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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 June 27, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 333-31187
W.R. CARPENTER NORTH AMERICA, INC.
(Exact name of registrant as specified in its charter)
Delaware 54-1049647
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
801 South Pine Street
Madera, California 93637
(Address of principal executive offices and zip code)
(559) 662-3900
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes[X] No [ ]
Indicate 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 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. [ ] Not applicable.
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates - Not applicable.
At September 27, 1999, there were 55,000 shares of Class A common stock, $1.00
par value, and 5,000 shares of Class B common stock, $1.00 par value, of the
registrant issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Not Applicable.
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PART I
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Item 1. Business ........................................................................... 1
Item 2. Properties ......................................................................... 8
Item 3. Legal Proceedings .................................................................. 9
Item 4. Submission of Matters to a Vote of Security Holders ................................ 10
PART II
Item 5. Market for Company's Common Equity and Related Stockholder Matters ................. 11
Item 6. Selected Financial Data ............................................................ 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ........................ 21
Item 8. Financial Statements and Supplementary Data ........................................ 22
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 42
PART III
Item 10. Directors and Executive Officers of the Company ................................... 43
Item 11. Executive Compensation ............................................................ 44
Item 12. Security Ownership of Certain Beneficial Owners and Management .................... 46
Item 13. Certain Relationships and Related Transactions .................................... 47
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K .................. 49
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FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements, usually containing the
words "estimate," "project," "expect," or similar expressions. Those statements
are subject to uncertainties, including those discussed in this report,
particularly in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 14 through 20. These uncertainties could cause
actual results to differ materially. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. For additional information regarding such forward-looking statements,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Forward-Looking Statements," on page 14.
PART I
ITEM 1. BUSINESS.
GENERAL
W.R. Carpenter North America, Inc. ("the Company") was incorporated in
1975 under the laws of Delaware and serves as the holding company for its two
operating subsidiaries, UpRight, Inc. ("UpRight') and Horizon High Reach, Inc.
("Horizon").
UpRight's stock was publicly traded from 1980 until 1988, when it was
acquired by an affiliate of the Company. In 1988, through a corporate
reorganization, UpRight became a wholly owned subsidiary of the Company. Prior
to 1989, Horizon was an independent company in the business of renting and
selling aerial work platform equipment in Southern California. In 1989, UpRight
acquired the assets of Horizon which were merged into the retail division of
UpRight's North American Operations. In 1994, Horizon became a wholly owned
subsidiary of the Company. Although Horizon distributes UpRight products, the
two companies have separate management teams and operate on an independent
basis.
UPRIGHT
UpRight is a leading manufacturer of aerial work platforms, including
scissor lifts, boom lifts, portable lifts, and aluminum scaffolding. UpRight has
been manufacturing powered scissor lifts since 1974 as an outgrowth of its
leadership in the development and sale of aluminum scaffolding. UpRight sells
its products through an extensive network of North American and international
equipment dealers and rental companies. UpRight's customers rent, and to a
lesser degree sell, its aerial work platforms to end users in construction,
commercial, industrial and institutional markets.
PRODUCTS
UpRight's aerial work platform product mix consists of four major
categories of equipment: scissor lifts, boom lifts, portable lifts and aluminum
scaffolding.
Scissor Lifts. Self-propelled scissor lifts feature work platforms
mounted on top of scissor-type or other vertical lifting mechanisms, which, in
turn, are mounted on mobile, four-wheel chassis. These machines are designed to
permit workers to position themselves and their tools and materials safely,
easily and quickly in elevated work areas. They can be maneuvered forward or
backward and steered in any direction by the operator from the work platform,
even while elevated. The uses and applications for scissor lifts are varied and
include non-residential construction, warehousing, renovations and retooling and
maintenance of manufacturing plants and institutional facilities. Equipment
Manufacturers Institute (EMI) data indicates that industry shipments of
self-propelled scissor lifts increased from approximately 11,300 units in 1990
to approximately 48,600 units in 1998, representing a compound annual growth
rate of 20% during such period.
UpRight offers scissor lifts with maximum platform heights ranging from
12 feet to 50 feet; and platform sizes ranging from 2.4 by 3.4 feet, to 5.8 by
19.3 feet. Rated lift capacities range from 500 to 2,000 pounds. UpRight offers
scissor lifts powered by electric motors; gasoline, diesel, or propane engines;
or a combination of diesel and electric power (bi-energy). Several internal
combustion engine powered models are available with four-wheel drive. Dealer net
prices for UpRight's standard models range from approximately $7,500 to $50,000.
Scissor lifts contributed 56%, 74%, and 77% of the Company's revenues for fiscal
years 1999, 1998, and 1997, respectively.
Boom Lifts. Boom lifts are especially useful for reaching over machinery
and equipment that is mounted on floors and for reaching other elevated
positions not easily accessed by other vertical lifting devices. Self-propelled
boom lifts may be maneuvered in a manner similar to scissor lifts. In addition,
the boom may be rotated up to 360 degrees in either direction. Boom lifts have
smaller platforms and less lifting capacities than larger scissor lift models.
In addition to applications similar to scissor lifts, boom lifts are used for
infrastructure construction, petroleum and chemical refineries, as well as ship
construction, repair and maintenance.
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According to industry sources, industry shipments of self-propelled boom lifts
increased from approximately 4,100 units in 1990 to approximately 19,300 units
in 1998, representing a compound annual growth rate of 21% during such period.
In 1997 UpRight introduced its first line of self-propelled boom lifts.
Since that time, UpRight has systematically deepened its boom offerings,
targeting high demand product segments. Maximum platform heights range from 46
to 80 feet, with outreach of up to 72 feet. Boom lifts are offered with electric
motors; gasoline, diesel, or propane engines; or a combination of diesel and
electric power (bi-energy). Several internal combustion engine powered models
are available with four-wheel drive. Dealer net prices for UpRight's standard
models range from approximately $38,000 to $108,000. Boom lifts contributed 10%,
12%, and 3% of the Company's revenues for fiscal years 1999, 1998, and 1997,
respectively.
Portable Lifts. Portable lifts consist of a work platform attached to a
telescopic mast that extends vertically, which in turn is mounted on a
push-around base. These machines, while in their retracted position, can fit
through standard door openings and can be loaded into a standard pickup truck
for ease in transport. Applications for this class of equipment include
institutional and commercial maintenance, distribution and retail centers,
airports and public buildings, places of worship and entertainment facilities.
UpRight offers portable lifts with maximum platform heights ranging from
20 feet to 40 feet. These models are available in either battery or AC power
configurations. In fiscal year 1999, UpRight introduced a portable lift model
featuring a self-propelled base. This machine can be maneuvered forward or
backward and steered in any direction by the operator from the work platform,
even while elevated. Current dealer net prices for UpRight's standard models
range from approximately $3,400 to $6,600.
Scaffolding. UpRight first introduced aluminum scaffolding in 1947 and
today is considered to be the North American leader in this product segment.
Scaffolding height can be adjusted by mounting individual sections on top of one
another up to a maximum height of approximately 100 feet. Today, scaffolding is
still a major rental and sales item for use on certain construction and
maintenance projects. Revenue from scaffolding in fiscal year 1999 was $5.9
million, representing approximately 2.9% of the Company's revenue.
PRODUCT DEVELOPMENT STRATEGY
UpRight's growth strategy includes developing new products to access
fast growing complementary product segments. In keeping with this strategy,
UpRight's core scissor lift line was broadened to include self-propelled boom
lifts. Having initially targeted high volume boom segments, UpRight is
developing additional models to fill out this line. UpRight is in the process of
developing a line of telescopic material handlers. Prototypes of machines in the
two largest product segments of telescopic material handlers have been completed
and are currently undergoing testing.
Telescopic material handlers are rough terrain vehicles used to
transport, lift and position materials between ground locations, between
vehicles and to elevations up to five stories in height. This equipment is
typically utilized in North America by residential and non-residential building
contractors to handle a wide range of building materials and components. In
addition, the availability of multiple attachments increases the versatility and
applications for these machines. Many of UpRight's aerial work platform
customers also sell and rent telescopic material handlers. According to industry
estimates, shipments of telescopic material handlers in North America grew from
approximately 2,400 units in 1990 to approximately 12,000 units in 1998,
representing a compound annual growth rate of 22% during such period.
UpRight invests significantly in product development and
diversification, including improvement of existing products. Research and
development expenses of UpRight have been $8.7 million, $6.0 million and $4.3
million for fiscal years 1999, 1998 and 1997, respectively. New and redesigned
products introduced in the past two years accounted for approximately 28% of
UpRight's sales in fiscal year 1999.
MARKETING AND DISTRIBUTION
UpRight sells its products through an extensive network of North
American and international equipment dealers and rental companies, including
Horizon. For fiscal year 1999, approximately 45% of UpRight's revenue was
generated by sales to customers outside of North America, which UpRight's
management believes is among the highest percentages of revenue from
international sales of any aerial work platform manufacturer.
UpRight's customers rent, and to a lesser degree sell, its aerial work
platforms to end users in construction, commercial, industrial and institutional
markets. These distributors also provide service support for UpRight machines.
UpRight supports the sales, service and rental programs of its distributors with
field sales support, product advertising, cooperative promotional programs,
major trade show participation and distributor personnel training in service,
safety and sales of all products UpRight manufactures and distributes.
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The primary customers for aerial work platforms are equipment rental
companies. Over the past several years, the North American equipment rental
industry has undergone significant consolidation. A number of UpRight's
customers have been acquired by large national rental companies. By
consolidating, these customers have gained purchasing power which has resulted
in concessions from manufacturers, including lower equipment prices, extended
financing terms, and the carrying of increased inventory to meet rapid delivery
requirements of customers. Management believes that UpRight's international
diversification and relationship with Horizon make the Company less dependent on
the business of the large national rental companies than many of its
competitors.
During fiscal years 1999, 1998 and 1997, UpRight's ten largest
customers, other than Horizon, together accounted for approximately 45%, 64% and
63% of UpRight's revenue, respectively. During fiscal year 1999, only one of
UpRight's customers accounted for more than 10% of the Company's revenue.
UpRight (U.K.) Limited (formerly Instant Zip-Up Limited) accounted for 19.1% of
UpRight's revenue and 14.7% of the Company's revenue for fiscal year 1999. An
affiliate of the Company owns a minority voting interest in UpRight (U.K.)
Limited. During fiscal year 1998, two of UpRight's customers accounted for 15.6%
and 12.8% of the Company's revenue, and in fiscal year 1997, two of UpRight's
customers accounted for 14.9% and 10.6% of the Company's revenue.
MANUFACTURING
UpRight currently manufactures scissor lifts, portable lifts, and
aluminum scaffolding in Selma, California. UpRight manufactures boom lifts in a
new facility in Madera, California, located 40 miles north of Selma.
Construction of the Madera facility was completed in December 1998, including a
telescopic material handler assembly building. UpRight transferred boom lift
production from Selma to Madera in January 1999.
The ramp-up of production at the Madera facility has been slower than
expected as UpRight underestimated the time necessary to establish a productive
workforce. While there is an abundance of unskilled labor in the Madera area,
hiring a new workforce with the requisite skills proved more difficult than
anticipated. UpRight is addressing this issue by providing training programs for
its personnel, including welders and assemblers. The continuous flow paint
facility at the Madera facility has also taken longer to come on line than
anticipated, adding substantial labor hours to each machine. UpRight is
currently painting one production boom model using this state-of-the-art paint
facility, and management believes that it will be fully operational for all
models by November 1999.
UpRight has also experienced capacity constraints at the Selma facility,
resulting primarily from increasing international customer demand for their
equipment to be painted particular colors, which usually include two tone color
schemes. The paint facilities at Selma do not have the capacity to undertake
this task efficiently at the volumes experienced in the second half of fiscal
1999. As a result, UpRight is currently in the process of installing a new
liquid paint system and negotiating to expand the existing powder paint system
at Selma. Management expects that the liquid paint facility will be operational
in January 2000 at an estimated cost of $5.0 million while the powder paint
facility is expected to be operational in June 2000 at an estimated cost of $1.5
million.
During fiscal year 2000, as capacity constraints are removed, UpRight
expects to adopt a manufacturing strategy of maintaining a relatively constant
level of production throughout the year. Although this strategy will most likely
result in elevated inventory levels in the historically slower first half of the
fiscal year, it is anticipated that it will smooth the manufacturing cycle
throughout the year, leading to more efficient use of facilities, personnel and
suppliers. In addition, this strategy is expected to increase UpRight's ability
to meet rapid delivery requirements of customers.
Historically, Upright has maintained a mix of "regular" and "temporary"
personnel, providing the flexibility to quickly adjust production levels during
periods of changing market demand. In response to smoother production levels,
and in order to retain the skilled workforce being developed, UpRight plans to
reduce the percentage of temporary workers.
MATERIAL AND SUPPLY ARRANGEMENTS
UpRight obtains raw materials, principally steel and aluminum, and other
component parts, most notably engines, drive motors, tires, bearings,
electronics and hydraulics, and supplies from third parties. Although
alternative suppliers are available for all raw materials and components,
UpRight could experience delays in obtaining components meeting the requisite
specifications from alternative suppliers in the event a principal supplier was
unable to supply a particular component. UpRight seeks to manage the risk of
unavailability of key components and raw materials through supply chain
management initiatives including supplier certification.
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COMPETITION
In selling its aerial work platform products, UpRight experiences two
principal types of competition: from alternative equipment and from other
manufacturers of aerial work platforms. UpRight competes with more traditional
means of accomplishing the tasks performed by aerial work platforms, including
truck- and trailer-mounted booms and, to a more limited extent, ladders,
scaffolding and other devices. UpRight's management believes that in many
applications its aerial work platforms are safer, more versatile and more
efficient, taking into account labor costs, than those traditional methods and
that its aerial work platforms enjoy competitive advantages when the job
requires frequent movement from one location to another at the same site or when
there is a need to return to the ground frequently for tools and materials.
UpRight competes in the aerial work platform industry primarily with
several other manufacturers, including JLG Industries ("JLG"), Genie Industries
("Genie"), Grove Worldwide, and Skyjack Inc. ("SkyJack"), which each manufacture
scissor lifts, boom lifts and portable lifts; OmniQuip International Inc.
("OmniQuip") and Terex Corp., which each manufacture scissor lifts and boom
lifts; and Mayville Engineering Company, which manufactures scissor lifts and
portable lifts. These companies compete on the basis of product quality, price,
financing, delivery, and sales and service support. Management believes JLG and
Genie each have over 30% share of the aerial work platform market, over twice
the share of the nearest competitor.
Management believes that UpRight's scissor lift product line is as
extensive as that of any other manufacturer in the industry, placing UpRight
among the top four scissor lift manufacturers worldwide. Since the introduction
of its first boom product line in 1997, UpRight has been systematically
deepening its boom offerings, targeting high demand product segments. However,
several of UpRight's competitors currently offer a more comprehensive boom lift
product line.
Certain of UpRight's competitors are part of, or are affiliated with,
companies that are larger and have greater financial resources than UpRight. For
example, Textron Inc. recently agreed to buy OmniQuip. Several of UpRight's
competitors, including JLG, Genie, and SkyJack, have significantly increased, or
are in the process of significantly increasing, their manufacturing capacity.
EMPLOYEES
UpRight had 988 persons employed as of June 27, 1999. None of UpRight's
employees is subject to collective bargaining agreements.
HORIZON
Horizon is a leading industrial equipment rental, sales and service
company specializing in aerial work platforms, including scissor lifts, boom
lifts and portable lifts, telescopic material handlers and forklifts,
scaffolding and general rental equipment, serving a diverse range of
approximately 10,000 active customers from 16 domestic locations. Horizon offers
a full service, integrated approach to serving its customers' needs by providing
rentals of equipment, sales of new and used equipment, sales of spare parts and
repair and maintenance services. For fiscal year 1999, approximately 49% of
Horizon's revenue was generated by equipment rentals, approximately 44% of
Horizon's revenue was generated by sales of new and used equipment, and the
remainder was generated by training services, sales of spare parts and certain
related customer services. Management believes that, among major industrial
equipment rental companies, Horizon has one of the highest ratios of sales to
rentals in the industry. Within the last five fiscal years, Horizon has
strategically expanded its product offerings to include, in addition to UpRight
products, certain additional product lines from other leading manufacturers.
Horizon acts as a distributor for UpRight products in all of Horizon's
designated market areas. Horizon and UpRight operate independently, and all
transactions between them are conducted on an arm's-length basis.
PRODUCTS AND SERVICES
Equipment rental represents Horizon's principal line of business. In
fiscal year 1999, equipment rental revenue, together with rental-related
revenue, such as repair services, delivery charges and damage waiver income,
accounted for approximately 49% of Horizon's revenue. Horizon also acts as a
distributor of new equipment on behalf of UpRight and certain other nationally
known equipment manufacturers. In fiscal year 1999, approximately 44% of
Horizon's revenue was derived from the sale of new and used equipment, of which
approximately 42% was equipment manufactured by UpRight. Revenue from the sale
of parts and merchandise accounted for approximately 7% of Horizon's revenue in
fiscal year 1999.
Rental Equipment. Horizon rents over 480 different models of aerial work
platforms and other industrial equipment as of June 27, 1999, consisting of
scissor lifts, boom lifts (including one truck-mounted boom lift model),
portable lifts and telescopic material handlers and forklifts, with a total
exceeding 4,250 pieces of equipment (excluding scaffolding and general rental).
The original equipment cost of Horizon's rental fleet was approximately $81.7
million as of such date. In addition, Horizon rents general rental
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equipment in two branches, with an original equipment cost of approximately $3.0
million as of such date. Horizon also maintains a comprehensive inventory of
aluminum scaffolding with an original equipment cost of approximately $977,000
as of such date. The distribution of Horizon's total rental equipment fleet
(based on original equipment cost) as of June 27, 1999 was: (i) scissor lifts
(42%); (ii) boom lifts (29%); (iii) telescopic material handlers (18%); (iv)
general rental equipment (4%); (v) forklifts (3%); (vi) scaffolding (1%); (vii)
portable lifts (1%); and (viii) other equipment (2%). The mix of rental
equipment at each of Horizon's 16 domestic locations is tailored to meet the
demands of the local customer base.
Sales of New Equipment. In addition to equipment rental, Horizon is a
distributor for various equipment manufacturers in certain of its designated
market areas, including UpRight (scissor lifts, boom lifts, portable lifts and
aluminum scaffolding), Denka Lift (specialized boom lifts), Mitsubishi
(forklifts), OmniQuip (Sky-Trak telescopic material handlers), Carelift
Equipment (telescopic material handlers) and Elliott (truck-mounted boom lifts).
Horizon also sells equipment manufactured by Genie (boom lifts). Horizon
believes that, by offering new equipment for sale, it strengthens its
relationships with its existing rental customers who may want to purchase
certain pieces of often-utilized equipment, and it enables Horizon to develop
new rental customer relationships as it sells new equipment to customers who
rent equipment to supplement their owned machines.
Sales of Used Equipment. Horizon routinely sells used equipment to
adjust the size and composition of its rental fleet to changing market
conditions and as part of its ongoing commitment to maintain a modern,
high-quality rental fleet. Horizon believes it achieves favorable sales prices
for its used equipment as a result of its preventive maintenance program and its
practice of selling used equipment before it becomes irreparable or obsolete.
Horizon's management attempts to optimize the timing of sales of used equipment
by taking into account maintenance costs, rental demand patterns and resale
prices. Horizon sells used equipment to its existing rental customers as well as
to other used equipment buyers. In fiscal year 1999, Horizon significantly
increased its sales of used equipment in order to reduce the level of equipment
that was five years old or older. The average age of Horizon's rental fleet
decreased from 39 months at June 1997 to 25 months at June 1999.
Sales of Parts and Merchandise. Horizon also sells a wide range of
repair and replacement parts, supplies and safety equipment, including
harnesses, belts and lanyards, as a complement to its equipment rental and sales
businesses. Management believes that the sales of parts, supplies and safety
equipment enhance the ability of Horizon to attract and retain customers.
Service. Horizon also generates revenue from maintenance and service by
providing various options to its customers, including service on a contract or
time-and-materials basis for customers who own their equipment and over the life
of a lease for customers who lease their equipment. Horizon's trained personnel
perform both the maintenance and service work on Horizon's rental fleet and to
customers who own equipment. Horizon's safety department also provides safety
training and operator training courses, including operator certification and
"train-the-trainer" programs.
OPERATIONS
Horizon's sales and rental functions are managed at each of its
locations. Each year, location managers budget expected new equipment sales and
rental equipment expenditures and parts and service needs for their respective
markets.
Horizon seeks to manage its rental fleet to optimize the return on its
investment in rental equipment. Senior management regularly interacts with
branch managers to monitor equipment utilization rates and indicated demand at
each location in order to determine and react to trends and imbalances between
supply and demand for equipment. In late fiscal year 1998, Horizon divided its
operations into three regions, which are overseen by regional managers. The use
of regions has superseded the need for a "hub-and-spoke" network among certain
of its branch and satellite locations. Through its information systems,
employees at locations within a certain region are able to locate a specific
item within that geographic region and determine whether that item is currently
rented to a customer, undergoing maintenance or available for delivery.
Depending on a number of objective factors, such as transportation costs between
branches and length of rental, management will determine whether the equipment
should be transferred to a different branch.
During fiscal year 1999, Horizon acquired the stock of an aerial work
platform sales, rental and repair company in Commerce City, Colorado for $2.3
million plus $3.3 million of assumed debt.
Horizon utilizes an integrated AS400 information system that allows both
the corporate headquarters and the branch locations to have instantaneous access
to all inventory and rental information. The system also provides immediate
access to customer records and needs and management believes enables Horizon to
move its assets among locations to optimize equipment utilization and maximize
customer service. Management believes that its information systems are an
integral component in its ability to manage its locations effectively.
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CUSTOMERS
Horizon serves a diverse range of approximately 10,000 active customers.
No single customer of Horizon accounted for more than 1% of Horizon's revenue
during fiscal years 1999, 1998 and 1997. Horizon classifies its customers as
either construction or industrial end users. In fiscal year 1999, approximately
59% of Horizon's revenue was derived from construction end users, with the
remaining 41% being derived from industrial end users. In fiscal year 1998,
approximately 54% of Horizon's revenue was derived from construction end users,
with the remaining 46% being derived from industrial end users. In fiscal year
1997, approximately 53% of Horizon's revenue was derived from construction end
users, with the remaining 47% being derived from industrial end users. The
increase in the percentage of revenue derived from construction related users in
fiscal year 1999 compared to fiscal year 1998 is due to an increase in Horizon's
sales and rental of telescopic material handlers during such period.
Construction customers include users in specialized trades, such as
electricians, painters, HVAC and mechanical contractors. Industrial customers
include users engaged in the maintenance of warehouses, manufacturing plants and
commercial and institutional facilities.
COMPETITION
The equipment rental industry has undergone significant consolidation
over the past several years. These large national rental companies have acquired
numerous companies in all regions of the country. In a number of large
metropolitan areas, notably New York and Los Angeles, management estimates that
the large national rental companies have market shares greater than 60%. The
largest national rental company, United Rentals, has reported annualized revenue
of approximately $2 billion in 700 locations, with Atlas-Copco, through its
owned companies Prime and Rental Service Corporation, reporting approximately
$1.2 billion in revenue in 300 locations. Horizon competes with some or all of
these large national rental companies in each of its locations.
At this point, management believes that such consolidation has had only
a negligible effect on Horizon's operations. On the positive side, rental rates
have tended to stabilize as companies that had been former competitors have been
consolidated. In addition, Horizon has been able to hire a number of quality
employees (mechanics, drivers, operations) in an otherwise tight job market. On
the negative side, with so many locations in a given market, the large national
rental companies are often better able to deliver equipment to the end user on a
timely basis.
SUPPLIERS
Each Horizon branch carries a comprehensive line of UpRight equipment in
its rental fleet, including scissor lifts, boom lifts and portable lifts, as
well as generally carrying aluminum scaffolding. Each location also carries a
variety of equipment from other manufacturers, including boom lifts and
forklifts. Horizon purchases all of its equipment directly from the original
equipment manufacturer. UpRight accounted for approximately 60%, 45%, and 53% of
Horizon's total capital purchases of equipment for fiscal years 1999, 1998 and
1997, respectively. Horizon believes it could readily replace any of its
suppliers for rental equipment if it were necessary.
SALES AND MARKETING
In the sales and rental of aerial work platforms, Horizon's strategy is
to focus on small- to mid-sized end users. Horizon concentrates on providing a
wide selection of equipment choices to a large, diversified customer base while
providing comprehensive customer service and technical support.
There are currently 78 employees in Horizon's sales force, including
specialists who focus on the construction industry, with a primary focus on
equipment rentals, specialists who focus on the industrial market, with a
primary focus on equipment sales, and special account managers who focus on
specialized industries and end users. Horizon's sales force has been with
Horizon an average of approximately three years. Sales personnel are compensated
on a salary-plus-commission basis and report directly to branch managers or
sales managers.
Horizon promotes its services through a combination of direct sales
contacts, telemarketing, listings in telephone directories, subscriptions to
industry data base lists and pursuing leads obtained from manufacturers. In
addition, each Horizon field office annually participates in approximately five
informational trade shows in their market area and, combined with the
manufacturers' national shows, Horizon sales representatives annually attend
approximately 60 trade shows on a company-wide basis.
EMPLOYEES
As of June 27, 1999, Horizon had a total of 329 full-time employees,
including 14 personnel in the Fresno headquarters who provide administrative and
accounting services. Each branch location averages 14 to 23 people, typically
structured as follows: one manager, three to four office persons, two to five
sales persons, five to eight mechanics and three to five truck drivers. Horizon
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is unionized in four locations: Ridgefield Park and Lakewood, New Jersey;
Highland, New York; and Chicago, Illinois. In New Jersey and New York, a total
of 19 mechanics and drivers are members of the International Brotherhood of
Operating Engineers, while the Chicago branch has a total of five mechanics and
drivers represented by the Automobile Mechanics' Local #701.
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ITEM 2. PROPERTIES.
The Company maintains its corporate and administrative offices at
UpRight's Madera, California facility at 801 South Pine Street, Madera,
California 93637, telephone (559) 662-3900.
UpRight maintains its headquarters and manufacturing operations at its
owned facilities at 1775 Park Street, Selma, California 93662, telephone (559)
891-5200. UpRight has approximately 335,000 square feet of manufacturing space
at its Selma, California facility, where it manufactures all of the scissor and
portable lift products as well as scaffolding. To support its product line
expansion strategy, UpRight added a 325,000 square foot facility in Madera,
California, where it manufactures boom lifts and which is expected to be
utilized to manufacture telescopic material handlers. The Madera building
program was financed through a 15 year bank loan. UpRight also leases a sales
office and training facility in Cincinnati, Ohio with a five-year term and a
storage facility in Selma, California with a six-month term with optional
six-month renewals.
Horizon's corporate headquarters are located at 1540 East Shaw Avenue,
Suite 123, Fresno, California 93710, telephone (559) 248-8180. Horizon currently
has 16 branch facilities at the following locations: Atlanta, Georgia; Charlotte
and Raleigh, North Carolina; Beltsville, Maryland; Hayward, Napa, Sacramento and
Brea, California; Elmhurst, Illinois; Houston, Katy (Houston), and Dallas,
Texas; Commerce City (Denver), Colorado; Ridgefield Park and Lakewood, New
Jersey; and Highland, New York. Horizon's corporate headquarters are leased for
a term expiring in August 2000. The branch facilities in Dallas and Katy, Texas,
and Brea, California are owned by the Company. Otherwise, Horizon's branch
facilities are typically leased for terms ranging from three to five years with
options to extend or renew. Horizon's management believes it would be able to
relocate its branches to alternate locations on comparable lease terms.
The Company's properties used in its operations are considered to be in
good operating condition, well maintained and suitable for their present
purposes.
Page 8
<PAGE> 11
ITEM 3. LEGAL PROCEEDINGS.
Use of products manufactured by UpRight and sold or rented by Horizon
involves exposure to personal injury as well as property damage, particularly if
operated carelessly or without proper maintenance, and liability exposure for
the Company, UpRight and Horizon.
There are various claims and litigation pending against UpRight and
Horizon for personal injury and property damage arising out of incidents
involving the use of UpRight products and, in the case of Horizon, products of
UpRight and other manufacturers. The Company believes that litigation of this
type is common in the businesses of UpRight and Horizon and for other
manufacturers and distributors in the aerial work platform industry. Although
the outcome of such litigation cannot be predicted with certainty, it is the
opinion of management, based on the advice of legal counsel and other
considerations, that (except as described below) all claims, legal actions,
complaints and proceedings which have been filed or are pending against UpRight
and Horizon, as well as possible future claims, are adequately covered by the
Company's comprehensive general liability insurance policies, subject to certain
deductible amounts and maximum coverage limits.
The Company has accrued what management believes are adequate reserves
with respect to pending and potential claims. Management believes that UpRight's
and Horizon's potential exposure to product liability/general claims may be
affected by the substantial growth in usage of aerial work platforms over the
past several years, which has dramatically increased machine population and the
number of users. There can be no assurance that existing or future claims will
not exceed the level of UpRight's and Horizon's insurance, or that such
insurance will continue to be available on economically reasonable terms, or at
all. In addition, certain types of claims, such as claims for punitive damages
or for damages arising from intentional misconduct, generally are not covered by
insurance. Since the acquisitions of UpRight and Horizon by the Company, neither
subsidiary has been required to pay any claim for punitive damages. Product
liability costs incurred by the Company, including premiums and self-insurance
retention payments for legal judgments and settlement costs, for fiscal years
1999, 1998 and 1997 approximated 0.2%, 1.7%, and 2.2% of revenue, respectively.
Various legal actions (in areas other than product liability) may arise in the
ordinary course of business from time to time against the Company, UpRight or
Horizon. Other than with respect to product liability or as described below,
there is no material litigation currently pending against the Company, UpRight
or Horizon. None of the litigation pending against UpRight is expected to have a
material adverse effect on the Company's financial condition, results of
operations or liquidity. Horizon has been sued for damages arising out of a
traffic accident involving a Horizon employee. The matter is in the early stages
of investigation, pleading and discovery. No demand has been received. However,
the initial "prayer" for damages in the complaint, which was filed in the
United States District Court for the Eastern District of Virginia,
Alexandria Division, in July 1999, by Roy Woodle, seeks to recover $25.0 million
in general damages, which amount exceeds Horizon's $11,000,000 combined policy
limits of primary and excess insurance for this type of loss. The complaint
alleges a cause of action for negligence. Based upon investigation to date and
consultation with the Company's insurance carrier and legal counsel, management
does not believe that the ultimate resolution of this matter will have a
materially adverse effect on the Company's financial condition, results of
operations or liquidity.
Page 9
<PAGE> 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
Page 10
<PAGE> 13
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is no public market for the common stock or equity securities of
the Company. See "Item 12" and "Item 7--Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
Page 11
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA.
The following Selected Financial Data has been taken or derived from the
audited consolidated financial statements of the Company and should be read in
conjunction with and is qualified in its entirety by the full consolidated
financial statements, related notes and other information included elsewhere
herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 27, JUNE 28, JUNE 29, JUNE 30, JULY 2,
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Revenue (1) ................................. $200,197 $170,797 $139,904 $117,903 $ 85,157
Cost of revenue ............................. 146,814 117,844 94,315 78,638 58,217
-------- -------- -------- -------- --------
Gross profit ................................ 53,383 52,953 45,589 39,265 26,940
Research and development expenses ........... 8,691 5,952 4,281 2,865 1,817
Product liability costs ..................... 351 2,807 3,115 3,015 2,094
Selling, general, and administrative expenses 31,623 23,902 18,117 15,124 13,982
-------- -------- -------- -------- --------
Income from operations ...................... 12,718 20,292 20,076 18,261 9,047
Interest expense, net ....................... 12,110 9,421 3,983 2,907 2,566
Other Expense, net .......................... 194 6 -- 539 186
-------- -------- -------- -------- --------
Income before provision for Income taxes .... 414 10,865 16,093 14,815 6,295
Provision for income taxes .................. 211 3,206 6,131 6,047 2,608
Net income .................................. $ 203 $ 7,659 $ 9,962 $ 8,768 $ 3,687
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Cash and cash equivalents ................... 13,328 63,669 77,345 11,164 4,314
Working Capital (deficit) ................... 54,709 88,490 98,835 7,877 (4,271)
Total assets ................................ 224,020 196,659 167,825 75,985 55,082
Total debt .................................. 150,606 124,127 113,884 36,999 30,456
Stockholder's equity ........................ 28,393 34,690 27,031 17,069 8,298
OTHER DATA:
EBITDA (2) .................................. $ 26,388 $ 28,345 $ 25,880 $ 22,695 $ 12,626
</TABLE>
Page 12
<PAGE> 15
(1) The following details UpRight's and Horizon's revenue, and the
elimination of inter-company sales for fiscal years 1999, 1998, 1997,
1996 and 1995:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
JUNE 27, JUNE 28, JUNE 29, JUNE 30, JULY 2,
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
UpRight ........... $ 153,875 $ 137,975 $ 110,471 $ 93,273 $ 65,593
Horizon ........... 77,110 54,725 44,315 38,112 32,236
Inter-company sales (30,788) (21,903) (14,882) (13,482) (12,672)
--------- --------- --------- --------- ---------
$ 200,197 $ 170,797 $ 139,904 $ 117,903 $ 85,157
========= ========= ========= ========= =========
</TABLE>
(2) EBITDA represents income before extraordinary item, net interest
expense, financing costs, income taxes, depreciation and amortization
and other expenses and income. The Company has included information
concerning EBITDA in its annual report because it is used by certain
investors as a measure of a company's ability to service its debt
obligations. EBITDA should not be used as an alternative to, or be
considered more meaningful than, operating income, net income or cash
flow as an indicator of the Company's operating performance. In
addition, in fiscal year 1999, depreciation and amortization includes
$408 of accelerated amortization, resulting from impairment of certain
long lived assets.
Page 13
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD-LOOKING STATEMENTS:
Certain statements in this Annual Report on Form 10-K include
forward-looking information 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, and are subject to the "safe harbor" created by those sections.
