI Credit
Agreement in its sole discretion, against the Secured Obligations under the Term
Loan Credit and Security Agreement, the Secured Obligations under this
Agreement, the Secured Obligations under the Line of Credit Credit Agreement, or
the Secured Obligations under the COPI Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
CRESCENT OPERATING, INC.
By:
------------------------------------------
Name:
Title:
Notice Address:
306 W. 7th St., Suite 1000
Fort Worth, Texas 76102
Facsimile: (817) 339-2220
CRESCENT REAL ESTATE EQUITIES
LIMITED PARTNERSHIP
By: Crescent Real Estate Equities, Ltd., its
general partner
By:
------------------------------------------
Name:
Title:
Notice Address:
777 Main Street, Suite 2100
Fort Worth, Texas 76102
Facsimile: (817) 321-2000
25
<PAGE> 26
EXHIBIT A
FORM OF NOTE
$19,500,000.00 March 11, 1999
PROMISSORY NOTE
FOR VALUE RECEIVED, CRESCENT OPERATING, INC., a Delaware corporation
("Borrower") promises to pay to CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited partnership ("Lender"), at 777 Main Street,
Suite 2100, Fort Worth, Texas 76102, the principal sum of Nineteen Million Five
Hundred Thousand and No/100 Dollars ($19,500,000.00), with interest on the
principal balance from time to time remaining unpaid at the rates hereinafter
provided.
The Borrower promises to pay interest on the unpaid principal balance
hereof from the date hereof until paid in full pursuant to the Credit and
Security Agreement, dated as of March 11, 1999, between the Borrower and the
Lender (as the same may be amended, modified or supplemented from time to time,
the "Credit Agreement"). The Borrower promises to pay the aggregate outstanding
principal amount of the Loan together with interest thereon, on the dates, in
the amounts and at the rate or rates provided in the Credit Agreement; provided
that the interest payable shall not exceed the maximum rate permitted by
applicable law (the "Maximum Rate"). Interest on the principal hereof from time
to time remaining unpaid and, to the extent permitted by applicable law,
interest on the unpaid interest, shall bear interest from and [during] an Event
of Default at the Default Rate provided that in no event shall the Default Rate
be more than the Maximum Rate.
This note is the "Note" referred to in the Credit Agreement. This Note and
the holder hereof are entitled to all of the benefits provided for thereby or
referred to therein. Reference is hereby made to the Credit Agreement for a
statement of such benefits. Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the Credit Agreement for
provisions for the acceleration of the maturity hereof.
This Note shall be payable as provided in the Credit Agreement.
Upon the occurrence of any Event of Default (after the giving of any notice
required in the Credit Agreement and the expiration of any applicable grace
periods provided for in the Credit Agreement), all amounts then remaining unpaid
on this Note shall become immediately due and payable, and the holder hereof
shall have all rights and remedies of Lender under the Credit Agreement and
other Loan Documents. The failure to exercise the option to accelerate the
maturity of this Note upon the happening of any one or more of the Events of
Default hereunder shall not constitute a waiver of the right with respect to
such uncured default or any other event of uncured default hereunder or under
any other of the Loan Documents. The remedies of the holder hereof, as provided
in the Note and in any other of the Loan Documents, shall be cumulative and
concurrent and may be pursued separately, successively or together, as often as
occasion therefor shall arise, at the sole discretion of the holder. The
acceptance by the holder hereof of any payment under this Note which is less
than payment in full of all amounts due and payable at the time of such payment
shall not constitute a waiver of or impair, reduce, release, or extinguish any
of the rights or remedies of the holder hereof to exercise the foregoing
<PAGE> 27
option or any other option granted to the holder in this Note or in any other of
the Loan Documents, at that time or at any subsequent time, or nullify any prior
exercise of any such option.
The undersigned and all other parties now or hereafter liable for the
payment hereof, whether as endorser, surety, or otherwise, except as provided in
the Credit Agreement, severally waive demand, presentment, notice of dishonor,
notice of intention to accelerate the indebtedness evidenced hereby, notice of
the acceleration of the maturity hereof, diligence in collecting, grace, notice
and protest, and consent to all extensions which from time to time may be
granted by the holder hereof and to all partial payments hereon, whether before
or after maturity.
If this Note is not paid when due, whether at maturity or by acceleration,
or if it is collected through a bankruptcy, or other court, whether before or
after maturity, the undersigned agrees to pay all costs of collection,
including, but not limited to, reasonable attorneys' fees and expenses incurred
by the holder hereof.
All agreements between the undersigned and the holder hereof, whether now
existing or hereafter arising and whether written or oral, are hereby limited so
that in no contingency, whether by reason of acceleration of the maturity hereof
or otherwise, shall the interest contracted for, charged, received, paid, or
agreed to be paid to the holder hereof exceed the maximum amount permissible
under applicable law. If from any circumstance the holder hereof shall ever
receive anything of value deemed interest by applicable law in excess of the
maximum lawful amount, an amount equal to any excess interest shall be applied
to the reduction of the principal hereof and not to the payment of interest, or
if such excess interest exceeds the unpaid balance of principal hereof, such
excess shall be refunded to the undersigned. All interest paid or agreed to be
paid to the holder hereof shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full period until
payment in full of the principal so that the interest hereon for such full
period shall not exceed the maximum amount permitted by applicable law. This
paragraph shall control all agreements between the undersigned and the holder
hereof.
The loan transaction evidenced hereby shall not be governed by, or be
subject to, Chapter 15 of the Texas Credit Code (Title 79, Revised Civil
Statutes of Texas, 1925, as amended).
EXCEPT WHERE FEDERAL LAW IS APPLICABLE (INCLUDING, WITHOUT LIMITATION, ANY
FEDERAL USURY CEILING OR OTHER FEDERAL LAW THAT, FROM TIME TO TIME, IS
APPLICABLE TO THE INDEBTEDNESS EVIDENCED HEREIN AND THAT PREEMPTS STATE USURY
LAWS), THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE LAWS OF THE UNITED STATES APPLICABLE TO TRANSACTIONS IN SUCH
STATE.
CRESCENT OPERATING, INC.
By:
--------------------------
Name:
Title:
2
<PAGE> 1
EXHIBIT 10.98
FIRST AMENDMENT TO
CREDIT AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this "Amendment") is
made and entered into effective as of March 11, 1999 between CRESCENT REAL
ESTATE EQUITIES LIMITED PARTNERSHIP, a Delaware limited partnership (the
"Lender"), and CRESCENT OPERATING, INC., a Delaware corporation (the
"Borrower").
R E C I T A L S:
A. The parties executed that certain Credit and Security Agreement dated as
of September 21, 1998 (the "Original Agreement"). All capitalized terms not
otherwise defined in this Amendment will have the same meaning as described in
the Original Agreement.
B. The Borrower has requested that the Lender make a loan to it in the
principal amount of $19,500,000, the proceeds of which are to be used to
accomplish the acquisition of various assets associated with the cold storage
business through a joint venture entity to be established and funded together
with Vornado Operating Company (the "Americold Loan").
C. In order to induce the Lender to make the Americold Loan, the Borrower
has agreed to modify the Original Agreement to cross default and cross
collateralize the Loan with the Americold Loan.
D. The Borrower is willing to modify the Original Agreement for such
purpose on the terms and conditions set forth herein.
In consideration of the mutual covenants set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Section 1.1. The following definitions are hereby added to Section 1.1
of the Original Agreement to read as follows:
"Americold Credit Agreement" means the Credit and Security Agreement
dated as of March 11, 1999 between the Borrower and the Lender, as such
agreement may be amended, supplemented or otherwise modified from time to
time.
"Americold Note" means the promissory note of the Borrower payable to
the order of the Lender under the terms of the Americold Credit Agreement,
as the same may be modified, supplemented, or amended from time to time,
and any note or notes issued in substitution or replacement therefor or in
addition thereto.
2. Section 1.1. The definition of "Secured Obligations" in Section 1.1 of
the Original Agreement is hereby amended in its entirety to read as follows:
"Secured Obligations" means the collective reference to the unpaid
principal of and interest on the Note, the Line of Credit Note, the Term
Note, the Americold Note and
<PAGE> 2
all other obligations and liabilities of the Borrower to the Lender,
whether direct or indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, which may arise under, out of, or
connection with, this Agreement, the Line of Credit Credit Agreement, the
Term Loan Credit and Security Agreement, the Americold Credit Agreement,
the Note, the Line of Credit Note, the Term Note, the Americold Note, the
Pledge Agreement, or any other document, made, delivered or given in
connection therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise.
3. Section 4.1. Section 4.1 of the Original Agreement is hereby amended and
restated in its entirety to read as follows:
As security for the prompt payment, performance, and observance in
full of the Secured Obligations, the Borrower hereby pledges and assigns to
the Lender, and grants to the Lender a continuing security interest in and
lien on all of the following property now owned or at any time hereafter
acquired by the Borrower or in which the Borrower now has or at any time in
the future may acquire any right, title or interest (the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Documents;
(iv) all Equipment;
(v) all General Intangibles;
(vi) all Instruments;
(vii) all Inventory;
(viii) all books and recordings pertaining to the Collateral; and
(ix) to the extent not otherwise included, all Proceeds and products
of any of the foregoing, in any form (whether cash or non-cash)
and all collateral security and guarantees given by any Person
with respect to any of the foregoing.
4. Section 7.1. The word "or" is hereby deleted from the end of subsection
7.1(i) of the Original Agreement; the word "or" is hereby added to the end of
subsection 7.1(j) of the Original Agreement; and the following paragraph (k) is
hereby added to Section 7.1 of the Original Agreement to read as follows:
(k) an "Event of Default" under the Americold Credit Agreement;
5. Section 8.11. Section 8.11 of the Original Agreement is hereby amended
and restated in its entirety to read as follows:
2
<PAGE> 3
The parties agree that the Lender shall have the right to apply the
proceeds of any Collateral under this Agreement, the Line of Credit Credit
Agreement, the Term Loan Credit and Security Agreement or the Americold
Credit Agreement in its sole discretion, against the Secured Obligations
under this Agreement, the Secured Obligations under the Line of Credit
Credit Agreement, the Secured Obligations under the Term Loan Credit and
Security Agreement, or the Secured Obligations under the Americold Credit
Agreement.
6. Remainder of Original Agreement. Except as amended hereby, the Original
Agreement shall continue in full force and effect in the form that was effective
immediately before the execution of this Amendment.
7. Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
document.
8. Binding Effect. This Amendment shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto.
9. Governing Law and Severability. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas. Whenever possible,
each provision hereof shall be interpreted in such manner as to be effective and
valid under applicable law.
IN WITNESS WHEREOF, the parties below have executed this Amendment
effective as of the date first written above.
CRESCENT OPERATING, INC.
By:
-------------------------------------
Name:
Title:
CRESCENT REAL ESTATE EQUITIES
LIMITED PARTNERSHIP
By: Crescent Real Estate Equities, Ltd.,
its general partner
By:
----------------------------------
Name:
Title:
3
<PAGE> 1
EXHIBIT 10.99
THIRD AMENDMENT TO
AMENDED AND RESTATED
CREDIT AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT
(this "Amendment") is made and entered into effective as of March 11, 1999
between CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Lender"), and CRESCENT OPERATING, INC., a Delaware corporation
(the "Borrower").
R E C I T A L S:
A. The parties executed that certain Amended and Restated Credit and
Security Agreement dated as of May 21, 1997, as amended by that certain First
Amendment to Amended and Restated Credit and Security Agreement dated as of
August 11, 1998 and by that certain Second Amendment to Amended and Restated
Credit and Security Agreement dated as of September 21, 1998 (collectively, the
"Original Agreement"). All capitalized terms not otherwise defined in this
Amendment will have the same meaning as described in the Original Agreement.
B. The Borrower has requested that the Lender make a loan to it in the
principal amount of $19,500,000, the proceeds of which are to be used to
accomplish the acquisition of various assets associated with the cold storage
business through a joint venture entity to be established and funded together
with Vornado Operating Company (the "Americold Loan").
C. In order to induce the Lender to make the Americold Loan, the Borrower
has agreed to modify the Original Agreement to cross default and cross
collateralize the Loan with the Americold Loan.
D. The Borrower is willing to modify the Original Agreement for such
purpose on the terms and conditions set forth herein.
In consideration of the mutual covenants set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Section 1.1. The following definitions are hereby added to Section 1.1
of the Original Agreement to read as follows:
"Americold Credit Agreement" means the Credit and Security Agreement
dated as of March 11, 1999 between the Borrower and the Lender, as such
agreement may be amended, supplemented or otherwise modified from time to
time.
"Americold Note" means the promissory note of the Borrower payable to
the order of the Lender under the terms of the Americold Credit Agreement,
as the same may be modified, supplemented, or amended from time to time,
and any note or notes issued in substitution or replacement therefor or in
addition thereto.
<PAGE> 2
2. Section 1.1. The definition of "Secured Obligations" in Section 1.1 of
the Original Agreement is hereby amended in its entirety to read as follows:
"Secured Obligations" means the collective reference to the unpaid
principal of and interest on the Note, the Line of Credit Note, the COPI
Note, the Americold Note, and all other obligations and liabilities of the
Borrower to the Lender, whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may
arise under, out of, or connection with, this Agreement, the Line of Credit
Credit Agreement, the COPI Credit Agreement, the Americold Credit
Agreement, the Note, the Line of Credit Note, the COPI Note, the Americold
Note, the Pledge Agreement, or any other document, made, delivered or given
in connection therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise.
3. Section 4.1. Section 4.1 of the Original Agreement is hereby amended and
restated in its entirety to read as follows:
As security for the prompt payment, performance, and observance in
full of the Secured Obligations, the Borrower hereby pledges and assigns to
the Lender, and grants to the Lender a continuing security interest in and
lien on all of the following property now owned or at any time hereafter
acquired by the Borrower or in which the Borrower now has or at any time in
the future may acquire any right, title or interest (the "Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Documents;
(iv) all Equipment;
(v) all General Intangibles;
(vi) all Instruments;
(vii) all Inventory;
(viii) all books and recordings pertaining to the Collateral; and
(ix) to the extent not otherwise included, all Proceeds and products
of any of the foregoing, in any form (whether cash or non-cash)
and all collateral security and guarantees given by any Person
with respect to any of the foregoing.
4. Section 7.1. The word "or" is hereby deleted from the end of subsection
7.1(i) of the Original Agreement; the word "or" is hereby added to the end of
subsection 7.1(j) of the Original Agreement; and the following paragraph (k) is
hereby added to Section 7.1 of the Original Agreement to read as follows:
(k) an "Event of Default" under the Americold Credit Agreement;
2
<PAGE> 3
5. Section 8.11. Section 8.11 of the Original Agreement is hereby amended
and restated in its entirety to read as follows:
The parties agree that the Lender shall have the right to apply the
proceeds of any Collateral under this Agreement, the Line of Credit Credit
Agreement, the COPI Credit Agreement, or the Americold Credit Agreement in
its sole discretion, against the Secured Obligations under this Agreement,
the Secured Obligations under the Line of Credit Credit Agreement, the
Secured Obligations under the COPI Credit Agreement, or the Secured
Obligations under the Americold Credit Agreement.
6. Remainder of Original Agreement. Except as amended hereby, the Original
Agreement shall continue in full force and effect in the form that was effective
immediately before the execution of this Amendment.
7. Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
document.
8. Binding Effect. This Amendment shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto.
9. Governing Law and Severability. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas. Whenever possible,
each provision hereof shall be interpreted in such manner as to be effective and
valid under applicable law.
IN WITNESS WHEREOF, the parties below have executed this Amendment
effective as of the date first written above.
CRESCENT OPERATING, INC.
By:
-----------------------------------------------
Name:
Title:
CRESCENT REAL ESTATE EQUITIES
LIMITED PARTNERSHIP
By: Crescent Real Estate Equities, Ltd.,
its general partner
By:
--------------------------------------------
Name:
Title:
3
<PAGE> 1
EXHIBIT 10.100
THIRD AMENDMENT TO
LINE OF CREDIT
CREDIT AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO LINE OF CREDIT CREDIT AND SECURITY AGREEMENT (this
"Amendment") is made and entered into effective as of March 11, 1999 between
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Lender"), and CRESCENT OPERATING, INC., a Delaware corporation
(the "Borrower").
R E C I T A L S:
A. The parties executed that certain Line of Credit Credit and Security
Agreement dated as of May 21, 1997, as amended by that certain First Amendment
to Line of Credit Credit and Security Agreement dated as of August 11, 1998 and
by that certain Second Amendment to Line of Credit Credit and Security Agreement
dated as of September 21, 1998 (collectively, the "Original Agreement"). All
capitalized terms not otherwise defined in this Amendment will have the same
meaning as described in the Original Agreement.
B. The Borrower has requested that the Lender make a loan to it in the
principal amount of $19,500,000, the proceeds of which are to be used to
accomplish the acquisition of various assets associated with the cold storage
business through a joint venture entity to be established and funded together
with Vornado Operating Company (the "Americold Loan").
C. In order to induce the Lender to make the Americold Loan, the Borrower
has agreed to modify the Original Agreement to cross default and cross
collateralize the Loan with the Americold Loan and to reduce the maximum
aggregate principal amount of the Loan to $17,200,000.
D. The Borrower is willing to modify the Original Agreement for such
purpose on the terms and conditions set forth herein.
In consideration of the mutual covenants set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Section 1.1. The following definitions are hereby added to Section 1.1
of the Original Agreement to read as follows:
"Americold Credit Agreement" means the Credit and Security Agreement
dated as of March 11, 1999 between the Borrower and the Lender, as such
agreement may be amended, supplemented or otherwise modified from time to
time.
<PAGE> 2
"Americold Note" means the promissory note of the Borrower payable to the
order of the Lender under the terms of the Americold Credit Agreement, as the
same may be modified, supplemented, or amended from time to time, and any note
or notes issued in substitution or replacement therefor or in addition thereto.
2. Section 1.1. The definitions of "Note" and "Secured Obligations" in
Section 1.1 of the Original Agreement are hereby amended in their entirety to
read as follows:
"Note" means the amended and restated promissory note of the Borrower
payable to the order of the Lender under the terms of this Agreement, as
the same may be modified, supplemented, or amended from time to time, and
any note or notes issued in substitution or replacement therefor or in
addition thereto, substantially in the form of Exhibit B hereto, in the
maximum principal amount from time to time outstanding of up to Seventeen
Million Two Hundred Thousand Dollars ($17,200,000), evidencing the
obligation of the Borrower to repay the Loan, as modified, supplemented or
amended from time to time.
"Secured Obligations" means the collective reference to the unpaid
principal of and interest on the Note, the Term Note, the COPI Note, the
Americold Note, and all other obligations and liabilities of the Borrower
to the Lender, whether direct or indirect, absolute or contingent, due or
to become due, or now existing or hereafter incurred, which may arise
under, out of, or connection with, this Agreement, the Term Loan Credit and
Security Agreement, the COPI Credit Agreement, the Americold Credit
Agreement, the Note, the Term Note, the COPI Note, the Americold Note, the
Pledge Agreement, or any other document, made, delivered or given in
connection therewith, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise.
3. Section 2.1. Section 2.1(a) of the Original Agreement is hereby amended
by deleting the phrase "Thirty Million Four Hundred Thousand Dollars
($30,400,000)" and inserting the phrase "Seventeen Million Two Hundred Thousand
Dollars ($17,200,000)" in lieu thereof.
4. Section 4.1. Section 4.1 of the Original Agreement is hereby amended and
restated in its entirety to read as follows:
As security for the prompt payment, performance, and observance in
full of the Secured Obligations, the Borrower hereby pledges and assigns to
the Lender, and grants to the Lender a continuing security interest in and
lien on all of the following property now owned or at any time hereafter
acquired by the Borrower or in which the Borrower now has or at any time in
the future may acquire any right, title or interest (the "Collateral"):
i) all Accounts;
ii) all Chattel Paper;
iii) all Documents;
-2-
<PAGE> 3
iv) all Equipment;
v) all General Intangibles;
vi) all Instruments;
vii) all Inventory;
viii) all books and recordings pertaining to the Collateral; and
ix) to the extent not otherwise included, all Proceeds and products of
any of the foregoing, in any form (whether cash or non-cash) and all
collateral security and guarantees given by any Person with respect
to any of the foregoing.
5. Section 7.1. The word "or" is hereby added to the end of subsection
7.1(j) of the Original Agreement, and the following paragraph (k) is hereby
added to Section 7.1 of the Original Agreement to read as follows:
(k) an "Event of Default" under the Americold Credit Agreement;
6. Section 8.11. Section 8.11 of the Original Agreement is hereby amended
and restated in its entirety to read as follows:
The parties agree that the Lender shall have the right to apply the
proceeds of any Collateral under this Agreement, the Term Loan Credit and
Security Agreement, the COPI Credit Agreement, or the Americold Credit
Agreement in its sole discretion, against the Secured Obligations under
this Agreement, the Secured Obligations under the Term Loan Credit and
Security Agreement, the Secured Obligations under the COPI Credit
Agreement, or the Secured Obligations under the Americold Credit Agreement.
7. Remainder of Original Agreement. Except as amended hereby, the Original
Agreement shall continue in full force and effect in the form that was effective
immediately before the execution of this Amendment.
8. Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
document.
9. Binding Effect. This Amendment shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto.
10. Governing Law and Severability. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas. Whenever possible,
each provision hereof shall be interpreted in such manner as to be effective and
valid under applicable law.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties below have executed this Amendment
effective as of the date first written above.
CRESCENT OPERATING, INC.
By:
-------------------------------------
Name:
Title:
CRESCENT REAL ESTATE EQUITIES
LIMITED PARTNERSHIP
By: Crescent Real Estate Equities, Ltd.,
its general partner
By:
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Name:
Title:
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EXHIBIT 10.101
AGREEMENT FOR WHOLESALE FINANCING
(Industrial/Construction - Rental)
This Agreement for Wholesale Financing ("Agreement") is made as of May 31, 1996
between Deutsche Financial Services Corporation ("DFS") and Western Traction
Company., a [___] SOLE PROPRIETORSHIP, [__] PARTNERSHIP, [XX] CORPORATION, [__]
LIMITED LIABILITY COMPANY (check applicable term) ("Dealer"), having a principal
place of business located at 1333 Atlantic Street, Union City, CA 94587.
1. Extension of Credit. In the course of Dealer's business, Dealer
acquires new and used inventory and equipment ("Inventory") which is
manufactured or sold by, and/or which bears a trademark or trade name of: (a)
Svedala Industries, Inc./Dynapac Mfg. and Link-Belt Construction Equipment
Company or any of their subsidiaries or affiliated companies ("Vendor"), or (b)
other manufacturers or distributors. Subject to the terms of this Agreement,
DFS, in its sole discretion, may extend credit to Dealer from time to time to
purchase Inventory from Vendor or other manufacturers or distributors. If DFS
advances funds to Dealer following Dealer's execution of this Agreement, DFS
will be deemed to have entered into this Agreement with Dealer, whether or not
executed by DFS. DFS may combine all of DFS' advances to Dealer or on Dealer's
behalf, whether under this Agreement or any other agreement, and whether
provided by one or more of DFS' branch offices, together with all finance
charges, fees and expenses related thereto, to make one debt owed by Dealer.
DFS' decision to advance funds on any Inventory will not be binding until the
funds are actually advanced. DFS may, at any time and without notice to Dealer,
elect not to finance any Inventory sold by Vendor or another specific
manufacturer or distributor if Vendor or the specific manufacturer or
distributor is in default of its obligations to DFS, or with respect to which
DFS reasonably feels insecure.
2. Financing Terms and Statements of Transaction. Dealer and DFS agree
that certain financial terms of any advance made by DFS under this Agreement,
whether regarding finance charges, other fees, maturities, curtailments or other
financial terms, are not set forth herein because such terms depend, in part,
upon the availability from time to time of discounts, payment terms or other
incentives from Vendor and other manufacturers and distributors, prevailing
economic conditions, and other economic factors which may vary over time. It is
therefore in DFS' and Dealer's best interest to set forth in this Agreement only
the general terms of Dealer's financing arrangement with DFS. Upon agreeing to
finance a particular item of Inventory for Dealer, DFS will send Dealer a
Statement of Transaction, and any amendment thereto ("Statement of
Transaction"), identifying such Inventory and the applicable financial terms.
Unless Dealer notifies DFS in writing of any objection within fifteen (15) days
after a Statement of Transaction is mailed to Dealer: (a) the amount shown on
such Statement of Transaction will be an account stated; (b) Dealer will have
agreed to all rates, charges and other terms shown on such Statement of
Transaction; (c) Dealer will have agreed that the items of Inventory referenced
in such Statement of Transaction are being financed by DFS at Dealer's request;
and (d) such Statement of Transaction will be incorporated herein by reference,
will be made a part hereof as if originally set forth herein, and will
constitute an addendum hereto. If Dealer objects to the terms of any Statement
of Transaction, Dealer will pay DFS for such Inventory
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in accordance with the most recent terms for similar Inventory to which Dealer
has not objected (or, if there are no prior terms, at the lesser of 16% per
annum or at the maximum lawful contract rate of interest permitted under
applicable law), but Dealer acknowledges that DFS may then elect to terminate
Dealer's financing program pursuant to Section 17, and cease making additional
advances to Dealer. However, such termination will not accelerate the maturities
of advances previously made, unless Dealer shall otherwise be in default of this
Agreement.
3. Security Interest. To secure payment of all Dealer's current and
future debts to DFS, whether under this Agreement or any current or future
guaranty or other agreement, Dealer grants DFS a security interest in all of
Dealer's new and used inventory and equipment which is manufactured or sold by,
and/or which bears a trademark or trade name of, (a) Vendor, or (b) any other
manufacturer or distributor, in each case which is financed by DFS or against
which DFS has advanced monies, whether now owned or hereafter acquired by
Dealer, and all accounts, contract rights, chattel paper, security agreements,
deposit accounts, reserves, documents, general intangibles and instruments
arising from all such inventory and equipment, and all judgments, claims,
insurance policies and payments owed or made to Dealer thereon, and all
attachments, accessories, accessions, substitutions and replacements thereto and
all proceeds thereof. All such assets are collectively referred to herein as the
"Collateral." All of such terms for which meanings are provided in the Uniform
Commercial Code of the applicable state are used herein with such meanings. All
Collateral financed by DFS, and all proceeds thereof, will be held in trust by
Dealer for DFS solely for release or distribution to DFS, with such proceeds
being payable solely to DFS in accordance with Section 9.
4. Affirmative Warranties and Representations. Dealer warrants and
represents to DFS that: (a) Dealer has good title to all Collateral; (b) DFS'
security interest in the Collateral is not now and will not become subordinate
to the security interest, lien, encumbrance or claim of any person; (c) Dealer
will execute all documents DFS requests to perfect and maintain DFS' security
interest in the Collateral; (d) Dealer will deliver to DFS immediately upon each
request, and DFS may retain, each Certificate of Title or Statement of Origin
issued for Collateral; (e) Dealer will at all times be duly organized, existing,
in good standing, qualified and licensed to do business in each state, county,
or parish, in which the nature of its business or property so requires; (f)
Dealer has the right and is duly authorized to enter into this Agreement; (g)
Dealer's execution of this Agreement does not constitute a breach of any
agreement to which Dealer is now or hereafter becomes bound; (h) there are and,
to the best of Dealer's knowledge will be, no actions or proceedings pending or
threatened against Dealer which might result in any material adverse change in
Dealer's financial or business condition or which might in any way adversely
affect any of Dealer's assets; (i) Dealer will maintain the Collateral in good
condition and repair; (j) Dealer has duly filed and will duly file all tax
returns required by law; (k) Dealer has paid and will pay when due all taxes,
levies, assessments and governmental charges of any nature; (1) Dealer will keep
and maintain all of its books and records pertaining to the Collateral at its
principal place of business designated in this Agreement; (m) Dealer will
promptly supply DFS with such information concerning it or any guarantor as DFS
hereafter may reasonably request; (n) all Collateral will be kept at Dealer's
principal place of business listed above, and such other locations, if any, of
which Dealer has notified DFS in writing or as listed on any current or future
Exhibit "A" attached hereto which written notice(s) to DFS and Exhibit A(s) are
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incorporated herein by reference; (0) Dealer will give DFS thirty (30) days
prior written notice of any change in Dealer's identity, name, form of business
organization, ownership, management, principal place of business, Collateral
locations or other business locations, and before moving any books and records
to any other location; (p) Dealer will observe and perform all matters required
by any lease, license, concession or franchise forming part of the Collateral in
order to maintain all the rights of DFS thereunder; (q) Dealer will advise DFS
of the commencement of material legal proceedings against Dealer or any
guarantor; and (r) Dealer will comply with all applicable laws and will conduct
its business in a manner which preserves and protects the Collateral and the
earnings and incomes thereof.
5. Negative Covenants. Dealer will not at any time (without DFS' prior
written consent): (a) other than in the ordinary course of its business, sell,
demonstrate, lease or otherwise dispose of or transfer any of its assets; (b)
demonstrate, consign, or use any Collateral; or (c) merge or consolidate with
another entity.
6. Insurance. Dealer will immediately notify DFS of any loss, theft or
damage to any Collateral. Dealer will keep the Collateral insured for its full
insurable value under an "all risk" property insurance policy with a company
acceptable to DFS, naming DFS as a lender loss-payee or mortgagee and containing
standard lender's loss payable and termination provisions. Dealer will provide
DFS with written evidence of such property insurance coverage and lender's
loss-payee or mortgagee endorsement.
7. Financial Statements. Dealer will deliver to DFS: (a) within ninety
(90) days after the end of each of Dealer's fiscal years, a reasonably detailed
balance sheet as of the last day of such fiscal year and a reasonably detailed
income statement covering Dealer's operations for such fiscal year, in a form
satisfactory to DFS; (b) within forty-five (45) days after the end of each of
Dealer's fiscal quarters, a reasonably detailed balance sheet as of the last day
of such quarter and an income statement covering Dealer's operations for such
quarter, in a form satisfactory to DFS; and (c) within thirty (30) days after
request therefor by DFS, any other report requested by DFS relating to the
Collateral or the financial condition of Dealer. Dealer warrants and represents
to DFS that all financial statements and information relating to Dealer or any
guarantor which have been or may hereafter be delivered by Dealer or any
guarantor are true and correct and have been and will be prepared in accordance
with generally accepted accounting principles consistently applied and, with
respect to such previously delivered statements or information, there has been
no material adverse change in the financial or business condition of Dealer or
any guarantor since the submission to DFS, either as of the date of delivery,
or, if different, the date specified therein, and Dealer acknowledges DFS'
reliance thereon.
8. Reviews. Dealer grants DFS an irrevocable license to enter Dealer's
business locations during normal business hours without notice to Dealer to: (a)
account for and inspect all Collateral; (b) verify Dealer's compliance with this
Agreement; and (c) examine and copy Dealer's books and records related to the
Collateral.
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9. Payment Terms. Dealer will immediately pay DFS the principal
indebtedness owed DFS on each item of Inventory financed by DFS or against which
DFS has advanced funds on the earliest occurrence of any of the following
events: (a) (i) when such Inventory is lost, stolen or damaged - immediately if
such loss, theft or damage is not covered completely by insurance, or (ii) if
completely covered by insurance, then upon Dealer's receipt of the insurance
proceeds therefor or thirty (30) days following the loss theft or damage,
whichever occurs first; (b) when such Inventory is sold, transferred or
otherwise disposed of; provided, however, if any item of Inventory financed by
DFS or against which DFS has advanced funds is sold and Dealer does not receive
payment for such item at the time of sale, Dealer will pay DFS the full amount
of the principal balance owed DFS on such item of Inventory within thirty (30)
days immediately following the sale date of such item of Inventory or
immediately upon Dealer's receipt of payment for such items of Inventory,
whichever occurs first; (c) in strict accordance with any curtailment schedule
for such Inventory (as shown on the Statement of Transaction identifying such
Inventory); (d) when any item of such Inventory matures (as shown on the
Statement of Transaction identifying such Inventory). With respect to Inventory
financed by DFS or against which DFS has advanced funds and held for rent and/or
lease, Dealer will owe DFS and agree to pay DFS monthly the percentage of the
principal balance owed on each item of such Inventory that is required under the
terms of Dealer's financing program with DFS. However, if any Inventory financed
by DFS or against which DFS has advanced funds and held for rent and/or lease:
(A) is sold and Dealer does not receive payment for such item at the time of
sale, Dealer will pay DFS the full amount of the principal balance owed to DFS
on such item of Inventory within thirty (30) days immediately following the sale
date of such item of Inventory or immediately upon Dealer's receipt of payment
for such item of Inventory, whichever occurs first; or (B) is stolen, destroyed
or otherwise disposed of, Dealer will immediately pay DFS the full amount of
Dealer's outstanding indebtedness owed to DFS for such Inventory. If Dealer from
time to time is required to make immediate payment to DFS of any past due
obligation discovered during any Inventory audit, or at any other time, Dealer
agrees that acceptance of such payments by DFS will not be construed to have
waived or amended the terms of its financing program. Dealer will send all
payments to DFS' branch office(s) responsible for Dealer's account. DFS may
apply: (i) payments to reduce finance charges first and then principal,
regardless of Dealer's instructions; and (ii) principal payments to the oldest
(earliest) invoice for Inventory financed by DFS, but, in any event, all
principal payments will first be applied to such Inventory which is sold, lost,
stolen, damaged, rented, leased, or otherwise disposed of or unaccounted for.
Any third party discount, rebate, bonus or credit granted to Dealer for any
Inventory will not reduce the debt Dealer owes DFS until DFS has received
payment therefor in cash. Dealer will: (1) pay DFS even if any Inventory
financed by DFS or against which DFS has advanced funds is defective or fails to
conform to any warranties extended by any third party; (2) not assert against
DFS any claim or defense Dealer has against any third party; and (3) indemnify
and hold DFS harmless against all claims and defenses asserted by any buyer of
the Inventory relating to the condition of, or any representations regarding,
any of the Inventory. Dealer waives all rights of offset and counterclaims which
Dealer may have against DFS.
10. Calculation of charges. Dealer will pay finance charges to DFS on
the outstanding principal debt Dealer owes DFS for each item of Inventory
financed-by DFS at the rate(s) shown on the Statement of Transaction identifying
such Inventory, unless Dealer objects thereto as provided in
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Section 2. The finance charges attributable to the rate shown on the Statement
of Transaction will: (a) be computed based on a 360 day year; (b) be calculated
by multiplying the Daily Charge (as defined below) by the actual number of days
in the applicable billing period; and (C) accrue from the invoice date of the
Inventory identified on such Statement of Transaction until DFS receives full
payment of the principal debt Dealer owes DFS for each item of such Inventory in
accordance with DFS' payment recognition policy and DFS applies such payment to
Dealer's principal debt in accordance with the terms of this Agreement. The
"Daily Charge" is the product of the Daily Rate (as defined below) multiplied by
the Average Daily Balance (as defined below) The "Daily Rate" is the quotient of
the annual rate shown on the Statement of Transaction divided by 360, or the
monthly rate shown on the Statement of Transaction divided by 30. The "Average
Daily Balance" is the quotient of: (i) the sum of the outstanding principal debt
owed DFS on each day of a billing period for each item of Inventory identified
on a Statement of Transaction; divided by (ii) the actual number of days in such
billing period. Dealer will also pay DFS $100 for each check returned unpaid for
insufficient funds (an "NSF check") (such $100 payment repays DFS' estimated
administrative costs; it does not waive the default caused by the NSF check).
Dealer acknowledges that DFS intends to strictly conform to the applicable usury
laws governing this Agreement. Regardless of any provision contained herein or
in any other document executed or delivered in connection herewith or therewith,
DFS shall never be deemed to have contracted for, charged or be entitled to
receive, collect or apply as interest on this Agreement (whether termed interest
herein or deemed to be interest by judicial determination or operation of law),
any amount in excess of the maximum amount allowed by applicable law, and, if
DFS ever receives, collects or applies as interest any such excess, such amount
which would be excessive interest will be applied first to the reduction of the
unpaid principal balances of advances under this Agreement, and, second, any
remaining excess will be paid to Dealer. In determining whether or not the
interest paid or payable under any specific contingency exceeds the highest
lawful rate, Dealer and DFS shall, to the maximum extent permitted under
applicable law: (A) characterize any non-principal payment (other than payments
which are expressly designated as interest payments hereunder) as an expense or
fee rather than as interest; (B) exclude voluntary pre-payments and the effect
thereof; and (C) spread the total amount of interest throughout the entire term
of this Agreement so that the interest rate is uniform throughout such term. The
annual percentage rate of the finance charges relating to any item of Inventory
financed by DFS will be calculated from the invoice date of such Inventory,
regardless of any period during which any finance charge subsidy will be paid or
payable by any third party.
11. Billing Statement. DFS will send Dealer a monthly billing statement
identifying all charges due on Dealer s account with DFS. The charges specified
on each billing statement will be: (a) due and payable in full upon receipt; and
(b) an account stated, unless DFS receives Dealer's written objection thereto
within 15 days after it is mailed to Dealer. If DFS does not receive, by the
25th day of any given month, payment of all charges accrued to Dealer's account
with DFS during the immediately preceding month, Dealer will (to the extent
allowed by law) pay DFS a late fee ("Late Fee") equal to the greater of $5 or 5%
of the amount of such finance charges (payment of the Late Fee does not waive
the default caused by the late payment). DFS may adjust the billing statement at
any time to conform to applicable law and this Agreement.
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12. Rental Contracts. Dealer may rent the Inventory financed by DFS or
against which DFS has advanced funds pursuant to the terms of Dealer's rental
contracts ("Rental Contracts"). Such Inventory will thereafter be subject to the
rates and terms of DFS' financing program in effect for goods which are rented,
as reflected in the Statement of Transaction for such Inventory. All of Dealer's
Rental Contracts, agreements, and rental transactions will be in a form
satisfactory to DFS and will be in accordance with all applicable Federal, State
and local laws. Dealer will indemnify DFS against any loss or damage which DFS
suffers, whether direct or indirect, resulting in any way from the Rental
Contracts, agreements, or rental transactions which fail to comply with such
laws. All Rental Contracts will be transferable to DFS. Dealer will indemnify
DFS against any claims by its customers regarding Dealer's obligations under the
Rental Contracts. Dealer will immediately, upon DFS' request, deliver to DFS all
Rental Contracts and all related documents. This assignment is a transfer for
security only, and, until DFS has foreclosed its interest in the Rental
Contracts, will not be deemed to delegate any of Dealer's duties under the
Rental Contracts to DFS, nor is it intended to alter or impair performance by
either party to the Rental Contracts. DFS may, from time to time, verify the
accuracy of the Rental Contracts, and Dealer will immediately, upon DFS'
request, provide DFS with the following information regarding Rental Contracts
which are in effect on the date of such request: (a) the name, address and
telephone number of each customer who has executed a Rental Contract; (b) the
location of the Inventory; (c) the date of each Rental Contract; (d) the date
when the Inventory is to be returned under each Rental Contract; and, (e) any
other information which DFS may reasonably request. If the rental period under
the Rental Contract is ninety (90) days or longer, Dealer will stamp the
original of such Rental Contract with the following legend:
`FOR VALUE RECEIVED, THIS AGREEMENT HAS BEEN ASSIGNED TO DEUTSCHE
FINANCIAL SERVICES CORPORATION AND THERE ARE NO DEFENSES AGAINST THE
ASSIGNEE.'
Other than to DFS, Dealer will not assign, sell, pledge, convey or by any other
means transfer any Rental Contracts or chattel paper, without DFS' prior written
consent. Dealer will not enter into any Rental Contracts for Inventory financed
by DFS or against which DFS has advanced funds pursuant to which: (i) the
original term of the Rental Contract is greater than three hundred sixty (360)
days; (ii) the original term of the Rental Contract is equal to or greater than
the remaining economic life of such Inventory; (iii) the customer is bound to
renew the Rental Contract for the economic life of such Inventory or is bound to
become the owner of such Inventory; or, (iv) the customer has an option to renew
the Rental Contract for the remaining economic life of such Inventory, or to
become the owner of such Inventory, for nominal consideration, or for
consideration which is less than the unpaid balance owed to DFS for such
Inventory. If any such Rental Contracts are issued, Dealer will take any action
which DFS may reasonably require to perfect and/or protect DFS' security
interest in such Rental Contracts and/or the Inventory subject thereto.
13. Default. Dealer will be in default under this Agreement if: (a)
Dealer breaches any terms, warranties or representations contained herein, in
any Statement of Transaction to which Dealer has not objected as provided in
Section 2, or in any other agreement between DFS and Dealer; (b) any guarantor
of Dealer's debts to DFS breaches any terms, warranties or representations
contained in
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any guaranty or other agreement between the guarantor and DFS; (c) any
representation, statement, report or certificate made or delivered by Dealer or
any guarantor to DFS is not accurate when made; (d) Dealer fails to pay any
portion of Dealer's debts to DFS when due and payable hereunder or under any
other agreement between DFS and Dealer; (e) Dealer abandons any Collateral; (f)
Dealer or any guarantor is or becomes in default in the payment of any debt owed
to any third party; (g) a money judgment issues against Dealer or any guarantor;
(h) an attachment, sale or seizure issues or is executed against any assets of
Dealer or of any guarantor; (i) the undersigned dies while Dealer's business is
operated as a sole proprietorship, any general partner dies while Dealer's
business is operated as a general or limited partnership, or any member dies
while Dealer's business is operated as a limited liability company, as
applicable; (j) any guarantor dies; (k) Dealer or any guarantor shall cease
existence as a corporation, partnership, limited liability company or trust, as
applicable; (1) Dealer or any guarantor ceases or suspends business; (m) Dealer,
any guarantor or any member while Dealer's business is operated as a limited
liability company, as applicable, makes a general assignment for the benefit of
creditors; (n) Dealer, any guarantor or any member while Dealer's business is
operated as a limited liability company, as applicable, becomes insolvent or
voluntarily or involuntarily becomes subject to the Federal Bankruptcy Code, any
state insolvency law or any similar law; (0) any receiver is appointed for any
assets of Dealer, any guarantor or any member while Dealer's business is
operated as a limited liability company, as applicable; (p) any guaranty of
Dealer's debts to DFS is terminated; (q) Dealer loses any franchise, permission,
license or right to sell or deal in any Inventory which DFS finances; or (r)
Dealer or any guarantor misrepresents Dealer's or such guarantor's financial
condition or organizational structure.
14. Rights of DFS Upon Default. In the event of a default:
(a) DFS may at any time at DFS' election, without notice or demand
to Dealer, do any one or more of the following: declare all or
any part of the debt Dealer owes DFS immediately due and
payable, together with all costs and expenses of DFS'
collection activity, including, without limitation, all
reasonable attorney's fees; exercise any or all rights under
applicable law (including, without limitation, the right to
possess, transfer and dispose of the Collateral); and/or cease
extending any additional credit to Dealer (DFS' right to cease
extending credit will not be construed to limit the
discretionary nature of this credit facility)
(b) Dealer will segregate and keep the Collateral in trust for
DFS, and in good order and repair, and will not sell, rent,
lease, consign, otherwise dispose of or use any Collateral,
nor further encumber any Collateral.
(c) Upon DFS' oral or written demand, Dealer will immediately
deliver the Collateral to DFS, in good order and repair, at a
place specified by DFS, together with all related documents;
or DFS may, in DFS' sole discretion and without notice or
demand to Dealer, take immediate possession of the Collateral
together with all related documents.
(d) DFS may, without notice, apply a default finance charge to
Dealer's outstanding principal indebtedness equal to the
default rate specified in Dealer's financing program with DFS,
if any, or if there is none so specified, at the lesser of 3%
per annum above the rate in effect immediately prior to the
default, or the highest lawful contract rate
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of interest permitted under applicable law.
(e) Dealer grants DFS an irrevocable power of attorney to: execute
or endorse on Dealer's behalf any checks, drafts or other
forms of exchange received as payment on any Collateral for
deposit in DFS' account; execute financing statements,
instruments, Certificates of Title and Statements of Origin
pertaining to the Collateral; supply any omitted information
and correct errors in any documents between DFS and Dealer;
sell, assign, transfer, negotiate, demand, collect, receive,
settle, extend, or renew any amounts due on any of the
Collateral; do anything Dealer is obligated to do hereunder;
initiate and settle any insurance claim pertaining to the
Collateral; and do anything to preserve and protect the
Collateral and DFS' rights and interests therein.
(f) Upon DFS' oral or written demand, Dealer will immediately
deliver the original Rental Contracts to DFS, and DFS may
collect in DFS' name all amounts owed to Dealer under the
Rental Contracts.
All of DFS' rights and remedies are cumulative. DFS' failure to exercise any of
DFS' rights or remedies hereunder will not waive any of DFS' rights or remedies
as to any past, current or future default.
15. Sale of Collateral. Dealer agrees that if DFS conducts a private
sale of any Collateral by requesting bids from 10 or more dealers or
distributors in that type of Collateral, any sale by DFS of such Collateral in
bulk or in parcels within 120 days of: (a) DFS' taking possession and control of
such Collateral; or (b) when DFS is otherwise authorized to sell such
Collateral; whichever occurs last, to the bidder submitting the highest cash bid
therefor, is a commercially reasonable sale of such Collateral under the Uniform
Commercial Code. Dealer agrees that the purchase of any Collateral by Vendor or
a manufacturer or distributor, as provided in any agreement between DFS and the
Vendor, manufacturer or distributor, is a commercially reasonable disposition
and private sale of such Collateral under the Uniform Commercial Code, and no
request for bids will be required. Dealer further agrees that 7 or more days
prior written notice will be commercially reasonable notice of any public or
private sale (including any sale to Vendor or a manufacturer or distributor).
Dealer irrevocably waives any requirement that DFS retain possession and not
dispose of any Collateral until after an arbitration hearing, arbitration award,
confirmation, trial or final judgment. If DFS disposes of any such Collateral
other than as herein contemplated, the commercial reasonableness of such
disposition will be determined in accordance with the laws of the state
governing this Agreement.
16. Power of Attorney; Information. Dealer grants DFS an irrevocable
power of attorney to do anything necessary to preserve and protect the
Collateral and DFS' rights and interest therein. DFS may provide to any third
party any credit, financial or other information on Dealer that DFS may from
time to time possess. DFS may obtain from any Vendor, manufacturer or
distributor, any credit, financial or other information regarding Dealer that
such Vendor, manufacturer or distributor may from time to time possess.
17. Termination. Either party may terminate this Agreement at any time
by written notice received by the other party. If DFS terminates this Agreement,
Dealer agrees that if Dealer: (a) is not in default hereunder, 30 days prior
notice of termination is reasonable and sufficient (although this
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provision shall not be construed to mean that shorter periods may not, in
particular circumstances, also be reasonable and sufficient); or (b) is in
default hereunder, no prior notice of termination is required. Dealer will riot
be relieved from any obligation to DFS arising out of DFS' advances or
commitments made before the effective termination date of this Agreement. DFS
will retain all of its rights, interests and remedies hereunder until Dealer has
paid all of Dealer's debts to DFS. All waivers set forth within this Agreement
will survive any termination of this Agreement.
18. Binding Effect. Dealer cannot assign its interest in this Agreement
without DFS' prior written consent, although DFS may assign or participate DFS'
interest, in whole or in part, without Dealer's consent. This Agreement will
protect and bind DFS' and Dealer's respective heirs, representatives, successors
and assigns.
19. Notices. Except as otherwise stated herein, all notices,
arbitration claims, responses, requests and documents will be sufficiently given
or served if mailed or delivered: (a) to Dealer at Dealer's principal place of
business specified above; and (b) to DFS at 655 Maryville Centre Drive, St.
Louis, Missouri 63141-5832, Attention: General Counsel, or such other address as
the parties may hereafter specify in writing.
20. NO ORAL AGREEMENTS. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING
PROMISES TO EXTEND OR RENEW SUCH DEBTS ARE NOT ENFORCEABLE. TO PROTECT DEALER
AND DFS FROM MISUNDERSTANDING OR DISAPPOINTMENT, ALL AGREEMENTS COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES, EXCEPT AS SPECIFICALLY PROVIDED
HEREIN OR AS THE PARTIES MAY LATER AGREE IN WRITING TO MODIFY IT. THERE ARE NO
UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
21. Other Waivers. Dealer irrevocably waives notice of: DFS' acceptance
of this Agreement, presentment, demand, protest, nonpayment, nonperformance, and
dishonor. Dealer and DFS irrevocably waive all rights to claim any punitive
and/or exemplary damages.
22. Severability. If any provision of this Agreement or its application
is invalid or unenforceable, the remainder of this Agreement will not be
impaired or affected and will remain binding and enforceable.
23. Supplement. If Dealer and DFS (or any predecessor in interest to
DFS) have heretofore executed other agreements in connection with all or any
part of the Collateral, this Agreement shall supplement each and every other
agreement previously executed by and between Dealer and DFS (or any predecessor
in interest to DFS), and in that event this Agreement shall neither be deemed a
novation nor a termination of such previously executed agreement nor shall
execution of this Agreement be deemed a satisfaction of any obligation secured
by such previously executed agreement.
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24. Receipt of Agreement. Dealer acknowledges that it has received a
true and complete copy of this Agreement. Dealer acknowledges that it has read
and understood this Agreement. Notwithstanding anything herein to the contrary:
(a) DFS may rely on any facsimile copy, electronic data transmission or
electronic data storage of this Agreement, any Statement of Transaction, billing
statement, invoice from Vendor or any manufacturer or distributor, financial
statements or other reports, and (b) such facsimile copy, electronic data
transmission or electronic data storage will be deemed an original, and the best
evidence thereof for all purposes, including, without limitation, under this
Agreement or any other agreement between DFS and Dealer, and for all evidentiary
purposes before any arbitrator, court or other adjudicatory authority.
25. Miscellaneous. Time is of the essence regarding Dealer's
performance of its obligations to DFS notwithstanding any course of dealing or
custom on DFS' part to grant extensions of time. Dealer's liability under this
Agreement is direct and unconditional and will not be affected by the release or
nonperfection of any security interest granted hereunder. DFS will have the
right 0 refrain from or postpone enforcement of this Agreement or any other
agreements between DFS and Dealer without prejudice and the failure to strictly
enforce these agreements will not be construed as having created a course of
dealing between DFS and Dealer contrary to the specific terms of the agreements
or as having modified, released or waived the same. The express terms of this
Agreement will not be modified by any course of dealing, usage of trade, or
custom of trade which may deviate from the terms hereof. If Dealer fails to pay
any taxes, fees or other obligations which may impair DFS' interest in the
Collateral, or fails to keep the Collateral insured, DFS may, but shall not be
required to, pay such taxes, fees or obligations and pay the cost to insure the
Collateral, and the amounts paid will be: (a) an additional debt owed by Dealer
to DFS, which shall be subject to finance charges as provided herein; and (b)
due and payable immediately in full. Dealer agrees to pay all of DFS' reasonable
attorneys' fees and expenses incurred by DFS in enforcing DFS' rights hereunder.
The Section titles used in this Agreement are for convenience only and do not
define or limit the contents of any Section.
26. BINDING ARBITRATION.
26.1 Arbitrable Claims. Except as otherwise specified below, all
actions, disputes, claims and controversies under common law,
statutory law or in equity of any type or nature whatsoever
(including, without limitation, all torts, whether regarding
negligence, breach of fiduciary duty, restraint of trade,
fraud, conversion, duress, interference, wrongful replevin,
wrongful sequestration, fraud in the inducement, usury or any
other tort, all contract actions, whether regarding express or
implied terms, such as implied covenants of good faith, fair
dealing, and the commercial reasonableness of any Collateral
disposition, or any other contract claim, all claims of
deceptive trade practices or lender liability, and all claims
questioning the reasonableness or lawfulness of any act),
whether arising before or after the date of this Agreement,
and whether directly or indirectly relating to: (a) this
Agreement and/or any amendments
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and addenda hereto, or the breach, invalidity or termination
hereof; (b) any previous or subsequent agreement between DFS
(or any predecessor in interest to DFS) and Dealer; (c) any
act committed by DFS (or any predecessor in interest to DFS)
or by any parent company, subsidiary or affiliated company of
DFS (or any predecessor in interest to DFS) (collectively the
"DFS Companies"), or by any employee, agent, officer or
director of an DFS Company whether or not arising within the
scope and course of employment or other contractual
representation of the DFS Companies provided that such act
arises under a relationship, transaction or dealing between
DFS (or any predecessor in interest to DFS) and Dealer; and/or
(d) any other relationship, transaction or dealing between DFS
(or any predecessor in interest to DFS) and Dealer
(collectively the "Disputes"), will be subject to and resolved
by binding arbitration.
26.2 Administrative Body. All arbitration hereunder will be
conducted in accordance with the Commercial Arbitration Rules
of The American Arbitration Association ("AAA"). If the AAA is
dissolved, disbanded or becomes subject to any state or
federal bankruptcy or insolvency proceeding, the parties will
remain subject to binding arbitration which will be conducted
by a mutually agreeable arbitral forum. The parties agree that
all arbitrator(s) selected will be attorneys with at least
five (5) years secured transactions experience. The
arbitrator(s) will decide if any inconsistency exists between
the rules of any applicable arbitral forum and the arbitration
provisions contained herein. If such inconsistency exists, the
arbitration provisions contained herein will control and
supersede such rules. The site of all arbitration proceedings
will be in the Division of the Federal Judicial District in
which AM maintains a regional office that is closest to
Dealer.
26.3 Discovery. Discovery permitted in any arbitration proceeding
commenced hereunder is limited as follows. No later than
thirty (30) days after the filing of a claim for arbitration,
the parties will exchange detailed statements setting forth
the facts supporting the claim(s) and all defenses to be
raised during the arbitration, and a list of all exhibits and
witnesses. No later than twenty-one (21) days prior to the
arbitration hearing, the parties will exchange a final list of
all exhibits and all witnesses, including any designation of
any expert witness(es) together with a summary of their
testimony; a copy of all documents and a detailed description
of any property to be introduced at the hearing. Under no
circumstances will the use of interrogatories, requests for
admission, requests for the production of documents or the
taking of depositions be permitted. However, in the event of
the designation of any expert witness(es), the following will
occur: (a) all information and documents relied upon by the
expert witness(es) will be delivered to the opposing party,
(b) the opposing party will be permitted to depose the expert
witness(es), (c) the opposing party will be permitted to
designate rebuttal expert witness(es), and (d) the arbitration
hearing will be continued to the earliest possible date that
enables the foregoing limited discovery to be accomplished.
26.4 Exemplary or Punitive Damages. The Arbitrator(s) will not have
the authority to award exemplary or punitive damages.
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26.5 Confidentiality of Awards. All arbitration proceedings,
including testimony or evidence at hearings, will be kept
confidential, although any award or order rendered by the
arbitrator(s) pursuant to the terms of this Agreement may be
entered as a judgment or order in any state or federal court
and may be confirmed within the federal judicial district
which includes the residence of the party against whom such
award or order was entered. This Agreement concerns
transactions involving commerce among the several states. The
Federal Arbitration Act, Title 9 U.S.C. Sections 1 et seq., as
amended ("FAA") will govern all arbitration(s) and
confirmation proceedings hereunder.
26.6 Prejudgment and Provisional Remedies. Nothing herein will be
construed to prevent DFS' or Dealer's use of bankruptcy,
receivership, injunction, repossession, replevin, claim and
delivery, sequestration, seizure, attachment, foreclosure,
dation and/or any other prejudgment or provisional action or
remedy relating to any Collateral for any current or future
debt owed by either party to the other. Any such action or
remedy will not waive DFS' or Dealer's right to compel
arbitration of any Dispute.
26.7 Attorneys' Fees. If either Dealer or DFS brings any other
action for judicial relief with respect to any Dispute (other
than those set forth in Section 26.6), the party bringing such
action will be liable for and immediately pay all of the other
party's costs and expenses (including attorneys' fees)
incurred to stay or dismiss such action and remove or refer
such Dispute to arbitration. If either Dealer or DFS brings or
appeals an action to vacate or modify an arbitration award and
such party does not prevail, such party will pay all costs and
expenses, including attorneys' fees, incurred by the other
party in defending such action. Additionally, if Dealer sues
DFS or institutes any arbitration claim or counterclaim
against DFS in which DFS is the prevailing party, Dealer will
pay all costs and expenses (including attorneys' fees)
incurred by DFS in the course of defending such action or
proceeding.
26.8 Limitations. Any arbitration proceeding must be instituted:
(a) with respect to any Dispute for the collection of any debt
owed by either party to the other, within two (2) years after
the date the last payment was received by the instituting
party; and (b) with respect to any other Dispute, within two
(2) years after the date the incident giving rise thereto
occurred, whether or not any damage was sustained or capable
of ascertainment or either party knew of such incident.
Failure to institute an arbitration proceeding within such
period will constitute an absolute bar and waiver to the
institution of any proceeding, whether arbitration or a court
proceeding, with respect to such Dispute.
26.9 Survival After Termination. The agreement to arbitrate will
survive the termination of this Agreement.
27. INVALIDITY/UNENFORCEABILITY OF BINDING ARBITRATION. IF THIS
AGREEMENT IS FOUND TO BE NOT SUBJECT TO ARBITRATION, ANY LEGAL PROCEEDING WITH
RESPECT TO ANY DISPUTE WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A
JUDGE WITHOUT A JURY. DEALER AND DFS WAIVE ANY RIGHT TO A JURY TRIAL IN ANY SUCH
PROCEEDING.
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28. Governing Law. Dealer acknowledges and agrees that this and all
other agreements between Dealer and DFS have been substantially negotiated, and
will be substantially performed, in the state of Missouri. Accordingly, Dealer
agrees that all Disputes will be governed by, and construed in accordance with,
the laws of such state, except to the extent inconsistent with the provisions of
the FAA which shall control and govern all arbitration proceedings hereunder.
THIS CONTRACT CONTAINS BINDING ARBITRATION, JURY WAIVER AND PUNITIVE DAMAGE
WAIVER PROVISIONS.
IN WITNESS WHEREOF, Deals and DFS have executed this Agreement as of the date
first set forth hereinabove.
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SECRETARY'S CERTIFICATE OF RESOLUTION
I certify that I am the Secretary or Assistant Secretary of the corporation
named below, and that the following completely and accurately sets forth certain
resolutions of the Board of Directors of the corporation adopted at a special
meeting thereof held on due notice (and with shareholder approval, if required
by law), at which meeting there was present a quorum authorized to transact the
business described below, and that the proceedings of the meeting were in
accordance with the certificate of incorporation, charter and by-laws of the
corporation, and that they have not been revoked, annulled or amended in any
manner whatsoever.
Upon motion duly made and seconded, the following resolution was unanimously
adopted after full discussion:
"RESOLVED, That the several officers, directors, and agents of this
corporation, or any one or more of them, are hereby authorized and empowered on
behalf of this corporation: to obtain financing from Deutsche Financial Services
Corporation ("DFS") in such amounts and on such terms as such officers,
directors or agents deem proper; to enter into financing, security, pledge and
other agreements with DFS relating to the terms upon which such financing may be
obtained and security and/or other credit support is to be furnished by this
corporation therefor; from time to time to supplement or amend any such
agreements; and from time to time to pledge, assign, mortgage, grant security
interests, and otherwise transfer, to DFS as collateral security for any
obligations of this corporation to DFS, whenever and however arising, any assets
of this corporation, whether now owned or hereafter acquired; the Board of
Directors hereby ratifying, approving and confirming all that any of said
officers, directors or agents have done or may do with respect to the
foregoing."
IN WITNESS WHEREOF, I have executed and affixed the seal of the corporation on
the date stated below.
Dated May 31, 1996
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AMENDMENT TO AGREEMENT FOR WHOLESALE FINANCING
This Amendment to Agreement for Wholesale Financing is made to that
certain Agreement for Wholesale Financing entered into by and between Western
Traction Company ("Dealer") and Deutsche Financial Services Corporation ("DFS")
on May 31, 1996, as amended ("Agreement").
FOR VALUE RECEIVED, Dealer and DFS agree to amend paragraph 17 of the
Agreement to provide as follows:
17. Termination. Either party may terminate this Agreement at any time
by written notice received by the other party. If DFS terminates this
Agreement, Dealer agrees that if Dealer: (a) is not in default
hereunder, 60 days prior notice of termination is reasonable and
sufficient, or (b) is in default hereunder, no prior notice of
termination is required. DFS will not, unless Dealer is in default
hereunder, accelerate the indebtedness owed by Dealer to DFS but will
allow Dealer to liquidate its indebtedness owed to DFS over the
original financing terms provided by DFS on particular units financed
by DFS. Dealer will not be relieved from any obligation to DFS arising
out of DFS' advances or commitments made before the effective
termination date of this Agreement. DFS will retain all of its rights,
interests and remedies hereunder until Dealer has paid all of Dealer's
debts to DFS. All waivers set forth within this Agreement will survive
any termination of this Agreement.
Dealer waives notice of DFS' acceptance of this Amendment.
All other terms as they appear in the Agreement, to the extent not
inconsistent with the foregoing, are ratified and remain unchanged and in full
force and effect.
IN WITNESS WHEREOF, Dealer and DFS have executed this Amendment to
Agreement for Wholesale Financing July 15, 1996.
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AGREEMENT FOR WHOLE SALE FINANCING
(Industrial/Construction - Rental)
This Agreement for Wholesale Financing ("Agreement") is made as of March 16,
1999 between Deutsche Financial Services Corporation ("DFS") and Machinery,
Inc., a [___] SOLE PROPRIETORSHIP, [__] PARTNERSHIP, [X] CORPORATION, [__]
LIMITED LIABILITY COMPANY (check applicable term) ("Dealer"), having a principal
place of business located at 4140 South 87th East Avenue, Tulsa, OK 74145.
1. Extension of Credit. In the course of Dealer's business, Dealer
acquires new and used inventory and equipment ("Inventory") which is
manufactured or sold by, and/or which bears a trademark or trade name of:
(a) Diversified, PPH Cranes (Terrex), or any of their subsidiaries or affiliated
companies ("Vendor"), or (b) other manufacturers or distributors. Subject to the
terms of this Agreement, DFS, in its sole discretion, may extend credit to
Dealer from time to time to purchase Inventory from Vendor or other
manufacturers or distributors. If DFS advances funds to Dealer following
Dealer's execution of this Agreement, DFS will be deemed to have entered into
this Agreement with Dealer, whether or not executed by DFS. DFS may combine all
of DFS' advances to Dealer or on Dealer's behalf whether under this Agreement or
any other agreement, and whether provided by one or more of DFS' branch offices,
together with all finance charges, fees and expenses related thereto, to make
one debt owed by Dealer. DFS' decision to advance funds on any Inventory will
not be binding until the funds are actually advanced. DFS may, at any time and
without notice to Dealer, elect not to finance any Inventory sold by Vendor or
another specific manufacturer or distributor if Vendor or the specific
manufacturer or distributor is in default of its obligations to DFS, or with
respect to which DFS reasonably feels insecure.
2. Financing Terms and Statements of Transaction. Dealer and DFS agree
that certain financial terms of any advance made by DFS under this Agreement,
whether regarding finance charges, other fees, maturities, curtailments or other
financial terms, are not set forth herein because such terms depend, in part,
upon the availability from time to time of discounts, payment terms or other
incentives from Vendor and other manufacturers and distributors, prevailing
economic conditions, and other economic factors which may vary over time. It is
therefore in DFS' and Dealer's best interest to set forth in this Agreement only
the general terms of Dealer's financing arrangement with DFS. Upon agreeing to
finance a particular item of Inventory for Dealer, DFS will send Dealer a
Statement of Transaction, and any amendment thereto ("Statement of
Transaction"), identifying such Inventory and the applicable financial terms.
Unless Dealer notifies DFS in writing of any objection within fifteen (15) days
after a Statement of Transaction is mailed to Dealer: (a) the amount shown on
such Statement of Transaction will be an account stated; (b) Dealer will have
agreed to all rates, charges and other terms shown on such Statement of
Transaction; (c) Dealer will have agreed that the items of Inventory referenced
in such Statement of Transaction are being financed by DFS at Dealer's request;
and (d) such Statement of Transaction will be incorporated herein by reference,
will be made a part hereof as if originally set forth herein, and will
constitute an addendum hereto. If Dealer objects to the terms of any Statement
of Transaction, Dealer will pay DFS for such Inventory in accordance with the
most recent terms for similar Inventory to which Dealer has not objected (or,
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if there are no prior terms, at the lesser of 16% per annum or at the maximum
lawful contract rate of interest permitted under applicable law), but Dealer
acknowledges that DFS may then elect to terminate Dealer's financing program
pursuant to Section 17, and cease making additional advances to Dealer. However,
such termination will not accelerate the maturities of advances previously made,
unless Dealer shall otherwise be in default of this Agreement.
3. Security Interest. To secure payment of all Dealer's current and
future debts to DFS, whether under this Agreement or any current or future
guaranty or other agreement, Dealer grants DFS a security interest in all of
Dealer's new and used inventory and equipment which is manufactured or sold by,
and/or which bears a trademark or trade name of, (a) Vendor, or (b) any other
manufacturer or distributor, in each case which is financed by DFS or against
which DFS has advanced monies, whether now owned or hereafter acquired by
Dealer, and all accounts, contract rights, chattel paper, security agreements,
deposit accounts, reserves, documents, general intangibles and instruments
arising from all such inventory and equipment, and all judgments, claims,
insurance policies and payments owed or made to Dealer thereon, and all
attachments, accessories, accessions, substitutions and replacements thereto and
all proceeds thereof. All such assets are collectively referred to herein as the
"Collateral." All of such terms for which meanings are provided in the Uniform
Commercial Code of the applicable state are used herein with such meanings. All
Collateral financed by DFS, and all proceeds thereof, will be held in trust by
Dealer for DFS solely for release or distribution to DFS, with such proceeds
being payable solely to DFS in accordance with Section 9.
4. Affirmative Warranties and Representations. Dealer warrants and
represents to DFS that: (a) Dealer has good title to all Collateral; (b) DFS'
security interest in the Collateral is not now and will not become subordinate
to the security interest, lien, encumbrance or claim of any person; (c) Dealer
will execute all documents DFS requests to perfect and maintain DFS' security
interest in the Collateral; (d) Dealer will deliver to DFS immediately upon each
request, and DFS may retain, each Certificate of Title or Statement of Origin
issued for Collateral; (e) Dealer will at all times be duly organized, existing,
in good standing, qualified and licensed to do business in each state, county,
or parish, in which the nature of its business or property so requires; (f)
Dealer has the right and is duly authorized to enter into this Agreement; (g)
Dealer's execution of this Agreement does not constitute a breach of any
agreement to which Dealer is now or hereafter becomes bound; (h) there are and,
to the best of Dealer's knowledge will be, no actions or proceedings pending or
threatened against Dealer which might result in any material adverse change in
Dealer's financial or business condition or which might in any way adversely
affect any of Dealer's assets; (i) Dealer will maintain the Collateral in good
condition and repair; (j) Dealer has duly filed and will duly file all tax
returns required by law; (k) Dealer has paid and will pay when due all taxes,
levies, assessments and governmental charges of any nature; (1) Dealer will keep
and maintain all of its books and records pertaining to the Collateral at its
principal place of business designated in this Agreement; (m) Dealer will
promptly supply DFS with such information concerning it or any guarantor as DFS
hereafter may reasonably request; (n) all Collateral will be kept at Dealer's
principal place of business listed above, and such other locations, if any, of
which Dealer has notified DFS in writing or as listed on any current or future
Exhibit "A" attached hereto which written notice(s) to DFS and Exhibit A(s) are
incorporated herein by reference; (0) Dealer will give DFS thirty (30) days
prior written notice of any
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change in Dealer's identity, name, form of business organization, ownership,
management, principal place of business, Collateral locations or other business
locations, and before moving any books and records to any other location; (p)
Dealer will observe and perform all matters required by any lease, license,
concession or franchise forming part of the Collateral in order to maintain all
the rights of DFS thereunder; (q) Dealer will advise DFS of the commencement of
material legal proceedings against Dealer or any guarantor; and (r) Dealer will
comply with all applicable laws and will conduct its business in a manner which
preserves and protects the Collateral and the earnings and incomes thereof.
5. Negative Covenants. Dealer will not at any time (without DFS' prior
written consent): (a) other than in the ordinary course of its business, sell,
demonstrate, lease or otherwise dispose of or transfer any of its assets; (b)
demonstrate, consign, or use any Collateral; or (c) merge or consolidate with
another entity.
6. Insurance. Dealer will immediately notify DFS of any loss, theft or
damage to any Collateral. Dealer will keep the Collateral insured for its full
insurable value under an "all risk" property insurance policy with a company
acceptable to DFS, naming DFS as a lender loss-payee or mortgagee and containing
standard lender's loss payable and termination provisions. Dealer will provide
DFS with written evidence of such property insurance coverage and lender's
loss-payee or mortgagee endorsement.
7. Financial Statements. Dealer will deliver to DFS: (a) within ninety
(90) days after the end of each of Dealer's fiscal years, a reasonably detailed
balance sheet as of the last day of such fiscal year and a reasonably detailed
income statement covering Dealer's operations for such fiscal year, in a form
satisfactory to DFS; (b) within forty-five (45) days after the end of each of
Dealer's fiscal quarters, a reasonably detailed balance sheet as of the last day
of such quarter and an income statement covering Dealer's operations for such
quarter, in a form satisfactory to DFS; and (c) within thirty (30) days after
request therefor by DFS, any other report requested by DFS relating to the
Collateral or the financial condition of Dealer. Dealer warrants and represents
to DFS that all financial statements and information relating to Dealer or any
guarantor which have been or may hereafter be delivered by Dealer or any
guarantor are true and correct and have been and will be prepared in accordance
with generally accepted accounting principles consistently applied and, with
respect to such previously delivered statements or information, there has been
no material adverse change in the financial or business condition of Dealer or
any guarantor since the submission to DFS, either as of the date of delivery,
or, if different, the date specified therein, and Dealer acknowledges DFS'
reliance thereon.
8. Reviews. Dealer grants DFS an irrevocable license to enter Dealer's
business locations during normal business hours without notice to Dealer to: (a)
account for and inspect all Collateral; (b) verify Dealer's compliance with this
Agreement; and (c) examine and copy Dealer's books and records related to the
Collateral.
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9. Payment Terms. Dealer will immediately pay DFS the principal
indebtedness owed DFS on each item of Inventory financed by DFS or against which
DFS has advanced funds on the earliest occurrence of any of the following
events: (a) (i) when such Inventory is lost, stolen or damaged - immediately if
such loss, theft or damage is not covered completely by insurance, or (ii) if
completely covered by insurance, then upon Dealer's receipt of the insurance
proceeds therefor or thirty (30) days following the loss theft or damage,
whichever occurs first; (b) when such Inventory is sold, transferred or
otherwise disposed of; provided, however, if any item of Inventory financed by
DFS or against which DFS has advanced funds is sold and Dealer does not receive
payment for such item at the time of sale, Dealer will pay DFS the full amount
of the principal balance owed DFS on such item of Inventory within thirty (30)
days immediately following the sale date of such item of Inventory or
immediately upon Dealer's receipt of payment for such items of Inventory,
whichever occurs first; (c) in strict accordance with any curtailment schedule
for such Inventory (as shown on the Statement of Transaction identifying such
Inventory); (d) when any item of such Inventory matures (as shown on the
Statement of Transaction identifying such Inventory). With respect to Inventory
financed by DFS or against which DFS has advanced funds and held for rent and/or
lease, Dealer will owe DFS and agree to pay DFS monthly the percentage of the
principal balance owed on each item of such Inventory that is required under the
terms of Dealer's financing program with DFS. However, if any Inventory financed
by DFS or against which DFS has advanced funds and held for rent and/or lease:
(A) is sold and Dealer does not receive payment for such item at the time of
sale, Dealer will pay DFS the full amount of the principal balance owed to DFS
on such item of Inventory within thirty (30) days immediately following the sale
date of such item of Inventory or immediately upon Dealer's receipt of payment
for such item of Inventory, whichever occurs first; or (B) is stolen, destroyed
or otherwise disposed of, Dealer will immediately pay DFS the full amount of
Dealer's outstanding indebtedness owed to DFS for such Inventory. If Dealer from
time to time is required to make immediate payment to DFS of any past due
obligation discovered during any Inventory audit, or at any other time, Dealer
agrees that acceptance of such payments by DFS will not be construed to have
waived or amended the terms of its financing program. Dealer will send all
payments to DFS' branch office(s) responsible for Dealer's account. DFS may
apply: (i) payments to reduce finance charges first and then principal,
regardless of Dealer's instructions; and (ii) principal payments to the oldest
(earliest) invoice for Inventory financed by DFS, but, in any event, all
principal payments will first be applied to such Inventory which is sold, lost,
stolen, damaged, rented, leased, or otherwise disposed of or unaccounted for.
Any third party discount, rebate, bonus or credit granted to Dealer for any
Inventory will not reduce the debt Dealer owes DFS until DFS has received
payment therefor in cash. Dealer will: (1) pay DFS even if any Inventory
financed by DFS or against which DFS has advanced funds is defective or fails to
conform to any warranties extended by any third party; (2) not assert against
DFS any claim or defense Dealer has against any third party; and (3) indemnify
and hold DFS harmless against all claims and defenses asserted by any buyer of
the Inventory relating to the condition of, or any representations regarding,
any of the Inventory. Dealer waives all rights of offset and counterclaims which
Dealer may have against DFS.
10. Calculation of Charges. Dealer will pay finance charges to DFS on
the outstanding principal debt Dealer owes DFS for each item of Inventory
financed-by DFS at the rate(s) shown on the Statement of Transaction identifying
such Inventory, unless Dealer objects thereto as provided in Section 2. The
finance charges attributable to the rate shown on the Statement of Transaction
will:
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(a) be computed based on a 360 day year; (b) be calculated by multiplying the
Daily Charge (as defined below) by the actual number of days in the applicable
billing period; and (C) accrue from the invoice date of the Inventory identified
on such Statement of Transaction until DFS receives full payment of the
principal debt Dealer owes DFS for each item of such Inventory in accordance
with DFS' payment recognition policy and DFS applies such payment to Dealer's
principal debt in accordance with the terms of this Agreement. The "Daily
Charge" is the product of the Daily Rate (as defined below) multiplied by the
Average Daily Balance (as defined below) The "Daily Rate" is the quotient of the
annual rate shown on the Statement of Transaction divided by 360, or the monthly
rate shown on the Statement of Transaction divided by 30. The "Average Daily
Balance" is the quotient of: (i) the sum of the outstanding principal debt owed
DFS on each day of a billing period for each item of Inventory identified on a
Statement of Transaction; divided by (ii) the actual number of days in such
billing period. Dealer will also pay DFS $100 for each check returned unpaid for
insufficient funds (an "NSF check") (such $100 payment repays DFS' estimated
administrative costs; it does not waive the default caused by the NSF check).
Dealer acknowledges that DFS intends to strictly conform to the applicable usury
laws governing this Agreement. Regardless of any provision contained herein or
in any other document executed or delivered in connection herewith or therewith,
DFS shall never be deemed to have contracted for, charged or be entitled to
receive, collect or apply as interest on this Agreement (whether termed interest
herein or deemed to be interest by judicial determination or operation of law),
any amount in excess of the maximum amount allowed by applicable law, and, if
DFS ever receives, collects or applies as interest any such excess, such amount
which would be excessive interest will be applied first to the reduction of the
unpaid principal balances of advances under this Agreement, and, second, any
remaining excess will be paid to Dealer. In determining whether or not the
interest paid or payable under any specific contingency exceeds the highest
lawful rate, Dealer and DFS shall, to the maximum extent permitted under
applicable law: (A) characterize any non-principal payment (other than payments
which are expressly designated as interest payments hereunder) as an expense or
fee rather than as interest; (B) exclude voluntary pre-payments and the effect
thereof; and (C) spread the total amount of interest throughout the entire term
of this Agreement so that the interest rate is uniform throughout such term. The
annual percentage rate of the finance charges relating to any item of Inventory
financed by DFS will be calculated from the invoice date of such Inventory,
regardless of any period during which any finance charge subsidy will be paid or
payable by any third party.
11. Billing Statement. DFS will send Dealer a monthly billing statement
identifying all charges due on Dealer s account with DFS. The charges specified
on each billing statement will be: (a) due and payable in full upon receipt; and
(b) an account stated, unless DFS receives Dealer's written objection thereto
within 15 days after it is mailed to Dealer. If DFS does not receive, by the
25th day of any given month, payment of all charges accrued to Dealer's account
with DFS during the immediately preceding month, Dealer will (to the extent
allowed by law) pay DFS a late fee ("Late Fee") equal to the greater of $5 or 5%
of the amount of such finance charges (payment of the Late Fee does not waive
the default caused by the late payment). DFS may adjust the billing statement at
any time to conform to applicable law and this Agreement.
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12. Rental Contracts. Dealer may rent the Inventory financed by DFS or
against which DFS has advanced funds pursuant to the terms of Dealer's rental
contracts ("Rental Contracts"). Such Inventory will thereafter be subject to the
rates and terms of DFS' financing program in effect for goods which are rented,
as reflected in the Statement of Transaction for such Inventory. All of Dealer's
Rental Contracts, agreements, and rental transactions will be in a form
satisfactory to DFS and will be in accordance with all applicable Federal, State
and local laws. Dealer will indemnify DFS against any loss or damage which DFS
suffers, whether direct or indirect, resulting in any way from the Rental
Contracts, agreements, or rental transactions which fail to comply with such
laws. All Rental Contracts will be transferable to DFS. Dealer will indemnify
DFS against any claims by its customers regarding Dealer's obligations under the
Rental Contracts. Dealer will immediately, upon DFS' request, deliver to DFS all
Rental Contracts and all related documents.
This assignment is a transfer for security only, and, until DFS has foreclosed
its interest in the Rental Contracts, will not be deemed to delegate any of
Dealer's duties under the Rental Contracts to DFS, nor is it intended to alter
or impair performance by either party to the Rental Contracts. DFS may, from
time to time, verify the accuracy of the Rental Contracts, and Dealer will
immediately, upon DFS' request, provide DFS with the following information
regarding Rental Contracts which are in effect on the date of such request: (a)
the name, address and telephone number of each customer who has executed a
Rental Contract; (b) the location of the Inventory; (c) the date of each Rental
Contract; (d) the date when the Inventory is to be returned under each Rental
Contract; and, (e) any other information which DFS may reasonably request. If
the rental period under the Rental Contract is ninety (90) days or longer,
Dealer will stamp the original of such Rental Contract with the following
legend:
`FOR VALUE RECEIVED, THIS AGREEMENT HAS BEEN ASSIGNED TO DEUTSCHE
FINANCIAL SERVICES CORPORATION AND THERE ARE NO DEFENSES AGAINST THE
ASSIGNEE.'
Other than to DFS, Dealer will not assign, sell, pledge, convey or by any other
means transfer any Rental Contracts or chattel paper, without DFS' prior written
consent. Dealer will not enter into any Rental Contracts for Inventory financed
by DFS or against which DFS has advanced funds pursuant to which: (i) the
original term of the Rental Contract is greater than three hundred sixty (360)
days; (ii) the original term of the Rental Contract is equal to or greater than
the remaining economic life of such Inventory; (iii) the customer is bound to
renew the Rental Contract for the economic life of such Inventory or is bound to
become the owner of such Inventory; or, (iv) the customer has an option to renew
the Rental Contract for the remaining economic life of such Inventory, or to
become the owner of such Inventory, for nominal consideration, or for
consideration which is less than the unpaid balance owed to DFS for such
Inventory. If any such Rental Contracts are issued, Dealer will take any action
which DFS may reasonably require to perfect and/or protect DFS' security
interest in such Rental Contracts and/or the Inventory subject thereto.
13. Default. Dealer will be in default under this Agreement if: (a)
Dealer breaches any terms, warranties or representations contained herein, in
any Statement of Transaction to which Dealer has not objected as provided in
Section 2, or in any other agreement between DFS and Dealer; (b) any
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guarantor of Dealer's debts to DFS breaches any terms, warranties or
representations contained in any guaranty or other agreement between the
guarantor and DFS; (c) any representation, statement, report or certificate made
or delivered by Dealer or any guarantor to DFS is not accurate when made; (d)
Dealer fails to pay any portion of Dealer's debts to DFS when due and payable
hereunder or under any other agreement between DFS and Dealer; (e) Dealer
abandons any Collateral; (f) Dealer or any guarantor is or becomes in default in
the payment of any debt owed to any third party; (g) a money judgment issues
against Dealer or any guarantor; (h) an attachment, sale or seizure issues or is
executed against any assets of Dealer or of any guarantor; (i) the undersigned
dies while Dealer's business is operated as a sole proprietorship, any general
partner dies while Dealer's business is operated as a general or limited
partnership, or any member dies while Dealer's business is operated as a limited
liability company, as applicable; (j) any guarantor dies; (k) Dealer or any
guarantor shall cease existence as a corporation, partnership, limited liability
company or trust, as applicable; (1) Dealer or any guarantor ceases or suspends
business; (m) Dealer, any guarantor or any member while Dealer's business is
operated as a limited liability company, as applicable, makes a general
assignment for the benefit of creditors; (n) Dealer, any guarantor or any member
while Dealer's business is operated as a limited liability company, as
applicable, becomes insolvent or voluntarily or involuntarily becomes subject to
the Federal Bankruptcy Code, any state insolvency law or any similar law; (0)
any receiver is appointed for any assets of Dealer, any guarantor or any member
while Dealer's business is operated as a limited liability company, as
applicable; (p) any guaranty of Dealer's debts to DFS is terminated; (q) Dealer
loses any franchise, permission, license or right to sell or deal in any
Inventory which DFS finances; or (r) Dealer or any guarantor misrepresents
Dealer's or such guarantor's financial condition or organizational structure.
14. Rights of DFS Upon Default. In the event of a default:
(a) DFS may at any time at DFS' election, without notice or demand
to Dealer, do any one or more of the following: declare all or
any part of the debt Dealer owes DFS immediately due and
payable, together with all costs and expenses of DFS'
collection activity, including, without limitation, all
reasonable attorney's fees; exercise any or all rights under
applicable law (including, without limitation, the right to
possess, transfer and dispose of the Collateral); and/or cease
extending any additional credit to Dealer (DFS' right to cease
extending credit will not be construed to limit the
discretionary nature of this credit facility)
(b) Dealer will segregate and keep the Collateral in trust for
DFS, and in good order and repair, and will not sell, rent,
lease, consign, otherwise dispose of or use any Collateral,
nor further encumber any Collateral.
(c) Upon DFS' oral or written demand, Dealer will immediately
deliver the Collateral to DFS, in good order and repair, at a
place specified by DFS, together with all related documents;
or DFS may, in DFS' sole discretion and without notice or
demand to Dealer, take immediate possession of the Collateral
together with all related documents.
(d) DFS may, without notice, apply a default finance charge to
Dealer's outstanding principal indebtedness equal to the
default rate specified in Dealer's financing program with DFS,
if any, or if there is none so specified, at the lesser of 3%
per annum above
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<PAGE> 23
the rate in effect immediately prior to the default, or the
highest lawful contract rate of interest permitted under
applicable law.
(e) Dealer grants DFS an irrevocable power of attorney to: execute
or endorse on Dealer's behalf any checks, drafts or other
forms of exchange received as payment on any Collateral for
deposit in DFS' account; execute financing statements,
instruments, Certificates of Title and Statements of Origin
pertaining to the Collateral; supply any omitted information
and correct errors in any documents between DFS and Dealer;
sell, assign, transfer, negotiate, demand, collect, receive,
settle, extend, or renew any amounts due on any of the
Collateral; do anything Dealer is obligated to do hereunder;
initiate and settle any insurance claim pertaining to the
Collateral; and do anything to preserve and protect the
Collateral and DFS' rights and interests therein.
(f) Upon DFS' oral or written demand, Dealer will immediately
deliver the original Rental Contracts to DFS, and DFS may
collect in DFS' name all amounts owed to Dealer under the
Rental Contracts.
All of DFS' rights and remedies are cumulative. DFS' failure to exercise any of
DFS' rights or remedies hereunder will not waive any of DFS' rights or remedies
as to any past, current or future default.
15. Sale of Collateral. Dealer agrees that if DFS conducts a private
sale of any Collateral by requesting bids from 10 or more dealers or
distributors in that type of Collateral, any sale by DFS of such Collateral in
bulk or in parcels within 120 days of: (a) DFS' taking possession and control of
such Collateral; or (b) when DFS is otherwise authorized to sell such
Collateral; whichever occurs last, to the bidder submitting the highest cash bid
therefor, is a commercially reasonable sale of such Collateral under the Uniform
Commercial Code. Dealer agrees that the purchase of any Collateral by Vendor or
a manufacturer or distributor, as provided in any agreement between DFS and the
Vendor, manufacturer or distributor, is a commercially reasonable disposition
and private sale of such Collateral under the Uniform Commercial Code, and no
request for bids will be required. Dealer further agrees that 7 or more days
prior written notice will be commercially reasonable notice of any public or
private sale (including any sale to Vendor or a manufacturer or distributor).
Dealer irrevocably waives any requirement that DFS retain possession and not
dispose of any Collateral until after an arbitration hearing, arbitration award,
confirmation, trial or final judgment. If DFS disposes of any such Collateral
other than as herein contemplated, the commercial reasonableness of such
disposition will be determined in accordance with the laws of the state
governing this Agreement.
16. Power of Attorney; Information. Dealer grants DFS an irrevocable
power of attorney to do anything necessary to preserve and protect the
Collateral and DFS' rights and interest therein. DFS may provide to any third
party any credit, financial or other information on Dealer that DFS may from
time to time possess. DFS may obtain from any Vendor, manufacturer or
distributor, any credit, financial or other information regarding Dealer that
such Vendor, manufacturer or distributor may from time to time possess.
17. Termination. Either party may terminate this Agreement at any time
by written notice received by the other party. If DFS terminates this Agreement,
Dealer agrees that if Dealer: (a) is
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not in default hereunder, 30 days prior notice of termination is reasonable and
sufficient (although this provision shall not be construed to mean that shorter
periods may not, in particular circumstances, also be reasonable and
sufficient); or (b) is in default hereunder, no prior notice of termination is
required. Dealer will riot be relieved from any obligation to DFS arising out of
DFS' advances or commitments made before the effective termination date of this
Agreement. DFS will retain all of its rights, interests and remedies hereunder
until Dealer has paid all of Dealer's debts to DFS. All waivers set forth within
this Agreement will survive any termination of this Agreement.
18. Binding Effect. Dealer cannot assign its interest in this Agreement
without DFS' prior written consent, although DFS may assign or participate DFS'
interest, in whole or in part, without Dealer's consent. This Agreement will
protect and bind DFS' and Dealer's respective heirs, representatives, successors
and assigns.
19. Notices. Except as otherwise stated herein, all notices,
arbitration claims, responses, requests and documents will be sufficiently given
or served if mailed or delivered: (a) to Dealer at Dealer's principal place of
business specified above; and (b) to DFS at 655 Maryville Centre Drive, St.
Louis, Missouri 63141-5832, Attention: General Counsel, or such other address as
the parties may hereafter specify in writing.
20. NO ORAL AGREEMENTS. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING
PROMISES TO EXTEND OR RENEW SUCH DEBTS ARE NOT ENFORCEABLE. TO PROTECT DEALER
AND DFS FROM MISUNDERSTANDING OR DISAPPOINTMENT, ALL AGREEMENTS COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES, EXCEPT AS SPECIFICALLY PROVIDED
HEREIN OR AS THE PARTIES MAY LATER AGREE IN WRITING TO MODIFY IT. THERE ARE NO
UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
21. Other Waivers. Dealer irrevocably waives notice of: DFS' acceptance
of this Agreement, presentment, demand, protest, nonpayment, nonperformance, and
dishonor. Dealer and DFS irrevocably waive all rights to claim any punitive
and/or exemplary damages.
22. Severability. If any provision of this Agreement or its application
is invalid or unenforceable, the remainder of this Agreement will not be
impaired or affected and will remain binding and enforceable.
23. Supplement. If Dealer and DFS (or any predecessor in interest to
DFS) have heretofore executed other agreements in connection with all or any
part of the Collateral, this Agreement shall supplement each and every other
agreement previously executed by and between Dealer and DFS (or any predecessor
in interest to DFS), and in that event this Agreement shall neither be deemed a
novation nor a termination of such previously executed agreement nor shall
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execution of this Agreement be deemed a satisfaction of any obligation secured
by such previously executed agreement.
24. Receipt of Agreement. Dealer acknowledges that it has received a
true and complete copy of this Agreement. Dealer acknowledges that it has read
and understood this Agreement. Notwithstanding anything herein to the contrary:
(a) DFS may rely on any facsimile copy, electronic data transmission or
electronic data storage of this Agreement, any Statement of Transaction, billing
statement, invoice from Vendor or any manufacturer or distributor, financial
statements or other reports, and (b) such facsimile copy, electronic data
transmission or electronic data storage will be deemed an original, and the best
evidence thereof for all purposes, including, without limitation, under this
Agreement or any other agreement between DFS and Dealer, and for all evidentiary
purposes before any arbitrator, court or other adjudicatory authority.
25. Miscellaneous. Time is of the essence regarding Dealer's
performance of its obligations to DFS notwithstanding any course of dealing or
custom on DFS' part to grant extensions of time. Dealer's liability under this
Agreement is direct and unconditional and will not be affected by the release or
nonperfection of any security interest granted hereunder. DFS will have the
right 0 refrain from or postpone enforcement of this Agreement or any other
agreements between DFS and Dealer without prejudice and the failure to strictly
enforce these agreements will not be construed as having created a course of
dealing between DFS and Dealer contrary to the specific terms of the agreements
or as having modified, released or waived the same. The express terms of this
Agreement will not be modified by any course of dealing, usage of trade, or
custom of trade which may deviate from the terms hereof. If Dealer fails to pay
any taxes, fees or other obligations which may impair DFS' interest in the
Collateral, or fails to keep the Collateral insured, DFS may, but shall not be
required to, pay such taxes, fees or obligations and pay the cost to insure the
Collateral, and the amounts paid will be: (a) an additional debt owed by Dealer
to DFS, which shall be subject to finance charges as provided herein; and (b)
due and payable immediately in full. Dealer agrees to pay all of DFS' reasonable
attorneys' fees and expenses incurred by DFS in enforcing DFS' rights hereunder.
The Section titles used in this Agreement are for convenience only and do not
define or limit the contents of any Section.
26. BINDING ARBITRATION.
26.1 Arbitrable Claims. Except as otherwise specified below, all
actions, disputes, claims and controversies under common law,
statutory law or in equity of any type or nature whatsoever
(including, without limitation, all torts, whether regarding
negligence, breach of fiduciary duty, restraint of trade,
fraud, conversion, duress, interference, wrongful replevin,
wrongful sequestration, fraud in the inducement, usury or any
other tort, all contract actions, whether regarding express or
implied terms, such as implied covenants of good faith, fair
dealing, and the commercial reasonableness of any Collateral
disposition, or any other contract claim, all claims of
deceptive trade practices or lender liability, and all claims
questioning the reasonableness or lawfulness of any act),
whether arising before or after the date of this Agreement,
and
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whether directly or indirectly relating to: (a) this Agreement
and/or any amendments and addenda hereto, or the breach,
invalidity or termination hereof; (b) any previous or
subsequent agreement between DFS (or any predecessor in
interest to DFS) and Dealer; (c) any act committed by DFS (or
any predecessor in interest to DFS) or by any parent company,
subsidiary or affiliated company of DFS (or any predecessor in
interest to DFS) (collectively the "DFS Companies"), or by any
employee, agent, officer or director of an DFS Company whether
or not arising within the scope and course of employment or
other contractual representation of the DFS Companies provided
that such act arises under a relationship, transaction or
dealing between DFS (or any predecessor in interest to DFS)
and Dealer; and/or (d) any other relationship, transaction or
dealing between DFS (or any predecessor in interest to DFS)
and Dealer (collectively the "Disputes"), will be subject to
and resolved by binding arbitration.
26.2 Administrative Body, All arbitration hereunder will be
conducted in accordance with the Commercial Arbitration Rules
of The American Arbitration Association ("AAA"). If the AAA is
dissolved, disbanded or becomes subject to any state or
federal bankruptcy or insolvency proceeding, the parties will
remain subject to binding arbitration which will be conducted
by a mutually agreeable arbitral forum. The parties agree that
all arbitrator(s) selected will be attorneys with at least
five (5) years secured transactions experience. The
arbitrator(s) will decide if any inconsistency exists between
the rules of any applicable arbitral forum and the arbitration
provisions contained herein. If such inconsistency exists, the
arbitration provisions contained herein will control and
supersede such rules. The site of all arbitration proceedings
will be in the Division of the Federal Judicial District in
which AM maintains a regional office that is closest to
Dealer.
26.3 Discovery. Discovery permitted in any arbitration proceeding
commenced hereunder is limited as follows. No later than
thirty (30) days after the filing of a claim for arbitration,
the parties will exchange detailed statements setting forth
the facts supporting the claim(s) and all defenses to be
raised during the arbitration, and a list of all exhibits and
witnesses. No later than twenty-one (21) days prior to the
arbitration hearing, the parties will exchange a final list of
all exhibits and all witnesses, including any designation of
any expert witness(es) together with a summary of their
testimony; a copy of all documents and a detailed description
of any property to be introduced at the hearing. Under no
circumstances will the use of interrogatories, requests for
admission, requests for the production of documents or the
taking of depositions be permitted. However, in the event of
the designation of any expert witness(es), the following will
occur: (a) all information and documents relied upon by the
expert witness(es) will be delivered to the opposing party,
(b) the opposing party will be permitted to depose the expert
witness(es), (c) the opposing party will be permitted to
designate rebuttal expert witness(es), and (d) the arbitration
hearing will be continued to the earliest possible date that
enables the foregoing limited discovery to be accomplished.
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26.4 Exemplary or Punitive Damages. The Arbitrator(s) will not have
the authority to award exemplary or punitive damages.
26.5 Confidentiality of Awards. All arbitration proceedings,
including testimony or evidence at hearings, will be kept
confidential, although any award or order rendered by the
arbitrator(s) pursuant to the terms of this Agreement may be
entered as a judgment or order in any state or federal court
and may be confirmed within the federal judicial district
which includes the residence of the party against whom such
award or order was entered. This Agreement concerns
transactions involving commerce among the several states. The
Federal Arbitration Act, Title 9 U.S.C. Sections 1 et seq., as
amended ("FAA") will govern all arbitration(s) and
confirmation proceedings hereunder.
26.6 Prejudgment and Provisional Remedies. Nothing herein will be
construed to prevent DFS' or Dealer's use of bankruptcy,
receivership, injunction, repossession, replevin, claim and
delivery, sequestration, seizure, attachment, foreclosure,
dation and/or any other prejudgment or provisional action or
remedy relating to any Collateral for any current or future
debt owed by either party to the other. Any such action or
remedy will not waive DFS' or Dealer's right to compel
arbitration of any Dispute.
26.7 Attorneys' Fees. If either Dealer or DFS brings any other
action for judicial relief with respect to any Dispute (other
than those set forth in Section 26.6), the party bringing such
action will be liable for and immediately pay all of the other
party's costs and expenses (including attorneys' fees)
incurred to stay or dismiss such action and remove or refer
such Dispute to arbitration. If either Dealer or DFS brings or
appeals an action to vacate or modify an arbitration award and
such party does not prevail, such party will pay all costs and
expenses, including attorneys' fees, incurred by the other
party in defending such action. Additionally, if Dealer sues
DFS or institutes any arbitration claim or counterclaim
against DFS in which DFS is the prevailing party, Dealer will
pay all costs and expenses (including attorneys' fees)
incurred by DFS in the course of defending such action or
proceeding.
26.8 Limitations. Any arbitration proceeding must be instituted:
(a) with respect to any Dispute for the collection of any debt
owed by either party to the other, within two (2) years after
the date the last payment was received by the instituting
party; and (b) with respect to any other Dispute, within two
(2) years after the date the incident giving rise thereto
occurred, whether or not any damage was sustained or capable
of ascertainment or either party knew of such incident.
Failure to institute an arbitration proceeding within such
period will constitute an absolute bar and waiver to the
institution of any proceeding, whether arbitration or a court
proceeding, with respect to such dispute.
26.9 Survival After Termination. The agreement to arbitrate will
survive the termination of this Agreement.
27. INVALIDITY/UNENFORCEABILITY OF BINDING ARBITRATION. IF THIS
AGREEMENT IS FOUND TO BE NOT SUBJECT TO ARBITRATION, ANY LEGAL PROCEEDING WITH
RESPECT TO ANY DISPUTE WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A
JUDGE WITHOUT A JURY. DEALER AND DFS WAIVE
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ANY RIGHT TO A JURY TRIAL IN ANY SUCH PROCEEDING.
28. Governing Law. Dealer acknowledges and agrees that this and all
other agreements between Dealer and DFS have been substantially negotiated, and
will be substantially performed, in the state of Missouri. Accordingly, Dealer
agrees that all Disputes will be governed by, and construed in accordance with,
the laws of such state, except to the extent inconsistent with the provisions of
the FAA which shall control and govern all arbitration proceedings hereunder.
IN WITNESS WHEREOF, Dealer and DFS have executed this Agreement as of the date
first set forth hereinabove.
THIS CONTRACT CONTAINS BINDING ARBITRATION, JURY WAIVER AND PUNITIVE DAMAGE
WAIVER PROVISIONS.
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SECRETARY'S CERTIFICATE OF RESOLUTION
I certify that I am the Secretary of the corporation named below, and
that the following completely and accurately sets forth certain resolutions of
the Board of Directors of the corporation adopted at a special meeting thereof
held on due notice (and with shareholder approval, if required by law), at which
meeting there was present a quorum authorized to transact the business described
below, and that the proceedings of the meeting were in accordance with the
certificate of incorporation, charter and by-laws of the corporation, and that
they have not been revoked, annulled or amended in any manner whatsoever.
Upon motion duly made and seconded, the following resolution was
unanimously adopted after full discussion:
"RESOLVED, That the several officers, directors, and agents of this
corporation, or any one or more of them, are hereby authorized and empowered on
behalf of this corporation: to obtain financing from Deutsche Financial Services
Corporation ("DFS") in such amounts and on such terms as such officers,
directors or agents deem proper; to enter into financing, security, pledge and
other agreements with DFS relating to the terms upon which such financing may be
obtained and security and/or other credit support is to be furnished by this
corporation therefor; from time to time to supplement or amend any such
agreements; and from time to time to pledge, assign, mortgage, grant security
interests, and otherwise transfer, to DFS as collateral security for any
obligations of this corporation to DFS, whenever and however arising, any assets
of this corporation, whether now owned or hereafter acquired; the Board of
Directors hereby ratifying, approving and confirming all that any of said
officers, directors or agents have done or may do with respect to the
foregoing."
IN WITNESS WHEREOF, I have executed and affixed the seal of the corporation on
the date stated below.
Dated: March 16, 1999
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AGREEMENT FOR WHOLESALE FINANCING
(Industrial/Construction - Rental)
This Agreement for Wholesale Financing ("Agreement") is made as of August 4,
1999 between Deutsche Financial Services Corporation ("DFS") and Solveson Crane
Rentals, Inc., a [___] SOLE PROPRIETORSHIP, [__] PARTNERSHIP, [X] CORPORATION,
[__] LIMITED LIABILITY COMPANY (check applicable term) ("Dealer"), having a
principal place of business located at 3820 Rhonda Way, Tracy, CA 95376.
1. Extension of Credit. In the course of Dealer's business, Dealer
acquires new and used inventory and equipment ("Inventory") which is
manufactured or sold by, and/or which bears a trademark or trade name of: (a) P
& H and Grove, or any of their subsidiaries or affiliated companies ("Vendor"),
or (b) other manufacturers or distributors. Subject to the terms of this
Agreement, DFS, in its sole discretion, may extend credit to Dealer from time to
time to purchase Inventory from Vendor or other manufacturers or distributors.
If DFS advances funds to Dealer following Dealer's execution of this Agreement,
DFS will be deemed to have entered into this Agreement with Dealer, whether or
not executed by DFS. DFS may combine all of DFS' advances to Dealer or on
Dealer's behalf whether under this Agreement or any other agreement, and whether
provided by one or more of DFS' branch offices, together with all finance
charges, fees and expenses related thereto, to make one debt owed by Dealer.
DFS' decision to advance funds on any Inventory will not be binding until the
funds are actually advanced. DFS may, at any time and without notice to Dealer,
elect not to finance any Inventory sold by Vendor or another specific
manufacturer or distributor if Vendor or the specific manufacturer or
distributor is in default of its obligations to DFS, or with respect to which
DFS reasonably feels insecure.
2. Financing Terms and Statements of Transaction. Dealer and DFS agree
that certain financial terms of any advance made by DFS under this Agreement,
whether regarding finance charges, other fees, maturities, curtailments or other
financial terms, are not set forth herein because such terms depend, in part,
upon the availability from time to time of discounts, payment terms or other
incentives from Vendor and other manufacturers and distributors, prevailing
economic conditions, and other economic factors which may vary over time. It is
therefore in DFS' and Dealer's best interest to set forth in this Agreement only
the general terms of Dealer's financing arrangement with DFS. Upon agreeing to
finance a particular item of Inventory for Dealer, DFS will send Dealer a
Statement of Transaction, and any amendment thereto ("Statement of
Transaction"), identifying such Inventory and the applicable financial terms.
Unless Dealer notifies DFS in writing of any objection within fifteen (15) days
after a Statement of Transaction is mailed to Dealer: (a) the amount shown on
such Statement of Transaction will be an account stated; (b) Dealer will have
agreed to all rates, charges and other terms shown on such Statement of
Transaction; (c) Dealer will have agreed that the items of Inventory referenced
in such Statement of Transaction are being financed by DFS at Dealer's request;
and (d) such Statement of Transaction will be incorporated herein by reference,
will be made a part hereof as if originally set forth herein, and will
constitute an addendum hereto. If Dealer objects to the terms of any Statement
of Transaction, Dealer will pay DFS for such Inventory in accordance with the
most recent terms for similar Inventory to which Dealer has not objected (or,
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if there are no prior terms, at the lesser of 16% per annum or at the maximum
lawful contract rate of interest permitted under applicable law), but Dealer
acknowledges that DFS may then elect to terminate Dealer's financing program
pursuant to Section 17, and cease making additional advances to Dealer. However,
such termination will not accelerate the maturities of advances previously made,
unless Dealer shall otherwise be in default of this Agreement.
3. Security Interest. To secure payment of all Dealer's current and
future debts to DFS, whether under this Agreement or any current or future
guaranty or other agreement, Dealer grants DFS a security interest in all of
Dealer's new and used inventory and equipment which is manufactured or sold by,
and/or which bears a trademark or trade name of, (a) Vendor, or (b) any other
manufacturer or distributor, in each case which is financed by DFS or against
which DFS has advanced monies, whether now owned or hereafter acquired by
Dealer, and all accounts, contract rights, chattel paper, security agreements,
deposit accounts, reserves, documents, general intangibles and instruments
arising from all such inventory and equipment, and all judgments, claims,
insurance policies and payments owed or made to Dealer thereon, and all
attachments, accessories, accessions, substitutions and replacements thereto and
all proceeds thereof. All such assets are collectively referred to herein as the
"Collateral." All of such terms for which meanings are provided in the Uniform
Commercial Code of the applicable state are used herein with such meanings. All
Collateral financed by DFS, and all proceeds thereof, will be held in trust by
Dealer for DFS solely for release or distribution to DFS, with such proceeds
being payable solely to DFS in accordance with Section 9.
4. Affirmative Warranties and Representations. Dealer warrants and
represents to DFS that: (a) Dealer has good title to all Collateral; (b) DFS'
security interest in the Collateral is not now and will not become subordinate
to the security interest, lien, encumbrance or claim of any person; (c) Dealer
will execute all documents DFS requests to perfect and maintain DFS' security
interest in the Collateral; (d) Dealer will deliver to DFS immediately upon each
request, and DFS may retain, each Certificate of Title or Statement of Origin
issued for Collateral; (e) Dealer will at all times be duly organized, existing,
in good standing, qualified and licensed to do business in each state, county,
or parish, in which the nature of its business or property so requires; (f)
Dealer has the right and is duly authorized to enter into this Agreement; (g)
Dealer's execution of this Agreement does not constitute a breach of any
agreement to which Dealer is now or hereafter becomes bound; (h) there are and,
to the best of Dealer's knowledge will be, no actions or proceedings pending or
threatened against Dealer which might result in any material adverse change in
Dealer's financial or business condition or which might in any way adversely
affect any of Dealer's assets; (i) Dealer will maintain the Collateral in good
condition and repair; (j) Dealer has duly filed and will duly file all tax
returns required by law; (k) Dealer has paid and will pay when due all taxes,
levies, assessments and governmental charges of any nature; (1) Dealer will keep
and maintain all of its books and records pertaining to the Collateral at its
principal place of business designated in this Agreement; (m) Dealer will
promptly supply DFS with such information concerning it or any guarantor as DFS
hereafter may reasonably request; (n) all Collateral will be kept at Dealer's
principal place of business listed above, and such other locations, if any, of
which Dealer has notified DFS in writing or as listed on any current or future
Exhibit "A" attached hereto which written notice(s) to DFS and Exhibit A(s) are
incorporated herein by reference; (0) Dealer will give DFS thirty (30) days
prior written notice of any
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change in Dealer's identity, name, form of business organization, ownership,
management, principal place of business, Collateral locations or other business
locations, and before moving any books and records to any other location; (p)
Dealer will observe and perform all matters required by any lease, license,
concession or franchise forming part of the Collateral in order to maintain all
the rights of DFS thereunder; (q) Dealer will advise DFS of the commencement of
material legal proceedings against Dealer or any guarantor; and (r) Dealer will
comply with all applicable laws and will conduct its business in a manner which
preserves and protects the Collateral and the earnings and incomes thereof.
5. Negative Covenants. Dealer will not at any time (without DFS' prior
written consent): (a) other than in the ordinary course of its business, sell,
demonstrate, lease or otherwise dispose of or transfer any of its assets; (b)
demonstrate, consign, or use any Collateral; or (c) merge or consolidate with
another entity.
6. Insurance. Dealer will immediately notify DFS of any loss, theft or
damage to any Collateral. Dealer will keep the Collateral insured for its full
insurable value under an "all risk" property insurance policy with a company
acceptable to DFS, naming DFS as a lender loss-payee or mortgagee and containing
standard lender's loss payable and termination provisions. Dealer will provide
DFS with written evidence of such property insurance coverage and lender's
loss-payee or mortgagee endorsement.
7. Financial Statements. Dealer will deliver to DFS: (a) within ninety
(90) days after the end of each of Dealer's fiscal years, a reasonably detailed
balance sheet as of the last day of such fiscal year and a reasonably detailed
income statement covering Dealer's operations for such fiscal year, in a form
satisfactory to DFS; (b) within forty-five (45) days after the end of each of
Dealer's fiscal quarters, a reasonably detailed balance sheet as of the last day
of such quarter and an income statement covering Dealer's operations for such
quarter, in a form satisfactory to DFS; and (c) within thirty (30) days after
request therefor by DFS, any other report requested by DFS relating to the
Collateral or the financial condition of Dealer. Dealer warrants and represents
to DFS that all financial statements and information relating to Dealer or any
guarantor which have been or may hereafter be delivered by Dealer or any
guarantor are true and correct and have been and will be prepared in accordance
with generally accepted accounting principles consistently applied and, with
respect to such previously delivered statements or information, there has been
no material adverse change in the financial or business condition of Dealer or
any guarantor since the submission to DFS, either as of the date of delivery,
or, if different, the date specified therein, and Dealer acknowledges DFS'
reliance thereon.
8. Reviews. Dealer grants DFS an irrevocable license to enter Dealer's
business locations during normal business hours without notice to Dealer to: (a)
account for and inspect all Collateral; (b) verify Dealer's compliance with this
Agreement; and (c) examine and copy Dealer's books and records related to the
Collateral.
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9. Payment Terms. Dealer will immediately pay DFS the principal
indebtedness owed DFS on each item of Inventory financed by DFS or against which
DFS has advanced funds on the earliest occurrence of any of the following
events: (a) (i) when such Inventory is lost, stolen or damaged - immediately if
such loss, theft or damage is not covered completely by insurance, or (ii) if
completely covered by insurance, then upon Dealer's receipt of the insurance
proceeds therefor or thirty (30) days following the loss theft or damage,
whichever occurs first; (b) when such Inventory is sold, transferred or
otherwise disposed of; provided, however, if any item of Inventory financed by
DFS or against which DFS has advanced funds is sold and Dealer does not receive
payment for such item at the time of sale, Dealer will pay DFS the full amount
of the principal balance owed DFS on such item of Inventory within thirty (30)
days immediately following the sale date of such item of Inventory or
immediately upon Dealer's receipt of payment for such items of Inventory,
whichever occurs first; (c) in strict accordance with any curtailment schedule
for such Inventory (as shown on the Statement of Transaction identifying such
Inventory); (d) when any item of such Inventory matures (as shown on the
Statement of Transaction identifying such Inventory). With respect to Inventory
financed by DFS or against which DFS has advanced funds and held for rent and/or
lease, Dealer will owe DFS and agree to pay DFS monthly the percentage of the
principal balance owed on each item of such Inventory that is required under the
terms of Dealer's financing program with DFS. However, if any Inventory financed
by DFS or against which DFS has advanced funds and held for rent and/or lease:
(A) is sold and Dealer does not receive payment for such item at the time of
sale, Dealer will pay DFS the full amount of the principal balance owed to DFS
on such item of Inventory within thirty (30) days immediately following the sale
date of such item of Inventory or immediately upon Dealer's receipt of payment
for such item of Inventory, whichever occurs first; or (B) is stolen, destroyed
or otherwise disposed of, Dealer will immediately pay DFS the full amount of
Dealer's outstanding indebtedness owed to DFS for such Inventory. If Dealer from
time to time is required to make immediate payment to DFS of any past due
obligation discovered during any Inventory audit, or at any other time, Dealer
agrees that acceptance of such payments by DFS will not be construed to have
waived or amended the terms of its financing program. Dealer will send all
payments to DFS' branch office(s) responsible for Dealer's account. DFS may
apply: (i) payments to reduce finance charges first and then principal,
regardless of Dealer's instructions; and (ii) principal payments to the oldest
(earliest) invoice for Inventory financed by DFS, but, in any event, all
principal payments will first be applied to such Inventory which is sold, lost,
stolen, damaged, rented, leased, or otherwise disposed of or unaccounted for.
Any third party discount, rebate, bonus or credit granted to Dealer for any
Inventory will not reduce the debt Dealer owes DFS until DFS has received
payment therefor in cash. Dealer will: (1) pay DFS even if any Inventory
financed by DFS or against which DFS has advanced funds is defective or fails to
conform to any warranties extended by any third party; (2) not assert against
DFS any claim or defense Dealer has against any third party; and (3) indemnify
and hold DFS harmless against all claims and defenses asserted by any buyer of
the Inventory relating to the condition of, or any representations regarding,
any of the Inventory. Dealer waives all rights of offset and counterclaims which
Dealer may have against DFS.
10. Calculation of charges. Dealer will pay finance charges to DFS on
the outstanding principal debt Dealer owes DFS for each item of Inventory
financed-by DFS at the rate(s) shown on the Statement of Transaction identifying
such Inventory, unless Dealer objects thereto as provided in Section 2. The
finance charges attributable to the rate shown on the Statement of Transaction
will:
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(a) be computed based on a 360 day year; (b) be calculated by multiplying the
Daily Charge (as defined below) by the actual number of days in the applicable
billing period; and (C) accrue from the invoice date of the Inventory identified
on such Statement of Transaction until DFS receives full payment of the
principal debt Dealer owes DFS for each item of such Inventory in accordance
with DFS' payment recognition policy and DFS applies such payment to Dealer's
principal debt in accordance with the terms of this Agreement. The "Daily
Charge" is the product of the Daily Rate (as defined below) multiplied by the
Average Daily Balance (as defined below) The "Daily Rate" is the quotient of the
annual rate shown on the Statement of Transaction divided by 360, or the monthly
rate shown on the Statement of Transaction divided by 30. The "Average Daily
Balance" is the quotient of: (i) the sum of the outstanding principal debt owed
DFS on each day of a billing period for each item of Inventory identified on a
Statement of Transaction; divided by (ii) the actual number of days in such
billing period. Dealer will also pay DFS $100 for each check returned unpaid for
insufficient funds (an "NSF check") (such $100 payment repays DFS' estimated
administrative costs; it does not waive the default caused by the NSF check).
Dealer acknowledges that DFS intends to strictly conform to the applicable usury
laws governing this Agreement. Regardless of any provision contained herein or
in any other document executed or delivered in connection herewith or therewith,
DFS shall never be deemed to have contracted for, charged or be entitled to
receive, collect or apply as interest on this Agreement (whether termed interest
herein or deemed to be interest by judicial determination or operation of law),
any amount in excess of the maximum amount allowed by applicable law, and, if
DFS ever receives, collects or applies as interest any such excess, such amount
which would be excessive interest will be applied first to the reduction of the
unpaid principal balances of advances under this Agreement, and, second, any
remaining excess will be paid to Dealer. In determining whether or not the
interest paid or payable under any specific contingency exceeds the highest
lawful rate, Dealer and DFS shall, to the maximum extent permitted under
applicable law: (A) characterize any non-principal payment (other than payments
which are expressly designated as interest payments hereunder) as an expense or
fee rather than as interest; (B) exclude voluntary pre-payments and the effect
thereof; and (C) spread the total amount of interest throughout the entire term
of this Agreement so that the interest rate is uniform throughout such term. The
annual percentage rate of the finance charges relating to any item of Inventory
financed by DFS will be calculated from the invoice date of such Inventory,
regardless of any period during which any finance charge subsidy will be paid or
payable by any third party.