These forward-looking statements involve certain risks and uncertainties that
could cause actual results to differ materially from those in the
forward-looking statement. Such risks and uncertainties include, but are not
limited to, the following factors: substantial leverage of the Company;
industrial cyclicality; dependence on the construction industry; consolidation
of the customer base; dependence upon major customers; risks relating to growth;
significance of new product development; the need for continual capital
expenditures; competition; product liability; insurance; availability of product
components; reliance on suppliers; foreign sales; government and environmental
regulation; labor matters; holding company structure; restrictions under debt
agreements; fraudulent conveyance; and control by the sole stockholder.
GENERAL
This discussion should be read in conjunction with the Company's
consolidated financial statements and the notes thereto appearing in Item 8 of
this Annual Report on Form 10-K.
The Company's strategy is to create shareholder value by providing
capital, strategic and financial direction and management to its wholly owned
operating subsidiaries, UpRight and Horizon. Prior to fiscal year 1994, Horizon
was a division of UpRight, operating as a captive equipment dealer and
industrial equipment rental company in certain markets. In fiscal year 1994, the
Company decided each business would be managed and operated separately. All
inter-company transactions between UpRight and Horizon are currently, and are
intended to continue to be, conducted on an arm's-length basis. UpRight sells
equipment to Horizon for the same price it would otherwise charge a comparable
distributor. Horizon purchases equipment from UpRight, as well as from other
major manufacturers, including certain models and product lines that may be
produced by UpRight. The Company intends to maintain the distributor/supplier
relationship between the two subsidiaries. Sales to Horizon accounted for
approximately 19%, 16%, and 13% of UpRight's revenue for fiscal years 1999, 1998
and 1997, respectively. Purchases from UpRight accounted for 60%, 45% and 53% of
Horizon's total capital purchases of equipment for fiscal years 1999, 1998 and
1997, respectively. UpRight and Horizon maintain stand-alone financial
statements. Sales from UpRight to Horizon are reflected in UpRight's stand-alone
financial statements at the actual arm's-length price charged. Purchases by
Horizon from UpRight are reflected in Horizon's stand-alone financial statements
at dealer cost. "Dealer cost" means the price paid by Horizon to purchase
equipment from equipment manufacturers, including from UpRight on arm's-length
terms. All significant inter-company balances and transactions are eliminated in
consolidation.
Demand in the aerial work platform and industrial equipment rental
industries has been historically related to the cyclical levels of construction
and industrial activity in North America, and may at times change dramatically.
The Company expects the aerial work platform industry will continue to be
dependent upon North American construction and industrial activity, although
international sales increasingly comprise a greater proportion of total industry
revenues. The Company believes that UpRight has among the highest percentages of
revenue from international sales of any aerial work platform manufacturer, and
that this diversification may help mitigate the impact of cyclical downturns in
North America. Horizon responds to downturns in the United States construction
market by delaying expansion capital expenditures and adjusting the timing of
replacement capital expenditures.
Page 14
<PAGE> 17
The following table sets forth for the periods indicated certain
historical revenue and percentages from customer geographical segments:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
JUNE 27, JUNE 28, JUNE 29,
1999 1998 1997
------------------- ------------------- -------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
United States, Canada, Latin
America ................. $132.0 65.9% $115.2 67.4% $ 96.8 69.2%
Europe ..................... 64.3 32.1% 48.3 28.3% 35.3 25.2%
Pacific Rim ................ 3.9 2.0% 7.3 4.3% 7.8 5.6%
------ ----- ------ ----- ------ -----
$200.2 100.0% $170.8 100.0% $139.9 100.0%
====== ===== ====== ===== ====== =====
</TABLE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain
historical income statement data derived from the Company's consolidated
statements of operations expressed in dollars and as a percentage of net
revenue.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
JUNE 27, JUNE 28, JUNE 29,
1999 1998 1997
------------------- ------------------- -------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue .............. $200,197 100.0% $170,797 100.0% $139,904 100.0%
Cost of revenue ...... 146,814 73.3% 117,844 69.0% 94,315 67.4%
-------- -------- -------- -------- -------- --------
Gross profit ......... 53,383 26.7% 52,953 31.0% 45,589 32.6%
Operating expenses ... 40,665 20.3% 32,661 19.1% 25,513 18.2%
-------- -------- -------- -------- -------- --------
Income from operations 12,718 6.4% 20,292 11.9% 20,076 14.4%
Interest expense, net 12,110 6.0% 9,421 5.5% 3,983 2.8%
Other expense, net .. 194 .1% 6 -- -- --
Provision for
Income taxes ......... 211 .1% 3,206 2.4% 6,131 4.4%
-------- -------- -------- -------- -------- --------
Net income ........... $ 203 .1% $ 7,659 4.5% $ 9,962 7.1%
======== ======== ======== ======== ======== ========
EBITDA ............... $ 26,388 13.2% $ 28,345 16.6% $ 25,880 18.5%
Depreciation &
amortization ....... 13,670 8,053 5,804
</TABLE>
SEGMENT OPERATIONS
The Company believes its results of operations for its UpRight and
Horizon subsidiaries are most meaningful when analyzed from the perspective of
two arm's-length companies. The following table sets forth for the periods
indicated certain historical consolidating income statement data derived from
the Company's consolidated statements of operations expressed in dollars and as
a percentage of revenue.
When equipment purchased from UpRight by Horizon is included in
Horizon's rental fleet, or held as sales inventory at the end of a reporting
period, the gross profit earned by UpRight on the sale of this equipment is
eliminated from the Company's consolidated gross profit. As Horizon's purchases
of equipment for rental fleet purposes vary by reporting period, and the level
of UpRight equipment held in sales inventory by Horizon fluctuates by reporting
period, the resulting elimination of gross profit on consolidation can cause
consolidated income from operations to fluctuate between reporting periods.
Page 15
<PAGE> 18
CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
12 MONTHS ENDED JUNE 27, 1999
<TABLE>
<CAPTION>
COMPANY HORIZON UPRIGHT ELIMINATIONS CONSOLIDATED
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues
Equipment Sales
New .......................... $ 30,315 $ 153,773 $ (30,788) $ 153,300
Used ......................... 7,109 7,109
Rental and Services .............. 39,686 102 39,788
--------- --------- --------- --------- ---------
Total Revenues ............... -- 77,110 153,875 (30,788) 200,197
Gross Profit
Equipment Sales
New .......................... 6,318 35,630 121 40,834
Used ......................... 2,109 2,109
Rental and Services .............. 322 13,710 (37) (4,790) 10,440
--------- --------- --------- --------- ---------
Total Gross Profit .......... 322 22,137 35,593 (4,669) 53,383
% of Revenues ............. 28.7% 23.1% 26.7%
Operating expenses
Selling, general and administrative $ 5,863 14,568 11,192 31,623
Product Liability ................. 351 351
Research and development .......... 8,691 8,691
--------- --------- --------- --------- ---------
Total Operating Expenses .... 5,863 14,568 20,234 -- 40,665
Income/(Loss) from Operations ........... $ (5,541) $ 7,569 $ 15,359 $ (4,669) $ 12,718
% of Revenues ............... 9.8% 10.0% 6.4%
</TABLE>
Page 16
<PAGE> 19
<TABLE>
<CAPTION>
CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
12 MONTHS ENDED JUNE 28, 1998
COMPANY HORIZON UPRIGHT ELIMINATIONS CONSOLIDATED
------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues
Equipment Sales
New .......................... $ 21,926 $ 137,975 $ (21,903) $ 137,998
Used ......................... 4,207 4,207
Rental and Services ............... 28,592 28,592
--------- ---------- --------- ---------- ---------
Total Revenues ............... -- 54,725 137,975 (21,903) 170,797
Gross Profit
Equipment Sales
New .......................... 4,900 39,022 (867) 43,055
Used ......................... 1,807 1,807
Rental and Services ............... 10,769 (2,678) 8,091
--------- ---------- --------- --------- ---------
Total Gross Profit .......... -- 17,476 39,022 (3,545) 52,953
% of Revenues ............. 31.9% 28.3% 31.0%
Operating expenses
Selling, general and administrative $ 1,321 11,376 11,205 23,902
Product Liability ................. 2,807 2,807
Research and development .......... 5,952 5,952
--------- --------- --------- --------- ---------
Total Operating Expenses .... 1,321 11,376 19,964 -- 32,661
Income/(Loss) from Operations .......... $ (1,321) $ 6,100 $ 19,058 $ (3,545) $ 20,292
% of Revenues ............... 11.1% 13.8% 11.9%
</TABLE>
FISCAL YEAR ENDED JUNE 27, 1999 COMPARED TO FISCAL YEAR ENDED JUNE 28, 1998
Revenue increased by 17.2% to $200.2 million in fiscal year 1999 from
$170.8 million in fiscal year 1998. The increase of $29.4 million was primarily
attributable to increased revenue from sales of new equipment of $15.3 million
(including sales of UpRight equipment by Horizon) and increased rental and
service revenue for Horizon of $11.1 million. The primary reasons for the
increase in new equipment sales were UpRight's sales of large scissor lifts and
boom lifts and Horizon's sales of telescopic material handlers. The increase in
Horizon's rental and service revenue was primarily attributable to significant
rental fleet additions and the inclusion of results from businesses acquired
subsequent to the third quarter in fiscal year 1998.
Gross profit for fiscal year 1999 was $53.4 million, an increase of $0.4
million over gross profit of $53.0 million for fiscal year 1998. The increase in
gross profit is attributable to higher revenue; however, gross margins decreased
to 26.7% for fiscal year 1999 compared to 31.0% for the previous fiscal year,
due to a combination of factors at UpRight and Horizon. During fiscal 1999,
UpRight faced increased competitive pricing pressure on its sales of new
equipment and inefficiencies in its manufacturing process. UpRight's
manufacturing inefficiencies were due to the ramp-up of production at the new
Madera facility caused by the slower than expected development of a trained,
productive workforce and delays in bringing on-line the continuous flow paint
facility. In addition, UpRight experienced paint capacity constraints at its
Selma facility. Gross profit was also negatively impacted due to increased sales
of lower margin forklifts and telescopic material handlers at Horizon, together
with lower sales prices on used equipment and increased depreciation expense,
and higher elimination of gross profit attributable to UpRight's products held
in Horizon's rental fleet and sales inventory as of June 27, 1999 compared to
June 28, 1998.
Operating expenses, consisting of selling, general and administrative
expenses, product liability and research and development expenses were $40.7
million for fiscal year 1999 compared to $32.7 million for the same period last
year. SG & A expenses increased by $7.7 million to $31.6 million in fiscal year
1999 compared to fiscal year 1998, due to higher corporate expenses of $3.5
million at the Company, including a $1.0 million severance payment to the former
President of the Company, and higher marketing and administrative expenses at
Horizon of $3.5 million due to the increase in size of the business. Product
liability expense was $0.4 million for fiscal year 1999 compared to $2.8 million
in fiscal year 1998. The decrease in product liability expense is primarily due
to the reduction in the accrued liability based on a low incident rate and cost
per case experienced in fiscal year 1999. Research and development expense for
fiscal year 1999 was $8.7 million compared to $6.0 million for fiscal year 1998.
The increase in Research and development expenses is due to developing new boom
lift products and telescopic material handlers.
Page 17
<PAGE> 20
Interest expense, net of interest income, increased to $12.1 million for
fiscal year 1999 from $9.4 million for fiscal year 1998 due primarily to lower
cash balances and higher borrowings used to fund Horizon's rental additions and
UpRight's Madera facility construction.
Income taxes in fiscal year 1999 were $0.2 million compared to $3.2
million in fiscal year 1998. The decrease in provision for income taxes is
primarily due to lower taxable income in fiscal year 1999.
Net income for fiscal year 1999 was $0.2 million, representing a
decrease of $7.5 million from net income of $7.7 million for the previous fiscal
year, as a result of the factors described above.
FISCAL YEAR ENDED JUNE 28, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 29, 1997
Revenue increased by 22.1% to $170.8 million in fiscal year 1998 from
$139.9 million in fiscal year 1997. The increase of $30.9 million was
attributable to increased revenue from sales of new equipment of $24.1 million
(including sales of UpRight equipment by Horizon) and increased rental and
service revenue for Horizon of $5.1 million. UpRight's sales of larger scissor
lifts and boom lifts were the primary reasons for the increase in new equipment
sales. The increase in Horizon's rental and service revenue was primarily
attributable to rental fleet additions and the inclusion of results from
businesses acquired subsequent to the third quarter in fiscal year 1997.
Gross profit for fiscal year 1998 was $53.0 million, an increase of $7.4
million over gross profit of $45.6 million for fiscal year 1997. The increase in
gross profit is attributable to higher revenue; however, gross margins decreased
to 31.0% for fiscal year 1998 compared to 32.6% for the previous fiscal year,
due to new product introductions and higher elimination of gross profit
attributable to UpRight's products held in Horizon's rental fleet and sales
inventory as of June 28, 1998 compared to June 29, 1997.
Operating expenses, consisting of selling, general and administrative
expenses, product liability and research and development expenses were $32.7
million for fiscal year 1998 compared to $25.5 million for the same period last
year. SG & A expenses increased by $5.8 million to $23.9 million in fiscal year
1998 compared to fiscal year 1997, due to an increase in domestic and
international selling and marketing expense associated with higher unit volumes,
as well as expenses incurred in connection with the introduction of new products
and establishing a sales office in South America and in Asia. Product liability
expense was $2.8 million for fiscal year 1998 compared to $3.1 million in fiscal
year 1997. Research and development expense for fiscal year 1998 was $6.0
million compared to $4.3 million for fiscal year 1997. The increase in Research
and development expenses reflected the Company's increased emphasis on
developing new and re-designed aerial work platform products.
Interest expense, net of interest income, increased to $9.4 million for
fiscal year 1998 from $4.0 million for fiscal year 1997 due to the Company's
issuance of its Notes in June 1997.
Income taxes in fiscal year 1998 were $3.2 million compared to $6.1
million in fiscal year 1997. The decrease in provision for income taxes is
primarily due to business tax credits realized in fiscal year 1998.
Net income for fiscal year 1998 was $7.7 million, representing a
decrease of $2.3 million from net income of $10.0 million for the previous
fiscal year, as a result of the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow requirements are for working capital, capital
expenditures and debt service.
The Company meets its liquidity needs through internally generated funds
and committed finance facilities available to its subsidiaries, UpRight and
Horizon, and cash balances.
Page 18
<PAGE> 21
The Company's cash balance as of June 27, 1999 was $13.3 million. This
cash is used in part to finance the capital expenditure program at UpRight and
Horizon and, in addition, used for general corporate purposes. UpRight and
Horizon have revolving lines of credit from major financial institutions of
$20.0 million and $5.3 million, respectively. As of June 27, 1999, UpRight and
Horizon had utilized $6.5 million and $4.4 million of their respective revolving
lines of credit. On August 9, 1999, UpRight entered into a financing agreement
with a financial institution that will hold available to UpRight credit
facilities in the aggregate total amount of $40.0 million to renegotiate its
existing revolving line of credit of $20.0 million. Facility number one is a
revolving line of credit for working capital of up to $25.0 million, with a
step-down of available commitment amount and outstanding balances to $20.0
million on January 31, 2000. Facility number two is a revolving line of credit
for funding equipment purchases of up to $10.0 million due and payable at
maturity, which is June 30, 2000, with periodic principal reductions from
refinance by certain leasing companies. Facility number three is a revolving
line of credit for real estate construction and improvements of the boom
manufacturing plant of up to $5.0 million, due and payable at maturity, which is
June 30, 2000. On September 3, 1999, Horizon entered into a financing agreement
with a financial institution to increase its credit facilities from $5.3 million
to $46.3 million. The facility includes a $30.0 million term loan, payable in
equal principal payments plus accrued interest for 60 months. In addition, a $10
million facility was established for purchasing rental equipment during fiscal
2000. This facility is interest only and will convert to a five year term loan
in July 2000. Finally, Horizon's revolver was increased from $5.25 million to
$6.25 million.
The Company's working capital was $54.7 million and $88.5 million at
June 27, 1999 and June 28, 1998, respectively. The decrease in working capital
is due to the reduction of cash balances of $50.3 million in fiscal year 1999.
The cash was used to finance Horizon's capital expenditure program, including
acquisitions made during fiscal year 1999. Inventories and accounts receivable
increased by $26.7 million during fiscal year 1999 due to the increased revenues
from new products, acquisitions made by Horizon, and extended terms provided by
UpRight to its international customers.
The Company's outstanding debt was $150.6 million and $124.1 million at
June 27, 1999 and June 28, 1998, respectively. The increase in borrowings was
due to UpRight financing capital expenditures at its Selma and Madera facilities
of $27.4 million during fiscal year 1999. Cash and cash equivalents were $13.3
million and $63.7 million as of June 27, 1999 and June 28, 1998, respectively.
Net cash used by operating activities was $9.9 million in fiscal year
1999 compared to net cash provided by operating activities of $5.0 million for
fiscal year 1998. The increase in net cash usage by operating activities of
$14.9 million is primarily related to lower net income of $7.5 million, an
increase in accounts receivable usage of $8.2 million, and an increase in
inventory usage of $3.0 million offset by higher depreciation and amortization
of $5.2 million.
Cash used in fiscal year 1999 for the purchase of property, plant and
equipment totaled $65.1 million, including $14.3 million used in the three
months ended June 27, 1999. This capital expenditure was incurred to upgrade and
expand Horizon's rental fleet and UpRight's manufacturing facilities at Selma
and Madera, California.
Net cash provided by financing activities was $19.9 million and $10.2
million in fiscal year 1999 and fiscal year 1998, respectively. The increase in
net cash provided by financing activities resulted primarily from UpRight
borrowing to fund the construction of its manufacturing facility at Madera,
California. The Company paid a dividend of $6.5 million to WRC Holdings, Inc. in
fiscal year 1999 and no dividend in fiscal year 1998.
In addition to its cash on hand, the Company believes that internally
generated funds and amounts available to UpRight and Horizon under revolving
credit facilities are and will continue to be sufficient to satisfy its
operating cash requirements and planned capital expenditures. The Company may,
however, require additional capital through borrowings if the Company undertakes
acquisitions.
SEASONALITY
The Company's revenue and operating results historically have fluctuated
from quarter to quarter, and the Company expects that they will continue to do
so in the future. These fluctuations have been caused by a number of factors,
including seasonal purchasing patterns of UpRight's customers and seasonal
rental patterns of Horizon's customers (principally due to the effect of weather
on construction activity). The operating results of any historical period are
not necessarily indicative of results for any future period.
Page 19
<PAGE> 22
YEAR 2000
The Year 2000 ("Y2K") issue is the result of computer programs being
written using two digits (i.e. "98") rather than four (i.e. "1998") to define
the applicable year. These programs treat years as occurring between 1900 and
the end of 1999 and do not self-convert to reflect the upcoming change in the
century. In addition, February, 2000 is a leap year at the end of a century, an
event that occurs only once every 400 years. If not corrected, computer
applications could fail or create erroneous results in date sensitive
applications.
Each of the Company, UpRight and Horizon has undertaken a program to
understand the nature and extent of the work required to make its respective
systems Y2K compliant. These programs encompass information systems, facilities
systems, vehicles, UpRight and Horizon's products and the readiness of UpRight
and Horizon's suppliers and customers. These programs include the following
phases: identification and assessment, compliance plan development, remediation
and testing, and contingency planning.
Each of the Company, UpRight and Horizon have essentially completed
their Y2K programs and believe their respective systems and products to be
compliant. The Company (including UpRight and Horizon) does not believe there to
be any Y2K issue with the products it sells, rents or services. Each of the
Company, UpRight and Horizon has written assurances from its respective
suppliers to confirm this.
The total cost of the Y2K project to date has not been material. The
Company believes that the most reasonably likely worst case Y2K scenario would
result from suppliers or other third parties failing to achieve Y2K compliance.
Depending upon the number of third parties, their identity and the nature of the
non-compliance, the Y2K issue could have a material adverse effect on the
Company's financial position or results of operations. The Y2K project has
significantly reduced the Company's level of uncertainty about the compliance
and readiness of third parties. The Company is completing a contingency plan
should any problems occur in critical areas.
Page 20
<PAGE> 23
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
Page 21
<PAGE> 24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Independent Auditors' Report ...................................... 23
Consolidated Balance Sheets -- June 27, 1999 and June 28, 1998 .... 24
Consolidated Statements of Operations -- Years Ended June 27, 1999,
June 28, 1998 and June 29, 1997 ................................... 25
Consolidated Statements of Stockholder's Equity -- Years Ended
June 27, 1999, June 28, 1998 and June 29, 1997 .................. 26
Consolidated Statements of Cash Flows -- Years Ended June 27, 1999,
June 28, 1998 and June 29, 1997 ................................. 27
Notes to Consolidated Financial Statements ........................ 28
Consolidated Financial Statements Schedule:
Schedule II-Valuation and Qualifying Accounts ................. 41
</TABLE>
Schedules other than those listed above are omitted because they are not
required or are not applicable, or the required information is shown in the
respective consolidated financial statements or notes thereto.
Page 22
<PAGE> 25
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
W.R. Carpenter North America, Inc.
Madera, California
We have audited the consolidated balance sheets of W.R. Carpenter North America,
Inc. and subsidiaries as of June 27, 1999 and June 28, 1998 and the related
consolidated statements of operations, stockholder's equity and cash flows for
each of the three years in the period ended June 27, 1999 and the related
financial statement schedule listed in the accompanying index at item 8. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of W.R. Carpenter North
America, Inc. and subsidiaries as of June 27, 1999 and June 28, 1998 and the
results of their operations and their cash flows for each of the three years in
the period ended June 27, 1999 in conformity with generally accepted accounting
principles.
PANNELL KERR FORSTER
Certified Public Accountants
A Professional Corporation
Los Angeles, California
August 22, 1999, except for note 21 for which the date is September 3, 1999
Page 23
<PAGE> 26
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
JUNE 27, JUNE 28,
1999 1998
-------- --------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents .................................... $ 13,328 $ 63,669
Accounts receivable (net of allowance for doubtful accounts
of $618 and $410, respectively) .......................... 41,817 28,625
Inventories .................................................. 38,748 27,407
Prepaid expenses and other ................................... 2,345 2,995
Prepaid income taxes ......................................... 1,300 --
Deferred income taxes ........................................ 1,448 1,791
-------- --------
Total current assets ...................................... 98,986 124,487
Property, plant and equipment, net ............................. 115,007 62,765
Other assets ................................................... 10,027 9,407
-------- --------
Total assets ......................................... $224,020 $196,659
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable ............................................. $ 26,833 $ 18,028
Accrued wages and employee benefits .......................... 3,644 3,911
Accrued interest ............................................. 750 674
Other accrued expenses ....................................... 4,792 7,193
Current portion of long-term debt ............................ 8,258 6,191
-------- --------
Total current liabilities ................................. 44,277 35,997
Senior Subordinated Notes Payable .............................. 104,619 104,571
Long-term debt, net of current portion ......................... 37,729 13,365
Other long-term liabilities .................................... 4,304 5,108
Deferred income taxes .......................................... 4,698 2,928
-------- --------
Total liabilities ......................................... 195,627 161,969
-------- --------
Commitments and contingencies
Stockholder's equity
Common stock, Class A - $1 par value; 70 shares authorized,
55 shares issued and outstanding .......................... 55 55
Common stock, Class B - $1 par value; 35 shares authorized,
5 shares issued and outstanding ........................... 5 5
Preferred stock - $1 par value; 25 shares authorized, issued
and outstanding ........................................... 25 25
Additional paid-in capital ..................................... 8,767 8,767
Cumulative currency translation adjustment (CTA) ............... 2,084 2,084
Retained earnings (On July 3, 1994 a deficit of $31,395
was eliminated due to a subsidiary's quasi-reorganization) 17,457 23,754
-------- --------
Total stockholder's equity............................ 28,393 34,690
-------- --------
Total liabilities and stockholder's equity ........... $224,020 $196,659
======== ========
</TABLE>
See notes to the consolidated financial statements.
Page 24
<PAGE> 27
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE AND PER-SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
JUNE 27, JUNE 28, JUNE 29,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Revenues
Equipment sales
New ............................... $ 149,955 $ 137,998 $ 113,867
Used .............................. 7,109 4,207 2,589
Rental and services .................. 43,133 28,592 23,448
--------- --------- ---------
Total revenues ............... 200,197 170,797 139,904
--------- --------- ---------
Cost of Revenues
Equipment sales
New ............................... 109,121 94,943 78,712
Used .............................. 5,000 2,400 1,257
Rental and services .................. 32,693 20,501 14,346
--------- --------- ---------
Total cost of revenues ............ 146,814 117,844 94,315
--------- --------- ---------
Gross profit
Equipment sales
New ............................... 40,834 43,055 35,155
Used .............................. 2,109 1,807 1,332
Rental and services .................. 10,440 8,091 9,102
--------- --------- ---------
Total gross profit ................ 53,383 52,953 45,589
--------- --------- ---------
Operating expenses
Selling, general and administrative .. 31,215 23,902 18,117
Product liability .................... 351 2,807 3,115
Research and development ............. 8,691 5,952 4,281
Impairment of long-lived assets ...... 408 -- --
--------- --------- ---------
Total operating expenses .......... 40,665 32,661 25,513
--------- --------- ---------
Income from operations ................. 12,718 20,292 20,076
Other income (expense)
Interest expense, net ................ (12,110) (9,421) (3,983)
Other expense ........................ (194) (6) --
--------- --------- ---------
Income before income taxes ............. 414 10,865 16,093
Provision for income taxes ............. 211 3,206 6,131
--------- --------- ---------
Net income ............................. $ 203 $ 7,659 $ 9,962
========= ========= =========
Earnings per common share .............. $ 3 $ 128 $ 166
========= ========= =========
Weighted average number of common shares 60,000 60,000 60,000
========= ========= =========
</TABLE>
See notes to the consolidated financial statements.
Page 25
<PAGE> 28
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED JUNE 27, 1999, JUNE 28, 1998 AND JUNE 29, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON STOCK PREFERRED STOCK ADDITIONAL COMPREHENSIVE TOTAL
-------------------- -------------------- PAID-IN INCOME RETAINED STOCKHOLDER'S
SHARES AMOUNTS SHARES AMOUNTS CAPITAL (CTA) EARNINGS EQUITY
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1996 60 $ 60 25 $ 25 $ 8,767 $ 2,084 $ 6,133 $ 17,069
Net income ......... -- -- -- -- -- -- 9,962 9,962
-------- -------- -------- -------- -------- -------- -------- --------
Balance, June 29, 1997 60 60 25 25 8,767 2,084 16,095 27,031
Net Income ......... -- -- -- -- -- -- 7,659 7,659
-------- -------- -------- -------- -------- -------- -------- --------
Balance, June 28, 1998 60 60 25 25 8,767 2,084 23,754 34,690
Net Income .......... -- -- -- -- -- -- 203 203
Dividends paid ...... -- -- -- -- -- -- (6,500) (6,500)
-------- -------- -------- -------- -------- -------- -------- --------
Balance, June 27, 1999 60 $ 60 25 $ 25 $ 8,767 $ 2,084 $ 17,457 $ 28,393
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
See notes to the consolidated financial statements.
Page 26
<PAGE> 29
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------
JUNE 27, JUNE 28, JUNE 29,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Net income ..................................................... $ 203 $ 7,659 $ 9,962
--------- --------- ---------
Adjustments to reconcile net income to net cash provided (used) by
operating activities
Depreciation and amortization .............................. 13,262 8,053 5,804
Gain on disposition of property, plant and
equipment .................................................. (2,163) (1,997) (1,380)
Impairment of long-lived assets ............................. 408 -- --
Deferred income taxes, net .................................. 2,113 93 943
Changes in operating assets and liabilities
Accounts receivable ....................................... (13,192) (5,034) (7,771)
Inventories ............................................... (13,532) (10,574) (1,001)
Prepaid expenses and other ................................ (650) (1,222) (20)
Accounts payable .......................................... 8,805 6,443 (339)
Accrued expenses .......................................... (2,592) 2,405 1,880
Other, net ................................................ (2,524) (808) (2,626)
--------- --------- ---------
Total adjustments .................................... (10,065) (2,641) (4,510)
--------- --------- ---------
Net cash provided (used) by operating
activities ........................................... (9,862) 5,018 5,452
--------- --------- ---------
Cash flows from investing activities
Additions to property, plant and equipment .................. (65,065) (27,424) (12,356)
Proceeds from disposition of assets ......................... 6,917 4,072 2,453
Acquisitions, net of cash acquired .......................... (2,262) (5,537) (2,174)
--------- --------- ---------
Net cash used by investing activities .................. (60,410) (28,889) (12,077)
--------- --------- ---------
Cash flows from financing activities
Proceeds from long-term debt ................................ 81,725 15,878 29,784
Repayment of long-term debt ................................. (55,294) (5,683) (48,034)
Proceeds from senior subordinated notes ..................... -- -- 104,519
Repayment of note payable -- related party .................. -- -- (13,463)
Dividends paid .............................................. (6,500) -- --
--------- --------- ---------
Net cash provided by financing activities .............. 19,931 10,195 72,806
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents ............. (50,341) (13,676) 66,181
Cash and cash equivalents at beginning of year ................... 63,669 77,345 11,164
--------- --------- ---------
Cash and cash equivalents at end of year ......................... $ 13,328 $ 63,669 $ 77,345
========= ========= =========
Supplemental disclosures of cash flow information:
Cash used for interest payments ................................ $ 13,502 $ 12,118 $ 4,777
========= ========= =========
Cash used for income tax payments .............................. $ 2,320 $ 2,226 $ 3,599
========= ========= =========
</TABLE>
See note 18 for additional supplemental disclosures of cash flow information.
See notes to the consolidated financial statements.
Page 27
<PAGE> 30
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1999, JUNE 28, 1998 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 1 -- THE COMPANY
W.R. Carpenter North America, Inc. (the Company), incorporated in 1975 under the
laws of Delaware, serves as the holding company for its operating subsidiaries
UpRight, Inc. (UpRight) and Horizon High Reach, Inc. (Horizon).
UpRight was incorporated in California in 1947, and its stock was publicly
traded from 1980 until 1988 when it was acquired by an affiliate of the Company.
In 1988, through a corporate reorganization, UpRight became a wholly owned
subsidiary of the Company. Prior to 1989, Horizon was an independent company in
the business of renting and selling aerial work platform equipment in Southern
California. In 1989, UpRight acquired the assets of Horizon which were merged
into the retail division of UpRight's North American Operations. In 1994,
Horizon became a separate, wholly owned subsidiary of the Company. Although
Horizon is a distributor for UpRight products, the two companies have separate
management teams and operate on an independent basis.
UpRight is a leading manufacturer of aerial work platforms. Sales are made
principally to independent distributors who rent and sell UpRight's products to
a broad customer base, which includes end users in the industrial, commercial,
institutional and construction markets.
The aerial work platform industry is highly competitive. In selling its aerial
work platform products, UpRight experiences two principal types of competition:
from other manufacturers and from alternative equipment. UpRight competes in the
aerial work platform industry primarily with several other manufacturers.
Certain of UpRight's competitors are part of, or are affiliated with, companies
that are larger and have greater financial resources than UpRight.
The principal customers for UpRight's new equipment are independent equipment
distributors that primarily rent UpRight's products and provide service support
to equipment users. In recent years, there has been significant consolidation in
ownership among rental companies, including certain UpRight customers, resulting
in a more limited number of major customers comprising a substantial portion of
total revenue.
Horizon is a leading industrial equipment rental, sales and service equipment
company serving a diverse range of customers from 16 domestic locations.
Horizon's rental fleet consists primarily of aerial work platforms, portable
lift products, self-propelled scissor lifts and boom lift products, telescopic
material handlers and forklifts. Horizon rents equipment on a daily, weekly and
monthly basis and, occasionally, for longer periods. Horizon is also a
distributor of new equipment for several leading manufacturers and sells used
equipment from its rental fleet, in addition to complementary parts, supplies
and accessories.
Horizon is a distributor for UpRight products in all of Horizon's designated
market areas. The equipment in Horizon's existing rental fleet consists of
scaffold, UpRight lifts, scissors, boom lifts, and other lift products. Horizon
also represents various product lines for other manufacturers. Horizon's
corporate headquarters are located in Fresno, California.
Horizon's competitors include national and multi-regional companies, regional
competitors that operate in a small number of states, small independent
businesses with one or a few rental locations, and equipment vendors and dealers
which both sell and rent equipment directly to end users.
RISK FACTORS
Economic -- The equipment rental industry is highly dependent upon the
level of business activity in the commercial and industrial segments of
the economy. As a result, the equipment rental industry is particularly
sensitive to national, regional and local slowdowns in the commercial
construction industry, which is highly cyclical and subject to downturns
during economic slowdowns.
Page 28
<PAGE> 31
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1999, JUNE 28, 1998 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
Competition -- The equipment rental, sales and service industry is
highly competitive. The Company's competitors include national,
multiregional companies and dealers that both sell and rent equipment
directly to end users. To the extent that existing or future competitors
seek to gain or retain market share by reducing rental rates or sales
prices, the Company may be required to lower its prices, thereby
adversely affecting the operating results of the Company.
Need for Continual Capital Expenditures -- A principal component of the
Company's strategy is to provide its rental customers with relatively
new, high-quality equipment. The Company continues to expand its
manufactured product lines and manufacturing capacity. The annual
replacement of equipment and plans to expand the Company's business will
require significant capital expenditures. There can be no assurance that
in the future the Company will have capital sufficient to fund such
planned or additional expenditures.
Insurance -- The Company maintains insurance coverage for its operations
and activities. There can be no assurance that existing or future claims
will not exceed the level of such insurance or that such insurance will
continue to be available at economically feasible terms.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, UpRight and Horizon. In consolidation, all
significant inter-company balances and transactions are eliminated.
Cash flows
For purposes of the statement of cash flows, the Company considers all cash
investments and related deposits purchased with a maturity of three months or
less to be cash equivalents.
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, disclosure of contingent
assets and liabilities at the dates of the financial statements, and the
reported amounts of revenue and expenses during the reporting periods. Actual
future results could differ from those estimates.
Revenue recognition
The Company's subsidiaries recognize revenue from equipment sales upon shipment.
Revenue from rentals is recognized ratably over the term of the rental contract.
Inventories
Inventories are valued at the lower of cost, using the first-in, first-out
(FIFO) method, or market.