11. Billing Statement. DFS will send Dealer a monthly billing statement
identifying all charges due on Dealer s account with DFS. The charges specified
on each billing statement will be: (a) due and payable in full upon receipt; and
(b) an account stated, unless DFS receives Dealer's written objection thereto
within 15 days after it is mailed to Dealer. If DFS does not receive, by the
25th day of any given month, payment of all charges accrued to Dealer's account
with DFS during the immediately preceding month, Dealer will (to the extent
allowed by law) pay DFS a late fee ("Late Fee") equal to the greater of $5 or 5%
of the amount of such finance charges (payment of the Late Fee does not waive
the default caused by the late payment). DFS may adjust the billing statement at
any time to conform to applicable law and this Agreement.
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12. Rental Contracts. Dealer may rent the Inventory financed by DFS or
against which DFS has advanced funds pursuant to the terms of Dealer's rental
contracts ("Rental Contracts"). Such Inventory will thereafter be subject to the
rates and terms of DFS' financing program in effect for goods which are rented,
as reflected in the Statement of Transaction for such Inventory. All of Dealer's
Rental Contracts, agreements, and rental transactions will be in a form
satisfactory to DFS and will be in accordance with all applicable Federal, State
and local laws. Dealer will indemnify DFS against any loss or damage which DFS
suffers, whether direct or indirect, resulting in any way from the Rental
Contracts, agreements, or rental transactions which fail to comply with such
laws. All Rental Contracts will be transferable to DFS. Dealer will indemnify
DFS against any claims by its customers regarding Dealer's obligations under the
Rental Contracts. Dealer will immediately, upon DFS' request, deliver to DFS all
Rental Contracts and all related documents. This assignment is a transfer for
security only, and, until DFS has foreclosed its interest in the Rental
Contracts, will not be deemed to delegate any of Dealer's duties under the
Rental Contracts to DFS, nor is it intended to alter or impair performance by
either party to the Rental Contracts. DFS may, from time to time, verify the
accuracy of the Rental Contracts, and Dealer will immediately, upon DFS'
request, provide DFS with the following information regarding Rental Contracts
which are in effect on the date of such request: (a) the name, address and
telephone number of each customer who has executed a Rental Contract; (b) the
location of the Inventory; (c) the date of each Rental Contract; (d) the date
when the Inventory is to be returned under each Rental Contract; and, (e) any
other information which DFS may reasonably request. If the rental period under
the Rental Contract is ninety (90) days or longer, Dealer will stamp the
original of such Rental Contract with the following legend:
`FOR VALUE RECEIVED, THIS AGREEMENT HAS BEEN ASSIGNED TO DEUTSCHE
FINANCIAL SERVICES CORPORATION AND THERE ARE NO DEFENSES AGAINST THE
ASSIGNEE.'
Other than to DFS, Dealer will not assign, sell, pledge, convey or by any other
means transfer any Rental Contracts or chattel paper, without DFS' prior written
consent. Dealer will not enter into any Rental Contracts for Inventory financed
by DFS or against which DFS has advanced funds pursuant to which: (i) the
original term of the Rental Contract is greater than three hundred sixty (360)
days; (ii) the original term of the Rental Contract is equal to or greater than
the remaining economic life of such Inventory; (iii) the customer is bound to
renew the Rental Contract for the economic life of such Inventory or is bound to
become the owner of such Inventory; or, (iv) the customer has an option to renew
the Rental Contract for the remaining economic life of such Inventory, or to
become the owner of such Inventory, for nominal consideration, or for
consideration which is less than the unpaid balance owed to DFS for such
Inventory. If any such Rental Contracts are issued, Dealer will take any action
which DFS may reasonably require to perfect and/or protect DFS' security
interest in such Rental Contracts and/or the Inventory subject thereto.
13. Default. Dealer will be in default under this Agreement if: (a) Dealer
breaches any terms, warranties or representations contained herein, in any
Statement of Transaction to which Dealer has not objected as provided in Section
2, or in any other agreement between DFS and Dealer; (b) any guarantor of
Dealer's debts to DFS breaches any terms, warranties or representations
contained in any guaranty or other agreement between the guarantor and DFS; (c)
any representation, statement,
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report or certificate made or delivered by Dealer or any guarantor to DFS is not
accurate when made; (d) Dealer fails to pay any portion of Dealer's debts to DFS
when due and payable hereunder or under any other agreement between DFS and
Dealer; (e) Dealer abandons any Collateral; (f) Dealer or any guarantor is or
becomes in default in the payment of any debt owed to any third party; (g) a
money judgment issues against Dealer or any guarantor; (h) an attachment, sale
or seizure issues or is executed against any assets of Dealer or of any
guarantor; (i) the undersigned dies while Dealer's business is operated as a
sole proprietorship, any general partner dies while Dealer's business is
operated as a general or limited partnership, or any member dies while Dealer's
business is operated as a limited liability company, as applicable; (j) any
guarantor dies; (k) Dealer or any guarantor shall cease existence as a
corporation, partnership, limited liability company or trust, as applicable; (1)
Dealer or any guarantor ceases or suspends business; (m) Dealer, any guarantor
or any member while Dealer's business is operated as a limited liability
company, as applicable, makes a general assignment for the benefit of creditors;
(n) Dealer, any guarantor or any member while Dealer's business is operated as a
limited liability company, as applicable, becomes insolvent or voluntarily or
involuntarily becomes subject to the Federal Bankruptcy Code, any state
insolvency law or any similar law; (0) any receiver is appointed for any assets
of Dealer, any guarantor or any member while Dealer's business is operated as a
limited liability company, as applicable; (p) any guaranty of Dealer's debts to
DFS is terminated; (q) Dealer loses any franchise, permission, license or right
to sell or deal in any Inventory which DFS finances; or (r) Dealer or any
guarantor misrepresents Dealer's or such guarantor's financial condition or
organizational structure.
14. Rights of DFS Upon Default. In the event of a default:
(a) DFS may at any time at DFS' election, without notice or demand
to Dealer, do any one or more of the following: declare all or
any part of the debt Dealer owes DFS immediately due and
payable, together with all costs and expenses of DFS'
collection activity, including, without limitation, all
reasonable attorney's fees; exercise any or all rights under
applicable law (including, without limitation, the right to
possess, transfer and dispose of the Collateral); and/or cease
extending any additional credit to Dealer (DFS' right to cease
extending credit will not be construed to limit the
discretionary nature of this credit facility)
(b) Dealer will segregate and keep the Collateral in trust for
DFS, and in good order and repair, and will not sell, rent,
lease, consign, otherwise dispose of or use any Collateral,
nor further encumber any Collateral.
(c) Upon DFS' oral or written demand, Dealer will immediately
deliver the Collateral to DFS, in good order and repair, at a
place specified by DFS, together with all related documents;
or DFS may, in DFS' sole discretion and without notice or
demand to Dealer, take immediate possession of the Collateral
together with all related documents.
(d) DFS may, without notice, apply a default finance charge to
Dealer's outstanding principal indebtedness equal to the
default rate specified in Dealer's financing program with DFS,
if any, or if there is none so specified, at the lesser of 3%
per annum above the rate in effect immediately prior to the
default, or the highest lawful contract rate of interest
permitted under applicable law.
(e) Dealer grants DFS an irrevocable power of attorney to: execute
or endorse on
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Dealer's behalf any checks, drafts or other forms of exchange
received as payment on any Collateral for deposit in DFS'
account; execute financing statements, instruments,
Certificates of Title and Statements of Origin pertaining to
the Collateral; supply any omitted information and correct
errors in any documents between DFS and Dealer; sell, assign,
transfer, negotiate, demand, collect, receive, settle, extend,
or renew any amounts due on any of the Collateral; do anything
Dealer is obligated to do hereunder; initiate and settle any
insurance claim pertaining to the Collateral; and do anything
to preserve and protect the Collateral and DFS' rights and
interests therein.
(f) Upon DFS' oral or written demand, Dealer will immediately
deliver the original Rental Contracts to DFS, and DFS may
collect in DFS' name all amounts owed to Dealer under the
Rental Contracts.
All of DFS' rights and remedies are cumulative. DFS' failure to exercise any of
DFS' rights or remedies hereunder will not waive any of DFS' rights or remedies
as to any past, current or future default.
15. Sale of Collateral. Dealer agrees that if DFS conducts a private
sale of any Collateral by requesting bids from 10 or more dealers or
distributors in that type of Collateral, any sale by DFS of such Collateral in
bulk or in parcels within 120 days of: (a) DFS' taking possession and control of
such Collateral; or (b) when DFS is otherwise authorized to sell such
Collateral; whichever occurs last, to the bidder submitting the highest cash bid
therefor, is a commercially reasonable sale of such Collateral under the Uniform
Commercial Code. Dealer agrees that the purchase of any Collateral by Vendor or
a manufacturer or distributor, as provided in any agreement between DFS and the
Vendor, manufacturer or distributor, is a commercially reasonable disposition
and private sale of such Collateral under the Uniform Commercial Code, and no
request for bids will be required. Dealer further agrees that 7 or more days
prior written notice will be commercially reasonable notice of any public or
private sale (including any sale to Vendor or a manufacturer or distributor).
Dealer irrevocably waives any requirement that DFS retain possession and not
dispose of any Collateral until after an arbitration hearing, arbitration award,
confirmation, trial or final judgment. If DFS disposes of any such Collateral
other than as herein contemplated, the commercial reasonableness of such
disposition will be determined in accordance with the laws of the state
governing this Agreement.
16. Power of Attorney; Information. Dealer grants DFS an irrevocable
power of attorney to do anything necessary to preserve and protect the
Collateral and DFS' rights and interest therein. DFS may provide to any third
party any credit, financial or other information on Dealer that DFS may from
time to time possess. DFS may obtain from any Vendor, manufacturer or
distributor, any credit, financial or other information regarding Dealer that
such Vendor, manufacturer or distributor may from time to time possess.
17. Termination. Either party may terminate this Agreement at any time
by written notice received by the other party. If DFS terminates this Agreement,
Dealer agrees that if Dealer: (a) is not in default hereunder, 30 days prior
notice of termination is reasonable and sufficient (although this provision
shall not be construed to mean that shorter periods may not, in particular
circumstances, also be reasonable and sufficient); or (b) is in default
hereunder, no prior notice of termination is
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required. Dealer will riot be relieved from any obligation to DFS arising out of
DFS' advances or commitments made before the effective termination date of this
Agreement. DFS will retain all of its rights, interests and remedies hereunder
until Dealer has paid all of Dealer's debts to DFS. All waivers set forth within
this Agreement will survive any termination of this Agreement.
18. Binding Effect. Dealer cannot assign its interest in this Agreement
without DFS' prior written consent, although DFS may assign or participate DFS'
interest, in whole or in part, without Dealer's consent. This Agreement will
protect and bind DFS' and Dealer's respective heirs, representatives, successors
and assigns.
19. Notices. Except as otherwise stated herein, all notices,
arbitration claims, responses, requests and documents will be sufficiently given
or served if mailed or delivered: (a) to Dealer at Dealer's principal place of
business specified above; and (b) to DFS at 655 Maryville Centre Drive, St.
Louis, Missouri 63141-5832, Attention: General Counsel, or such other address as
the parties may hereafter specify in writing.
20. NO ORAL AGREEMENTS. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING
PROMISES TO EXTEND OR RENEW SUCH DEBTS ARE NOT ENFORCEABLE. TO PROTECT DEALER
AND DFS FROM MISUNDERSTANDING OR DISAPPOINTMENT, ALL AGREEMENTS COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES, EXCEPT AS SPECIFICALLY PROVIDED
HEREIN OR AS THE PARTIES MAY LATER AGREE IN WRITING TO MODIFY IT. THERE ARE NO
UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
21. Other Waivers. Dealer irrevocably waives notice of: DFS' acceptance
of this Agreement, presentment, demand, protest, nonpayment, nonperformance, and
dishonor. Dealer and DFS irrevocably waive all rights to claim any punitive
and/or exemplary damages.
22. Severability. If any provision of this Agreement or its application
is invalid or unenforceable, the remainder of this Agreement will not be
impaired or affected and will remain binding and enforceable.
23. Supplement. If Dealer and DFS (or any predecessor in interest to
DFS) have heretofore executed other agreements in connection with all or any
part of the Collateral, this Agreement shall supplement each and every other
agreement previously executed by and between Dealer and DFS (or any predecessor
in interest to DFS), and in that event this Agreement shall neither be deemed a
novation nor a termination of such previously executed agreement nor shall
execution of this Agreement be deemed a satisfaction of any obligation secured
by such previously executed agreement.
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24. Receipt of Agreement. Dealer acknowledges that it has received a
true and complete copy of this Agreement. Dealer acknowledges that it has read
and understood this Agreement. Notwithstanding anything herein to the contrary:
(a) DFS may rely on any facsimile copy, electronic data transmission or
electronic data storage of this Agreement, any Statement of Transaction, billing
statement, invoice from Vendor or any manufacturer or distributor, financial
statements or other reports, and (b) such facsimile copy, electronic data
transmission or electronic data storage will be deemed an original, and the best
evidence thereof for all purposes, including, without limitation, under this
Agreement or any other agreement between DFS and Dealer, and for all evidentiary
purposes before any arbitrator, court or other adjudicatory authority.
25. Miscellaneous. Time is of the essence regarding Dealer's
performance of its obligations to DFS notwithstanding any course of dealing or
custom on DFS' part to grant extensions of time. Dealer's liability under this
Agreement is direct and unconditional and will not be affected by the release or
nonperfection of any security interest granted hereunder. DFS will have the
right 0 refrain from or postpone enforcement of this Agreement or any other
agreements between DFS and Dealer without prejudice and the failure to strictly
enforce these agreements will not be construed as having created a course of
dealing between DFS and Dealer contrary to the specific terms of the agreements
or as having modified, released or waived the same. The express terms of this
Agreement will not be modified by any course of dealing, usage of trade, or
custom of trade which may deviate from the terms hereof. If Dealer fails to pay
any taxes, fees or other obligations which may impair DFS' interest in the
Collateral, or fails to keep the Collateral insured, DFS may, but shall not be
required to, pay such taxes, fees or obligations and pay the cost to insure the
Collateral, and the amounts paid will be: (a) an additional debt owed by Dealer
to DFS, which shall be subject to finance charges as provided herein; and (b)
due and payable immediately in full. Dealer agrees to pay all of DFS' reasonable
attorneys' fees and expenses incurred by DFS in enforcing DFS' rights hereunder.
The Section titles used in this Agreement are for convenience only and do not
define or limit the contents of any Section.
26. BINDING ARBITRATION.
26.1 Arbitrable Claims. Except as otherwise specified below, all
actions, disputes, claims and controversies under common law,
statutory law or in equity of any type or nature whatsoever
(including, without limitation, all torts, whether regarding
negligence, breach of fiduciary duty, restraint of trade,
fraud, conversion, duress, interference, wrongful replevin,
wrongful sequestration, fraud in the inducement, usury or any
other tort, all contract actions, whether regarding express or
implied terms, such as implied covenants of good faith, fair
dealing, and the commercial reasonableness of any Collateral
disposition, or any other contract claim, all claims of
deceptive trade practices or lender liability, and all claims
questioning the reasonableness or lawfulness of any act),
whether arising before or after the date of this Agreement,
and whether directly or indirectly relating to: (a) this
Agreement and/or any amendments and addenda hereto, or the
breach, invalidity or termination hereof; (b) any previous or
subsequent agreement between DFS (or any predecessor in
interest to DFS) and
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Dealer; (c) any act committed by DFS (or any predecessor in
interest to DFS) or by any parent company, subsidiary or
affiliated company of DFS (or any predecessor in interest to
DFS) (collectively the "DFS Companies"), or by any employee,
agent, officer or director of an DFS Company whether or not
arising within the scope and course of employment or other
contractual representation of the DFS Companies provided that
such act arises under a relationship, transaction or dealing
between DFS (or any predecessor in interest to DFS) and
Dealer; and/or (d) any other relationship, transaction or
dealing between DFS (or any predecessor in interest to DFS)
and Dealer (collectively the "Disputes"), will be subject to
and resolved by binding arbitration.
26.2 Administrative Body. All arbitration hereunder will be
conducted in accordance with the Commercial Arbitration Rules
of The American Arbitration Association ("AAA"). If the AAA is
dissolved, disbanded or becomes subject to any state or
federal bankruptcy or insolvency proceeding, the parties will
remain subject to binding arbitration which will be conducted
by a mutually agreeable arbitral forum. The parties agree that
all arbitrator(s) selected will be attorneys with at least
five (5) years secured transactions experience. The
arbitrator(s) will decide if any inconsistency exists between
the rules of any applicable arbitral forum and the arbitration
provisions contained herein. If such inconsistency exists, the
arbitration provisions contained herein will control and
supersede such rules. The site of all arbitration proceedings
will be in the Division of the Federal Judicial District in
which AM maintains a regional office that is closest to
Dealer.
26.3 Discovery. Discovery permitted in any arbitration proceeding
commenced hereunder is limited as follows. No later than
thirty (30) days after the filing of a claim for arbitration,
the parties will exchange detailed statements setting forth
the facts supporting the claim(s) and all defenses to be
raised during the arbitration, and a list of all exhibits and
witnesses. No later than twenty-one (21) days prior to the
arbitration hearing, the parties will exchange a final list of
all exhibits and all witnesses, including any designation of
any expert witness(es) together with a summary of their
testimony; a copy of all documents and a detailed description
of any property to be introduced at the hearing. Under no
circumstances will the use of interrogatories, requests for
admission, requests for the production of documents or the
taking of depositions be permitted. However, in the event of
the designation of any expert witness(es), the following will
occur: (a) all information and documents relied upon by the
expert witness(es) will be delivered to the opposing party,
(b) the opposing party will be permitted to depose the expert
witness(es), (c) the opposing party will be permitted to
designate rebuttal expert witness(es), and (d) the arbitration
hearing will be continued to the earliest possible date that
enables the foregoing limited discovery to be accomplished.
26.4 Exemplary or Punitive Damages. The Arbitrator(s) will not have
the authority to award exemplary or punitive damages.
26.5 Confidentiality of Awards. All arbitration proceedings,
including testimony or evidence at hearings, will be kept
confidential, although any award or order rendered
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by the arbitrator(s) pursuant to the terms of this Agreement
may be entered as a judgment or order in any state or federal
court and may be confirmed within the federal judicial
district which includes the residence of the party against
whom such award or order was entered. This Agreement concerns
transactions involving commerce among the several states. The
Federal Arbitration Act, Title 9 U.S.C.Sections 1 et seq., as
amended ("FAA") will govern all arbitration(s) and
confirmation proceedings hereunder.
26.6 Prejudgment and Provisional Remedies. Nothing herein will be
construed to prevent DFS' or Dealer's use of bankruptcy,
receivership, injunction, repossession, replevin, claim and
delivery, sequestration, seizure, attachment, foreclosure,
dation and/or any other prejudgment or provisional action or
remedy relating to any Collateral for any current or future
debt owed by either party to the other. Any such action or
remedy will not waive DFS' or Dealer's right to compel
arbitration of any Dispute.
26.7 Attorneys' Fees. If either Dealer or DFS brings any other
action for judicial relief with respect to any Dispute (other
than those set forth in Section 26.6), the party bringing such
action will be liable for and immediately pay all of the other
party's costs and expenses (including attorneys' fees)
incurred to stay or dismiss such action and remove or refer
such Dispute to arbitration. If either Dealer or DFS brings or
appeals an action to vacate or modify an arbitration award and
such party does not prevail, such party will pay all costs and
expenses, including attorneys' fees, incurred by the other
party in defending such action. Additionally, if Dealer sues
DFS or institutes any arbitration claim or counterclaim
against DFS in which DFS is the prevailing party, Dealer will
pay all costs and expenses (including attorneys' fees)
incurred by DFS in the course of defending such action or
proceeding.
26.8 Limitations. Any arbitration proceeding must be instituted:
(a) with respect to any Dispute for the collection of any debt
owed by either party to the other, within two (2) years after
the date the last payment was received by the instituting
party; and (b) with respect to any other Dispute, within two
(2) years after the date the incident giving rise thereto
occurred, whether or not any damage was sustained or capable
of ascertainment or either party knew of such incident.
Failure to institute an arbitration proceeding within such
period with constitute an absolute bar and waiver to the
institution of any proceeding, whether arbitration or court
proceeding, with respect to such Dispute.
26.9 Survival After Termination. The agreement to arbitrate will
survive the termination of this Agreement.
27. INVALIDITY/UNENFORCEABILITY OF BINDING ARBITRATION. IF THIS
AGREEMENT IS FOUND TO BE NOT SUBJECT TO ARBITRATION, ANY LEGAL PROCEEDING WITH
RESPECT TO ANY DISPUTE WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A
JUDGE WITHOUT A JURY. DEALER AND DFS WAIVE ANY RIGHT TO A JURY TRIAL IN ANY SUCH
PROCEEDING.
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28. Governing Law. Dealer acknowledges and agrees that this and all
other agreements between Dealer and DFS have been substantially negotiated, and
will be substantially performed, in the state of Missouri. Accordingly, Dealer
agrees that all Disputes will be governed by, and construed in accordance with,
the laws of such state, except to the extent inconsistent with the provisions of
the FAA which shall control and govern all arbitration proceedings hereunder.
IN WITNESS WHEREOF, Dealer and DFS have executed this Agreement as of the date
first set forth hereinabove.
THIS CONTRACT CONTAINS BINDING ARBITRATION, JURY WAIVER AND
PUNITIVE DAMAGE WAIVER PROVISIONS.
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SECRETARY'S CERTIFICATE OF RESOLUTION
I certify that I am the Secretary of the corporation named below, and that the
following completely and accurately sets forth certain resolutions of the Board
of Directors of the corporation adopted at a special meeting thereof held on due
notice (and with shareholder approval, if required by law), at which meeting
there was present a quorum authorized to transact the business described below,
and that the proceedings of the meeting were in accordance with the certificate
of incorporation, charter and by-laws of the corporation, and that they have not
been revoked, annulled or amended in any manner whatsoever.
Upon motion duly made and seconded, the following resolution was unanimously
adopted after full discussion:
"RESOLVED, That the several officers, directors, and agents of this
corporation, or any one or more of them, are hereby authorized and empowered on
behalf of this corporation: to obtain financing from Deutsche Financial Services
Corporation ("DFS") in such amounts and on such terms as such officers,
directors or agents deem proper; to enter into financing, security, pledge and
other agreements with DFS relating to the terms upon which such financing may be
obtained and security and/or other credit support is to be furnished by this
corporation therefor; from time to time to supplement or amend any such
agreements; and from time to time to pledge, assign, mortgage, grant security
interests, and otherwise transfer, to DFS as collateral security for any
obligations of this corporation to DFS, whenever and however arising, any assets
of this corporation, whether now owned or hereafter acquired; the Board of
Directors hereby ratifying, approving and confirming all that any of said
officers, directors or agents have done or may do with respect to the
foregoing."
IN WITNESS WHEREOF, I have executed and affixed the seal of the corporation on
the date stated below.
Dated August 4, 1999
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AGREEMENT FOR WHOLESALE FINANCING
(Industrial/Construction - Rental)
This Agreement for Wholesale Financing ("Agreement") is made as of December 2,
1999 between Deutsche Financial Services Corporation ("DFS") and Harvey
Equipment Center, Inc., a [___] SOLE PROPRIETORSHIP, [__] PARTNERSHIP, [X]
CORPORATION, [__] LIMITED LIABILITY COMPANY (check applicable term) ("Dealer"),
having a principal place of business located at 3585 Eastview Dr., Franklin, IN
46131.
1. Extension of Credit. In the course of Dealer's business, Dealer
acquires new and used inventory and equipment ("Inventory") which is
manufactured or sold by, and/or which bears a trademark or trade name of: (a)
PPH Cranes or any of their subsidiaries or affiliated companies ("Vendor"), or
(b) other manufacturers or distributors. Subject to the terms of this Agreement,
DFS, in its sole discretion, may extend credit to Dealer from time to time to
purchase Inventory from Vendor or other manufacturers or distributors. If DFS
advances funds to Dealer following Dealer's execution of this Agreement, DFS
will be deemed to have entered into this Agreement with Dealer, whether or not
executed by DFS. DFS may combine all of DFS' advances to Dealer or on Dealer's
behalf, whether under this Agreement or any other agreement, and whether
provided by one or more of DFS' branch offices, together with all finance
charges, fees and expenses related thereto, to make one debt owed by Dealer.
DFS' decision to advance funds on any Inventory will not be binding until the
funds are actually advanced. DFS may, at any time and without notice to Dealer,
elect not to finance any Inventory sold by Vendor or another specific
manufacturer or distributor if Vendor or the specific manufacturer or
distributor is in default of its obligations to DFS, or with respect to which
DFS reasonably feels insecure.
2. Financing Terms and Statements of Transaction. Dealer and DFS agree
that certain financial terms of any advance made by DFS under this Agreement,
whether regarding finance charges, other fees, maturities, curtailments or other
financial terms, are not set forth herein because such terms depend, in part,
upon the availability from time to time of discounts, payment terms or other
incentives from Vendor and other manufacturers and distributors, prevailing
economic conditions, and other economic factors which may vary over time. It is
therefore in DFS' and Dealer's best interest to set forth in this Agreement only
the general terms of Dealer's financing arrangement with DFS. Upon agreeing to
finance a particular item of Inventory for Dealer, DFS will send Dealer a
Statement of Transaction, and any amendment thereto ("Statement of
Transaction"), identifying such Inventory and the applicable financial terms.
Unless Dealer notifies DFS in writing of any objection within fifteen (15) days
after a Statement of Transaction is mailed to Dealer: (a) the amount shown on
such Statement of Transaction will be an account stated; (b) Dealer will have
agreed to all rates, charges and other terms shown on such Statement of
Transaction; (c) Dealer will have agreed that the items of Inventory referenced
in such Statement of Transaction are being financed by DFS at Dealer's request;
and (d) such Statement of Transaction will be incorporated herein by reference,
will be made a part hereof as if originally set forth herein, and will
constitute an addendum hereto. If Dealer objects to the terms of any Statement
of Transaction, Dealer will pay DFS for such Inventory in accordance with the
most recent terms for similar Inventory to which Dealer has not objected (or,
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if there are no prior terms, at the lesser of 16% per annum or at the maximum
lawful contract rate of interest permitted under applicable law), but Dealer
acknowledges that DFS may then elect to terminate Dealer's financing program
pursuant to Section 17, and cease making additional advances to Dealer. However,
such termination will not accelerate the maturities of advances previously made,
unless Dealer shall otherwise be in default of this Agreement.
3. Security Interest. To secure payment of all Dealer's current and
future debts to DFS, whether under this Agreement or any current or future
guaranty or other agreement, Dealer grants DFS a security interest in all of
Dealer's new and used inventory and equipment which is manufactured or sold by,
and/or which bears a trademark or trade name of, (a) Vendor, or (b) any other
manufacturer or distributor, in each case which is financed by DFS or against
which DFS has advanced monies, whether now owned or hereafter acquired by
Dealer, and all accounts, contract rights, chattel paper, security agreements,
deposit accounts, reserves, documents, general intangibles and instruments
arising from all such inventory and equipment, and all judgments, claims,
insurance policies and payments owed or made to Dealer thereon, and all
attachments, accessories, accessions, substitutions and replacements thereto and
all proceeds thereof. All such assets are collectively referred to herein as the
"Collateral." All of such terms for which meanings are provided in the Uniform
Commercial Code of the applicable state are used herein with such meanings. All
Collateral financed by DFS, and all proceeds thereof, will be held in trust by
Dealer for DFS solely for release or distribution to DFS, with such proceeds
being payable solely to DFS in accordance with Section 9.
4. Affirmative Warranties and Representations. Dealer warrants and
represents to DFS that: (a) Dealer has good title to all Collateral; (b) DFS'
security interest in the Collateral is not now and will not become subordinate
to the security interest, lien, encumbrance or claim of any person; (c) Dealer
will execute all documents DFS requests to perfect and maintain DFS' security
interest in the Collateral; (d) Dealer will deliver to DFS immediately upon each
request, and DFS may retain, each Certificate of Title or Statement of Origin
issued for Collateral; (e) Dealer will at all times be duly organized, existing,
in good standing, qualified and licensed to do business in each state, county,
or parish, in which the nature of its business or property so requires; (f)
Dealer has the right and is duly authorized to enter into this Agreement; (g)
Dealer's execution of this Agreement does not constitute a breach of any
agreement to which Dealer is now or hereafter becomes bound; (h) there are and,
to the best of Dealer's knowledge will be, no actions or proceedings pending or
threatened against Dealer which might result in any material adverse change in
Dealer's financial or business condition or which might in any way adversely
affect any of Dealer's assets; (i) Dealer will maintain the Collateral in good
condition and repair; (j) Dealer has duly filed and will duly file all tax
returns required by law; (k) Dealer has paid and will pay when due all taxes,
levies, assessments and governmental charges of any nature; (1) Dealer will keep
and maintain all of its books and records pertaining to the Collateral at its
principal place of business designated in this Agreement; (m) Dealer will
promptly supply DFS with such information concerning it or any guarantor as DFS
hereafter may reasonably request; (n) all Collateral will be kept at Dealer's
principal place of business listed above, and such other locations, if any, of
which Dealer has notified DFS in writing or as listed on any current or future
Exhibit "A" attached hereto which written notice(s) to DFS and Exhibit A(s) are
incorporated herein by reference; (0) Dealer will give DFS thirty (30) days
prior written notice of any
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change in Dealer's identity, name, form of business organization, ownership,
management, principal place of business, Collateral locations or other business
locations, and before moving any books and records to any other location; (p)
Dealer will observe and perform all matters required by any lease, license,
concession or franchise forming part of the Collateral in order to maintain all
the rights of DFS thereunder; (q) Dealer will advise DFS of the commencement of
material legal proceedings against Dealer or any guarantor; and (r) Dealer will
comply with all applicable laws and will conduct its business in a manner which
preserves and protects the Collateral and the earnings and incomes thereof.
5. Negative Covenants. Dealer will not at any time (without DFS' prior
written consent): (a) other than in the ordinary course of its business, sell,
demonstrate, lease or otherwise dispose of or transfer any of its assets; (b)
demonstrate, consign, or use any Collateral; or (c) merge or consolidate with
another entity.
6. Insurance. Dealer will immediately notify DFS of any loss, theft or
damage to any Collateral. Dealer will keep the Collateral insured for its full
insurable value under an "all risk" property insurance policy with a company
acceptable to DFS, naming DFS as a lender loss-payee or mortgagee and containing
standard lender's loss payable and termination provisions. Dealer will provide
DFS with written evidence of such property insurance coverage and lender's
loss-payee or mortgagee endorsement.
7. Financial Statements. Dealer will deliver to DFS: (a) within ninety
(90) days after the end of each of Dealer's fiscal years, a reasonably detailed
balance sheet as of the last day of such fiscal year and a reasonably detailed
income statement covering Dealer's operations for such fiscal year, in a form
satisfactory to DFS; (b) within forty-five (45) days after the end of each of
Dealer's fiscal quarters, a reasonably detailed balance sheet as of the last day
of such quarter and an income statement covering Dealer's operations for such
quarter, in a form satisfactory to DFS; and (c) within thirty (30) days after
request therefor by DFS, any other report requested by DFS relating to the
Collateral or the financial condition of Dealer. Dealer warrants and represents
to DFS that all financial statements and information relating to Dealer or any
guarantor which have been or may hereafter be delivered by Dealer or any
guarantor are true and correct and have been and will be prepared in accordance
with generally accepted accounting principles consistently applied and, with
respect to such previously delivered statements or information, there has been
no material adverse change in the financial or business condition of Dealer or
any guarantor since the submission to DFS, either as of the date of delivery,
or, if different, the date specified therein, and Dealer acknowledges DFS'
reliance thereon.
8. Reviews. Dealer grants DFS an irrevocable license to enter Dealer's
business locations during normal business hours without notice to Dealer to: (a)
account for and inspect all Collateral; (b) verify Dealer's compliance with this
Agreement; and (c) examine and copy Dealer's books and records related to the
Collateral.
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9. Payment Terms. Dealer will immediately pay DFS the principal
indebtedness owed DFS on each item of Inventory financed by DFS or against which
DFS has advanced funds on the earliest occurrence of any of the following
events: (a) (i) when such Inventory is lost, stolen or damaged - immediately if
such loss, theft or damage is not covered completely by insurance, or (ii) if
completely covered by insurance, then upon Dealer's receipt of the insurance
proceeds therefor or thirty (30) days following the loss theft or damage,
whichever occurs first; (b) when such Inventory is sold, transferred or
otherwise disposed of; provided, however, if any item of Inventory financed by
DFS or against which DFS has advanced funds is sold and Dealer does not receive
payment for such item at the time of sale, Dealer will pay DFS the full amount
of the principal balance owed DFS on such item of Inventory within thirty (30)
days immediately following the sale date of such item of Inventory or
immediately upon Dealer's receipt of payment for such items of Inventory,
whichever occurs first; (c) in strict accordance with any curtailment schedule
for such Inventory (as shown on the Statement of Transaction identifying such
Inventory); (d) when any item of such Inventory matures (as shown on the
Statement of Transaction identifying such Inventory). With respect to Inventory
financed by DFS or against which DFS has advanced funds and held for rent and/or
lease, Dealer will owe DFS and agree to pay DFS monthly the percentage of the
principal balance owed on each item of such Inventory that is required under the
terms of Dealer's financing program with DFS. However, if any Inventory financed
by DFS or against which DFS has advanced funds and held for rent and/or lease:
(A) is sold and Dealer does not receive payment for such item at the time of
sale, Dealer will pay DFS the full amount of the principal balance owed to DFS
on such item of Inventory within thirty (30) days immediately following the sale
date of such item of Inventory or immediately upon Dealer's receipt of payment
for such item of Inventory, whichever occurs first; or (B) is stolen, destroyed
or otherwise disposed of, Dealer will immediately pay DFS the full amount of
Dealer's outstanding indebtedness owed to DFS for such Inventory. If Dealer from
time to time is required to make immediate payment to DFS of any past due
obligation discovered during any Inventory audit, or at any other time, Dealer
agrees that acceptance of such payments by DFS will not be construed to have
waived or amended the terms of its financing program. Dealer will send all
payments to DFS' branch office(s) responsible for Dealer's account. DFS may
apply: (i) payments to reduce finance charges first and then principal,
regardless of Dealer's instructions; and (ii) principal payments to the oldest
(earliest) invoice for Inventory financed by DFS, but, in any event, all
principal payments will first be applied to such Inventory which is sold, lost,
stolen, damaged, rented, leased, or otherwise disposed of or unaccounted for.
Any third party discount, rebate, bonus or credit granted to Dealer for any
Inventory will not reduce the debt Dealer owes DFS until DFS has received
payment therefor in cash. Dealer will: (1) pay DFS even if any Inventory
financed by DFS or against which DFS has advanced funds is defective or fails to
conform to any warranties extended by any third party; (2) not assert against
DFS any claim or defense Dealer has against any third party; and (3) indemnify
and hold DFS harmless against all claims and defenses asserted by any buyer of
the Inventory relating to the condition of, or any representations regarding,
any of the Inventory. Dealer waives all rights of offset and counterclaims which
Dealer may have against DFS.
10. Calculation of charges. Dealer will pay finance charges to DFS on
the outstanding principal debt Dealer owes DFS for each item of Inventory
financed-by DFS at the rate(s) shown on the Statement of Transaction identifying
such Inventory, unless Dealer objects thereto as provided in Section 2. The
finance charges attributable to the rate shown on the Statement of Transaction
will:
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(a) be computed based on a 360 day year; (b) be calculated by multiplying the
Daily Charge (as defined below) by the actual number of days in the applicable
billing period; and (C) accrue from the invoice date of the Inventory identified
on such Statement of Transaction until DFS receives full payment of the
principal debt Dealer owes DFS for each item of such Inventory in accordance
with DFS' payment recognition policy and DFS applies such payment to Dealer's
principal debt in accordance with the terms of this Agreement. The "Daily
Charge" is the product of the Daily Rate (as defined below) multiplied by the
Average Daily Balance (as defined below) The "Daily Rate" is the quotient of the
annual rate shown on the Statement of Transaction divided by 360, or the monthly
rate shown on the Statement of Transaction divided by 30. The "Average Daily
Balance" is the quotient of: (i) the sum of the outstanding principal debt owed
DFS on each day of a billing period for each item of Inventory identified on a
Statement of Transaction; divided by (ii) the actual number of days in such
billing period. Dealer will also pay DFS $100 for each check returned unpaid for
insufficient funds (an "NSF check") (such $100 payment repays DFS' estimated
administrative costs; it does not waive the default caused by the NSF check).
Dealer acknowledges that DFS intends to strictly conform to the applicable usury
laws governing this Agreement. Regardless of any provision contained herein or
in any other document executed or delivered in connection herewith or therewith,
DFS shall never be deemed to have contracted for, charged or be entitled to
receive, collect or apply as interest on this Agreement (whether termed interest
herein or deemed to be interest by judicial determination or operation of law),
any amount in excess of the maximum amount allowed by applicable law, and, if
DFS ever receives, collects or applies as interest any such excess, such amount
which would be excessive interest will be applied first to the reduction of the
unpaid principal balances of advances under this Agreement, and, second, any
remaining excess will be paid to Dealer. In determining whether or not the
interest paid or payable under any specific contingency exceeds the highest
lawful rate, Dealer and DFS shall, to the maximum extent permitted under
applicable law: (A) characterize any non-principal payment (other than payments
which are expressly designated as interest payments hereunder) as an expense or
fee rather than as interest; (B) exclude voluntary pre-payments and the effect
thereof; and (C) spread the total amount of interest throughout the entire term
of this Agreement so that the interest rate is uniform throughout such term. The
annual percentage rate of the finance charges relating to any item of Inventory
financed by DFS will be calculated from the invoice date of such Inventory,
regardless of any period during which any finance charge subsidy will be paid or
payable by any third party.
11. Billing Statement. DFS will send Dealer a monthly billing statement
identifying all charges due on Dealer s account with DFS. The charges specified
on each billing statement will be: (a) due and payable in full upon receipt; and
(b) an account stated, unless DFS receives Dealer's written objection thereto
within 15 days after it is mailed to Dealer. If DFS does not receive, by the
25th day of any given month, payment of all charges accrued to Dealer's account
with DFS during the immediately preceding month, Dealer will (to the extent
allowed by law) pay DFS a late fee ("Late Fee") equal to the greater of $5 or 5%
of the amount of such finance charges (payment of the Late Fee does not waive
the default caused by the late payment). DFS may adjust the billing statement at
any time to conform to applicable law and this Agreement.
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12. Rental Contracts. Dealer may rent the Inventory financed by DFS or
against which DFS has advanced funds pursuant to the terms of Dealer's rental
contracts ("Rental Contracts"). Such Inventory will thereafter be subject to the
rates and terms of DFS' financing program in effect for goods which are rented,
as reflected in the Statement of Transaction for such Inventory. All of Dealer's
Rental Contracts, agreements, and rental transactions will be in a form
satisfactory to DFS and will be in accordance with all applicable Federal, State
and local laws. Dealer will indemnify DFS against any loss or damage which DFS
suffers, whether direct or indirect, resulting in any way from the Rental
Contracts, agreements, or rental transactions which fail to comply with such
laws. All Rental Contracts will be transferable to DFS. Dealer will indemnify
DFS against any claims by its customers regarding Dealer's obligations under the
Rental Contracts. Dealer will immediately, upon DFS' request, deliver to DFS all
Rental Contracts and all related documents. This assignment is a transfer for
security only, and, until DFS has foreclosed its interest in the Rental
Contracts, will not be deemed to delegate any of Dealer's duties under the
Rental Contracts to DFS, nor is it intended to alter or impair performance by
either party to the Rental Contracts. DFS may, from time to time, verify the
accuracy of the Rental Contracts, and Dealer will immediately, upon DFS'
request, provide DFS with the following information regarding Rental Contracts
which are in effect on the date of such request: (a) the name, address and
telephone number of each customer who has executed a Rental Contract; (b) the
location of the Inventory; (c) the date of each Rental Contract; (d) the date
when the Inventory is to be returned under each Rental Contract; and, (e) any
other information which DFS may reasonably request. If the rental period under
the Rental Contract is ninety (90) days or longer, Dealer will stamp the
original of such Rental Contract with the following legend:
`FOR VALUE RECEIVED, THIS AGREEMENT HAS BEEN ASSIGNED TO DEUTSCHE
FINANCIAL SERVICES CORPORATION AND THERE ARE NO DEFENSES AGAINST THE
ASSIGNEE.'
Other than to DFS, Dealer will not assign, sell, pledge, convey or by any other
means transfer any Rental Contracts or chattel paper, without DFS' prior written
consent. Dealer will not enter into any Rental Contracts for Inventory financed
by DFS or against which DFS has advanced funds pursuant to which: (i) the
original term of the Rental Contract is greater than three hundred sixty (360)
days; (ii) the original term of the Rental Contract is equal to or greater than
the remaining economic life of such Inventory; (iii) the customer is bound to
renew the Rental Contract for the economic life of such Inventory or is bound to
become the owner of such Inventory; or, (iv) the customer has an option to renew
the Rental Contract for the remaining economic life of such Inventory, or to
become the owner of such Inventory, for nominal consideration, or for
consideration which is less than the unpaid balance owed to DFS for such
Inventory. If any such Rental Contracts are issued, Dealer will take any action
which DFS may reasonably require to perfect and/or protect DFS' security
interest in such Rental Contracts and/or the Inventory subject thereto.
13. Default. Dealer will be in default under this Agreement if: (a)
Dealer breaches any terms, warranties or representations contained herein, in
any Statement of Transaction to which Dealer has not objected as provided in
Section 2, or in any other agreement between DFS and Dealer; (b) any guarantor
of Dealer's debts to DFS breaches any terms, warranties or representations
contained in any guaranty or other agreement between the guarantor and DFS; (c)
any representation, statement,
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report or certificate made or delivered by Dealer or any guarantor to DFS is not
accurate when made; (d) Dealer fails to pay any portion of Dealer's debts to DFS
when due and payable hereunder or under any other agreement between DFS and
Dealer; (e) Dealer abandons any Collateral; (f) Dealer or any guarantor is or
becomes in default in the payment of any debt owed to any third party; (g) a
money judgment issues against Dealer or any guarantor; (h) an attachment, sale
or seizure issues or is executed against any assets of Dealer or of any
guarantor; (i) the undersigned dies while Dealer's business is operated as a
sole proprietorship, any general partner dies while Dealer's business is
operated as a general or limited partnership, or any member dies while Dealer's
business is operated as a limited liability company, as applicable; (j) any
guarantor dies; (k) Dealer or any guarantor shall cease existence as a
corporation, partnership, limited liability company or trust, as applicable; (1)
Dealer or any guarantor ceases or suspends business; (m) Dealer, any guarantor
or any member while Dealer's business is operated as a limited liability
company, as applicable, makes a general assignment for the benefit of creditors;
(n) Dealer, any guarantor or any member while Dealer's business is operated as a
limited liability company, as applicable, becomes insolvent or voluntarily or
involuntarily becomes subject to the Federal Bankruptcy Code, any state
insolvency law or any similar law; (0) any receiver is appointed for any assets
of Dealer, any guarantor or any member while Dealer's business is operated as a
limited liability company, as applicable; (p) any guaranty of Dealer's debts to
DFS is terminated; (q) Dealer loses any franchise, permission, license or right
to sell or deal in any Inventory which DFS finances; or (r) Dealer or any
guarantor misrepresents Dealer's or such guarantor's financial condition or
organizational structure.
14. Rights of DFS Upon Default. In the event of a default:
(a) DFS may at any time at DFS' election, without notice or demand
to Dealer, do any one or more of the following: declare all or
any part of the debt Dealer owes DFS immediately due and
payable, together with all costs and expenses of DFS'
collection activity, including, without limitation, all
reasonable attorney's fees; exercise any or all rights under
applicable law (including, without limitation, the right to
possess, transfer and dispose of the Collateral); and/or cease
extending any additional credit to Dealer (DFS' right to cease
extending credit will not be construed to limit the
discretionary nature of this credit facility)
(b) Dealer will segregate and keep the Collateral in trust for
DFS, and in good order and repair, and will not sell, rent,
lease, consign, otherwise dispose of or use any Collateral,
nor further encumber any Collateral.
(c) Upon DFS' oral or written demand, Dealer will immediately
deliver the Collateral to DFS, in good order and repair, at a
place specified by DFS, together with all related documents;
or DFS may, in DFS' sole discretion and without notice or
demand to Dealer, take immediate possession of the Collateral
together with all related documents.
(d) DFS may, without notice, apply a default finance charge to
Dealer's outstanding principal indebtedness equal to the
default rate specified in Dealer's financing program with DFS,
if any, or if there is none so specified, at the lesser of 3%
per annum above the rate in effect immediately prior to the
default, or the highest lawful contract rate of interest
permitted under applicable law.
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(e) Dealer grants DFS an irrevocable power of attorney to: execute
or endorse on Dealer's behalf any checks, drafts or other
forms of exchange received as payment on any Collateral for
deposit in DFS' account; execute financing statements,
instruments, Certificates of Title and Statements of Origin
pertaining to the Collateral; supply any omitted information
and correct errors in any documents between DFS and Dealer;
sell, assign, transfer, negotiate, demand, collect, receive,
settle, extend, or renew any amounts due on any of the
Collateral; do anything Dealer is obligated to do hereunder;
initiate and settle any insurance claim pertaining to the
Collateral; and do anything to preserve and protect the
Collateral and DFS' rights and interests therein.
(f) Upon DFS' oral or written demand, Dealer will immediately
deliver the original Rental Contracts to DFS, and DFS may
collect in DFS' name all amounts owed to Dealer under the
Rental Contracts.
All of DFS' rights and remedies are cumulative. DFS' failure to exercise any of
DFS' rights or remedies hereunder will not waive any of DFS' rights or remedies
as to any past, current or future default.
15. Sale of Collateral. Dealer agrees that if DFS conducts a private
sale of any Collateral by requesting bids from 10 or more dealers or
distributors in that type of Collateral, any sale by DFS of such Collateral in
bulk or in parcels within 120 days of: (a) DFS' taking possession and control of
such Collateral; or (b) when DFS is otherwise authorized to sell such
Collateral; whichever occurs last, to the bidder submitting the highest cash bid
therefor, is a commercially reasonable sale of such Collateral under the Uniform
Commercial Code. Dealer agrees that the purchase of any Collateral by Vendor or
a manufacturer or distributor, as provided in any agreement between DFS and the
Vendor, manufacturer or distributor, is a commercially reasonable disposition
and private sale of such Collateral under the Uniform Commercial Code, and no
request for bids will be required. Dealer further agrees that 7 or more days
prior written notice will be commercially reasonable notice of any public or
private sale (including any sale to Vendor or a manufacturer or distributor).
Dealer irrevocably waives any requirement that DFS retain possession and not
dispose of any Collateral until after an arbitration hearing, arbitration award,
confirmation, trial or final judgment. If DFS disposes of any such Collateral
other than as herein contemplated, the commercial reasonableness of such
disposition will be determined in accordance with the laws of the state
governing this Agreement.
16. Power of Attorney; Information. Dealer grants DFS an irrevocable
power of attorney to do anything necessary to preserve and protect the
Collateral and DFS' rights and interest therein. DFS may provide to any third
party any credit, financial or other information on Dealer that DFS may from
time to time possess. DFS may obtain from any Vendor, manufacturer or
distributor, any credit, financial or other information regarding Dealer that
such Vendor, manufacturer or distributor may from time to time possess.
17. Termination. Either party may terminate this Agreement at any time
by written notice received by the other party. If DFS terminates this Agreement,
Dealer agrees that if Dealer: (a) is not in default hereunder, 30 days prior
notice of termination is reasonable and sufficient (although this provision
shall not be construed to mean that shorter periods may not, in particular
circumstances,
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also be reasonable and sufficient); or (b) is in default hereunder, no prior
notice of termination is required. Dealer will riot be relieved from any
obligation to DFS arising out of DFS' advances or commitments made before the
effective termination date of this Agreement. DFS will retain all of its rights,
interests and remedies hereunder until Dealer has paid all of Dealer's debts to
DFS. All waivers set forth within this Agreement will survive any termination of
this Agreement.
18. Binding Effect. Dealer cannot assign its interest in this Agreement
without DFS' prior written consent, although DFS may assign or participate DFS'
interest, in whole or in part, without Dealer's consent. This Agreement will
protect and bind DFS' and Dealer's respective heirs, representatives, successors
and assigns.
19. Notices. Except as otherwise stated herein, all notices,
arbitration claims, responses, requests and documents will be sufficiently given
or served if mailed or delivered: (a) to Dealer at Dealer's principal place of
business specified above; and (b) to DFS at 655 Maryville Centre Drive, St.
Louis, Missouri 63141-5832, Attention: General Counsel, or such other address as
the parties may hereafter specify in writing.
20. NO ORAL AGREEMENTS. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING
PROMISES TO EXTEND OR RENEW SUCH DEBTS ARE NOT ENFORCEABLE. TO PROTECT DEALER
AND DFS FROM MISUNDERSTANDING OR DISAPPOINTMENT, ALL AGREEMENTS COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES, EXCEPT AS SPECIFICALLY PROVIDED
HEREIN OR AS THE PARTIES MAY LATER AGREE IN WRITING TO MODIFY IT. THERE ARE NO
UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
21. Other Waivers. Dealer irrevocably waives notice of: DFS' acceptance
of this Agreement, presentment, demand, protest, nonpayment, nonperformance, and
dishonor. Dealer and DFS irrevocably waive all rights to claim any punitive
and/or exemplary damages.
22. Severability. If any provision of this Agreement or its application
is invalid or unenforceable, the remainder of this Agreement will not be
impaired or affected and will remain binding and enforceable.
23. Supplement. If Dealer and DFS (or any predecessor in interest to
DFS) have heretofore executed other agreements in connection with all or any
part of the Collateral, this Agreement shall supplement each and every other
agreement previously executed by and between Dealer and DFS (or any predecessor
in interest to DFS), and in that event this Agreement shall neither be deemed a
novation nor a termination of such previously executed agreement nor shall
execution of this Agreement be deemed a satisfaction of any obligation secured
by such previously executed agreement.
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24. Receipt of Agreement. Dealer acknowledges that it has received a
true and complete copy of this Agreement. Dealer acknowledges that it has read
and understood this Agreement. Notwithstanding anything herein to the contrary:
(a) DFS may rely on any facsimile copy, electronic data transmission or
electronic data storage of this Agreement, any Statement of Transaction, billing
statement, invoice from Vendor or any manufacturer or distributor, financial
statements or other reports, and (b) such facsimile copy, electronic data
transmission or electronic data storage will be deemed an original, and the best
evidence thereof for all purposes, including, without limitation, under this
Agreement or any other agreement between DFS and Dealer, and for all evidentiary
purposes before any arbitrator, court or other adjudicatory authority.
25. Miscellaneous. Time is of the essence regarding Dealer's
performance of its obligations to DFS notwithstanding any course of dealing or
custom on DFS' part to grant extensions of time. Dealer's liability under this
Agreement is direct and unconditional and will not be affected by the release or
nonperfection of any security interest granted hereunder. DFS will have the
right 0 refrain from or postpone enforcement of this Agreement or any other
agreements between DFS and Dealer without prejudice and the failure to strictly
enforce these agreements will not be construed as having created a course of
dealing between DFS and Dealer contrary to the specific terms of the agreements
or as having modified, released or waived the same. The express terms of this
Agreement will not be modified by any course of dealing, usage of trade, or
custom of trade which may deviate from the terms hereof. If Dealer fails to pay
any taxes, fees or other obligations which may impair DFS' interest in the
Collateral, or fails to keep the Collateral insured, DFS may, but shall not be
required to, pay such taxes, fees or obligations and pay the cost to insure the
Collateral, and the amounts paid will be: (a) an additional debt owed by Dealer
to DFS, which shall be subject to finance charges as provided herein; and (b)
due and payable immediately in full. Dealer agrees to pay all of DFS' reasonable
attorneys' fees and expenses incurred by DFS in enforcing DFS' rights hereunder.
The Section titles used in this Agreement are for convenience only and do not
define or limit the contents of any Section.
26. BINDING ARBITRATION.
26.1 Arbitrable Claims. Except as otherwise specified below, all
actions, disputes, claims and controversies under common law,
statutory law or in equity of any type or nature whatsoever
(including, without limitation, all torts, whether regarding
negligence, breach of fiduciary duty, restraint of trade,
fraud, conversion, duress, interference, wrongful replevin,
wrongful sequestration, fraud in the inducement, usury or any
other tort, all contract actions, whether regarding express or
implied terms, such as implied covenants of good faith, fair
dealing, and the commercial reasonableness of any Collateral
disposition, or any other contract claim, all claims of
deceptive trade practices or lender liability, and all claims
questioning the reasonableness or lawfulness of any act),
whether arising before or after the date of this Agreement,
and whether directly or indirectly relating to: (a) this
Agreement and/or any amendments and addenda hereto, or the
breach, invalidity or termination hereof; (b) any previous or
subsequent agreement between DFS (or any predecessor in
interest to DFS) and
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Dealer; (c) any act committed by DFS (or any predecessor in
interest to DFS) or by any parent company, subsidiary or
affiliated company of DFS (or any predecessor in interest to
DFS) (collectively the "DFS Companies"), or by any employee,
agent, officer or director of an DFS Company whether or not
arising within the scope and course of employment or other
contractual representation of the DFS Companies provided that
such act arises under a relationship, transaction or dealing
between DFS (or any predecessor in interest to DFS) and
Dealer; and/or (d) any other relationship, transaction or
dealing between DFS (or any predecessor in interest to DFS)
and Dealer (collectively the "Disputes"), will be subject to
and resolved by binding arbitration.
26.2 Administrative Body. All arbitration hereunder will be
conducted in accordance with the Commercial Arbitration Rules
of The American Arbitration Association ("AAA"). If the AAA is
dissolved, disbanded or becomes subject to any state or
federal bankruptcy or insolvency proceeding, the parties will
remain subject to binding arbitration which will be conducted
by a mutually agreeable arbitral forum. The parties agree that
all arbitrator(s) selected will be attorneys with at least
five (5) years secured transactions experience. The
arbitrator(s) will decide if any inconsistency exists between
the rules of any applicable arbitral forum and the arbitration
provisions contained herein. If such inconsistency exists, the
arbitration provisions contained herein will control and
supersede such rules. The site of all arbitration proceedings
will be in the Division of the Federal Judicial District in
which AM maintains a regional office that is closest to
Dealer.
26.3 Discovery. Discovery permitted in any arbitration proceeding
commenced hereunder is limited as follows. No later than
thirty (30) days after the filing of a claim for arbitration,
the parties will exchange detailed statements setting forth
the facts supporting the claim(s) and all defenses to be
raised during the arbitration, and a list of all exhibits and
witnesses. No later than twenty-one (21) days prior to the
arbitration hearing, the parties will exchange a final list of
all exhibits and all witnesses, including any designation of
any expert witness(es) together with a summary of their
testimony; a copy of all documents and a detailed description
of any property to be introduced at the hearing. Under no
circumstances will the use of interrogatories, requests for
admission, requests for the production of documents or the
taking of depositions be permitted. However, in the event of
the designation of any expert witness(es), the following will
occur: (a) all information and documents relied upon by the
expert witness(es) will be delivered to the opposing party,
(b) the opposing party will be permitted to depose the expert
witness(es), (c) the opposing party will be permitted to
designate rebuttal expert witness(es), and (d) the arbitration
hearing will be continued to the earliest possible date that
enables the foregoing limited discovery to be accomplished.
26.4 Exemplary or Punitive Damages. The Arbitrator(s) will not have
the authority to award exemplary or punitive damages.
26.5 Confidentiality of Awards. All arbitration proceedings,
including testimony or evidence at hearings, will be kept
confidential, although any award or order rendered
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by the arbitrator(s) pursuant to the terms of this Agreement
may be entered as a judgment or order in any state or federal
court and may be confirmed within the federal judicial
district which includes the residence of the party against
whom such award or order was entered. This Agreement concerns
transactions involving commerce among the several states. The
Federal Arbitration Act, Title 9 U.S.C.Sections 1 et seq., as
amended ("FAA") will govern all arbitration(s) and
confirmation proceedings hereunder.
26.6 Prejudgment and Provisional Remedies. Nothing herein will be
construed to prevent DFS' or Dealer's use of bankruptcy,
receivership, injunction, repossession, replevin, claim and
delivery, sequestration, seizure, attachment, foreclosure,
dation and/or any other prejudgment or provisional action or
remedy relating to any Collateral for any current or future
debt owed by either party to the other. Any such action or
remedy will not waive DFS' or Dealer's right to compel
arbitration of any Dispute.