Page 29
<PAGE> 32
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1999, JUNE 28, 1998 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
Property, plant and equipment
Property, plant and equipment are stated at cost. When units of property are
disposed of, the cost and accumulated depreciation are removed from the
accounts, and any resulting gain or loss is recognized in operations for the
period. Sales of rental equipment are reflected as used equipment sales in the
accompanying consolidated financial statements. Cost of used equipment sales
consists of the net book value of the equipment sold plus costs directly
associated with the sale. (See Note 6 regarding assets acquired through
acquisition.)
Depreciation is computed using the straight-line method over the following
estimated useful lives of the assets, as follows:
<TABLE>
<S> <C>
Building and improvements........................... 5 - 39 years
Machinery and equipment............................. 3 - 10 years
Rental equipment.................................... 3 - 10 years
</TABLE>
Expenditures for ordinary repairs and maintenance are charged to operations;
betterments are capitalized.
Other assets
Organization costs are amortized using the straight-line method over estimated
life of 6 years. Noncompete covenants are amortized using the straight-line
method over the terms of the respective agreements, two to five years.
Impairment of long-lived assets
The Company reviews long-lived assets and identifiable intangibles whenever
events or circumstances indicate that the carrying amount of such assets may not
be fully recoverable. The Company evaluates the recoverability of long-lived
assets by measuring the carrying amounts of the assets against the estimated
undiscounted cash flows associated with these assets. At the time such
evaluations indicate that the future undiscounted cash flows of certain
long-lived assets are not sufficient to recover the assets' carrying value, the
assets are adjusted to their fair values (based upon discounted cash flows).
During fiscal 1997, the Company acquired certain assets and liabilities of a
forklift sales, rental and repair company in California, Forklift Sales, Inc.
This acquisition was accounted for under the purchase method, with the excess of
cost over management's estimated fair value of the net assets acquired of $687
allocated to goodwill.
During 1999, management reviewed the estimated future cash flows related to this
operation and deemed them to be insufficient to fully recover the carrying value
of the assets acquired. Accordingly, management has recognized a $408 impairment
expense to reduce goodwill to its estimated fair value. In addition, the Company
fully accrued for the remaining portion of a consulting agreement with the
former president of the acquired company. The impact of accruing this liability
was $60.
Goodwill
Goodwill represents the excess purchase price paid over the fair market value of
the assets of companies acquired by Horizon. Goodwill is being amortized over 10
years on a straight-line basis.
Debt issue costs
Debt issue costs are amortized on a straight-line basis over the term of the
related debt.
Foreign currency translation
Assets and liabilities denominated in foreign currencies are translated to U.S.
dollars using prevailing rates of exchange. Gains and losses on foreign currency
translation from operations for which the functional currency is other than the
U.S. dollar, together
Page 30
<PAGE> 33
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1999, JUNE 28, 1998 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
with related hedges tax effects, are reported in stockholder's equity. For
foreign operations for which the U.S. dollar is the functional currency, gains
and losses resulting from converting foreign currency assets and liabilities to
U.S. dollars, including the related hedges, are included in trading revenue.
Income taxes
The Company files a consolidated tax return with its subsidiaries. Current and
deferred taxes are recorded for differences in the timing of the recognition of
revenues and expenses for financial reporting and income tax purposes. Deferred
taxes result primarily from the use of accelerated depreciation methods for
income tax purposes, timing in the deduction of state income taxes,
capitalization of certain costs in inventories for tax purposes, and differences
in the recognition of certain accruals for tax and financial statement purposes.
Earnings per share
Earnings per share is computed using the weighted average number of shares
outstanding of common stock. In February 1997, the Financial Accounting
Standards Board issued SFAS No. 128, "Earnings per Share." This statement
establishes simplified standards for computing and presenting earnings per share
(EPS). It requires dual presentation of basic and diluted EPS on the face of the
income statement for entities with complex capital structures and disclosures of
the calculation of each EPS amount.
Fiscal year
The fiscal year of the Company ends on the Sunday nearest to June 30.
Reclassifications
Certain reclassifications have been made to the 1998 financial statements to
conform with 1999 classifications. These reclassifications have no effect on
equity or the net income as previously reported.
NOTE 3 -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Finished goods ......... $12,998 $ 9,444
Work-in-progress ....... 3,200 1,312
Raw materials .......... 22,550 16,651
------- -------
$38,748 $27,407
======= =======
</TABLE>
A reserve of $551 and $550 for fiscal years 1999 and 1998, respectively, has
been deducted from inventories for potential obsolescence.
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Land ................................ $ 1,647 $ 391
Building and improvements ........... 18,565 7,248
Machinery and equipment ............. 53,475 35,463
Rental equipment .................... 77,132 48,053
--------- ---------
150,819 91,155
Less accumulated depreciation........ (35,812) (28,390)
--------- ---------
$ 115,007 $ 62,765
========= =========
</TABLE>
Page 31
<PAGE> 34
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1999, JUNE 28, 1998 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 5 -- OTHER ASSETS
<TABLE>
<CAPTION>
Other assets consist of the following: 1999 1998
-------- --------
<S> <C> <C>
Debt issue costs, net ................................................ $ 3,848 $ 4,334
Goodwill ............................................................. 6,863 5,029
Organization costs* .................................................. 457 457
Noncompete covenants ................................................. -- 80
Deposits ............................................................. 130 82
Long-term receivables ................................................ 108 98
Note receivable, due from officer .................................... 439 452
-------- --------
11,845 10,532
Less accumulated amortization ........................................ (1,284) (592)
-------- --------
10,561 9,940
Less: Current portion (included in "Prepaid and other" current assets) (534) (533)
-------- --------
Other assets, net .................................................... $ 10,027 $ 9,407
======== ========
</TABLE>
Amortization expense related to goodwill and organization costs during 1999 and
1998 was $692 and $323, respectively.
*Organization costs were incurred in connection with the split of Horizon from
UpRight as described in note 1. Unamortized organizational costs as of June 27,
1999 were $59.
NOTE 6 -- ACQUISITIONS
During 1999, the Company acquired the stock of an aerial work platform sales,
rental and repair company in Colorado (Contractor's Equipment Company of
Colorado, Inc.) for $2,262 plus $3,300 of assumed debt.
During fiscal year 1998, Horizon acquired the stock of a general rental company
in Texas and the stock of an aerial access sales, rental and repair company in
California for $1,384 and $4,153, respectively.
The acquisition of these assets was financed as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Cash payments and/or expenses, net of cash acquired $2,262 $5,537
====== ======
</TABLE>
All acquisitions have been accounted for under the purchase method. The excess
of cost over management's estimated fair value of the net assets acquired
related to these acquisitions totaled $1,856 and $3,899 in 1999 and 1998,
respectively, and has been allocated to goodwill.
Results of the Contractor's Equipment Company of Colorado, Inc. acquisition are
included in the consolidated financial statements beginning March 28, 1999.
Results of the Texas acquisition are included in the consolidated financial
statements beginning January 1, 1998. Results of the California acquisition in
fiscal year 1998 are included in the consolidated financial statements beginning
April 1, 1998.
Unaudited proforma consolidated results of operations for the year ended June
27, 1999, were not material to the consolidated financial statements.
Page 32
<PAGE> 35
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1999, JUNE 28, 1998 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 7 -- LEASE OBLIGATIONS
The Company's subsidiaries lease certain office and operating facilities and
certain machinery and equipment under operating leases. The Company's
subsidiaries also have capital lease obligations for other equipment. The
following table sets forth future minimum principal payments under capital lease
arrangements and minimum payments under operating lease arrangements:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------ ------
<S> <C> <C>
2000 ......................................... $ 64 $1,906
2001 ......................................... 61 1,127
2002 ......................................... -- 958
2003 ......................................... -- 694
2004 ......................................... -- 534
Thereafter ................................... -- 157
------ ------
Total future minimum lease payments .......... 125 5,376
====== ======
Less amount representing interest ............ (7) --
------ ------
Present value of future minimum lease payments $ 118 $5,376
====== ======
</TABLE>
Rent expense under operating leases was $1,511, $744 and $1,021 in fiscal years
1994, 1995 and 1996, respectively. Rent expense under operating leases was
$2,896, $3,064 and $1,324 in fiscal years 1999, 1998 and 1997, respectively.
NOTE 8 -- LONG-TERM DEBT AND CREDIT FACILITIES
Long-term debt and credit facilities consists of the following:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Notes payable obligation and credit facilities secured with accounts
receivable, inventory and machinery and equipment, due in monthly
installments of various amounts with imputed interest at various rates per
annum (ranging from 7.7% to 10.0%) due at various dates through May 2014 . $39,851 $13,167
Variable interest bonds (ranging from 7% to 11%), secured by deed of
trust and equipment due in monthly installments of varying amounts
through September 2014 ................................................... 6,136 6,389
------- -------
45,987 19,556
Less current portion ..................................................... 8,258 6,191
------- -------
$37,729 $13,365
======= =======
</TABLE>
On October 27, 1994, the Company's UpRight subsidiary finalized a bonds payable
agreement with the Community Redevelopment Agency (Agency) of the City of Selma,
California, for purchases of buildings, equipment and tooling. For the fiscal
years ended June 27, 1999 and June 28, 1998, the Company made principal payments
of $253 and $215, respectively, on the bonds. The total value of bond funds was
$7,870, of which $750 is to remain undisbursed as bond reserves remaining with
the Agency and unavailable for UpRight's use through the entire term of the bond
agreement. As of June 27, 1999 and June 28, 1998, $750 was undisbursed and
remained as bond reserves with the Agency. As of June 27, 1999 and June 28,
1998, the bonds payable had outstanding balances of $6,136 and $6,389,
respectively, included on the long-term debt and credit facilities schedule
above as Variable interest bonds.
Page 33
<PAGE> 36
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1999, JUNE 28, 1998 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
The following is a five year maturity schedule for long-term debt (excluding
capital leases -- see Note 7 and senior subordinated notes -- see Note 9).
<TABLE>
<CAPTION>
Notes
Bonds Payable
------- -------
<S> <C> <C>
2000 $ 1,035 $ 7,898
2001 1,026 16,995
2002 1,014 4,253
2003 1,000 3,419
2004 988 2,044
Thereafter (2005 to 2014) 8,727 5,124
------- -------
13,790 39,733
Less amount representing bond interest 6,904 --
------- -------
Gross present value 6,886 39,733
Bond reserve remaining with Agency 750 --
------- -------
Net present value $ 6,136 $39,733
======= =======
</TABLE>
On October 27, 1994, UpRight also entered into an agreement with the City of
Selma (City) to develop and improve at the Company's expense, certain of the
City's real property infrastructure. The improvements project was financed by
the issuance of Limited Obligation Improvement Bonds for Assessment District No.
1994-1 (District). The total project cost, including aggregate bond fees of
$504, was not to exceed $1,400. As of June 30, 1996, the Company had received in
the form of bond financing a total of $1,400. The improvements, upon completion,
were acquired from UpRight by the City. UpRight is obligated for future property
tax assessments to the District in amounts sufficient to repay the bonds. The
bonds call for bi-annual payments of varying amounts at an interest rate of 7.5
percent through December 2014. Due to the structure of the agreement with the
City, the Company is issued bi-annual property tax bills as the bond payments
are due. The consequence of this treatment is that the Company's financial
statements do not reflect a bond payable balance at the year end.
On April 23, 1998, UpRight entered into an equipment financing agreement with a
financial institution which allows it to borrow funds for the purchase of
equipment, up to $20 million. Loan balances outstanding are payable in monthly
installments, at variable interest rates based on the Daily Treasury Index for
the day on which funds are drawn. As of June 27, 1999, drawn funds totaled
$6,523, and unused available funds totaled $13,477.
Horizon has a revolving line of credit with a bank allowing Horizon to borrow up
to $5,275 not to exceed 80 percent of eligible receivables plus 25 percent of
the Company's inventory. Interest accrues at Horizon's option at either the
bank's prime lending rate (7.5 percent at June 27, 1999), LIBOR plus 1.85
percent, or .25 percent below the bank's prime lending rate. As of June 27,
1999, and June 28, 1998, the balance outstanding under the Revolving Credit Line
was $4,354 and $1,466, respectively. The Revolving Credit Line is secured by the
assets of Horizon. The Revolving Credit Agreement contains various restrictive
covenants, including minimum tangible net worth, minimum current ratio, maximum
debt to tangible net worth, and limits on annual capital expenditures and
operating lease expenses. Horizon has obtained waivers for the capital
expenditure and current ratio covenants. See note 21.
NOTE 9 -- SENIOR SUBORDINATED NOTES
On June 4, 1997, the Company filed a private placement offering of $105,000,
10.625 percent senior subordinated notes due in 2007 (the Notes). The Notes are
guaranteed by the subsidiaries and are subordinated to all senior indebtedness
of the subsidiaries. The notes are reflected in accompanying balance sheets net
of unamortized discount of $381 and $429, at June 27, 1999, and June 28, 1998,
respectively. The effective interest rate is approximately 10.68%.
Page 34
<PAGE> 37
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1999, JUNE 28, 1998 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
The Company applied the net proceeds to repay the outstanding indebtedness and
various term loans of the subsidiaries, finance capital expansion programs, and
fund acquisitions in complementary businesses.
The terms of the Notes contain covenants that, among other things, restrict the
ability of the Company and its subsidiaries to (i) incur additional
indebtedness; (ii) pay dividends and make distributions; (iii) issue stock of
subsidiaries; (iv) make certain investments; (v) repurchase stock; (vi) create
liens; (vii) enter into transactions with affiliates; (viii) enter into sale and
leaseback transactions; (ix) create dividend or other payment restrictions
affecting subsidiaries; (x) merge or consolidate the Company or any of the
guarantors; and (xi) transfer or sell assets. These covenants are subject to a
number of exceptions as defined in the agreement.
NOTE 10 -- EMPLOYEE BENEFIT PLANS
Employees of UpRight participate in a Taxsaver's Investment Plan (UpRight 401(k)
Plan). The UpRight 401(k) Plan was originally adopted effective as of January 1,
1984 as an addition to the Company's Employee Stock Ownership Plan, originally
adopted in January 1, 1975. The Company's Employee Stock Ownership Plan was
terminated in 1987. UpRight makes fixed contributions to the UpRight 401(k) Plan
for each year in an amount equal to 4% of the compensation of all eligible
participants, plus up to an additional 2% matching of participants'
contributions. The UpRight 401(k) Plan also contains features that allow
employees to save money before paying Federal income tax on the amount saved.
The UpRight 401(k) Plan covers all employees who have at least one year of
service, and is administrated by a Plan Committee, whose members are appointed
by UpRight's Board of Directors. The UpRight 401(k) Plan is intended to conform
to the provisions of the Employee Retirement Income Security Act of 1974.
Contributions to the UpRight 401(k) Plan are fully vested as of December 31 in
the year in which such contributions were made. Contributions of approximately
$540, $611 and $540 were made by UpRight during 1999, 1998 and 1997,
respectively.
Employees of Horizon participate in the Horizon High Reach 401(k) Plan (Horizon
401(k) Plan). Participation in this defined contribution plan is available to
all full-time employees who have completed at least one year of service and
attained the age of 21. Horizon makes fixed contributions to the Horizon 401(k)
Plan for each year in an amount up to 4% of the compensation of all eligible
participants. In addition to the fixed annual contribution, Horizon is required
to make a matching contribution equal to the participant's elective contribution
up to 2% of the participant's compensation for the calendar year. Employee
contributions to the Horizon 401(k) Plan are fully vested. Employer
contributions are vested in 20% annual increments beginning after the second
year of participation in the Horizon 401(k) Plan, with full vesting occurring
after the sixth year of participation. Employees are fully vested upon their
65th birthday. Employees of Horizon who had been employed by UpRight or Horizon
for one year as of December 31, 1993 are fully vested in the Horizon 401(k)
Plan. During 1999, 1998 and 1997, Horizon expensed and accrued $457, $500, and
$350, respectively, under the Horizon 401(k) Plan.
NOTE 11 -- CAPITAL STOCK
The Company is authorized to issue 70 shares of its $1 par value Class A common
stock and 35 shares of its $1 par value Class B common stock. At June 27, 1999,
June 28, 1998, and June 29, 1997, 55 shares of Class A common stock and 5 shares
of Class B common stock were issued and outstanding. The Class A and Class B
shares have equal voting rights and, subject to the rights of the Company's
preferred shares, equal rights as to dividends and other distributions.
The Company is also authorized to issue 25 shares of its $1 par value preferred
stock, all of which was issued and outstanding at June 27, 1999, June 28, 1998,
and June 29, 1997. The preferred shares have no voting rights and have
preference over both classes of common stock as to dividends and other
distributions. The preferred shares are entitled to a $10 per share preferential
distribution before any distribution to common share holders in the event the
Company is dissolved or liquidated.
Page 35
<PAGE> 38
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1999, JUNE 28, 1998 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 12 -- PROVISION FOR INCOME TAXES
The provision for income taxes consists of the following
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Current
Federal $ 125 $2,632 $3,841
State . 25 481 1,347
------ ------ ------
150 3,113 5,188
Deferred 61 93 943
------ ------ ------
$ 211 $3,206 $6,131
====== ====== ======
</TABLE>
The following is a summary of deferred tax assets and liabilities:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- --------------------- ---------------------
CURRENT NON-CURRENT CURRENT NON-CURRENT CURRENT NON-CURRENT
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Deferred tax liabilities resulting from
taxable temporary differences ............... $ (96) $(7,714) $ (44) $(5,120) $ (321) $(4,128)
Deferred tax assets resulting from deductible
temporary differences and tax credit carried
forward ....................................... 1,544 3,016 1,835 2,192 1,412 1,993
------- ------- ------- ------- ------- -------
$ 1,448 $(4,698) $ 1,791 $(2,928) $ 1,091 $(2,135)
======= ======= ======= ======= ======= =======
</TABLE>
The provision for income taxes differs from the expense that would result from
applying Federal statutory rates to income before taxes because of the inclusion
of a provision for state income taxes. In addition, the provision includes
deferred income taxes resulting from adjustments in the amount of temporary
differences.
The Company concluded that a deferred tax asset valuation allowance as of June
27, 1999, June 28, 1998 and June 29, 1997, was not necessary.
NOTE 13 -- REORGANIZATION OF UPRIGHT, INC.
Effective July 3, 1994, UpRight's Board of Directors approved the elimination of
UpRight's accumulated deficit through an accounting reorganization of its equity
accounts (a quasi-reorganization). The quasi-reorganization, as reflected in the
accompanying consolidated financial statements, did not result in the
revaluation of any assets or liabilities of UpRight, because the fair values
were estimated to approximate book values.
The purpose of the quasi-reorganization was to provide users of UpRight's
financial statements with a "fresh start" presentation of UpRight's operations
subsequent to the spin off of its former retail operating division into Horizon,
a separate wholly-owned subsidiary of the Company (see Note 1).
The reorganization of Horizon into a separate subsidiary and UpRight's
quasi-reorganization were all significant aspects of the Company's efforts to
strategically refocus its capital resources and operational structure.
Page 36
<PAGE> 39
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1999, JUNE 28, 1998 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 14 -- LEASES
During fiscal 1999 UpRight entered into rental share agreements with purchase
options with equipment rental companies. The agreements are being treated as
operating leases. UpRight maintains ownership of the equipment during the term
of the agreement, normally twelve months in duration. Up until the agreement
term expires, the retail equipment company has a purchase option to buy the
rental equipment, reduced by any rental payments made under the agreement. From
the date the equipment is shipped until the equipment rental term terminates,
UpRight is entitled to receive 40% of the rental revenue attributed to the
machines rented by the equipment rental companies. Up to 50% of the units can be
retained by UpRight for returned units. As of June 27, 1999, rental revenue was
not material in amount. Cost and accumulated depreciation of the rental
equipment at June 27, 1999, were $2,191 and $76, respectively. Minimum future
rentals for fiscal year 2000 are approximately $1,400.
NOTE 15 -- BUSINESS SEGMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement requires public business
enterprises to report financial and descriptive information about reportable
segments. The statement also establishes standards for related disclosures about
products and services, geographic areas and major customers. In fiscal year 1999
the Company adopted SFAS No. 131. The Company operates in two business segments,
the manufacturing of aerial work platforms, boom lifts, portable lifts and
aluminum scaffolding segment, and in the industrial equipment rental, sales and
service company segment.
The manufacturing segment sells its product principally to independent
distributors who rent and sell the product to customers, which include end users
in the industrial, commercial, institutional and construction markets.
The industrial equipment rental segment rents, sells and services primarily
aerial work platforms, potable lifts and boom products, and forklifts from 16
domestic locations. New equipment is also distributed for several manufacturers.
Used equipment is sold from its rental fleet, as well as parts, supplies and
accessories.
Total revenues by segment reflect sales to unaffiliated customers. In computing
income from operations, none of the following have been added or deducted:
nonoperating interest expense, nonoperating interest income, and income taxes.
Capital expenditures excludes property, plant and equipment acquired through
acquisition.
Page 37
<PAGE> 40
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1999, JUNE 28, 1998 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
A summary of revenue, income from operations, identifiable assets, depreciation
and amortization, and capital expenditures for the years ended June 27, 1999,
June 28, 1998, and June 29, 1997, is as follows:
<TABLE>
<CAPTION>
Rental
Manufacturing and Services Corporate Consolidated
------------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Revenues*
1999 $123,087 $77,110 $-- $200,197
1998 116,072 54,725 -- 170,797
1997 95,588 44,315 -- 139,903
------- ------ -------- -------
Income from operations
1999 $10,690 $7,569 $(5,541) $12,718
1998 15,513 6,100 (1,321) 20,292
1997 14,956 5,299 (179) 20,076
------- ------ -------- -------
Identifiable assets
1999 $115,862 $87,703 $20,455 $224,020
1998 81,485 58,608 56,566 196,659
1997 57,472 35,465 74,888 167,825
------- ------ -------- -------
Depreciation and amortization
1999 $4,157 $9,513 $-- $13,670
1998 2,678 5,375 -- 8,053
1997 1,918 3,886 -- 5,804
------- ------ -------- -------
Capital expenditures
1999 $27,425 $33,965 $3,675 $65,065
1998 10,456 16,968 -- 27,424
1997 3,671 8,685 -- 12,356
------- ------ -------- -------
Number of operating locations at year end (unaudited)
1999 2 16 -- 18
1998 1 15 -- 16
1997 1 14 -- 15
------- ------ -------- -------
</TABLE>
* Includes revenue from external customers for all groups of products and
services in each segment reported. Products and services sold by each segment
are similar in nature; also, it is impracticable to disclose revenues by
product. During the fiscal years ended 1999, 1998 and 1997, one customer of
the manufacturing segment accounted for sales of $31,178, $20,667 and $20,819,
respectively.
Revenue from customer geographical segments were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
U.S., Canada and Latin America $132,023 66% $115,161 67% $ 96,774 69%
Europe ....................... 64,338 32 48,339 28 35,295 25
Pacific Rim .................. 3,836 2 7,297 5 7,835 6
-------- -------- -------- -------- -------- --------
$200,197 100% $170,797 100% $139,904 100%
======== ======== ======== ======== ======== ========
</TABLE>
The majority of the Company's operating long lived assets are located in the
United States.
NOTE 16 -- CONTINGENCIES
The Company and its subsidiaries have various product liability claims and suits
pending. The Company's policy is to defend each suit vigorously, regardless of
the amount sought in damages. Although the outcome of such litigation cannot be
predicted with certainty, it is the opinion of management, based on the advice
of legal counsel and other considerations, that (except as described below) all
claims, legal actions, complaints and proceedings which have been filed or are
pending against the Company and its subsidiaries, as well as possible future
claims are adequately covered by reserves or insurance, and are not expected to
have a material adverse effect on the Company's consolidated financial position.
Horizon has been sued for damages arising out of a traffic accident involving a
Horizon employee. The matter is in the early stages of investigation, pleading
and discovery. No demand has been received. However, the initial "prayer" for
damages in
Page 38
<PAGE> 41
the complaint exceeds Horizon's $11,000 combined policy limits of primary and
excess insurance for this type of loss. Based upon investigation to date and
consultation with the Company's insurance carrier and legal counsel, management
does not believe that the ultimate resolution of this matter will have a
material adverse effect on the financial position of the Company.
NOTE 17 -- RELATED PARTY TRANSACTIONS
Included in the financial statements are the following related party balances
and transactions.
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Balances due from related parties ............................. $ 2,406 $ 15,362
Note receivable from officer .................................. 439 452
Interest and other payables due to related party .............. 774 --
Revenues from related parties ................................. 39,103 34,166
Cost of revenues from related parties ......................... 30,020 24,652
Purchases from related parties ................................ 2,793 3,000
Marketing expense paid (received) to/from related parties - net (595) 1,212
Service agreement fees ........................................ 2,007 1,598
Dividends paid to related party ............................... 6,500 --
</TABLE>
During fiscal 1997, both UpRight and Horizon entered into corporate services
agreements (the "Corporate Services Agreements") with Griffin Group
International Management LTD ("Griffin"), an affiliate of the Company. Pursuant
to the Corporate Services Agreements, Griffin provides consulting services to
UpRight and Horizon in various areas, including operations, finance and
accounting, asset management, strategic planning and policy, management
organization, marketing, technology and communications, and public relations.
During fiscal 1997, UpRight and Horizon paid Griffin $800 for services rendered
by Griffin pursuant to the Corporate Services Agreements. The Corporate Services
Agreements terminated on June 29, 1997. On May 12, 1997 the Company entered into
a corporate services agreement with Griffin pursuant to which Griffin will, for
a term of one fiscal year commencing June 30, 1997, provide consulting services
to the Company, UpRight and Horizon in various areas including operations,
finance and accounting, asset management, strategic planning and policy,
management organization, marketing, technology, communications, public relations
and SEC compliance and reporting. During fiscal years 1999 and 1998, the Company
paid an aggregate of $2,007 and $1,598, respectively, for services rendered by
Griffin.
The note receivable due from officer is secured by deed of trust and assignment
of rents and real estate owned by the officer. The note receivable carries
interest of 7.0%. The principal sum of the note and all accrued and unpaid
interest thereon shall be paid in full on or before May 27, 2001.
The former President of the Company resigned effective March 4, 1999 and was
granted severance compensation of $1,000.
NOTE 18 -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Noncash investing and financing activities:
During fiscal year ended June 27, 1999, inventory was transferred to rental
equipment, in the amount of $2,191.
During fiscal year ended June 28, 1998, fixed assets were acquired using capital
lease obligations, in the amount of $128.
NOTE 19 -- CONCENTRATIONS OF CREDIT RISK
Financial instruments that subject the Company to concentration of credit risk
are cash equivalents and trade receivables. Cash equivalents consist principally
of short-term money market funds. These instruments are short-term in nature and
bear minimal risk. To date, the Company has not experienced significant losses
on these instruments.
The Company performs on-going credit evaluations of its customer's financial
conditions. Security is required on all accounts with credit limits in excess of
$50. UCC financing statements are filed, when necessary, for U.S. customers and
sixty days (from invoice date) letter of credit are required for export
shipments.
Page 39
<PAGE> 42
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 27, 1999, JUNE 28, 1998 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 20 -- RECENT ACCOUNTING PRONOUNCEMENT
In March 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
This statement requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. This new standard requires that an enterprise classify
items of other comprehensive income by their nature in a financial statement;
display the accumulated balances of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position. This statement is effective for fiscal years
beginning after December 15, 1997. The Company has adopted SFAS No. 130, and as
of June 27, 1999, accumulated other comprehensive income amounts to $2,084.
Comprehensive income equals net income for fiscal years 1999, 1998 and 1997.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position No. 98-5 (SOP No. 98-5), "Reporting on the Costs of
Start-up Activities." Adoption of SOP No. 98-5 in fiscal year 2000 will have an
impact of approximately $60 to the Company's financial statements.
NOTE 21 -- SUBSEQUENT EVENTS
Subsequent to June 27, 1999, UpRight entered into a note payable agreement for
approximately $2,500 in increased borrowings from an unrelated lender.
On August 9, 1999, UpRight entered into a financing agreement with a financial
institution, to renegotiate its existing line of credit of $20,000, that will
hold available to UpRight credit facilities in the aggregate total amount of
$40,000. Facility number one is a revolving line of credit for working capital
of up to $25,000; with a step-down of available commitment amount and
outstanding balances to $20,000 on January 31, 2000. Payment terms for the
revolving line of credit is interest monthly with all principal due and payable
at maturity, which is October 15, 2000, at which time all unpaid principal and
interest shall be due and payable. Interest accrues on amounts borrowed at the
institution's reference rate minus one half of one percent, or Libor plus 120
basis points. At June 27, 1999 the actual interest rate was 7.25%, and the
outstanding balance on the line of credit was $13,256 (that is reflected as
long-term), see note 8, with available funds of $11,744. Collateral includes a
security agreement assuring a first priority position covering: accounts
receivable, inventory and equipment (net of debt outstanding). Facility number
two is a revolving line of credit for funding equipment purchases related to the
boom manufacturing plant of up to $10,000. Payment terms are interest monthly,
all principal due and payable at maturity which is June 30, 2000, with periodic
principal reductions from refinance by certain leasing companies, with release
of equipment finance. Interest terms and security agreement are the same as
those noted above. As of June 27, 1999, no outstanding balance was due. Facility
number three is a revolving line of credit for real estate construction and
improvements of the boom manufacturing plant of up to $5,000. Payment terms are
interest monthly, all principal due and payable at maturity, which is June 30,
2000. Interest terms and security agreement are the same as noted above. As of
June 27, 1999, no outstanding balance was due.
On September 3, 1999, Horizon entered into a financing agreement with a
financial institution to increase its credit facilities from $5.3 million to
$46.3 million. The facility includes a $30.0 million term loan, payable in equal
principal payments plus accrued interest for 60 months. Interest is at Libor
plus 175 basis points. In addition, a $10 million facility was established for
purchasing rental equipment during fiscal 2000. This facility is interest only
and will convert to a 5 year term loan in July, 2000. Interest is based on Libor
plus 175 basis points. Finally, Horizon's revolver was increased from $5,250 to
$6,250.
Page 40
<PAGE> 43
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 27, 1999, JUNE 28, 1998 AND JUNE 29, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at Balance
Beginning Charged to Charged to at
of Costs and Other End
Period Expenses Accounts Deductions of Period
------ -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowances are
deducted from the
Asset to which
they apply
Year ended June 27, 1999:
Reserve for
Product liability $ 6,340 $ 351 $ -- $ 1,148 $ 5,543
Allowance for
Uncollectible
Accounts 410 183 -- (25) 618
Product obsolescence 550 436 -- 435 551
------- ------- ------- ------- -------
$ 7,300 $ 970 $ -- $ 1,558 $ 6,712
------- ------- ------- ------- -------
Year ended June 28, 1998:
Reserve for
Product liability $ 5,235 $ 2,807 $ -- $ 1,702 $ 6,340
Allowances for
Uncollectible accounts 364 292 -- 246 410
Product obsolescence 334 216 -- -- 550
------- ------- ------- ------- -------
$ 5,933 $ 3,315 $ -- $ 1,948 $ 7,300
------- ------- ------- ------- -------
Year ended June 29, 1997:
Reserve for Product liability $ 4,102 $ 3,115 $ -- $ 1,982 $ 5,235
Allowance for
Uncollectible accounts 287 180 -- 103 364
Product obsolescence 957 25 -- 648 334
------- ------- ------- ------- -------
$ 5,346 $ 3,320 $ -- $ 2,733 $ 5,933
------- ------- ------- ------- -------
</TABLE>
Page 41
<PAGE> 44
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
Page 42
<PAGE> 45
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The following table sets forth certain information concerning the
directors and executive officers of the Company, UpRight and Horizon:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert F. Stowe 55 Chairman of the Board of Directors of the Company
David K. Sargent 60 President and Director of the Company
Graham D. Croot 44 Chief Financial Officer of the Company
Noel Corcoran 53 Secretary of the Company
Peter B. Sawdy 67 Director of the Company
Barris Evulich 51 Vice President and General Manager of UpRight
Rick Penkert 36 Vice President and General Manager of Horizon
</TABLE>
Robert F. Stowe has served as Chairman of the Board of Directors of the
Company since 1985. He is the founder of various trusts, the beneficiaries of
which are the family, relations and other descendants of Mr. Stowe (the "Stowe
Family Trusts"). Since 1974, Mr. Stowe has served as Chairman of various
companies which are owned by the Stowe Family Trusts and which are affiliates of
the Company. Mr. Stowe is a Fellow of the Institute of Chartered Accountants in
Australia.
David K. Sargent served as Chief Executive Officer of the Company,
UpRight and Horizon from 1989 until December 31, 1997 and as President of the
Company, UpRight and Horizon from 1989 to June 28, 1998 and has served as
President of the Company from March 4, 1999 to the present. He has served as a
Director of the Company since 1994. Mr. Sargent resumed the position of
President of the Company in March 1999. Prior to 1989, Mr. Sargent was President
of Instant Zip-Up Limited, a distributor of UpRight products in the United
Kingdom. Mr. Sargent is currently a director of UpRight (U.K.) Limited (formerly
Instant Zip-Up Limited).
Graham D. Croot has served as Chief Financial Officer of the Company
since 1990. He served as the Company's Treasurer from 1981 to 1989. In addition
to his responsibilities with the Company, Mr. Croot serves as chief financial
officer of various companies owned by the Stowe Family Trusts. Mr. Croot is a
member of The Australian Society of Certified Practicing Accountants.
Noel Corcoran has served as Secretary of the Company since April 1997.
In addition to his responsibilities with the Company, since 1994, Mr. Corcoran
has served as secretary and in other capacities of various companies owned by
the Stowe Family Trusts. From 1990 to 1994, Mr. Corcoran served as the Financial
Controller of European Operations of UpRight. Mr. Corcoran is a Fellow of the
Association of Chartered Certified Accountants.
Peter B. Sawdy has served as a Director of the Company since April 1997.
Mr. Sawdy is currently the Chairman of Peter Sawdy Associates, a business
consultancy. From 1990 to 1993, Mr. Sawdy was Chairman of Costain Group. Mr.
Sawdy has served in various director and advisory capacities with the Stowe
Family Trusts since 1985.
Barris Evulich has served as Vice President and General Manager of
UpRight since January 1, 1998 and as Vice President-Engineering of UpRight from
1990 to December 31, 1997. Mr. Evulich joined UpRight in 1971 as Project
Engineer.