26.7 Attorneys' Fees. If either Dealer or DFS brings any other
action for judicial relief with respect to any Dispute (other
than those set forth in Section 26.6), the party bringing such
action will be liable for and immediately pay all of the other
party's costs and expenses (including attorneys' fees)
incurred to stay or dismiss such action and remove or refer
such Dispute to arbitration. If either Dealer or DFS brings or
appeals an action to vacate or modify an arbitration award and
such party does not prevail, such party will pay all costs and
expenses, including attorneys' fees, incurred by the other
party in defending such action. Additionally, if Dealer sues
DFS or institutes any arbitration claim or counterclaim
against DFS in which DFS is the prevailing party, Dealer will
pay all costs and expenses (including attorneys' fees)
incurred by DFS in the course of defending such action or
proceeding.
26.8 Limitations. Any arbitration proceeding must be instituted:
(a) with respect to any Dispute for the collection of any debt
owed by either party to the other, within two (2) years after
the date the last payment was received by the instituting
party; and (b) with respect to any other Dispute, within two
(2) years after the date the incident giving rise thereto
occurred, whether or not any damage was sustained or capable
of ascertainment or either party knew of such incident.
Failure to institute an arbitration proceeding within such
period will constitute an absolute bar and waiver to the
institution of any proceeding, whether arbitration or a court
proceeding, with respect to such Dispute.
26.9 Survival After Termination. The agreement to arbitrate will
survive the termination of this Agreement.
27. INVALIDITY/UNENFORCEABILITY OF BINDING ARBITRATION. IF THIS
AGREEMENT IS FOUND TO BE NOT SUBJECT TO ARBITRATION, ANY LEGAL PROCEEDING WITH
RESPECT TO ANY DISPUTE WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A
JUDGE WITHOUT A JURY. DEALER AND DFS WAIVE ANY RIGHT TO A JURY TRIAL IN ANY SUCH
PROCEEDING.
28. Governing Law. Dealer acknowledges and agrees that this and all
other agreements between Dealer and DFS have been substantially negotiated, and
will be substantially performed, in
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the state of Missouri. Accordingly, Dealer agrees that all Disputes will be
governed by, and construed in accordance with, the laws of such state, except to
the extent inconsistent with the provisions of the FAA which shall control and
govern all arbitration proceedings hereunder.
IN WITNESS WHEREOF, Dealer and DFS have executed this Agreement as of the date
first set forth hereinabove.
THIS CONTRACT CONTAINS BINDING ARBITRATION, JURY WAIVER AND PUNITIVE DAMAGE
WAIVER PROVISIONS.
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SECRETARY'S CERTIFICATE OF RESOLUTION
I certify that I am the Secretary of the corporation named below, and
that the following completely and accurately sets forth certain resolutions of
the Board of Directors of the corporation adopted at a special meeting thereof
held on due notice (and with shareholder approval, if required by law), at which
meeting there was present a quorum authorized to transact the business described
below, and that the proceedings of the meeting were in accordance with the
certificate of incorporation, charter and by-laws of the corporation, and that
they have not been revoked, annulled or amended in any manner whatsoever.
Upon motion duly made and seconded, the following resolution was
unanimously adopted after full discussion:
"RESOLVED, That the several officers, directors, and agents of this
corporation, or any one or more of them, are hereby authorized and empowered on
behalf of this corporation: to obtain financing from Deutsche Financial Services
Corporation ("DFS") in such amounts and on such terms as such officers,
directors or agents deem proper; to enter into financing, security, pledge and
other agreements with DFS relating to the terms upon which such financing may be
obtained and security and/or other credit support is to be furnished by this
corporation therefor; from time to time to supplement or amend any such
agreements; and from time to time to pledge, assign, mortgage, grant security
interests, and otherwise transfer, to DFS as collateral security for any
obligations of this corporation to DFS, whenever and however arising, any assets
of this corporation, whether now owned or hereafter acquired; the Board of
Directors hereby ratifying, approving and confirming all that any of said
officers, directors or agents have done or may do with respect to the
foregoing."
IN WITNESS WHEREOF, I have executed and affixed the seal of the corporation on
the date stated below.
Dated: December 2, 1999
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ADDENDUM TO AGREEMENT FOR WHOLESALE FINANCING
This Addendum is made to that certain Agreement for Wholesale Financing
entered into by and between Crescent Machinery Company ("Dealer") and Deutsche
Financial Services Corporation ("DFS") on April 6, 1998, as amended
("Agreement").
FOR VALUE RECEIVED, DFS and Dealer agree that the following paragraph
is incorporated into the Agreement as if fully and originally set forth therein:
"Dealer will at all times maintain:
(a) a Tangible Net Worth in the amount of not less than twenty million
dollars ($20,000,000.00); and
(b) a ratio of Debt to Tangible Net Worth of not more than five to one
(5.0:1).
For purposes of this paragraph: (i) 'Tangible Net Worth' means the book
value of Dealer's assets less liabilities, excluding from such assets
all Intangibles; (ii) 'Intangibles' means and includes general
intangibles (as that term is defined in the Uniform Commercial Code);
accounts receivable and advances due from officers, directors,
employees, stockholders and affiliates; leasehold improvements net of
depreciation; licenses; good will; prepaid expenses; escrow deposits;
covenants not to compete; franchise fees; organizational costs; finance
reserves held for recourse obligations; capitalized research and
development costs; and such other similar items as DFS may from time to
time determine in DFS' sole discretion; (iii) 'Debt' means all of
Dealer's liabilities and indebtedness for borrowed money of any kind
and nature whatsoever, whether direct or indirect, absolute or
contingent, and including obligations under capitalized leases,
guaranties, or with respect to which Dealer has pledged assets to
secure performance, whether or not direct recourse liability has been
assumed by Dealer; and (iv) 'Subordinated Debt' means all of Dealer's
Debt which is subordinated to the payment of Dealer's liabilities to
DFS by an agreement in form and substance satisfactory to DFS. The
foregoing terms shall be determined in accordance with generally
accepted accounting principles consistently applied, and, if
applicable, on a consolidated basis."
All other terms and provisions of the Agreement, to the extent not inconsistent
with the foregoing, are ratified and remain unchanged and in full force and
effect.
IN WITNESS WHEREOF, Dealer and DFS executed this Addendum on this 12th day of
April 1999.
<PAGE> 59
GUARANTY
TO: DEUTSCHE FINANCIAL SERVICES CORPORATION
In consideration of financing provided or to be provided by you to Western
Traction Company ("Dealer"), and for other good and valuable consideration
received, we jointly, severally, unconditionally and absolutely guaranty to you,
from property held separately, jointly or in community, the immediate payment
when due of all current and future liabilities owed by Dealer to you, whether
such liabilities are direct, indirect or owed by Dealer to a third party and
acquired by you ("Liabilities"). We will pay you on demand the full amount of
all sums owed by Dealer to you, together with all costs and expenses (including,
without limitation, reasonable attorneys' fees). We also indemnify and hold you
harmless from and against all (a) losses, costs and expenses you incur and/or
are liable for (including, without limitation, reasonable attorneys' fees) and
(b) claims, actions and demands made by Dealer or any third party against you,
which in any way relate to any relationship or transaction between you and
Dealer.
Our guaranty will not be released, discharged or affected by, and we hereby
irrevocably consent to, any: (a) change in the manner, place, interest rate,
finance or other charges, or terms of payment or performance in any current or
future agreement between you and Dealer, the release, settlement or compromise
of or with any party liable for the payment or performance thereof or the
substitution, release, non-perfection, impairment, sale or other disposition of
any collateral thereunder; (b) change in Dealer's financial condition; (c)
interruption of relations between Dealer and you or us; (d) claim or action by
Dealer against you; and/or (e) increases or decreases in any credit you may
provide to Dealer. We will pay you even if you have not: (i) notified Dealer
that it is in default of the Liabilities, and/or that you intend to accelerate
or have accelerated the payment of all or any part of the Liabilities, or (ii)
exercised any of your rights or remedies against Dealer, any other person or any
current or future collateral. This Guaranty is assignable by you and will inure
to the benefit of your assignee. If Dealer hereafter undergoes any change in its
ownership, identity or organizational structure, this Guaranty will extend to
all current and future obligations which such new or changed legal entity owes
to you.
We irrevocably waive: notice of your acceptance of this Guaranty, presentment,
demand, protest, nonpayment, nonperformance, notice of breach or default, notice
of intent to accelerate and notice of acceleration of any indebtedness of
Dealer, any right of contribution from other guarantors, dishonor, the amount of
indebtedness of Dealer outstanding at any time, the number and amount of
advances made by you to Dealer in reliance on this Guaranty and any claim or
action against Dealer; all other demands and notices required by law; all rights
of offset and counterclaims against you or Dealer; all defenses to the
enforceability of this Guaranty (including, without limitation, fraudulent
inducement). We further waive all defenses based on suretyship or impairment of
collateral, and defenses which the Dealer may assert on the underlying debt,
including but not limited to, failure of consideration, breach of warranty,
fraud, payment, statute of frauds, bankruptcy, lack of legal capacity, statute
of limitations, lender liability, deceptive trade practices, accord and
satisfaction and usury. We also waive all rights to claim, arbitrate for or sue
for any punitive or exemplary damages.
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In addition, we hereby irrevocably subordinate to you any and all of our present
and future rights and remedies: (a) of subrogation against Dealer to any of your
rights or remedies against Dealer, (b) of contribution, reimbursement,
indemnification and restoration from Dealer; and (c) to assert any other claim
or action against Dealer directly or indirectly relating to this Guaranty, such
subordinations to last until you have been paid in full for all Liabilities. All
of our waivers and subordinations herein will survive any termination of this
Guaranty.
We have made an independent investigation of the financial condition of Dealer
and give this Guaranty based on that investigation and not upon any
representation made by you. We have access to current and future Dealer
financial information which enables us to remain continuously informed of
Dealer's financial condition. We represent and warrant to you that we have
received and will receive substantial direct or indirect benefit by making this
Guaranty and incurring the Liabilities. We will provide you with financial
statements on us each year within ninety (90) days after the end of Dealer's
fiscal year end. We warrant and represent to you that all financial statements
and information relating to us or Dealer which have been or may hereafter be
delivered by us or Dealer to you are true and correct and have been and will be
prepared in accordance with generally accepted accounting principles
consistently applied and, with respect to previously delivered statements and
information, there has been no material adverse change in the financial or
business condition of us or Dealer since the submission to you, either as of the
date of delivery, or if different, the date specified therein, and we
acknowledge your reliance thereon. This Guaranty will survive any federal and/or
state bankruptcy or insolvency action involving Dealer. We are solvent and our
execution of this Guaranty will not make us insolvent. If you are required in
any action involving Dealer to return or rescind any payment made to or value
received by you from or for the account of Dealer, this Guaranty will remain in
full force and effect and will be automatically reinstated without any further
action by you and notwithstanding any termination of this Guaranty or your
release of us. Any delay or failure by you, or your successors or assigns, in
exercising any of your rights or remedies hereunder will not waive any such
rights or remedies. Oral agreements or commitments to loan money, extend credit
or to forbear from enforcing repayment of a debt including promises to extend or
renew such debt are not enforceable. To protect us and you from misunderstanding
or disappointment, any agreements we reach covering such matters are contained
in this writing, which is the complete and exclusive statement of the agreement
between us, except as specifically provided herein or as we may later agree in
writing to modify it. Notwithstanding anything herein to the contrary: (a) you
may rely on any facsimile copy, electronic data transmission or electronic data
storage of this Guaranty, any agreement between you and Dealer, any Statement of
Transaction, billing statement, invoice from a vendor, financial statements or
other report, and (b) such facsimile copy, electronic data transmission or
electronic data storage will be deemed an original, and the best evidence
thereof for all purposes, including, without limitation, under this Guaranty or
any other agreement between you and us, and for all evidentiary purposes before
any arbitrator, court or other adjudicatory authority. We may terminate this
Guaranty by a written notice to you, the termination to be effective sixty (60)
days after you receive and acknowledge it, but the termination will not
terminate our obligations hereunder for Liabilities arising prior to the
effective termination date. We have read and understood all terms and provisions
of this Guaranty. We acknowledge receipt of a true copy of this Guaranty and of
all agreements between you and Dealer. The meanings of all terms herein are
equally applicable to both the singular and plural forms of such terms.
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BINDING ARBITRATION. Except as otherwise specified below, all actions, disputes,
claims and controversies under common law, statutory law or in equity of any
type or nature whatsoever (including, without limitation, all torts, whether
regarding negligence, breach of fiduciary duty, restraint of trade, fraud,
conversion, duress, interference, wrongful replevin, wrongful sequestration,
fraud in the inducement, usury or any other tort, all contract actions, whether
regarding express or implied terms, such as implied covenants of good faith,
fair dealing, and the commercial reasonableness of any collateral disposition,
or any other contract claim, all claims of deceptive trade practices or lender
liability, and all claims questioning the reasonableness or lawfulness of any
act), whether arising before or after the date of this Guaranty, and whether
directly or indirectly relating to this Guaranty and/or any amendments and
addenda hereto, or the breach, invalidity or termination hereof (collectively
the "Disputes"), will be subject to and resolved by binding arbitration.
All arbitration hereunder will be conducted in accordance with The Commercial
Arbitration Rules of The American Arbitration Association ("AAA"). If the AAA is
dissolved, disbanded or becomes subject to any state or federal bankruptcy or
insolvency proceeding, the parties will remain subject to binding arbitration
which will be conducted by a mutually agreeable arbitral forum. The parties
agree that all arbitrator(s) selected will be attorneys with at least five (5)
years secured transactions experience. The arbitrator(s) will decide if any
inconsistency exists between the rules of any applicable arbitral forum and the
arbitration provisions contained herein. If such inconsistency exists, the
arbitration provisions contained herein will control and supersede such rules.
The site of all arbitrations will be in the Division of the Federal Judicial
District in which AAA maintains a regional office that is closest to Dealer.
Discovery permitted in any arbitration proceeding commenced hereunder
is limited as follows: No later than thirty (30) days after the filing of a
claim for arbitration, the parties will exchange detailed statements setting
forth the facts supporting the claim(s) and all defenses to be raised during the
arbitration, and a list of all exhibits and witnesses. No later than twenty-one
(21) days prior to the arbitration hearing, the parties will exchange a final
list of all exhibits and all witnesses, including any designation of any expert
witness(es) together with a summary of their testimony; a copy of all documents
and a detailed description of any property to be introduced at the hearing.
Under no circumstances will the use of interrogatories, requests for admission,
requests for the production of documents or the taking of depositions be
permitted. However, in the event of the designation of any expert witness(es),
the following will occur: (a) all information and documents relied upon by the
expert witness(es) will be delivered to the opposing party, (b) the opposing
party will be permitted to depose the expert witness(es), (c) the opposing party
will be permitted to designate rebuttal expert witness(es), and (d) the
arbitration hearing will be continued to the earliest possible date that enables
the foregoing limited discovery to be accomplished.
The Arbitrator(s) will not have the authority to award exemplary or
punitive damages.
All arbitration proceedings, including testimony or evidence at
hearings, will be kept
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confidential, although any award or order rendered by the arbitrator(s) pursuant
to the terms of this Guaranty may be entered as a judgment or order in any state
or federal court and may be entered as a judgment or order within the federal
judicial district which includes the residence of the party against whom such
award or order was entered. This Guaranty concerns transactions involving
commerce among the several states. The Federal Arbitration Act ("FAA") will
govern all arbitration(s) and confirmation proceedings hereunder.
Nothing herein will be construed to prevent your or our use of bankruptcy,
receivership, injunction, repossession, replevin, claim and delivery,
sequestration, seizure, attachment, foreclosure, dation and/or any other
prejudgment or provisional action or remedy relating to any collateral for any
current or future debt owed by either party to the other. Any such action or
remedy will not waive your or our right to compel arbitration of any Dispute.
If either we or you bring any other action for judicial relief with
respect to any Dispute (other than those set forth in the immediately preceding
paragraph), the party bringing such action will be liable for and immediately
pay all of the other party's costs and expenses (including attorneys' fees)
incurred to stay or dismiss such action and remove or refer such Dispute to
arbitration. If either we or you bring or appeal an action to vacate or modify
an arbitration award and such party does not prevail, such party will pay all
costs and expenses, including attorneys' fees, incurred by the other party in
defending such action. Additionally, if we sue you or institute any arbitration
claim or counterclaim against you in which you are the prevailing party, we will
pay all costs and expenses (including attorneys' fees) incurred by you in the
course of defending such action or proceeding.
Any arbitration proceeding must be instituted: (a) with respect to any
Dispute for the collection of any debt owed by either party to the other, within
two (2) years after the date the last payment was received by the instituting
party; and (b) with respect to any other Dispute, within two (2) years after the
date the incident giving rise thereto occurred, whether or not any damage was
sustained or capable of ascertainment or either party knew of such incident.
Failure to institute an arbitration proceeding within such period will
constitute an absolute bar and waiver to the institution of any proceeding with
respect to such Dispute. Except as otherwise stated herein, all notices,
arbitration claims, responses, requests and documents will be sufficiently given
or served if mailed or delivered: (i) to us at our address below; (ii) to you at
655 Maryville Centre Drive, St. Louis, Missouri 63141-5832, Attention: General
Counsel; or such other address as the parties may specify from time to time in
writing.
The agreement to arbitrate will survive the termination of this
Guaranty.
IF THIS GUARANTY IS FOUND TO BE NOT SUBJECT TO ARBITRATION, ANY LEGAL
PROCEEDING WITH RESPECT TO ANY DISPUTE WILL BE TRIED IN A COURT OF COMPETENT
JURISDICTION BY A JUDGE WITHOUT A JURY. WE WAIVE ANY RIGHT TO A JURY TRIAL IN
ANY SUCH PROCEEDING.
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We acknowledge and agree that this Guaranty and all agreements between Dealer
and you have been substantially negotiated, and will be performed, in the state
of Missouri. Accordingly, we agree that all Disputes will be governed by, and
construed in accordance with, the laws of such state, except to the extent
inconsistent with the provisions of the FAA which will control and govern all
arbitration proceedings hereunder.
THIS GUARANTY CONTAINS BINDING ARBITRATION, JURY WAIVER AND PUNITIVE DAMAGES
WAIVER PROVISIONS.
Date: October 26, 1998
SECRETARY'S CERTIFICATE
I hereby certify that I am the Secretary or Assistant Secretary of Crescent
Machinery Company ("Guarantor") and that execution of the above Guaranty was
ratified, approved and confirmed by the Shareholders at a meeting, if necessary,
and pursuant to a resolution of the Board of Directors of Guarantor at a meeting
of the Board of Directors duly called, and which is currently in effect, which
resolution was duly presented, seconded and adopted and read as follows:
"BE IT RESOLVED that any executive officer of this corporation is hereby
authorized to execute a guaranty of the obligations of Western Traction Company
("Dealer") to Deutsche Financial Services Corporation on behalf of the
corporation, which instrument may contain such terms as the above named persons
may see fit including, but not limited to a waiver of notice of the acceptance
of the guaranty; presentment; demand; protest; notices of nonpayment,
nonperformance, dishonor, the amount of indebtedness of Dealer outstanding at
any time, any legal proceedings Dealer, and any other demands and notices
required by law; and any right of ___________ from other guarantors * RIDER 1."
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RIDERS TO
SECRETARY'S CERTIFICATE
DEUTSCHE FINANCIAL SERVICES CORPORATION/CRESCENT MACHINERY COMPANY
RIDER 1:
; provided, however, that, in the case of any such executive officer who is not
also an executive officer of Crescent Operating, Inc., a Delaware corporation,
such authorization is limited to one or more transactions having an aggregate
value of no greater than Five Hundred Thousand Dollars ($500,000.00).
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COLLATERALIZED GUARANTY
TO: DEUTSCHE FINANCIAL SERVICES CORPORATION ("DFS")
1. Guaranty and Indemnification. In consideration of financing provided or to be
provided by you to Crescent Machinery Company ("Dealer"), and for other good and
valuable consideration received, the undersigned (individually and/or
collectively "Guarantor") unconditionally and absolutely guaranty to DFS, from
property held separately, jointly or in community, the immediate payment when
due of all current and future liabilities owed by Dealer to DFS, whether such
liabilities are direct, indirect or owed by Dealer to a third party and acquired
by DFS ("Liabilities"). Guarantor will pay DFS on demand the full amount of all
sums owed by Dealer to DFS, together with all costs and expenses (including,
without limitation, reasonable attorneys fees). Guarantor also indemnifies and
holds DFS harmless from and against all (a) losses, costs and expenses DFS
incurs and/or is liable for (including, without limitation, reasonable
attorneys' fees) and (b) claims, actions and demands made by Dealer or any third
party against DFS; which in any way relate to any relationship or transaction
between DFS and Dealer.
2. Consents. This Guaranty will not be released, discharged or affected by, and
Guarantor hereby irrevocably consents to, any: (a) change in the manner, place,
interest rate, finance or other charges, or terms of payment or performance in
any current or future agreement between DFS and Dealer, the release, settlement
or compromise of or with any party liable for the payment or performance thereof
or the substitution, release, non-perfection, impairment, sale or other
disposition of any collateral thereunder; (b) change in Dealer's financial
condition; (c) interruption of relations between Dealer and DFS or Guarantor;
(d) claim or action by Dealer against DFS; and/or (e) increases or decreases in
any credit DFS may provide to Dealer.
3. Unconditional Obligations. Guarantor will pay DFS even if DFS has not: (a)
notified Dealer that it is in default of the Liabilities, and/or that DFS
intends to accelerate or has accelerated the payment of all or any part of the
Liabilities, or (b) exercised any of DFS' rights or remedies against Dealer, any
other person or any current or future collateral. If Dealer hereafter undergoes
any change in its ownership, identity or organizational structure, this Guaranty
will extend to all current and future obligations which such new or changed
legal entity owes to DFS.
4. Waivers. Guarantor irrevocably waives: notice of DFS' acceptance of this
Guaranty, presentment, demand, protest, nonpayment, nonperformance, notice of
breach or default, notice of intent to accelerate and notice of acceleration of
any indebtedness of Dealer, any right of contribution from other guarantors,
dishonor, the amount of indebtedness of Dealer outstanding at any time, the
number and amount of advances made by DFS to Dealer in reliance on this Guaranty
and any claim or action against Dealer; all other demands and notices required
by law; all rights of offset and counterclaims against DFS or Dealer; all
defenses to the enforceability of this Guaranty (including, without limitation,
fraudulent inducement). Guarantor further waives all defenses based on
suretyship or impairment of collateral, and defenses which the Dealer may assert
on the underlying debt, including but not limited to, failure of consideration,
breach of warranty, fraud, payment,
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statute of frauds, bankruptcy, lack of legal capacity, statute of limitations,
lender liability, deceptive trade practices, accord and satisfaction and usury.
Guarantor also waives all rights to claim, arbitrate for or sue for any punitive
or exemplary damages. In addition, Guarantor hereby irrevocably subordinates to
DFS any and all of Guarantor's present and future rights and remedies: (a) of
subrogation against Dealer to any of DFS' rights or remedies against Dealer, (b)
of contribution, reimbursement, indemnification and restoration from Dealer; and
(c) to assert any other claim or action against Dealer directly or indirectly
relating to this Guaranty, such subordinations to last until DFS has been paid
in full for all Liabilities. All of Guarantor's waivers and subordinations
herein will survive any termination of this Guaranty.
5. Warranties and Representations. Guarantor has made an independent
investigation of the financial condition of Dealer and gives this Guaranty based
on that investigation and not upon any representation made by DFS. Guarantor has
access to current and future Dealer financial information which enables
Guarantor to remain continuously informed of Dealer's financial condition.
Guarantor represents and warrants to DFS that Guarantor has received and will
receive substantial direct or indirect benefit by making this Guaranty and
incurring the Liabilities. Guarantor also represents and warrants to DFS that
Guarantor is solvent and Guarantor's execution of this Guaranty will not make
Guarantor insolvent. Guarantor further represents and warrants to DFS that: (a)
the present fair salable value of Guarantor's assets is greater than the amount
required to pay Guarantor's liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities); (b) Guarantor is able to pay all of its
liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities) as they become absolute and matured; and (c) Guarantor does not
have unreasonably small capital.
6. Grant of Security Interest. To secure payment of all Liabilities and all of
Guarantor's current and future debts to DFS, whether under this Guaranty or any
current or future guaranty or other agreement, Guarantor grants DFS a security
interest in all of Guarantor's (1) new and used inventory and equipment which is
financed by DFS for, or against which DFS has loaned monies to, Guarantor or
Dealer or any of their subsidiaries or affiliated companies, whether now owned
or hereafter acquired and whether or not transferred among such entities or any
of their subsidiaries or affiliated companies, and (2) all accounts, contract
rights, chattel paper, security agreements, deposit accounts, reserves,
documents, general intangibles and instruments arising from the sale, lease,
rental or other disposition of all such inventory and equipment, and all
judgments, claims, insurance policies and payments owed or made to Guarantor
thereon, and all attachments, accessories, accessions, substitutions and
replacements thereto and all cash and non-cash proceeds of all of the foregoing.
All such assets are collectively referred to herein as the "Collateral." All of
such terms for which meanings are provided in the Uniform Commercial Code of the
applicable state are used herein with such meanings. All Collateral financed by
DFS for Dealer or Guarantor, and all proceeds thereof, will be held in trust by
Guarantor for DFS.
7. Additional Warranties and Representations. Guarantor warrants and represents
to DFS that: (a) Guarantor has good title to all Collateral; (b) DFS' security
interest in the Collateral financed by DFS for Dealer or Guarantor is not now
and will not become subordinate to the security interest, lien, encumbrance or
claim of any person; (c) Guarantor will execute all documents DFS requests to
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perfect and maintain DFS' security interest in the Collateral; (d) Guarantor
will deliver to DFS immediately upon each request, and DFS may retain, each
Certificate of Title or Statement of Origin issued for Collateral financed by
DFS for Dealer or Guarantor; (e) Guarantor will at all times be duly organized,
existing, in good standing, qualified and licensed to do business in each state,
county, or parish, in which the nature of its business or property so requires;
(f) Guarantor has the right and is duly authorized to enter into this Guaranty;
(g) Guarantor's execution of this Guaranty does not constitute a breach of any
agreement to which Guarantor is now or hereafter becomes bound; (h) there are
and will be no actions or proceedings pending or threatened against Guarantor
which might result in any material adverse change in Guarantor's financial or
business condition or which might in any way adversely affect any of Guarantor's
assets; (i) Guarantor will maintain the Collateral in good condition and repair;
(j) Guarantor has duly filed and will duly file all tax returns required by law;
(k) Guarantor has paid and will pay when due all taxes, levies, assessments and
governmental charges of any nature; (I) Guarantor will keep and maintain all of
its books and records pertaining to the Collateral at its principal place of
business designated below; (m) Guarantor will promptly supply DFS with such
information concerning it as DFS hereafter may reasonably request; (n) all
Collateral will be kept at Dealer's principal place of business or Guarantor's
place of business listed below, and such other locations, if any, of which
Dealer or Guarantor has notified DFS in writing or as listed on any current or
future Exhibit "A" attached to any Agreement for Wholesale Financing or security
agreement between Dealer and DFS or this Guaranty which written notice(s) to DFS
and Exhibit A(s) are incorporated herein by reference; (o) Guarantor will give
DFS thirty (30) days prior written notice of any change in Guarantor's identity,
name, form of business organization, ownership, management, principal place of
business, Collateral locations or other business locations, and before moving
any books and records to any other location; (p) Guarantor will observe and
perform all matters required by any lease, license, concession or franchise
forming part of the Collateral in order to maintain all the rights of DFS
thereunder; (q) Guarantor will advise DFS of the commencement of material legal
proceedings against Dealer or Guarantor; and (r) Guarantor will comply with all
applicable laws and will conduct its business in a manner which preserves and
protects the Collateral and the earnings and incomes thereof.
8. Negative Covenants. Guarantor will not at any time (without DFS' prior
written consent): (a) other than in the ordinary course of its business, sell,
lease or otherwise dispose of or transfer any of its assets; (b) rent, lease,
demonstrate, consign, or use any Collateral financed by DFS for Dealer or
Guarantor; or (c) merge or consolidate with another entity.
9. Insurance. Guarantor will immediately notify DFS of any loss, theft or damage
to any Collateral. Guarantor will keep the Collateral insured for its full
insurable value under an "all risk" property insurance policy with a company
acceptable to DFS, naming DFS as a lender loss-payee and containing standard
lender's loss payable and termination provisions. Guarantor will provide DFS
with written evidence of such property insurance coverage and lender's
loss-payee endorsement.
10. Financial Statements. Guarantor will provide DFS with financial statements
on it each year within ninety (90) days after the end of Dealer's fiscal year
end. Guarantor warrants and represents
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to DFS that all financial statements and information relating to Guarantor or
Dealer which have been or may hereafter be delivered by Guarantor or Dealer to
DFS are true and correct and have been and will be prepared in accordance with
generally accepted accounting principles consistently applied and, with respect
to previously delivered statements and information, there has been no material
adverse change in the financial or business condition of Guarantor or Dealer
since the submission to DFS, either as of the date of delivery, or if different,
the date specified therein, and Guarantor acknowledges DFS' reliance thereon.
11. Reviews. Guarantor grants DFS an irrevocable license to enter Guarantor's
business locations during normal business hours without notice to Guarantor to:
(a) account for and inspect all Collateral; (b) verify Guarantor's compliance
with this Guaranty; and (c) examine and copy Guarantor's books and records
related to the Collateral.
12. Default. Guarantor will be in default under this Guaranty if: (a) Dealer
breaches any terms, warranties or representations contained in any Agreement for
Wholesale Financing, in any Statement of Transaction to which Dealer has not
objected, or in any other agreement between DFS and Dealer; (b) Guarantor
breaches any terms, warranties or representations contained herein or in any
other agreement between Guarantor and DFS; (c) any representation, statement,
report or certificate made or delivered by Dealer or Guarantor to DFS is not
accurate when made; (d) Dealer fails to pay any portion of Dealer's debts to DFS
when due and payable under any agreement between DFS and Dealer; (e) Guarantor
fails to pay any portion of Guarantor's debts to DFS when due and payable under
any agreement between DFS and Guarantor; (f) Dealer or Guarantor abandons any
Collateral; (g) Dealer or Guarantor is or becomes in default in the payment of
any debt owed to any third party; (h) a money judgment issues against Dealer or
Guarantor; (i) an attachment, sale or seizure issues or is executed against any
assets of Dealer or Guarantor; (j) Guarantor dies if Guarantor is an individual,
any general partner dies while Guarantor is a general or limited partnership, or
any member dies while Guarantor is a limited liability company, as applicable;
(k) Dealer or Guarantor shall cease existence as a corporation, partnership,
limited liability company or trust, as applicable; (l) Dealer or Guarantor
ceases or suspends business; (m) Dealer, Guarantor or any member while Dealer or
Guarantor is a limited liability company, as applicable, makes a general
assignment for the benefit of creditors; (n) Dealer, Guarantor or any member
while Dealer or Guarantor is a limited liability company, as applicable, becomes
insolvent or voluntarily or involuntarily becomes subject to the Federal
Bankruptcy Code, any state insolvency law or any similar law; (o) any receiver
is appointed for any assets of Dealer, Guarantor or any member while Dealer or
Guarantor is a limited liability company, as applicable; (p) this Guaranty or
any other guaranty of Dealer's debts to DFS is terminated; (q) Dealer or
Guarantor loses any franchise, permission, license or right to sell or deal in
any Collateral which DFS finances for Dealer or Guarantor; (r) Dealer or
Guarantor misrepresents their respective financial condition or organizational
structure; or (5) DFS determines in good faith that it is insecure with respect
to any of the Collateral or the payment of any part of Dealer's or Guarantor's
obligation to DFS.
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13. Rights of DFS Upon Default. In the event of a default:
(a) DFS may at any time at DFS' election, without notice or demand
to Dealer or Guarantor, do any one or more of the following:
declare all or any part of the debt Guarantor owes DFS,
whether contingent or noncontingent and whether arising
hereunder or under any other agreement between Guarantor and
DFS, immediately due and payable, together with all costs and
expenses of DFS' collection activity, including, without
limitation, all reasonable attorneys' fees; exercise any or
all rights under applicable law (including, without
limitation, the right to possess, transfer and dispose of the
Collateral); and/or cease extending any additional credit to
Guarantor, if applicable, or Dealer (DFS' right to cease
extending credit shall not be construed to limit the
discretionary nature of any credit facility)
(b) Guarantor will segregate and keep the Collateral in trust for
DFS, and in good order and repair, and will not sell, rent,
lease, consign, otherwise dispose of or use any Collateral,
nor further encumber any Collateral.
(c) Upon DFS' oral or written demand, Guarantor will immediately
deliver the Collateral to DFS, in good order and repair, at a
place specified by DFS, together with all related documents;
or DFS may, in DFS' sole discretion and without notice or
demand to Guarantor, take immediate possession of the
Collateral together with all related documents.
All of DFS' rights and remedies are cumulative. DFS' failure
to exercise any of DFS' rights or remedies hereunder will not
waive any of DFS' rights or remedies as to any past, current
or future default.
14. Sale of Collateral. Guarantor agrees that if DFS conducts a private sale of
any Collateral by requesting bids from 10 or more dealers or distributors in
that type of Collateral, any sale by DFS of such Collateral in bulk or in
parcels within 120 days of: (a) DFS' taking possession and control of such
Collateral; or (b) when DFS is otherwise authorized to sell such Collateral;
whichever occurs last, to the bidder submitting the highest cash bid therefor,
is a commercially reasonable sale of such Collateral under the Uniform
Commercial Code. Guarantor agrees that the purchase of any Collateral by a
vendor, as provided in any agreement between DFS and the vendor, is a
commercially reasonable disposition and private sale of such Collateral under
the Uniform Commercial Code, and no request for bids shall be required.
Guarantor further agrees that 7 or more days prior written notice will be
commercially reasonable notice of any public or private sale (including any sale
to a Vendor). Guarantor irrevocably waives any requirement that DFS retain
possession and not dispose of any Collateral until after an arbitration hearing,
arbitration award, confirmation, trial or final judgment. If DFS disposes of any
such Collateral other than as herein contemplated, the commercial reasonableness
of such disposition will be determined in accordance with the laws of the state
governing this Guaranty.
15. Power of Attorney. Guarantor grants DFS an irrevocable power of attorney to:
execute or endorse on Guarantor's behalf any checks, financing statements,
instruments, Certificates of Title and Statements of Origin pertaining to the
Collateral; supply any omitted information and correct errors in any documents
between DFS and Guarantor; initiate and settle any insurance claim pertaining to
the Collateral; and do anything to preserve and protect the Collateral and DFS'
rights and interest therein.
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16. Termination. Guarantor may terminate this Guaranty by a written notice to
DFS, the termination to be effective sixty (60) days after DFS receives and
acknowledges it, but the termination will not terminate Guarantor's obligations
hereunder for Liabilities arising prior to the effective termination date.
17. Binding Effect. Guarantor cannot assign this Guaranty without DFS' prior
written consent, although DFS may assign its interest herein without notice to,
or consent from, Guarantor. This Guaranty will protect and bind DFS' and
Guarantor's respective heirs, representatives, Successors and assigns.
18. Notices. Except as otherwise stated herein, all notices, arbitration claims,
responses, requests and documents will be sufficiently given or served if mailed
or delivered: (a) to Guarantor at its address below; (b) to DFS at 655 Maryville
Centre Drive, St. Louis, Missouri 63141-5832, Attention: General Counsel; or
such other address as the parties may specify from time to time in writing.
19. Severability. If any provision of this Guaranty or its application is
invalid or unenforceable, the remainder of this Guaranty will not be impaired or
affected and will remain binding and enforceable.
20. Supplement. If Guarantor and DFS have heretofore executed other guaranties
or agreements in connection with all or any part of the Collateral, this
Guaranty shall supplement each and every other such guaranty and agreement
previously executed by and between Guarantor and DFS, and in that event this
Guaranty shall neither be deemed a novation nor a termination of such previously
executed guaranty or agreement nor shall execution of this Guaranty be deemed a
satisfaction of any obligation secured by such previously executed guaranty or
agreement.
21. Receipt of Guaranty. Guarantor has read and understood all terms and
provisions of this Guaranty. Guarantor acknowledges receipt of a true copy of
this Guaranty and of all agreements between DFS and Dealer. The meanings of all
terms herein are equally applicable to both the singular and plural forms of
such terms. Notwithstanding anything herein to the contrary: (a) DFS may rely on
any facsimile copy, electronic data transmission or electronic data storage of
this Guaranty, any agreement between DFS and Dealer, any Statement of
Transaction, billing statement, invoice from a vendor, financial statements or
other report, and (b) such facsimile copy, electronic data transmission or
electronic data storage will be deemed an original, and the best evidence
thereof for all purposes, including, without limitation, under this Guaranty or
any other agreement between DFS and Guarantor, and for all evidentiary purposes
before any arbitrator, court or other adjudicatory authority.
22. NO ORAL AGREEMENTS. Oral agreements or commitments to loan money, extend
credit or to forbear from enforcing repayment of a debt including promises to
extend or renew such debt
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are not enforceable. To protect Guarantor and DFS from misunderstanding or
disappointment, any agreements Guarantor and DFS or Dealer and DFS reach
covering such matters are contained in this Guaranty, an Agreement for Wholesale
Financing, or another agreement between Guarantor and DFS or between Dealer and
DFS, which agreement(s) is (are) the complete and exclusive statement of the
agreement between Guarantor and DFS and between Dealer and DFS, except as
specifically provided herein, in such other agreement(s) or as Guarantor and DFS
or Dealer and DFS may later agree in writing.
23. Miscellaneous. This Guaranty will survive any federal and/or state
bankruptcy or insolvency action involving Dealer. If DFS is required in any
action involving Dealer to return or rescind any payment made to or value
received by DFS from or for the account of Dealer, this Guaranty will remain in
full force and effect and will be automatically reinstated without any further
action by DFS and notwithstanding any termination of this Guaranty or DFS'
release of Guarantor. Any delay or failure by DFS, or DFS' successors or
assigns, in exercising any of DFS' rights or remedies hereunder will not waive
any such rights or remedies. If Guarantor fails to pay any taxes, fees or other
obligations which may impair DFS' interest in the Collateral, or fails to keep
the Collateral insured, DFS may, but shall not be required to, pay such taxes,
fees or obligations and pay the cost to insure the Collateral, and the amounts
paid will be: (a) an additional debt directly owed by Guarantor to DFS, which
shall be subject to finance charges at the highest rate allowed by law; and (b)
due and payable immediately in full. Guarantor agrees to pay all of DFS'
reasonable attorneys fees and expenses incurred by DFS in enforcing DFS' rights
hereunder. The Section titles used in this Guaranty are for convenience only and
do not define or limit the contents of any Section.
24. BINDING ARBITRATION.
24.1 Arbitrable Claims. Except as otherwise specified below, all
actions, disputes, claims and Controversies under common law, statutory law or
in equity of any type or nature whatsoever (including, without limitation, all
torts, whether regarding negligence, breach of fiduciary duty, restraint of
trade, fraud, conversion, duress, interference, wrongful replevin, wrongful
sequestration, fraud in the inducement, usury or any other tort, all contract
actions, whether regarding express or implied terms, such as implied covenants
of good faith, fair dealing, and the commercial reasonableness of any collateral
disposition, or any other contract claim, all claims of deceptive trade
practices or lender liability, and all claims questioning the reasonableness or
lawfulness of any act), whether arising before or after the date of this
Guaranty, and whether directly or indirectly relating to: (a) this Guaranty
and/or any amendments and addenda hereto, or the breach, invalidity or
termination hereof; (b) any previous or subsequent agreement between DFS and us;
(c) any act committed by DFS or by any parent company, subsidiary or affiliated
company of DFS (the "DFS Companies"), or by an employee, agent, officer or
director of a DFS Company, whether or not arising within the scope and course of
employment or other contractual representation of the DFS Companies provided
that such act arises under a relationship, transaction or dealing between DFS
and Dealer or DFS and Guarantor; and/or (d) any other relationship, transaction,
dealing or agreement between DFS and Dealer or DFS and Guarantor (collectively
the "Disputes"), will be subject to and resolved by binding arbitration.
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24.2 Administrative Body. All arbitration hereunder will be conducted
in accordance with The Commercial Arbitration Rules of The American Arbitration
Association ("AAA"). If the AAA is dissolved, disbanded or becomes subject to
any state or federal bankruptcy or insolvency proceeding, the parties will
remain subject to binding arbitration which will be conducted by a mutually
agreeable arbitral forum. The parties agree that all arbitrator('s) selected
will be attorneys with at least five (5) years secured transactions experience.
The arbitrator(s) will decide if any inconsistency exists between the rules of
any applicable arbitral forum and the arbitration provisions contained herein.
If such inconsistency exists, the arbitration provisions contained herein will
control and supersede such rules. The site of all arbitrations will be in the
Division of the Federal Judicial District in which AAA maintains a regional
office that is closest to Dealer.
24.3 Discovery. Discovery permitted in any arbitration proceeding
commenced hereunder is limited as follows: No later than thirty (30) days after
the filing of a claim for arbitration, the parties will exchange detailed
statements setting forth the facts supporting the claim(s) and all defenses to
be raised during the arbitration, and a list of all exhibits and witnesses. No
later than twenty-one (21) days prior to the arbitration hearing, the parties
will exchange a final list of all exhibits and all witnesses, including any
designation of any expert witness(es) together with a summary of their
testimony; a copy of all documents and a detailed description of any property to
be introduced at the hearing. Under no circumstances will the use of
interrogatories, requests for admission, requests for the production of
documents or the taking of depositions be permitted. However, in the event of
the designation of any expert witness(es), the following will occur: (a) all
information and documents relied upon by the expert witness(es) will be
delivered to the opposing party, (b) the opposing party will be permitted to
depose the expert witness(es), (c) the opposing party will be permitted to
designate rebuttal expert witness(es), and (d) the arbitration hearing will be
continued to the earliest possible date that enables the foregoing limited
discovery to be accomplished.
24.4 Exemplary or Punitive Damages. The Arbitrator(s) will not have the
authority to award exemplary or punitive damages.
24.5 Confidentiality of Awards. All arbitration proceedings, including
testimony or evidence at hearings, will be kept confidential, although any award
or order rendered by the arbitrator(s) pursuant to the terms of this Guaranty
may be entered as a judgment or order in any state or federal court and may be
entered as a judgment or order within the federal judicial district which
includes the residence of the party against whom such award or order was
entered. This Guaranty concerns transactions involving commerce among the
several states. The Federal Arbitration Act ("FAA") will govern all
arbitration(s) and confirmation proceedings hereunder.
24.6 Prejudgment and Provisional Remedies. Nothing herein will be
Construed to prevent DFS' or Guarantor's use of bankruptcy, receivership,
injunction, repossession, replevin, claim and delivery, sequestration, seizure,
attachment, foreclosure, dation and/or any other prejudgment or provisional
action or remedy relating to any collateral for any current or future debt owed
by either party to the other. Any such action or remedy will not waive DFS' or
Guarantor's right to compel arbitration of any Dispute.
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24.7 Attorneys' Fees. If either Guarantor or DFS bring any other action
for judicial relief with respect to any Dispute (other than those set forth in
the immediately preceding paragraph), the party bringing such action will be
liable for and immediately pay all of the other party's costs and expenses
(including attorneys' fees). incurred to stay or dismiss such action and remove
or refer such Dispute to arbitration. If either Guarantor or DFS bring or appeal
an action to vacate or modify an arbitration award and such party does not
prevail, such party will pay all costs and expenses, including attorneys' fees,
incurred by the other party in defending such action. Additionally, if Guarantor
sues DFS or institutes any arbitration claim or counterclaim against DFS in
which DFS is the prevailing party, Guarantor will pay all costs and expenses
(including attorneys' fees) incurred by DFS in the course of defending such
action or proceeding.
24.8 Limitations. Any arbitration proceeding must be instituted: (a)
with respect to any Dispute for the collection of any debt owed by either party
to the other, within two (2) years after the date the last payment was received
by the instituting party; and (b) with respect to any other Dispute, within two
(2) years after the date the incident giving rise thereto occurred, whether or
not any damage was sustained or capable of ascertainment or either party knew of
such incident. Failure to institute an arbitration proceeding within such period
will constitute an absolute bar and waiver to the institution of any proceeding
with respect to such Dispute.
24.9 Survival After Termination. The agreement to arbitrate will
survive the termination of this Guaranty.
25. INVALIDITY/UNENFORCEABILITY OF BINDING ARBITRATION. IF THIS GUARANTY IS
FOUND TO BE NOT SUBJECT TO ARBITRATION, ANY LEGAL PROCEEDING WITH RESPECT TO ANY
DISPUTE WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE WITHOUT A
JURY. DFS AND GUARANTOR WAIVE ANY RIGHT TO A JURY TRIAL IN ANY SUCH PROCEEDING.
26. Governing Law. Guarantor acknowledges and agrees that this Guaranty and all
agreements between Dealer and DFS have been substantially negotiated, and will
be performed, in the state of Missouri. Accordingly, Guarantor agrees that all
Disputes will be governed by, and construed in accordance with, the laws of such
state, except to the extent inconsistent with the provisions of the FAA which
will control and govern all arbitration proceedings herein.
THIS CONTRACT CONTAINS BINDING ARBITRATION, JURY WAIVER AND PUNITIVE DAMAGE
WAIVER PROVISIONS.
Date: April 12, 1999
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"SECRETARY'S CERTIFICATE
I hereby certify that I am the Secretary or Assistant Secretary of Harvey
Equipment Center, Inc. ("Guarantor") and that execution of the above Guaranty
was ratified, approved and confirmed by the Shareholders at a meeting, if
necessary, and pursuant to a resolution of the Board of Directors of Guarantor
at a meeting of the Board of Directors duly called, and which is currently in
effect, which resolution was duly presented, seconded and adopted and reads as
follows:
"BE IT RESOLVED that any officer of this corporation is hereby authorized to
execute a guaranty of the obligations of Crescent Machinery Company ("Dealer")
to Deutsche Financial Services Corporation ("DFS") on behalf of the corporation,
which instrument may contain such terms as the above named persons may see fit
including, but not limited to a waiver of notice of the acceptance of the
guaranty; presentment; demand; protest; notices of nonpayment, nonperformance,
dishonor, the amount of indebtedness of Dealer outstanding at any time, any
legal proceedings against Dealer, and any other demands and notices required by
law; and any right of contribution from other guarantors. As security for such
guaranty to DFS, any officer of this corporation is hereby authorized to pledge,
assign, mortgage, grant security interests, and otherwise transfer to DFS as
collateral security for any obligations of this corporation to DFS, whenever and
however arising, any assets of this corporation, whether now owned or hereafter
acquired."
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal
on this 12th day of April, 1999.
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COLLATERALIZED GUARANTY
TO: DEUTSCHE FINANCIAL SERVICES CORPORATION ("DFS")
1. Guaranty and Indemnification. In consideration of financing provided or to be
provided by you to Harvey Equipment Center, Inc. ("Dealer"), and for other good
and valuable consideration received, the undersigned (individually and/or
collectively "Guarantor") unconditionally and absolutely guaranty to DFS, from
property held separately, jointly or in community, the immediate payment when
due of all current and future liabilities owed by Dealer to DFS, whether such
liabilities are direct, indirect or owed by Dealer to a third party and acquired
by DFS ("Liabilities"). Guarantor will pay DFS on demand the full amount of all
sums owed by Dealer to DFS, together with all costs and expenses (including,
without limitation, reasonable attorneys fees). Guarantor also indemnifies and
holds DFS harmless from and against all (a) losses, costs and expenses DFS
incurs and/or is liable for (including, without limitation, reasonable
attorneys' fees) and (b) claims, actions and demands made by Dealer or any third
party against DFS; which in any way relate to any relationship or transaction
between DFS and Dealer.
2. Consents. This Guaranty will not be released, discharged or affected by, and
Guarantor hereby irrevocably consents to, any: (a) change in the manner, place,
interest rate, finance or other charges, or terms of payment or performance in
any current or future agreement between DFS and Dealer, the release, settlement
or compromise of or with any party liable for the payment or performance thereof
or the substitution, release, non-perfection, impairment, sale or other
disposition of any collateral thereunder; (b) change in Dealer's financial
condition; (c) interruption of relations between Dealer and DFS or Guarantor;
(d) claim or action by Dealer against DFS; and/or (e) increases or decreases in
any credit DFS may provide to Dealer.
3. Unconditional Obligations. Guarantor will pay DFS even if DFS has not: (a)
notified Dealer that it is in default of the Liabilities, and/or that DFS
intends to accelerate or has accelerated the payment of all or any part of the
Liabilities, or (b) exercised any of DFS' rights or remedies against Dealer, any
other person or any current or future collateral. If Dealer hereafter undergoes
any change in its ownership, identity or organizational structure, this Guaranty
will extend to all current and future obligations which such new or changed
legal entity owes to DFS.
4. Waivers. Guarantor irrevocably waives: notice of DFS' acceptance of this
Guaranty, presentment, demand, protest, nonpayment, nonperformance, notice of
breach or default, notice of intent to accelerate and notice of acceleration of
any indebtedness of Dealer, any right of contribution from other guarantors,
dishonor, the amount of indebtedness of Dealer outstanding at any time, the
number and amount of advances made by DFS to Dealer in reliance on this Guaranty
and any claim or action against Dealer; all other demands and notices required
by law; all rights of offset and counterclaims against DFS or Dealer; all
defenses to the enforceability of this Guaranty (including, without limitation,
fraudulent inducement). Guarantor further waives all defenses based on
suretyship or impairment of collateral, and defenses which the Dealer may assert
on the underlying debt, including but not limited to, failure of consideration,
breach of warranty, fraud, payment,
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statute of frauds, bankruptcy, lack of legal capacity, statute of limitations,
lender liability, deceptive trade practices, accord and satisfaction and usury.
Guarantor also waives all rights to claim, arbitrate for or sue for any punitive
or exemplary damages. In addition, Guarantor hereby irrevocably subordinates to
DFS any and all of Guarantor's present and future rights and remedies: (a) of
subrogation against Dealer to any of DFS' rights or remedies against Dealer, (b)
of contribution, reimbursement, indemnification and restoration from Dealer; and
(c) to assert any other claim or action against Dealer directly or indirectly
relating to this Guaranty, such subordinations to last until DFS has been paid
in full for all Liabilities. All of Guarantor's waivers and subordinations
herein will survive any termination of this Guaranty.
5. Warranties and Representations. Guarantor has made an independent
investigation of the financial condition of Dealer and gives this Guaranty based
on that investigation and not upon any representation made by DFS. Guarantor has
access to current and future Dealer financial information which enables
Guarantor to remain continuously informed of Dealer's financial condition.
Guarantor represents and warrants to DFS that Guarantor has received and will
receive substantial direct or indirect benefit by making this Guaranty and
incurring the Liabilities. Guarantor also represents and warrants to DFS that
Guarantor is solvent and Guarantor's execution of this Guaranty will not make
Guarantor insolvent. Guarantor further represents and warrants to DFS that: (a)
the present fair salable value of Guarantor's assets is greater than the amount
required to pay Guarantor's liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities); (b) Guarantor is able to pay all of its
liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities) as they become absolute and matured; and (c) Guarantor does not
have unreasonably small capital.
6. Grant of Security Interest. To secure payment of all Liabilities and all of
Guarantor's current and future debts to DFS, whether under this Guaranty or any
current or future guaranty or other agreement, Guarantor grants DFS a security
interest in all of Guarantor's (1) new and used inventory and equipment which is
financed by DFS for, or against which DFS has loaned monies to, Guarantor or
Dealer or any of their subsidiaries or affiliated companies, whether now owned
or hereafter acquired and whether or not transferred among such entities or any
of their subsidiaries or affiliated companies, and (2) all accounts, contract
rights, chattel paper, security agreements, deposit accounts, reserves,
documents, general intangibles and instruments arising from the sale, lease,
rental or other disposition of all such inventory and equipment, and all
judgments, claims, insurance policies and payments owed or made to Guarantor
thereon, and all attachments, accessories, accessions, substitutions and
replacements thereto and all cash and non-cash proceeds of all of the foregoing.
All such assets are collectively referred to herein as the "Collateral." All of
such terms for which meanings are provided in the Uniform Commercial Code of the
applicable state are used herein with such meanings. All Collateral financed by
DFS for Dealer or Guarantor, and all proceeds thereof, will be held in trust by
Guarantor for DFS.
7. Additional Warranties and Representations. Guarantor warrants and represents
to DFS that: (a) Guarantor has good title to all Collateral; (b) DFS' security
interest in the Collateral financed by DFS for Dealer or Guarantor is not now
and will not become subordinate to the security interest, lien, encumbrance or
claim of any person; (c) Guarantor will execute all documents DFS requests to
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perfect and maintain DFS' security interest in the Collateral; (d) Guarantor
will deliver to DFS immediately upon each request, and DFS may retain, each
Certificate of Title or Statement of Origin issued for Collateral financed by
DFS for Dealer or Guarantor; (e) Guarantor will at all times be duly organized,
existing, in good standing, qualified and licensed to do business in each state,
county, or parish, in which the nature of its business or property so requires;
(f) Guarantor has the right and is duly authorized to enter into this Guaranty;
(g) Guarantor's execution of this Guaranty does not constitute a breach of any
agreement to which Guarantor is now or hereafter becomes bound; (h) there are
and will be no actions or proceedings pending or threatened against Guarantor
which might result in any material adverse change in Guarantor's financial or
business condition or which might in any way adversely affect any of Guarantor's
assets; (i) Guarantor will maintain the Collateral in good condition and repair;
(j) Guarantor has duly filed and will duly file all tax returns required by law;
(k) Guarantor has paid and will pay when due all taxes, levies, assessments and
governmental charges of any nature; (I) Guarantor will keep and maintain all of
its books and records pertaining to the Collateral at its principal place of
business designated below; (m) Guarantor will promptly supply DFS with such
information concerning it as DFS hereafter may reasonably request; (n) all
Collateral will be kept at Dealer's principal place of business or Guarantor's
place of business listed below, and such other locations, if any, of which
Dealer or Guarantor has notified DFS in writing or as listed on any current or
future Exhibit "A" attached to any Agreement for Wholesale Financing or security
agreement between Dealer and DFS or this Guaranty which written notice(s) to DFS
and Exhibit A(s) are incorporated herein by reference; (o) Guarantor will give
DFS thirty (30) days prior written notice of any change in Guarantor's identity,
name, form of business organization, ownership, management, principal place of
business, Collateral locations or other business locations, and before moving
any books and records to any other location; (p) Guarantor will observe and
perform all matters required by any lease, license, concession or franchise
forming part of the Collateral in order to maintain all the rights of DFS
thereunder; (q) Guarantor will advise DFS of the commencement of material legal
proceedings against Dealer or Guarantor; and (r) Guarantor will comply with all
applicable laws and will conduct its business in a manner which preserves and
protects the Collateral and the earnings and incomes thereof.
8. Negative Covenants. Guarantor will not at any time (without DFS' prior
written consent): (a) other than in the ordinary course of its business, sell,
lease or otherwise dispose of or transfer any of its assets; (b) rent, lease,
demonstrate, consign, or use any Collateral financed by DFS for Dealer or
Guarantor; or (c) merge or consolidate with another entity.
9. Insurance. Guarantor will immediately notify DFS of any loss, theft or damage
to any Collateral. Guarantor will keep the Collateral insured for its full
insurable value under an "all risk" property insurance policy with a company
acceptable to DFS, naming DFS as a lender loss-payee and containing standard
lender's loss payable and termination provisions. Guarantor will provide DFS
with written evidence of such property insurance coverage and lender's
loss-payee endorsement.
10. Financial Statements. Guarantor will provide DFS with financial statements
on it each year within ninety (90) days after the end of Dealer's fiscal year
end. Guarantor warrants and represents
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to DFS that all financial statements and information relating to Guarantor or
Dealer which have been or may hereafter be delivered by Guarantor or Dealer to
DFS are true and correct and have been and will be prepared in accordance with
generally accepted accounting principles consistently applied and, with respect
to previously delivered statements and information, there has been no material
adverse change in the financial or business condition of Guarantor or Dealer
since the submission to DFS, either as of the date of delivery, or if different,
the date specified therein, and Guarantor acknowledges DFS' reliance thereon.
11. Reviews. Guarantor grants DFS an irrevocable license to enter Guarantor's
business locations during normal business hours without notice to Guarantor to:
(a) account for and inspect all Collateral; (b) verify Guarantor's compliance
with this Guaranty; and (c) examine and copy Guarantor's books and records
related to the Collateral.
12. Default. Guarantor will be in default under this Guaranty if: (a) Dealer
breaches any terms, warranties or representations contained in any Agreement for
Wholesale Financing, in any Statement of Transaction to which Dealer has not
objected, or in any other agreement between DFS and Dealer; (b) Guarantor
breaches any terms, warranties or representations contained herein or in any
other agreement between Guarantor and DFS; (c) any representation, statement,
report or certificate made or delivered by Dealer or Guarantor to DFS is not
accurate when made; (d) Dealer fails to pay any portion of Dealer's debts to DFS
when due and payable under any agreement between DFS and Dealer; (e) Guarantor
fails to pay any portion of Guarantor's debts to DFS when due and payable under
any agreement between DFS and Guarantor; (f) Dealer or Guarantor abandons any
Collateral; (g) Dealer or Guarantor is or becomes in default in the payment of
any debt owed to any third party; (h) a money judgment issues against Dealer or
Guarantor; (i) an attachment, sale or seizure issues or is executed against any
assets of Dealer or Guarantor; (j) Guarantor dies if Guarantor is an individual,
any general partner dies while Guarantor is a general or limited partnership, or
any member dies while Guarantor is a limited liability company, as applicable;
(k) Dealer or Guarantor shall cease existence as a corporation, partnership,
limited liability company or trust, as applicable; (l) Dealer or Guarantor
ceases or suspends business; (m) Dealer, Guarantor or any member while Dealer or
Guarantor is a limited liability company, as applicable, makes a general
assignment for the benefit of creditors; (n) Dealer, Guarantor or any member
while Dealer or Guarantor is a limited liability company, as applicable, becomes
insolvent or voluntarily or involuntarily becomes subject to the Federal
Bankruptcy Code, any state insolvency law or any similar law; (o) any receiver
is appointed for any assets of Dealer, Guarantor or any member while Dealer or
Guarantor is a limited liability company, as applicable; (p) this Guaranty or
any other guaranty of Dealer's debts to DFS is terminated; (q) Dealer or
Guarantor loses any franchise, permission, license or right to sell or deal in
any Collateral which DFS finances for Dealer or Guarantor; (r) Dealer or
Guarantor misrepresents their respective financial condition or organizational
structure; or (5) DFS determines in good faith that it is insecure with respect
to any of the Collateral or the payment of any part of Dealer's or Guarantor's
obligation to DFS.
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13. Rights of DFS Upon Default. In the event of a default:
(a) DFS may at any time at DFS' election, without notice or demand
to Dealer or Guarantor, do any one or more of the following:
declare all or any part of the debt Guarantor owes DFS,
whether contingent or noncontingent and whether arising
hereunder or under any other agreement between Guarantor and
DFS, immediately due and payable, together with all costs and
expenses of DFS' collection activity, including, without
limitation, all reasonable attorneys' fees; exercise any or
all rights under applicable law (including, without
limitation, the right to possess, transfer and dispose of the
Collateral); and/or cease extending any additional credit to
Guarantor, if applicable, or Dealer (DFS' right to cease
extending credit shall not be construed to limit the
discretionary nature of any credit facility)
(b) Guarantor will segregate and keep the Collateral in trust for
DFS, and in good order and repair, and will not sell, rent,
lease, consign, otherwise dispose of or use any Collateral,
nor further encumber any Collateral.
(c) Upon DFS' oral or written demand, Guarantor will immediately
deliver the Collateral to DFS, in good order and repair, at a
place specified by DFS, together with all related documents;
or DFS may, in DFS' sole discretion and without notice or
demand to Guarantor, take immediate possession of the
Collateral together with all related documents.
All of DFS' rights and remedies are cumulative. DFS' failure
to exercise any of DFS' rights or remedies hereunder will not
waive any of DFS' rights or remedies as to any past, current
or future default.
14. Sale of Collateral. Guarantor agrees that if DFS conducts a private sale of
any Collateral by requesting bids from 10 or more dealers or distributors in
that type of Collateral, any sale by DFS of such Collateral in bulk or in
parcels within 120 days of: (a) DFS' taking possession and control of such
Collateral; or (b) when DFS is otherwise authorized to sell such Collateral;
whichever occurs last, to the bidder submitting the highest cash bid therefor,
is a commercially reasonable sale of such Collateral under the Uniform
Commercial Code. Guarantor agrees that the purchase of any Collateral by a
vendor, as provided in any agreement between DFS and the vendor, is a
commercially reasonable disposition and private sale of such Collateral under
the Uniform Commercial Code, and no request for bids shall be required.
Guarantor further agrees that 7 or more days prior written notice will be
commercially reasonable notice of any public or private sale (including any sale
to a Vendor). Guarantor irrevocably waives any requirement that DFS retain
possession and not dispose of any Collateral until after an arbitration hearing,
arbitration award, confirmation, trial or final judgment. If DFS disposes of any
such Collateral other than as herein contemplated, the commercial reasonableness
of such disposition will be determined in accordance with the laws of the state
governing this Guaranty.
15. Power of Attorney. Guarantor grants DFS an irrevocable power of attorney to:
execute or endorse on Guarantor's behalf any checks, financing statements,
instruments, Certificates of Title and Statements of Origin pertaining to the
Collateral; supply any omitted information and correct errors in any documents
between DFS and Guarantor; initiate and settle any insurance claim pertaining to
the Collateral; and do anything to preserve and protect the Collateral and DFS'
rights and interest therein.
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16. Termination. Guarantor may terminate this Guaranty by a written notice to
DFS, the termination to be effective sixty (60) days after DFS receives and
acknowledges it, but the termination will not terminate Guarantor's obligations
hereunder for Liabilities arising prior to the effective termination date.
17. Binding Effect. Guarantor cannot assign this Guaranty without DFS' prior
written consent, although DFS may assign its interest herein without notice to,
or consent from, Guarantor. This Guaranty will protect and bind DFS' and
Guarantor's respective heirs, representatives, Successors and assigns.
18. Notices. Except as otherwise stated herein, all notices, arbitration claims,
responses, requests and documents will be sufficiently given or served if mailed
or delivered: (a) to Guarantor at its address below; (b) to DFS at 655 Maryville
Centre Drive, St. Louis, Missouri 63141-5832, Attention: General Counsel; or
such other address as the parties may specify from time to time in writing.
19. Severability. If any provision of this Guaranty or its application is
invalid or unenforceable, the remainder of this Guaranty will not be impaired or
affected and will remain binding and enforceable.
20. Supplement. If Guarantor and DFS have heretofore executed other guaranties
or agreements in connection with all or any part of the Collateral, this
Guaranty shall supplement each and every other such guaranty and agreement
previously executed by and between Guarantor and DFS, and in that event this
Guaranty shall neither be deemed a novation nor a termination of such previously
executed guaranty or agreement nor shall execution of this Guaranty be deemed a
satisfaction of any obligation secured by such previously executed guaranty or
agreement.
21. Receipt of Guaranty. Guarantor has read and understood all terms and
provisions of this Guaranty. Guarantor acknowledges receipt of a true copy of
this Guaranty and of all agreements between DFS and Dealer. The meanings of all
terms herein are equally applicable to both the singular and plural forms of
such terms. Notwithstanding anything herein to the contrary: (a) DFS may rely on
any facsimile copy, electronic data transmission or electronic data storage of
this Guaranty, any agreement between DFS and Dealer, any Statement of
Transaction, billing statement, invoice from a vendor, financial statements or
other report, and (b) such facsimile copy, electronic data transmission or
electronic data storage will be deemed an original, and the best evidence
thereof for all purposes, including, without limitation, under this Guaranty or
any other agreement between DFS and Guarantor, and for all evidentiary purposes
before any arbitrator, court or other adjudicatory authority.
22. NO ORAL AGREEMENTS. Oral agreements or commitments to loan money, extend
credit or to forbear from enforcing repayment of a debt including promises to
extend or renew such debt
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are not enforceable. To protect Guarantor and DFS from misunderstanding or
disappointment, any agreements Guarantor and DFS or Dealer and DFS reach
covering such matters are contained in this Guaranty, an Agreement for Wholesale
Financing, or another agreement between Guarantor and DFS or between Dealer and
DFS, which agreement(s) is (are) the complete and exclusive statement of the
agreement between Guarantor and DFS and between Dealer and DFS, except as
specifically provided herein, in such other agreement(s) or as Guarantor and DFS
or Dealer and DFS may later agree in writing.
23. Miscellaneous. This Guaranty will survive any federal and/or state
bankruptcy or insolvency action involving Dealer. If DFS is required in any
action involving Dealer to return or rescind any payment made to or value
received by DFS from or for the account of Dealer, this Guaranty will remain in
full force and effect and will be automatically reinstated without any further
action by DFS and notwithstanding any termination of this Guaranty or DFS'
release of Guarantor. Any delay or failure by DFS, or DFS' successors or
assigns, in exercising any of DFS' rights or remedies hereunder will not waive
any such rights or remedies. If Guarantor fails to pay any taxes, fees or other
obligations which may impair DFS' interest in the Collateral, or fails to keep
the Collateral insured, DFS may, but shall not be required to, pay such taxes,
fees or obligations and pay the cost to insure the Collateral, and the amounts
paid will be: (a) an additional debt directly owed by Guarantor to DFS, which
shall be subject to finance charges at the highest rate allowed by law; and (b)
due and payable immediately in full. Guarantor agrees to pay all of DFS'
reasonable attorneys fees and expenses incurred by DFS in enforcing DFS' rights
hereunder. The Section titles used in this Guaranty are for convenience only and
do not define or limit the contents of any Section.
24. BINDING ARBITRATION.
24.1 Arbitrable Claims. Except as otherwise specified below, all
actions, disputes, claims and Controversies under common law, statutory law or
in equity of any type or nature whatsoever (including, without limitation, all
torts, whether regarding negligence, breach of fiduciary duty, restraint of
trade, fraud, conversion, duress, interference, wrongful replevin, wrongful
sequestration, fraud in the inducement, usury or any other tort, all contract
actions, whether regarding express or implied terms, such as implied covenants
of good faith, fair dealing, and the commercial reasonableness of any collateral
disposition, or any other contract claim, all claims of deceptive trade
practices or lender liability, and all claims questioning the reasonableness or
lawfulness of any act), whether arising before or after the date of this
Guaranty, and whether directly or indirectly relating to: (a) this Guaranty
and/or any amendments and addenda hereto, or the breach, invalidity or
termination hereof; (b) any previous or subsequent agreement between DFS and us;
(c) any act committed by DFS or by any parent company, subsidiary or affiliated
company of DFS (the "DFS Companies"), or by an employee, agent, officer or
director of a DFS Company, whether or not arising within the scope and course of
employment or other contractual representation of the DFS Companies provided
that such act arises under a relationship, transaction or dealing between DFS
and Dealer or DFS and Guarantor; and/or (d) any other relationship, transaction,
dealing or agreement between DFS and Dealer or DFS and Guarantor (collectively
the "Disputes"), will be subject to and resolved by binding arbitration.
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24.2 Administrative Body. All arbitration hereunder will be conducted
in accordance with The Commercial Arbitration Rules of The American Arbitration
Association ("AAA"). If the AAA is dissolved, disbanded or becomes subject to
any state or federal bankruptcy or insolvency proceeding, the parties will
remain subject to binding arbitration which will be conducted by a mutually
agreeable arbitral forum. The parties agree that all arbitrator('s) selected
will be attorneys with at least five (5) years secured transactions experience.
The arbitrator(s) will decide if any inconsistency exists between the rules of
any applicable arbitral forum and the arbitration provisions contained herein.
If such inconsistency exists, the arbitration provisions contained herein will
control and supersede such rules. The site of all arbitrations will be in the
Division of the Federal Judicial District in which AAA maintains a regional
office that is closest to Dealer.
24.3 Discovery. Discovery permitted in any arbitration proceeding
commenced hereunder is limited as follows: No later than thirty (30) days after
the filing of a claim for arbitration, the parties will exchange detailed
statements setting forth the facts supporting the claim(s) and all defenses to
be raised during the arbitration, and a list of all exhibits and witnesses. No
later than twenty-one (21) days prior to the arbitration hearing, the parties
will exchange a final list of all exhibits and all witnesses, including any
designation of any expert witness(es) together with a summary of their
testimony; a copy of all documents and a detailed description of any property to
be introduced at the hearing. Under no circumstances will the use of
interrogatories, requests for admission, requests for the production of
documents or the taking of depositions be permitted. However, in the event of
the designation of any expert witness(es), the following will occur: (a) all
information and documents relied upon by the expert witness(es) will be
delivered to the opposing party, (b) the opposing party will be permitted to
depose the expert witness(es), (c) the opposing party will be permitted to
designate rebuttal expert witness(es), and (d) the arbitration hearing will be
continued to the earliest possible date that enables the foregoing limited
discovery to be accomplished.
24.4 Exemplary or Punitive Damages. The Arbitrator(s) will not have the
authority to award exemplary or punitive damages.
24.5 Confidentiality of Awards. All arbitration proceedings, including
testimony or evidence at hearings, will be kept confidential, although any award
or order rendered by the arbitrator(s) pursuant to the terms of this Guaranty
may be entered as a judgment or order in any state or federal court and may be
entered as a judgment or order within the federal judicial district which
includes the residence of the party against whom such award or order was
entered. This Guaranty concerns transactions involving commerce among the
several states. The Federal Arbitration Act ("FAA") will govern all
arbitration(s) and confirmation proceedings hereunder.
24.6 Prejudgment and Provisional Remedies. Nothing herein will be
Construed to prevent DFS' or Guarantor's use of bankruptcy, receivership,
injunction, repossession, replevin, claim and delivery, sequestration, seizure,
attachment, foreclosure, dation and/or any other prejudgment or provisional
action or remedy relating to any collateral for any current or future debt owed
by either party to the other. Any such action or remedy will not waive DFS' or
Guarantor's right to compel arbitration of any Dispute.
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24.7 Attorneys' Fees. If either Guarantor or DFS bring any other action
for judicial relief with respect to any Dispute (other than those set forth in
the immediately preceding paragraph), the party bringing such action will be
liable for and immediately pay all of the other party's costs and expenses
(including attorneys' fees). incurred to stay or dismiss such action and remove
or refer such Dispute to arbitration. If either Guarantor or DFS bring or appeal
an action to vacate or modify an arbitration award and such party does not
prevail, such party will pay all costs and expenses, including attorneys' fees,
incurred by the other party in defending such action. Additionally, if Guarantor
sues DFS or institutes any arbitration claim or counterclaim against DFS in
which DFS is the prevailing party, Guarantor will pay all costs and expenses
(including attorneys' fees) incurred by DFS in the course of defending such
action or proceeding.
24.8 Limitations. Any arbitration proceeding must be instituted: (a)
with respect to any Dispute for the collection of any debt owed by either party
to the other, within two (2) years after the date the last payment was received
by the instituting party; and (b) with respect to any other Dispute, within two
(2) years after the date the incident giving rise thereto occurred, whether or
not any damage was sustained or capable of ascertainment or either party knew of
such incident. Failure to institute an arbitration proceeding within such period
will constitute an absolute bar and waiver to the institution of any proceeding
with respect to such Dispute.
24.9 Survival After Termination. The agreement to arbitrate will
survive the termination of this Guaranty.
25. INVALIDITY/UNENFORCEABILITY OF BINDING ARBITRATION. IF THIS GUARANTY IS
FOUND TO BE NOT SUBJECT TO ARBITRATION, ANY LEGAL PROCEEDING WITH RESPECT TO ANY
DISPUTE WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE WITHOUT A
JURY. DFS AND GUARANTOR WAIVE ANY RIGHT TO A JURY TRIAL IN ANY SUCH PROCEEDING.
26. Governing Law. Guarantor acknowledges and agrees that this Guaranty and all
agreements between Dealer and DFS have been substantially negotiated, and will
be performed, in the state of Missouri. Accordingly, Guarantor agrees that all
Disputes will be governed by, and construed in accordance with, the laws of such
state, except to the extent inconsistent with the provisions of the FAA which
will control and govern all arbitration proceedings herein.
THIS CONTRACT CONTAINS BINDING ARBITRATION, JURY WAIVER AND PUNITIVE DAMAGE
WAIVER PROVISIONS.
Dated: April 12, 1999
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"SECRETARY' S CERTIFICATE
I hereby certify that I am the Secretary or Assistant Secretary of Crescent
Machinery Company ("Guarantor") and that execution of the above Guaranty was
ratified, approved and confirmed by the Shareholders at a meeting, if necessary,
and pursuant to a resolution of the Board of Directors of Guarantor at a meeting
of the Board of Directors duly called, and which is currently in effect, which
resolution was duly presented, seconded and adopted and reads as follows:
"BE IT RESOLVED that any officer of this corporation is hereby authorized to
execute a guaranty of the obligations of Harvey Equipment Center, Inc.
("Dealer") to Deutsche Financial Services Corporation ("DFS") on behalf of the
corporation, which instrument may contain such terms as the above named persons
may see fit including, but not limited to a waiver of notice of the acceptance
of the guaranty; presentment; demand; protest; notices of nonpayment,
nonperformance, dishonor, the amount of indebtedness of Dealer outstanding at
any time, any legal proceedings against Dealer, and any other demands and
notices required by law; and any right of contribution from other guarantors. As
security for such guaranty to DFS, any officer of this corporation is hereby
authorized to pledge, assign, mortgage, grant security interests, and otherwise
transfer to DFS as collateral security for any obligations of this corporation
to DFS, whenever and however arising, any assets of this corporation, whether
now owned or hereafter acquired."
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal
on this 12th day of April, 1999.
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COLLATERALIZED GUARANTY
TO: DEUTSCHE FINANCIAL SERVICES CORPORATION ("DFS")
1. Guaranty and Indemnification. In consideration of financing provided or to be
provided by you to Machinery, Inc. ("Dealer"), and for other good and valuable
consideration received, the undersigned (individually and/or collectively
"Guarantor") unconditionally and absolutely guaranty to DFS, from property held
separately, jointly or in community, the immediate payment when due of all
current and future liabilities owed by Dealer to DFS, whether such liabilities
are direct, indirect or owed by Dealer to a third party and acquired by DFS
("Liabilities"). Guarantor will pay DFS on demand the full amount of all sums
owed by Dealer to DFS, together with all costs and expenses (including, without
limitation, reasonable attorneys' fees). Guarantor also indemnifies and holds
DFS harmless from and against all (a) losses, costs and expenses DFS incurs
and/or is liable for (including, without limitation, reasonable attorneys' fees)
and (b) claims, actions and demands made by Dealer or any third party against
DFS; which in any way relate to any relationship or transaction between DFS and
Dealer.
2. Consents. This Guaranty will not be released, discharged or affected by, and
Guarantor hereby irrevocably consents to, any: (a) change in the manner, place,
interest rate, finance or other charges, or terms of payment or performance in
any current or future agreement between DFS and Dealer, the release, settlement
or compromise of or with any party liable for the payment or performance thereof
or the substitution, release, non-perfection, impairment, sale or other
disposition of any collateral thereunder; (b) change in Dealer's financial
condition; (c) interruption of relations between Dealer and DFS or Guarantor;
(d) claim or action by Dealer against DFS; and/or (e) increases or decreases in
any credit DFS may provide to Dealer.
3. Unconditional Obligations. Guarantor will pay DFS even if DFS has not: (a)
notified Dealer that it is in default of the Liabilities, and/or that DFS
intends to accelerate or has accelerated the payment of all or any part of the
Liabilities, or (b) exercised any of DFS' rights or remedies against Dealer, any
other person or any current or future collateral. If Dealer hereafter undergoes
any change in its ownership, identity or organizational structure, this Guaranty
will extend to all current and future obligations which such new or changed
legal entity owes to DFS.
4. Waivers. Guarantor irrevocably waives: notice of DFS' acceptance of this
Guaranty, presentment, demand, protest, nonpayment, nonperformance, notice of
breach or default, notice of intent to accelerate and notice of acceleration of
any indebtedness of Dealer, any right of contribution from other guarantors,
dishonor, the amount of indebtedness of Dealer outstanding at any time, the
number and amount of advances made by DFS to Dealer in reliance on this Guaranty
and any claim or action against Dealer; all other demands and notices required
by law; all rights of offset and counterclaims against DFS or Dealer; all
defenses to the enforceability of this Guaranty (including, without limitation,
fraudulent inducement). Guarantor further waives all defenses based on
suretyship or impairment of collateral, and defenses which the Dealer may assert
on the underlying debt, including but not limited to, failure of consideration,
breach of warranty, fraud, payment,
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statute of frauds, bankruptcy, lack of legal capacity, statute of limitations,
lender liability, deceptive trade practices, accord and satisfaction and usury.
Guarantor also waives all rights to claim, arbitrate for or sue for any punitive
or exemplary damages. In addition, Guarantor hereby irrevocably subordinates to
DFS any and all of Guarantor's present and future rights and remedies: (a) of
subrogation against Dealer to any of DFS' rights or remedies against Dealer, (b)
of contribution, reimbursement, indemnification and restoration from Dealer; and
(c) to assert any other claim or action against Dealer directly or indirectly
relating to this Guaranty, such subordinations to last until DFS has been paid
in full for all Liabilities. All of Guarantor's waivers and subordinations
herein will survive any termination of this Guaranty.
5. Warranties and Representations. Guarantor has made an independent
investigation of the financial condition of Dealer and gives this Guaranty based
on that investigation and not upon any representation made by DFS. Guarantor has
access to current and future Dealer financial information which enables
Guarantor to remain continuously informed of Dealer's financial condition.
Guarantor represents and warrants to DFS that Guarantor has received and will
receive substantial direct or indirect benefit by making this Guaranty and
incurring the Liabilities. Guarantor also represents and warrants to DFS that
Guarantor is solvent and Guarantor's execution of this Guaranty will not make
Guarantor insolvent. Guarantor further represents and warrants to DFS that: (a)
the present fair salable value of Guarantor's assets is greater than the amount
required to pay Guarantor's liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities); (b) Guarantor is able to pay all of its
liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities) as they become absolute and matured; and (c) Guarantor does not
have unreasonably small capital.
6. Grant of Security Interest. To secure payment of all Liabilities and all of
Guarantor's current and future debts to DFS, whether under this Guaranty or any
current or future guaranty or other agreement, Guarantor grants DFS a security
interest in all of Guarantor's (1) new and used inventory and equipment which is
financed by DFS for, or against which DFS has loaned monies to, Guarantor or
Dealer or any of their subsidiaries or affiliated companies, whether now owned
or hereafter acquired and whether or not transferred among such entities or any
of their subsidiaries or affiliated companies, and (2) all accounts, contract
rights, chattel paper, security agreements, deposit accounts, reserves,
documents, general intangibles and instruments arising from the sale, lease,
rental or other disposition of all such inventory and equipment, and all
judgments, claims, insurance policies and payments owed or made to Guarantor
thereon, and all attachments, accessories, accessions, substitutions and
replacements thereto and all cash and non-cash proceeds of all of the foregoing.
All such assets are collectively referred to herein as the "Collateral." All of
such terms for which meanings are provided in the Uniform Commercial Code of the
applicable state are used herein with such meanings. All Collateral financed by
DFS for Dealer or Guarantor, and all proceeds thereof, will be held in trust by
Guarantor for DFS.
7. Additional Warranties and Representations. Guarantor warrants and represents
to DFS that: (a) Guarantor has good title to all Collateral; (b) DFS' security
interest in the Collateral financed by DFS for Dealer or Guarantor is not now
and will not become subordinate to the security interest, lien, encumbrance or
claim of any person; (c) Guarantor will execute all documents DFS requests to
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perfect and maintain DFS' security interest in the Collateral; (d) Guarantor
will deliver to DFS immediately upon each request, and DFS may retain, each
Certificate of Title or Statement of Origin issued for Collateral financed by
DFS for Dealer or Guarantor; (e) Guarantor will at all times be duly organized,
existing, in good standing, qualified and licensed to do business in each state,
county, or parish, in which the nature of its business or property so requires;
(f) Guarantor has the right and is duly authorized to enter into this Guaranty;
(g) Guarantor's execution of this Guaranty does not constitute a breach of any
agreement to which Guarantor is now or hereafter becomes bound; (h) there are
and will be no actions or proceedings pending or threatened against Guarantor
which might result in any material adverse change in Guarantor's financial or
business condition or which might in any way adversely affect any of Guarantor's
assets; (i) Guarantor will maintain the Collateral in good condition and repair;
(j) Guarantor has duly filed and will duly file all tax returns required by law;
(k) Guarantor has paid and will pay when due all taxes, levies, assessments and
governmental charges of any nature; (I) Guarantor will keep and maintain all of
its books and records pertaining to the Collateral at its principal place of
business designated below; (m) Guarantor will promptly supply DFS with such
information concerning it as DFS hereafter may reasonably request; (n) all
Collateral will be kept at Dealer's principal place of business or Guarantor's
place of business listed below, and such other locations, if any, of which
Dealer or Guarantor has notified DFS in writing or as listed on any current or
future Exhibit "A" attached to any Agreement for Wholesale Financing or security
agreement between Dealer and DFS or this Guaranty which written notice(s) to DFS
and Exhibit A(s) are incorporated herein by reference; (o) Guarantor will give
DFS thirty (30) days prior written notice of any change in Guarantor's identity,
name, form of business organization, ownership, management, principal place of
business, Collateral locations or other business locations, and before moving
any books and records to any other location; (p) Guarantor will observe and
perform all matters required by any lease, license, concession or franchise
forming part of the Collateral in order to maintain all the rights of DFS
thereunder; (q) Guarantor will advise DFS of the commencement of material legal
proceedings against Dealer or Guarantor; and (r) Guarantor will comply with all
applicable laws and will conduct its business in a manner which preserves and
protects the Collateral and the earnings and incomes thereof.
8. Negative Covenants. Guarantor will not at any time (without DFS' prior
written consent): (a) other than in the ordinary course of its business, sell,
lease or otherwise dispose of or transfer any of its assets; (b) rent, lease,
demonstrate, consign, or use any Collateral financed by DFS for Dealer or
Guarantor; or (c) merge or consolidate with another entity.
9. Insurance. Guarantor will immediately notify DFS of any loss, theft or damage
to any Collateral. Guarantor will keep the Collateral insured for its full
insurable value under an "all risk" property insurance policy with a company
acceptable to DFS, naming DFS as a lender loss-payee and containing standard
lender's loss payable and termination provisions. Guarantor will provide DFS
with written evidence of such property insurance coverage and lender's
loss-payee endorsement.
10. Financial Statements. Guarantor will provide DFS with financial statements
on it each year within ninety (90) days after the end of Dealer's fiscal year
end. Guarantor warrants and represents
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to DFS that all financial statements and information relating to Guarantor or
Dealer which have been or may hereafter be delivered by Guarantor or Dealer to
DFS are true and correct and have been and will be prepared in accordance with
generally accepted accounting principles consistently applied and, with respect
to previously delivered statements and information, there has been no material
adverse change in the financial or business condition of Guarantor or Dealer
since the submission to DFS, either as of the date of delivery, or if different,
the date specified therein, and Guarantor acknowledges DFS' reliance thereon.
11. Reviews. Guarantor grants DFS an irrevocable license to enter Guarantor's
business locations during normal business hours without notice to Guarantor to:
(a) account for and inspect all Collateral; (b) verify Guarantor's compliance
with this Guaranty; and (c) examine and copy Guarantor's books and records
related to the Collateral.
12. Default. Guarantor will be in default under this Guaranty if: (a) Dealer
breaches any terms, warranties or representations contained in any Agreement for
Wholesale Financing, in any Statement of Transaction to which Dealer has not
objected, or in any other agreement between DFS and Dealer; (b) Guarantor
breaches any terms, warranties or representations contained herein or in any
other agreement between Guarantor and DFS; (c) any representation, statement,
report or certificate made or delivered by Dealer or Guarantor to DFS is not
accurate when made; (d) Dealer fails to pay any portion of Dealer's debts to DFS
when due and payable under any agreement between DFS and Dealer; (e) Guarantor
fails to pay any portion of Guarantor's debts to DFS when due and payable under
any agreement between DFS and Guarantor; (f) Dealer or Guarantor abandons any
Collateral; (g) Dealer or Guarantor is or becomes in default in the payment of
any debt owed to any third party; (h) a money judgment issues against Dealer or
Guarantor; (i) an attachment, sale or seizure issues or is executed against any
assets of Dealer or Guarantor; (j) Guarantor dies if Guarantor is an individual,
any general partner dies while Guarantor is a general or limited partnership, or
any member dies while Guarantor is a limited liability company, as applicable;
(k) Dealer or Guarantor shall cease existence as a corporation, partnership,
limited liability company or trust, as applicable; (l) Dealer or Guarantor
ceases or suspends business; (m) Dealer, Guarantor or any member while Dealer or
Guarantor is a limited liability company, as applicable, makes a general
assignment for the benefit of creditors; (n) Dealer, Guarantor or any member
while Dealer or Guarantor is a limited liability company, as applicable, becomes
insolvent or voluntarily or involuntarily becomes subject to the Federal
Bankruptcy Code, any state insolvency law or any similar law; (o) any receiver
is appointed for any assets of Dealer, Guarantor or any member while Dealer or
Guarantor is a limited liability company, as applicable; (p) this Guaranty or
any other guaranty of Dealer's debts to DFS is terminated; (q) Dealer or
Guarantor loses any franchise, permission, license or right to sell or deal in
any Collateral which DFS finances for Dealer or Guarantor; (r) Dealer or
Guarantor misrepresents their respective financial condition or organizational
structure; or (5) DFS determines in good faith that it is insecure with respect
to any of the Collateral or the payment of any part of Dealer's or Guarantor's
obligation to DFS.
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13. Rights of DFS Upon Default. In the event of a default:
(a) DFS may at any time at DFS' election, without notice or demand
to Dealer or Guarantor, do any one or more of the following:
declare all or any part of the debt Guarantor owes DFS,
whether contingent or noncontingent and whether arising
hereunder or under any other agreement between Guarantor and
DFS, immediately due and payable, together with all costs and
expenses of DFS' collection activity, including, without
limitation, all reasonable attorneys' fees; exercise any or
all rights under applicable law (including, without
limitation, the right to possess, transfer and dispose of the
Collateral); and/or cease extending any additional credit to
Guarantor, if applicable, or Dealer (DFS' right to cease
extending credit shall not be construed to limit the
discretionary nature of any credit facility)
(b) Guarantor will segregate and keep the Collateral in trust for
DFS, and in good order and repair, and will not sell, rent,
lease, consign, otherwise dispose of or use any Collateral,
nor further encumber any Collateral.
(c) Upon DFS' oral or written demand, Guarantor will immediately
deliver the Collateral to DFS, in good order and repair, at a
place specified by DFS, together with all related documents;
or DFS may, in DFS' sole discretion and without notice or
demand to Guarantor, take immediate possession of the
Collateral together with all related documents.
All of DFS' rights and remedies are cumulative. DFS' failure
to exercise any of DFS' rights or remedies hereunder will not
waive any of DFS' rights or remedies as to any past, current
or future default.
14. Sale of Collateral. Guarantor agrees that if DFS conducts a private sale of
any Collateral by requesting bids from 10 or more dealers or distributors in
that type of Collateral, any sale by DFS of such Collateral in bulk or in
parcels within 120 days of: (a) DFS' taking possession and control of such
Collateral; or (b) when DFS is otherwise authorized to sell such Collateral;
whichever occurs last, to the bidder submitting the highest cash bid therefor,
is a commercially reasonable sale of such Collateral under the Uniform
Commercial Code. Guarantor agrees that the purchase of any Collateral by a
vendor, as provided in any agreement between DFS and the vendor, is a
commercially reasonable disposition and private sale of such Collateral under
the Uniform Commercial Code, and no request for bids shall be required.
Guarantor further agrees that 7 or more days prior written notice will be
commercially reasonable notice of any public or private sale (including any sale
to a Vendor). Guarantor irrevocably waives any requirement that DFS retain
possession and not dispose of any Collateral until after an arbitration hearing,
arbitration award, confirmation, trial or final judgment. If DFS disposes of any
such Collateral other than as herein contemplated, the commercial reasonableness
of such disposition will be determined in accordance with the laws of the state
governing this Guaranty.
15. Power of Attorney. Guarantor grants DFS an irrevocable power of attorney to:
execute or endorse on Guarantor's behalf any checks, financing statements,
instruments, Certificates of Title and Statements of Origin pertaining to the
Collateral; supply any omitted information and correct errors in any documents
between DFS and Guarantor; initiate and settle any insurance claim pertaining to
the Collateral; and do anything to preserve and protect the Collateral and DFS'
rights and interest therein.
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16. Termination. Guarantor may terminate this Guaranty by a written notice to
DFS, the termination to be effective sixty (60) days after DFS receives and
acknowledges it, but the termination will not terminate Guarantor's obligations
hereunder for Liabilities arising prior to the effective termination date.
17. Binding Effect. Guarantor cannot assign this Guaranty without DFS' prior
written consent, although DFS may assign its interest herein without notice to,
or consent from, Guarantor. This Guaranty will protect and bind DFS' and
Guarantor's respective heirs, representatives, Successors and assigns.
18. Notices. Except as otherwise stated herein, all notices, arbitration claims,
responses, requests and documents will be sufficiently given or served if mailed
or delivered: (a) to Guarantor at its address below; (b) to DFS at 655 Maryville
Centre Drive, St. Louis, Missouri 63141-5832, Attention: General Counsel; or
such other address as the parties may specify from time to time in writing.
19. Severability. If any provision of this Guaranty or its application is
invalid or unenforceable, the remainder of this Guaranty will not be impaired or
affected and will remain binding and enforceable.
20. Supplement. If Guarantor and DFS have heretofore executed other guaranties
or agreements in connection with all or any part of the Collateral, this
Guaranty shall supplement each and every other such guaranty and agreement
previously executed by and between Guarantor and DFS, and in that event this
Guaranty shall neither be deemed a novation nor a termination of such previously
executed guaranty or agreement nor shall execution of this Guaranty be deemed a
satisfaction of any obligation secured by such previously executed guaranty or
agreement.
21. Receipt of Guaranty. Guarantor has read and understood all terms and
provisions of this Guaranty. Guarantor acknowledges receipt of a true copy of
this Guaranty and of all agreements between DFS and Dealer. The meanings of all
terms herein are equally applicable to both the singular and plural forms of
such terms. Notwithstanding anything herein to the contrary: (a) DFS may rely on
any facsimile copy, electronic data transmission or electronic data storage of
this Guaranty, any agreement between DFS and Dealer, any Statement of
Transaction, billing statement, invoice from a vendor, financial statements or
other report, and (b) such facsimile copy, electronic data transmission or
electronic data storage will be deemed an original, and the best evidence
thereof for all purposes, including, without limitation, under this Guaranty or
any other agreement between DFS and Guarantor, and for all evidentiary purposes
before any arbitrator, court or other adjudicatory authority.
22. NO ORAL AGREEMENTS. Oral agreements or commitments to loan money, extend
credit or to forbear from enforcing repayment of a debt including promises to
extend or renew such debt
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are not enforceable. To protect Guarantor and DFS from misunderstanding or
disappointment, any agreements Guarantor and DFS or Dealer and DFS reach
covering such matters are contained in this Guaranty, an Agreement for Wholesale
Financing, or another agreement between Guarantor and DFS or between Dealer and
DFS, which agreement(s) is (are) the complete and exclusive statement of the
agreement between Guarantor and DFS and between Dealer and DFS, except as
specifically provided herein, in such other agreement(s) or as Guarantor and DFS
or Dealer and DFS may later agree in writing.
23. Miscellaneous. This Guaranty will survive any federal and/or state
bankruptcy or insolvency action involving Dealer. If DFS is required in any
action involving Dealer to return or rescind any payment made to or value
received by DFS from or for the account of Dealer, this Guaranty will remain in
full force and effect and will be automatically reinstated without any further
action by DFS and notwithstanding any termination of this Guaranty or DFS'
release of Guarantor. Any delay or failure by DFS, or DFS' successors or
assigns, in exercising any of DFS' rights or remedies hereunder will not waive
any such rights or remedies. If Guarantor fails to pay any taxes, fees or other
obligations which may impair DFS' interest in the Collateral, or fails to keep
the Collateral insured, DFS may, but shall not be required to, pay such taxes,
fees or obligations and pay the cost to insure the Collateral, and the amounts
paid will be: (a) an additional debt directly owed by Guarantor to DFS, which
shall be subject to finance charges at the highest rate allowed by law; and (b)
due and payable immediately in full. Guarantor agrees to pay all of DFS'
reasonable attorneys fees and expenses incurred by DFS in enforcing DFS' rights
hereunder. The Section titles used in this Guaranty are for convenience only and
do not define or limit the contents of any Section.
24. BINDING ARBITRATION.
24.1 Arbitrable Claims. Except as otherwise specified below, all
actions, disputes, claims and Controversies under common law, statutory law or
in equity of any type or nature whatsoever (including, without limitation, all
torts, whether regarding negligence, breach of fiduciary duty, restraint of
trade, fraud, conversion, duress, interference, wrongful replevin, wrongful
sequestration, fraud in the inducement, usury or any other tort, all contract
actions, whether regarding express or implied terms, such as implied covenants
of good faith, fair dealing, and the commercial reasonableness of any collateral
disposition, or any other contract claim, all claims of deceptive trade
practices or lender liability, and all claims questioning the reasonableness or
lawfulness of any act), whether arising before or after the date of this
Guaranty, and whether directly or indirectly relating to: (a) this Guaranty
and/or any amendments and addenda hereto, or the breach, invalidity or
termination hereof; (b) any previous or subsequent agreement between DFS and us;
(c) any act committed by DFS or by any parent company, subsidiary or affiliated
company of DFS (the "DFS Companies"), or by an employee, agent, officer or
director of a DFS Company, whether or not arising within the scope and course of
employment or other contractual representation of the DFS Companies provided
that such act arises under a relationship, transaction or dealing between DFS
and Dealer or DFS and Guarantor; and/or (d) any other relationship, transaction,
dealing or agreement between DFS and Dealer or DFS and Guarantor (collectively
the "Disputes"), will be subject to and resolved by binding arbitration.
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24.2 Administrative Body. All arbitration hereunder will be conducted
in accordance with The Commercial Arbitration Rules of The American Arbitration
Association ("AAA"). If the AAA is dissolved, disbanded or becomes subject to
any state or federal bankruptcy or insolvency proceeding, the parties will
remain subject to binding arbitration which will be conducted by a mutually
agreeable arbitral forum. The parties agree that all arbitrator('s) selected
will be attorneys with at least five (5) years secured transactions experience.
The arbitrator(s) will decide if any inconsistency exists between the rules of
any applicable arbitral forum and the arbitration provisions contained herein.
If such inconsistency exists, the arbitration provisions contained herein will
control and supersede such rules. The site of all arbitrations will be in the
Division of the Federal Judicial District in which AAA maintains a regional
office that is closest to Dealer.
24.3 Discovery. Discovery permitted in any arbitration proceeding
commenced hereunder is limited as follows: No later than thirty (30) days after
the filing of a claim for arbitration, the parties will exchange detailed
statements setting forth the facts supporting the claim(s) and all defenses to
be raised during the arbitration, and a list of all exhibits and witnesses. No
later than twenty-one (21) days prior to the arbitration hearing, the parties
will exchange a final list of all exhibits and all witnesses, including any
designation of any expert witness(es) together with a summary of their
testimony; a copy of all documents and a detailed description of any property to
be introduced at the hearing. Under no circumstances will the use of
interrogatories, requests for admission, requests for the production of
documents or the taking of depositions be permitted. However, in the event of
the designation of any expert witness(es), the following will occur: (a) all
information and documents relied upon by the expert witness(es) will be
delivered to the opposing party, (b) the opposing party will be permitted to
depose the expert witness(es), (c) the opposing party will be permitted to
designate rebuttal expert witness(es), and (d) the arbitration hearing will be
continued to the earliest possible date that enables the foregoing limited
discovery to be accomplished.
24.4 Exemplary or Punitive Damages. The Arbitrator(s) will not have the
authority to award exemplary or punitive damages.
24.5 Confidentiality of Awards. All arbitration proceedings, including
testimony or evidence at hearings, will be kept confidential, although any award
or order rendered by the arbitrator(s) pursuant to the terms of this Guaranty
may be entered as a judgment or order in any state or federal court and may be
entered as a judgment or order within the federal judicial district which
includes the residence of the party against whom such award or order was
entered. This Guaranty concerns transactions involving commerce among the
several states. The Federal Arbitration Act ("FAA") will govern all
arbitration(s) and confirmation proceedings hereunder.
24.6 Prejudgment and Provisional Remedies. Nothing herein will be
Construed to prevent DFS' or Guarantor's use of bankruptcy, receivership,
injunction, repossession, replevin, claim and delivery, sequestration, seizure,
attachment, foreclosure, dation and/or any other prejudgment or provisional
action or remedy relating to any collateral for any current or future debt owed
by either party to the other. Any such action or remedy will not waive DFS' or
Guarantor's right to compel arbitration of any Dispute.
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24.7 Attorneys' Fees. If either Guarantor or DFS bring any other action
for judicial relief with respect to any Dispute (other than those set forth in
the immediately preceding paragraph), the party bringing such action will be
liable for and immediately pay all of the other party's costs and expenses
(including attorneys' fees). incurred to stay or dismiss such action and remove
or refer such Dispute to arbitration. If either Guarantor or DFS bring or appeal
an action to vacate or modify an arbitration award and such party does not
prevail, such party will pay all costs and expenses, including attorneys' fees,
incurred by the other party in defending such action. Additionally, if Guarantor
sues DFS or institutes any arbitration claim or counterclaim against DFS in
which DFS is the prevailing party, Guarantor will pay all costs and expenses
(including attorneys' fees) incurred by DFS in the course of defending such
action or proceeding.
24.8 Limitations. Any arbitration proceeding must be instituted: (a)
with respect to any Dispute for the collection of any debt owed by either party
to the other, within two (2) years after the date the last payment was received
by the instituting party; and (b) with respect to any other Dispute, within two
(2) years after the date the incident giving rise thereto occurred, whether or
not any damage was sustained or capable of ascertainment or either party knew of
such incident. Failure to institute an arbitration proceeding within such period
will constitute an absolute bar and waiver to the institution of any proceeding
with respect to such Dispute.
24.9 Survival After Termination. The agreement to arbitrate will
survive the termination of this Guaranty.
25. INVALIDITY/UNENFORCEABILITY OF BINDING ARBITRATION. IF THIS GUARANTY IS
FOUND TO BE NOT SUBJECT TO ARBITRATION, ANY LEGAL PROCEEDING WITH RESPECT TO ANY
DISPUTE WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE WITHOUT A
JURY. DFS AND GUARANTOR WAIVE ANY RIGHT TO A JURY TRIAL IN ANY SUCH PROCEEDING.
26. Governing Law. Guarantor acknowledges and agrees that this Guaranty and all
agreements between Dealer and DFS have been substantially negotiated, and will
be performed, in the state of Missouri. Accordingly, Guarantor agrees that all
Disputes will be governed by, and construed in accordance with, the laws of such
state, except to the extent inconsistent with the provisions of the FAA which
will control and govern all arbitration proceedings herein.
THIS CONTRACT CONTAINS BINDING ARBITRATION, JURY WAIVER AND PUNITIVE DAMAGE
WAIVER PROVISIONS.
Date: March 16, 1999
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"SECRETARY' S CERTIFICATE
I hereby certify that I am the Secretary or Assistant Secretary of Crescent
Machinery Company, Inc. ("Guarantor") and that execution of the above Guaranty
was ratified, approved and confirmed by the Shareholders at a meeting, if
necessary, and pursuant to a resolution of the Board of Directors of Guarantor
at a meeting of the Board of Directors duly called, and which is currently in
effect, which resolution was duly presented, seconded and adopted and reads as
follows:
"BE IT RESOLVED that any officer of this corporation is hereby authorized to
execute a guaranty of the obligations of Machinery, Inc. ("Dealer") to Deutsche
Financial Services Corporation ("DFS") on behalf of the corporation, which
instrument may contain such terms as the above named persons may see fit
including, but not limited to a waiver of notice of the acceptance of the
guaranty; presentment; demand; protest; notices of nonpayment, nonperformance,
dishonor, the amount of indebtedness of Dealer outstanding at any time, any
legal proceedings against Dealer, and any other demands and notices required by
law; and any right of contribution from other guarantors. As security for such
guaranty to DFS, any officer of this corporation is hereby authorized to pledge,
assign, mortgage, grant security interests, and otherwise transfer to DFS as
collateral security for any obligations of this corporation to DFS, whenever and
however arising, any assets of this corporation, whether now owned or hereafter
acquired."
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal
on this 16th day of March, 1999.
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COLLATERALIZED GUARANTY
TO: DEUTSCHE FINANCIAL SERVICES CORPORATION ("DFS")
1. Guaranty and Indemnification. In consideration of financing provided or to be
provided by you to Solvenson Crane Rentals, Inc. ("Dealer"), and for other good
and valuable consideration received, the undersigned (individually and/or
collectively "Guarantor") unconditionally and absolutely guaranty to DFS, from
property held separately, jointly or in community, the immediate payment when
due of all current and future liabilities owed by Dealer to DFS, whether such
liabilities are direct, indirect or owed by Dealer to a third party and acquired
by DFS ("Liabilities"). Guarantor will pay DFS on demand the full amount of all
sums owed by Dealer to DFS, together with all costs and expenses (including,
without limitation, reasonable attorneys' fees). Guarantor also indemnifies and
holds DFS harmless from and against all (a) losses, costs and expenses DFS
incurs and/or is liable for (including, without limitation, reasonable
attorneys' fees) and (b) claims, actions and demands made by Dealer or any third
party against DFS; which in any way relate to any relationship or transaction
between DFS and Dealer.
2. Consents. This Guaranty will not be released, discharged or affected by, and
Guarantor hereby irrevocably consents to, any: (a) change in the manner, place,
interest rate, finance or other charges, or terms of payment or performance in
any current or future agreement between DFS and Dealer, the release, settlement
or compromise of or with any party liable for the payment or performance thereof
or the substitution, release, non-perfection, impairment, sale or other
disposition of any collateral thereunder; (b) change in Dealer's financial
condition; (c) interruption of relations between Dealer and DFS or Guarantor;
(d) claim or action by Dealer against DFS; and/or (e) increases or decreases in
any credit DFS may provide to Dealer.
3. Unconditional Obligations. Guarantor will pay DFS even if DFS has not: (a)
notified Dealer that it is in default of the Liabilities, and/or that DFS
intends to accelerate or has accelerated the payment of all or any part of the
Liabilities, or (b) exercised any of DFS' rights or remedies against Dealer, any
other person or any current or future collateral. If Dealer hereafter undergoes
any change in its ownership, identity or organizational structure, this Guaranty
will extend to all current and future obligations which such new or changed
legal entity owes to DFS.
4. Waivers. Guarantor irrevocably waives: notice of DFS' acceptance of this
Guaranty, presentment, demand, protest, nonpayment, nonperformance, notice of
breach or default, notice of intent to accelerate and notice of acceleration of
any indebtedness of Dealer, any right of contribution from other guarantors,
dishonor, the amount of indebtedness of Dealer outstanding at any time, the
number and amount of advances made by DFS to Dealer in reliance on this Guaranty
and any claim or action against Dealer; all other demands and notices required
by law; all rights of offset and counterclaims against DFS or Dealer; all
defenses to the enforceability of this Guaranty (including, without limitation,
fraudulent inducement). Guarantor further waives all defenses based on
suretyship or impairment of collateral, and defenses which the Dealer may assert
on the underlying debt, including but not limited to, failure of consideration,
breach of warranty, fraud, payment,
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statute of frauds, bankruptcy, lack of legal capacity, statute of limitations,
lender liability, deceptive trade practices, accord and satisfaction and usury.
Guarantor also waives all rights to claim, arbitrate for or sue for any punitive
or exemplary damages. In addition, Guarantor hereby irrevocably subordinates to
DFS any and all of Guarantor's present and future rights and remedies: (a) of
subrogation against Dealer to any of DFS' rights or remedies against Dealer, (b)
of contribution, reimbursement, indemnification and restoration from Dealer; and
(c) to assert any other claim or action against Dealer directly or indirectly
relating to this Guaranty, such subordinations to last until DFS has been paid
in full for all Liabilities. All of Guarantor's waivers and subordinations
herein will survive any termination of this Guaranty.
5. Warranties and Representations. Guarantor has made an independent
investigation of the financial condition of Dealer and gives this Guaranty based
on that investigation and not upon any representation made by DFS. Guarantor has
access to current and future Dealer financial information which enables
Guarantor to remain continuously informed of Dealer's financial condition.
Guarantor represents and warrants to DFS that Guarantor has received and will
receive substantial direct or indirect benefit by making this Guaranty and
incurring the Liabilities. Guarantor also represents and warrants to DFS that
Guarantor is solvent and Guarantor's execution of this Guaranty will not make
Guarantor insolvent. Guarantor further represents and warrants to DFS that: (a)
the present fair salable value of Guarantor's assets is greater than the amount
required to pay Guarantor's liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities); (b) Guarantor is able to pay all of its
liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities) as they become absolute and matured; and (c) Guarantor does not
have unreasonably small capital.
6. Grant of Security Interest. To secure payment of all Liabilities and all of
Guarantor's current and future debts to DFS, whether under this Guaranty or any
current or future guaranty or other agreement, Guarantor grants DFS a security
interest in all of Guarantor's (1) new and used inventory and equipment which is
financed by DFS for, or against which DFS has loaned monies to, Guarantor or
Dealer or any of their subsidiaries or affiliated companies, whether now owned
or hereafter acquired and whether or not transferred among such entities or any
of their subsidiaries or affiliated companies, and (2) all accounts, contract
rights, chattel paper, security agreements, deposit accounts, reserves,
documents, general intangibles and instruments arising from the sale, lease,
rental or other disposition of all such inventory and equipment, and all
judgments, claims, insurance policies and payments owed or made to Guarantor
thereon, and all attachments, accessories, accessions, substitutions and
replacements thereto and all cash and non-cash proceeds of all of the foregoing.
All such assets are collectively referred to herein as the "Collateral." All of
such terms for which meanings are provided in the Uniform Commercial Code of the
applicable state are used herein with such meanings. All Collateral financed by
DFS for Dealer or Guarantor, and all proceeds thereof, will be held in trust by
Guarantor for DFS.
7. Additional Warranties and Representations. Guarantor warrants and represents
to DFS that: (a) Guarantor has good title to all Collateral; (b) DFS' security
interest in the Collateral financed by DFS for Dealer or Guarantor is not now
and will not become subordinate to the security interest, lien, encumbrance or
claim of any person; (c) Guarantor will execute all documents DFS requests to
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perfect and maintain DFS' security interest in the Collateral; (d) Guarantor
will deliver to DFS immediately upon each request, and DFS may retain, each
Certificate of Title or Statement of Origin issued for Collateral financed by
DFS for Dealer or Guarantor; (e) Guarantor will at all times be duly organized,
existing, in good standing, qualified and licensed to do business in each state,
county, or parish, in which the nature of its business or property so requires;
(f) Guarantor has the right and is duly authorized to enter into this Guaranty;
(g) Guarantor's execution of this Guaranty does not constitute a breach of any
agreement to which Guarantor is now or hereafter becomes bound; (h) there are
and will be no actions or proceedings pending or threatened against Guarantor
which might result in any material adverse change in Guarantor's financial or
business condition or which might in any way adversely affect any of Guarantor's
assets; (i) Guarantor will maintain the Collateral in good condition and repair;
(j) Guarantor has duly filed and will duly file all tax returns required by law;
(k) Guarantor has paid and will pay when due all taxes, levies, assessments and
governmental charges of any nature; (I) Guarantor will keep and maintain all of
its books and records pertaining to the Collateral at its principal place of
business designated below; (m) Guarantor will promptly supply DFS with such
information concerning it as DFS hereafter may reasonably request; (n) all
Collateral will be kept at Dealer's principal place of business or Guarantor's
place of business listed below, and such other locations, if any, of which
Dealer or Guarantor has notified DFS in writing or as listed on any current or
future Exhibit "A" attached to any Agreement for Wholesale Financing or security
agreement between Dealer and DFS or this Guaranty which written notice(s) to DFS
and Exhibit A(s) are incorporated herein by reference; (o) Guarantor will give
DFS thirty (30) days prior written notice of any change in Guarantor's identity,
name, form of business organization, ownership, management, principal place of
business, Collateral locations or other business locations, and before moving
any books and records to any other location; (p) Guarantor will observe and
perform all matters required by any lease, license, concession or franchise
forming part of the Collateral in order to maintain all the rights of DFS
thereunder; (q) Guarantor will advise DFS of the commencement of material legal
proceedings against Dealer or Guarantor; and (r) Guarantor will comply with all
applicable laws and will conduct its business in a manner which preserves and
protects the Collateral and the earnings and incomes thereof.
8. Negative Covenants. Guarantor will not at any time (without DFS' prior
written consent): (a) other than in the ordinary course of its business, sell,
lease or otherwise dispose of or transfer any of its assets; (b) rent, lease,
demonstrate, consign, or use any Collateral financed by DFS for Dealer or
Guarantor; or (c) merge or consolidate with another entity.
9. Insurance. Guarantor will immediately notify DFS of any loss, theft or damage
to any Collateral. Guarantor will keep the Collateral insured for its full
insurable value under an "all risk" property insurance policy with a company
acceptable to DFS, naming DFS as a lender loss-payee and containing standard
lender's loss payable and termination provisions. Guarantor will provide DFS
with written evidence of such property insurance coverage and lender's
loss-payee endorsement.
10. Financial Statements. Guarantor will provide DFS with financial statements
on it each year within ninety (90) days after the end of Dealer's fiscal year
end. Guarantor warrants and represents
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to DFS that all financial statements and information relating to Guarantor or
Dealer which have been or may hereafter be delivered by Guarantor or Dealer to
DFS are true and correct and have been and will be prepared in accordance with
generally accepted accounting principles consistently applied and, with respect
to previously delivered statements and information, there has been no material
adverse change in the financial or business condition of Guarantor or Dealer
since the submission to DFS, either as of the date of delivery, or if different,
the date specified therein, and Guarantor acknowledges DFS' reliance thereon.
11. Reviews. Guarantor grants DFS an irrevocable license to enter Guarantor's
business locations during normal business hours without notice to Guarantor to:
(a) account for and inspect all Collateral; (b) verify Guarantor's compliance
with this Guaranty; and (c) examine and copy Guarantor's books and records
related to the Collateral.
12. Default. Guarantor will be in default under this Guaranty if: (a) Dealer
breaches any terms, warranties or representations contained in any Agreement for
Wholesale Financing, in any Statement of Transaction to which Dealer has not
objected, or in any other agreement between DFS and Dealer; (b) Guarantor
breaches any terms, warranties or representations contained herein or in any
other agreement between Guarantor and DFS; (c) any representation, statement,
report or certificate made or delivered by Dealer or Guarantor to DFS is not
accurate when made; (d) Dealer fails to pay any portion of Dealer's debts to DFS
when due and payable under any agreement between DFS and Dealer; (e) Guarantor
fails to pay any portion of Guarantor's debts to DFS when due and payable under
any agreement between DFS and Guarantor; (f) Dealer or Guarantor abandons any
Collateral; (g) Dealer or Guarantor is or becomes in default in the payment of
any debt owed to any third party; (h) a money judgment issues against Dealer or
Guarantor; (i) an attachment, sale or seizure issues or is executed against any
assets of Dealer or Guarantor; (j) Guarantor dies if Guarantor is an individual,
any general partner dies while Guarantor is a general or limited partnership, or
any member dies while Guarantor is a limited liability company, as applicable;
(k) Dealer or Guarantor shall cease existence as a corporation, partnership,
limited liability company or trust, as applicable; (l) Dealer or Guarantor
ceases or suspends business; (m) Dealer, Guarantor or any member while Dealer or
Guarantor is a limited liability company, as applicable, makes a general
assignment for the benefit of creditors; (n) Dealer, Guarantor or any member
while Dealer or Guarantor is a limited liability company, as applicable, becomes
insolvent or voluntarily or involuntarily becomes subject to the Federal
Bankruptcy Code, any state insolvency law or any similar law; (o) any receiver
is appointed for any assets of Dealer, Guarantor or any member while Dealer or
Guarantor is a limited liability company, as applicable; (p) this Guaranty or
any other guaranty of Dealer's debts to DFS is terminated; (q) Dealer or
Guarantor loses any franchise, permission, license or right to sell or deal in
any Collateral which DFS finances for Dealer or Guarantor; (r) Dealer or
Guarantor misrepresents their respective financial condition or organizational
structure; or (5) DFS determines in good faith that it is insecure with respect
to any of the Collateral or the payment of any part of Dealer's or Guarantor's
obligation to DFS.
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13. Rights of DFS Upon Default. In the event of a default:
(a) DFS may at any time at DFS' election, without notice or demand
to Dealer or Guarantor, do any one or more of the following:
declare all or any part of the debt Guarantor owes DFS,
whether contingent or noncontingent and whether arising
hereunder or under any other agreement between Guarantor and
DFS, immediately due and payable, together with all costs and
expenses of DFS' collection activity, including, without
limitation, all reasonable attorneys' fees; exercise any or
all rights under applicable law (including, without
limitation, the right to possess, transfer and dispose of the
Collateral); and/or cease extending any additional credit to
Guarantor, if applicable, or Dealer (DFS' right to cease
extending credit shall not be construed to limit the
discretionary nature of any credit facility)
(b) Guarantor will segregate and keep the Collateral in trust for
DFS, and in good order and repair, and will not sell, rent,
lease, consign, otherwise dispose of or use any Collateral,
nor further encumber any Collateral.