Rick Penkert has served as Vice President and General Manager of Horizon
since January 1, 1999. Mr. Penkert served as Southeast Regional Manager of
Horizon from April 1998 until December 1998. Prior to that time, Mr. Penkert was
the Dallas, Texas Branch Manager from April 1994 until March 1998. Since joining
Horizon, Mr. Penkert has also served in the capacities of salesperson and Rental
Operations Manager.
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<PAGE> 46
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth for the last three fiscal years certain
compensation information about the Company's chief executive officer and the
other persons who served as executive officers of the Company, UpRight or
Horizon during fiscal year 1999 and earned in excess of $100,000 during such
year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- --------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
David K. Sargent (1) 1999 $ -- $ --
President of the Company 1998 200,000 --
1997 200,000 42,918
Graham D. Croot (2) 1999 $330,000 $ --
Chief Financial Officer of the Company 1998 -- --
1997 -- --
Barris Evulich (3) 1999 $225,000 $ 20,000
Vice President and General Manager 1998 153,169 78,000
of UpRight 1997 101,973 40,750
Rick Penkert (4) 1999 $164,140 $ 3,744
Vice President and General Manager 1998 101,731 75,000
of Horizon 1997 83,192 105,003
Shaun Flanagan (5) 1999 $238,500 $ --
Vice President and General 1998 225,000 --
Manager of Horizon 1997 190,126 77,000
James T. Dillon (6) 1999 $315,252 $ -- $1,000,000 (7)
1998 337,500 194,875
1997 250,000 178,352
</TABLE>
(1) Mr. Sargent served as Chief Executive Officer of the Company, UpRight and
Horizon until December 31, 1997 and as President of the Company, UpRight and
Horizon until June 28, 1998. He resumed the position of President of the Company
in March 1999 due to the departure of Mr. Dillon. Mr. Sargent is acting as
President of the Company pursuant to the corporate services agreement with
Griffin Group International Management Limited, an affiliate of the Company. See
"Item 13--Certain Relationships and Related Transactions."
(2) Until the start of fiscal year 1999, Mr. Croot's salary was paid by
Devereaux Holdings, a company owned by the Stowe Family Trusts. However, prior
to fiscal year 1999, Mr. Croot had been providing consulting services to the
Company pursuant to a corporate services agreement with Griffin Group
International Management Limited, an affiliate of the Company. See "Item
13--Certain Relationships and Related Transactions."
(3) Mr. Evulich served as Vice President and General Manager of UpRight
beginning January 1, 1998.
(4) Mr. Penkert served as Vice President and General Manager of Horizon
beginning January 1, 1999.
(5) Mr. Flanagan served as Vice President and General Manager of Horizon until
December 31, 1998. He remains a director of Horizon.
(6) Mr. Dillon served as Chief Executive Officer of the Company, UpRight and
Horizon beginning January 1, 1998 and as President of the Company, UpRight and
Horizon beginning June 29, 1998. Mr. Dillon resigned from the Company effective
March 4, 1999.
(7) Consists of severance payments, paid or accrued to Mr. Dillon during fiscal
year 1999.
DIRECTORS
Directors of the Company are elected annually and hold office until the
next annual meeting of stockholders or until their
Page 44
<PAGE> 47
successors are duly elected and qualified.
Directors of the Company do not receive any fees for services on the
Board of Directors. Directors are reimbursed for their expenses for each meeting
attended.
EMPLOYEE BENEFIT PLANS
Employees of UpRight participate in a Taxsaver's Investment Plan (the
"UpRight 401(k) Plan"). The UpRight 401(k) Plan was originally adopted effective
as of January 1, 1984 as an addition to the Company's Employee Stock Ownership
Plan, originally adopted in January 1, 1975. The Company's Employee Stock
Ownership Plan was terminated in 1987. UpRight makes fixed contributions to the
UpRight 401(k) Plan for each year in an amount equal to 4% of the compensation
of all eligible participants, plus up to an additional 2% matching of
participants' contributions. The UpRight 401(k) Plan also contains features that
allow employees to save money before paying Federal income tax on the amount
saved. The UpRight 401(k) Plan covers all employees who have at least one year
of service, and is administrated by a Plan Committee, whose members are
appointed by UpRight's Board of Directors. The UpRight 401(k) Plan is intended
to conform to the provisions of the Employee Retirement Income Security Act of
1974. Contributions to the UpRight 401(k) Plan are fully vested as of December
31 in the year in which such contributions were made.
Employees of Horizon participate in the Horizon High Reach 401(k) Plan
(the "Horizon 401(k) Plan"). Participation in this defined contribution plan is
available to all full-time employees who have completed at least one year of
service and attained the age of 21. Horizon makes fixed contributions to the
Horizon 401(k) Plan for each year in an amount up to 4% of the compensation of
all eligible participants. In addition to the fixed annual contribution, Horizon
is required to make a matching contribution equal to the participant's elective
contribution up to 2% of the participant's compensation for the calendar year.
Employee contributions to the Horizon 401(k) Plan are fully vested. Employer
contributions are vested in 20% annual increments beginning after the second
year of participation in the Horizon 401(k) Plan, with full vesting occurring
after the sixth year of participation. Employees are fully vested upon their
65th birthday. Employees of Horizon who had been employed by UpRight or Horizon
for one year as of December 31, 1993 are fully vested in the Horizon 401(k)
Plan.
INCENTIVE COMPENSATION
The Company has in effect various arrangements pursuant to which certain
officers may receive incentive cash bonuses based upon the achievement of
financial performance objectives. The Company's Board of Directors determines
the amounts of incentive bonuses, and performance criteria for such bonuses.
DIRECTORS' AND OFFICERS' INSURANCE
Group International Securities Limited, the parent of UpRight
International Limited, has purchased liability insurance for the directors and
officers of its subsidiaries, including the Company, UpRight and Horizon,
effective October 1, 1997, for an aggregate 24 months' premium of $200,000.
Directors and executive officers of the Company will pay no part of this
premium. The aggregate insurance coverage under the policy is limited to $15.0
million per policy period, and a $75,000 deductible for each claim, other than
claims arising from the Securities and Exchange Commission for which the
deductible is $150,000, is payable under the policy by Group International
Securities Limited in respect of any claim made against a director or officer
for which Group International Securities Limited has indemnified such director
or officer. The Company is currently in negotiations to obtain an extension of
this insurance policy or a new policy of liability insurance on similar terms.
Page 45
<PAGE> 48
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the date hereof, information with
respect to the beneficial ownership of shares of the Company's Common
Stock by each stockholder known by the Company to be the beneficial
owner of more than 5% of such shares. No executive officers or directors
of the Company own any shares of the Company's Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS OF STOCKHOLDER CLASS SHARES OF CLASS
- ------------------------------- ----- ------ --------
<S> <C> <C> <C>
WRC Holdings, Inc. (1) Class A Common Stock 55,000 100%
801 South Pine Street Class B Common Stock 5,000 100%
Madera, California 93637 Preferred Stock 25,000 100%
</TABLE>
(1) All of the capital stock of WRC Holdings, Inc. is owned beneficially by
UpRight International Limited. All of the capital stock of UpRight
International Limited is owned beneficially by the Stowe Family Trusts.
Mr. Stowe, who is not a beneficiary thereunder, appoints the trustees of
the trusts.
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<PAGE> 49
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 12, 1997, the Company entered into a corporate services agreement
with Griffin Group International Management Limited ("Griffin"), an affiliate of
the Company (the "Company Corporate Services Agreement") pursuant to which
Griffin, for a term of one fiscal year commencing June 30, 1997, provides
consulting services to the Company, UpRight and Horizon in various areas
including operations, finance and accounting, asset management, strategic
planning and policy, management organization, marketing, technology,
communications, public relations and SEC compliance and reporting. The term of
the Company Corporate Services Agreement is automatically extended for
additional one-year periods, unless either party gives notice of termination 180
days prior to the end of such fiscal year. During fiscal year 1999, the Company
paid $2.0 million to Griffin for such services.
UpRight International Manufacturing Ltd. ("UpRight Ireland"), an
affiliate of the Company located in Ireland, Vectur GmbH ("Instant
Deutschland"), an affiliate of the Company located in Germany, and Instant
Access Australia Pty. Ltd. ("Instant Australia"), an affiliate of the Company
located in Australia, each purchase and distribute products for UpRight in their
respective market areas. UpRight management believes that each of the foregoing
arrangements is conducted on an arm's-length basis and on terms at least as
favorable to UpRight as those generally available from unaffiliated third
parties. During fiscal year 1999, the Company's revenue from UpRight Ireland,
Instant Deutschland and Instant Australia were $1.2 million, $4.6 million and
$2.0 million, respectively. During fiscal year 1998, the Company's revenue from
UpRight Ireland, Instant Deutschland and Instant Australia were $4.3 million,
$3.1 million and $3.0 million, respectively. During fiscal year 1997, the
Company's revenue from UpRight Ireland, Instant Deutschland and Instant
Australia were $6.2 million, $1.7 million and $1.3 million, respectively. In
addition, UpRight and Horizon purchase and UpRight distributes in the United
States certain products manufactured by UpRight Ireland. During fiscal years
1999, 1998 and 1997, the Company's purchases from UpRight Ireland totaled
approximately $2.8 million, $3.0 million and $3.5 million, respectively. During
fiscal years 1999, 1998 and 1997, UpRight paid UpRight Ireland $1.5 million,
$1.2 million and $1.1 million, respectively, for participation in UpRight
Ireland's cooperative marketing programs.
During fiscal years 1999, 1998 and 1997, the Company had revenue from
UpRight (U.K.) Limited (formerly Instant Zip-Up Limited) of approximately $31.2
million, $26.7 million and $20.8 million, respectively. An affiliate of the
Company owns a minority voting interest in UpRight (U.K.) Limited.
At the end of fiscal year 1996, the Company was indebted to UpRight
International Limited for an aggregate principal amount of approximately $13.5
million. In fiscal year 1997 the Company repaid this indebtedness in full, and
at the end of fiscal years 1999, 1998, and 1997, the Company was not indebted to
UpRight International Limited.
In May 1998, an executive officer of the Company executed two promissory
notes payable to the Company in the aggregate amount of $452,000. These notes
are secured by a deed of trust and assignment of rents and real estate owned by
the officer. The notes bear interest of 7.0% and the principal thereof and all
accrued and unpaid interest thereon is due in full on or before May 27, 2001.
Page 47
<PAGE> 50
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
1. FINANCIAL STATEMENTS
See Index included on page 22
2. FINANCIAL STATEMENT SCHEDULES
See Index included on page 22
Financial Statement schedules other than those listed above are omitted
because they are not required or are not applicable, or the required information
is shown in the respective consolidated financial statements or notes thereto.
3. EXHIBITS
The following Exhibits are filed herewith and made a part hereof:
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------ -----------------------
<S> <C>
*3.1(i) Certificate of Incorporation of the Registrant, as amended.
*3.1(ii) Bylaws of the Registrant, as amended.
*4.1 Indenture, dated as of June 10, 1997, by and among the
Registrant, the Guarantors named therein and U.S. Trust Company
of California, N.A.
*4.4 Form of Exchange Global Note.
*10.3 Industrial Lease, dated February 7 1997, between A.L.L., a
general partnership, and UpRight, Inc.
*10.4 Lease, entered into as of November 1995, by and between Townview
Partners, a Ohio partnership and UpRight, Inc.
*10.5 Recourse Agreement, dated February 11, 1997, by and between
Horizon High Reach, Inc., and American Equipment Leasing.
*10.6 Management Services Agreement, dated May 12, 1997, by and
between the Registrant and Griffin Group International
Management Ltd.
*10.7 Lease, dated November 15, 1996, by and between Akzo Nobel
Coatings, Inc., and Horizon High Reach, Inc.
*10.8 Lease, dated January 1997, by and between Morris Ragona and Joan
Ragona, and Horizon High Reach, Inc.
*10.9 Agreement of Lease, dated January 26, 1995, by and between
Richard V. Gunner and George Andros, and Horizon High Reach,
Inc.
*10.10(i) Lease Agreement, executed November 10, 1989, by and between
Trussel Electric, Inc., and Up-Right, Inc., including Lease
Extension Agreement dated February 28, 1994, Lease Modification
Agreement dated January 26, 1994, and Notice of Option to Renew
dated May 7, 1992.
**10.10(ii) Lease Extension and Modification Agreement dated September 3,
1998.
***10.10(iii) Lease Extension and Modification Agreement dated October 28,
1997.
*10.11 Lease Agreement (undated) by and between T.T. Templin and
Horizon High Reach & Equipment Company.
*10.12 Agreement of Lease, dated October 15, 1992, by and between
Robert I. Selsky and Up-Right Aerial Platforms, Assignment of
Lease, dated June 1994, by and between Up-Right, Inc., and
Horizon High Reach, Inc., and Consent to Assignment dated July
15, 1994.
*10.13 Lease Agreement, dated April 27, 1990, by and between D.L.
Phillips Investment Builders, Inc., and Up-Right, Inc., together
with Supplemental Agreement to Lease, dated September 30, 1994,
Assignment of Lease, dated June 18, 1990, by and between D.L.
Phillips Investment Builders, Inc., and JMA, Ltd., Assignment of
Lease dated June 1994, by and between Up-Right, Inc., and
Horizon High Reach, Inc., and Consent to Assignment dated July
15, 1994.
*10.14 Lease Renewal Agreement, dated October 19, 1992, between Ronald
W. Werner and UpRight, Inc.
*10.15 Lease, dated March 7, 1995, by and between BMB Investment Group
and Horizon High Reach, Inc.
**10.16 Lease Agreement, dated December 31, 1997, by and between William
L. Morillon and Marie Anne Morillon and Horizon High Reach, Inc.
**10.17 Revolving Loan Agreement, dated May 5, 1998, between UpRight,
Inc., and Union Bank of California.
**10.18(i) Equipment Financing Agreement, dated April 23, 1998, between
UpRight, Inc., and KeyCorp Leasing LTD.
</TABLE>
Page 48
<PAGE> 51
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------ -----------------------
<S> <C>
10.18(ii) Promissory Note of UpRight, Inc., and Security Agreement, dated
April 1, 1999, between UpRight, Inc., and KeyCorp Leasing.
10.18(iii) Promissory Note of UpRight, Inc., and Security Agreement, dated
May 4, 1999, between UpRight, Inc., and KeyCorp Leasing.
****10.19(i) Equipment Financing Agreement, dated February 26, 1999, between
UpRight, Inc., and Associates Commercial Corp.
10.19(ii) Security Agreement, dated May 13, 1999, between UpRight, Inc.,
and Associates Commercial Corporation.
10.19(iii) Security Agreement, dated June 2, 1999, between UpRight, Inc.,
and Associates Commercial Corporation.
10.20 Lease Agreement, dated April 1, 1999, between FMCSR Holding
Corp., and Horizon High Reach, Inc.
10.21 Lease, dated May 24, 1999, between Industrial Boxboard Company
and Horizon High Reach, Inc.
*21.1 Subsidiaries of the Company
24.1 Power of Attorney (see page 50)
27.1 Financial Data Schedule
</TABLE>
* Incorporated herein by reference to the Company's Registration Statement on
Form S-4 (Reg. No. 333-31187), filed with the Securities and Exchange Commission
on July 11, 1997.
** Incorporated herein by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended June 28, 1998, filed with the Securities and Exchange
Commission on September 28, 1998.
*** Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 27, 1998 filed with the Securities
and Exchange Commission on November 12, 1998.
**** Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 28, 1999, filed with the Securities
and Exchange Commission on May 12, 1999.
(b) REPORTS ON FORM 8-K.
The Company filed a report on Form 8-K with the Securities and Exchange
Commission on June 25, 1999 announcing that, in an election held on June 10,
1999 by the United Steelworkers of America Union to certify the union as the
exclusive representative for the production and maintenance employees of UpRight
at UpRight's Selma and Madera, California facilities, such employees voted
against unionization and certification of the union.
Page 49
<PAGE> 52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
W.R. CARPENTER NORTH AMERICA, INC.
Date: September 27, 1999
By: /s/ David K. Sargent By: /s/ Graham D. Croot
--------------------- ------------------------------------
David K. Sargent Graham D. Croot
President Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Graham D. Croot and David K. Sargent, and
each of them, his attorney-in-fact, with full power of substitution, for him in
any and all capacities, to sign any amendments to the Report, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David K. Sargent President and Director September 27, 1999
- --------------------------------- (Principal Executive Officer)
David K. Sargent
/s/ Graham D. Croot
- --------------------------------- Chief Financial Officer September 27, 1999
Graham D. Croot (Principal Financial Officer
and Principal Accounting Officer)
/s/ Peter B. Sawdy
- -------------------------------- Director September 27, 1999
Peter B. Sawdy
/s/ Robert F. Stowe
- --------------------------------- Chairman of the Board of Directors September 27, 1999
Robert F. Stowe
</TABLE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT
No such annual report or proxy material has been sent to security
holders.
Page 50
<PAGE> 53
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------ -----------------------
<S> <C>
*3.1(i) Certificate of Incorporation of the Registrant, as amended.
*3.1(ii) Bylaws of the Registrant, as amended.
*4.1 Indenture, dated as of June 10, 1997, by and among the
Registrant, the Guarantors named therein and U.S. Trust Company
of California, N.A.
*4.4 Form of Exchange Global Note.
*10.3 Industrial Lease, dated February 7 1997, between A.L.L., a
general partnership, and UpRight, Inc.
*10.4 Lease, entered into as of November 1995, by and between Townview
Partners, a Ohio partnership and UpRight, Inc.
*10.5 Recourse Agreement, dated February 11, 1997, by and between
Horizon High Reach, Inc., and American Equipment Leasing.
*10.6 Management Services Agreement, dated May 12, 1997, by and
between the Registrant and Griffin Group International
Management Ltd.
*10.7 Lease, dated November 15, 1996, by and between Akzo Nobel
Coatings, Inc., and Horizon High Reach, Inc.
*10.8 Lease, dated January 1997, by and between Morris Ragona and Joan
Ragona, and Horizon High Reach, Inc.
*10.9 Agreement of Lease, dated January 26, 1995, by and between
Richard V. Gunner and George Andros, and Horizon High Reach,
Inc.
*10.10(i) Lease Agreement, executed November 10, 1989, by and between
Trussel Electric, Inc., and Up-Right, Inc., including Lease
Extension Agreement dated February 28, 1994, Lease Modification
Agreement dated January 26, 1994, and Notice of Option to Renew
dated May 7, 1992.
**10.10(ii) Lease Extension and Modification Agreement dated September 3,
1998.
***10.10(iii) Lease Extension and Modification Agreement dated October 28,
1997.
*10.11 Lease Agreement (undated) by and between T.T. Templin and
Horizon High Reach & Equipment Company.
*10.12 Agreement of Lease, dated October 15, 1992, by and between
Robert I. Selsky and Up-Right Aerial Platforms, Assignment of
Lease, dated June 1994, by and between Up-Right, Inc., and
Horizon High Reach, Inc., and Consent to Assignment dated July
15, 1994.
*10.13 Lease Agreement, dated April 27, 1990, by and between D.L.
Phillips Investment Builders, Inc., and Up-Right, Inc., together
with Supplemental Agreement to Lease, dated September 30, 1994,
Assignment of Lease, dated June 18, 1990, by and between D.L.
Phillips Investment Builders, Inc., and JMA, Ltd., Assignment of
Lease dated June 1994, by and between Up-Right, Inc., and
Horizon High Reach, Inc., and Consent to Assignment dated July
15, 1994.
*10.14 Lease Renewal Agreement, dated October 19, 1992, between Ronald
W. Werner and UpRight, Inc.
*10.15 Lease, dated March 7, 1995, by and between BMB Investment Group
and Horizon High Reach, Inc.
**10.16 Lease Agreement, dated December 31, 1997, by and between William
L. Morillon and Marie Anne Morillon and Horizon High Reach, Inc.
**10.17 Revolving Loan Agreement, dated May 5, 1998, between UpRight,
Inc., and Union Bank of California.
**10.18(i) Equipment Financing Agreement, dated April 23, 1998, between
UpRight, Inc., and KeyCorp Leasing LTD.
10.18(ii) Promissory Note of UpRight, Inc., and Security Agreement, dated
April 1, 1999, between UpRight, Inc., and KeyCorp Leasing.
10.18(iii) Promissory Note of UpRight, Inc., and Security Agreement, dated
May 4, 1999, between UpRight, Inc., and KeyCorp Leasing.
****10.19(i) Equipment Financing Agreement, dated February 26, 1999, between
UpRight, Inc., and Associates Commercial Corp.
10.19(ii) Security Agreement, dated May 13, 1999, between UpRight, Inc.,
and Associates Commercial Corporation.
10.19(iii) Security Agreement, dated June 2, 1999, between UpRight, Inc.,
and Associates Commercial Corporation.
10.20 Lease Agreement, dated April 1, 1999, between FMCSR Holding
Corp. and Horizon High Reach, Inc.
10.21 Lease, dated May 24, 1999, between Industrial Boxboard Company
and Horizon High Reach, Inc.
*21.1 Subsidiaries of the Company
24.1 Power of Attorney (see page 50)
27.1 Financial Data Schedule
</TABLE>
* Incorporated herein by reference to the Company's Registration Statement on
Form S-4 (Reg. No. 333-31187), filed with the Securities and Exchange Commission
on July 11, 1997.
** Incorporated herein by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended June 28, 1998, filed with the Securities and Exchange
Commission on September 28, 1998.
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<PAGE> 54
*** Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 27, 1998 filed with the Securities
and Exchange Commission on November 12, 1998.
**** Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 28, 1999, filed with the Securities
and Exchange Commission on May 12, 1999.
Page 52
<PAGE> 1
EXHIBIT 10.18(ii)
- -------------------------------------------------------------------------------
PROMISSORY NOTE
- ------------------------------------------------------------------------------
$2,656,506.49 Funding Date: _____________________,__________
FOR VALUE RECEIVED, UPRIGHT, INC., a California corporation ("Maker"),
promises to pay to the order of KEYCORP LEASING, A DIVISION OF KEY CORPORATE
CAPITAL INC. ("Holder"), the sum of TWO MILLION SIX HUNDRED FIFTY SIX THOUSAND
FIVE HUNDRED SIX AND FORTY-NINE CENTS ($2,656,506.49) in lawful money of the
United States of America (the "Principal"), with interest thereon as hereafter
provided ("Interest"), to be paid in the manner set forth herein. This Note is
executed pursuant to that certain security agreement (the "Security Agreement")
dated as of April 1, 1999 between Maker and Holder. Capitalized terms used
herein without definition shall have the meaning given them in the Security
Agreement.
1. INTEREST RATE; PLACE OF PAYMENT. Interest on the balance of the
Principal outstanding on this Note shall accrue from the Funding Date of this
Note and shall be due and payable at a fixed rate of seven and twenty-five
hundredths percent (7.25%) per annum (the "Interest Rate"). Interest shall be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Payment of the Principal and Interest hereunder shall be made to Holder at P.O.
Box 1865, Albany, New York 12201-1865, or at such other place as Holder may
designate from time to time in writing. Holder reserves the right to require
payment on this Note to be made by wired federal funds or other immediately
available funds.
2. REPAYMENT TERMS. The Principal and Interest shall be due and payable
in sixty (60) consecutive monthly installments payable in arrears, each in an
amount equal to $52,915.91 commencing and payable on the same date which is one
month after the Funding Date and on the same day of each month thereafter. In
addition, Maker will pay a late payment charge of five percent (5%) of any
payment due hereunder that is not paid on or before the date due hereunder.
3. SECURITY. Payment of the Principal and Interest hereunder, and the
performance and observance by Maker of all agreements, covenants and provisions
contained herein, is secured by a first priority security interest in the
Collateral.
4. PREPAYMENT. Except as contemplated by clause (3) of section 10 of
the Security Agreement, Maker may not prepay, in whole or in part, the principal
outstanding hereunder; provided, however, that Maker may prepay, in whole but
not in part, the principal outstanding hereunder by paying to Holder such
outstanding principal, together with all accrued and unpaid interest thereon,
plus a prepayment premium ("Prepayment Premium") equal to five percent (5%) of
such outstanding principal.
5. TRANSFER OR ASSIGNMENT. Holder may at any time assign or otherwise
transfer or negotiate this Note in whole or in part, without any notice to
Maker. The rights and obligations of Maker may not be assigned or delegated.
6. APPLICATION OF PAYMENTS. Prior to an Event of Default, each payment
received on this Note shall be applied first to all costs of collection, then to
unpaid late payment charges (if any) and Prepayment Premium (if any) hereunder,
then to Interest as of the payment due date and the balance, if any, to the
outstanding Principal as of the date received. Upon the occurrence, and during
the continuance, of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral when received by Holder in cash
or its equivalent, will be applied first to costs of collection and, thereafter,
in reduction of the Secured Obligations in such order and manner as Holder may
direct in its sole discretion, and Maker irrevocably waives the right to direct
the application of such payments and proceeds and acknowledges and agrees that
Holder shall have the continuing and exclusive right to apply any and all such
payments and proceeds in the Holder's sole discretion, notwithstanding any entry
to the contrary upon any of its books and records.
7. EVENTS OF DEFAULT. (a) Maker shall be in default if any of the
following happens (an "Event of Default"): (1) Maker fails to make any
installment of the Principal or Interest, or any other payment due and owing,
under this Note within ten (10) days after the same becomes due and payable; or
(2) Maker fails to perform any other obligation required to be performed by
Maker under this Note, the Security Agreement or any of the other Loan Documents
for thirty (30) days after written notice from Holder of such failure; or (3)
any representation, warranty or other statement by or on behalf of Maker in
connection with this Note is false or misleading in any material respect; or (4)
an Event of Default has occurred and is continuing under the Security Agreement.
Page 1 of 3
<PAGE> 2
(b) Notwithstanding anything to the contrary contained herein, upon the
occurrence of an Event of Default: (i) Holder may declare the entire outstanding
balance of the Principal, together with all accrued and unpaid Interest thereon,
immediately due and payable without notice or demand which amounts shall,
together with all other sums due hereunder, accrue interest from such
acceleration until the date of actual payment at the Default Rate (provided,
however, that should there occur an Event of Default, and if a voluntary or
involuntary petition under the United States Bankruptcy Code is filed by or
against Maker while such default remains uncured, the entire outstanding balance
of the Principal automatically shall be accelerated and due and payable with
interest thereon at the Default Rate), and Holder may exercise any and all of
its remedies hereunder, under the other Loan Documents and under Applicable Law.
The remedies of Holder provided herein, in the Security Agreement and under
Applicable Law shall be cumulative and concurrent and may be pursued singly,
successively or concurrently at the sole discretion of Holder and may be
exercised as often as occasion therefor shall occur. The failure to exercise, or
any delay in the exercise of, any right or remedy shall in no event be construed
as a waiver, release or exhaustion of any such remedies.
8. COLLECTION COSTS. In addition to the Principal, Interest, Prepayment
Premium (if any), and late payment charges (if any). Maker shall pay Holder on
demand, and Holder shall be entitled to collect all costs and expenses of
collection, including, without limitation, reasonable attorneys' fees, incurred
in connection with enforcement of its rights and remedies hereunder and under
the other Loan Documents, the protection or realization of the Collateral or in
connection with Holder's collection efforts, or in connection with any
bankruptcy or other judicial proceeding, whether or not suit on this Note or any
foreclosure proceeding is filed. All such costs and expenses shall be payable on
demand and, until paid, shall be Secured Obligations secured by the security
interest granted under the Security Agreement and all other collateral, if any,
held by Holder as security for Maker's obligations under this Note.
9. GOVERNING LAW; BINDING AGREEMENT. The provisions of this Note shall
be binding upon, and shall inure to the benefit of the parties hereto and their
respective successors and assigns. THIS NOTE IS BEING DELIVERED IN THE STATE OF
NEW YORK AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAWS
PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
10. MORE THAN ONE SIGNER. If more than one person or entity signs this
Note as a Maker, the obligations contained herein shall be deemed joint and
several and all references to "Maker" shall apply both jointly and severally.
11. GENERAL. Maker represents and warrants that this Note evidences a
loan for business or commercial purposes. Prior to signing this Note, Maker read
and understood the provisions hereof, and agrees to all terms and conditions
contained herein.
12. WAIVER. MAKER AND ALL ENDORSERS, SURETIES, AND GUARANTORS HEREOF
HEREBY JOINTLY AND SEVERALLY WAIVE PRESENTMENT FOR PAYMENT, DEMAND, NOTICE OF
NONPAYMENT OR DISHONOR, NOTICE OF INTENTION TO ACCELERATE THE MATURITY, NOTICE
OF PROTEST AND PROTEST OF THIS NOTE. HOLDER AND MAKER HEREBY EACH WAIVE THEIR
RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF OR RELATED TO THIS NOTE, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION OR PROCEEDING TO
WHICH HOLDER OR MAKER MAY BE PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY ACTION, COUNTERCLAIM
OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY
OR ENFORCEABILITY, OF THIS NOTE OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER IS MADE KNOWINGLY, WILLINGLY AND VOLUNTARILY BY
HOLDER AND THE MAKER WHO EACH ACKNOWLEDGE THAT NO REPRESENTATIONS HAVE BEEN MADE
BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY
OR NULLIFY ITS EFFECT. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE AND THE OTHER LOAN
DOCUMENTS.
Page 2 of 3
<PAGE> 3
13. USURY; PARTIAL INVALIDITY. (a) At no time shall the Interest Rate
(or the Default Rate or other amounts paid or collected hereunder) exceed the
highest rate allowed by applicable law for this type of loan. Should Holder ever
collect interest at a rate that exceeds such applicable legal limit, such excess
will be credited to the Principal.
(b) Whenever possible, each provision of this Note shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under the laws of any
applicable jurisdiction, such provision, as to such jurisdiction, shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Note in any other jurisdiction.
14. NOTICES. All notices and other communications under this Note shall
be in writing and shall be addressed: (i) if to Maker, 1775 Park Street, Selma,
California 93622; and (ii) if to Holder, KeyCorp Leasing, a Division of Key
Corporate Capital Inc., 54 State Street, Albany, New York 12207, Attention:
Account Manager, or such other address as either party hereto shall communicate
to the other party at its address specified above. All such notices and other
communications shall be deemed to have been duly given if delivered by hand,
overnight courier or if sent by certified mail, return receipt requested, to the
party to whom such notice is intended to be given, and shall be effective upon
receipt.
15. FUNDING DATE. The Funding Date for this Note shall be the date on
which Holder disburses funds hereunder. TO THE EXTENT THE FUNDING DATE IS LEFT
BLANK ABOVE, OR DOES NOT REFLECT THE ACTUAL DATE THAT HOLDER DISBURSES FUNDS
HEREUNDER, MAKER HEREBY AUTHORIZES HOLDER TO WRITE IN THE CORRECT DATE AT THE
TIME OF DISBURSEMENT.
IN WITNESS WHEREOF, Maker, intending to be legally bound, has caused
this Note to be duly executed on the day and year first above written.
MAKER:
UPRIGHT, INC.
By: /s/ Grant C. Melocik
-----------------------------------------
Name: Grant C. Melocik
Title: VP Operations
STATE OF CALIFORNIA )
) SS.:
COUNTY OF FRESNO )
On this 1 day of April, 1999, before me the subscriber personally
appeared Grant C. Melocik, who being by me duly sworn, did depose and say; that
he resides at Fresno County, State of California; that he is a VP Operations of
UPRIGHT, INC., the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the Board of
Directors of said corporation.
/s/ Lisa R. Downs
- --------------------------------------
NOTARY PUBLIC
My Commission Expires:
9/19/01
[Notary Seal]
Page 3 of 3
<PAGE> 4
SECURITY AGREEMENT
- -------------------------------------------------------------------------------
THIS SECURITY AGREEMENT (this "Agreement" or "Security Agreement")
dated as of April 1, 1999 is made by and between UPRIGHT, INC., a California
corporation having its chief executive office at 1775 Park Street, Selma,
California 93622 (the "Borrower"), and KEYCORP LEASING, A DIVISION OF KEY
CORPORATE CAPITAL INC. and assigns, having an office at 54 State Street, Albany,
New York 12207 ("KCL").
W I T N E S S E T H:
1. GRANT OF SECURITY INTEREST IN THE EQUIPMENT. In consideration of one or more
loans, advances or other financial accommodations at any time before, at or
after the date hereof, made or extended by KCL to or for the account of the
Borrower, directly or indirectly, as principal, guarantor or otherwise and to
secure the prompt payment and performance in full when due, whether by lapse of
time, acceleration or otherwise, of the Secured Obligations, the Borrower hereby
pledges, assigns, transfers hypothecates to KCL and grants to KCL a security
interest in, and acknowledges and agrees that this Agreement shall create a
continuing security interest in, all of Borrower's right, title and interest in
and to the Collateral.
The Secured Obligations of the Borrower are absolute, irrevocable and
unconditional under any and all circumstances whatsoever and shall not be
subject to any right of set-off, counterclaim, deduction, defense or other right
which the Borrower may have for any reason against any vendor, supplier,
manufacturer, KCL or any other party. All obligations of Borrower hereunder
shall survive the expiration, cancellation or other termination of this
Agreement.
2. DEFINITIONS. Unless the context otherwise requires, as used in this
Agreement, the following terms shall have the respective meanings indicated
below and shall be equally applicable to both the singular and the plural forms
thereof:
"Alteration" shall have the meaning specified in Section 6 hereof.
"Applicable Law" shall mean all applicable Federal, state, local and foreign
laws, ordinances, judgments, decrees, injunctions, writs, rules, regulations,
orders, licenses and permits of any Governmental Authority.
"Authorized Signer" shall mean any officer of Borrower, set forth on an
incumbency certificate (in form and substance satisfactory to KCL) delivered by
Borrower to KCL, who is authorized and empowered to execute the Loan Documents.
"Certificate of Acceptance" shall mean a certificate of acceptance, in form and
substance satisfactory to KCL, executed and delivered by Borrower in accordance
with Section 3 hereof.
"Collateral" shall mean the Equipment and any and all substitutions,
replacements or exchanges therefor, and any and all proceeds (both cash and
non-cash) receivable or received from the sale, lease, license, collection, use,
exchange or other disposition of the Collateral, including insurance proceeds,
thereof (including, without limitation, claims of the Borrower against third
parties for Loss or Damage to any such collateral).
"Collateral Schedule" shall mean each collateral schedule now or hereafter
attached hereto and made a part hereof, in substantially the form of Schedule 1
hereto.
"Default" shall mean any event or condition which, with the passage of time or
the giving of notice, or both, would constitute an Event of Default.