(c) Upon DFS' oral or written demand, Guarantor will immediately
deliver the Collateral to DFS, in good order and repair, at a
place specified by DFS, together with all related documents;
or DFS may, in DFS' sole discretion and without notice or
demand to Guarantor, take immediate possession of the
Collateral together with all related documents.
All of DFS' rights and remedies are cumulative. DFS' failure
to exercise any of DFS' rights or remedies hereunder will not
waive any of DFS' rights or remedies as to any past, current
or future default.
14. Sale of Collateral. Guarantor agrees that if DFS conducts a private sale of
any Collateral by requesting bids from 10 or more dealers or distributors in
that type of Collateral, any sale by DFS of such Collateral in bulk or in
parcels within 120 days of: (a) DFS' taking possession and control of such
Collateral; or (b) when DFS is otherwise authorized to sell such Collateral;
whichever occurs last, to the bidder submitting the highest cash bid therefor,
is a commercially reasonable sale of such Collateral under the Uniform
Commercial Code. Guarantor agrees that the purchase of any Collateral by a
vendor, as provided in any agreement between DFS and the vendor, is a
commercially reasonable disposition and private sale of such Collateral under
the Uniform Commercial Code, and no request for bids shall be required.
Guarantor further agrees that 7 or more days prior written notice will be
commercially reasonable notice of any public or private sale (including any sale
to a Vendor). Guarantor irrevocably waives any requirement that DFS retain
possession and not dispose of any Collateral until after an arbitration hearing,
arbitration award, confirmation, trial or final judgment. If DFS disposes of any
such Collateral other than as herein contemplated, the commercial reasonableness
of such disposition will be determined in accordance with the laws of the state
governing this Guaranty.
15. Power of Attorney. Guarantor grants DFS an irrevocable power of attorney to:
execute or endorse on Guarantor's behalf any checks, financing statements,
instruments, Certificates of Title and Statements of Origin pertaining to the
Collateral; supply any omitted information and correct errors in any documents
between DFS and Guarantor; initiate and settle any insurance claim pertaining to
the Collateral; and do anything to preserve and protect the Collateral and DFS'
rights and interest therein.
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16. Termination. Guarantor may terminate this Guaranty by a written notice to
DFS, the termination to be effective sixty (60) days after DFS receives and
acknowledges it, but the termination will not terminate Guarantor's obligations
hereunder for Liabilities arising prior to the effective termination date.
17. Binding Effect. Guarantor cannot assign this Guaranty without DFS' prior
written consent, although DFS may assign its interest herein without notice to,
or consent from, Guarantor. This Guaranty will protect and bind DFS' and
Guarantor's respective heirs, representatives, Successors and assigns.
18. Notices. Except as otherwise stated herein, all notices, arbitration claims,
responses, requests and documents will be sufficiently given or served if mailed
or delivered: (a) to Guarantor at its address below; (b) to DFS at 655 Maryville
Centre Drive, St. Louis, Missouri 63141-5832, Attention: General Counsel; or
such other address as the parties may specify from time to time in writing.
19. Severability. If any provision of this Guaranty or its application is
invalid or unenforceable, the remainder of this Guaranty will not be impaired or
affected and will remain binding and enforceable.
20. Supplement. If Guarantor and DFS have heretofore executed other guaranties
or agreements in connection with all or any part of the Collateral, this
Guaranty shall supplement each and every other such guaranty and agreement
previously executed by and between Guarantor and DFS, and in that event this
Guaranty shall neither be deemed a novation nor a termination of such previously
executed guaranty or agreement nor shall execution of this Guaranty be deemed a
satisfaction of any obligation secured by such previously executed guaranty or
agreement.
21. Receipt of Guaranty. Guarantor has read and understood all terms and
provisions of this Guaranty. Guarantor acknowledges receipt of a true copy of
this Guaranty and of all agreements between DFS and Dealer. The meanings of all
terms herein are equally applicable to both the singular and plural forms of
such terms. Notwithstanding anything herein to the contrary: (a) DFS may rely on
any facsimile copy, electronic data transmission or electronic data storage of
this Guaranty, any agreement between DFS and Dealer, any Statement of
Transaction, billing statement, invoice from a vendor, financial statements or
other report, and (b) such facsimile copy, electronic data transmission or
electronic data storage will be deemed an original, and the best evidence
thereof for all purposes, including, without limitation, under this Guaranty or
any other agreement between DFS and Guarantor, and for all evidentiary purposes
before any arbitrator, court or other adjudicatory authority.
22. NO ORAL AGREEMENTS. Oral agreements or commitments to loan money, extend
credit or to forbear from enforcing repayment of a debt including promises to
extend or renew such debt
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are not enforceable. To protect Guarantor and DFS from misunderstanding or
disappointment, any agreements Guarantor and DFS or Dealer and DFS reach
covering such matters are contained in this Guaranty, an Agreement for Wholesale
Financing, or another agreement between Guarantor and DFS or between Dealer and
DFS, which agreement(s) is (are) the complete and exclusive statement of the
agreement between Guarantor and DFS and between Dealer and DFS, except as
specifically provided herein, in such other agreement(s) or as Guarantor and DFS
or Dealer and DFS may later agree in writing.
23. Miscellaneous. This Guaranty will survive any federal and/or state
bankruptcy or insolvency action involving Dealer. If DFS is required in any
action involving Dealer to return or rescind any payment made to or value
received by DFS from or for the account of Dealer, this Guaranty will remain in
full force and effect and will be automatically reinstated without any further
action by DFS and notwithstanding any termination of this Guaranty or DFS'
release of Guarantor. Any delay or failure by DFS, or DFS' successors or
assigns, in exercising any of DFS' rights or remedies hereunder will not waive
any such rights or remedies. If Guarantor fails to pay any taxes, fees or other
obligations which may impair DFS' interest in the Collateral, or fails to keep
the Collateral insured, DFS may, but shall not be required to, pay such taxes,
fees or obligations and pay the cost to insure the Collateral, and the amounts
paid will be: (a) an additional debt directly owed by Guarantor to DFS, which
shall be subject to finance charges at the highest rate allowed by law; and (b)
due and payable immediately in full. Guarantor agrees to pay all of DFS'
reasonable attorneys fees and expenses incurred by DFS in enforcing DFS' rights
hereunder. The Section titles used in this Guaranty are for convenience only and
do not define or limit the contents of any Section.
24. BINDING ARBITRATION.
24.1 Arbitrable Claims. Except as otherwise specified below, all
actions, disputes, claims and Controversies under common law, statutory law or
in equity of any type or nature whatsoever (including, without limitation, all
torts, whether regarding negligence, breach of fiduciary duty, restraint of
trade, fraud, conversion, duress, interference, wrongful replevin, wrongful
sequestration, fraud in the inducement, usury or any other tort, all contract
actions, whether regarding express or implied terms, such as implied covenants
of good faith, fair dealing, and the commercial reasonableness of any collateral
disposition, or any other contract claim, all claims of deceptive trade
practices or lender liability, and all claims questioning the reasonableness or
lawfulness of any act), whether arising before or after the date of this
Guaranty, and whether directly or indirectly relating to: (a) this Guaranty
and/or any amendments and addenda hereto, or the breach, invalidity or
termination hereof; (b) any previous or subsequent agreement between DFS and us;
(c) any act committed by DFS or by any parent company, subsidiary or affiliated
company of DFS (the "DFS Companies"), or by an employee, agent, officer or
director of a DFS Company, whether or not arising within the scope and course of
employment or other contractual representation of the DFS Companies provided
that such act arises under a relationship, transaction or dealing between DFS
and Dealer or DFS and Guarantor; and/or (d) any other relationship, transaction,
dealing or agreement between DFS and Dealer or DFS and Guarantor (collectively
the "Disputes"), will be subject to and resolved by binding arbitration.
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24.2 Administrative Body. All arbitration hereunder will be conducted
in accordance with The Commercial Arbitration Rules of The American Arbitration
Association ("AAA"). If the AAA is dissolved, disbanded or becomes subject to
any state or federal bankruptcy or insolvency proceeding, the parties will
remain subject to binding arbitration which will be conducted by a mutually
agreeable arbitral forum. The parties agree that all arbitrator('s) selected
will be attorneys with at least five (5) years secured transactions experience.
The arbitrator(s) will decide if any inconsistency exists between the rules of
any applicable arbitral forum and the arbitration provisions contained herein.
If such inconsistency exists, the arbitration provisions contained herein will
control and supersede such rules. The site of all arbitrations will be in the
Division of the Federal Judicial District in which AAA maintains a regional
office that is closest to Dealer.
24.3 Discovery. Discovery permitted in any arbitration proceeding
commenced hereunder is limited as follows: No later than thirty (30) days after
the filing of a claim for arbitration, the parties will exchange detailed
statements setting forth the facts supporting the claim(s) and all defenses to
be raised during the arbitration, and a list of all exhibits and witnesses. No
later than twenty-one (21) days prior to the arbitration hearing, the parties
will exchange a final list of all exhibits and all witnesses, including any
designation of any expert witness(es) together with a summary of their
testimony; a copy of all documents and a detailed description of any property to
be introduced at the hearing. Under no circumstances will the use of
interrogatories, requests for admission, requests for the production of
documents or the taking of depositions be permitted. However, in the event of
the designation of any expert witness(es), the following will occur: (a) all
information and documents relied upon by the expert witness(es) will be
delivered to the opposing party, (b) the opposing party will be permitted to
depose the expert witness(es), (c) the opposing party will be permitted to
designate rebuttal expert witness(es), and (d) the arbitration hearing will be
continued to the earliest possible date that enables the foregoing limited
discovery to be accomplished.
24.4 Exemplary or Punitive Damages. The Arbitrator(s) will not have the
authority to award exemplary or punitive damages.
24.5 Confidentiality of Awards. All arbitration proceedings, including
testimony or evidence at hearings, will be kept confidential, although any award
or order rendered by the arbitrator(s) pursuant to the terms of this Guaranty
may be entered as a judgment or order in any state or federal court and may be
entered as a judgment or order within the federal judicial district which
includes the residence of the party against whom such award or order was
entered. This Guaranty concerns transactions involving commerce among the
several states. The Federal Arbitration Act ("FAA") will govern all
arbitration(s) and confirmation proceedings hereunder.
24.6 Prejudgment and Provisional Remedies. Nothing herein will be
Construed to prevent DFS' or Guarantor's use of bankruptcy, receivership,
injunction, repossession, replevin, claim and delivery, sequestration, seizure,
attachment, foreclosure, dation and/or any other prejudgment or provisional
action or remedy relating to any collateral for any current or future debt owed
by either party to the other. Any such action or remedy will not waive DFS' or
Guarantor's right to compel arbitration of any Dispute.
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24.7 Attorneys' Fees. If either Guarantor or DFS bring any other action
for judicial relief with respect to any Dispute (other than those set forth in
the immediately preceding paragraph), the party bringing such action will be
liable for and immediately pay all of the other party's costs and expenses
(including attorneys' fees). incurred to stay or dismiss such action and remove
or refer such Dispute to arbitration. If either Guarantor or DFS bring or appeal
an action to vacate or modify an arbitration award and such party does not
prevail, such party will pay all costs and expenses, including attorneys' fees,
incurred by the other party in defending such action. Additionally, if Guarantor
sues DFS or institutes any arbitration claim or counterclaim against DFS in
which DFS is the prevailing party, Guarantor will pay all costs and expenses
(including attorneys' fees) incurred by DFS in the course of defending such
action or proceeding.
24.8 Limitations. Any arbitration proceeding must be instituted: (a)
with respect to any Dispute for the collection of any debt owed by either party
to the other, within two (2) years after the date the last payment was received
by the instituting party; and (b) with respect to any other Dispute, within two
(2) years after the date the incident giving rise thereto occurred, whether or
not any damage was sustained or capable of ascertainment or either party knew of
such incident. Failure to institute an arbitration proceeding within such period
will constitute an absolute bar and waiver to the institution of any proceeding
with respect to such Dispute.
24.9 Survival After Termination. The agreement to arbitrate will
survive the termination of this Guaranty.
25. INVALIDITY/UNENFORCEABILITY OF BINDING ARBITRATION. IF THIS GUARANTY IS
FOUND TO BE NOT SUBJECT TO ARBITRATION, ANY LEGAL PROCEEDING WITH RESPECT TO ANY
DISPUTE WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE WITHOUT A
JURY. DFS AND GUARANTOR WAIVE ANY RIGHT TO A JURY TRIAL IN ANY SUCH PROCEEDING.
26. Governing Law. Guarantor acknowledges and agrees that this Guaranty and all
agreements between Dealer and DFS have been substantially negotiated, and will
be performed, in the state of Missouri. Accordingly, Guarantor agrees that all
Disputes will be governed by, and construed in accordance with, the laws of such
state, except to the extent inconsistent with the provisions of the FAA which
will control and govern all arbitration proceedings herein.
THIS CONTRACT CONTAINS BINDING ARBITRATION, JURY WAIVER AND PUNITIVE DAMAGE
WAIVER PROVISIONS.
Date: August 8, 1999
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"SECRETARY'S CERTIFICATE
I hereby certify that I am the Secretary or Assistant Secretary of Crescent
Machinery Company. ("Guarantor") and that execution of the above Guaranty was
ratified, approved and confirmed by the Shareholders at a meeting, if necessary,
and pursuant to a resolution of the Board of Directors of Guarantor at a meeting
of the Board of Directors duly called, and which is currently in effect, which
resolution was duly presented, seconded and adopted and reads as follows:
"BE IT RESOLVED that any officer of this corporation is hereby authorized to
execute a guaranty of the obligations of Solvenson Crane Rentals, Inc.
("Dealer") to Deutsche Financial Services Corporation ("DFS") on behalf of the
corporation, which instrument may contain such terms as the above named persons
may see fit including, but not limited to a waiver of notice of the acceptance
of the guaranty; presentment; demand; protest; notices of nonpayment,
nonperformance, dishonor, the amount of indebtedness of Dealer outstanding at
any time, any legal proceedings against Dealer, and any other demands and
notices required by law; and any right of contribution from other guarantors. As
security for such guaranty to DFS, any officer of this corporation is hereby
authorized to pledge, assign, mortgage, grant security interests, and otherwise
transfer to DFS as collateral security for any obligations of this corporation
to DFS, whenever and however arising, any assets of this corporation, whether
now owned or hereafter acquired."
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal
on this 4th day of August, 1999.
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AGREEMENT FOR WHOLESALE FINANCING
(Industrial/Construction - Rental)
This Agreement for Wholesale Financing ("Agreement") is made as of April 6, 1998
between Deutsche Financial Services Corporation ("DFS") and Moody-Day, Inc., a
[___] SOLE PROPRIETORSHIP, [__] PARTNERSHIP, [X] CORPORATION, [__] LIMITED
LIABILITY COMPANY (check applicable term) ("Dealer"), having a principal place
of business located at 2323 Irving Blvd. Dallas, TX 75207.
1. Extension of Credit. In the course of Dealer's business, Dealer
acquires new and used inventory and equipment ("Inventory") which is
manufactured or sold by, and/or which bears a trademark or trade name of: (a)
JCB, Ingersoll-Rand, P & H Cranes, Pioneer Boom Trucks, Super Pac and Broderson
or any of their subsidiaries or affiliated companies ("Vendor"), or (b) other
manufacturers or distributors. Subject to the terms of this Agreement, DFS, in
its sole discretion, may extend credit to Dealer from time to time to purchase
Inventory from Vendor or other manufacturers or distributors. If DFS advances
funds to Dealer following Dealer's execution of this Agreement, DFS will be
deemed to have entered into this Agreement with Dealer, whether or not executed
by DFS. DFS may combine all of DFS' advances to Dealer or on Dealer's behalf,
whether under this Agreement or any other agreement, and whether provided by one
or more of DFS' branch offices, together with all finance charges, fees and
expenses related thereto, to make one debt owed by Dealer. DFS' decision to
advance funds on any Inventory will not be binding until the funds are actually
advanced. DFS may, at any time and without notice to Dealer, elect not to
finance any Inventory sold by Vendor or another specific manufacturer or
distributor if Vendor or the specific manufacturer or distributor is in default
of its obligations to DFS, or with respect to which DFS reasonably feels
insecure.
2. Financing Terms and Statements of Transaction. Dealer and DFS agree
that certain financial terms of any advance made by DFS under this Agreement,
whether regarding finance charges, other fees, maturities, curtailments or other
financial terms, are not set forth herein because such terms depend, in part,
upon the availability from time to time of discounts, payment terms or other
incentives from Vendor and other manufacturers and distributors, prevailing
economic conditions, and other economic factors which may vary over time. It is
therefore in DFS' and Dealer's best interest to set forth in this Agreement only
the general terms of Dealer's financing arrangement with DFS. Upon agreeing to
finance a particular item of Inventory for Dealer, DFS will send Dealer a
Statement of Transaction, and any amendment thereto ("Statement of
Transaction"), identifying such Inventory and the applicable financial terms.
Unless Dealer notifies DFS in writing of any objection within fifteen (15) days
after a Statement of Transaction is mailed to Dealer: (a) the amount shown on
such Statement of Transaction will be an account stated; (b) Dealer will have
agreed to all rates, charges and other terms shown on such Statement of
Transaction; (c) Dealer will have agreed that the items of Inventory referenced
in such Statement of Transaction are being financed by DFS at Dealer's request;
and (d) such Statement of Transaction will be incorporated herein by reference,
will be made a part hereof as if originally set forth herein, and will
constitute an addendum hereto. If Dealer objects to the terms of any Statement
of Transaction, Dealer will pay DFS for such Inventory
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in accordance with the most recent terms for similar Inventory to which Dealer
has not objected (or, if there are no prior terms, at the lesser of 16% per
annum or at the maximum lawful contract rate of interest permitted under
applicable law), but Dealer acknowledges that DFS may then elect to terminate
Dealer's financing program pursuant to Section 17, and cease making additional
advances to Dealer. However, such termination will not accelerate the maturities
of advances previously made, unless Dealer shall otherwise be in default of this
Agreement.
3. Security Interest. To secure payment of all Dealer's current and
future debts to DFS, whether under this Agreement or any current or future
guaranty or other agreement, Dealer grants DFS a security interest in all of
Dealer's new and used inventory and equipment which is manufactured or sold by,
and/or which bears a trademark or trade name of, (a) Vendor, or (b) any other
manufacturer or distributor, in each case which is financed by DFS or against
which DFS has advanced monies, whether now owned or hereafter acquired by
Dealer, and all accounts, contract rights, chattel paper, security agreements,
deposit accounts, reserves, documents, general intangibles and instruments
arising from all such inventory and equipment, and all judgments, claims,
insurance policies and payments owed or made to Dealer thereon, and all
attachments, accessories, accessions, substitutions and replacements thereto and
all proceeds thereof. All such assets are collectively referred to herein as the
"Collateral." All of such terms for which meanings are provided in the Uniform
Commercial Code of the applicable state are used herein with such meanings. All
Collateral financed by DFS, and all proceeds thereof, will be held in trust by
Dealer for DFS solely for release or distribution to DFS, with such proceeds
being payable solely to DFS in accordance with Section 9.
4. Affirmative Warranties and Representations. Dealer warrants and
represents to DFS that: (a) Dealer has good title to all Collateral; (b) DFS'
security interest in the Collateral is not now and will not become subordinate
to the security interest, lien, encumbrance or claim of any person; (c) Dealer
will execute all documents DFS requests to perfect and maintain DFS' security
interest in the Collateral; (d) Dealer will deliver to DFS immediately upon each
request, and DFS may retain, each Certificate of Title or Statement of Origin
issued for Collateral; (e) Dealer will at all times be duly organized, existing,
in good standing, qualified and licensed to do business in each state, county,
or parish, in which the nature of its business or property so requires; (f)
Dealer has the right and is duly authorized to enter into this Agreement; (g)
Dealer's execution of this Agreement does not constitute a breach of any
agreement to which Dealer is now or hereafter becomes bound; (h) there are and,
to the best of Dealer's knowledge will be, no actions or proceedings pending or
threatened against Dealer which might result in any material adverse change in
Dealer's financial or business condition or which might in any way adversely
affect any of Dealer's assets; (i) Dealer will maintain the Collateral in good
condition and repair; (j) Dealer has duly filed and will duly file all tax
returns required by law; (k) Dealer has paid and will pay when due all taxes,
levies, assessments and governmental charges of any nature; (1) Dealer will keep
and maintain all of its books and records pertaining to the Collateral at its
principal place of business designated in this Agreement; (m) Dealer will
promptly supply DFS with such information concerning it or any guarantor as DFS
hereafter may reasonably request; (n) all Collateral will be kept at Dealer's
principal place of business listed above, and such other locations, if any, of
which Dealer has notified DFS in writing or as listed on any current or future
Exhibit "A" attached hereto which written notice(s) to DFS and Exhibit A(s) are
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incorporated herein by reference; (0) Dealer will give DFS thirty (30) days
prior written notice of any change in Dealer's identity, name, form of business
organization, ownership, management, principal place of business, Collateral
locations or other business locations, and before moving any books and records
to any other location; (p) Dealer will observe and perform all matters required
by any lease, license, concession or franchise forming part of the Collateral in
order to maintain all the rights of DFS thereunder; (q) Dealer will advise DFS
of the commencement of material legal proceedings against Dealer or any
guarantor; and (r) Dealer will comply with all applicable laws and will conduct
its business in a manner which preserves and protects the Collateral and the
earnings and incomes thereof.
5. Negative Covenants. Dealer will not at any time (without DFS' prior
written consent) : (a) other than in the ordinary course of its business, sell,
demonstrate, lease or otherwise dispose of or transfer any of its assets; (b)
demonstrate, consign, or use any Collateral; or (c) merge or consolidate with
another entity.
6. Insurance. Dealer will immediately notify DFS of any loss, theft or
damage to any Collateral. Dealer will keep the Collateral insured for its full
insurable value under an "all risk" property insurance policy with a company
acceptable to DFS, naming DFS as a lender loss-payee or mortgagee and containing
standard lender's loss payable and termination provisions. Dealer will provide
DFS with written evidence of such property insurance coverage and lender's
loss-payee or mortgagee endorsement.
7. Financial Statements. Dealer will deliver to DFS: (a) within ninety
(90) days after the end of each of Dealer's fiscal years, a reasonably detailed
balance sheet as of the last day of such fiscal year and a reasonably detailed
income statement covering Dealer's operations for such fiscal year, in a form
satisfactory to DFS; (b) within forty-five (45) days after the end of each of
Dealer's fiscal quarters, a reasonably detailed balance sheet as of the last day
of such quarter and an income statement covering Dealer's operations for such
quarter, in a form satisfactory to DFS; and (c) within thirty (30) days after
request therefor by DFS, any other report requested by DFS relating to the
Collateral or the financial condition of Dealer. Dealer warrants and represents
to DFS that all financial statements and information relating to Dealer or any
guarantor which have been or may hereafter be delivered by Dealer or any
guarantor are true and correct and have been and will be prepared in accordance
with generally accepted accounting principles consistently applied and, with
respect to such previously delivered statements or information, there has been
no material adverse change in the financial or business condition of Dealer or
any guarantor since the submission to DFS, either as of the date of delivery,
or, if different, the date specified therein, and Dealer acknowledges DFS'
reliance thereon.
8. Reviews. Dealer grants DFS an irrevocable license to enter Dealer's
business locations during normal business hours without notice to Dealer to: (a)
account for and inspect all Collateral; (b) verify Dealer's compliance with this
Agreement; and (c) examine and copy Dealer's books and records related to the
Collateral.
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9. Payment Terms. Dealer will immediately pay DFS the principal
indebtedness owed DFS on each item of Inventory financed by DFS or against which
DFS has advanced funds on the earliest occurrence of any of the following
events: (a) (i) when such Inventory is lost, stolen or damaged - immediately if
such loss, theft or damage is not covered completely by insurance, or (ii) if
completely covered by insurance, then upon Dealer's receipt of the insurance
proceeds therefor or thirty (30) days following the loss theft or damage,
whichever occurs first; (b) when such Inventory is sold, transferred or
otherwise disposed of; provided, however, if any item of Inventory financed by
DFS or against which DFS has advanced funds is sold and Dealer does not receive
payment for such item at the time of sale, Dealer will pay DFS the full amount
of the principal balance owed DFS on such item of Inventory within thirty (30)
days immediately following the sale date of such item of Inventory or
immediately upon Dealer's receipt of payment for such items of Inventory,
whichever occurs first; (c) in strict accordance with any curtailment schedule
for such Inventory (as shown on the Statement of Transaction identifying such
Inventory); (d) when any item of such Inventory matures (as shown on the
Statement of Transaction identifying such Inventory). With respect to Inventory
financed by DFS or against which DFS has advanced funds and held for rent and/or
lease, Dealer will owe DFS and agree to pay DFS monthly the percentage of the
principal balance owed on each item of such Inventory that is required under the
terms of Dealer's financing program with DFS. However, if any Inventory financed
by DFS or against which DFS has advanced funds and held for rent and/or lease:
(A) is sold and Dealer does not receive payment for such item at the time of
sale, Dealer will pay DFS the full amount of the principal balance owed to DFS
on such item of Inventory within thirty (30) days immediately following the sale
date of such item of Inventory or immediately upon Dealer's receipt of payment
for such item of Inventory, whichever occurs first; or (B) is stolen, destroyed
or otherwise disposed of, Dealer will immediately pay DFS the full amount of
Dealer's outstanding indebtedness owed to DFS for such Inventory. If Dealer from
time to time is required to make immediate payment to DFS of any past due
obligation discovered during any Inventory audit, or at any other time, Dealer
agrees that acceptance of such payments by DFS will not be construed to have
waived or amended the terms of its financing program. Dealer will send all
payments to DFS' branch office(s) responsible for Dealer's account. DFS may
apply: (i) payments to reduce finance charges first and then principal,
regardless of Dealer's instructions; and (ii) principal payments to the oldest
(earliest) invoice for Inventory financed by DFS, but, in any event, all
principal payments will first be applied to such Inventory which is sold, lost,
stolen, damaged, rented, leased, or otherwise disposed of or unaccounted for.
Any third party discount, rebate, bonus or credit granted to Dealer for any
Inventory will not reduce the debt Dealer owes DFS until DFS has received
payment therefor in cash. Dealer will: (1) pay DFS even if any Inventory
financed by DFS or against which DFS has advanced funds is defective or fails to
conform to any warranties extended by any third party; (2) not assert against
DFS any claim or defense Dealer has against any third party; and (3) indemnify
and hold DFS harmless against all claims and defenses asserted by any buyer of
the Inventory relating to the condition of, or any representations regarding,
any of the Inventory. Dealer waives all rights of offset and counterclaims which
Dealer may have against DFS.
10. Calculation of charges. Dealer will pay finance charges to DFS on
the outstanding principal debt Dealer owes DFS for each item of Inventory
financed-by DFS at the rate(s) shown on the Statement of Transaction identifying
such Inventory, unless Dealer objects thereto as provided in
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Section 2. The finance charges attributable to the rate shown on the Statement
of Transaction will: (a) be computed based on a 360 day year; (b) be calculated
by multiplying the Daily Charge (as defined below) by the actual number of days
in the applicable billing period; and (C) accrue from the invoice date of the
Inventory identified on such Statement of Transaction until DFS receives full
payment of the principal debt Dealer owes DFS for each item of such Inventory in
accordance with DFS' payment recognition policy and DFS applies such payment to
Dealer's principal debt in accordance with the terms of this Agreement. The
"Daily Charge" is the product of the Daily Rate (as defined below) multiplied by
the Average Daily Balance (as defined below) The "Daily Rate" is the quotient of
the annual rate shown on the Statement of Transaction divided by 360, or the
monthly rate shown on the Statement of Transaction divided by 30. The "Average
Daily Balance" is the quotient of: (i) the sum of the outstanding principal debt
owed DFS on each day of a billing period for each item of Inventory identified
on a Statement of Transaction; divided by (ii) the actual number of days in such
billing period. Dealer will also pay DFS $100 for each check returned unpaid for
insufficient funds (an "NSF check") (such $100 payment repays DFS' estimated
administrative costs; it does not waive the default caused by the NSF check) .
Dealer acknowledges that DFS intends to strictly conform to the applicable usury
laws governing this Agreement. Regardless of any provision contained herein or
in any other document executed or delivered in connection herewith or therewith,
DFS shall never be deemed to have contracted for, charged or be entitled to
receive, collect or apply as interest on this Agreement (whether termed interest
herein or deemed to be interest by judicial determination or operation of law),
any amount in excess of the maximum amount allowed by applicable law, and, if
DFS ever receives, collects or applies as interest any such excess, such amount
which would be excessive interest will be applied first to the reduction of the
unpaid principal balances of advances under this Agreement, and, second, any
remaining excess will be paid to Dealer. In determining whether or not the
interest paid or payable under any specific contingency exceeds the highest
lawful rate, Dealer and DFS shall, to the maximum extent permitted under
applicable law: (A) characterize any non-principal payment (other than payments
which are expressly designated as interest payments hereunder) as an expense or
fee rather than as interest; (B) exclude voluntary pre-payments and the effect
thereof; and (C) spread the total amount of interest throughout the entire term
of this Agreement so that the interest rate is uniform throughout such term. The
annual percentage rate of the finance charges relating to any item of Inventory
financed by DFS will be calculated from the invoice date of such Inventory,
regardless of any period during which any finance charge subsidy will be paid or
payable by any third party.
11. Billing Statement. DFS will send Dealer a monthly billing statement
identifying all charges due on Dealer s account with DFS. The charges specified
on each billing statement will be: (a) due and payable in full upon receipt; and
(b) an account stated, unless DFS receives Dealer's written objection thereto
within 15 days after it is mailed to Dealer. If DFS does not receive, by the
25th day of any given month, payment of all charges accrued to Dealer's account
with DFS during the immediately preceding month, Dealer will (to the extent
allowed by law) pay DFS a late fee ("Late Fee") equal to the greater of $5 or 5%
of the amount of such finance charges (payment of the Late Fee does not waive
the default caused by the late payment). DFS may adjust the billing statement at
any time to conform to applicable law and this Agreement.
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12. Rental Contracts. Dealer may rent the Inventory financed by DFS or
against which DFS has advanced funds pursuant to the terms of Dealer's rental
contracts ("Rental Contracts"). Such Inventory will thereafter be subject to the
rates and terms of DFS' financing program in effect for goods which are rented,
as reflected in the Statement of Transaction for such Inventory. All of Dealer's
Rental Contracts, agreements, and rental transactions will be in a form
satisfactory to DFS and will be in accordance with all applicable Federal, State
and local laws. Dealer will indemnify DFS against any loss or damage which DFS
suffers, whether direct or indirect, resulting in any way from the Rental
Contracts, agreements, or rental transactions which fail to comply with such
laws. All Rental Contracts will be transferable to DFS. Dealer will indemnify
DFS against any claims by its customers regarding Dealer's obligations under the
Rental Contracts. Dealer will immediately, upon DFS' request, deliver to DFS all
Rental Contracts and all related documents. This assignment is a transfer for
security only, and, until DFS has foreclosed its interest in the Rental
Contracts, will not be deemed to delegate any of Dealer's duties under the
Rental Contracts to DFS, nor is it intended to alter or impair performance by
either party to the Rental Contracts. DFS may, from time to time, verify the
accuracy of the Rental Contracts, and Dealer will immediately, upon DFS'
request, provide DFS with the following information regarding Rental Contracts
which are in effect on the date of such request: (a) the name, address and
telephone number of each customer who has executed a Rental Contract; (b) the
location of the Inventory; (c) the date of each Rental Contract; (d) the date
when the Inventory is to be returned under each Rental Contract; and, (e) any
other information which DFS may reasonably request. If the rental period under
the Rental Contract is ninety (90) days or longer, Dealer will stamp the
original of such Rental Contract with the following legend:
`FOR VALUE RECEIVED, THIS AGREEMENT HAS BEEN ASSIGNED TO DEUTSCHE
FINANCIAL SERVICES CORPORATION AND THERE ARE NO DEFENSES AGAINST THE
ASSIGNEE.'
Other than to DFS, Dealer will not assign, sell, pledge, convey or by any other
means transfer any Rental Contracts or chattel paper, without DFS' prior written
consent. Dealer will not enter into any Rental Contracts for Inventory financed
by DFS or against which DFS has advanced funds pursuant to which: (i) the
original term of the Rental Contract is greater than three hundred sixty (360)
days; (ii) the original term of the Rental Contract is equal to or greater than
the remaining economic life of such Inventory; (iii) the customer is bound to
renew the Rental Contract for the economic life of such Inventory or is bound to
become the owner of such Inventory; or, (iv) the customer has an option to renew
the Rental Contract for the remaining economic life of such Inventory, or to
become the owner of such Inventory, for nominal consideration, or for
consideration which is less than the unpaid balance owed to DFS for such
Inventory. If any such Rental Contracts are issued, Dealer will take any action
which DFS may reasonably require to perfect and/or protect DFS' security
interest in such Rental Contracts and/or the Inventory subject thereto.
13. Default. Dealer will be in default under this Agreement if: (a)
Dealer breaches any terms, warranties or representations contained herein, in
any Statement of Transaction to which Dealer has not objected as provided in
Section 2, or in any other agreement between DFS and Dealer; (b) any guarantor
of Dealer's debts to DFS breaches any terms, warranties or representations
contained in
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any guaranty or other agreement between the guarantor and DFS; (c) any
representation, statement, report or certificate made or delivered by Dealer or
any guarantor to DFS is not accurate when made; (d) Dealer fails to pay any
portion of Dealer's debts to DFS when due and payable hereunder or under any
other agreement between DFS and Dealer; (e) Dealer abandons any Collateral; (f)
Dealer or any guarantor is or becomes in default in the payment of any debt owed
to any third party; (g) a money judgment issues against Dealer or any guarantor;
(h) an attachment, sale or seizure issues or is executed against any assets of
Dealer or of any guarantor; (i) the undersigned dies while Dealer's business is
operated as a sole proprietorship, any general partner dies while Dealer's
business is operated as a general or limited partnership, or any member dies
while Dealer's business is operated as a limited liability company, as
applicable; (j) any guarantor dies; (k) Dealer or any guarantor shall cease
existence as a corporation, partnership, limited liability company or trust, as
applicable; (1) Dealer or any guarantor ceases or suspends business; (m) Dealer,
any guarantor or any member while Dealer's business is operated as a limited
liability company, as applicable, makes a general assignment for the benefit of
creditors; (n) Dealer, any guarantor or any member while Dealer's business is
operated as a limited liability company, as applicable, becomes insolvent or
voluntarily or involuntarily becomes subject to the Federal Bankruptcy Code, any
state insolvency law or any similar law; (0) any receiver is appointed for any
assets of Dealer, any guarantor or any member while Dealer's business is
operated as a limited liability company, as applicable; (p) any guaranty of
Dealer's debts to DFS is terminated; (q) Dealer loses any franchise, permission,
license or right to sell or deal in any Inventory which DFS finances; or (r)
Dealer or any guarantor misrepresents Dealer's or such guarantor's financial
condition or organizational structure.
14. Rights of DFS Upon Default. In the event of a default:
(a) DFS may at any time at DFS' election, without notice or demand
to Dealer, do any one or more of the following: declare all or
any part of the debt Dealer owes DFS immediately due and
payable, together with all costs and expenses of DFS'
collection activity, including, without limitation, all
reasonable attorney's fees; exercise any or all rights under
applicable law (including, without limitation, the right to
possess, transfer and dispose of the Collateral); and/or cease
extending any additional credit to Dealer (DFS' right to cease
extending credit will not be construed to limit the
discretionary nature of this credit facility)
(b) Dealer will segregate and keep the Collateral in trust for
DFS, and in good order and repair, and will not sell, rent,
lease, consign, otherwise dispose of or use any Collateral,
nor further encumber any Collateral.
(c) Upon DFS' oral or written demand, Dealer will immediately
deliver the Collateral to DFS, in good order and repair, at a
place specified by DFS, together with all related documents;
or DFS may, in DFS' sole discretion and without notice or
demand to Dealer, take immediate possession of the Collateral
together with all related documents.
(d) DFS may, without notice, apply a default finance charge to
Dealer's outstanding principal indebtedness equal to the
default rate specified in Dealer's financing program with DFS,
if any, or if there is none so specified, at the lesser of 3%
per annum above the rate in effect immediately prior to the
default, or the highest lawful contract rate of interest
permitted under applicable law.
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(e) Dealer grants DFS an irrevocable power of attorney to: execute
or endorse on Dealer's behalf any checks, drafts or other
forms of exchange received as payment on any Collateral for
deposit in DFS' account; execute financing statements,
instruments, Certificates of Title and Statements of Origin
pertaining to the Collateral; supply any omitted information
and correct errors in any documents between DFS and Dealer;
sell, assign, transfer, negotiate, demand, collect, receive,
settle, extend, or renew any amounts due on any of the
Collateral; do anything Dealer is obligated to do hereunder;
initiate and settle any insurance claim pertaining to the
Collateral; and do anything to preserve and protect the
Collateral and DFS' rights and interests therein.
(f) Upon DFS' oral or written demand, Dealer will immediately
deliver the original Rental Contracts to DFS, and DFS may
collect in DFS' name all amounts owed to Dealer under the
Rental Contracts.
All of DFS' rights and remedies are cumulative. DFS' failure to exercise any of
DFS' rights or remedies hereunder will not waive any of DFS' rights or remedies
as to any past, current or future default.
15. Sale of Collateral. Dealer agrees that if DFS conducts a private
sale of any Collateral by requesting bids from 10 or more dealers or
distributors in that type of Collateral, any sale by DFS of such Collateral in
bulk or in parcels within 120 days of: (a) DFS' taking possession and control of
such Collateral; or (b) when DFS is otherwise authorized to sell such
Collateral; whichever occurs last, to the bidder submitting the highest cash bid
therefor, is a commercially reasonable sale of such Collateral under the Uniform
Commercial Code. Dealer agrees that the purchase of any Collateral by Vendor or
a manufacturer or distributor, as provided in any agreement between DFS and the
Vendor, manufacturer or distributor, is a commercially reasonable disposition
and private sale of such Collateral under the Uniform Commercial Code, and no
request for bids will be required. Dealer further agrees that 7 or more days
prior written notice will be commercially reasonable notice of any public or
private sale (including any sale to Vendor or a manufacturer or distributor).
Dealer irrevocably waives any requirement that DFS retain possession and not
dispose of any Collateral until after an arbitration hearing, arbitration award,
confirmation, trial or final judgment. If DFS disposes of any such Collateral
other than as herein contemplated, the commercial reasonableness of such
disposition will be determined in accordance with the laws of the state
governing this Agreement.
16. Power of Attorney; Information. Dealer grants DFS an irrevocable
power of attorney to do anything necessary to preserve and protect the
Collateral and DFS' rights and interest therein. DFS may provide to any third
party any credit, financial or other information on Dealer that DFS may from
time to time possess. DFS may obtain from any Vendor, manufacturer or
distributor, any credit, financial or other information regarding Dealer that
such Vendor, manufacturer or distributor may from time to time possess.
17. Termination. Either party may terminate this Agreement at any time
by written notice received by the other party. If DFS terminates this Agreement,
Dealer agrees that if Dealer: (a) is not in default hereunder, 30 days prior
notice of termination is reasonable and sufficient (although this
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provision shall not be construed to mean that shorter periods may not, in
particular circumstances, also be reasonable and sufficient); or (b) is in
default hereunder, no prior notice of termination is required. Dealer will riot
be relieved from any obligation to DFS arising out of DFS' advances or
commitments made before the effective termination date of this Agreement. DFS
will retain all of its rights, interests and remedies hereunder until Dealer has
paid all of Dealer's debts to DFS. All waivers set forth within this Agreement
will survive any termination of this Agreement.
18. Binding Effect. Dealer cannot assign its interest in this Agreement
without DFS' prior written consent, although DFS may assign or participate DFS'
interest, in whole or in part, without Dealer's consent. This Agreement will
protect and bind DFS' and Dealer's respective heirs, representatives, successors
and assigns.
19. Notices. Except as otherwise stated herein, all notices,
arbitration claims, responses, requests and documents will be sufficiently given
or served if mailed or delivered: (a) to Dealer at Dealer's principal place of
business specified above; and (b) to DFS at 655 Maryville Centre Drive, St.
Louis, Missouri 63141-5832, Attention: General Counsel, or such other address as
the parties may hereafter specify in writing.
20. NO ORAL AGREEMENTS. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING
PROMISES TO EXTEND OR RENEW SUCH DEBTS ARE NOT ENFORCEABLE. TO PROTECT DEALER
AND DFS FROM MISUNDERSTANDING OR DISAPPOINTMENT, ALL AGREEMENTS COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES, EXCEPT AS SPECIFICALLY PROVIDED
HEREIN OR AS THE PARTIES MAY LATER AGREE IN WRITING TO MODIFY IT. THERE ARE NO
UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
21. Other Waivers. Dealer irrevocably waives notice of: DFS' acceptance
of this Agreement, presentment, demand, protest, nonpayment, nonperformance, and
dishonor. Dealer and DFS irrevocably waive all rights to claim any punitive
and/or exemplary damages.
22. Severability. If any provision of this Agreement or its application
is invalid or unenforceable, the remainder of this Agreement will not be
impaired or affected and will remain binding and enforceable.
23. Supplement. If Dealer and DFS (or any predecessor in interest to
DFS) have heretofore executed other agreements in connection with all or any
part of the Collateral, this Agreement shall supplement each and every other
agreement previously executed by and between Dealer and DFS (or any predecessor
in interest to DFS), and in that event this Agreement shall neither be deemed a
novation nor a termination of such previously executed agreement nor shall
execution of this Agreement be deemed a satisfaction of any obligation secured
by such previously executed agreement.
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24. Receipt of Agreement. Dealer acknowledges that it has received a
true and complete copy of this Agreement. Dealer acknowledges that it has read
and understood this Agreement. Notwithstanding anything herein to the contrary:
(a) DFS may rely on any facsimile copy, electronic data transmission or
electronic data storage of this Agreement, any Statement of Transaction, billing
statement, invoice from Vendor or any manufacturer or distributor, financial
statements or other reports, and (b) such facsimile copy, electronic data
transmission or electronic data storage will be deemed an original, and the best
evidence thereof for all purposes, including, without limitation, under this
Agreement or any other agreement between DFS and Dealer, and for all evidentiary
purposes before any arbitrator, court or other adjudicatory authority.
25. Miscellaneous. Time is of the essence regarding Dealer's
performance of its obligations to DFS notwithstanding any course of dealing or
custom on DFS' part to grant extensions of time. Dealer's liability under this
Agreement is direct and unconditional and will not be affected by the release or
nonperfection of any security interest granted hereunder. DFS will have the
right 0 refrain from or postpone enforcement of this Agreement or any other
agreements between DFS and Dealer without prejudice and the failure to strictly
enforce these agreements will not be construed as having created a course of
dealing between DFS and Dealer contrary to the specific terms of the agreements
or as having modified, released or waived the same. The express terms of this
Agreement will not be modified by any course of dealing, usage of trade, or
custom of trade which may deviate from the terms hereof. If Dealer fails to pay
any taxes, fees or other obligations which may impair DFS' interest in the
Collateral, or fails to keep the Collateral insured, DFS may, but shall not be
required to, pay such taxes, fees or obligations and pay the cost to insure the
Collateral, and the amounts paid will be: (a) an additional debt owed by Dealer
to DFS, which shall be subject to finance charges as provided herein; and (b)
due and payable immediately in full. Dealer agrees to pay all of DFS' reasonable
attorneys' fees and expenses incurred by DFS in enforcing DFS' rights hereunder.
The Section titles used in this Agreement are for convenience only and do not
define or limit the contents of any Section.
26. BINDING ARBITRATION.
26.1 Arbitrable Claims. Except as otherwise specified below, all
actions, disputes, claims and controversies under common law,
statutory law or in equity of any type or nature whatsoever
(including, without limitation, all torts, whether regarding
negligence, breach of fiduciary duty, restraint of trade,
fraud, conversion, duress, interference, wrongful replevin,
wrongful sequestration, fraud in the inducement, usury or any
other tort, all contract actions, whether regarding express or
implied terms, such as implied covenants of good faith, fair
dealing, and the commercial reasonableness of any Collateral
disposition, or any other contract claim, all claims of
deceptive trade practices or lender liability, and all claims
questioning the reasonableness or lawfulness of any act),
whether arising before or after the date of this Agreement,
and whether directly or indirectly relating to: (a) this
Agreement and/or any amendments
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and addenda hereto, or the breach, invalidity or termination
hereof; (b) any previous or subsequent agreement between DFS
(or any predecessor in interest to DFS) and Dealer; (c) any
act committed by DFS (or any predecessor in interest to DFS)
or by any parent company, subsidiary or affiliated company of
DFS (or any predecessor in interest to DFS) (collectively the
"DFS Companies"), or by any employee, agent, officer or
director of an DFS Company whether or not arising within the
scope and course of employment or other contractual
representation of the DFS Companies provided that such act
arises under a relationship, transaction or dealing between
DFS (or any predecessor in interest to DFS) and Dealer; and/or
(d) any other relationship, transaction or dealing between DFS
(or any predecessor in interest to DFS) and Dealer
(collectively the "Disputes"), will be subject to and resolved
by binding arbitration.
26.2 Administrative Body. All arbitration hereunder will be
conducted in accordance with the Commercial Arbitration Rules
of The American Arbitration Association ("AAA"). If the AAA is
dissolved, disbanded or becomes subject to any state or
federal bankruptcy or insolvency proceeding, the parties will
remain subject to binding arbitration which will be conducted
by a mutually agreeable arbitral forum. The parties agree that
all arbitrator(s) selected will be attorneys with at least
five (5) years secured transactions experience. The
arbitrator(s) will decide if any inconsistency exists between
the rules of any applicable arbitral forum and the arbitration
provisions contained herein. If such inconsistency exists, the
arbitration provisions contained herein will control and
supersede such rules. The site of all arbitration proceedings
will be in the Division of the Federal Judicial District in
which AM maintains a regional office that is closest to
Dealer.
26.3 Discovery. Discovery permitted in any arbitration proceeding
commenced hereunder is limited as follows. No later than
thirty (30) days after the filing of a claim for arbitration,
the parties will exchange detailed statements setting forth
the facts supporting the claim(s) and all defenses to be
raised during the arbitration, and a list of all exhibits and
witnesses. No later than twenty-one (21) days prior to the
arbitration hearing, the parties will exchange a final list of
all exhibits and all witnesses, including any designation of
any expert witness(es) together with a summary of their
testimony; a copy of all documents and a detailed description
of any property to be introduced at the hearing. Under no
circumstances will the use of interrogatories, requests for
admission, requests for the production of documents or the
taking of depositions be permitted. However, in the event of
the designation of any expert witness(es), the following will
occur: (a) all information and documents relied upon by the
expert witness(es) will be delivered to the opposing party,
(b) the opposing party will be permitted to depose the expert
witness(es), (c) the opposing party will be permitted to
designate rebuttal expert witness(es), and (d) the arbitration
hearing will be continued to the earliest possible date that
enables the foregoing limited discovery to be accomplished.
26.4 Exemplary or Punitive Damages. The Arbitrator(s) will not have
the authority to award exemplary or punitive damages.
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26.5 Confidentiality of Awards. All arbitration proceedings,
including testimony or evidence at hearings, will be kept
confidential, although any award or order rendered by the
arbitrator(s) pursuant to the terms of this Agreement may be
entered as a judgment or order in any state or federal court
and may be confirmed within the federal judicial district
which includes the residence of the party against whom such
award or order was entered. This Agreement concerns
transactions involving commerce among the several states. The
Federal Arbitration Act, Title 9 U.S.C.Sections 1 et seq., as
amended ("FAA") will govern all arbitration(s) and
confirmation proceedings hereunder.
26.6 Prejudgment and Provisional Remedies. Nothing herein will be
construed to prevent DFS' or Dealer's use of bankruptcy,
receivership, injunction, repossession, replevin, claim and
delivery, sequestration, seizure, attachment, foreclosure,
dation and/or any other prejudgment or provisional action or
remedy relating to any Collateral for any current or future
debt owed by either party to the other. Any such action or
remedy will not waive DFS' or Dealer's right to compel
arbitration of any Dispute.
26.7 Attorneys' Fees. If either Dealer or DFS brings any other
action for judicial relief with respect to any Dispute (other
than those set forth in Section 26.6), the party bringing such
action will be liable for and immediately pay all of the other
party's costs and expenses (including attorneys' fees)
incurred to stay or dismiss such action and remove or refer
such Dispute to arbitration. If either Dealer or DFS brings or
appeals an action to vacate or modify an arbitration award and
such party does not prevail, such party will pay all costs and
expenses, including attorneys' fees, incurred by the other
party in defending such action. Additionally, if Dealer sues
DFS or institutes any arbitration claim or counterclaim
against DFS in which DFS is the prevailing party, Dealer will
pay all costs and expenses (including attorneys' fees)
incurred by DFS in the course of defending such action or
proceeding.
26.8 Limitations. Any arbitration proceeding must be instituted:
(a) with respect to any Dispute for the collection of any debt
owed by either party to the other, within two (2) years after
the date the last payment was received by the instituting
party; and (b) with respect to any other Dispute, within two
(2) years after the date the incident giving rise thereto
occurred, whether or not any damage was sustained or capable
of ascertainment or either party knew of such incident.
Failure to institute an arbitration proceeding within such
period will constitute an absolute bar and waiver to the
institution of any proceeding, whether arbitration or a court
proceeding, with respect to such Dispute.
26.9 Survival After Termination. The agreement to arbitrate will
survive the termination of this Agreement.
27. INVALIDITY/UNENFORCEABILITY OF BINDING ARBITRATION. IF THIS
AGREEMENT IS FOUND TO BE NOT SUBJECT TO ARBITRATION, ANY LEGAL PROCEEDING WITH
RESPECT TO ANY DISPUTE WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A
JUDGE WITHOUT A JURY. DEALER AND DFS WAIVE ANY RIGHT TO A JURY TRIAL IN ANY SUCH
PROCEEDING.
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28. Governing Law. Dealer acknowledges and agrees that this and all
other agreements between Dealer and DFS have been substantially negotiated, and
will be substantially performed, in the state of Missouri. Accordingly, Dealer
agrees that all Disputes will be governed by, and construed in accordance with,
the laws of such state, except to the extent inconsistent with the provisions of
the FAA which shall control and govern all arbitration proceedings hereunder.
IN WITNESS WHEREOF, Dealer and DFS have executed this Agreement as of the date
first set forth hereinabove.
THIS CONTRACT CONTAINS BINDING ARBITRATION, JURY WAIVER AND PUNITIVE DAMAGE
WAIVER PROVISIONS.
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SECRETARY'S CERTIFICATE OF RESOLUTION
I certify that I am the Secretary of the corporation named below, and
that the following completely and accurately sets forth certain resolutions of
the Board of Directors of the corporation adopted at a special meeting thereof
held on due notice (and with shareholder approval, if required by law), at which
meeting there was present a quorum authorized to transact the business described
below, and that the proceedings of the meeting were in accordance with the
certificate of incorporation, charter and by-laws of the corporation, and that
they have not been revoked, annulled or amended in any manner whatsoever.
Upon motion duly made and seconded, the following resolution was
unanimously adopted after full discussion:
"RESOLVED, That the several officers, directors, and agents of this
corporation, or any one or more of them, are hereby authorized and empowered on
behalf of this corporation: to obtain financing from Deutsche Financial Services
Corporation ("DFS") in such amounts and on such terms as such officers,
directors or agents deem proper; to enter into financing, security, pledge and
other agreements with DFS relating to the terms upon which such financing may be
obtained and security and/or other credit support is to be furnished by this
corporation therefor; from time to time to supplement or amend any such
agreements; and from time to time to pledge, assign, mortgage, grant security
interests, and otherwise transfer, to DFS as collateral security for any
obligations of this corporation to DFS, whenever and however arising, any assets
of this corporation, whether now owned or hereafter acquired; the Board of
Directors hereby ratifying, approving and confirming all that any of said
officers, directors or agents have done or may do with respect to the
foregoing."
IN WITNESS WHEREOF, I have executed and affixed the seal of the corporation on
the date stated below.
Dated: December 2, 1999
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EXHIBIT 10.102
MASTER SECURITY AGREEMENT
(Wholesale and Fleet Rental Finance)
This Master Security Agreement (this "Agreement") is entered into by and between
Associates Commercial Corporation ("Secured Party") and the party signing below
as debtor ("Debtor"). Debtor and Secured Party agree (hat the security interest
granted herein is limited to Inventory upon which indebtedness or obligation is
owed by Debtor to Secured Party.
1. INVENTORY
1.1 Inventory. Debtor is now or may hereafter be engaged in the business of
selling or renting to Debtor's retail customers the types of property described
in any Supplemental Security Agreement now or hereafter executed by Secured
Party and Debtor relating to this Agreement. The property described on such
Supplemental Security Agreements, together with all attachments exchanges,
replacement parts, repairs and additions to any such property (whether a part of
such property at the time of Debtor's purchase or incorporated in or attached to
such property by Debtor at a later time) is individually referred to in this
Agreement as an "item of Inventory", by classification as a "type of Inventory"
and is collectively referred to in this Agreement as "Inventory."
1.2 Wholesale Inventory. "Wholesale Inventory" is an item of Inventory or type
of Inventory subject to the terms of this Agreement which is (a) acquired or
held by Debtor solely for the purpose of sale and not for the purpose of rental
and/or lease, or (b) acquired by Debtor under the terms of a Special Finance
Plan (as defined below) designating the item or type of Inventory as Wholesale
Inventory. Any item or type of Inventory subject to the terms of this Agreement
and which is not Fleet Rental Inventory (as defined below) will be considered
Wholesale Inventory.
1.3 Fleet Rental Inventory. "Fleet Rental Inventory" is an item of Inventory or
type of Inventory subject to the terms of this Agreement which is (a) designated
by Debtor with the written consent of Secured Party as being acquired or held by
Debtor for the purposes of rental or lease as well as for the purposes of sale,
or (b) acquired by Debtor under the terms of a Special Finance Plan (as defined
below) designating the item or type of Inventory as Fleet Rental Inventory. An
item of Inventory classified as wholesale Inventory may be re-classified as
Fleet Rental Inventory only upon the written consent and agreement of Secured
Party. An item of Wholesale Inventory re-classified as Fleet Rental Inventory
will be considered as reclassified effective as of the first day of the month in
which the written consent and agreement to re-classification is executed or as
otherwise provided in such agreement.
2. ADVANCES AND INTEREST
2.1 Advances. Debtor has requested that Secured Party from time to time make
loans or otherwise extend credit (herein individually referred to as "Advances")
to or on behalf of Debtor, the proceeds of which will be used by Debtor to
acquire one or more items of Inventory or for other legitimate purposes of
Debtor in carrying on the business for which Debtor is acquiring or maintaining
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the Inventory. Debtor agrees and acknowledges that any Advance to or on behalf
of Debtor will be in the sole discretion of Secured Party and that no Advance
made by Secured Party will obligate Secured Party to make any additional
Advance.
2.2 Special Finance Plans. From time to time, a manufacturer or distributor
(herein called "Manufacturer") of one or more items of Inventory may arrange
with Secured Party for Secured Party to offer special finance terms with respect
to Advances made by Secured Party on behalf of Debtor which are used by Debtor
to acquire specified items or types of Inventory from a Manufacturer (herein
called a "Special Finance Plan"). Neither Secured Party nor any Manufacturer
will be obligated in any way to arrange or continue a Special Finance Plan or
offer or continue offering the terms of any Special Finance Plan to Debtor. In
the event a Manufacturer arranges for a Special Finance Plan, Secured Party
offers the Special Finance Plan to Debtor and Debtor accepts the terms of the
Special Finance Plan, Debtor will evidence Debtor's acceptance by executing an
appropriate Special Finance Plan Supplemental Agreement which outlines the terms
of the Special Finance Plan. Secured Party may, in its sole discretion, modify
the terms of a Special Finance Plan with respect to Advances made under the
Special Finance Plan after the date of notice to Debtor and Debtor's acceptance
of Advances after the date of notice will be Debtor's consent to the
modification to the Special Finance Plan. Debtor hereby directs Secured Party to
disburse the proceeds of any Advance made under a Special Finance Plan directly
to the Manufacturer based upon sales invoices presented to Secured Party from
time to time by the Manufacturer which evidence the sale by the Manufacturer to
Debtor of one or more items of Inventory. The Advance to the Manufacturer will
be considered made on the date of the Manufacturer's invoice upon which the
Advance is made regardless of any special funding instructions agreed upon
between Secured Party and Manufacturer.
2.3 Wholesale Inventory/Payment and Interest. Debtor agrees to pay to Secured
Party the unpaid balance of each Advance with respect to an item of Wholesale
Inventory as follows: (a) an Advance which is evidenced by a Supplemental
Security Agreement will be payable as provided in the Supplemental Security
Agreement, (b) an Advance made pursuant to a Special Finance Plan will be
payable as provided in the Special Finance Plan Supplemental Agreement, and (c)
an Advance not subject to a Special Finance Plan or evidenced by a Supplemental
Security Agreement will be payable upon demand.
Debtor agrees to pay Secured Party promptly as billed at the beginning of each
month interest and other charges on the unpaid balance of each Advance from time
to time outstanding with respect to an item of Wholesale Inventory, computed in
accordance with the terms of this section. Interest charges for each item of
Wholesale Inventory for which an Advance was outstanding during the prior month
shall be computed and accrued at the lesser of (a) the Applicable Wholesale Rate
(as defined below) which is in effect on the first business day of the month in
which the interest accrues, or (b) the Maximum Legal Rate (as defined below).
The "Applicable Wholesale Rate" with respect to each Advance is as follows: (a)
the Applicable Wholesale Rate with respect to an Advance evidenced by a
Supplemental Security Agreement will be the rate of interest provided in such
Supplemental Security Agreement, (b) the Applicable Wholesale Rate with respect
to an Advance made pursuant to a Special Finance Plan will be the rate of
interest provided in the Special Finance Plan, and (c) the
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Applicable Wholesale Rate with respect to an Advance not subject to a Special
Finance Plan or evidenced by a Supplemental Security Agreement will be a simple
interest per annum rate equal to the greater of N/A % per annum or the Base Rate
(as defined below).
2.4 Fleet Rental Inventory Payment and Interest. Debtor agrees to pay Secured
Party the unpaid balance of each Advance outstanding with respect to an item of
Fleet Rental Inventory as follows: (a) an Advance which is evidenced by a
Supplemental Security Agreement will be payable as provided in the Supplemental
Security Agreement, (b) an Advance made pursuant to a Special Finance Plan will
be payable as provided in the Special Finance Plan, and (c) an Advance not
subject to a Special Finance Plan or evidenced by a Supplemental Security
Agreement will be payable in monthly installments such that the unpaid balance
will be repaid in full no later than 24 months after the earlier of(a) the date
of Secured Party's Advance with respect to the item of Inventory (whether the
Advance was made based upon a classification of the item of Inventory as
Wholesale Inventory or Fleet Rental Inventory) and (b), if the Advance was made
by Secured Party to enable the Debtor to acquire the item of Inventory from a
manufacturer (whether or not pursuant to a Special Finance Plan), the date of
the manufacturer's invoice to Debtor with respect to the item of Inventory. The
amount of each monthly installment payment will be in amount equal to the
greater of(a) the amount necessary to repay the Advance in full in substantially
equal monthly payments as provided above, and (b) 80% of the Revenues invoiced
by Debtor upon the rental of the item of Inventory during the prior calendar
month.
Debtor agrees to pay Secured Party promptly as billed at the beginning of each
month interest and other charges on the unpaid balance of each Advance from time
to time outstanding with respect to an item of Fleet Rental Inventory, computed
in accordance with the terms of this section. Interest charges for each item of
Fleet Rental Inventory for which an Advance was outstanding during the prior
month shall be computed and accrued at the lesser of (a) the Applicable Fleet
Rental Rate (as defined below) which is in effect on the first business day of
the month in which the interest accrues, or (b) the Maximum Legal Rate (as
defined below). The "Applicable Fleet Rental Rate" with respect to each Advance
is as follows: (a) the Applicable Fleet Rental Rate with respect to an Advance
evidenced by a Supplemental Security Agreement will be the rate of interest
provided in such Supplemental Security Agreement, (b) the Applicable Fleet
Rental Rate with respect to an Advance made pursuant to a Special Finance Plan
will be the rate of interest provided in the Special Finance Plan, and (c) the
Applicable Fleet Rental Rate with respect to an Advance not subject to a Special
Finance Plan or evidenced by a Supplemental Security Agreement will be a simple
interest per annum rate equal to the greater of N/A % per annum the Base Rate
(as defined below).
2.5 Interest Free Periods. If the terms of a Special Finance Plan provide that
interest will not accrue with respect to specified Advances on specified items
or types of Inventory for an initial period of time (the "Interest Free
Period"), so long as Debtor is in compliance with the conditions or restrictions
contained in the Special Finance Plan and is not in default under the terms of
this Agreement, interest will not accrue or be payable on such Advances for the
period from the date of the Advance until the earlier of the date the Advance is
payable to Secured Party or the end of the Interest Free Period. If, however,
Debtor at any time defaults in any obligation to Associates with
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respect to an item of Inventory to which the Advance relates, Debtor will
forfeit Debtor's rights with respect to the Interest Free Period, and interest
will accrue on the related Advance as provided in this Agreement from the date
of such Advance.
2.6 Administrative Charges. Debtor further agrees to pay Secured Party, promptly
as billed, any charge ("Flat Charge") related to each item of Inventory or
Advance which is specified in the Supplemental Security Agreement or under a
Special Finance Plan applicable to such item of Inventory or Advance.
2.7 Calculations of Interest Rate. Wherever used in this Agreement, in any
Supplemental Security Agreement referring to this Agreement or in any Special
Finance Plan Supplemental Agreement, the term "Base Rate" shall mean the Prime
Rate as published from time to time in the Money Rates section of the Wall
Street Journal as the base rate on corporate loans. If more than one Prime Rate
or a range of rates is published, the Prime Rate will be the highest of the
published rates. In the event the Prime Rate as published in the Wall Street
Journal ceases to exist or the Wall Street Journal ceases publishing a Prime
Rate, Associates will substitute a comparable index which is outside the control
of Associates. In the event of an error by the Wall Street Journal, the "Prime
Rate" will be based upon the Prime Rate as corrected. Interest will be computed
at the option of Secured Party on the basis of a 360-day year for the actual
number of days elapsed.
2.8 Maximum Legal Rate. In no event shall the interest rate or other charges
provided in this Agreement or in any Supplemental Security Agreement or Special
Finance Plan exceed the highest rate or charges that Debtor can legally obligate
itself to pay or Secured Party can legally collect (the "Maximum Legal Rate").
If at any time the implementation if any provision of this Agreement would
function to raise the interest rate or other charges of Secured Party above the
Maximum Legal Rate, if any, in effect from time to time in the jurisdiction
whose laws govern this Agreement, including ally applicable Federal laws, for
loans to borrowers of the type, in the amount, for the purposes, and otherwise
of the kind contemplated in this Agreement, then the interest rate or other
charges will be limited to the Maximum Legal Rate and any excess interest or
charges inadvertently collected will be deemed a partial prepayment of the
principal portion of the Advances and applied or reapplied by Secured Party
accordingly.
2.9 Statement of Account. Secured Party will furnish to Debtor from time to time
on a monthly or other periodic basis a statement of Debtor's account with
Secured Party, prepared from Secured Party's records showing all applicable
credits and debits, including all Advances, other charges and payments with
respect to each item of Inventory against which an Advance has been made
pursuant to this Agreement (any error in the identification of one or more items
of Inventory on such statement will not prejudice Secured Party's security
interest in such item). Each such statement will be considered true and correct
and to have been accepted by Debtor and will be conclusively binding on Debtor
with respect to all matters contained therein, unless Debtor notifies Secured
Party in writing of any discrepancy or exception within 30 days of the date of
the mailing by Secured Party to Debtor of any such statement. All payments will
be applied, at Secured Party's option, to accrued changes and interest and then
to principal.
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2.10 Miscellaneous Payment Provisions. Debtor's obligation to pay Secured Party
the entire amount of each Advance will be absolute and unconditional
notwithstanding any contrary agreement, modification or substitution with any
Manufacturer. All amounts payable pursuant to this Agreement are payable at
Secured Party's address set forth below or at such other address as Secured
Party may specify from time to time in writing. After the maturity of any such
payment or upon the acceleration of all indebtedness under this Agreement,
Debtor agrees to pay interest thereon at the rate of 1 1/2% per month if not
prohibited by law, otherwise at the highest rate permitted by applicable law.
Any instrument or agreement which is executed by Debtor and specifies an amount
payable will evidence indebtedness and not payment.
3. SECURITY INTEREST
3.1 Security Interest. To secure payment of all Advances which Secured Party may
elect to make pursuant to this Agreement from time to time, Debtor hereby grants
to Secured Party a security interest in all of the Collateral as described and
defined in any Supplemental Security Agreement executed by Debtor and Secured
Party in connection with this Agreement from time to time (collectively herein
called "Collateral"). Debtor agrees that at any time and from time to time, upon
the request of Secured Party, Debtor will promptly (a) deliver to Secured Party
all Collateral other than Inventory, (b) mark all chattel paper, documents and
instruments and debtor's books of account, ledger cards and other records
relative to the Collateral with a notation satisfactory to Secured Party
disclosing that they are subject to Secured Party's security interest, (c)
execute and deliver to Secured Party such instruments, Uniform Commercial Code
financing statements, statements and agreements as Secured Party may request to
further evidence each Advance and the security interests granted under this
Agreement, provided, however, Debtor's failure to comply with such request shall
not affect or limit Secured Party's security interest or other rights in and to
the Collateral, and (d) permit Secured Party or its representatives to examine
the Collateral and Debtor's books and records at any and all reasonable times.
Debtor shall pay all expenses and costs of any nature whatsoever incurred by
Secured Party in connection with any Advances made pursuant hereto, including,
but not limited to, all filing fees and recording costs, and stamp taxes
actually incurred.
4. SALE AND LEASE OF INVENTORY
4.1 Location. The Collateral shall be kept at Debtor's place of business at the
address set forth below Debtor's signature or at one of the following places of
business of Debtor except when the Collateral is being leased or demonstrated
pursuant to the provisions of this Agreement: Dallas, TX; Houston, TX; Corpus
Christi, TX; Beaumont, TX; San Antonio, TX: Austin, TX; Tulsa, OK; Oklahoma
City, OK; Van Wert, Ohio
4.2 Lease of Fleet Rental Inventory. So long as Debtor is not in default under
this Agreement, Debtor may lease any item of Fleet Rental Inventory to retail
customers in the normal course of Debtor's business in accordance with the
following terms and conditions: (a) each lease agreement (herein called a
"Lease") relating to one or more items of Fleet Rental Inventory shall: (i) be
in a
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form approved by Secured Party and be in conformity with all applicable
governmental laws and regulations, (ii) provide that any assignee of the lessor
shall not be obligated to perform or fulfill any of lessor's obligations
thereunder, including, without limitation, any obligation to furnish
maintenance, repairs, or services or to provide insurance, (iii) contain a
waiver by the lessee thereunder of all rights to any set-off, abatement,
defense, counterclaim or cross-claim against an assignee of the lessor, (iv) be
the only agreement (other than this Agreement) then covering the items of
Inventory being leased thereunder, (v) be the entire agreement between Debtor
and the lessee thereunder relating to the items of Inventory being leased
thereunder, (vi) not contain any purchase or renewal options or grant any rights
to the lessee thereunder or any other third parties in or to any Fleet Rental
Inventory, except as approved in writing by Secured Party, and (vii) otherwise
conform to such requirements as Secured Party may specify from time to time; (b)
Debtor will comply with all of its warranties and other obligations under the
Lease; and (c) Debtor will report in writing to Secured Party each month (or at
such other times as Secured Party may request) the location of the Inventory,
the name and address of each lessee, the Revenues billed during such period and
such other information as Secured Party may request. Neither the leasing of any
Inventory nor any Lease shall relieve Debtor of any of its obligations to
Secured Party under this Agreement, and the assignment of and security interest
granted in the Documents shall not be construed as authorizing Debtor to do
anything with the Inventory other than to lease the same in accordance with the
provisions hereof. Debtor agrees that Secured Party does not, by this Agreement
or otherwise, assume any of the obligations of Debtor under the Lease or other
Documents. Debtor hereby grants to Secured Party the right (in debtor's name or
otherwise, and without affecting Debtor's obligations to Secured Party) to
demand, receive, compromise extend the time of payment of, or give a discharge
for, any and all Revenues, to endorse any checks or other instruments or orders
in connection with the Revenues and to file any claims or take such actions or
institute such proceedings as Secured Party may deem necessary or desirable to
protect Secured Party's interests. Debtor shall have no authority to, and will
not, without Secured Party's prior written consent, accept collections,
repossess, substitute or consent to the return of the Inventory or modify the
terms of the Documents, provided, however, until Secured Party notifies Debtor
to the contrary, Debtor may collect the rents and monies owing under the
Documents as the same become due but not otherwise. Debtor agrees, upon request
of Secured Party, to notify the lessees and all other obligors under the
Documents of the interest of Secured Party and to direct the lessees and all
other obligors under the Documents to pay all Revenues directly to Secured
Party. Debtor agrees to promptly render monthly billings to all lessees of the
Inventory.
4.3 Sale of Inventory. So long as Debtor is not in default under this Agreement,
Debtor may sell any item of Inventory in the regular course of Debtor's business
for a price not less than the amount of the Advance applicable thereto except as
otherwise agreed to in writing by Secured Party. All sales of Inventory shall be
for cash or upon such terms and conditions as Secured Party may approve in
writing. Upon the sale of any item of Inventory (with or without the consent of
Secured Party) the amount of the Advance applicable thereto shall become
immediately due and payable and Debtor shall immediately pay such amount in cash
to Secured Party without notice or demand. All Collateral resulting from such
sale shall be held by Debtor in trust for Secured Party, separated from all
other funds and assets of Debtor.
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5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties. Debtor warrants and agrees that: the
execution of and performance by Debtor under the terms of this Agreement has
been approved for Debtor by all necessary action and by Debtor's partners or
board of directors, as applicable; the Inventory is currently and will continue
be maintained in good operating condition, repair and appearance and is
currently and will continue be used and operated with care only by qualified
personnel in the regular course of Debtor's business and in conformity with all
applicable governmental laws and regulations, manufacturer's specifications and
the restrictions contained in any insurance policy insuring the Inventory; the
Inventory is not currently and will not be used in conjunction with the storage,
transportation or disposal of substances considered to be toxic or hazardous or
in conjunction with any activity or for any use that would subject the Inventory
to seizure or confiscation by any governmental body; and the Inventory is
currently located at and will be kept by Debtor at the location set forth in
this Agreement and will not be removed from said location without the prior
written consent of Secured Party. Secured Party shall have the right to inspect
the Inventory at all reasonable times and from time to time.
Debtor further warrants and agrees that: the security interest in the Collateral
granted to or retained by Secured Party is and will continue to be superior to
any title to or interest in the Inventory now or hereafter held or claimed by
any other party; the Collateral is free from and will be kept free from all
liens, claims, security interests and encumbrances (whether superior or inferior
to the interests of Secured Party) other than that created by this Agreement;
notwithstanding Secured Party's interest in proceeds, Debtor will not and will
not allow any other party to consign, sell, rent, lend, encumber, pledge,
transfer, secrete or otherwise dispose of any of the Collateral other than as
authorized in this Agreement without Secured Party's prior written consent;
Debtor will do everything Secured Party deems necessary or expedient to perfect
or preserve the interests granted to Secured Party under this Agreement and the
first priority of such interests; any Manufacturer's Statement or Certificate of
Origin or Certificate of Title relating to the Inventory shall be immediately
delivered to Secured Party and, if a Certificate of Title or registration is
required to be issued for any item of Inventory, Debtor will cooperate with
Secured Party in obtaining the Certificate of Title or registration disclosing
the interests of Debtor and Secured Party in the Inventory; Debtor will defend
any action, proceeding or claim affecting the Collateral or the interests of
Secured Party in the Collateral; Debtor shall promptly pay all amounts payable
in conjunction with the storage, maintenance or repair of the Inventory and all
taxes, assessments, license fees and other public or private charges levied or
assessed in conjunction with the ownership, operation or use of the Inventory or
levied or assessed against the Collateral, this Agreement or any accompanying
note except for those which are being contested by Debtor in good faith by
appropriate proceedings and which do not constitute a lien or encumbrance upon
the Collateral; and Debtor will from time to time furnish Secured Party with
such financial statements and other information as Secured Party may reasonably
request.
5.2 Insurance and Risk of Loss. Debtor will at all times bear all risk of loss
of, damage to or destruction of the Inventory. Debtor agrees to immediately
procure and maintain insurance on the Inventory for the full insurable value
thereof and for the life of this Agreement, in the form of "All
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Risk" or similar insurance (insuring the Inventory for fire, extended coverage,
vandalism, theft and collision and containing only those exclusions from
coverage which are acceptable to Secured Party) plus such other insurance as
Secured Party may specify from time to time, all in form and amount and with
insurers satisfactory to Secured Party. Debtor agrees to deliver promptly to
Secured Party certificates or, if requested, policies of insurance satisfactory
to Secured Party, each with a standard long-form loss-payable endorsement naming
Secured Party or assigns as loss-payee and providing that Secured Party's rights
under such policy will not be invalidated by any act, omission or neglect of
anyone other than Secured Party, and containing the insurers agreement to give
30 days prior written notice to Secured Party before any cancellation of or
material change in the policy(s) will be effective as to Secured Party, whether
such cancellation or change is at the direction of Debtor or insurer. Secured
Party's acceptance of policies in lesser amounts or risks will not be a waiver
of Debtor's obligation to procure insurance complying with the provisions hereof
promptly after notice from Secured Party. Debtor assigns to Secured Party all
proceeds of any physical damage or credit insurance which is maintained by
Debtor in accordance herewith, including returned and unearned premiums, up to
the amount owing hereunder by Debtor. Debtor directs all insurers to pay such
proceeds solely to the order of Secured Party for application to Debtor's
indebtedness to Secured Party. Secured Party may, at its option, apply any such
proceeds received by Secured Party to the final maturing installments due
hereunder in the inverse order of their maturity.
5.3 Performance by Secured Party, If Debtor fails to perform any of Debtor's
obligations pursuant to Paragraphs 1 or 2 above, Secured Party may perform the
same for the account of Debtor. Any such action by Secured Party will be in
Secured Party's sole discretion and Secured Party will not be obligated in any
way to do so. Secured Party's performance on behalf of Debtor will not obligate
Secured Party to perform the same or any similar act in the future and will not
cure or waive Debtor's failure of performance as an event of default hereunder.
All sums advanced or costs and expenses incurred by Secured Party pursuant to
this Paragraph, including the reasonable fees of any attorney retained by
Secured Party, will be for the account of Debtor, will constitute indebtedness
secured by Secured Party's security interest in the Collateral, will bear
interest at the rate as specified on the reverse side of this Agreement in the
event of acceleration and, unless Secured Party, in Secured Party's sole
discretion agrees otherwise in writing, shall be immediately due and payable.
6. DEFAULT
6.1 Events of Default. Time is of the essence. An event of default will occur
if: (a) Debtor fails to pay when due any amount owed by it to Secured Party
under this Agreement or under the terms of any promissory note delivered in
conjunction with this Agreement or if Debtor fails to pay when due any amount
owed by it to Secured Party or to any affiliate of Secured Party under any other
document, agreement or instrument; (b) Debtor fails to perform in compliance
with any of its agreements hereunder or any warranty made by Debtor in this
Agreement is or becomes incorrect or if Debtor fails to perform or observe any
term or provision to be performed or observed by it under any other document,
instrument or agreement furnished by Debtor to Secured Party or any affiliate of
Secured Party or otherwise acquired by Secured Party or any affiliate of Secured
Party; (c) any
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information, representation, or warranty furnished by Debtor to Secured Party or
to any affiliate of Secured Party is inaccurate or incorrect in any material
respect when furnished; (d) Debtor becomes insolvent or ceases to do or is
prohibited by any court order or govern mental action from conducting the
business in which Debtor is principally engaged on the date of this Agreement as
a going concern; (e) any surety or bonding company assumes any of Debtor's
responsibilities under any contract or job; (f) if any of the Inventory is lost,
stolen, destroyed, confiscated by any governmental agency, abandoned, or
relocated, used or maintained in violation of the terms hereof or if Debtor
attempts to consign, sell, rent, lend or encumber any of the Inventory or allows
another to do so; (g) Debtor files a petition in bankruptcy, or for an
arrangement, reorganization, or similar relief, or makes an assignment for the
benefit of creditors, or applies for the appointment of a receiver or trustee
for a substantial part of its assets or for any of the Inventory, or attempt to
take advantage of any process or proceeding for the relief of debtors, or if any
such action is taken against Debtor; (h) any other party attempts to attach,
repossess or execute upon any of the Collateral; (i) Debtor ceases to exist as a
legal entity or Debtor or any party in control of Debtor takes any action
looking to Debtor's dissolution as a legal entity; (1) there shall be a material
change in the management, ownership or control of Debtor; or (k) Secured Party
in good faith believes that the prospect of payment or performance hereunder is
impaired. Secured Party's inaction with respect to an event of default shall not
be a waiver of such default and Secured Party's waiver of any default shall not
be a waiver of any other default.
6.2 Remedies Upon Default. Upon the occurrence of an event of default, and at
any time thereafter as long as the default continues, Secured Party may, at its
option, with or without notice to Debtor (i) declare this Agreement to be in
default, (ii) declare the indebtedness hereunder to be immediately due and
payable, (iii) declare all other debts then owing by Debtor to Secured Party to
be immediately due and payable, (iv) cancel any insurance and credit any refund
to the indebtedness, and (v) exercise all of the rights and remedies of a
Secured Party under the Uniform Commercial Code and any other applicable laws,
including, without limitation, the right to require Debtor to assemble the
Inventory and deliver it to Secured Party at a place to be designated by Secured
Party which is reasonably convenient to both parties and to lawfully enter any
premises where the Collateral may be without judicial process and take
possession thereof. Acceleration of any or all indebtedness, if so elected by
Secured Party, shall be subject to all applicable laws including those
pertaining to refunds and rebates of unearned charges. Any property other than
the Collateral which is in or upon the Collateral at the time of repossession
may be taken and held without liability until its return is requested by Debtor.
Any sale or other disposition of any of the Collateral may be made at public or
private sale or through public auction for a wholesale or retail price at the
option of Secured Party. Secured Party may buy at any sale and become the owner
of the Collateral. Unless otherwise provided by law, any requirement of
reasonable notice which Secured Party may be obligated to give regarding the
sale or other disposition of Collateral will be met if such notice is mailed to
Debtor at its address shown herein at least ten days before the time of sale or
other disposition. Debtor agrees that Secured Party may bring any legal
proceedings it deems necessary to enforce the payment and performance of
Debtor's obligations hereunder in any court in the State shown in Secured
Party's address set forth herein, and service of process may be made upon Debtor
by mailing a copy of the summons to Debtor at its address shown herein. The
filing by Secured Party of any action or
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proceeding with respect to the Collateral or any of Debtor's obligations
hereunder shall not constitute an election by Secured Party of Secured Party's
remedies or a waiver of Secured Party's rights to take possession of the
Collateral as provided above. Expenses of retaking, holding, preparing for sale,
selling and the like shall include (a) the reasonable fees of any attorneys
retained by Secured Party, (b) any amounts advanced or expenses incurred by
Secured Party pursuant to Paragraph 3 hereof and (c) all other legal and other
expenses incurred by Secured Party. Debtor agrees that it is liable for and will
promptly pay any deficiency remaining after any disposition of Collateral after
default and all costs and expenses, including the reasonable fees of any
attorney, incurred by Secured Party in the collection of any such deficiency.
7. ADDITIONAL PROVISIONS
7.1 Power of Attorney. Debtor hereby appoints Secured Party or any duly
authorized officer or employee of Secured Party as Debtor's attorney-in-fact to,
in Debtor's or Secured Party's name: (a) prepare, execute and submit any notice
or proof of loss in order to realize the benefits of any insurance policy
insuring the Collateral; (b) prepare, execute and file any instrument which. in
Secured Party's opinion, is required by law to perfect and give or modify public
notice of Secured Party's interest in the Collateral; and (c) endorse Debtor's
name on any remittance representing proceeds of any insurance insuring the
Collateral or the proceeds of the sale, or other disposition of any of the
Collateral (whether or not such disposition is a default hereunder). This power
is coupled with an interest and is irrevocable so long as any indebtedness
secured hereunder remains unpaid.
7.2 Assignment. Debtor shall not assign this Agreement without the prior written
consent of Secured Party. Secured Party may assign this Agreement with or
without notice to or the consent of Debtor. Upon assignment, the term "Secured
Party" shall mean and refer to any assignee who is the holder of this Agreement.
After assignment of this Agreement by Secured Party, the assignor will not be
the assignee's agent for any purpose and Debtor's obligations to the assignee
will be absolute and unconditional and, to the extent permitted by applicable
law, will not be subject to any abatement, reduction, recoupment, defense,
set-off or counterclaim available to Debtor for breach of warranty or for any
other reason whatsoever. Upon full payment of all obligations secured by this
Agreement, the assignee may deliver all original papers to the assignor for
Debtor.
7.3 Miscellaneous. (A) All of Secured Party's rights hereunder are cumulative
and not alternative. (B) The inclusion of a trade name or division name in the
identification of Debtor hereunder does not limit Secured Party's rights, after
the occurrence of an event of default, to proceed against all of Debtor's
assets, including those held or used by Debtor individually or under another
trade or division name. (C) If permitted by law, Debtor agrees that a carbon,
photographic or other reproduction of this Agreement or of a financing statement
may be filed as a financing statement. (D) Secured Party may correct patent
errors herein and fill in blanks. (E) All of the terms and provisions hereof
will apply to and be binding upon Debtor, its heirs, personal representatives,
successors and assigns and shall inure to the benefit of Secured Party, its
successors and assigns. (F) Debtor and Secured Party hereby waive any right to
trial by jury in any action or proceeding relating to this Agreement or the
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transaction contemplated hereby. (G) Debtor hereby expressly waives notice of
nonpayment, presentment, protest, dishonor, default, intent to accelerate the
maturity hereof and of acceleration of the maturity hereof. (H) Deleted (I) To
the extent allowed by law, Debtor hereby waives any exemptions or appraisals.
(J) No waiver or change in this Agreement or in any related note will be binding
upon Secured Party, or Secured Party's assignee, unless such waiver or change is
in writing and signed by one of its officers and any such waiver or change shall
then be effective only upon the terms and to the extent provided in such
writing. (K) The acceptance by Secured Party of any remittance from a party
other than Debtor will in no way constitute Secured Party's consent to the
transfer of any of the Collateral to such party. (L) Any captions or headings
included in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning of any provision contained in this
Agreement. (M) Any provision contained herein which is contrary to, prohibited
by or invalid under applicable laws or regulations will be deemed inapplicable
and omitted herefrom, but shall not invalidate the remaining provisions hereof
(N) The only copy of this Agreement which constitutes "chattel paper" is the
original executed copy designated as "Original For Associates".
8. GOVERNING LAW
8.1 Governing Law. This Agreement shall in all respects be governed by, and
construed in accordance with, the laws of the State of Texas including all
matters of construction, validity and performance. No oral agreement, guaranty,
promise. representation or warranty shall be binding upon Secured Party.
Dated: January 5, 1999
Crescent Machinery Company
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Schedule A
(Inventory Description)
This Schedule A (Description of Inventory) is attached to and made a part of
that certain Master Security Agreement (Wholesale and Fleet Rental Finance) (the
"Agreement") dated January 5,1999 between Associates Commercial Corporation
("Secured Party") and Crescent Machinery Company ("Debtor").
I. Description of Inventory. The following items or types of inventory are
subject to the terms of the Agreement and to the security interest granted by
Debtor to Secured Party pursuant to the Agreement:
All new and used equipment, machines, products, attachments and/or parts
financed by Secured Party and upon which any financing or related charges remain
unpaid.
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MASTER SECURITY AGREEMENT
(Wholesale and Fleet Rental Finance)
This Master Security Agreement (this "Agreement") is entered into by and between
Associates Commercial Corporation ("Secured Party") and the party signing below
as debtor ("Debtor"). Debtor and Secured Party agree (hat the security interest
granted herein is limited to Inventory upon which indebtedness or obligation is
owed by Debtor to Secured Party.
1. INVENTORY
1.1 Inventory. Debtor is now or may hereafter be engaged in the business of
selling or renting to Debtor's retail customers the types of property described
in any Supplemental Security Agreement now or hereafter executed by Secured
Party and Debtor relating to this Agreement. The property described on such
Supplemental Security Agreements, together with all attachments exchanges,
replacement parts, repairs and additions to any such property (whether a part of
such property at the time of Debtor's purchase or incorporated in or attached to
such property by Debtor at a later time) is individually referred to in this
Agreement as an "item of Inventory", by classification as a "type of Inventory"
and is collectively referred to in this Agreement as "Inventory."
1.2 Wholesale Inventory. "Wholesale Inventory" is an item of Inventory or type
of Inventory subject to the terms of this Agreement which is (a) acquired or
held by Debtor solely for the purpose of sale and not for the purpose of rental
and/or lease, or (b) acquired by Debtor under the terms of a Special Finance
Plan (as defined below) designating the item or type of Inventory as Wholesale
Inventory. Any item or type of Inventory subject to the terms of this Agreement
and which is not Fleet Rental Inventory (as defined below) will be considered
Wholesale Inventory.
1.3 Fleet Rental Inventory. "Fleet Rental Inventory" is an item of Inventory or
type of Inventory subject to the terms of this Agreement which is (a) designated
by Debtor with the written consent of Secured Party as being acquired or held by
Debtor for the purposes of rental or lease as well as for the purposes of sale,
or (b) acquired by Debtor under the terms of a Special Finance Plan (as defined
below) designating the item or type of Inventory as Fleet Rental Inventory. An
item of Inventory classified as wholesale Inventory may be re-classified as
Fleet Rental Inventory only upon the written consent and agreement of Secured
Party. An item of Wholesale Inventory re-classified as Fleet Rental Inventory
will be considered as reclassified effective as of the first day of the month in
which the written consent and agreement to re-classification is executed or as
otherwise provided in such agreement.
2. ADVANCES AND INTEREST
2.1 Advances. Debtor has requested that Secured Party from time to time make
loans or otherwise extend credit (herein individually referred to as "Advances")
to or on behalf of Debtor, the proceeds of which will be used by Debtor to
acquire one or more items of Inventory or for other legitimate purposes of
Debtor in carrying on the business for which Debtor is acquiring or maintaining
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the Inventory. Debtor agrees and acknowledges that any Advance to or on behalf
of Debtor will be in the sole discretion of Secured Party and that no Advance
made by Secured Party will obligate Secured Party to make any additional
Advance.
2.2 Special Finance Plans. From time to time, a manufacturer or distributor
(herein called "Manufacturer") of one or more items of Inventory may arrange
with Secured Party for Secured Party to offer special finance terms with respect
to Advances made by Secured Party on behalf of Debtor which are used by Debtor
to acquire specified items or types of Inventory from a Manufacturer (herein
called a "Special Finance Plan"). Neither Secured Party nor any Manufacturer
will be obligated in any way to arrange or continue a Special Finance Plan or
offer or continue offering the terms of any Special Finance Plan to Debtor. In
the event a Manufacturer arranges for a Special Finance Plan, Secured Party
offers the Special Finance Plan to Debtor and Debtor accepts the terms of the
Special Finance Plan, Debtor will evidence Debtor's acceptance by executing an
appropriate Special Finance Plan Supplemental Agreement which outlines the terms
of the Special Finance Plan. Secured Party may, in its sole discretion, modify
the terms of a Special Finance Plan with respect to Advances made under the
Special Finance Plan after the date of notice to Debtor and Debtor's acceptance
of Advances after the date of notice will be Debtor's consent to the
modification to the Special Finance Plan. Debtor hereby directs Secured Party to
disburse the proceeds of any Advance made under a Special Finance Plan directly
to the Manufacturer based upon sales invoices presented to Secured Party from
time to time by the Manufacturer which evidence the sale by the Manufacturer to
Debtor of one or more items of Inventory. The Advance to the Manufacturer will
be considered made on the date of the Manufacturer's invoice upon which the
Advance is made regardless of any special funding instructions agreed upon
between Secured Party and Manufacturer.
2.3 Wholesale Inventory/Payment and Interest. Debtor agrees to pay to Secured
Party the unpaid balance of each Advance with respect to an item of Wholesale
Inventory as follows: (a) an Advance which is evidenced by a Supplemental
Security Agreement will be payable as provided in the Supplemental Security
Agreement, (b) an Advance made pursuant to a Special Finance Plan will be
payable as provided in the Special Finance Plan Supplemental Agreement, and (c)
an Advance not subject to a Special Finance Plan or evidenced by a Supplemental
Security Agreement will be payable upon demand.
Debtor agrees to pay Secured Party promptly as billed at the beginning of each
month interest and other charges on the unpaid balance of each Advance from time
to time outstanding with respect to an item of Wholesale Inventory, computed in
accordance with the terms of this section. Interest charges for each item of
Wholesale Inventory for which an Advance was outstanding during the prior month
shall be computed and accrued at the lesser of (a) the Applicable Wholesale Rate
(as defined below) which is in effect on the first business day of the month in
which the interest accrues, or (b) the Maximum Legal Rate (as defined below).
The "Applicable Wholesale Rate" with respect to each Advance is as follows: (a)
the Applicable Wholesale Rate with respect to an Advance evidenced by a
Supplemental Security Agreement will be the rate of interest provided in such
Supplemental Security Agreement, (b) the Applicable Wholesale Rate with respect
to an Advance made pursuant to a Special Finance Plan will be the rate of
interest provided in the Special Finance Plan, and (c) the
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Applicable Wholesale Rate with respect to an Advance not subject to a Special
Finance Plan or evidenced by a Supplemental Security Agreement will be a simple
interest per annum rate equal to the greater of N/A % per annum or the Base Rate
(as defined below).
2.4 Fleet Rental Inventory Payment and Interest. Debtor agrees to pay Secured
Party the unpaid balance of each Advance outstanding with respect to an item of
Fleet Rental Inventory as follows: (a) an Advance which is evidenced by a
Supplemental Security Agreement will be payable as provided in the Supplemental
Security Agreement, (b) an Advance made pursuant to a Special Finance Plan will
be payable as provided in the Special Finance Plan, and (c) an Advance not
subject to a Special Finance Plan or evidenced by a Supplemental Security
Agreement will be payable in monthly installments such that the unpaid balance
will be repaid in full no later than 24 months after the earlier of(a) the date
of Secured Party's Advance with respect to the item of Inventory (whether the
Advance was made based upon a classification of the item of Inventory as
Wholesale Inventory or Fleet Rental Inventory) and (b), if the Advance was made
by Secured Party to enable the Debtor to acquire the item of Inventory from a
manufacturer (whether or not pursuant to a Special Finance Plan), the date of
the manufacturer's invoice to Debtor with respect to the item of Inventory. The
amount of each monthly installment payment will be in amount equal to the
greater of(a) the amount necessary to repay the Advance in full in substantially
equal monthly payments as provided above, and (b) 80% of the Revenues invoiced
by Debtor upon the rental of the item of Inventory during the prior calendar
month.
Debtor agrees to pay Secured Party promptly as billed at the beginning of each
month interest and other charges on the unpaid balance of each Advance from time
to time outstanding with respect to an item of Fleet Rental Inventory, computed
in accordance with the terms of this section. Interest charges for each item of
Fleet Rental Inventory for which an Advance was outstanding during the prior
month shall be computed and accrued at the lesser of (a) the Applicable Fleet
Rental Rate (as defined below) which is in effect on the first business day of
the month in which the interest accrues, or (b) the Maximum Legal Rate (as
defined below). The "Applicable Fleet Rental Rate" with respect to each Advance
is as follows: (a) the Applicable Fleet Rental Rate with respect to an Advance
evidenced by a Supplemental Security Agreement will be the rate of interest
provided in such Supplemental Security Agreement, (b) the Applicable Fleet
Rental Rate with respect to an Advance made pursuant to a Special Finance Plan
will be the rate of interest provided in the Special Finance Plan, and (c) the
Applicable Fleet Rental Rate with respect to an Advance not subject to a Special
Finance Plan or evidenced by a Supplemental Security Agreement will be a simple
interest per annum rate equal to the greater of N/A % per annum the Base Rate
(as defined below).
2.5 Interest Free Periods. If the terms of a Special Finance Plan provide that
interest will not accrue with respect to specified Advances on specified items
or types of Inventory for an initial period of time (the "Interest Free
Period"), so long as Debtor is in compliance with the conditions or restrictions
contained in the Special Finance Plan and is not in default under the terms of
this Agreement, interest will not accrue or be payable on such Advances for the
period from the date of the Advance until the earlier of the date the Advance is
payable to Secured Party or the end of the Interest Free Period. If, however,
Debtor at any time defaults in any obligation to Associates with
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respect to an item of Inventory to which the Advance relates, Debtor will
forfeit Debtor's rights with respect to the Interest Free Period, and interest
will accrue on the related Advance as provided in this Agreement from the date
of such Advance.
2.6 Administrative Charges. Debtor further agrees to pay Secured Party, promptly
as billed, any charge ("Flat Charge") related to each item of Inventory or
Advance which is specified in the Supplemental Security Agreement or under a
Special Finance Plan applicable to such item of Inventory or Advance.
2.7 Calculations of Interest Rate. Wherever used in this Agreement, in any
Supplemental Security Agreement referring to this Agreement or in any Special
Finance Plan Supplemental Agreement, the term "Base Rate" shall mean the Prime
Rate as published from time to time in the Money Rates section of the Wall
Street Journal as the base rate on corporate loans. If more than one Prime Rate
or a range of rates is published, the Prime Rate will be the highest of the
published rates. In the event the Prime Rate as published in the Wall Street
Journal ceases to exist or the Wall Street Journal ceases publishing a Prime
Rate, Associates will substitute a comparable index which is outside the control
of Associates. In the event of an error by the Wall Street Journal, the "Prime
Rate" will be based upon the Prime Rate as corrected. Interest will be computed
at the option of Secured Party on the basis of a 360-day year for the actual
number of days elapsed.
2.8 Maximum Legal Rate. In no event shall the interest rate or other charges
provided in this Agreement or in any Supplemental Security Agreement or Special
Finance Plan exceed the highest rate or charges that Debtor can legally obligate
itself to pay or Secured Party can legally collect (the "Maximum Legal Rate").
If at any time the implementation if any provision of this Agreement would
function to raise the interest rate or other charges of Secured Party above the
Maximum Legal Rate, if any, in effect from time to time in the jurisdiction
whose laws govern this Agreement, including ally applicable Federal laws, for
loans to borrowers of the type, in the amount, for the purposes, and otherwise
of the kind contemplated in this Agreement, then the interest rate or other
charges will be limited to the Maximum Legal Rate and any excess interest or
charges inadvertently collected will be deemed a partial prepayment of the
principal portion of the Advances and applied or reapplied by Secured Party
accordingly.
2.9 Statement of Account. Secured Party will furnish to Debtor from time to time
on a monthly or other periodic basis a statement of Debtor's account with
Secured Party, prepared from Secured Party's records showing all applicable
credits and debits, including all Advances, other charges and payments with
respect to each item of Inventory against which an Advance has been made
pursuant to this Agreement (any error in the identification of one or more items
of Inventory on such statement will not prejudice Secured Party's security
interest in such item). Each such statement will be considered true and correct
and to have been accepted by Debtor and will be conclusively binding on Debtor
with respect to all matters contained therein, unless Debtor notifies Secured
Party in writing of any discrepancy or exception within 30 days of the date of
the mailing by Secured Party to Debtor of any such statement. All payments will
be applied, at Secured Party's option, to accrued changes and interest and then
to principal.
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2.10 Miscellaneous Payment Provisions. Debtor's obligation to pay Secured Party
the entire amount of each Advance will be absolute and unconditional
notwithstanding any contrary agreement, modification or substitution with any
Manufacturer. All amounts payable pursuant to this Agreement are payable at
Secured Party's address set forth below or at such other address as Secured
Party may specify from time to time in writing. After the maturity of any such
payment or upon the acceleration of all indebtedness under this Agreement,
Debtor agrees to pay interest thereon at the rate of 1 1/2% per month if not
prohibited by law, otherwise at the highest rate permitted by applicable law.
Any instrument or agreement which is executed by Debtor and specifies an amount
payable will evidence indebtedness and not payment.
3. SECURITY INTEREST
3.1 Security Interest. To secure payment of all Advances which Secured Party may
elect to make pursuant to this Agreement from time to time, Debtor hereby grants
to Secured Party a security interest in all of the Collateral as described and
defined in any Supplemental Security Agreement executed by Debtor and Secured
Party in connection with this Agreement from time to time (collectively herein
called "Collateral"). Debtor agrees that at any time and from time to time, upon
the request of Secured Party, Debtor will promptly (a) deliver to Secured Party
all Collateral other than Inventory, (b) mark all chattel paper, documents and
instruments and debtor's books of account, ledger cards and other records
relative to the Collateral with a notation satisfactory to Secured Party
disclosing that they are subject to Secured Party's security interest, (c)
execute and deliver to Secured Party such instruments, Uniform Commercial Code
financing statements, statements and agreements as Secured Party may request to
further evidence each Advance and the security interests granted under this
Agreement, provided, however, Debtor's failure to comply with such request shall
not affect or limit Secured Party's security interest or other rights in and to
the Collateral, and (d) permit Secured Party or its representatives to examine
the Collateral and Debtor's books and records at any and all reasonable times.
Debtor shall pay all expenses and costs of any nature whatsoever incurred by
Secured Party in connection with any Advances made pursuant hereto, including,
but not limited to, all filing fees and recording costs, and stamp taxes
actually incurred.
4. SALE AND LEASE OF INVENTORY
4.1 Location. The Collateral shall be kept at Debtor's place of business at the
address set forth below Debtor's signature or at one of the following places of
business of Debtor except when the Collateral is being leased or demonstrated
pursuant to the provisions of this Agreement: Union City, CA; Fresno, CA;
Pleasant Grove, CA; Sparks, Nevada; Honolulu, Hawaii.
4.2 Lease of Fleet Rental Inventory. So long as Debtor is not in default under
this Agreement, Debtor may lease any item of Fleet Rental Inventory to retail
customers in the normal course of Debtor's business in accordance with the
following terms and conditions: (a) each lease agreement (herein called a
"Lease") relating to one or more items of Fleet Rental Inventory shall: (i) be
in a form approved by Secured Party and be in conformity with all applicable
governmental laws and
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regulations, (ii) provide that any assignee of the lessor shall not be obligated
to perform or fulfill any of lessor's obligations thereunder, including, without
limitation, any obligation to furnish maintenance, repairs, or services or to
provide insurance, (iii) contain a waiver by the lessee thereunder of all rights
to any set-off, abatement, defense, counterclaim or cross-claim against an
assignee of the lessor, (iv) be the only agreement (other than this Agreement)
then covering the items of Inventory being leased thereunder, (v) be the entire
agreement between Debtor and the lessee thereunder relating to the items of
Inventory being leased thereunder, (vi) not contain any purchase or renewal
options or grant any rights to the lessee thereunder or any other third parties
in or to any Fleet Rental Inventory, except as approved in writing by Secured
Party, and (vii) otherwise conform to such requirements as Secured Party may
specify from time to time; (b) Debtor will comply with all of its warranties and
other obligations under the Lease; and (c) Debtor will report in writing to
Secured Party each month (or at such other times as Secured Party may request)
the location of the Inventory, the name and address of each lessee, the Revenues
billed during such period and such other information as Secured Party may
request. Neither the leasing of any Inventory nor any Lease shall relieve Debtor
of any of its obligations to Secured Party under this Agreement, and the
assignment of and security interest granted in the Documents shall not be
construed as authorizing Debtor to do anything with the Inventory other than to
lease the same in accordance with the provisions hereof. Debtor agrees that
Secured Party does not, by this Agreement or otherwise, assume any of the
obligations of Debtor under the Lease or other Documents. Debtor hereby grants
to Secured Party the right (in debtor's name or otherwise, and without affecting
Debtor's obligations to Secured Party) to demand, receive, compromise extend the
time of payment of, or give a discharge for, any and all Revenues, to endorse
any checks or other instruments or orders in connection with the Revenues and to
file any claims or take such actions or institute such proceedings as Secured
Party may deem necessary or desirable to protect Secured Party's interests.
Debtor shall have no authority to, and will not, without Secured Party's prior
written consent, accept collections, repossess, substitute or consent to the
return of the Inventory or modify the terms of the Documents, provided, however,
until Secured Party notifies Debtor to the contrary, Debtor may collect the
rents and monies owing under the Documents as the same become due but not
otherwise. Debtor agrees, upon request of Secured Party, to notify the lessees
and all other obligors under the Documents of the interest of Secured Party and
to direct the lessees and all other obligors under the Documents to pay all
Revenues directly to Secured Party. Debtor agrees to promptly render monthly
billings to all lessees of the Inventory.
4.3 Sale of Inventory. So long as Debtor is not in default under this Agreement,
Debtor may sell any item of Inventory in the regular course of Debtor's business
for a price not less than the amount of the Advance applicable thereto except as
otherwise agreed to in writing by Secured Party. All sales of Inventory shall be
for cash or upon such terms and conditions as Secured Party may approve in
writing. Upon the sale of any item of Inventory (with or without the consent of
Secured Party) the amount of the Advance applicable thereto shall become
immediately due and payable and Debtor shall immediately pay such amount in cash
to Secured Party without notice or demand. All Collateral resulting from such
sale shall be held by Debtor in trust for Secured Party, separated from all
other funds and assets of Debtor.
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5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties. Debtor warrants and agrees that: the
execution of and performance by Debtor under the terms of this Agreement has
been approved for Debtor by all necessary action and by Debtor's partners or
board of directors, as applicable; the Inventory is currently and will continue
be maintained in good operating condition, repair and appearance and is
currently and will continue be used and operated with care only by qualified
personnel in the regular course of Debtor's business and in conformity with all
applicable governmental laws and regulations, manufacturer's specifications and
the restrictions contained in any insurance policy insuring the Inventory; the
Inventory is not currently and will not be used in conjunction with the storage,
transportation or disposal of substances considered to be toxic or hazardous or
in conjunction with any activity or for any use that would subject the Inventory
to seizure or confiscation by any governmental body; and the Inventory is
currently located at and will be kept by Debtor at the location set forth in
this Agreement and will not be removed from said location without the prior
written consent of Secured Party. Secured Party shall have the right to inspect
the Inventory at all reasonable times and from time to time.
Debtor further warrants and agrees that: the security interest in the Collateral
granted to or retained by Secured Party is and will continue to be superior to
any title to or interest in the Inventory now or hereafter held or claimed by
any other party; the Collateral is free from and will be kept free from all
liens, claims, security interests and encumbrances (whether superior or inferior
to the interests of Secured Party) other than that created by this Agreement;
notwithstanding Secured Party's interest in proceeds, Debtor will not and will
not allow any other party to consign, sell, rent, lend, encumber, pledge,
transfer, secrete or otherwise dispose of any of the Collateral other than as
authorized in this Agreement without Secured Party's prior written consent;
Debtor will do everything Secured Party deems necessary or expedient to perfect
or preserve the interests granted to Secured Party under this Agreement and the
first priority of such interests; any Manufacturer's Statement or Certificate of
Origin or Certificate of Title relating to the Inventory shall be immediately
delivered to Secured Party and, if a Certificate of Title or registration is
required to be issued for any item of Inventory, Debtor will cooperate with
Secured Party in obtaining the Certificate of Title or registration disclosing
the interests of Debtor and Secured Party in the Inventory; Debtor will defend
any action, proceeding or claim affecting the Collateral or the interests of
Secured Party in the Collateral; Debtor shall promptly pay all amounts payable
in conjunction with the storage, maintenance or repair of the Inventory and all
taxes, assessments, license fees and other public or private charges levied or
assessed in conjunction with the ownership, operation or use of the Inventory or
levied or assessed against the Collateral, this Agreement or any accompanying
note except for those which are being contested by Debtor in good faith by
appropriate proceedings and which do not constitute a lien or encumbrance upon
the Collateral; and Debtor will from time to time furnish Secured Party with
such financial statements and other information as Secured Party may reasonably
request.
5.2 Insurance and Risk of Loss. Debtor will at all times bear all risk of loss
of, damage to or destruction of the Inventory. Debtor agrees to immediately
procure and maintain insurance on the Inventory for the full insurable value
thereof and for the life of this Agreement, in the form of "All Risk" or similar
insurance (insuring the Inventory for fire, extended coverage, vandalism, theft
and collision and containing only those exclusions from coverage which are
acceptable to Secured Party)
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plus such other insurance as Secured Party may specify from time to time, all in
form and amount and with insurers satisfactory to Secured Party. Debtor agrees
to deliver promptly to Secured Party certificates or, if requested, policies of
insurance satisfactory to Secured Party, each with a standard long-form
loss-payable endorsement naming Secured Party or assigns as loss-payee and
providing that Secured Party's rights under such policy will not be invalidated
by any act, omission or neglect of anyone other than Secured Party, and
containing the insurers agreement to give 30 days prior written notice to
Secured Party before any cancellation of or material change in the policy(s)
will be effective as to Secured Party, whether such cancellation or change is at
the direction of Debtor or insurer. Secured Party's acceptance of policies in
lesser amounts or risks will not be a waiver of Debtor's obligation to procure
insurance complying with the provisions hereof promptly after notice from
Secured Party. Debtor assigns to Secured Party all proceeds of any physical
damage or credit insurance which is maintained by Debtor in accordance herewith,
including returned and unearned premiums, up to the amount owing hereunder by
Debtor. Debtor directs all insurers to pay such proceeds solely to the order of
Secured Party for application to Debtor's indebtedness to Secured Party. Secured
Party may, at its option, apply any such proceeds received by Secured Party to
the final maturing installments due hereunder in the inverse order of their
maturity.
5.3 Performance by Secured Party, If Debtor fails to perform any of Debtor's
obligations pursuant to Paragraphs 1 or 2 above, Secured Party may perform the
same for the account of Debtor. Any such action by Secured Party will be in
Secured Party's sole discretion and Secured Party will not be obligated in any
way to do so. Secured Party's performance on behalf of Debtor will not obligate
Secured Party to perform the same or any similar act in the future and will not
cure or waive Debtor's failure of performance as an event of default hereunder.
All sums advanced or costs and expenses incurred by Secured Party pursuant to
this Paragraph, including the reasonable fees of any attorney retained by
Secured Party, will be for the account of Debtor, will constitute indebtedness
secured by Secured Party's security interest in the Collateral, will bear
interest at the rate as specified on the reverse side of this Agreement in the
event of acceleration and, unless Secured Party, in Secured Party's sole
discretion agrees otherwise in writing, shall be immediately due and payable.
6. DEFAULT
6.1 Events of Default. Time is of the essence. An event of default will occur
if: (a) Debtor fails to pay when due any amount owed by it to Secured Party
under this Agreement or under the terms of any promissory note delivered in
conjunction with this Agreement or if Debtor fails to pay when due any amount
owed by it to Secured Party or to any affiliate of Secured Party under any other
document, agreement or instrument; (b) Debtor fails to perform in compliance
with any of its agreements hereunder or any warranty made by Debtor in this
Agreement is or becomes incorrect or if Debtor fails to perform or observe any
term or provision to be performed or observed by it under any other document,
instrument or agreement furnished by Debtor to Secured Party or any affiliate of
Secured Party or otherwise acquired by Secured Party or any affiliate of Secured
Party; (c) any information, representation, or warranty furnished by Debtor to
Secured Party or to any affiliate of Secured Party is inaccurate or incorrect in
any material respect when furnished; (d) Debtor becomes
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insolvent or ceases to do or is prohibited by any court order or govern mental
action from conducting the business in which Debtor is principally engaged on
the date of this Agreement as a going concern; (e) any surety or bonding company
assumes any of Debtor's responsibilities under any contract or job; (f) if any
of the Inventory is lost, stolen, destroyed, confiscated by any governmental
agency, abandoned, or relocated, used or maintained in violation of the terms
hereof or if Debtor attempts to consign, sell, rent, lend or encumber any of the
Inventory or allows another to do so; (g) Debtor files a petition in bankruptcy,
or for an arrangement, reorganization, or similar relief, or makes an assignment
for the benefit of creditors, or applies for the appointment of a receiver or
trustee for a substantial part of its assets or for any of the Inventory, or
attempt to take advantage of any process or proceeding for the relief of
debtors, or if any such action is taken against Debtor; (h) any other party
attempts to attach, repossess or execute upon any of the Collateral; (i) Debtor
ceases to exist as a legal entity or Debtor or any party in control of Debtor
takes any action looking to Debtor's dissolution as a legal entity; (1) there
shall be a material change in the management, ownership or control of Debtor; or
(k) Secured Party in good faith believes that the prospect of payment or
performance hereunder is impaired. Secured Party's inaction with respect to an
event of default shall not be a waiver of such default and Secured Party's
waiver of any default shall not be a waiver of any other default.
6.2 Remedies Upon Default. Upon the occurrence of an event of default, and at
any time thereafter as long as the default continues, Secured Party may, at its
option, with or without notice to Debtor (i) declare this Agreement to be in
default, (ii) declare the indebtedness hereunder to be immediately due and
payable, (iii) declare all other debts then owing by Debtor to Secured Party to
be immediately due and payable, (iv) cancel any insurance and credit any refund
to the indebtedness, and (v) exercise all of the rights and remedies of a
Secured Party under the Uniform Commercial Code and any other applicable laws,
including, without limitation, the right to require Debtor to assemble the
Inventory and deliver it to Secured Party at a place to be designated by Secured
Party which is reasonably convenient to both parties and to lawfully enter any
premises where the Collateral may be without judicial process and take
possession thereof. Acceleration of any or all indebtedness, if so elected by
Secured Party, shall be subject to all applicable laws including those
pertaining to refunds and rebates of unearned charges. Any property other than
the Collateral which is in or upon the Collateral at the time of repossession
may be taken and held without liability until its return is requested by Debtor.
Any sale or other disposition of any of the Collateral may be made at public or
private sale or through public auction for a wholesale or retail price at the
option of Secured Party. Secured Party may buy at any sale and become the owner
of the Collateral. Unless otherwise provided by law, any requirement of
reasonable notice which Secured Party may be obligated to give regarding the
sale or other disposition of Collateral will be met if such notice is mailed to
Debtor at its address shown herein at least ten days before the time of sale or
other disposition. Debtor agrees that Secured Party may bring any legal
proceedings it deems necessary to enforce the payment and performance of
Debtor's obligations hereunder in any court in the State shown in Secured
Party's address set forth herein, and service of process may be made upon Debtor
by mailing a copy of the summons to Debtor at its address shown herein. The
filing by Secured Party of any action or proceeding with respect to the
Collateral or any of Debtor's obligations hereunder shall not constitute an
election by Secured Party of Secured Party's remedies or a waiver of Secured
Party's rights to take
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possession of the Collateral as provided above. Expenses of retaking, holding,
preparing for sale, selling and the like shall include (a) the reasonable fees
of any attorneys retained by Secured Party, (b) any amounts advanced or expenses
incurred by Secured Party pursuant to Paragraph 3 hereof and (c) all other legal
and other expenses incurred by Secured Party. Debtor agrees that it is liable
for and will promptly pay any deficiency remaining after any disposition of
Collateral after default and all costs and expenses, including the reasonable
fees of any attorney, incurred by Secured Party in the collection of any such
deficiency.
7. ADDITIONAL PROVISIONS
7.1 Power of Attorney. Debtor hereby appoints Secured Party or any duly
authorized officer or employee of Secured Party as Debtor's attorney-in-fact to,
in Debtor's or Secured Party's name: (a) prepare, execute and submit any notice
or proof of loss in order to realize the benefits of any insurance policy
insuring the Collateral; (b) prepare, execute and file any instrument which. in
Secured Party's opinion, is required by law to perfect and give or modify public
notice of Secured Party's interest in the Collateral; and (c) endorse Debtor's
name on any remittance representing proceeds of any insurance insuring the
Collateral or the proceeds of the sale, or other disposition of any of the
Collateral (whether or not such disposition is a default hereunder). This power
is coupled with an interest and is irrevocable so long as any indebtedness
secured hereunder remains unpaid.
7.2 Assignment. Debtor shall not assign this Agreement without the prior written
consent of Secured Party. Secured Party may assign this Agreement with or
without notice to or the consent of Debtor. Upon assignment, the term "Secured
Party" shall mean and refer to any assignee who is the holder of this Agreement.
After assignment of this Agreement by Secured Party, the assignor will not be
the assignee's agent for any purpose and Debtor's obligations to the assignee
will be absolute and unconditional and, to the extent permitted by applicable
law, will not be subject to any abatement, reduction, recoupment, defense,
set-off or counterclaim available to Debtor for breach of warranty or for any
other reason whatsoever. Upon full payment of all obligations secured by this
Agreement, the assignee may deliver all original papers to the assignor for
Debtor.