"Equipment" shall mean an item or items of personal property which are described
on the Collateral Schedule, together with all replacement parts, additions and
accessories incorporated therein or affixed thereto including, without
limitation, any software that is a component or integral part of, or is included
or used in connection with, any Item of Equipment, but with respect to such
software, only to the extent of Borrower's interest therein, if any.
"Equipment Location" shall mean the location of the Equipment, as set forth on
Schedule 1, or such other location (approved in writing by KCL) as Borrower
shall from time to time specify in writing. "Event of Default" shall have the
meaning specified in Section 16 hereof. "GAAP" shall have the meaning specified
in Section 22(g) hereof. "Governmental Action" shall mean all authorizations,
consents, approvals, waivers, filings and declarations of any Governmental
Authority, including, without limitation, those environmental and operating
permits required for the ownership, lease, use and operation of the Equipment.
"Governmental Authority" shall mean any foreign, Federal, state, county,
municipal or other governmental authority, agency, board or court.
Page 1 of 12
<PAGE> 5
"Guarantor" shall mean any guarantor of the Secured Obligations.
"Installment(s)" shall mean the periodic payments due to repay the Note, and,
where the context hereof requires, all such additional amounts as may from time
to time be payable under any provision of the Loan Documents.
"Item of Equipment" shall mean each item of the Equipment.
"Default Rate" shall mean an annual interest rate equal to the lesser of 18% or
the maximum interest rate permitted by Applicable Law.
"Liability" shall have the meaning set forth in Section 18 hereof.
"Loan Documents" shall mean, collectively, this Agreement, the Note, and all
other documents prepared by KCL and now or hereafter executed in connection
therewith.
"Lien" shall mean all mortgages, pledges, security interests, liens,
encumbrances, claims or other charges of any kind whatsoever, except the
security interest of KCL created by this Agreement.
"Loss or Damage" shall mean any loss, theft, destruction, disappearance or any
condemnation, expropriation or requisition of or damage to any Item of
Equipment.
"Note" shall mean that certain Promissory Note in the original principal amount
of $2,679,202.99 executed in connection herewith, together with any extensions,
modifications, renewals, refinancings or other restructurings thereof.
"Secured Obligations" means all of the following obligations of Borrower,
whether direct or indirect, absolute or contingent, matured or unmatured,
originally contracted with KCL or another party, and now or hereafter owing to
or acquired in any manner partially or totally by KCL or in which KCL may have
acquired a participation, contracted by Borrower alone or jointly or severally:
(1) any and all indebtedness, obligations, liabilities, contracts, indentures,
agreements, warranties, covenants, guaranties, representations, provisions,
terms, and conditions of whatever kind, now existing or hereafter arising, and
however evidenced, that are now or hereafter owed, incurred or executed by
Borrower to, in favor of, or with KCL (including, without limitation, those as
are set forth or contained in, referred to, evidenced by, or executed with
reference to the Loan Documents, any letter of credit agreements, advance
agreements, indemnity agreements, guaranties, lines of credit, mortgage deeds,
security agreements, assignments, pledge agreements, hypothecation agreements,
instruments, and acceptance financing, agreements), and including any partial or
total extension, restatement, renewal, amendment, and substitution thereof or
therefor; (2) any and all claims of whatever kind of KCL against Borrower, now
existing or hereafter arising, including, without limitation, any arising out of
or in any way connected with warranties made by Borrower to KCL in connection
with any instrument purchased by KCL; and (3) any and all of KCL's fees, costs
and expenses related to the foregoing.
"Supplier" shall mean the manufacturer or the vendor of the Equipment, as set
forth on each Collateral Schedule.
"Term" shall mean the term of the Note.
"UCC" shall have the meaning set forth in Section 16(b)(ii) hereof. Where
applicable and except as otherwise defined herein, terms used in this Agreement
shall have the meaning assigned to them in the UCC.
"Upgrade" shall have the meaning specified in Section 8 hereof.
3. DELIVERY AND ACCEPTANCE. Concurrently with execution of the Collateral
Schedule hereunder, Borrower shall execute and deliver to KCL a Certificate of
Acceptance for the Equipment described on such Collateral Schedule. KCL SHALL
HAVE NO OBLIGATION TO ADVANCE ANY FUNDS TO BORROWER UNLESS AND UNTIL KCL SHALL
HAVE RECEIVED A CERTIFICATE OF ACCEPTANCE RELATING TO THE EQUIPMENT EXECUTED BY
BORROWER. Such Certificate of Acceptance shall constitute Borrower's
acknowledgment that such Equipment (a) was received by Borrower, (b) is
satisfactory to Borrower in all respects, (c) is suitable for Borrower's
purposes, (d) is in good order, repair and condition, (e) has been installed and
operates properly, and (f) is subject to all of the terms and conditions of the
Loan Documents. Borrower's execution and delivery of a Certificate of Acceptance
shall be conclusive evidence as between KCL and Borrower that the Items of
Equipment described therein are in all of the foregoing respects satisfactory to
Borrower, and Borrower shall not assert any claim of any nature whatsoever
against KCL based on any of the foregoing matters; provided, however, that
nothing contained herein shall in any way bar, reduce or defeat any claim that
Borrower may have against the Supplier or any other person (other than KCL).
4. PAYMENTS. Borrower shall pay the Note on the terms set forth therein. All
Installments shall be payable when due whether or not Borrower has received any
additional notice that such Installments are due. All Installments shall be paid
to KCL at P.O. Box 1865, Albany, New York 12201-1865, or as otherwise directed
by KCL in writing.
5. LOCATION; INSPECTION. The Equipment shall be delivered to the Equipment
Location and shall not be removed therefrom without KCL's prior written consent.
Borrower shall maintain possession and control of the Equipment at all times.
KCL shall have the right to enter upon the Equipment Location and inspect the
Equipment at any reasonable time. Borrower will promptly give written notice to
KCL of any change in the identity or location of any Item of Equipment which
might require new filings or other
Page 2 of 12
<PAGE> 6
action to assure continued perfection of the security interest of KCL granted
hereby. The Borrower owns, and will continue to own, all Equipment Locations
except as otherwise indicated on Schedule 1.
6. USE; ALTERATIONS. Borrower shall use the Equipment only in the course of its
business for commercial purposes (and shall not permanently discontinue use of
the Equipment), and in compliance with Applicable Law and the requirements of
any applicable insurance policies, and only in the manner for which it was
designed and intended and so as to subject it only to ordinary wear and tear.
Borrower shall comply with all Applicable Law with respect to the Equipment.
Borrower shall immediately notify KCL in writing of any existing or threatened
investigation, claim or action by any Governmental Authority in connection with
any Applicable Law or Governmental Action which could adversely affect the value
of the Equipment or the perfection or priority of the security interest of KCL
in the Collateral. Borrower shall not make any material alterations, additions,
modifications or improvements (each, an "Alteration") to the Equipment without
KCL's prior written consent; provided that Borrower, at its own expense, shall
make Alterations as may be required from time to time to meet the requirements
of Applicable Law or Governmental Action. All such Alterations immediately, and
without further act, shall be deemed to constitute Items of Equipment and fully
be subject to the security interest granted to KCL hereunder.
7. REPAIRS AND MAINTENANCE. Borrower, at Borrower's own cost and expense, shall
(a) keep the Equipment in good repair, operating condition and working order and
in compliance with the manufacturer's specifications and Borrower's standard
practices (but with respect to the latter, in no event less than industry
practices) and (b) enter into and keep in full force and effect during the Term
hereof a maintenance agreement with the manufacturer of the Equipment, or a
manufacturer-approved maintenance organization, to maintain, service and repair
the Equipment as otherwise required herein. Upon KCL's request, Borrower shall
furnish KCL with an executed copy of any such maintenance agreement. An
alternate source of maintenance may be used by Borrower with KCL's prior written
consent. Borrower, at its own cost and expense and within a reasonable period of
time, shall replace any part of any Item of Equipment that is unfit or
unavailable for use from any cause (whether or not such replacement is covered
by the aforesaid maintenance agreement) with a replacement part of the same
manufacture, value, remaining useful life and utility as the replaced part
immediately preceding the replacement (assuming that such replaced part was in
the condition required by this Agreement). Such replacement part shall be free
and clear of all Liens and upon installation, attachment or incorporation in, on
or into such Item of Equipment, such replacement part immediately, and without
further act, shall be deemed to constitute an Item of Equipment and fully be
subject to the security interest granted to KCL hereunder. If KCL repossesses
the Equipment pursuant to its rights under this Agreement and at that time, in
the opinion of KCL, any Item of Equipment fails to meet the standards set forth
above, Borrower agrees to pay on demand all costs and expenses incurred in
connection with repairing or restoring such Item of Equipment so as to meet such
standards and/or assembling and delivering such Item of Equipment.
8. EQUIPMENT UPGRADES/ATTACHMENTS. In addition to the requirements of Section 6
hereof, Borrower, at its own expense, may from time to time add or install
upgrades or attachments (each, in "Upgrade") to the Equipment; provided, that
such Upgrades are readily removable without causing material damage to the
Equipment, and do not materially adversely affect the fair market value of the
Equipment. Any such Upgrades shall be owned by Borrower, shall become subject to
the security interest created by this Agreement and shall be kept free and clear
of all Liens so long as attached to the Equipment.
9. LEASE AND ASSIGNMENT. (A) WITHOUT KCL'S PRIOR WRITTEN CONSENT, BORROWER SHALL
NOT (I) ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF, THE
EQUIPMENT OR ANY INTEREST THEREIN, OR ASSIGN OR DELEGATE ITS RIGHTS OR
OBLIGATIONS UNDER THE LOAN DOCUMENTS, OR (II) LEASE OR LEND THE EQUIPMENT TO, OR
PERMIT THE EQUIPMENT TO BE USED BY, ANYONE OTHER THAN BORROWER.
(b) KCL, at any time with or without notice to Borrower, may sell,
transfer, grant participations in, assign and/or grant a security interest in
any or all of KCL's right, title and interest in and to the Loan Documents, or
in KCL's security interest in any Item of Equipment. In any such event, any such
purchaser, transferee, assignee or secured party shall have and may exercise all
of KCL's rights hereunder or thereunder, and BORROWER SHALL NOT ASSERT AGAINST
ANY SUCH PURCHASER, TRANSFEREE, ASSIGNEE OR SECURED PARTY ANY DEFENSE,
COUNTERCLAIM OR OFFSET THAT BORROWER MAY HAVE AGAINST KCL. Borrower agrees that
upon written notice to Borrower of any such sale, transfer, assignment and/or
security interest, Borrower shall acknowledge receipt thereof in writing and
shall comply with the reasonable directions and demands of such purchaser,
transferee, assignee or secured party.
Page 3 of 12
<PAGE> 7
(c) Subject to the foregoing, all covenants and agreements contained
herein shall be binding upon, and inure to the benefit of, KCL and its
successors and permitted assigns and Borrower and its successors and permitted
assigns.
10. LOSS OF OR DAMAGE TO EQUIPMENT. In the event of Loss or Damage to any Item
of Equipment, Borrower shall immediately notify KCL of same and, at the option
of KCL, as specified in a notice from KCL to Borrower, Borrower shall within
thirty (30) days following such Loss or Damage: (1) place such Item of Equipment
in good condition and repair, in accordance with the terms hereof, (2) replace
such Item of Equipment with replacement equipment (acceptable to KCL) in as good
condition and repair, and with the same or better fair market value as such
replaced Item of Equipment immediately preceding the Loss or Damage (assuming
that such replaced Item of Equipment was in the condition required by this
Agreement), which replacement equipment shall immediately, and without further
act, be deemed to constitute Items of Equipment and be fully subject to this
Agreement as if originally pledged as Collateral hereunder and shall be free and
clear of all Liens; or (3) pay to KCL any unpaid Installments and other charges
due prior to the payment date specified in such notice plus an amount, with
respect to an Item of Equipment, equal to the pro rata portion of the
Installments attributable to such Item of Equipment under the Loan Documents
after discounting such Installments to present worth as of the payment date
specified in such notice on the basis of a per annum rate of discount equal to
three percent (3%) from the respective dates upon which such Installments would
have been paid but for the operation of this clause, together with interest on
such amount at the Default Rate from the payment date specified in such notice
to the date of actual payment.
Upon KCL's receipt of the payment required under clause (3) above, KCL
shall release its security interest in such Item of Equipment. If Borrower
replaces the Item of Equipment pursuant to clause (2) above, such replacement
shall be deemed to constitute an Item of Equipment and be fully subject to this
Agreement and the security interest granted to KCL hereunder, as if originally
pledged hereunder. If Borrower fails to either restore or replace the Item of
Equipment pursuant to clauses (1) or (2) above, respectively, Borrower shall
make the payment under clause (3) above.
11. INSURANCE. (a) Borrower, at Borrower's own cost and expense, shall maintain
(1) insurance against all risks of physical loss or damage to the Equipment
(which shall include theft and collision for Equipment consisting of motor
vehicles, and shall not exclude loss resulting from flood or earthquake) in an
amount not less than the full replacement value thereof and (2) comprehensive
public liability insurance including blanket contractual liability for personal
and bodily injury and property damage in an amount satisfactory to KCL.
(b) All insurance policies required hereunder shall (1) require 30
days' prior written notice to KCL of cancellation or material change in coverage
(any such cancellation or change, as applicable, not being effective until the
thirtieth (30th) day after the giving of such notice); (2) name "KeyCorp and
its subsidiaries and affiliated companies, including KeyCorp Leasing, a Division
of Key Corporate Capital Inc." as sole loss payee under the property insurance
policies: (3) not require contributions from other policies held by KCL; (4)
waive any right of subrogation against KCL; (5) in respect of any liability of
KCL, except for the insurers' salvage rights in the event of a Loss or Damage,
waive the right of such insurers to set-off, to counterclaim or to any other
deduction, whether by attachment or otherwise, to the extent of any monies due
KCL under such policies; (6) not require that KCL pay or be liable for any
premiums with respect to such insurance covered thereby; (7) be in full force
and effect throughout any geographical areas at any time traversed by any Item
of Equipment; and (8) contain breach of warranty provisions providing that, in
respect of the interests of KCL in such policies, the insurance shall not be
invalidated by any action or inaction of Borrower or any other person (other
than KCL) and shall insure KCL regardless of any breach or violation of any
warranty, declaration or condition contained in such policies by Borrower or by
any other person (other than KCL). Prior to funding the Note, and thereafter not
less than 15 days prior to the expiration dates of the expiring policies
theretofore delivered pursuant to this Section, Borrower shall deliver to KCL a
duplicate original of all policies (or in the case of blanket policies,
certificates thereof issued by the insurers thereunder) for the insurance
maintained pursuant to this Section.
(c) Proceeds of insurance with respect to physical loss or damage to
the Equipment shall be applied, at the option of KCL, to repair or replace the
Equipment or to reduce or satisfy (as applicable) the Secured Obligations.
12. TAXES. Borrower shall pay when due any and all taxes, fees, levies, imposts,
duties, assessments and public and private charges levied or assessed on or with
respect to the Equipment, on the use thereof, or on this Agreement or any of the
other Loan Documents.
13. KCL'S RIGHT TO PERFORM FOR BORROWER. If Borrower fails to perform any of its
obligations contained in the Loan Documents, KCL may (but shall not be obligated
to) itself perform such obligations, and the amount of the reasonable costs and
expenses of KCL incurred in connection with such performance, together with
interest on such amount from the date paid by KCL
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<PAGE> 8
until the date repaid by Borrower to KCL, at the Default Rate, shall be payable
by Borrower to KCL upon demand. No such performance by KCL shall be deemed a
waiver of any rights or remedies of KCL, or be deemed to cure the default of
Borrower hereunder. All such sums and amounts so expended by KCL shall be
repayable by the Borrower immediately without notice or demand, shall constitute
additional Secured Obligations and shall bear interest from the date said
amounts are expended at the Default Rate.
14. DELINQUENT PAYMENTS; INTEREST. If Borrower fails to pay any of the
Installments on the date when the same becomes due, Borrower shall pay to KCL a
late charge equal to five percent (5%) of such delinquent amount. Such late
charge shall be payable by Borrower upon demand by KCL and shall be deemed part
of the Secured Obligations. In no event shall such late charge exceed the
maximum amounts permitted under Applicable Law.
15. PERSONAL PROPERTY; LIENS; WARRANTY OF TITLE. The Borrower is, and will
continue to be, the sole owner of the Equipment, free from any Lien. KCL and
Borrower hereby agree that the Equipment is, and shall at all times remain,
personal property notwithstanding the fact that any Item of Equipment may now
be, or hereafter become, in any manner affixed or attached to real property or
any improvements thereon. Borrower shall at all times keep the Equipment free
and clear from all Liens, and the Borrower shall obtain and deliver to KCL (to
be recorded at the Borrower's expense) from each person having a Lien on any
Equipment Location waivers of any Lien which such person might have or hereafter
obtain or claim with respect to the Equipment. Borrower shall (i) give KCL
immediate written notice of any Lien on the Collateral, (ii) promptly, at
Borrower's sole cost and expense, take such action as may be necessary to
discharge any such Lien, and (iii) indemnify and hold KCL, on an after-tax
basis, harmless from and against any loss or damage caused by any such Lien.
Borrower warrants that it has good, valid and marketable title to the Equipment,
and that (i) the security interest in the Collateral granted to KCL hereunder,
when properly perfected by filing, shall constitute a valid and perfected first
priority security interest in the Collateral and, (ii) the Collateral is not
subject to, and Borrower will not grant or permit to exist, any Liens or claims
on or against the Collateral, whether senior, superior, junior, subordinate or
equal to the security interest granted to KCL hereby, or otherwise.
16. EVENTS OF DEFAULT; REMEDIES. (a) As used herein, the term "Event of Default"
shall mean any of the following events: (1) Borrower fails to pay any
Installment within ten (10) days after the same becomes due and payable; (2)
Borrower breaches any of its other obligations under any of the Loan Documents
and fails to cure the same within thirty (30) days after written notice thereof;
(3) any dissolution, termination of existence, merger, consolidation, change in
controlling ownership of Borrower or Guarantor, or if Borrower or Guarantor is a
natural person, the death or incompetence of Borrower or Guarantor; (4) Borrower
or any Guarantor fails to pay its debts generally as they become due or becomes
insolvent or makes an assignment for the benefit of its creditors; (5) a
receiver, trustee, conservator or liquidator of Borrower or any Guarantor or of
all or a substantial part of Borrower's or such Guarantor's assets is appointed
with or without the application or consent of Borrower or such Guarantor,
respectively; (6) a petition is filed by or against Borrower or any Guarantor
under any bankruptcy, insolvency or similar legislation; (7) Borrower or any
Guarantor violates or fails to perform any provision of either the Loan
Documents or any other loan, lease or credit agreement or any acquisition or
purchase agreement with KCL or any other party; (8) Borrower violates or fails
to perform any covenant or representation made by Borrower in the Loan
Documents; (9) any representation or warranty made herein or in any of the Loan
Documents, certificates, financial statements or other statements furnished to
KCL (or KCL's parent, subsidiaries or affiliates) shall prove to be false or
misleading in any material respect as of the date on which the same was made;
(10) there is a material adverse change in Borrower's or any Guarantor's
financial condition; (11) Borrower shall fail to satisfy any final judgment
rendered against the Borrower by any court of competent jurisdiction where the
judgment is material in amount as to the Borrower or materially impairs the
financial or business condition of the Borrower; (12) any of the liens created
or granted hereby, or intended to be granted or created hereby, to KCL shall
fail to be valid, first priority perfected liens subject to no prior or equal
lien; or (13) the receipt by KCL of a notice to creditors with regard to a bulk
transfer by the Borrower pursuant to Article 6 of the Uniform Commercial Code;
or (14) an additional Lien attaches to the Equipment or the Equipment becomes
subject to risk of seizure or forfeiture.
(b) (i) Upon the occurrence of an Event of Default, KCL, at its option,
may declare any or all of the Secured Obligations, including, without
limitation, the Note, to be immediately due and payable, without demand or
notice to Borrower or any Guarantor. The obligations and liabilities accelerated
thereby shall bear interest (both before and after any judgment) until paid in
full at the Default Rate. Should there occur a Default and if a voluntary or
involuntary petition under the United States Bankruptcy Code is filed by or
against Borrower while such Default remains uncured, the Secured Obligations
automatically shall be accelerated and due and payable and interest thereon at
the Default Rate automatically shall apply as of the date of the first
occurrence of the Default, without any notice, demand or action of any type on
the part of KCL (including any action evidencing the acceleration or imposition
of the Default Rate). The fact that KCL has, prior to the filing of the
voluntary or involuntary petition under the United States
Page 5 of 12
<PAGE> 9
Bankruptcy Code, acted in a manner which is inconsistent with the acceleration
and imposition of the Default Rate shall not constitute a waiver of this
provision or estop KCL from asserting or enforcing KCL's rights hereunder.
(ii) Furthermore, upon the occurrence of an Event of Default, KCL shall
have, in addition to the rights and remedies provided herein, in the other Loan
Documents or by law, the rights and remedies of a secured party under the
Uniform Commercial Code under the laws of the State of New York (the "UCC")
(regardless of whether the UCC is the law of the jurisdiction where the rights
and remedies are asserted and regardless of whether the UCC applies to the
affected Collateral), and further KCL may do any one or more of the following as
KCL in its sole discretion may elect, with or without judicial process or the
aid and assistance of others: (i) enter and remain on any premises on which any
of the Equipment may be located and, without resistance or interference by the
Borrower, without liability to KCL by reason of such entry or taking possession,
take possession of the Equipment, (ii) prepare for sale and sell or otherwise
dispose of any Equipment on any such premises, (iii) require the Borrower to
assemble and make available to KCL at Borrower's expense any Equipment at any
place and time designated by KCL, (iv) remove any Equipment from any such
premises for the purpose of effecting sale or other disposition thereof, (v)
without demand and without advertisement, notice, hearing or process of law, all
of which the Borrower hereby waives, at any place and time or times, sell and
deliver any or all Equipment held by or for it at public or private sale, by one
or more contracts, in one or more parcels, for cash, upon credit or otherwise,
at such prices and upon such terms as KCL deems advisable, in its sole
discretion, or (vi) lease all or any portion of the Equipment on such terms and
conditions as KCL in its sole discretion may determine. In addition to all other
sums due KCL hereunder, the Borrower shall pay KCL all reasonable costs and
expenses incurred by KCL, including reasonable attorneys' fees and court costs,
in obtaining or liquidating the Collateral, in enforcing payment of Secured
Obligations, or in the prosecution or defense of any action or proceeding by or
against KCL or the Borrower concerning any matter arising out of or connected
with the Loan Documents, the Collateral or the Secured Obligations, including
without limitation any of the foregoing arising in, arising under or related to
a case under the United States Bankruptcy Code.
(iii) BORROWER'S WAIVERS REGARDING DISPOSITION OF THE EQUIPMENT. IF AN
EVENT OF DEFAULT OCCURS, BORROWER HEREBY WAIVES ANY DEFENSES, RIGHTS, OFFSETS OR
CLAIMS AGAINST KCL ARISING OUT OF THE REPOSSESSION, RETENTION, SALE, MANNER OR
METHOD OF SALE OR DISPOSITION OF ANY ITEMS OF EQUIPMENT. THE BORROWER AGREES
THAT ANY REQUIREMENT OF REASONABLE NOTICE SHALL BE MET IF SUCH NOTICE IS
PERSONALLY SERVED ON OR MAILED, POSTAGE PREPAID, TO THE BORROWER IN ACCORDANCE
WITH THE NOTICE PROVISIONS HEREOF AT LEAST 10 DAYS BEFORE THE TIME OF SALE OR
OTHER EVENT GIVING RISE TO THE REQUIREMENT OF SUCH NOTICE. KCL SHALL NOT BE
OBLIGATED TO MAKE ANY SALE OR OTHER DISPOSITION OF THE EQUIPMENT REGARDLESS OF
NOTICE HAVING BEEN GIVEN. KCL MAY BE THE PURCHASER AT ANY SUCH SALE. THE
BORROWER HEREBY WAIVES ALL OF ITS RIGHTS OF REDEMPTION FROM ANY SUCH SALE. KCL
MAY POSTPONE OR CAUSE THE POSTPONEMENT OF THE SALE OF ALL OR ANY PORTION OF THE
EQUIPMENT BY ANNOUNCEMENT AT THE TIME AND PLACE OF SUCH SALE, AND SUCH SALE MAY,
WITHOUT FURTHER NOTICE, BE MADE AT THE TIME AND PLACE TO WHICH THE SALE WAS
SCHEDULED. NONE OF KCL'S RIGHTS OR REMEDIES HEREUNDER ARE INTENDED TO BE
EXCLUSIVE OF, BUT EACH SHALL BE CUMULATIVE AND IN ADDITION TO, ANY OTHER RIGHT
OR REMEDY REFERRED TO HEREUNDER OR OTHERWISE AVAILABLE TO KCL OR ITS ASSIGNS AT
LAW OR IN EQUITY, AND MAY BE PURSUED SINGLY, SUCCESSIVELY OR CONCURRENTLY AT THE
SOLE DISCRETION OF LENDER AND MAY BE EXERCISED AS OFTEN AS OCCASION THEREFOR
SHALL OCCUR. THE FAILURE TO EXERCISE, OR ANY DELAY IN THE EXERCISE OF, ANY RIGHT
OR REMEDY SHALL IN NO EVENT BE CONSTRUED AS A WAIVER, RELEASE OR EXHAUSTION OF
ANY SUCH REMEDIES. NO EXPRESS OR IMPLIED WAIVER BY KCL OF ANY EVENT OF DEFAULT
SHALL CONSTITUTE A WAIVER OF ANY OTHER EVENT OF DEFAULT OR A WAIVER OF ANY OF
KCL'S RIGHTS UPON THE REOCCURRENCE OF ANY SUCH EVENT OF DEFAULT.
(c) The Borrower hereby authorizes KCL, upon the occurrence and during
the continuation of any Event of Default hereunder, at KCL's option to adjust,
compromise and settle any losses under any insurance afforded, and the Borrower
does hereby irrevocably constitute KCL and each of its designees, as its
attorneys-in-fact, with full power and authority, upon the occurrence and during
the continuation of any Event of Default hereunder, to effect such adjustment,
compromise and/or settlement and to endorse any drafts drawn by an insurer of
the Equipment or any part thereof and to do everything necessary to carry out
such purposes and to receive and receipt for any unearned premiums due under
policies of such insurance; but unless or until KCL elects to adjust, compromise
or settle losses as aforesaid, such insurance proceeds shall be subject to the
lien and security interest of KCL hereunder.
Page 6 of 12
<PAGE> 10
(d) Upon the occurrence, and during the continuance, of an Event of
Default hereunder, any payments in respect of the Secured Obligations and any
proceeds of the Collateral, when received by KCL in cash or its equivalent, will
be applied first to costs of collection and, thereafter, in reduction of the
Secured Obligations in such order and manner as KCL may direct in its sole
discretion, and the Borrower irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that KCL
shall have the continuing and exclusive right to apply any and all such payments
and proceeds in KCL's sole discretion, notwithstanding any entry to the contrary
upon any of its books and records. The Borrower shall remain liable to KCL for
any deficiency. Any surplus remaining after the full payment and satisfaction of
the Secured Obligation shall be returned to the Borrower or to whomsoever a
court of competent jurisdiction shall determine to be entitled thereto.
(c) To the extent that any of the Secured Obligations are now or
hereafter secured by property other than the Collateral, or by a guarantee,
endorsement or property of any other person, then KCL also shall have the right
to proceed against such other property, guarantee or endorsement upon the
occurrence of a default hereunder, and KCL shall have the right, in its sole
discretion, to determine which rights, liens, security interests or remedies KCL
shall at any time pursue, relinquish, subordinate or modify, without in any way
affecting the Secured Obligations or any of KCL's rights under this Agreement.
17. NOTICES. All notices and other communications hereunder shall be in writing
and shall be transmitted by hand, overnight courier or certified mail (return
receipt requested), postage prepaid. Such notices and other communications shall
be addressed to the respective party at the address set forth above or at such
other address as any party may from time to time designate by notice duly given
in accordance with this Section. Such notices and other communications shall be
effective upon the earlier of receipt or three (3) days after mailing if mailed
in accordance with the terms of this section.
18. GENERAL INDEMNIFICATION. Borrower shall pay, and shall indemnify and hold
KCL and its directors, officers, employees, counsel, agents and advisors
harmless on an after-tax basis from and against, any and all liabilities, causes
of action, claims, suits, penalties, damages, losses, costs or expenses
(including attorneys' fees), obligations, liabilities, demands and judgments,
and Liens, of any nature whatsoever (collectively, a "Liability") arising out of
or in any way related to: (a) the Loan Documents (b) a failure to comply fully
with Applicable Law and (c) Borrower's failure to perform any covenant, or
breach of any representation or warranty under the Loan Documents; provided,
that the foregoing indemnity shall not extend to the Liabilities to the extent
resulting solely from the gross negligence or willful misconduct of KCL.
Borrower shall promptly deliver to KCL (i) copies of any documents received from
the United States Environmental Protection Agency or to any state, county or
municipal environmental or health agency concerning the Equipment or its
operation and (ii) copies of any documents submitted by Borrower or any of its
subsidiaries to the United States Environmental Protection Agency or any state,
county or municipal environmental or health agency concerning the Equipment or
its operation. Borrower further agrees to indemnify KCL against and hold it
harmless from all present and future stamp, transfer, documentary and other such
taxes, levies, fees, assessments or other charges made by any jurisdiction by
reason of the execution, delivery, performance and enforcement of the Loan
Documents.
19. SEVERABILITY; CAPTIONS. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
Applicable Law. If, however, any provision of this Agreement or any of the Loan
Documents shall be prohibited or unenforceable in any jurisdiction, it shall, as
to such jurisdiction, be deemed modified to conform to the minimum requirements
of such law, or if for any reason it is not deemed so modified, it shall be
ineffective only to the extent of such prohibition or unenforceability without
affecting the remaining provisions hereof, and any such prohibition or
unenforceability shall not invalidate or render unenforceable such provision in
any other jurisdiction. Captions are intended for convenience or reference only,
and shall not be construed to define, limit or describe the scope or intent of
any provisions hereof.
20. FINANCIAL AND OTHER DATA. During the Term hereof, Borrower shall furnish
KCL, as soon as available and in any event within 120 days after the last day of
each fiscal year, financial statements of Borrower and each Guarantor, in each
case compiled, reviewed or audited by an independent certified public accountant
as required by KCL. Borrower shall also furnish such other financial reports,
information or data (including federal and state income tax returns and
quarterly or interim financial statements compiled, reviewed or audited by an
independent certified public accountant if required by KCL) as KCL may
reasonably request from time to time.
21. [RESERVED]
22. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower represents and warrants
that: (a) Borrower is a corporation duly organized and validly existing in good
standing under the laws of the state of its incorporation; (b) the execution,
delivery and performance of this Agreement and all related instruments and
documents: (1) have been duly authorized by all necessary corporate
Page 7 of 12
<PAGE> 11
action on the part of Borrower, (2) do not require the approval of any
stockholder, partner, trustee, or holder of any obligations of Borrower except
such as have been duly obtained, and (3) do not and will not contravene any law,
governmental rule, regulation or order now binding on Borrower, or the charter
or by-laws of Borrower, or contravene the provisions of, or constitute a default
under, or result in the creation of any lien or encumbrance upon the property of
Borrower under, any indenture, mortgage, contract or other agreement to which
Borrower is a party or by which it or its property is bound; (c) the Loan
Documents, when entered into, will constitute legal, valid and binding
obligations of Borrower enforceable against Borrower in accordance with the
terms thereof, (d) there are no pending actions or proceedings to which Borrower
is a party, and there are no other pending or threatened actions or proceedings
of which Borrower has knowledge, before any court, arbitrator or administrative
agency, which, either individually or in the aggregate, would adversely affect
the financial condition of Borrower, or the ability of Borrower to perform its
obligations under the Loan Documents; (e) Borrower is not in default under any
obligation for the payment of borrowed money, for the deferred purchase price of
property or for the payment of any installments under any lease agreement which,
either individually or in the aggregate, would have the same such effect; (f)
under the laws of the state(s) in which the Equipment is to be located, the
Equipment consists solely of personal property and not fixtures; (g) the
financial statements of Borrower (copies of which have been furnished to KCL)
have been prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"), and fairly present Borrower's financial condition
and the results of its operations as of the date of and for the period covered
by such statements, and since the date of such statements there has been no
material adverse change in such conditions or operations; (h) the address stated
above is the chief place of business and chief executive office, or in the case
of individuals, the primary residence, of Borrower; (i) Borrower does not
conduct business under a trade, assumed or fictitious name, except as set forth
in Schedule 1; (j) this Agreement creates a valid first priority security
interest in the Collateral securing payment and performance of the Secured
Obligations and all filings and other action necessary to perfect such security
interest have been taken or shall be promptly taken; (k) Borrower has filed or
has caused to have been filed all Federal, state and local tax returns which, to
the knowledge of Borrower, are required to be filed, and has paid or caused to
have been paid all taxes as shown on such returns or on any assessment received
by it, to the extent that such taxes have become due, unless and to the extent
only that such taxes, assessments and governmental charges are currently
contested in good faith and by appropriate proceedings by Borrower and adequate
reserves therefor have been established as required under GAAP and, to the
extent Borrower believes it advisable to do so, Borrower has set up reserves
which are believed by Borrower to be adequate for the payment of additional
taxes for years which have not been audited by the respective tax authorities;
(1) except as previously disclosed in writing to KCL, neither Borrower nor any
of its officers or directors (if a corporation), partners (if a partnership) or
members or managers (if a limited liability corporation) has, directly or
indirectly, any financial interest in the Supplier; and (m) Borrower has
conducted a comprehensive review and assessment of the Borrower's computer
applications and made inquiry of the Borrower's key suppliers, vendors and
customers with respect to the "year 2000 problem" (that is, the risk that
computer applications may not be able to properly perform date-sensitive
functions after December 31, 1999) and based on that review and inquiry, the
Borrower does not believe the year 2000 problem will result in a material
adverse change in the Borrower's business condition (financial or otherwise),
operations, properties or prospects, or ability to perform the obligations of
Borrower under this Agreement; (n) Borrower is not in violation of any
Applicable Law, the violation of which would have a material adverse effect on
the conduct of its business, and Borrower has obtained any and all licenses,
permits, franchises or other governmental authorizations necessary for the
ownership of its properties and the conduct of its business; and (o) none of the
proceeds of the loan made by KCL will be used, directly or indirectly, by
Borrower for the purpose of purchasing or carrying, or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any "margin stock" within the meaning of Regulation U (12 CFR Part
221), of the Board of Governors of the Federal Reserve System (herein called
"margin stock") or for any other purpose which might make the transactions
contemplated herein a "purpose credit" within the meaning of Regulation U, or
cause this Agreement to violate any other regulation of the Board of Governors
of the Federal Reserve System or the Securities Exchange Act of 1934 or the
Small Business Investment Act of 1958, as amended, or any rules or regulations
promulgated under any of such statutes.
23. FURTHER COVENANTS OF BORROWER. The Borrower further covenants and agrees
that it will not change its legal name, be a party to a merger, consolidation or
other change in structure or use a trade name in its business without at least
30 days' prior written notice to KCL; and shall execute and deliver to KCL (to
be filed at Borrower's expense) all UCC statements as may be required by KCL in
connection with such event.
24. MISCELLANEOUS. Time is of the essence with respect to this Agreement. ANY
FAILURE OF KCL TO REQUIRE STRICT PERFORMANCE BY BORROWER OR ANY WAIVER BY KCL OF
ANY PROVISION HEREIN SHALL NOT BE CONSTRUED AS A CONSENT OR WAIVER OF ANY
PROVISION OF THIS AGREEMENT. None of the Loan Documents may be amended except by
a writing signed by KCL and Borrower. This Agreement will be binding upon KCL
only if executed by a duly authorized officer or representative of KCL at KCL's
principal place of business as set forth above. This Agreement and all other
Loan Documents shall be executed on Borrower's behalf by Authorized Signers of
Borrower. The Borrower hereby waives
Page 8 of 12
<PAGE> 12
presentment, notice of dishonor and protest of all instruments included in or
evidencing any Secured Obligations, and all other notices and demands whatsoever
(except as expressly provided herein). THIS AGREEMENT IS BEING DELIVERED IN THE
STATE OF NEW YORK AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT
OF LAWS PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF NEW YORK.
25. JURY TRIAL WAIVER. KCL AND BORROWER HEREBY EACH WAIVE THEIR RESPECTIVE
RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION OR PROCEEDING TO
WHICH KCL OR BORROWER MAY BE PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY ACTION, COUNTERCLAIM
OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY
OR ENFORCEABILITY, OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY
PROVISION HEREOF OR THEREOF. THIS WAIVER IS MADE KNOWINGLY, WILLINGLY AND
VOLUNTARILY BY KCL AND THE BORROWER WHO EACH ACKNOWLEDGE THAT NO REPRESENTATIONS
HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN
ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
26. MORE THAN ONE BORROWER. If more than one person or entity executes this
Agreement, each of the other Loan Documents, and all addenda or other documents
executed in connection herewith or therewith, as "Borrower," the obligations of
"Borrower" contained herein and therein shall be deemed joint and several and
all references to "Borrower" shall apply both individually and jointly.
27. ENTIRE AGREEMENT. This Agreement, together with the other Loan Documents,
collectively constitute the entire understanding or agreement between KCL and
Borrower with respect to the financing of the Equipment, and there is no
understanding or agreement, oral or written, which is not set forth herein or
therein. This Agreement shall not be modified except by the written agreement of
KCL and Borrower.
28. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.
Page 9 of 12
<PAGE> 13
29. POWER OF ATTORNEY; UCC FILINGS. BORROWER SHALL EXECUTE AND DELIVER TO KCL
CONCURRENTLY WITH THE EXECUTION OF THIS AGREEMENT, AND AT ANY TIME FROM TIME TO
TIME THEREAFTER, ALL FINANCING STATEMENT, AMENDMENTS TO FINANCING STATEMENTS,
CHATTEL MORTGAGES, ASSIGNMENTS, AND ALL OTHER INSTRUMENTS, IN FORM SATISFACTORY
TO KCL, AND TAKE ALL OTHER ACTION AS KCL MAY REASONABLY REQUIRED, TO PERFECT AND
CONTINUE PERFECTED, MAINTAIN THE PRIORITY OF OR PROVIDE NOTICE OF KCL'S SECURITY
IN THE COLLATERAL. BORROWER HEREBY APPOINTS KCL, OR ITS ASSIGNEE, AND ANY OF
KCL'S OR ASSIGNEE'S OFFICERS OR EMPLOYEES AS ITS TRUE AND LAWFUL ATTORNEY IN
FACT, IRREVOCABLY AND COUPLED WITH AN INTEREST, TO EXECUTE AND FILE ON BEHALF OF
BORROWER ALL UCC FINANCING STATEMENTS WHICH IN KCL'S SOLE DISCRETION ARE
NECESSARY OR PROPER TO SECURE KCL'S INTEREST IN THE EQUIPMENT IN ALL APPLICABLE
JURISDICTIONS. Borrower hereby ratifies, to the extent permitted by law, all
that KCL shall lawfully and in good faith do or cause to be done by reason of
and in compliance with this paragraph
LENDER: BORROWER:
KEYCORP LEASING,
A DIVISION OF KEY CORPORATE CAPITAL INC. UPRIGHT, INC.
By: By: /s/ Grant C. Melocik
------------------------------------- ------------------------------
Name: Name: Grant C. Melocik
Title Title: VP Operations
Page 10 of 12
<PAGE> 14
COLLATERAL SCHEDULE
SCHEDULE 1
- -------------------------------------------------------------------------------
DESCRIPTION OF EQUIPMENT
EQUIPMENT LOCATION: 801 South Pine Street, Madera, California 93637
<TABLE>
<CAPTION>
VENDOR INVOICE NUMBER SHORT DESCRIPTION
------ -------------- -----------------
<S> <C> <C>
AIR GAS 290017 DELTAWELD & FEEDER
AIR GAS 298173 DELTAWELD/MILLER
CALIFORNIA BUSINESS FURNISHINGS 38625 OFFICE FURNITURE
CALIFORNIA BUSINESS FURNISHINGS 38681 OFFICE FURNITURE
CALIFORNIA BUSINESS FURNISHINGS 38826 OFFICE FURNITURE
CALIFORNIA BUSINESS FURNISHINGS 38982 OFFICE FURNITURE
CAL-WELD SUPPLY 42257 DELTAWELD 452
CAL-WELD SUPPLY 45922 1/2 TON ARBOR PRESS
CAL-WELD SUPPLY 50301 DELTAWELD
CAL-WELD SUPPLY 51952 SQUAREWAVE WELDER
CAL-WELD SUPPLY 52466 SAW BAND 1600 MITRE
CAL-WELD SUPPLY 52839 FEEDER
CAL-WELD SUPPLY 52843 ANALOG METER KIT
CAL-WELD SUPPLY 53934 GRINDER
CAL-WELD SUPPLY 53973 PLAZMA TORCH
CAL-WELD SUPPLY 54866 GRINDER
CAL-WELD SUPPLY 55060 FEEDER
CONTEC INDUSTRIES 19751 CANTILEVER JIB CRANES
19762
20651
21490
CRANE PRO SERVICES SLE76748 2 TON BRIDGE CRANE WITH ELECTRIC CHAIN HOIST
ELECTRIC MOTOR SHOP 038588 CRIMPING TOOL
EMRICK MACHINERY SALES 015756 ACRAM LATHE
FARO TECHNOLOGIES 13552 SILVER SERIES FARO ARM
FREEDOM FORD 5433 1999 FORD F800
FRESNO OXYGEN 728802 COMBINATION SANDER
FRESNO OXYGEN 734798 AIR SANDER & GRINDER
FRESNO OXYGEN 735625 SPECTRA WITH FRAME
FRESNO OXYGEN 735626 AIR SANDER & GRINDER
FRESNO OXYGEN 741698 MILLER DELTAWELD
FRESNO OXYGEN 770863 DRILL PRESS
HI-TECH MACHINE TOOL 2 WYSONG PRESS BRAKES MODEL FAB80 250-144
HI-TECH MACHINE TOOL 1 WYSONG PRESS BRAKES MODEL FAB80 250-144
IDEAL INDUSTRIES 741231 WIRE PROCESSOR 120V
IDEAL INDUSTRIES, INC. 741231 WIRE PROCESSOR 120V
J.M. EQUIPMENT CO. 23799 SELF-DUMPING HOPPER
J.M. EQUIPMENT CO. 24253 DUMPING HOPPERS
J.M. EQUIPMENT CO., INC. 23789 LM100 HOPPER
J.M. EQUIPMENT CO., INC. 23792 DUMPING HOPPER
JOHNSTON INDUSTRIAL B183638 WILLIS DRILL
</TABLE>
Page 11 of 12
<PAGE> 15
<TABLE>
<CAPTION>
VENDOR INVOICE NUMBER SHORT DESCRIPTION
------ -------------- -----------------
<S> <C> <C>
KENTEK 1486B AUTO DRILL UNIT
1574
KENTEK 1587 HYDRAULIC CONTROLS FOR DRILL UNIT
KINGS CYN WELDING 199822 SL-20 WORK TABLE
KINGS CYN WELDING 199825 BRAKE TOOL CART
MAGNA MACHINERY 33635-IN DAEWOO PUMA 250B CNC TURNING CENTER
MAGNA MACHINERY 34273-IN 2 DAEWOO HIGH SPEED TURNING CENTER
MAGNA MACHINERY 34274-IN DAEWOO PUMA 250B CNC TURNING CENTER
MAZAK 56201 MAZAK FH-680 HORIZONTAL MACHINING CENTER
56201-A
56201-B
56201-C
MCMASTER CARR 1878929 STOCK CART
MITCHELL INSTRUMENT CO. 0806T27 SOUND METER
MSC INDUSTRIAL SUPPLY 3995814 KENNEDY WORK STATIONS
NORTHERN STEEL SL0000208 BINS/STACK RACKS
NORTHERN STEEL SL0000376 FRAMES & STACK RACKS
NORTHERN STEEL SL0000636 STACKBINS & STACK RACKS
NORTHERN STEEL SL0000728 "I" BEAMS & FRAMES
PANGBORN CORP 88-018-5796 TWO GRAVITY ROLLER CONVEYOR SECTIONS
PANGBORN CORP 88-247-5644 ROTOBLAST MACHINE
88-261-5685
88-281-5887
PANGBORN CORP 88-281-5888 BLAST WHEEL MOTOR
PICO CORP 9507 HEAVY DUTY POWER UNIT
PICO CRIMPING TOOLS 10102 POWER UNIT
SAW SERVICE OF AMERICA 1081015-01 HOUGEN CUTTER
SAW SERVICE OF AMERICA 1081085-01 AUTOMATIC HORIZON BAND SAW
SCALES, INC 32110 MSI 7200 DYNA LINK
TECH-TOOLS 10189 CLICKER TORQUE WRENCH
TECH-TOOLS 10518 CLICKER TORQUE WRENCH
TECH-TOOLS 10644 BELT SANDER
TECH-TOOLS 7426 LISTA CABINET
TECH-TOOLS 8163 SHANK TREPANNER CUTTER
TECH-TOOLS 8324 STANDARD CABINET
TECH-TOOLS 9174 QUICK CHANGE LATHE
TECH-TOOLS 9402 SPITRONIC LEVEL
</TABLE>
Page 12 of 12
<PAGE> 1
EXHIBIT 10.18(iii)
PROMISSORY NOTE
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$1,069,596.74 Funding Date: ________________, ____ (Year)
FOR VALUE RECEIVED, UPRIGHT, INC., a California corporation ("Maker"),
promises to pay to the order of KEYCORP LEASING, A DIVISION OF KEY CORPORATE
CAPITAL INC. ("Holder"), the sum of ONE MILLION SIXTY NINE THOUSAND FIVE
HUNDRED NINETY SIX DOLLARS AND SEVENTY-FOUR CENTS ($1,069,596.74) in lawful
money of the United States of America (the "Principal"), with interest thereon
as hereafter provided ("Interest"), to be paid in the manner set forth herein.
This Note is executed pursuant to that certain security agreement (the "Security
Agreement") dated as of May 4, 1999 between Maker and Holder. Capitalized terms
used herein without definition shall have the meaning given them in the Security
Agreement.
1. INTEREST RATE; PLACE OF PAYMENT. Interest on the balance of the Principal
outstanding on this Note shall accrue from the Funding Date of this Note and
shall be due and payable at a fixed rate of seven and fifty seven hundredths
percent (7.57%) per annum (the "Interest Rate"). Interest shall be calculated on
the basis of a 360-day year consisting of twelve 30-day months. Payment of the
Principal and Interest hereunder shall be made to Holder at P.O. Box 1865,
Albany, New York 12201-1865, or at such other place as Holder may designate from
time to time in writing. Holder reserves the right to require payment on this
Note to be made by wired federal funds or other immediately available funds.
2. REPAYMENT TERMS. The Principal and Interest shall be due and payable in
forty-eight (48) consecutive monthly installments payable in arrears, each in an
amount equal to $25,896.63 commencing and payable on the same date which is one
month after the Funding Date and on the same day of each month thereafter. In
addition, Maker will pay a late payment charge of five percent (5%) of any
payment due hereunder that is not paid on or before the date due hereunder.
3. SECURITY. Payment of the Principal and Interest hereunder, and the
performance and observance by Maker of all agreements, covenants and provisions
contained herein, is secured by a first priority security interest in the
Collateral.
4. PREPAYMENT. Except as contemplated by clause (3) of section 10 of the
Security Agreement, Maker may not prepay, in whole or in part, the principal
outstanding hereunder; provided, however, that Maker may prepay, in whole but
not in part, the principal outstanding hereunder by paying to Holder such
outstanding principal, together with all accrued and unpaid interest thereon,
plus a prepayment premium ("Prepayment Premium") equal to five percent (5%) of
such outstanding principal.
5. TRANSFER OR ASSIGNMENT. Holder may at any time assign or otherwise transfer
or negotiate this Note in whole or in part, without any notice to Maker. The
rights and obligations of Maker may not be assigned or delegated.
6. APPLICATION OF PAYMENTS. Prior to an Event of Default, each payment received
on this Note shall be applied first to all costs of collection, then to unpaid
late payment charges (if any) and Prepayment Premium (if any) hereunder, then to
Interest as of the payment due date and the balance, if any, to the outstanding
Principal as of the date received. Upon the occurrence, and during the
continuance, of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral when received by Holder in cash
or its equivalent, will be applied first to costs of collection and, thereafter,
in reduction of the Secured Obligations in such order and manner as Holder may
direct in its sole discretion, and Maker irrevocably waives the right to direct
the application of such payments and proceeds and acknowledges and agrees that
Holder shall have the continuing and exclusive right to apply any and all such
payments and proceeds in the Holder's sole discretion, notwithstanding any entry
to the contrary upon any of its books and records.
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Page 1 of 1
<PAGE> 2
7. EVENTS OF DEFAULT. (a) Maker shall be in default if any of the following
happens (an "Event of Default"): (1) Maker fails to make any installment of the
Principal or Interest, or any other payment due and owing, under this Note
within ten (10) days after the same becomes due and payable; or (2) Maker fails
to perform any other obligation required to be performed by Maker under this
Note, the Security Agreement or any of the other Loan Documents for thirty (30)
days after written notice from Holder of such failure; or (3) any
representation, warranty or other statement by or on behalf of Maker in
connection with this Note is false or misleading in any material respect; or (4)
an Event of Default has occurred and is continuing under the Security Agreement.
(b) Notwithstanding anything to the contrary contained herein, upon the
occurrence of an Event of Default: (i) Holder may declare the entire outstanding
balance of the Principal, together with all accrued and unpaid Interest thereon,
immediately due and payable without notice or demand which amounts shall,
together with all other sums due hereunder, accrue interest from such
acceleration until the date of actual payment at the Default Rate (provided,
however, that should there occur an Event of Default, and if a voluntary or
involuntary petition under the United States Bankruptcy Code is filed by or
against Maker while such default remains uncured, the entire outstanding balance
of the Principal automatically shall be accelerated and due and payable with
interest thereon at the Default Rate), and Holder may exercise any and all of
its remedies hereunder, under the other Loan Documents and under Applicable Law.
The remedies of Holder provided herein, in the Security Agreement and under
Applicable Law shall be cumulative and concurrent and may be pursued singly,
successively or concurrently at the sole discretion of Holder and may be
exercised as often as occasion therefor shall occur. The failure to exercise, or
any delay in the exercise of, any right or remedy shall in no event be construed
as a waiver, release or exhaustion of any such remedies.
8. COLLECTION COSTS. In addition to the Principal, Interest, Prepayment Premium
(if any), and late payment charges (if any), Maker shall pay Holder on demand,
and Holder shall be entitled to collect all costs and expenses of collection,
including, without limitation, reasonable attorneys' fees, incurred in
connection with enforcement of its rights and remedies hereunder and under the
other Loan Documents, the protection or realization of the Collateral or in
connection with Holder's collection efforts, or in connection with any
bankruptcy or other judicial proceeding, whether or not suit on this Note or any
foreclosure proceeding is filed. All such costs and expenses shall be payable on
demand and, until paid, shall be Secured Obligations secured by the security
interest granted under the Security Agreement and all other collateral, if any,
held by Holder as security for Maker's obligations under this Note.
9. GOVERNING LAW; BINDING AGREEMENT. The provisions of this Note shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns. THIS NOTE IS BEING DELIVERED IN THE STATE OF
NEW YORK AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAWS
PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
10. MORE THAN ONE SIGNER. If more than one person or entity signs this Note as a
Maker, the obligations contained herein shall be deemed joint and several and
all references to "Maker" shall apply both jointly and severally.
11. GENERAL. Maker represents and warrants that this Note evidences a loan for
business or commercial purposes. Prior to signing this Note, Maker read and
understood the provisions hereof, and agrees to all terms and conditions
contained herein.
12. WAIVER. MAKER AND ALL ENDORSERS, SURETIES, AND GUARANTORS HEREOF HEREBY
JOINTLY AND SEVERALLY WAIVE PRESENTMENT FOR PAYMENT, DEMAND, NOTICE OF
NONPAYMENT OR DISHONOR, NOTICE OF INTENTION TO ACCELERATE THE MATURITY, NOTICE
OF PROTEST AND PROTEST OF THIS NOTE. HOLDER AND MAKER HEREBY EACH WAIVE THEIR
RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF OR RELATED TO THIS NOTE, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION OR PROCEEDING TO
WHICH HOLDER OR MAKER MAY BE PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY ACTION, COUNTERCLAIM
OR OTHER PROCEEDING WHICH SEEKS, IN
<PAGE> 3
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY, OF THIS NOTE OR
THE OTHER LOAN
- --------------------------------------------------------------------------------
Page 2 of 2
<PAGE> 4
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER IS MADE KNOWINGLY,
WILLINGLY AND VOLUNTARILY BY HOLDER AND THE MAKER WHO EACH ACKNOWLEDGE THAT NO
REPRESENTATIONS HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL
BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
NOTE AND THE OTHER LOAN DOCUMENTS.
13. USURY; PARTIAL INVALIDITY. (a) At no time shall the Interest Rate (or the
Default Rate or other amounts paid or collected hereunder) exceed the highest
rate allowed by applicable law for this type of loan. Should Holder ever collect
interest at a rate that exceeds such applicable legal limit, such excess will be
credited to the Principal.
(b) Whenever possible, each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or invalid under the laws of any
applicable jurisdiction, such provision, as to such jurisdiction, shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Note in any other jurisdiction.
14. NOTICES. All notices and other communications under this Note shall be in
writing and shall be addressed: (i) if to Maker, 1775 Park Street, Selma, CA
93622; and (ii) if to Holder, KeyCorp Leasing, a Division of Key Corporate
Capital Inc., 54 State Street, Albany, New York 12207, Attention: Account
Manager, or such other address as either party hereto shall communicate to the
other party at its address specified above. All such notices and other
communications shall be deemed to have been duly given if delivered by hand,
overnight courier or if sent by certified mail, return receipt requested, to the
party to whom such notice is intended to be given, and shall be effective upon
receipt.
15. FUNDING DATE. The Funding Date for this Note shall be the date on which
Holder disburses funds hereunder. TO THE EXTENT THE FUNDING DATE IS LEFT BLANK
ABOVE, OR DOES NOT REFLECT THE ACTUAL DATE THAT HOLDER DISBURSES FUNDS
HEREUNDER, MAKER HEREBY AUTHORIZES HOLDER TO WRITE IN THE CORRECT DATE AT THE
TIME OF DISBURSEMENT.
IN WITNESS WHEREOF, Maker, intending to be legally bound, has caused this
Note to be duly executed on the day and year first above written.
MAKER:
UPRIGHT, INC.
By: /s/ Grant C. Melocik
----------------------------
Name: Grant C. Melocik
Title: Vice President Operations
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Page 3 of 3
<PAGE> 5
STATE OF )
)ss.:
COUNTY OF )
On this 6 (Day) day of May (Month), 1999 (Year), before me the subscriber
personally appeared GRANT MELOCIK who being by me duly sworn, did depose and
say; that (s)he resides at Fresno County, State of Calif. : that (s)he is a Vice
President of Operations of Upright , the corporation described in and which
executed the foregoing instrument; and that (s)he signed his/her name thereto by
order of the Board of Directors of said corporation.
/s/ SUZANNE KO
- -------------------------------
NOTARY PUBLIC
My Commission Expires: July 4, 2001
[NOTARY PUBLIC SEAL]
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Page 4 of 4
<PAGE> 6
[Logo]
SECURITY AGREEMENT
- --------------------------------------------------------------------------------
THIS SECURITY AGREEMENT (this "Agreement" or "Security Agreement") dated
as of May 4,1999 is made by and between UPRIGHT, INC., a California corporation
having its chief executive office at 1775 Park Street, Selma, CA 93622 (the
"Borrower"), and KEYCORP LEASING, A DIVISION OF KEY CORPORATE CAPITAL INC. and
assigns, having an office at 54 State Street, Albany, New York 12207 ("KCL").
W I T N E S S E T H:
1. GRANT OF SECURITY INTEREST IN THE EQUIPMENT. In consideration of one or more
loans, advances or other financial accommodations at any time before, at or
after the date hereof, made or extended by KCL to or for the account of the
Borrower, directly or indirectly, as principal, guarantor or otherwise and to
secure the prompt payment and performance in full when due, whether by lapse of
time, acceleration or otherwise, of the Secured Obligations, the Borrower hereby
pledges, assigns, transfers hypothecates to KCL and grants to KCL a security
interest in, and acknowledges and agrees that this Agreement shall create a
continuing security interest in, all of Borrower's right, title and interest in
and to the Collateral.
The Secured Obligations of the Borrower are absolute, irrevocable and
unconditional under any and all circumstances whatsoever and shall not be
subject to any right of set-off, counterclaim, deduction, defense or other right
which the Borrower may have for any reason against any vendor, supplier,
manufacturer, KCL or any other party. All obligations of Borrower hereunder
shall survive the expiration, cancellation or other termination of this
Agreement.
2. DEFINITIONS. Unless the context otherwise requires, as used in this
Agreement, the following terms shall have the respective meanings indicated
below and shall be equally applicable to both the singular and the plural forms
thereof:
"Alteration" shall have the meaning specified in Section 6 hereof.
"Applicable Law" shall mean all applicable Federal, state, local and foreign
laws, ordinances, judgments, decrees, injunctions, writs, rules, regulations,
orders, licenses and permits of any Governmental Authority.
"Authorized Signer" shall mean any officer of Borrower, set forth on an
incumbency certificate (in form and substance satisfactory to KCL) delivered by
Borrower to KCL, who is authorized and empowered to execute the Loan Documents.
"Certificate of Acceptance" shall mean a certificate of acceptance, in form and
substance satisfactory to KCL, executed and delivered by Borrower in accordance
with Section 3 hereof.
"Collateral" shall mean the Equipment and any and all substitutions,
replacements or exchanges therefor, and any and all proceeds (both cash and
non-cash) receivable or received from the sale, lease, license, collection, use,
exchange or other disposition of the Collateral, including insurance proceeds,
thereof (including, without limitation, claims of the Borrower against third
parties for Loss or Damage to any such collateral).
"Collateral Schedule" shall mean each collateral schedule now or hereafter
attached hereto and made a part hereof, in substantially the form of Schedule 1
hereto.
"Default" shall mean any event or condition which, with the passage of time or
the giving of notice, or both, would constitute an Event of Default.
"Equipment" shall mean an item or items of personal property which are described
on the Collateral Schedule, together with all replacement parts, additions and
accessories incorporated therein or affixed thereto including, without
limitation, any software that is a component or integral part of, or is included
or used in connection with, any Item of Equipment, but with respect to such
software, only to the extent of Borrower's interest therein, if any.
"Equipment Location" shall mean the location of the Equipment, as set forth on
Schedule 1, or such other location (approved in writing by KCL) as Borrower
shall from time to time specify in writing.
"Event of Default" shall have the meaning specified in Section 16 hereof.
"GAAP" shall have the meaning specified in Section 22(g) hereof.
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Page 1 of 13
<PAGE> 7
"Governmental Action" shall mean all authorizations, consents, approvals,
waivers, filings and declarations of any Governmental Authority, including,
without limitation, those environmental and operating permits required for the
ownership, lease, use and operation of the Equipment.
"Governmental Authority" shall mean any foreign, Federal, state, county,
municipal or other governmental authority, agency, board or court.
"Guarantor" shall mean any guarantor of the Secured Obligations.
"Installment(s)" shall mean the periodic payments due to repay the Note, and,
where the context hereof requires, all such additional amounts as may from time
to time be payable under any provision of the Loan Documents.
"Item of Equipment" shall mean each item of the Equipment.
"Default Rate" shall mean an annual interest rate equal to the lesser of 18% or
the maximum interest rate permitted by Applicable Law.
"Liability" shall have the meaning set forth in Section 18 hereof.
"Loan Documents" shall mean, collectively, this Agreement, the Note, and all
other documents prepared by KCL and now or hereafter executed in connection
therewith.
"Lien" shall mean all mortgages, pledges, security interests, liens,
encumbrances, claims or other charges of any kind whatsoever, except the
security interest of KCL created by this Agreement.
"Loss or Damage" shall mean any loss, theft, destruction, disappearance or any
condemnation, expropriation or requisition of or damage to any Item of
Equipment.
"Note" shall mean that certain Promissory Note in the original principal amount
of $1,069,596.74 executed in connection herewith, together with any extensions,
modifications, renewals, refinancings or other restructurings thereof.
"Secured Obligations" means all of the following obligations of Borrower,
whether direct or indirect, absolute or contingent, matured or unmatured,
originally contracted with KCL or another party, and now or hereafter owing to
or acquired in any manner partially or totally by KCL or in which KCL may have
acquired a participation, contracted by Borrower alone or jointly or severally:
(1) any and all indebtedness, obligations, liabilities, contracts, indentures,
agreements, warranties, covenants, guaranties, representations, provisions,
terms, and conditions of whatever kind, now existing or hereafter arising, and
however evidenced, that are now or hereafter owed, incurred or executed by
Borrower to, in favor of, or with KCL (including, without limitation, those as
are set forth or contained in, referred to, evidenced by, or executed with
reference to the Loan Documents, any letter of credit agreements, advance
agreements, indemnity agreements, guaranties, lines of credit, mortgage deeds,
security agreements, assignments, pledge agreements, hypothecation agreements,
instruments, and acceptance financing agreements), and including any partial or
total extension, restatement, renewal, amendment, and substitution thereof or
therefor; (2) any and all claims of whatever kind of KCL against Borrower, now
existing or hereafter arising, including, without limitation, any arising out of
or in any way connected with warranties made by Borrower to KCL in connection
with any instrument purchased by KCL; and (3) any and all of KCL's fees, costs
and expenses related to the foregoing.
"Supplier" shall mean the manufacturer or the vendor of the Equipment, as set
forth on each Collateral Schedule.
"Term" shall mean the term of the Note.
"UCC" shall have the meaning set forth in Section 16(b)(ii) hereof. Where
applicable and except as otherwise defined herein, terms used in this Agreement
shall have the meaning assigned to them in the UCC.
"Upgrade" shall have the meaning specified in Section 8 hereof.
3. DELIVERY AND ACCEPTANCE. Concurrently with execution of the Collateral
Schedule hereunder, Borrower shall execute and deliver to KCL a Certificate of
Acceptance for the Equipment described on such Collateral Schedule. KCL SHALL
HAVE NO OBLIGATION TO ADVANCE ANY FUNDS TO BORROWER UNLESS AND UNTIL KCL SHALL
HAVE RECEIVED A CERTIFICATE OF ACCEPTANCE RELATING TO THE EQUIPMENT EXECUTED BY
BORROWER. Such Certificate of Acceptance shall constitute Borrower's
acknowledgment that such Equipment (a) was received by Borrower, (b) is
satisfactory to Borrower in all respects, (c) is suitable for Borrower's
purposes, (d) is in good order, repair and condition, (e) has been installed and
operates properly, and (f) is subject to all of the terms and conditions of the
Loan Documents. Borrower's execution and delivery of a Certificate of Acceptance
shall be conclusive evidence as between KCL and
- --------------------------------------------------------------------------------
Page 2 of 13
<PAGE> 8
Borrower that the Items of Equipment described therein are in all of the
foregoing respects satisfactory to Borrower, and Borrower shall not assert any
claim of any nature whatsoever against KCL based on any of the foregoing
matters; provided, however, that nothing contained herein shall in any way bar,
reduce or defeat any claim that Borrower may have against the Supplier or any
other person (other than KCL).
4. PAYMENTS. Borrower shall pay the Note on the terms set forth therein. All
Installments shall be payable when due whether or not Borrower has received any
additional notice that such Installments are due. All Installments shall be paid
to KCL at P.O. Box 1865, Albany, New York 12201-1865, or as otherwise directed
by KCL in writing.
5. LOCATION; INSPECTION. The Equipment shall be delivered to the Equipment
Location and shall not be removed therefrom without KCL's prior written consent.
Borrower shall maintain possession and control of the Equipment at all times.
KCL shall have the right to enter upon the Equipment Location and inspect the
Equipment at any reasonable time. Borrower will promptly give written notice to
KCL of any change in the identity or location of any Item of Equipment which
might require new filings or other action to assure continued perfection of the
security interest of KCL granted hereby. The Borrower owns, and will continue to
own, all Equipment Locations except as otherwise indicated on Schedule 1.
6. USE; ALTERATIONS. Borrower shall use the Equipment only in the course of its
business for commercial purposes (and shall not permanently discontinue use of
the Equipment), and in compliance with Applicable Law and the requirements of
any applicable insurance policies, and only in the manner for which it was
designed and intended and so as to subject it only to ordinary wear and tear.
Borrower shall comply with all Applicable Law with respect to the Equipment.
Borrower shall immediately notify KCL in writing of any existing or threatened
investigation, claim or action by any Governmental Authority in connection with
any Applicable Law or Governmental Action which could adversely affect the value
of the Equipment or the perfection or priority of the security interest of KCL
in the Collateral. Borrower shall not make any material alterations, additions,
modifications or improvements (each, an "Alteration") to the Equipment without
KCL's prior written consent; provided that Borrower, at its own expense, shall
make Alterations as may be required from time to time to meet the requirements
of Applicable Law or Governmental Action. All such Alterations immediately, and
without further act, shall be deemed to constitute Items of Equipment and fully
be subject to the security interest granted to KCL hereunder.
7. REPAIRS AND MAINTENANCE. Borrower, at Borrower's own cost and expense, shall
(a) keep the Equipment in good repair, operating condition and working order and
in compliance with the manufacturer's specifications and Borrower's standard
practices (but with respect to the latter, in no event less than industry
practices) and (b) enter into and keep in full force and effect during the Term
hereof a maintenance agreement with the manufacturer of the Equipment, or a
manufacturer-approved maintenance organization, to maintain, service and repair
the Equipment as otherwise required herein. Upon KCL's request, Borrower shall
furnish KCL with an executed copy of any such maintenance agreement. An
alternate source of maintenance may be used by Borrower with KCL's prior written
consent. Borrower, at its own cost and expense and within a reasonable period of
time, shall replace any part of any Item of Equipment that is unfit or
unavailable for use from any cause (whether or not such replacement is covered
by the aforesaid maintenance agreement) with a replacement part of the same
manufacture, value, remaining useful life and utility as the replaced part
immediately preceding the replacement (assuming that such replaced part was in
the condition required by this Agreement). Such replacement part shall be free
and clear of all Liens and upon installation, attachment or incorporation in, on
or into such Item of Equipment, such replacement part immediately, and without
further act, shall be deemed to constitute an Item of Equipment and fully be
subject to the security interest granted to KCL hereunder. If KCL repossesses
the Equipment pursuant to its rights under this Agreement and at that time, in
the opinion of KCL, any Item of Equipment fails to meet the standards set forth
above, Borrower agrees to pay on demand all costs and expenses incurred in
connection with repairing or restoring such Item of Equipment so as to meet such
standards and/or assembling and delivering such Item of Equipment.
- --------------------------------------------------------------------------------
Page 3 of 13
<PAGE> 9
8. EQUIPMENT UPGRADES/ATTACHMENTS. In addition to the requirements of Section 6
hereof, Borrower, at its own expense, may from time to time add or install
upgrades or attachments (each, in "Upgrade") to the Equipment; provided, that
such Upgrades are readily removable without causing material damage to the
Equipment, and do not materially adversely affect the fair market value of the
Equipment. Any such Upgrades shall be owned by Borrower, shall become subject to
the security interest created by this Agreement and shall be kept free and clear
of all Liens so long as attached to the Equipment.
9. LEASE AND ASSIGNMENT. (a) WITHOUT KCL'S PRIOR WRITTEN CONSENT, BORROWER SHALL
NOT (i) ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF, THE
EQUIPMENT OR ANY INTEREST THEREIN, OR ASSIGN OR DELEGATE ITS RIGHTS OR
OBLIGATIONS UNDER THE LOAN DOCUMENTS, OR (ii) LEASE OR LEND THE EQUIPMENT TO, OR
PERMIT THE EQUIPMENT TO BE USED BY, ANYONE OTHER THAN BORROWER.