7.3 Miscellaneous. (A) All of Secured Party's rights hereunder are cumulative
and not alternative. (B) The inclusion of a trade name or division name in the
identification of Debtor hereunder does not limit Secured Party's rights, after
the occurrence of an event of default, to proceed against all of Debtor's
assets, including those held or used by Debtor individually or under another
trade or division name. (C) If permitted by law, Debtor agrees that a carbon,
photographic or other reproduction of this Agreement or of a financing statement
may be filed as a financing statement. (D) Secured Party may correct patent
errors herein and fill in blanks. (E) All of the terms and provisions hereof
will apply to and be binding upon Debtor, its heirs, personal representatives,
successors and assigns and shall inure to the benefit of Secured Party, its
successors and assigns. (F) Debtor and Secured Party hereby waive any right to
trial by jury in any action or proceeding relating to this Agreement or the
transaction contemplated hereby. (G) Debtor hereby expressly waives notice of
nonpayment, presentment, protest, dishonor, default, intent to accelerate the
maturity hereof and of acceleration
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of the maturity hereof. (H) Deleted (I) To the extent allowed by law, Debtor
hereby waives any exemptions or appraisals. (J) No waiver or change in this
Agreement or in any related note will be binding upon Secured Party, or Secured
Party's assignee, unless such waiver or change is in writing and signed by one
of its officers and any such waiver or change shall then be effective only upon
the terms and to the extent provided in such writing. (K) The acceptance by
Secured Party of any remittance from a party other than Debtor will in no way
constitute Secured Party's consent to the transfer of any of the Collateral to
such party. (L) Any captions or headings included in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of any provision contained in this Agreement. (M) Any provision
contained herein which is contrary to, prohibited by or invalid under applicable
laws or regulations will be deemed inapplicable and omitted herefrom, but shall
not invalidate the remaining provisions hereof (N) The only copy of this
Agreement which constitutes "chattel paper" is the original executed copy
designated as "Original For Associates".
8. GOVERNING LAW
8.1 Governing Law. This Agreement shall in all respects be governed by, and
construed in accordance with, the laws of the State of Texas including all
matters of construction, validity and performance. No oral agreement, guaranty,
promise. representation or warranty shall be binding upon Secured Party.
Dated: January 5, 1999
Western Traction Company
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Schedule A
(Inventory Description)
This Schedule A (Description of Inventory) is attached to and made a part of
that certain Master Security Agreement (Wholesale and Fleet Rental Finance) (the
"Agreement") dated January 5,1999 between Associates Commercial Corporation
("Secured Party") and Western Traction Company ("Debtor").
I. Description of Inventory. The following items or types of inventory are
subject to the terms of the Agreement and to the security interest granted by
Debtor to Secured Party pursuant to the Agreement:
All new and used equipment, machines, products, attachments and/or parts
financed by Secured Party and upon which any financing or related charges remain
unpaid.
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SECURITY AGREEMENT
Made this 31 day of August 1994, by Associates Commercial Corporation,
a Delaware corporation (herein called "CREDIT"), having a place of business at
P.O. Box 162234 Sacramento, CA and Western Traction Company a California
Corporation, with its chief executive office at 1333 Atlantic St., Union City,
CA 94587, and additional places of business at 2330 E. Date, Fresno, CA 93706,
870 S. Rock Blvd., Sparks, NV 89431 and 7518 Pacific Avenue, Pleasant Grove, CA
95668 (herein called "DEALER").
1. STATEMENT OF PURPOSE
Dealer normally purchases and maintains a substantial inventory of
Products and Parts for sale to its customers. In addition, DEALER purchases
Products which it rents or leases to its customers. In the course of these
activities, DEALER may desire financing of many different varieties.
CREDIT is engaged in making financing available to DEALER on a
continuing basis.
CREDIT, at its option, when DEALER requests, will make loans to DEALER
to finance DEALER's acquisition of Products or Parts to be held as inventory for
ultimate sale to DEALER's customers or to be held for rental or lease to
DEALER's customers, and further at its option, will furnish financing to
DEALER's customers, and may make loans for such other purposes as may be
mutually agreed by DEALER and CREDIT.
Since it is expected that financing activities between DEALER and
CREDIT will be continuing and that there will be numerous separate transactions,
the parties intend by this agreement to establish herein, without the need for
further documentation, a Security Interest in all Collateral to secure all
Liability of DEALER to CREDIT, and to further establish certain obligations of
DEALER to CREDIT.
2. DEFINITIONS
When capitalized in this Agreement, the terms defined in this Section 2
have the meanings specified below:
2.1 Account - has the meaning accorded it by the Uniform Commercial
Code as in effect from time to time under applicable state law.
2.2 Account Debtor - has the meaning accorded it by the Uniform
Commercial Code as in effect from time to time under applicable state law.
2.3 Chattel Paper - has the meaning accorded it by the Uniform
Commercial Code as in effect from time to time under applicable state law.
<PAGE> 26
2.4 Collateral - means all of the following, whether now owned or
hereafter acquired: (a) Products; (b) Parts; (c) returned or repossessed
Products or Parts; (d) Accounts and Chattel Paper arising out of or relating to
the sale, lease, rental or other disposition of Products or Parts; and (e) all
proceeds of any of the foregoing items described in (a)-(d).
2.5 Financed Inventory - means Products or Parts which are now or
hereafter financed by CREDIT.
2.6 Financing Plan - means the policies announced to DEALER by CREDIT
from time to time as the amounts that will be loaned to finance the acquisition
of any Financed Inventory and the amounts that will be loaned for other
purposes, the terms of any such loan and interest, service charge and conditions
thereof and any related terms or conditions, whether such policies are contained
in a finance manual or other documents, including any separate agreement or
documents relating to the financing extended to DEALER by CREDIT.
2.7 Inventory - has the meaning accorded it by the Uniform Commercial
Code as in effect time to time under applicable state law.
2.8 Liability - means any and all direct and indirect obligations,
contingent or otherwise, of DEALER to CREDIT, of every kind and description, now
existing or hereafter arising, whether under this Agreement or otherwise.
Liability includes obligations to perform acts or refrain from taking action, as
well as obligations to pay money.
2.9 Parts - means Inventory consisting of service and replacements
parts and kits of parts for repair or modification, for use on Products or
similar goods.
2.10 Products - means Inventory whether now or owned or hereafter
acquired by DEALER consisting of: (i) all trenching, construction, material
handling, agricultural, road building, earth moving, compaction, paving, mining,
logging, forestry, commercial or industrial equipment or other similar goods;
and (ii) accessory items and attachments for use or installation on goods of the
type listed in (i) above.
2.11 Security Interest - has the meaning accorded it by the Uniform
Commercial Code as in effect from time to time under applicable state law.
3. GRANT OF SECURITY INTEREST
To secure performance or payment of Liability, DEALER hereby grants to
CREDIT a security interest in the Collateral. As additional security for
Liability, DEALER hereby assigns to CREDIT, as its interests may appear, all of
DEALER's right, title and interest in and to insurance proceeds payable to
DEALER by reason of loss of or damage to all or any part of the Collateral.
<PAGE> 27
4. FINANCING TERMS
4.1 CREDIT will announce from time to time its Financing Plans. DEALER
shall abide by and adhere to the applicable Financing Plan, which may be changed
from time to time in whole or in part without prior notice to DEALER.
4.2 When DEALER wishes to obtain financing from CREDIT for itself or
for DEALER's customers, it shall request such financing in accordance with
applicable procedures established by CREDIT in the Financing Plan.
4.3 If CREDIT, at its sole option, agrees to provide financing
requested by DEALER, such financing shall be on such terms and subject to such
condition as may be established in accordance with this Agreement, the
Applicable Financing Plan or otherwise by CREDIT and DEALER.
4.4 CREDIT may, from time to time, prepare and deliver to DEALER one or
more statements of account reflecting the loans and financing extended by CREDIT
to DEALER hereunder. Unless DEALER objects thereto within 10 days of receipt of
any such statement of account, the terms, conditions and contents of such
statements of account shall be conclusively deemed accurate and correct and
shall constitute a valid and binding obligation of the DEALER to pay the amounts
set forth therein at the time specified therein.
4.5 DEALER agrees to execute and deliver to CREDIT any and all
documents requested by CREDIT, including but not limited to promissory notes, in
connection with the financing extended by CREDIT to DEALER hereunder.
5. DISPOSITION OF FINANCED INVENTORY
5.1 Financed Inventory may be sold by DEALER only in the ordinary
course of business and only in accordance with the terms and upon the conditions
of the applicable Financing Plan in effect from time to time. In the event any
piece of Financed Inventory is sold by DEALER, DEALER shall remit to CREDIT the
unpaid balance of the amount financed by CREDIT plus all interest due at the
earliest of (a) The expiration of 24 hours after DEALER receives the proceeds of
such sale or (b) 30 days after such sale DEALER shall hold all proceeds of any
disposition of Financed Inventory as trustee for CREDIT and shall not sell,
assign or otherwise dispose of all or any part of such proceeds without the
prior written consent of CREDIT.
5.2 Financed Inventory may be placed in the possession of a customer
for demonstration purposes only in accordance with the terms of the applicable
Financing Plan.
5.3 DEALER will not rent or lease any piece of Financed Inventory that
has not previously been identified by CREDIT as being held by DEALER for lease
or rental and for which DEALER has not previously submitted to and had approved
CREDIT a Request for Rental Financing. The rental or lease by DEALER of any
piece of Financed Inventory shall at all times comply and be in accordance with
the terms of the applicable Financing Plan.
<PAGE> 28
5.4 The sale of any Financed Inventory for which CREDIT is not paid as
required by Section 5.1 and the lease or rental of any Financed Inventory
without the prior written consent of CREDIT, will constitute an "Out-of-Trust"
occurrence in violation of this Agreement.
6. COVENANTS OF DEALER
DEALER covenants and warrants to CREDIT as follows:
6.1 Payment or Performance of Liability - Dealer shall pay when due all
Liability and shall observe or perform all Liability in accordance with the
terms thereof. The obligation of DEALER to pay such Liability shall be absolute
and unconditional and shall not be affected by any offset, counterclaim or
occurrence whatsoever, whether against CREDIT or any other person, including but
not limited to any damage to, loss or destruction of, or defect in any of the
Products.
6.2 Maintenance of Collateral - Dealer shall maintain and preserve the
Collateral in good order and condition; shall not permit the Collateral to be
wasted or destroyed, and shall protect the Security Interest of CREDIT. DEALER
will not cause or permit the removal of any component or accessory from a piece
of Financed Inventory except during the course of maintenance or repair. If
Financed Inventory shall not, in the opinion of CREDIT, be maintained in good
order and condition, CREDIT may, without prejudice to any other rights, give
written notice to DEALER to put such Financed Inventory in good order and
condition, and if DEALER does not, within the (10) days from the date of such
notice, comply with the requirements therein set forth, CREDIT may cause such
Financed Inventory to be put in good order and condition, the expense thereof to
be paid or reimbursed by DEALER on demand. DEALER will immediately notify CREDIT
of any loss of or damage to, or material diminution in value (including but not
limited to diminution in value through demonstration to prospective customers)
or any occurrence which adversely affects the value of the Collateral. If
CREDIT, in its dole discretion, determines there has been any such loss, damage
or diminution in value, DEALER shall upon the request of CREDIT, pay to CREDIT,
within such period as specified by CREDIT, such amount as CREDIT has determined
to represent the amount of such loss, damage or diminution in value.
6.3 Taxes - DEALER shall be liable for all taxes, fees or assessments
in the Collateral, or the use thereof and shall reimburse CREDIT for amounts
equal to all taxes, fees, or assessments including penalties and interest levied
or based on the Agreement, the Collateral or the use or operation thereof,
excepting only franchise taxes or taxes measured by net income or net worth of
CREDIT.
6.4 Liability and Insurance - DEALER shall indemnify, save and hold
CREDIT harmless in respect to all claims, demands, suits and expenses on account
of bodily injury, sickness or disease, including death, sustained by any person
or persons, injury to or the destruction or property, and any and all other
losses, accidents, claims, suits and expenses whatsoever and howsoever arising
or incurred in the course of the business activities carried on by DEALER.
DEALER assumes all risk of physical loss or damage to the Collateral and shall
provide and maintain insurance evidencing fire, extended coverage perils,
vandalism and malicious mischief and theft insurance in an amount not less than
the full insurable value of the Collateral. Such insurance shall include a loss
payable clause
<PAGE> 29
showing DEALER and CREDIT as loss payees, as their interest may appear. DEALER,
at its own expense, shall also carry public liability insurance with bodily
injury limits of not less than $250,000.00/$500,000.00 and with property damage
limits of not less than $100,000.00 per accident for the contractual liability
coverage of the hold harmless clause provided herein. DEALER shall furnish to
CREDIT certificates evidencing the insurance coverage required herein which
certificates shall require ten (10) days' prior written notice to CREDIT prior
to cancellation. If DEALER does not secure any or all of the insurance required
to be carried hereunder, CREDIT may, but it not obligated to, purchases such
insurance, the cost of which must be reimbursed to CREDIT by DEALER immediately.
6.5 Records - DEALER shall maintain at its permanent office full and
complete records with respect to COLLATERAL, which records shall include the
location of each item of Collateral at all times. Such records shall be
available as all times to CREDIT or its duly authorized representatives for
purposes of inspection, and CREDIT and its representatives shall have free
access at all reasonable time to inspect any item of Collateral.
6.6 Security Interest - DEALER shall sign and execute alone or with
CREDIT any financing statement or other document or certificate of title or
procure any document or certificate of title, and pay all connected costs,
necessary or desirable to perfect or otherwise protect CREDIT's Security
Interest under this Agreement against the rights or interest of third persons.
If permitted by applicable law, DEALER authorizes CREDIT to sign and file on
behalf of DEALER any financing statement or amendment thereof necessary or
desirable to perfect the Security Interest of CREDIT. A carbon, photographic or
other reproduction of this Agreement is sufficient as a financing statement and
may be filed by CREDIT, at its option, in such filing offices as it deems
appropriate.
6.7 Notification of Account Debtors - DEALER agrees that at any time or
times, CREDIT may notify any Account Debtor or other person obligated on any
Account, Chattel Paper or other item of Collateral of the interest of CREDIT
therein. If DEALER is in default under this Agreement, CREDIT may further notify
such Account Debtor or other person that such Account Debtor or other Person
shall make all payments directly to CREDIT. DEALER shall, at the request of
CREDIT, execute any such notifications.
6.8 Signatory Authorization - DEALER hereby constitutes and appoints
such of CREDIT's employees or designees as CREDIT may decide from time to time
as DEALER's true and lawful attorney-in-fact to perform the following: (a) to
write in the description of Products, the quantities, prices, interest rates,
repayment schedules and other details of the transaction on the instruments
evidencing DEALER's obligation to CREDIT, which instruments shall be
substantially in the form of promissory note as designated by CREDIT from time
to time; (b) to sign in DEALER's name by use of a facsimile signature or by any
other appropriate means, and promissory notes or other evidences of
indebtedness; and (c) to execute on behalf of DEALER the notification letters
described in Section 6.7 hereof.
DEALER further agrees that, if DEALER is in default hereunder and, as a result
of such default, Liability is accelerated by CREDIT, any employee or authorized
representative of CREDIT may
<PAGE> 30
execute, sign, endorse and transfer in the name of DEALER notes, checks, drafts,
or other instruments for the payment of money and receipts, certificate of
origin and applications for certificates of title or other documents, necessary
to evidence, perfect and realize upon the Security Interest and Liability.
6.9 Name Change - DEALER shall notify CREDIT of any proposed changed in
its name, identity, ownership or structure not less than thirty (30) days before
such change is effective. If any such change would, in the opinion of CREDIT,
adversely affect its Security Interest or otherwise adversely affect its
interest under this Agreement or otherwise, CREDIT in its sole discretion, may
notify DEALER of corrective action it will be required to take (including,
without limitation, execution and filing any financing statements evidencing
such change). DEALER shall promptly comply with all the terms of any such
notification.
6.10 Location of Collateral; Offices - Except for a sale, lease or
rental of Products and Parts in accordance with this Agreement, DEALER shall
keep the Collateral in its possession or control at one of DEALER's places of
business specified in this Agreement, unless CREDIT consents in writing to
removal of such Collateral to another location. DEALER shall promptly notify
CREDIT in writing of any proposed change of the location of its chief executive
office, and of all proposed additional places of its business.
6.11 Partnership - If DEALER is a partnership, all Liability shall
remain in force and shall apply to and shall be binding upon those individuals
or entities which are the partners at the time this Agreement is signed and any
individuals or entities who subsequently become partners DEALER, notwithstanding
any changes in the individuals or entities comprising the partnership. The term
"DEALER" shall include any alternate or successor partnerships.
6.12 Transactions with Affiliates - Without the prior approval of
CREDIT, DEALER shall not sell, transfer, assign or otherwise convey any item of
Collateral to any person or entity which controls, is controlled by, or is under
common control with DEALER.
6.13 Financial Statements - DEALER shall furnish to CREDIT as soon as
available and in any event within 120 days after the end of each fiscal year a
copy of the financial statements of DEALER and each of its affiliates (including
balance sheet and statement of income and retained earnings) for such year,
prepared in accordance with generally accepted accounting principles and, except
as otherwise permitted by CREDIT, audited by independent auditors. DEALER shall
also furnish other periodic financial statements and reports as shall be
requested by CREDIT.
6.14 Accuracy of Statement - DEALER covenants and warrants that all
representations and warranties now or hereafter made to CREDIT, whether in this
Agreement or in any supporting or supplemental reports, statements or
documentation, including, without limitation, statements relating to the
Collateral and financial statements, are, and shall continue to be, true and
correct.
<PAGE> 31
7. Default
DEALER shall be in default on this Agreement upon the happening of any
of the following events.
7.1 Failure to pay, perform or observe any Liability in accordance with
its terms, including without limitation any Out-Of-Trust occurrence.
7.2 Insolvency of DEALER or the making of an assignment for the benefit
of creditors by Dealer or the commencement of proceedings in bankruptcy or for a
receivership by or against DEALER.
7.3 Breach by DEALER of any terms, conditions or covenants of this
Agreement or any Financing Plan of CREDIT in effect from time to time or any
term of any other agreement previously or hereafter entered into between DEALER
and CREDIT or any of CREDIT's subsidiaries or affiliates.
7.4 Termination of or failure to renew, for any reason, any agreement
which is material to DEALER's or any affiliate of DEALER, business pursuant to
which the manufacturer name in such agreement has appointed DEALER or any
affiliate of DEALER a distributor of Products.
7.5 At any time that CREDIT in good faith believe the prospect of
payment or performance hereunder is impaired or the Collateral is insecure,
including without limitation DEALER's default under any agreement with any third
party which default materially and adversely affects DEALER's business.
8. REMEDIES
If any of the events of Default specified herein shall occur, all
Liability due or to become due shall accelerate and become immediately due and
payable without notice or demand and CREDIT may exercise and shall have any and
all rights and remedies accorded to it by the Uniform Commercial Code as in
effect from time to time under applicable state law. In addition, CREDIT may
require DEALER to assemble the Collateral and make it available to CREDIT at a
place designated by CREDIT which is reasonably convenient to all parties. CREDIT
is also hereby authorized and empowered to enter in a lawful manner and without
breaching the peace, any premises of DEALER or other place where Collateral may
be located and take possession of the Collateral without notice or demand, and
DEALER waives any rights DEALER may have to such notice or demand. CREDIT may
take possession of Collateral wherever found except as otherwise provided by
applicable law. In connection with the enforcement of its Security Interest
hereunder, CREDIT may take possession of any goods installed in, affixed to or
otherwise in or upon the Collateral at the time of repossession, an hold such
goods for DEALER at DEALER's risk without any liability on the part of CREDIT.
As to any Collateral which is rented to a customer of DEALER, CREDIT shall be
deemed to have taken possession of DEALER's interest in such Collateral by
giving notice to the lessee of such Collateral that CREDIT has acquired DEALER's
interest. DEALER agrees that notice sent to it by any of the methods provided in
Section 10.1 hereof at least five (5) days before the action or occurrence
described in such notice shall, constitute reasonable notice under applicable
law; provided
<PAGE> 32
however, that is the circumstances indicate that a shorter period of notice is
reasonable, such shorter period shall constitute reasonable notice under
applicable law. DEALER shall pay CREDIT on demand any and all expenses,
including reasonable attorney's fees and court costs, incurred or paid by CREDIT
in protecting or enforcing any of their rights or remedies hereunder. Rights and
remedies provided for herein are cumulative, and shall not limit rights or
remedies otherwise available to CREDIT under any other agreement or applicable
law.
9. APPLICATION OF PAYMENTS - OFFSET
DEALER waives any right it may have to direct the application of any
payments made by it to CREDIT, and CREDIT may at its option offset and deduct
any Liability of DEALER from any or all sums owed by it to DEALER.
10. GENERAL
10.1 Notices - Any notice required or permitted under the terms of this
Agreement may be delivered in person to the party to whom the notice is being
given and shall be in writing; or may be sent by facsimile transmission or
mailed by ordinary, certified or registered mail, potage fully prepaid, in a
properly addressed envelope to the party to whom notice is being given at the
last know address.
10.2 Waivers - Failure of any party at any time to require performance
of any provision shall not affect the right to require full performance thereof
at any time thereafter, and the waiver by any party of a breach of any such
provision shall not constitute a waiver of any subsequent breach.
10.3 Assignment - This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the parties hereto; provided, however,
DEALER shall not without the prior written consent of CREDIT assign any right to
credit advances from CREDIT or delegate any of its obligations under this
Agreement to any third party. CREDIT may assign its rights and obligations under
this Agreement at any time.
10.4 Effective Date; Prior Agreements - This Agreement shall take
effect on the first date above written and shall govern the relationship of the
parties in respect to its subject matter after such date. If DEALER and CREDIT
or any of CREDIT's subsidiaries or affiliates have previously executed a
security agreement or related financing agreements, such agreements shall not be
terminated by this Agreement.
10.5 Applicable Law - THE AGREEMENT IS ENTERED INTO AND ALL LOANS AND
OTHER EXTENSIONS OF CREDIT ARE GRANTED IN THE CITY OF BUCHANAN, STATE OF
MICHIGAN AND THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF CALIFORNIA. IF ANY PROVISION HEREOF IS PROHIBITED BY
SUCH LAW OR ANY OTHER LAW WHICH IS FOUND TO BE APPLICABLE, SUCH PROVISIONS SHALL
BE INEFFECTIVE WITHOUT INVALIDATING THE REMAINING PROVISIONS HEREOF.
<PAGE> 33
10.6 Jury Waiver - IN ANY LITIGATION ARISING OUT OF OR RELATING TO ANY
OF THE MATTERS CONTAINED HEREIN, OR ANY OTHER DOCUMENTS EXECUTED IN CONNECTION
HEREWITH, IN WHICH THE DEALER AND CREDIT ARE ADVERSE PARTIES, THE DEALER WAIVES
TRIAL BY JURY.
<PAGE> 34
ADDENDUM TO SECURITY AGREEMENTS
THIS ADDENDUM, is by and between Associates Commercial Corporation ("Secured
Party"), Western Traction Company ("Western") and Crescent Machinery Company,
(Western and Crescent shall hereafter be referred to individually and
collectively as "Crescent").
WHEREAS, Crescent and Secured Party have entered into that certain Security
Agreement dated _______________________; and
WHEREAS, Crescent and Secured Party have entered into that certain Security
Agreement dated _______________________; and
WHEREAS Secured Party and Crescent hereby desire to modify the terms of the
Security Agreements referenced above (collectively the "Security Agreements").
Now therefore, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Secured Party and Crescent agreed that the
following terms shall be incorporated into the Security Agreements as if
originally set forth therein:
1. Definitions. As used herein, the following terms have the following meanings:
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or
in statements of the Financial Accounting Standards Board and/or their
respective successors and which are applicable in the circumstances as
of the date in question. Accounting principles are applied on a
"consistent basis" when the accounting principles observed in a current
period are comparable in all material respects to those accounting
principles applied in a preceding period.
"Minimum Tangible Net Worth" means a Tangible Net Worth that is the
greater of Twenty Million and no/dollars ($20,000,000) or 80% of the
internal credit limit established by Secured Party for wholesale and
fleet and rental as set forth in that certain letter dated 1/19/99,
from Secured Party to Crescent, which letter is attached hereto as
Exhibit 1 and incorporated herein by reference.
"Tangible Net Worth" means, at any particular time, all amounts which,
in conformity with GAAP, would be included as stockholders' equity on a
balance sheet of Crescent; provided, however, there shall be excluded
therefrom: (a) any amount at which shares of capital stock of Crescent
appear as an asset on Crescent's balance sheet, (b) goodwill, including
any amounts, however designated, that represent the excess of the
purchase price paid for assets or stock over the value assigned
thereto, (c) patents, trademarks, trade names, and
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<PAGE> 35
copyrights, (d) deferred expenses, (e) loans and advances to any
stockholder, director, officer, or employee of Crescent or any
Subsidiary or any Affiliate, and (f) all other assets which are
properly classified as intangible assets.
2. Tangible Net Worth Covenant. Crescent will at all times, during the term of
any of the Security Agreements, maintain a Tangible Net Worth in an amount not
less than the Minimum Tangible Net Worth. If at any time the Tangible Net Worth
of Crescent falls below the Minimum Tangible Net Worth, Crescent shall, within
30 days thereof, either increase its Tangible Net Worth to an amount not less
than the Minimum Tangible Net Worth or reduce the amount of Crescent's
outstandings under the Security Agreements to an amount which is less than
Crescent's Tangible Net Worth. Commensurate with any such reduction in
Crescent's outstandings under the Security Agreements, Secured Party may in its
sole discretion, and as otherwise outlined in Exhibit I, adjust its internal
credit limits to reflect an amount not in excess of Crescent's then Tangible Net
Worth. If the Tangible Net Worth of Crescent thereafter increases, Associates
may, in its sole discretion, elect to increase Crescent's internal credit
limits.
3. Reporting Requirements. Crescent will furnish to Secured Party:
a. Annual Financial Statements. As soon as available, and in any
event within one hundred eighty (180) days after the end of
each fiscal year of Crescent, beginning with the fiscal year
ending December 31, 1998, (i) a copy of the annual audit
report of Crescent for such fiscal year containing, on a
consolidated basis, balance sheets, statements of income,
statements of retained earnings, statements of changes in
financial position, and cash flows as at the end of such
fiscal year and for the 12-month period then ended, in each
case setting forth in comparative form the figures for the
preceding fiscal year, all in reasonable detail and audited
and certified by Ernst Young or other independent certified
public accountants of recognized standing acceptable to
Secured Party, to the effect that such report has been
prepared in accordance with GAAP; and (ii) a certificate from
the Vice President of Finance of Crescent to Secured Party (A)
stating that to their knowledge no event of default and no
event which with notice or lapse of time or both would be an
event of default has occurred and is continuing, or if in
their opinion an event of default or such event has occurred
and is continuing, a statement as to the nature thereof, and
(13)confirming the calculations set forth in the officer's
certificate delivered simultaneously therewith;
b. Quarterly Financial Statements. As soon as available, and in
any event within thirty (30) days after the end of each
calendar quarter a copy of an unaudited financial report of
Crescent as of the end of such calendar quarter and for the
portion of the fiscal year then ended, containing, on a
consolidated basis, balance sheets, statements of income,
statements of retained earnings, statements of changes in
financial position, and cash flows, in each case setting forth
in comparative form the figures for the corresponding period
of the preceding fiscal year, all in reasonable detail
certified by the Vice President of Finance of Crescent to have
been prepared in accordance with
2
<PAGE> 36
GAAP and to fairly and accurately present (subject to year-end
audit adjustments) the financial condition and results of
operations of Crescent, on a consolidated basis, at the date
and for the periods indicated therein;
c. General Information. Promptly, such other information
concerning Crescent as Secured Party may from time to time
reasonably request.
All terms not specifically defined herein shall have the same meanings as forth
in the respective Crescent Security Agreements.
Crescent and Secured Party acknowledge and agree that (i) the Security
Agreements as amended hereby do not obligate Crescent to borrow any monies from
Secured Party and do not obligate Secured Party to advance fluids to Crescent
and that (ii) the Secured Party's internal guidelines are one of many factors
considered by Secured Party when reviewing a specific request for an advance to
Crescent. The guidelines are not a commitment by Secured Party to make any
particular advance. Crescent further represents and warrants to Secured Party
that Western is a wholly owned subsidiary of Crescent.
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<PAGE> 37
CONTINUING GUARANTY
For Valuable Consideration, the receipt and sufficiency of which is hereby
acknowledged, the undersigned, for themselves, their heirs, executors, personal
representatives, successors and assigns (individually called "Guarantor" end
collectively called "Guarantors") jointly and severally and in solido, hereby
unconditionally guarantee to Associates Commercial Corporation, its successors,
endorsees end assigns, (collectively called "Associates") that Western Traction
Company (the "Company") whose address is 1333 Atlantic Street, Union City, CA
94587 shall promptly and fully perform, pay and discharge all of its present and
future liabilities, obligations and indebtedness to Associates, whether direct
or indirect, joint or several, absolute or contingent, secured or unsecured,
matured or unmatured, and whether originally contracted with or otherwise
acquired by Associates (all of which liabilities, obligations and indebtedness
are herein individually and collectively called the "Indebtedness"). This
Guaranty is an absolute and unconditional guarantee of payment and not of
collectibility. The liability of each Guarantor hereunder is not conditional or
contingent upon the genuineness, validity, sufficiency or enforceability of the
Indebtedness or any instruments, agreements or chattel paper related thereto
(collectively called "Agreements") or any security or collateral therefor
(collectively called "Security") or the pursuit by Associates of any rights or
remedies which it now has or may hereafter have. If the Company fails to pay the
indebtedness promptly as the same becomes due, or otherwise fails to perform any
obligation under any of the Agreements, each Guarantor agrees to pay on demand
the entire Indebtedness and all losses, costs, attorneys' fees and expenses
which may be suffered by Associates by reason of the Company's default or the
default of any Guarantor hereunder, and agrees to be bound by and to pay on
demand any deficiency established by the sale of any of the Agreements or
Security, all without relief from valuation and appraisement laws and without
requiring Associates to (i) proceed against the Company by suit or otherwise,
(ii) foreclose, proceed against, liquidate or exhaust any of the Agreements or
Security, or (iii) exercise, pursue or enforce any right or remedy Associates
may have against the Company, any co-Guarantor (whether hereunder or under a
separate instrument) or any other party. Each Guarantor agrees that: this
Guaranty shall not be discharged or affected by any circumstances which
constitute a legal or equitable discharge of a Guarantor or surety, or by the
death of any Guarantor; the records of Associates shall be received as
conclusive evidence of the amount of the Indebtedness at any time owing; one or
more successive or concurrent suits may be brought and maintained against any or
all of the Guarantors, at the option of Associates, with or without joinder of
the Company or any of the other Guarantors as parties thereto; such Guarantor
will not avail itself of any defense whatsoever which the Company may have
against Associates, other than full payment of the Indebtedness; and such
Guarantor will not seek a change of venue from any jurisdiction or court in
which any action, proceeding or litigation is commenced.
EACH GUARANTOR HEREBY WAIVES NOTICE OF ANY ADVERSE CHANGE IN THE COMPANY'S
CONDITION OR OF ANY OTHER FACT WHICH MIGHT MATERIALLY INCREASE SUCH GUARANTOR'S
RISK, WHETHER OR NOT ASSOCIATES HAS KNOWLEDGE OF THE SAME. EACH GUARANTOR ALSO
HEREBY WAIVES ANY CLAIM, RIGHT OR REMEDY WHICH SUCH GUARANTOR MAY NOW HAVE OR
HEREAFTER ACQUIRE AGAINST THE COMPANY THAT ARISES HEREUNDER AND/OR FROM THE
1
<PAGE> 38
PERFORMANCE BY ANY GUARANTOR HEREUNDER INCLUDING, WITHOUT LIMITATION, ANY CLAIM,
REMEDY OR RIGHT OF SUBROGATION, REIMBURSEMENT, EXONERATION, CONTRIBUTION,
INDEMNIFICATION, OR PARTICIPATION IN ANY CLAIM, RIGHT OR REMEDY OF ASSOCIATES
AGAINST THE COMPANY OR ANY SECURITY WHICH ASSOCIATES NOW HAS OR HEREAFTER
ACQUIRES; WHETHER OR NOT SUCH CLAIM, RIGHT OR REMEDY ARISES IN EQUITY, UNDER
CONTRACT, BY STATUTE, UNDER COMMON LAW OR OTHERWISE.
No termination hereof shall be effective until the Guarantors deliver to
Associates a written notice signed by them electing not to guarantee any new
extension of credit that may be granted by Associates to the Company after its
receipt of such notice, but such notice shall not effect the obligations of the
guarantors hereunder as to any and all Indebtedness existing at the time such
notice is received. Each Guarantor hereby waives (i) notice of acceptance hereof
and notice of extensions of credit given by Associates to the Company from time
to time; (ii) presentment, demand, protest, and notice of non-payment or protest
as to any note or other evidence of indebtedness signed, accepted, endorsed or
assigned to Associates by the Company, (iii) all exemptions and homestead laws;
(iv) any other demands and notices required by law; and (v) any right to trial
by jury. Associates may at any time and from time to time, without notice to or
the consent of any Guarantor, and without affecting or impairing the obligation
of any Guarantor hereunder; (a) renew, extend or refinance any part or all of
the Indebtedness of the Company or any Indebtedness of its customers, or of any
co-Guarantor (whether hereunder or under a separate instrument) or any other
party; (b) accept partial payments of the Indebtedness and apply such payments
to any part of the Indebtedness; (c) settle, release (by operation of law or
otherwise), compound, compromise, collect or liquidate, in any manner, any of
the Indebtedness, any Security, or any Indebtedness of any Guarantor (whether
hereunder or under a separate instrument) or any other party; (d) consent to the
transfer of any Security; (e) bid end purchase at any sale of any of the
Agreements or Security; and (f) exercise any and all rights and remedies
available to Associates by law or agreement even if the exercise thereof may
affect, modify or eliminate any rights or remedies which a Guarantor may have
against the Company. Each Guarantor shall continue to be liable under this
Guaranty, the provisions hereof shall remain in full force and effect, and
Associates shall not be estopped from exercising any rights hereunder,
notwithstanding (i) Associates waiver of or failure to enforce any of the terms,
covenants or conditions contained in any of the Agreements; (iii) any release
of, or failure on the part of Associates to perfect any security interest in or
foreclose, proceed against, or exhaust, any Security; or (iii) Associates
failure to take new, additional or substitute security or collateral for the
Indebtedness.
Each Guarantor agrees that Associates may bring any legal proceedings it deems
necessary to enforce any or all of such Guarantor's obligations hereunder in any
court in the State in which Associates' office administering the Indebtedness is
located; and service of process may be made upon such Guarantor by mailing a
copy of the summons to such Guarantor at its address last known to Associates.
All rights and remedies of Associates are cumulative and not alternative. Each
provision of this Guaranty is intended to be severable. Any term or provision
hereof declared to be contrary to, prohibited by or invalid under applicable
laws or regulations shall be inapplicable and deemed omitted herefrom, but shall
not invalidate the remaining terms and provisions hereof.
IN WITNESS WHEREOF, the Guarantors have executed this Guaranty on 08/10/98.
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Schedule A
Attached to and made a part of a Uniform Commercial Code Financing Statement
Form UCC-1 between Associates Commercial Corporation as Secured Party and
Western Traction Company as Debtor.
All of the Debtor's new and used inventory and equipment which is financed by
Secured Party or against which Secured Party has advanced monies and for which
Secured Party has not been paid in full, whether now owned or hereafter acquired
by Debtor, together with all present and future attachments, accessories,
exchanges, repairs, and additions thereto, and all chattel paper, documents,
general intangibles, instruments, accounts and contract rights now existing or
hereafter arising with respect to any thereof, and all cash and non-cash
proceeds of any of the foregoing.
3
<PAGE> 1
EXHIBIT 10.103
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment"), dated as of December 20, 1999, between CRESCENT REAL ESTATE
EQUITIES LIMITED PARTNERSHIP, a Delaware limited partnership (the "Lender") and
CRESCENT DEVELOPMENT MANAGEMENT CORP., a Delaware corporation (the "Borrower") .
RECITALS
WHEREAS, the Borrower and the Lender entered into that Amended and
Restated Credit Agreement dated as of January 1, 1999 (the "Credit Agreement");
defined terms used herein but not herein defined have the meanings ascribed to
those terms in the Credit Agreement; and
WHEREAS, Section 4.3(b) of the Credit Agreement provides that Borrower
may not use Proceeds from Advances after January 1, 1999, to make capital
contributions to, among other things, East West Resort Development III, L.L.L.
P. ("EWRD 3") for the Eagle Ranch Project in an amount exceeding the Remaining
Project Equity Advance for the Project as shown in Schedule A to the Credit
Agreement (which, as of January 1, 1999, was $435,000); and
WHEREAS, the General Partner of EWRD 3 has appealed to Borrower to make
an additional capital contribution of $8 million, all of which will be applied
exclusively towards completion of the Eagle Ranch Project; and
WHEREAS, the Borrower desires to make such $8 million additional
capital contribution to EWRD 3 exclusively for the Eagle Ranch Project; and the
Borrower has requested that Lender agree to increase the Commitment Amount by
Eight Million Dollars ($8,000,000) on the condition that -- and that the Lender,
notwithstanding Section 4.3(b) of the Credit Agreement, consent that -- all of
such additional loaned funds shall be contributed to EWRD 3 exclusively for
application towards completion of the Eagle Ranch Project; and
WHEREAS, the Lender is willing, on the terms and subject to the
conditions set forth in the Credit Agreement as amended by this Amendment, to
modify and increase the Commitment Amount and to make the Loan in a maximum
aggregate principal amount at any one time outstanding not to exceed
$56,166,666, from time to time prior to the Commitment Termination Date, and to
consent to the Borrower making an additional contribution of $8 million to EWRD
3 to be applied towards completion of the Eagle Ranch Project; and
WHEREAS, except as expressly amended by this Amendment or other
instruments executed pursuant hereto, the Loan Documents shall remain in full
force and effect in accordance with their respective terms;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE> 2
1. Amendment of Sections 2.1 and 2.3 and Addition of Section 2.5
(Commitment, Note, and Eagle Ranch Component).
(a) The first and second sentences of Section 2.1 of the Credit
Agreement are amended and restated in their entireties as follows:
"On the terms and subject to the conditions of this Agreement
(including, without limitation, Article V, Section 2.5 and Section
4.3), the Lender agrees, until the Commitment Termination Date, to make
advances under the Loan to the Borrower up to an aggregate outstanding
principal amount of Fifty-Six Million One Hundred Sixty-Six Thousand
Six Hundred Sixty-Six and No/100 Dollars ($56,166,666) (the "Commitment
Amount") pursuant to Section 2.2. Prior to the available Commitment
Termination Date but subject to Section 2.5, the Borrower may repay and
reborrow up to the full amount of the Commitment Amount in accordance
with the terms hereof."
(b) Section 2.3 of the Credit Agreement is amended and restated in its
entirety as follows:
"Section 2.3 Note. The Loan shall be evidenced by a single promissory
note (the "Note") payable to the order of Lender in the maximum
principal amount of Fifty-Six Million One Hundred Sixty-Six Thousand
Six Hundred Sixty-Six and No/100 Dollars ($56,166,666), which modifies,
restates, replaces and substitutes for that Note dated January 1, 1999,
made by the Borrower in favor of the Lender, which itself modified,
restated, replaced and substituted for that Note dated May 8, 1998,
made by the Borrower in favor of the Lender, which itself modified,
restated, replaced and substituted for that Note dated April 15, 1997,
made by Borrower in favor of Lender, which itself modified, restated,
replaced and substituted for that Note dated August 11, 1995."
(c) The following Section 2.5 is added to the Credit Agreement:
Section 2.5 Eagle Ranch Component of Commitment. As shown in
Schedule A hereto, the Eagle Ranch Project (the "Eagle Ranch Project")
of East West Resort Development III, L. P. ("EWRD 3") is an Approved
Project. Notwithstanding anything in Section 2.1 to the contrary, the
Borrower agrees its right to borrow the Eight Million Dollar
($8,000,000) increase in the Commitment effected by that First
Amendment to the Amended and Restated Credit Agreement dated December
20, 1999 (the "First Amendment"), which portion of the Commitment is
called the "Eagle Ranch Component of Commitment" shall be governed by
this Section 2.5 and Section 4.3(c). Each Advance made after December
20, 1999, to fund the Eagle Ranch Project shall be considered an
Advance against the Eagle Ranch Component of Commitment and is called
an "Eagle Ranch Advance"; the aggregate amount of all Eagle Ranch
Advances made after December 20, 1999 shall not exceed Eight Million
Dollars ($8,000,000). All
<PAGE> 3
Eagle Ranch Principal Payments (as defined in Article III) shall
reduce, dollar-for-dollar, the Eagle Ranch Component of the Commitment;
but after the Eagle Ranch Component of the Commitment has been reduced
to zero, Eagle Ranch Principal Payments shall not reduce the
Commitment."
2. Addition of Section 3.1.4 (Eagle Ranch Payments). The following
Section 3.1.4 is added to the Credit Agreement:
Section 3.1.4 Eagle Ranch Payments. All mandatory payments
made pursuant to Section 3.1.2 out of Distributions from EWRD 3
attributable to the Eagle Ranch Project are called "Eagle Ranch
Payments"; all amounts of Eagle Ranch Payments applied to the
outstanding principal balance of the Loan are called "Eagle Ranch
Principal Payments."
3. Amendment of Sections 4.3(a) and 4.3(b) and addition of Section
4.3(c).
(a) At the end of Section 4.3(a), the word "and" is deleted.
(b) At the beginning of Section 4.3(b), there are added the words
"subject to Section 4.3(c)," and the period at the end of the final sentence of
Section 4.3(b) is deleted and replaced by a semicolon followed by the word
"and".
(c) The following Section 4.3(c) is added to the Credit Agreement:
"(c) after December 20, 1999, this Section 4.3(c) and not
Section 4.3(b) shall govern the use of Advances to make capital
contributions to EWRD 3 for the Eagle Ranch Project. The Borrower shall
use each Eagle Ranch Advance solely to make capital contributions to
EWRD 3 exclusively for application towards the Eagle Ranch Project; the
aggregate amount of Eagle Ranch Advances, plus all capital
contributions to Partnerships made prior to December 20, 1999, for the
Eagle Ranch Project, shall not exceed the Project Advance Limit for the
Eagle Ranch Project, which shall be $25,100,000; no Eagle Ranch Advance
may be used for any other purpose; and the Borrower may not use
proceeds from any Advance other than Eagle Ranch Advances to make
capital contributions to EWRD 3 for the Eagle Ranch Project."
4. Amendment of Schedule A. Schedule A to the Credit Agreement is
deleted and Schedule A attached to this Amendment is substituted therefor.
5. Payment of Costs and Expenses. The Borrower agrees to pay on demand
all reasonable expenses of the Lender (including the reasonable fees and
out-of-pocket expenses of counsel to the Lender and of local counsel, if any,
who may be retained by counsel to the Lender) in connection with this Amendment
and the transactions contemplated hereby.
6. Execution in Counterparts, Effectiveness, etc. This Amendment may be
executed by the parties hereto in several counterparts, each of which shall be
an original and all of which shall
<PAGE> 4
constitute together but one and the same agreement. This Amendment, together
with each other Loan Document executed in connection with this Amendment, shall
become effective when counterparts hereof executed on behalf of the Borrower and
Lender (or notice thereof satisfactory to the Lender) shall have been received
by the Lender and notice thereof shall have been given by the Lender to the
Borrower.
7. Governing Law: Entire Agreement. THIS AMENDMENT, THE NOTE GIVEN IN
CONNECTION HEREWITH, AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT
REGARD FOR CONFLICT OF LAWS PRINCIPLES. Except as otherwise provided herein,
this Amendment, the Note given in replacement of that promissory note made
January 1, 1999, and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersede any prior agreements, written or oral, with respect thereto.
8. REIT Compliance. Borrower acknowledges that Lender's affiliate,
Crescent Real Estate Equities Company ("Crescent"), is a real estate investment
trust under the Internal Revenue Code of 1986, as amended (the "Code"). Borrower
agrees that it will not knowingly or intentionally take or omit to take any
action which Borrower knows would or could result in Crescent being disqualified
from treatment as a real estate investment trust under the Code.
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
BORROWER: CRESCENT DEVELOPMENT MANAGEMENT CORP.,
a Delaware corporation
By:
Name:
Title:
LENDER: CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Crescent Real Estate Equities, Ltd.,
Sole general partner
By:
Name:
Title:
<PAGE> 6
LINE OF CREDIT NOTE
$56,166,666.00 December 20, 1999
FOR VALUE RECEIVED, CRESCENT DEVELOPMENT MANAGEMENT CORP., a Delaware
corporation ("Borrower") promises to pay to CRESCENT REAL ESTATE EQUITIES
LIMITED PARTNERSHIP, a Delaware limited partnership ("Lender"), at 777 Main
Street, Suite 2700, Fort Worth, Texas 76102, the principal sum of FIFTY-SIX
MILLION ONE HUNDRED SIXTY-SIX THOUSAND SIX HUNDRED SIXTY-SIX AND NO/100 DOLLARS
($56,166,666.00), or so much thereof as may be advanced, with interest on the
principal balance from time to time remaining unpaid at the rates hereinafter
provided.
Interest on the principal balance hereof from time to time remaining
unpaid prior to an Event of Default shall be payable at the Interest Rate,
provided that the interest payable shall not exceed the maximum rate permitted
by applicable law (the "Maximum Rate"). Interest on the principal hereof from
time to time remaining unpaid and, to the extent permitted by applicable law,
interest on the unpaid interest, shall bear interest from and after an Event of
Default at the Default Rate provided that in no event shall the Default Rate be
more than the Maximum Rate.
This Note renews, modifies, replaces and is given in substitution for
that certain Note dated January 1, 1999, in the principal amount of
$48,166,666.00 made by Borrower and payable to Lender and is the "Note" referred
to in the Amended and Restated Credit Agreement dated January 1, 1999, executed
by Lender and Borrower as amended by that First Amendment to Amended and
Restated Credit Agreement of even date herewith (the "Credit Agreement").
Borrower may borrow, repay and reborrow amounts under this Note as permitted by
the Credit Agreement. Terms defined in the Credit Agreement and not otherwise
defined herein are used herein with the meanings given those terms in the Credit
Agreement.
Borrower may request and receive Advances hereunder only in accordance
with the terms and provisions of the Credit Agreement. This Note shall be
payable as provided in Article III of the Credit Agreement.
Upon the occurrence of any Event of Default (after the giving of any
notice required in the Credit Agreement and the expiration of any applicable
grace periods provided for in the Credit Agreement), all amounts then remaining
unpaid on this Note shall become or may be declared to be immediately due and
payable and the holder hereof shall have all rights and remedies of Lender under
the Credit Agreement and other Loan Documents. The failure to exercise the
option to accelerate the maturity of this Note upon the happening of any one or
more of the Events of Default hereunder shall not constitute a waiver of the
right of the holder of this Note to exercise the same or any other option at
that time or at any subsequent time with respect to such uncured default or any
other event of uncured default hereunder or under any other of the Loan
Documents. The remedies of the holder hereof, as provided in this Note and in
any other of the Loan Documents, shall be cumulative and concurrent and may be
pursued separately, successively or together, as often as occasion therefor
shall arise, at the sole discretion of the holder hereof. The acceptance by the
holder hereof of any payment under this Note which is less than payment in full
of all amounts due and payable at the time of such payment shall not constitute
a waiver of or impair, reduce, release or extinguish any of the rights or
remedies of the holder hereof to exercise the foregoing option or any other
option granted to the holder in this Note or in any other of the Loan Documents,
at that time or at any subsequent time, or nullify any prior exercise of any
such option.
The undersigned and all other parties now or hereafter liable for the
payment hereof, whether as endorser, surety or otherwise, except as provided in
the Credit Agreement, severally waive demand, presentment, notice of dishonor,
notice of intention to accelerate the indebtedness evidenced hereby, notice of
the acceleration of the maturity hereof, diligence in collecting, grace, notice
and protest, and consent to all extensions which from time to time may be
granted by the holder hereof and to all partial payments hereon, whether before
or after maturity.
If this Note is not paid when due, whether at maturity or by
acceleration, or if it is collected through a bankruptcy, probate or other
court, whether before or after maturity, the undersigned agrees to pay all costs
of collection, including, but not limited to, reasonable attorneys' fees and
expenses incurred by the holder hereof.
All agreements between the undersigned and the holder hereof, whether
now existing or hereafter arising and whether written or oral, are hereby
limited so that in no contingency, whether by reason of acceleration of the
maturity hereof or otherwise, shall the interest contracted for, charged,
received, paid or agreed to be paid to the holder hereof exceed the maximum
amount permissible under applicable law. If from any circumstance the holder
hereof shall ever receive anything of value deemed interest by applicable law in
excess of the maximum lawful amount, an amount equal to any excessive interest
shall be applied to the reduction of the principal hereof and not to the payment
of interest, or if such excessive interest exceeds the unpaid balance of
principal hereof, such excess shall be refunded to the undersigned. All interest
paid or agreed to be paid to the holder hereof shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full period until payment in full of the principal so that the interest hereon
for such full period
<PAGE> 7
shall not exceed the maximum amount permitted by applicable law. This paragraph
shall control all agreements between the undersigned and the holder hereof.
This Note may be prepaid only in accordance with the terms of the
Credit Agreement.
The loan transaction evidenced hereby shall not be governed by, or be
subject to, Chapter 303 or Chapter 346 of the Texas Finance Code.
EXCEPT WHERE FEDERAL LAW IS APPLICABLE (INCLUDING, WITHOUT LIMITATION,
ANY FEDERAL USURY CEILING OR OTHER FEDERAL LAW WHICH, FROM TIME TO TIME, IS
APPLICABLE TO THE INDEBTEDNESS EVIDENCED HEREIN AND WHICH PREEMPTS STATE USURY
LAWS), THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE LAWS OF THE UNITED STATES APPLICABLE TO TRANSACTIONS IN SUCH
STATE.
THIS NOTE, TOGETHER WITH THE CREDIT AGREEMENT AND EACH OTHER
LOAN DOCUMENT REFERENCED HEREIN OR THEREIN, REPRESENT THE FINAL AGREEMENTS
BETWEEN THE PARTIES WITH RESPECT TO THE LOAN AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
CRESCENT DEVELOPMENT MANAGEMENT CORP.,
a Delaware corporation
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
2
<PAGE> 8
CRESCENT DEVELOPMENT MANAGEMENT CORP.
100 East Thomas Place, Drawer 2770
Avon, Colorado 81620
December 20, 1999
Crescent Real Estate Equities Limited Partnership
777 Main Street, Suite 2100
Fort Worth, Texas 76102
Re: Amended and Restated Credit Agreement dated January 1,
1999, as amended ("Credit Agreement") between Crescent
Development Management Corp., as borrower, and Crescent Real
Estate Equities Limited Partnership, as lender
Gentlemen:
The undersigned has requested that the Commitment Amount (as defined in the
Credit Agreement) be increased by $8 million to $56,166,666, and in that
connection that you execute and deliver a First Amendment to Amended and
Restated Credit Agreement, dated as of December 20, 1999, and accept, in place
of the Note in the principal amount of $48,166,666 dated January 1, 1999, made
by the undersigned, a new Note in the principal sum of $56,166,666 made by the
undersigned as of the date of this letter.
To induce you to execute that First Amendment to Amended and Restated Credit
Agreement and accept the new Note in substitution for the prior Note, the
undersigned hereby acknowledges, represents and warrants, confirms and agrees
that (i) the new Note constitutes a renewal, extension, modification and
rearrangement of the indebtedness evidenced by the prior Note and accordingly
that the security interests granted by that Amended and Restated Security
Agreement dated January 1, 1999 (the "Security Agreement"), in the collateral
therein described continue to be first lien perfected security interests and
pledges securing payment and performance of the new Note and (ii) the Security
Agreement continues in full force and effect, enforceable in accordance with its
terms.
THIS LETTER SHALL CONSTITUTE AN AMENDMENT TO THE SECURITY AGREEMENT AND YOU
SHALL BE ENTITLED TO ENJOY THE BENEFITS OF "SECURED PARTY" UNDER, AND THE
UNDERSIGNED SHALL BE BOUND BY ALL OF THE OBLIGATIONS OF "DEBTOR" UNDER, SUCH
SECURITY AGREEMENT AS IF THE SAME WERE RESTATED HEREIN. Borrower agrees upon
request of Lender to execute and deliver an amendment to the Security Agreement
incorporating this amendment.
<PAGE> 9
Crescent Real Estate Equities Limited Partnership
December 20, 1999
Page 2
To signify your receipt and acceptance of this letter of inducement, please sign
this letter in the space provided below and return a copy to the undersigned.
Very truly yours,
Crescent Development Management Corp.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
RECEIVED AND ACCEPTED:
Crescent Real Estate Equities Limited Partnership
By: Crescent Real Estate Equities, Ltd.
By:
---------------------------
Its:
---------------------------
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF CRESCENT OPERATING, INC.
<TABLE>
<S> <C>
Name of Subsidiary State of Incorporation or Organization
COI Hotel Group, Inc. Texas
WOCOI Investment Company Texas
RoseStar Management LLC Texas
Desert Mountain Development Corporation Delaware
Woodlands Land Company, Inc. Texas
Crescent CS Holdings Corporation Delaware
Crescent CS Holding II Corporation Delaware
RSCR Arizona Corp. Delaware
RSSW Corp. Delaware
Crescent Machinery Company (formerly, Moody-Day, Inc.) Texas
COPI Colorado, LP Delaware
CRL Investments, Inc. Texas
COI Arena Company Texas
Crescent Development Management Corp. Delaware
Desert Mountain Properties, LP Delaware
Western Traction Company California
E.L. Lester & Company, Inc. Texas
Solveson Crane Rental, Inc. California
COPI Cold Storage, LLC Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the: (i) Registration Statement
on Form S-4 (No. 333-57891) and related Prospectus of Crescent Operating, Inc.
(the "Company"); (ii) Registration Statement on Form S-8 (No. 333-29069) related
to the Company's Stock Incentive Plan; and (iii) Registration Statement on Form
S-8 (No. 333-43291) related to the Company's Management Stock Incentive Plan of
our reports (a) dated March 22, 2000, with respect to the consolidated financial
statements of Crescent Operating, Inc. and (b) dated March 2, 1998, with
respect to the combined financial statements of Carter-Crowley Asset Group, both
of which are included in this Annual Report on Form 10-K for the year ended
December 31, 1999.
/s/ Ernst & Young LLP
Dallas, Texas
March 28, 2000
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-57891 on Form S-4, 333-29069 on Form S-8 and 333-43291 on Form S-8 of
Crescent Operating, Inc. of our report on the consolidated financial statements
of Vornado Crescent Logistics Operating Partnership dated March 2, 2000 (March
8, 2000 as to Note 6), appearing in this Annual Report on Form 10-K of Crescent
Operating, Inc. for the period ended December 31, 1999.
/s/ DELOITTE & TOUCHE LLP
Atlanta Georgia
March 29, 2000
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statement File Numbers 333-57891, 333-29069 and 333-43291.
/s/ ARTHUR ANDERSEN LLP
Denver, Colorado
March 30, 2000.
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated December 3, 1998 except with respect to the matters discussed in
Note 13, as to which date is March 30, 2000 for Charter Behavioral Health
Systems, LLC as of and for the years ended September 30, 1998 and 1997 included
in this Form 10-K for Crescent Operating, Inc. for the year ended December 31,
1999, into the previously filed registration statements of Crescent Operating,
Inc. (Form S-4 No. 333-57891, Form S-8 No. 333-29069 and Form S-8 No.
333-43291).
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 30, 2000
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports on The Woodlands Operating Company, L.P. and The Woodlands Land
Development Company, L.P. dated January 14, 2000, and January 15, 1999,
included in this Form 10-K, into Crescent Operating, Inc.'s previously filed
Registration Statement File Nos. 333-57891, 333-29069 and 333-43291.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 39,017
<SECURITIES> 0
<RECEIVABLES> 58,445
<ALLOWANCES> 478
<INVENTORY> 47,442
<CURRENT-ASSETS> 274,223
<PP&E> 247,807
<DEPRECIATION> 32,043
<TOTAL-ASSETS> 795,653
<CURRENT-LIABILITIES> 229,969
<BONDS> 0
0
0
<COMMON> 114
<OTHER-SE> (20,636)
<TOTAL-LIABILITY-AND-EQUITY> 795,653
<SALES> 717,987
<TOTAL-REVENUES> 717,987
<CGS> 704,120
<TOTAL-COSTS> 704,120
<OTHER-EXPENSES> 26,860
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,775
<INCOME-PRETAX> 7,946
<INCOME-TAX> 3,471
<INCOME-CONTINUING> (2,695)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,695)
<EPS-BASIC> (.26)
<EPS-DILUTED> (.26)
</TABLE>