(b) KCL, at any time with or without notice to Borrower, may sell,
transfer, grant participations in, assign and/or grant a security interest in
any or all of KCL's right, title and interest in and to the Loan Documents, or
in KCL's security interest in any Item of Equipment. In any such event, any such
purchaser, transferee, assignee or secured party shall have and may exercise all
of KCL's rights hereunder or thereunder, and BORROWER SHALL NOT ASSERT AGAINST
ANY SUCH PURCHASER, TRANSFEREE, ASSIGNEE OR SECURED PARTY ANY DEFENSE,
COUNTERCLAIM OR OFFSET THAT BORROWER MAY HAVE AGAINST KCL. Borrower agrees that
upon written notice to Borrower of any such sale, transfer, assignment and/or
security interest, Borrower shall acknowledge receipt thereof in writing and
shall comply with the reasonable directions and demands of such purchaser,
transferee, assignee or secured party.
(c) Subject to the foregoing, all covenants and agreements contained
herein shall be binding upon, and inure to the benefit of, KCL and its
successors and permitted assigns and Borrower and its successors and permitted
assigns.
10. LOSS OF OR DAMAGE TO EQUIPMENT. In the event of Loss or Damage to any Item
of Equipment, Borrower shall immediately notify KCL of same and, at the option
of KCL, as specified in a notice from KCL to Borrower, Borrower shall within
thirty (30) days following such Loss or Damage: (1) place such Item of Equipment
in good condition and repair, in accordance with the terms hereof; (2) replace
such Item of Equipment with replacement equipment (acceptable to KCL) in as good
condition and repair, and with the same or better fair market value as such
replaced Item of Equipment immediately preceding the Loss or Damage (assuming
that such replaced Item of Equipment was in the condition required by this
Agreement), which replacement equipment shall immediately, and without further
act, be deemed to constitute Items of Equipment and be fully subject to this
Agreement as if originally pledged as Collateral hereunder and shall be free and
clear of all Liens; or (3) pay to KCL any unpaid Installments and other charges
due prior to the payment date specified in such notice plus an amount, with
respect to an Item of Equipment, equal to the pro rata portion of the
Installments attributable to such Item of Equipment under the Loan Documents
after discounting such Installments to present worth as of the payment date
specified in such notice on the basis of a per annum rate of discount equal to
three percent (3%) from the respective dates upon which such Installments would
have been paid but for the operation of this clause, together with interest on
such amount at the Default Rate from the payment date specified in such notice
to the date of actual payment.
Upon KCL's receipt of the payment required under clause (3) above, KCL
shall release its security interest in such Item of Equipment. If Borrower
replaces the Item of Equipment pursuant to clause (2) above, such replacement
shall be deemed to constitute an Item of Equipment and be fully subject to this
Agreement and the security interest granted to KCL hereunder, as if originally
pledged hereunder. If Borrower fails to either restore or replace the Item of
Equipment pursuant to clauses (1) or (2) above, respectively, Borrower shall
make the payment under clause (3) above.
11. INSURANCE. (a) Borrower, at Borrower's own cost and expense, shall maintain
(1) insurance against all risks of physical loss or damage to the Equipment
(which shall include theft and collision for Equipment
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<PAGE> 10
consisting of motor vehicles, and shall not exclude loss resulting from flood or
earthquake) in an amount not less than the full replacement value thereof and
(2) comprehensive public liability insurance including blanket contractual
liability for personal and bodily injury and property damage in an amount
satisfactory to KCL.
(b) All insurance policies required hereunder shall (1) require 30 days'
prior written notice to KCL of cancellation or material change in coverage (any
such cancellation or change, as applicable, not being effective until the
thirtieth (30th) day after the giving of such notice); (2) name "KeyCorp and its
subsidiaries and affiliated companies, including KeyCorp Leasing, a Division of
Key Corporate Capital Inc." as sole loss payee under the property insurance
policies; (3) not require contributions from other policies held by KCL; (4)
waive any right of subrogation against KCL; (5) in respect of any liability of
KCL, except for the insurers' salvage rights in the event of a Loss or Damage,
waive the right of such insurers to set-off, to counterclaim or to any other
deduction, whether by attachment or otherwise, to the extent of any monies due
KCL under such policies; (6) not require that KCL pay or be liable for any
premiums with respect to such insurance covered thereby; (7) be in full force
and effect throughout any geographical areas at any time traversed by any Item
of Equipment; and (8) contain breach of warranty provisions providing that, in
respect of the interests of KCL in such policies, the insurance shall not be
invalidated by any action or inaction of Borrower or any other person (other
than KCL) and shall insure KCL regardless of any breach or violation of any
warranty, declaration or condition contained in such policies by Borrower or by
any other person (other than KCL). Prior to funding the Note, and thereafter not
less than 15 days prior to the expiration dates of the expiring policies
theretofore delivered pursuant to this Section, Borrower shall deliver to KCL a
duplicate original of all policies (or in the case of blanket policies,
certificates thereof issued by the insurers thereunder) for the insurance
maintained pursuant to this Section.
(c) Proceeds of insurance with respect to physical loss or damage to the
Equipment shall be applied, at the option of KCL, to repair or replace the
Equipment or to reduce or satisfy (as applicable) the Secured Obligations.
12. TAXES. Borrower shall pay when due any and all taxes, fees, levies, imposts,
duties, assessments and public and private charges levied or assessed on or with
respect to the Equipment, on the use thereof, or on this Agreement or any of the
other Loan Documents.
13. KCL'S RIGHT TO PERFORM FOR BORROWER. If Borrower fails to perform any of its
obligations contained in the Loan Documents, KCL may (but shall not be obligated
to) itself perform such obligations, and the amount of the reasonable costs and
expenses of KCL incurred in connection with such performance, together with
interest on such amount from the date paid by KCL until the date repaid by
Borrower to KCL, at the Default Rate, shall be payable by Borrower to KCL upon
demand. No such performance by KCL shall be deemed a waiver of any rights or
remedies of KCL, or be deemed to cure the default of Borrower hereunder. All
such sums and amounts so expended by KCL shall be repayable by the Borrower
immediately without notice or demand, shall constitute additional Secured
Obligations and shall bear interest from the date said amounts are expended at
the Default Rate.
14. DELINQUENT PAYMENTS; INTEREST. If Borrower fails to pay any of the
Installments on the date when the same becomes due, Borrower shall pay to KCL a
late charge equal to five percent (5%) of such delinquent amount. Such late
charge shall be payable by Borrower upon demand by KCL and shall be deemed part
of the Secured Obligations. In no event shall such late charge exceed the
maximum amounts permitted under Applicable Law.
15. PERSONAL PROPERTY; LIENS; WARRANTY OF TITLE. The Borrower is, and will
continue to be, the sole owner of the Equipment, free from any Lien. KCL and
Borrower hereby agree that the Equipment is, and shall at all times remain,
personal property notwithstanding the fact that any Item of Equipment may now
be, or hereafter become, in any manner affixed or attached to real property or
any improvements thereon. Borrower shall at all times keep the Equipment free
and clear from all Liens, and the Borrower shall obtain and deliver to KCL (to
be recorded at the Borrower's expense) from each person having a Lien on any
Equipment Location waivers of any Lien which such person might have or hereafter
obtain or claim with respect to the Equipment. Borrower shall (i) give KCL
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<PAGE> 11
immediate written notice of any Lien on the Collateral, (ii) promptly, at
Borrower's sole cost and expense, take such action as may be necessary to
discharge any such Lien, and (iii) indemnify and hold KCL, on an after-tax
basis, harmless from and against any loss or damage caused by any such Lien.
Borrower warrants that it has good, valid and marketable title to the Equipment,
and that (i) the security interest in the Collateral granted to KCL hereunder,
when properly perfected by filing, shall constitute a valid and perfected first
priority security interest in the Collateral and, (ii) the Collateral is not
subject to, and Borrower will not grant or permit to exist, any Liens or claims
on or against the Collateral, whether senior, superior, junior, subordinate or
equal to the security interest granted to KCL hereby, or otherwise.
16. EVENTS OF DEFAULT; REMEDIES. (a) As used herein, the term "Event of Default"
shall mean any of the following events: (1) Borrower fails to pay any
Installment within ten (10) days after the same becomes due and payable; (2)
Borrower breaches any of its other obligations under any of the Loan Documents
and fails to cure the same within thirty (30) days after written notice thereof;
(3) any dissolution, termination of existence, merger, consolidation, change in
controlling ownership of Borrower or Guarantor, or if Borrower or Guarantor is a
natural person, the death or incompetence of Borrower or Guarantor; (4) Borrower
or any Guarantor fails to pay its debts generally as they become due or becomes
insolvent or makes an assignment for the benefit of its creditors; (5) a
receiver, trustee, conservator or liquidator of Borrower or any Guarantor or of
all or a substantial part of Borrower's or such Guarantor's assets is appointed
with or without the application or consent of Borrower or such Guarantor,
respectively; (6) a petition is filed by or against Borrower or any Guarantor
under any bankruptcy, insolvency or similar legislation; (7) Borrower or any
Guarantor violates or fails to perform any provision of either the Loan
Documents or any other loan, lease or credit agreement or any acquisition or
purchase agreement with KCL or any other party; (8) Borrower violates or fails
to perform any covenant or representation made by Borrower in the Loan
Documents; (9) any representation or warranty made herein or in any of the Loan
Documents, certificates, financial statements or other statements furnished to
KCL (or KCL's parent, subsidiaries or affiliates) shall prove to be false or
misleading in any material respect as of the date on which the same was made;
(10) there is a material adverse change in Borrower's or any Guarantor's
financial condition; (11) Borrower shall fail to satisfy any final judgment
rendered against the Borrower by any court of competent jurisdiction where the
judgment is material in amount as to the Borrower or materially impairs the
financial or business condition of the Borrower; (12) any of the liens created
or granted hereby, or intended to be granted or created hereby, to KCL shall
fail to be valid, first priority perfected liens subject to no prior or equal
lien; or (13) the receipt by KCL of a notice to creditors with regard to a bulk
transfer by the Borrower pursuant to Article 6 of the Uniform Commercial Code;
or (14) an additional Lien attaches to the Equipment or the Equipment becomes
subject to risk of seizure or forfeiture.
(b) (i) Upon the occurrence of an Event of Default, KCL, at its option,
may declare any or all of the Secured Obligations, including, without
limitation, the Note, to be immediately due and payable, without demand or
notice to Borrower or any Guarantor. The obligations and liabilities accelerated
thereby shall bear interest (both before and after any judgment) until paid in
full at the Default Rate. Should there occur a Default and if a voluntary or
involuntary petition under the United States Bankruptcy Code is filed by or
against Borrower while such Default remains uncured, the Secured Obligations
automatically shall be accelerated and due and payable and interest thereon at
the Default Rate automatically shall apply as of the date of the first
occurrence of the Default, without any notice, demand or action of any type on
the part of KCL (including any action evidencing the acceleration or imposition
of the Default Rate). The fact that KCL has, prior to the filing of the
voluntary or involuntary petition under the United States Bankruptcy Code, acted
in a manner which is inconsistent with the acceleration and imposition of the
Default Rate shall not constitute a waiver of this provision or estop KCL from
asserting or enforcing KCL's rights hereunder.
(ii) Furthermore, upon the occurrence of an Event of Default, KCL shall
have, in addition to the rights and remedies provided herein, in the other Loan
Documents or by law, the rights and remedies of a secured party under the
Uniform Commercial Code under the laws of the State of New York (the "UCC")
(regardless of whether the UCC is the law of the jurisdiction where the rights
and remedies are asserted and regardless of whether the UCC applies to the
affected Collateral), and further KCL may do any one or more of the following as
KCL in its sole discretion may elect, with or without judicial process or the
aid and assistance of others: (i) enter and remain
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<PAGE> 12
on any premises on which any of the Equipment may be located and, without
resistance or interference by the Borrower, without liability to KCL by reason
of such entry or taking possession, take possession of the Equipment, (ii)
prepare for sale and sell or otherwise dispose of any Equipment on any such
premises, (iii) require the Borrower to assemble and make available to KCL at
Borrower's expense any Equipment at any place and time designated by KCL, (iv)
remove any Equipment from any such premises for the purpose of effecting sale or
other disposition thereof, (v) without demand and without advertisement, notice,
hearing or process of law, all of which the Borrower hereby waives, at any place
and time or times, sell and deliver any or all Equipment held by or for it at
public or private sale, by one or more contracts, in one or more parcels, for
cash, upon credit or otherwise, at such prices and upon such terms as KCL deems
advisable, in its sole discretion, or (vi) lease all or any portion of the
Equipment on such terms and conditions as KCL in its sole discretion may
determine. In addition to all other sums due KCL hereunder, the Borrower shall
pay KCL all reasonable costs and expenses incurred by KCL, including reasonable
attorneys' fees and court costs, in obtaining or liquidating the Collateral, in
enforcing payment of Secured Obligations, or in the prosecution or defense of
any action or proceeding by or against KCL or the Borrower concerning any matter
arising out of or connected with the Loan Documents, the Collateral or the
Secured Obligations, including without limitation any of the foregoing arising
in, arising under or related to a case under the United States Bankruptcy Code.
(iii) Borrower's waivers regarding disposition of the equipment. IF AN
EVENT OF DEFAULT OCCURS, BORROWER HEREBY WAIVES ANY DEFENSES, RIGHTS, OFFSETS OR
CLAIMS AGAINST KCL ARISING OUT OF THE REPOSSESSION, RETENTION, SALE, MANNER OR
METHOD OF SALE OR DISPOSITION OF ANY ITEMS OF EQUIPMENT. THE BORROWER AGREES
THAT ANY REQUIREMENT OF REASONABLE NOTICE SHALL BE MET IF SUCH NOTICE IS
PERSONALLY SERVED ON OR MAILED, POSTAGE PREPAID, TO THE BORROWER IN ACCORDANCE
WITH THE NOTICE PROVISIONS HEREOF AT LEAST 10 DAYS BEFORE THE TIME OF SALE OR
OTHER EVENT GIVING RISE TO THE REQUIREMENT OF SUCH NOTICE. KCL SHALL NOT BE
OBLIGATED TO MAKE ANY SALE OR OTHER DISPOSITION OF THE EQUIPMENT REGARDLESS OF
NOTICE HAVING BEEN GIVEN. KCL MAY BE THE PURCHASER AT ANY SUCH SALE. THE
BORROWER HEREBY WAIVES ALL OF ITS RIGHTS OF REDEMPTION FROM ANY SUCH SALE. KCL
MAY POSTPONE OR CAUSE THE POSTPONEMENT OF THE SALE OF ALL OR ANY PORTION OF THE
EQUIPMENT BY ANNOUNCEMENT AT THE TIME AND PLACE OF SUCH SALE, AND SUCH SALE MAY,
WITHOUT FURTHER NOTICE, BE MADE AT THE TIME AND PLACE TO WHICH THE SALE WAS
SCHEDULED. NONE OF KCL'S RIGHTS OR REMEDIES HEREUNDER ARE INTENDED TO BE
EXCLUSIVE OF, BUT EACH SHALL BE CUMULATIVE AND IN ADDITION TO, ANY OTHER RIGHT
OR REMEDY REFERRED TO HEREUNDER OR OTHERWISE AVAILABLE TO KCL OR ITS ASSIGNS AT
LAW OR IN EQUITY, AND MAY BE PURSUED SINGLY, SUCCESSIVELY OR CONCURRENTLY AT THE
SOLE DISCRETION OF LENDER AND MAY BE EXERCISED AS OFTEN AS OCCASION THEREFOR
SHALL OCCUR. THE FAILURE TO EXERCISE, OR ANY DELAY IN THE EXERCISE OF, ANY RIGHT
OR REMEDY SHALL IN NO EVENT BE CONSTRUED AS A WAIVER, RELEASE OR EXHAUSTION OF
ANY SUCH REMEDIES. NO EXPRESS OR IMPLIED WAIVER BY KCL OF ANY EVENT OF DEFAULT
SHALL CONSTITUTE A WAIVER OF ANY OTHER EVENT OF DEFAULT OR A WAIVER OF ANY OF
KCL'S RIGHTS UPON THE REOCCURRENCE OF ANY SUCH EVENT OF DEFAULT.
(c) The Borrower hereby authorizes KCL, upon the occurrence and during the
continuation of any Event of Default hereunder, at KCL's option to adjust,
compromise and settle any losses under any insurance afforded, and the Borrower
does hereby irrevocably constitute KCL and each of its designees, as its
attorneys-in-fact, with full power and authority, upon the occurrence and during
the continuation of any Event of Default hereunder, to effect such adjustment,
compromise and/or settlement and to endorse any drafts drawn by an insurer of
the Equipment or any part thereof and to do everything necessary to carry out
such purposes and to receive and receipt for any unearned premiums due under
policies of such insurance; but unless or until KCL
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<PAGE> 13
elects to adjust, compromise or settle losses as aforesaid, such insurance
proceeds shall be subject to the lien and security interest of KCL hereunder.
(d) Upon the occurrence, and during the continuance, of an Event of
Default hereunder, any payments in respect of the Secured Obligations and any
proceeds of the Collateral, when received by KCL in cash or its equivalent, will
be applied first to costs of collection and, thereafter, in reduction of the
Secured Obligations in such order and manner as KCL may direct in its sole
discretion, and the Borrower irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that KCL
shall have the continuing and exclusive right to apply any and all such payments
and proceeds in KCL's sole discretion, notwithstanding any entry to the contrary
upon any of its books and records. The Borrower shall remain liable to KCL for
any deficiency. Any surplus remaining after the full payment and satisfaction of
the Secured Obligations shall be returned to the Borrower or to whomsoever a
court of competent jurisdiction shall determine to be entitled thereto.
(e) To the extent that any of the Secured Obligations are now or hereafter
secured by property other than the Collateral, or by a guarantee, endorsement or
property of any other person, then KCL also shall have the right to proceed
against such other property, guarantee or endorsement upon the occurrence of a
default hereunder, and KCL shall have the right, in its sole discretion, to
determine which rights, liens, security interests or remedies KCL shall at any
time pursue, relinquish, subordinate or modify, without in any way affecting the
Secured Obligations or any of KCL's rights under this Agreement.
17. NOTICES. All notices and other communications hereunder shall be in writing
and shall be transmitted by hand, overnight courier or certified mail (return
receipt requested), postage prepaid. Such notices and other communications shall
be addressed to the respective party at the address set forth above or at such
other address as any party may from time to time designate by notice duly given
in accordance with this Section. Such notices and other communications shall be
effective upon the earlier of receipt or three (3) days after mailing if mailed
in accordance with the terms of this section.
18. GENERAL INDEMNIFICATION. Borrower shall pay, and shall indemnify and hold
KCL and its directors, officers, employees, counsel, agents and advisors
harmless on an after-tax basis from and against, any and all liabilities, causes
of action, claims, suits, penalties, damages, losses, costs or expenses
(including attorneys' fees), obligations, liabilities, demands and judgments,
and Liens, of any nature whatsoever (collectively, a "Liability") arising out of
or in any way related to: (a) the Loan Documents (b) a failure to comply fully
with Applicable Law and (c) Borrower's failure to perform any covenant, or
breach of any representation or warranty under the Loan Documents; provided,
that the foregoing indemnity shall not extend to the Liabilities to the extent
resulting solely from the gross negligence or willful misconduct of KCL.
Borrower shall promptly deliver to KCL (i) copies of any documents received from
the United States Environmental Protection Agency or to any state, county or
municipal environmental or health agency concerning the Equipment or its
operation and (ii) copies of any documents submitted by Borrower or any of its
subsidiaries to the United States Environmental Protection Agency or any state,
county or municipal environmental or health agency concerning the Equipment or
its operation. Borrower further agrees to indemnify KCL against and hold it
harmless from all present and future stamp, transfer, documentary and other such
taxes, levies, fees, assessments or other charges made by any jurisdiction by
reason of the execution, delivery, performance and enforcement of the Loan
Documents.
19. SEVERABILITY; CAPTIONS. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
Applicable Law. If, however, any provision of this Agreement or any of the Loan
Documents shall be prohibited or unenforceable in any jurisdiction, it shall, as
to such jurisdiction, be deemed modified to conform to the minimum requirements
of such law, or if for any reason it is not deemed so modified, it shall be
ineffective only to the extent of such prohibition or unenforceability without
affecting the remaining provisions hereof, and any such prohibition or
unenforceability shall not invalidate or render unenforceable such provision in
any other jurisdiction. Captions are intended for convenience or reference only,
and shall not be construed to define, limit or describe the scope or intent of
any provisions hereof.
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<PAGE> 14
20. FINANCIAL AND OTHER DATA. During the Term hereof, Borrower shall furnish
KCL, as soon as available and in any event within 120 days after the last day of
each fiscal year, financial statements of Borrower and each Guarantor, in each
case compiled, reviewed or audited by an independent certified public accountant
as required by KCL. Borrower shall also furnish such other financial reports,
information or data (including federal and state income tax returns and
quarterly or interim financial statements compiled, reviewed or audited by an
independent certified public accountant if required by KCL) as KCL may
reasonably request from time to time.
21. [RESERVED]
22. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower represents and warrants
that: (a) Borrower is a corporation duly organized and validly existing in good
standing under the laws of the state of its incorporation; (b) the execution,
delivery and performance of this Agreement and all related instruments and
documents: (1) have been duly authorized by all necessary corporate action on
the part of Borrower, (2) do not require the approval of any stockholder,
partner, trustee, or holder of any obligations of Borrower except such as have
been duly obtained, and (3) do not and will not contravene any law, governmental
rule, regulation or order now binding on Borrower, or the charter or by-laws of
Borrower, or contravene the provisions of, or constitute a default under, or
result in the creation of any lien or encumbrance upon the property of Borrower
under, any indenture, mortgage, contract or other agreement to which Borrower is
a party or by which it or its property is bound; (c) the Loan Documents, when
entered into, will constitute legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with the terms thereof; (d) there are
no pending actions or proceedings to which Borrower is a party, and there are no
other pending or threatened actions or proceedings of which Borrower has
knowledge, before any court, arbitrator or administrative agency, which, either
individually or in the aggregate, would adversely affect the financial condition
of Borrower, or the ability of Borrower to perform its obligations under the
Loan Documents; (e) Borrower is not in default under any obligation for the
payment of borrowed money, for the deferred purchase price of property or for
the payment of any installments under any lease agreement which, either
individually or in the aggregate, would have the same such effect; (f) under the
laws of the state(s) in which the Equipment is to be located, the Equipment
consists solely of personal property and not fixtures; (g) the financial
statements of Borrower (copies of which have been furnished to KCL) have been
prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"), and fairly present Borrower's financial condition
and the results of its operations as of the date of and for the period covered
by such statements, and since the date of such statements there has been no
material adverse change in such conditions or operations; (h) the address stated
above is the chief place of business and chief executive office, or in the case
of individuals, the primary residence, of Borrower; (i) Borrower does not
conduct business under a trade, assumed or fictitious name, except as set forth
in Schedule 1; (j) this Agreement creates a valid first priority security
interest in the Collateral securing payment and performance of the Secured
Obligations and all filings and other action necessary to perfect such security
interest have been taken or shall be promptly taken; (k) Borrower has filed or
has caused to have been filed all Federal, state and local tax returns which, to
the knowledge of Borrower, are required to be filed, and has paid or caused to
have been paid all taxes as shown on such returns or on any assessment received
by it, to the extent that such taxes have become due, unless and to the extent
only that such taxes, assessments and governmental charges are currently
contested in good faith and by appropriate proceedings by Borrower and adequate
reserves therefor have been established as required under GAAP and, to the
extent Borrower believes it advisable to do so, Borrower has set up reserves
which are believed by Borrower to be adequate for the payment of additional
taxes for years which have not been audited by the respective tax authorities;
(1) except as previously disclosed in writing to KCL, neither Borrower nor any
of its officers or directors (if a corporation), partners (if a partnership) or
members or managers (if a limited liability corporation) has, directly or
indirectly, any financial interest in the Supplier; and (m) Borrower has
conducted a comprehensive review and assessment of the Borrower's computer
applications and made inquiry of the Borrower's key suppliers, vendors and
customers with respect to the "year 2000 problem" (that is, the risk that
computer applications may not be able to properly perform date-sensitive
functions after December 31, 1999) and based on that review and inquiry, the
Borrower does not believe the year 2000 problem will result in a material
adverse change in the Borrower's business condition (financial or otherwise),
operations, properties or prospects, or ability to perform the obligations of
Borrower under this Agreement; (n) Borrower is not in violation of any
Applicable Law, the violation of which would have a material adverse effect on
the conduct of its business,
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and Borrower has obtained any and all licenses, permits, franchises or other
governmental authorizations necessary for the ownership of its properties and
the conduct of its business; and (o) none of the proceeds of the loan made by
KCL will be used, directly or indirectly, by Borrower for the purpose of
purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any "margin
stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of
Governors of the Federal Reserve System (herein called "margin stock") or for
any other purpose which might make the transactions contemplated herein a
"purpose credit" within the meaning of Regulation U, or cause this Agreement to
violate any other regulation of the Board of Governors of the Federal Reserve
System or the Securities Exchange Act of 1934 or the Small Business Investment
Act of 1958, as amended, or any rules or regulations promulgated under any of
such statutes.
23. FURTHER COVENANTS OF BORROWER. The Borrower further covenants and agrees
that it will not change its legal name, be a party to a merger, consolidation or
other change in structure or use a trade name in its business without at least
30 days' prior written notice to KCL; and shall execute and deliver to KCL (to
be filed at Borrower's expense) all UCC statements as may be required by KCL in
connection with such event.
24. MISCELLANEOUS. Time is of the essence with respect to this Agreement. ANY
FAILURE OF KCL TO REQUIRE STRICT PERFORMANCE BY BORROWER OR ANY WAIVER BY KCL OF
ANY PROVISION HEREIN SHALL NOT BE CONSTRUED AS A CONSENT OR WAIVER OF ANY
PROVISION OF THIS AGREEMENT. None of the Loan Documents may be amended except by
a writing signed by KCL and Borrower. This Agreement will be binding upon KCL
only if executed by a duly authorized officer or representative of KCL at KCL's
principal place of business as set forth above. This Agreement and all other
Loan Documents shall be executed on Borrower's behalf by Authorized Signers of
Borrower. The Borrower hereby waives presentment, notice of dishonor and protest
of all instruments included in or evidencing any Secured Obligations, and all
other notices and demands whatsoever (except as expressly provided herein). THIS
AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK AND SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING
ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAWS PROVISION OR RULE (WHETHER OF THE STATE OF
NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS
OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
25. JURY TRIAL WAIVER. KCL AND BORROWER HEREBY EACH WAIVE THEIR RESPECTIVE
RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION OR PROCEEDING TO
WHICH KCL OR BORROWER MAY BE PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY ACTION, COUNTERCLAIM
OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY
OR ENFORCEABILITY, OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY
PROVISION HEREOF OR THEREOF. THIS WAIVER IS MADE KNOWINGLY, WILLINGLY AND
VOLUNTARILY BY KCL AND THE BORROWER WHO EACH ACKNOWLEDGE THAT NO REPRESENTATIONS
HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN
ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
26. MORE THAN ONE BORROWER. If more than one person or entity executes this
Agreement, each of the other Loan Documents, and all addenda or other documents
executed in connection herewith or therewith, as
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<PAGE> 16
"Borrower," the obligations of "Borrower" contained herein and therein shall be
deemed joint and several and all references to "Borrower" shall apply both
individually and jointly.
27. ENTIRE AGREEMENT. This Agreement, together with the other Loan Documents,
collectively constitute the entire understanding or agreement between KCL and
Borrower with respect to the financing of the Equipment, and there is no
understanding or agreement, oral or written, which is not set forth herein or
therein. This Agreement shall not be modified except by the written agreement of
KCL and Borrower.
28. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all
of which taken together shall constitute but one and the same instrument.
29. POWER OF ATTORNEY; UCC FILINGS. BORROWER SHALL EXECUTE AND DELIVER TO KCL
CONCURRENTLY WITH THE EXECUTION OF THIS AGREEMENT, AND AT ANY TIME FROM TIME TO
TIME THEREAFTER, ALL FINANCING STATEMENTS, AMENDMENTS TO FINANCING STATEMENTS,
CHATTEL MORTGAGES, ASSIGNMENTS, AND ALL OTHER INSTRUMENTS, IN FORM SATISFACTORY
TO KCL, AND TAKE ALL OTHER ACTION AS KCL MAY REASONABLY REQUIRED, TO PERFECT AND
CONTINUE PERFECTED, MAINTAIN THE PRIORITY OF OR PROVIDE NOTICE OF KCL'S SECURITY
IN THE COLLATERAL. BORROWER HEREBY APPOINTS KCL, OR ITS ASSIGNEE, AND ANY OF
KCL'S OR ASSIGNEE'S OFFICERS OR EMPLOYEES AS ITS TRUE AND LAWFUL ATTORNEY IN
FACT, IRREVOCABLY AND COUPLED WITH AN INTEREST, TO EXECUTE AND FILE ON BEHALF OF
BORROWER ALL UCC FINANCING STATEMENTS WHICH IN KCL'S SOLE DISCRETION ARE
NECESSARY OR PROPER TO SECURE KCL'S INTEREST IN THE EQUIPMENT IN ALL APPLICABLE
JURISDICTIONS. Borrower hereby ratifies, to the extent permitted by law, all
that KCL shall lawfully and in good faith do or cause to be done by reason of
and in compliance with this paragraph
LENDER: BORROWER:
KEYCORP LEASING, UPRIGHT, INC.
A DIVISION OF KEY CORPORATION CAPITAL INC.
By: /s/ Grant C. Melocik
-------------------------------
By: Name: Grant C. Melocik
-------------------------- Title: Vice President Operations
Name:
Title:
- --------------------------------------------------------------------------------
Page 11 of 13
<PAGE> 17
COLLATERAL SCHEDULE
SCHEDULE 1
- --------------------------------------------------------------------------------
BORROWER TRADE NAMES
- --------------------------------------------------------------------------------
DESCRIPTION OF EQUIPMENT
EQUIPMENT LOCATION: 1775 Park Street, Selma, CA 93622
LANDLORD NAME & ADDRESS (if not owned by Borrower)
QUANTITY EQUIPMENT DESCRIPTION
- -------- ---------------------
1 Roller for Assembly Fixture
1 Fab. Bomm Assembly Fixture
1 Mfg. Weld Fixture
1 SC3000 Coolant Purifier
1 Mill Fixture
16 Clickner Torque Wrench
12 Open End Drive Wrench
1 Transfer Cart
1 Special Rocker Dies
1 Machine Fixture
1 Weld Fixture
1 Special Punch
1 Dr. Torque Wrench
1 Hand Crimp Tool
1 Spindle Liner
1 Drive Shaft
4 Assembly Gage
2 Finger Gage
3 Harris Regulator
1 Pusher Head
1 Sling 1000lb. Capacity
2 Sleeve Change Adapter/Collet
5 Bushings
1 Jancy Slugger Cutter
8 Cobalt Spade Drill
1 Spade Drill
1 Hammer
1 Rotary Tool Clamp
6 Grinders
2 SPL Dies
3 Spanner Wrench
1 Power Unit
1 Boring Head
1 Dr. Torque Wrench
90 Tote
1 Bin Cart
2 Set of SPL Dies
- --------------------------------------------------------------------------------
Page 12 of 13
<PAGE> 18
1 MIG Gun
1 2666MF Fixture
1 Weld Fixture
1 Machining Fixture
7 Weld Fixture and Design Weld Fixture
1 AB 60 Turret Cover Tooling
6 Weld Fixture and Design Weld Fixture
1 Design and Build Machining Fixture
1 Mill Fixture
9 Design Weld Fixtures
12 Weld Fixture
2 Ball Pushers
13 Weld Fixtures
2 Design and Weld Fixture
3 Machining Fixtures
3 Shank Drill/Chucking Reamer
1 HSS Drill
1 Hypertherm Machine
1 Belt Sander
1 Radius Ruler
1 Special Dies
1 Special Goosneck Punch
1 Weld Fixture
17 Machine Fixture
2 Drill
4 Cast Iron Tombstone
1 Horizontal Machining Fixture
1 Shell Mill Arbor
2 Indexable Drill
2 Wrenches
1 Quick Chng Sleeve Adapter
1 Profile Tool
2 Boring Bar
1 Sleeve Bushings
1 Lift Magnet
2 Press Fit Ball
2 Steel Roller Conveyor
5 Carbology Tools
3 Carbide Drill
1 Wrenches
1 Ratched Crimper
1 Drill & Boring Bar
2 Center Drill
1 Drill
1 Boring Bar
1 Torch Kit
1 Grinder
1 Mono Hard Block Jaw S
- --------------------------------------------------------------------------------
Page 13 of 13
<PAGE> 1
EXHIBIT 10.19(ii)
[Logo] SECURITY AGREEMENT
The undersigned debtor, meaning all debtors jointly and severally ("Debtor"), to
secure the obligations set forth herein grants to the secured party named below
(herein, with its successors and assigns, called "Secured Party") under the
terms and provisions of this agreement (this "Agreement") a security interest in
the following described property (herein, with all present and future
attachments, accessories, replacement parts, repairs and additions or
substitutions, referred to collectively as "Equipment"):
See Schedule A attached hereto and made a part hereof:
The Equipment will be used primarily for: X business or commercial use other
than farming operations _____ farming operations. When not in and, when in use,
will be used only in the following State(s): CA Equipment will be kept at: 1775
Park Street, Selma, CA 93662
PAYMENT SCHEDULE
Debtor promises to pay Secured Party the Total Amount of $1,540,930.84 in
installments as follows: (the "total Amount")
(a) ______ at ______, beginning thirty (30) calendar days following the date of
the Delivery and Acceptance
or
(b) 24 payment(s) of $17,248.76, followed by
36 payment(s) of $31,304.46, followed by
provided, however, that the final installment will be in the amount of the then
remaining unpaid balance. All amounts payable under this Agreement are payable
at Secured Party's address shown below or at such other address as Secured Party
may specify from time to time.
USE OF PROCEEDS
Secured Party is hereby irrevocably authorized and directed to disburse the
proceeds of this Agreement as follows:
Amount Payee (Name and Address)
$1,264,590.85 Upright, Inc.
1775 Park Street
Selma, CA 93662
$0.00
$0.00
Debtor hereby acknowledges and agrees that the proceeds of this Agreement will
be used for commercial, business or agricultural purposes and will not be used
for personal, family or household purposes.
Secured Party may disburse the proceeds using checks, drafts, orders, transfer
funds, or any other method or media Secured Party deems desirable. Disbursement
may be made in Secured Party's name on Debtor's behalf or in Debtor's name.
Disbursement in accordance with the above instructions or any written supplement
to these instructions will constitute payment and delivery to and receipt by
Debtor of all such proceeds.
INSURANCE: Physical damage insurance covering the equipment is required. Debtor
can furnish this insurance through an agent or broker of Debtor's choice. Debtor
hereby authorizes Secured Party and any assignee to release to any insurance
company affiliated with Secured Party or any assignee any information relating
to a contract or policy of insurance which is providing or may provide insurance
coverage against physical damage to the Equipment.
DELINQUENCY: For each installment not paid when due, Debtor agrees to pay
Secured Party a delinquency charge calculated on the amount of such installment
at the rate of 1 1/2% per month for the period of the delinquency, or, a Secured
Party's option, 5% of such installment, provided that such a delinquency charge
is not prohibited by law, otherwise at the highest rate that Debtor can legally
obligate itself to pay and/or Secured Party can legally collect. Debtor agrees
to reimburse Secured Party immediately upon demand for any amount charged to
Secured Party by any depositary institution because a check, draft or other
order made or drawn by or for the benefit of Debtor is returned unpaid for any
reason. From and after acceleration, Debtor agrees to pay interest on all
amounts then owing at the rate of 1 1/2% per month, if not prohibited by law,
otherwise at the highest rate that Debtor can legally obligate itself to pay
and/or Secured Party can legally collect. If the implementation of any provision
of this Agreement would at any time raise the interest rate (whether before or
after acceleration) or delinquency charge above the lawful maximum, if any, in
effect from time to time under applicable state or federal laws for loans to
borrowers of the type, in the amount, for the purposes, and otherwise of the
kind contemplated by this Agreement, then such interest rate and/or delinquency
charge will be limited to such lawful maximum and any excess amount
inadvertently collected will be deemed to be a partial prepayment of principal
and applied or reapplied by Secured Party in that manner.
SECURITY INTEREST: To secure payment of the Total Amount and all of Debtor's
obligations under this Agreement or with respect to the Equipment, Debtor hereby
grants to Secured Party a first priority security interest in the Equipment and
in all cash and non-cash proceeds thereof (the Equipment and all such proceeds
are herein called the "Collateral") regardless of any retaking and/or redelivery
of the Collateral to Debtor.
CROSS SECURITY: Debtor further grants to Secured Party a security interest in
the Collateral to secure the payment of all absolute and all contingent
obligations and liabilities of Debtor to Secured Party now existing or hereafter
arising, whether under this Agreement or under any other agreement and whether
due directly or by assignment; provided, however, upon any assignment of this
Agreement by Secured Party, the assignee shall be deemed for the purpose of this
paragraph as the only party with a security interest in the Collateral.
DELIVERY AND ACCEPTANCE OF EQUIPMENT
(Check Appropriate Box)
Debtor's obligations and liabilities to Secured Party are absolute and
unconditional under all circumstances and regardless of any failure of operation
or Debtor's loss of possession of any item of Equipment or the cessation or
interruption of Debtor's business for any reason whatsoever.
[ ] On _______________________ , the Equipment being purchased with the
proceeds of this Agreement was delivered to Debtor with all installation
and other work necessary for the proper use of the Equipment completed
at a location agreed upon by Debtor; the Equipment was inspected by
Debtor and found to be in satisfactory condition in all respects and
delivery was unconditionally accepted by Debtor.
[ ] The Equipment being purchased with the proceeds of this Agreement has
not yet been delivered to or accepted by Debtor and, upon delivery,
Debtor agrees to executed such delivery and acceptance certificate as
Secured Party requires.
[X] All of the Equipment was acquired by Debtor prior to the date hereof and was
previously delivered to and unconditionally accepted by Debtor.
Page 1 of 3 of Security Agreement dated: 5/13/99 between Upright, Inc. (Debtor)
and Associates Commercial Corporation (Secured Party).
<PAGE> 2
STATEMENT OF ADDITIONAL TERMS
1. Additional Warranties and Agreements. 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 Equipment 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 Equipment; the
Equipment is not currently and will not be used in conjunction with the storage,
transportation or disposal of substances considered to be toxic and/or hazardous
or in conjunction with any activity or for any use that would subject the
Equipment to seizure or confiscation by any governmental body; and the Equipment
is currently located at and will be kept by Debtor at the location set forth for
it on the reverse side of this Agreement and will not be removed from said
location without the prior written consent of Secured Party, except that if the
Equipment is of a type which is mobile and normally used by Debtor at more than
one location, Debtor may use the Equipment away from said location in the
regular course of Debtor's business provided that (a) if the Equipment is not
returned to said location within 30 days, Debtor will immediately thereafter,
and each 30 days thereafter until the Equipment is returned, report the then
current location of the Equipment to Secured Party in writing and (b) the
Equipment shall not be removed from the State(s) of use indicated on the reverse
side of this Agreement. Secured Party shall have the right to inspect the
Equipment at all reasonable times and from time to time.
Debtor further warrants and agrees that: the security interest in the
Collateral granted to and/or retained by Secured Party is and will continue to
be superior to any title to or interest in the Equipment 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 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 Equipment shall be immediately delivered to Secured Party and,
if a registration is required for any item of Equipment, Debtor will cooperate
with Secured Party in obtaining the Certificate of Title or registration
disclosing the interests of Debtor and Secured Party in the Equipment; 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
Equipment and all taxes, assessments, license fees and other public or private
charges levied or assessed in conjunction with the operation or use of the
Equipment 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.
2. Insurance and Risk of Loss. Debtor will at all times bear all risk of loss
of, damage to or destruction of the Equipment. Debtor agrees to immediately
procure and maintain insurance on the Equipment for the full insurable value
thereof and for the life of this agreement, in the form of "All Risk" or similar
insurance (insuring the Equipment 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 insurer's 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 will not have the right to cancel
any such insurance without Debtor's consent prior to the occurrence of any event
of default and the repossession, loss or destruction of the Equipment. 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.
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.
4. 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 insolvent or ceases to
do or is prohibited by any court order or governmental 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 Equipment
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 Equipment 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 Equipment, or attempts 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; (j) there shall be a material
change in the management, ownership or control of Debtor; or (k) Secured {arty
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.
5. 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
Equipment 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
Page 2 of 3 of Security Agreement dated: 5/13/99 between Upright, Inc. (Debtor)
and Associates Commercial Corporation (Secured Party).
<PAGE> 3
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'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.
6. Power of Attorney And Financing Statement. DEBTOR HEREBY APPOINTS SECURED
PARTY OR ANY OFFICER, EMPLOYEE OR DESIGNEE OF SECURED PARTY OR ANY ASSIGNEE OF
SECURED PARTY (OR ANY DESIGNEE OF SUCH ASSIGNEE) AS DEBTOR'S ATTORNEY-IN-FACT
TO, IN DEBTOR'S OR SECURED PARTY'S NAME, TO: (a) PREPARE, EXECUTE AND SUBMIT ANY
NOTICE OR PROOF OF LOSS IN ORDER TO REALIZE THE BENEFITS OF ANY INSURANCE POLICY
INSURING THE EQUIPMENT; (b) PREPARE, EXECUTE AND FILE NAY INSTRUMENT WHICH, IN
SECURED PARTY'S OPINION, IS NECESSARY TO PERFECT AND/OR GIVE PUBLIC NOTICE OF
THE INTERESTS OF SECURED PARTY IN THE EQUIPMENT; AND (c) ENDORSE DEBTOR'S NAME
ON ANY REMITTANCE REPRESENTING PROCEEDS OF ANY INSURANCE RELATING TO THE
EQUIPMENT OR THE PROCEEDS OF THE SALE LEASE OR OTHER DISPOSITION OF THE
EQUIPMENT (WHETHER OR NOT THE SAME IS A DEFAULT HEREUNDER). This power is
coupled with an interest and is irrevocable so long as any indebtedness
hereunder remains unpaid. Debtor agrees to execute and deliver Secured Party,
upon Secured Party's request such documents and assurances as Secured Party
deems necessary or advisable for the confirmation or perfection of this Security
Agreement and Secured Party's rights hereunder, including such documents as
Secured Party may require for filing or recording. DEBTOR AGREES THAT A CARBON,
PHOTOGRAPHIC OR OTHER REPRODUCTION OR THIS LEASE OR OF A FINANCING STATEMENT MAY
BE FILED AS A FINANCING STATEMENT.
7. 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.
8. 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 of the maturity hereof. (H) If allowed by
law, the "reasonable fees of attorneys" retained by Secured Party shall include
the amount of any flat fee, retainer, contingent fee and/or the hourly charges
of any attorney retained by Secured Party in enforcing any of Secured Party's
rights hereunder in the prosecution or defense of any litigation related to this
Agreement or the transactions contemplated by this Agreement. (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".
ADDITIONAL TERMS AND ORAL AGREEMENTS: Debtor and Secured Party agree that this
is a three page Agreement and each page hereof constitutes a part of this
Agreement. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES 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.
Debtor's Social Security or Federal Identification Number is 94-1099653 and
Co-Debtor's is:___________________________
Debtor hereby acknowledges
receipt of an exact copy of this
Agreement.
DATED:
----------------------------------
SECURED
PARTY Associates Commercial Corporation DEBTOR Upright, Inc.
--------------------------
By By /S/ Barris J. Evulich
-------------------------------------- ------------------------------
Title Title V.P. & Gen. Mgr.
----------------------------------- --------------------------
10100 Pioneer Blvd, Suite 315 By /s/ Graham D. Croot
----------------------------------- ------------------------------
(Street Address)
Santa Fe Springs, CA 90670 Title Authorised Signatory.
----------------------------------- --------------------------
(City, State and Zip Code)
1775 Park Street,
--------------------------
(Street Address)
Selma, CA 93662
--------------------------
(City, COUNTY, State and
Zip Code)
Page 3 of 3 of Security Agreement dated: 5/13/99 between Upright, Inc. (Debtor)
and Associates Commercial Corporation (Secured Party).
<PAGE> 4
[Logo]
PAYMENT ADJUSTMENT ADDENDUM TO PROMISSORY NOTE
AND SECURITY AGREEMENT BETWEEN
Associates Commercial Corporation., AS SECURED PARTY AND
Upright, Inc., AS DEBTOR
DATED 13 MAY, 1999
ADJUSTMENT CLAUSE:
Base Monthly Payments have been calculated using a rate factor of (.0247546%)
times equipment cost. This factor is based on a Sixty (60) month U.S. Treasury
Note Yield of 5.28% as published in the Wall Street Journal on April 01, 1999.
The Rate Factor and Base Monthly Payments are fixed for a period of Thirty (30)
days from April 20, 1999. Debtor agrees that, after this Thirty (30) Day Period,
(until the day of contract commencement) the rate factor and monthly payment
will be adjusted to any increase in the aforementioned Sixty (60) month U.S.
Treasury Note Yield as of the first day of the month the contract commencement.
If no sixty (60) month U.S. Treasury Note Yield is published as of the first of
the month, an average of the published Fifty-Nine (59) month and Sixty-One (61)
month U.S. Treasury Note Yields will be used for adjustment purposes. The final
rate factor and monthly payments will be fixed on the day of contract
commencement for the full term.
Agreed to, this 13 day of MAY, 1999
Upright, Inc.
Debtor
/s/ Graham D. Croot
----------------------------
By: /s/ Barris Evulich Title: V.P. & Gen Mgr.
----------------------------- --------------------------------
<PAGE> 5
SCHEDULE A
Attached to and made a part of a(n) SECURITY AGREEMENT Dated May 13, 1999 (Name
of document, such as Security Agreement) between Upright, Inc. (Debtor) and
Associates Commercial Corporation (Secured Party)
(Describe property fully, including year if appropriate, make, model, kind of
unit, serial number and any other pertinent information.)
<TABLE>
<CAPTION>
VENDOR INVOICE NUMBER DESCRIPTION
- ------ -------------- -----------
<S> <C> <C>
COAST TOOL CO. 2009571-01 BORING BAR; COOLANT DRILL
MC MASTER-CARR 5796153 WEB SLING NYLON
TECNARA TOOLING SYSTEM 31010 TAP HOLDER & ADAPTER
JOHNSON INDT'L SUPPLY 1007542-01 INSERTS
JOHNSON INDT'L SUPPLY 1007542-02 BORING HEAD & ARBOR
JOHNSON INDT'L SUPPLY 1007024-01 SPOT DRILL
JOHNSON INDT'L SUPPLY 1007024-03 COLLET
JOHNSON INDT'L SUPPLY 1007542-04 MILL HOLDER
JOHNSON INDT'L SUPPLY 1007542-05 END MILL HOLDER
JOHNSON INDT'L SUPPLY 1007542-03 APPLIX TAP
TECH-TOOLS 10796 COLLET
CAL-WELD SUPPLY CO. 58815 HAMMER ROTARY; BIT
CAL-WELD SUPPLY CO. 58374 CABLE, METERS, CV655, ETC
CAL-WELD SUPPLY CO. 59437 GRINDING WHEEL
CAL-WELD SUPPLY CO. 59435 CONDUIT, GLOVES, INSULATOR, ETC.
CAL-WELD SUPPLY CO. 59438 HDGEAR, VISOR, RESPIRATOR, ETC.
CAL-WELD SUPPLY CO. 59436 WHEEL, LENS, CUTTER, ETC.
CAL-WELD SUPPLY CO. 59922 REGULATOR
CAL-WELD SUPPLY CO. 59582 EEZER PAD
COAST TOOL CO. 2009942-01 SHANK, BRNG HD, INSERTS, ETC.
COAST TOOL CO. 2009979-02 END MILL HOLDER
COAST TOOL CO. 2009979-01 INSERT DRILL, TIALN
CAL-WELD SUPPLY CO. 60513 WRENCH
CAL-WELD SUPPLY CO. 60329 GRINDER, HAMMER, SANDER, ETC.
CAL-WELD SUPPLY CO. 60355 WLDR SQWAVE, COOLER, ETC.
TECH-TOOLS 11293 DRILL, INSERTS, HOLDER
TECH-TOOLS 11329 SQ SET, CALIPER, SOCKET
TECH-TOOLS 11318 CARBIDE DRILL
ALLIED ELECTRIC 454759 CONN BODY, CORD
CAL-WELD SUPPLY CO. 60422 HYD. HOSE
CAL-WELD SUPPLY CO. 60351 CV655, CABLE, LN10, PLUG, ETC.
CAL-WELL SUPPLY CO. 60917 HAMMER SPLIT HD
CAL-WELD SUPPLY CO. 60687 CART WELDING
JOHNSON INDT'L SUPPLY 1007024-04 CARBOLOY
NU-STAR, INC. 907383 PWR PUSHER
NU-STAR, INC. 907388 PWR PUSHER
STANLEY STRG SYSTEM 471991 CABINET
JOHNSON INDT'L SUPPLY 1007024-02 JOBBER DRILL
CAL-WELD SUPPLY CO. 60356 CUTTER, HOSE, TORCH, CART WLD
CAL-WELD SUPPLY CO. 61283 SAW BAND
CAL-WELD SUPPLY CO. 60424 CLAMP
TECH-TOOLS 11740 END MILL HOLDER
TECH-TOOLS 11738 SHANK HOLDER, DRILL INSERT
TECH-TOOLS 11739 SHANK HOLDER, DRILL INSERT
</TABLE>
/s/ Graham D. Croot
(Debtor) Signature: /s/ Barris J. Evulich
---------------------
Page 1 of 4
<PAGE> 6
<TABLE>
<S> <C> <C>
JOHNSON INDT'L SUPPLY 1012278-02 DRILL WRENCH, GRINDER
JOHNSON INDT'L SUPPLY 1012278-01 DRILL WRENCH, GRINDER
JOHNSON INDT'L SUPPLY 1007024-05 COLLET
JOHNSON INDT'L SUPPLY 1012278-03 DRILL
TECH-TOOLS 11741 SPOT, TIALN DRILL
TECH-TOOLS 11737 SPOT, TIALN DRILL
TECH-TOOLS 11782 SHANK HOLDER
TECH-TOOLS 11779 SPT DRILL COLLET, END MILL HLDR
TECH-TOOLS 11780 END MILL
TECH-TOOLS 11781 DRILL INSERT
CAL-WELD SUPPLY CO. 62259 WRENCH
COAST TOOL CO. 2010401-01 SHANK, BRNG HD, INSERTS, ETC.
COAST TOOL CO. 2010402-01 SHANK BRNG HD. INSERTS, ETC.
COAST TOOL CO. 2010501-01 TOOL PRO
COAST TOOL CO. 2010403-02 INSERTS
CONTEC INDUSTRIES 22314 WGHT LIFTING
CONTEC INDUSTRIES 22315 LIFTING BEAM
TECH-TOOLS 11938 DRILL INSERT
TECH-TOOLS 11888 CARBIDE DRILL
TECH-TOOLS 11889 MEGA-MILL & INSERTS
JOHNSON INDT'L SUPPLY 1012278-04 DRILL
JOHNSON INDT'L SUPPLY 1013387-01 CARBOLOY
TECH-TOOLS 11857 CARBIDE DRILL
TECH-TOOLS 11789 SANDER, STARTER
TECH-TOOLS 12069 BRNG BAR, HLDR BUSHING
TECNARA TOOLING SYSTEM 32247 COLLET, HOLDER CHUCK
TECNARA TOOLING SYSTEM 32248 COLLET, HOLDER, CHUCK
TECNARA TOOLING SYSTEM 32246 COLLET, HOLDER,CHUCK
PICO CORP. 11079 PWR UNIT, DIE SET & ASSY
MC MASTER-CARR 8436739 CAN, CRIMPER,LOAD MISER, ETC.
MC MASTER-CARR 8330336 NOZZLE, STOOL, BLOWGUN, ETC.
SCHAEFFER SYSTEM 100689 MBL SHLF UNIT
TECH-TOOLS 12037 SHANK, MILL INSERTS
QUINN CO. 5000913-001 TRUCK RENTAL
QUALI-T-RUCK SRVC. 20982 SHELVING
ALLIED ELECTRIC 456801 WIRE, PLUG
JOHNSON INDT'L SUPPLY 1007531-01 CARBOLOY
COAST TOOL CO. 2010403-01 HOLDER, INSERTS, RGH HD, SCREW
TECH-TOOLS 10918 COLLET, SEAL, CHUCK
ALLIED ELECTRIC 461547 CONN BODY, CORD
CAL-WELD SUPPLY CO. 64133 WELD CURTAIN
CAL-WELD SUPPLY CO. 58120 POSITIONER, SWITCH
TECH-TOOLS 12131 TOOL HOLDER
TECH-TOOLS 12140 BENCH & PIPE VISE
TECH-TOOLS 12130 HOLDER BUSHING
PRAXAIR 751510 TAP EMUGE
PRAXAIR 775030 TAP EMUGE
PRAXAIR 775027 CARBIDE INSERT
PRAXAIR 775028 FACEMILL
KINGS CANYON WELDING 199901 RACK
CNC MACHINE SVRC. 7967 FIXTURE 2682 MF
CNC MACHINE SVRC. 7966 FIXTURE 2683 MF
CNC MACHINE SVRC. 7989 FIXTURE 2696 MF
JACK MARTIN TOOL & DIE 5847 DESIGN & MFG 2633 MF
ENTEGEE 102098EFF BED057
JACK MARTIN TOOL & DIE 5852 DESIGN & MFG 2680 T
MICHAEL H. CLEMENTS 11719 FIXTURE 2675, 2670 MF
MANUFACTURING SRVC 7856 DESIGN & MFG 2929 WF
MANUFACTURING SRVC 7855 DESIGN & MFG 2928 MF
KERN-TECH 10508 REVISE FIXTURE 2695 MF
JACK MARTIN TOOL & DIE 5864 REVISE FIXTURE 2633 MF
</TABLE>
/s/ Graham D. Croot
(Debtor) Signature: /s/ Barris J. Evulich
---------------------
Page 2 of 4
<PAGE> 7
<TABLE>
<S> <C> <C>
MICHAEL H. CLEMENTS 11720 DESIGN & MFG 2631
METHOD TOOL & DESIGN UPRT#2 50% DWN 2818 WF TOOL
ENTEGEE 110898a BED129
METHOD TOOL & DESIGN 50% DWN 2846 WF
ABELL TOOL CO. 990010107 WELD FIXTURE 2765 WF
ENTEGEE 63997+ 2770 WF & 2771 WF
COB ENTERPRISE 2231 2829 WF
COB ENTERPRISE 2232 2828 WF
JORGENSEN-KILSBY 205417465 CF BAR ASTM
JORGENSEN-KILSBY 205412465 HREW FI, CF BAR ASTM
JORGENSEN-KILSBY 101019465 CARBON STRUCTURAL
JOHNSON INDT'L SUPPLY 1012927-02 HANDWHEEL
JOHNSON INDT'L SUPPLY 1012927-01 BOLT, JIG FEET
CARR LANE MFG. V137937 PIN CL-16-LP
JORGENSEN-KILSBY 191672465 CARBON STRUCTURAL
MC MASTER-CARR 789255 BALL BEARING, POT MAGNET, ETC.
ENTEGEE 64242 2765 WF DESIGN
REID TOOL SUPPLY 1829602 FLAT STOCK SFS
METHOD TOOL & DESIGN 10 DESIGN & BUILD 2885 WF
TECH-TOOLS 11769 BUSHING
TECH-TOOLS 11731 SPINDLE ASSY
TECH-TOOLS 11838 CLAMP
TUBULAR STEEL INC. 50473 TUBING XTRA WF
METHOD TOOL & DESIGN UPRT#3 BAL.2818 WF
JAECKEL TOOL & DIE 99023 2848 WF
ENTEGEE 67197 2770, 2771 WF
CARR LANE MFG. V143303 BALL LOCK PIN
ABELL TOOL CO. 990010116 REVISE 2765 WF
METHOD TOOL & DESIGN 10 BAL 2846 WF
METHOD TOOL & DESIGN 10 DESIGN & BUILD 2950 WF
COB ENTERPRISE 2234 2829 WF
COB ENTERPRISE 2233 2882 WF
JACK MARTIN TOOL & DIE 5844 MFG 2621 WF
COB ENTERPRISE 2225 2672 WF
JACK MARTIN TOOL & DIE 5846 DESIGN & MFG 2632 WF
MANUFACTURING SRVC 3950 REVISE 2699WF, 2698WF, 2550MF
MANUFACTURING SRVC 3946 50% DWN 2692 WF
METHOD TOOL & DESIGN UPRT#2 DESIGN & BUILD 2685 WF
JAECKEL TOOL & DIE 98710 2727DJ, 2730WF, 2732WF
JACK MARTIN TOOL & DIE 5858 DESIGN & MFG 2725 WF
CNC MACHINE SVRC. 8071 2654 MF
VECO TECHNOLOGIES 11268 50% DWN 2597WF, 2599WF
VECO TECHNOLOGIES` 11267 50% DWN 2648WF, 2652WF
KERN-TECH 10485 2673 MF
AERO METHODS 1469 DESIGN 2675 WF
AERO METHODS 1467 DESIGN 2674 WF
JACK MARTIN TOOL & DIE 5859 REVISE 2632 WF, 2680 T
JACK MARTIN TOOL & DIE 5857 DESIGN & MFG 2715WF
CNC MACHINE SVRC. 8104 2689 MF
ABELL TOOL CO. 980010004 2660WF
AMERICAN COMPOSITE INC. 10503 BAL AB 60 (INV 10474)
COB ENTERPRISE 2230 2639 WF
JACK MARTIN TOOL & DIE 5851 DESIGN & MFG 2681 WF
MANUFACTURING SRVC 7854 DESIGN & BUILD 2762 WF
VALLEY IND'L SUPPLY 52920 GEAR BOX, BRAKE KIT
VECO TECHNOLOGIES 11287 BUILD 2718 WF
CNC MACHINE SVRC. 8113 2690 MF
JACK MARTIN TOOL & DIE 5861 DESIGN & MFG 2659 WF
CNC MACHINE SVRC. 8124 2606 MF
MICHAEL H. CLEMENTS 11720 2830WF, 2720WF, 2721WF, 2631MF
MANUFACTURING SRVC 7853 2491 WF
</TABLE>
/s/ Graham D. Croot
(Debtor) Signature: /s/ Barris J. Evulich
---------------------
Page 3 of 4
<PAGE> 8
<TABLE>
<S> <C> <C>
MANUFACTURING SRVC 7852 2692 WF
VALLEY TOOL & MACHINE 7811 2640 MF
AERO METHODS 1415 DESIGN 2638 WF
JACK MARTIN TOOL & DIE 5861 DESIGN & MFG 2659 WF
BLAST-TECH 33367 TABLES
BLAST-TECH 33454 TABLES
BLAST-TECH 33488 EASELS & ARMS
BLAST-TECH 33459 TABLES
VECO TECHNOLOGIES 11320 2597 WF
VECO TECHNOLOGIES 11284 2599 WF
VECO TECHNOLOGIES 11285 2648 WF, 2652 WF
KINGS CANYON WELDING 199851 FORKLIFT TUBES & CASTERS
SPECTRUM HR SYSTEM UP1775 HR VANTAGE NETWORK
FRANK WILBER CO. 4868 INTERFACED SCALE
FRANK WILBER CO. 4640 STRG TABLE, SORTER, CART, ETC.
FRANK WILBER CO. 4569 LETTER OPENER
FRANK WILBER CO. 4568 MAILING MACHINE BASE
DELL RECEIVABLE 200329530 PENTIUM II PROCESSOR
TUBELITE CO. 6070224-00 GERBER OUTPUT DEVICE
TUBELITE CO. 6070224-02 GERBER PREMIER
CALIFORNIA SWEEPERS 10425 ARMADILLO SEPPER
SIEMENS BUS COM 8092300430 DATANET
CAL-WELD SUPPLY CO. 58785 DELTAWELD, FEEDER, GEARS, ETC.
TCB IND'L 980648 CONCRETE FOUNDATION
ACE ELECTRIC 12774 RELOCATE CINCINNATI 630 HMC
CONTEC INDUSTRIES 22309 RELOCATE JIB CRANES
UPTIME ELECTRONICS 35799 RELOCATE CINCINNATI 630 HMC
TCB IND'L 990026 RELOCATE CINCINNATI 630 HMC
TECH-TOOLS 10870 SPT DRILL, HLDR, CHUCK
JACK MARTIN TOOL & DIE 5853 TOMBSTONE TOOLING
ACE ELECTRIC 12707 PRDCT BLDG BRAKE PRESS
ACE ELECTRIC 12706 PRDCT BLDG TURNING CTR
TCB IND'L 990012 FOUNDATION FOR SB60
TCB IND'L 980644 FOUNDATION FOR SB60
TCB IND'L 980575 FOUNDATION FOR SB60
HI-TECH MACHINE TOOL 5001 TRAINING, LODGING, MEALS
ACE ELECTRIC 12775 SB60 RELOCATION
ACE ELECTRIC 12766 SB60 RELOCATION
QUINN CO. 2126301 EQUIPT. RENTAL
HI-TECH MACHINE TOOL 5006 PART FOR WYSONG PRESS BRAKE
TECH-TOOLS 12062 CABINET
NU-STAR, INC. 10092 PWR PUSHER, PUSH PAD
TCB IND'L 990016 LINE AB46 RELOCATION
ACE ELECTRIC 12773 LINE AB46 RELOCATION
TCB IND'L 990113 LINE AB46 RELOCATION
TCB IND'L 980645 LINE AB46 RELOCATION
TCB IND'L 990068 LINE AB46 RELOCATION
</TABLE>
/s/ Graham D. Croot
(Debtor) Signature: /s/ Barris J. Evulich
---------------------
Page 4 of 4
<PAGE> 1
[Logo] EXHIBIT 10.19(iii)
SECURITY AGREEMENT
The undersigned debtor, meaning all debtors jointly and severally ("Debtor"), to
secure the obligations set forth herein grants to the secured party named below
(herein, with its successors and assigns, called "Secured Party") under the
terms and provisions of this agreement (this "Agreement") a security interest in
the following described property (herein, with all present and future
attachments, accessories, replacement parts, repairs and additions or
substitutions, referred to collectively as "Equipment"):
See Attached Schedule A
The Equipment will be used primarily for: [X] business or commercial use other
than farming operations; [ ] farming operations. When not in use, the Equipment
will be kept at: 801 S. Pine Street, Madera 93637 and, when in use, will be used
only in the following State(s): CA.
- --------------------------------------------------------------------------------
PAYMENT SCHEDULE
Debtor promises to pay Secured Party the Total Amount of $3,005,704.96 (the
"Total Amount") in 60 installments as follows:
(a) $__________ on __________ and a like sum on the like date of each month
thereafter until fully paid.
Or
(b) Each installment in the groups below is payable on a consecutive monthly
basis
1 installment of 31,542.85 due 07/01/99 followed by
23 installments of 31,542.83 each commencing 08/01/99 followed by
1 installment of 62,463.27 due 07/01/01 followed by
35 installments of 62,463.25 each commencing 08101/01
provided, however, that the final installment will be in the amount of the
then remaining unpaid balance. All amounts payable under this Agreement are
payable at Secured Party's address shown below or at such other address as
Secured Party may specify from time to time in writing. Any note taken in
conjunction with this Agreement evidences indebtedness and not payment.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
USE OF PROCEEDS
Secured Party is hereby irrevocably authorized and directed to disburse the
proceeds of this Agreement as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNT PAYEE (NAME AND ADDRESS)
------------- ------------------------------
$2,426,106.43 Upright, Inc.
1775 Park Street,
Selma, CA 93662
$ 0.00 ------------------------------
------------------------------
------------------------------
$ 0.00 ------------------------------
------------------------------
------------------------------
</TABLE>
Debtor hereby acknowledges and agrees that the proceeds of this Agreement will
be used for commercial, business or agricultural purposes and will not be used
for personal, family or household purposes. Secured Party may disburse the
proceeds using checks, drafts, orders, transfer funds, or any other method or
media Secured Party deems desirable. Disbursement may be made in Secured Party's
name on Debtor's behalf or in Debtor's name. Disbursement in accordance with the
above instructions or any written supplement to these instructions will
constitute payment and delivery to and receipt by Debtor of all such proceeds.
- --------------------------------------------------------------------------------
INSURANCE: PHYSICAL DAMAGE INSURANCE COVERING THE EQUIPMENT IS REQUIRED. DEBTOR
CAN FURNISH THIS INSURANCE THROUGH AN AGENT OR BROKER OF DEBTOR'S CHOICE. DEBTOR
HEREBY AUTHORIZES SECURED PARTY AND ANY ASSIGNEE TO RELEASE TO ANY INSURANCE
COMPANY AFFILIATED WITH SECURED PARTY OR ANY ASSIGNEE ANY INFORMATION RELATING
TO A CONTRACT OR POLICY OF INSURANCE WHICH IS PROVIDING OR MAY PROVIDE INSURANCE
COVERAGE AGAINST PHYSICAL DAMAGE TO THE EQUIPMENT.
DELINQUENCY, RETURNED CHECKS AND ACCELERATION INTEREST: For each installment not
paid when due, Debtor agrees to pay to Secured Party a delinquency charge
calculated thereon at the rate of 1-1/2 % per month for the period of
delinquency or, at Secured Party's option, 5% of such installment, provided that
such a delinquency charge is not prohibited by law, otherwise at the highest
rate Debtor can legally obligate itself to pay and/or Secured Party can legally
collect. DEBTOR AGREES TO REIMBURSE SECURED PARTY IMMEDIATELY UPON DEMAND FOR
ANY AMOUNT CHARGED TO SECURED PARTY BY ANY DEPOSITARY INSTITUTION BECAUSE A
CHECK, DRAFT OR OTHER ORDER MADE OR DRAWN BY OR FOR THE BENEFIT OF DEBTOR IS
RETURNED UNPAID FOR ANY REASON AND, IF ALLOWED BY LAW, TO PAY SECURED PARTY AN
ADDITIONAL HANDLING CHARGE IN THE AMOUNT OF $25.00 OR IN THE EVENT APPLICABLE
LAW LIMITS OR RESTRICTS THE AMOUNT OF SUCH REIMBURSEMENT AND/OR HANDLING CHARGE,
THE AMOUNTS CHARGEABLE UNDER THIS PROVISION WILL BE LIMITED AND/OR RESTRICTED IN
ACCORDANCE WITH APPLICABLE LAW. Debtor agrees to pay Secured Party, upon
acceleration of Debtor's indebtedness, interest on all sums then owing hereunder
at the rate of 1-1/2% per month if not prohibited by law, otherwise at the
highest rate Debtor can legally obligate itself to pay and/or Secured Party can
legally collect. Any note take herewith evidences indebtedness and not payment.
All amounts payable hereunder are payable at Secured Party's address shown below
or at such other address as Secured Party may specify from time to time in
writing.
SECURITY INTEREST: To secure payment of the Total Amount and all of Secured
Party's obligations under this Agreement or with respect to the Equipment,
Debtor hereby grants to Secured Party a first priority security interest in the
Equipment and in all cash and non-cash proceeds thereof (the Equipment and all
such proceeds are herein called the "Collateral") regardless of any retaking
and/or redelivery of the Collateral to Debtor.
CROSS SECURITY: Debtor grants to Secured Party a security interest in the
Collateral (separate and distinct from and subordinate to that security interest
granted pursuant to Secured Party pursuant to Section 2 above) to secure the
payment of all absolute and all contingent obligations and liabilities of Debtor
to Secured Party, or to any assignee of Secured Party, now existing of hereafter
arising, whether under this Agreement or any other agreement and whether due
directly or by assignment; provided, however, upon any assignment of this
Agreement by Secured Party, the assignee shall be deemed for the purpose of this
paragraph as the only party with a security interest in the Collateral.
PREPAYMENT: Debtor may prepay Debtor's obligations under this Agreement in full
at any time. Upon prepayment Debtor will receive a rebate of the unearned
portion of the finance charge calculated using an actuarial method or such other
method as is required by any applicable law minus, if the prepayment is made
prior to the last twelve months of the contract, a prepayment processing fee
equal to the lesser of (a) one percent (1%) of the amount prepaid for each full
twelve month period remaining under the term of this Agreement as of prepayment
and (b) the maximum prepayment and/or acquisition charge allowed by applicable
law. All accrued and unpaid late charges and other amounts chargeable to Debtor
under this Agreement will be payable immediately upon such prepayment.
DELIVERY AND ACCEPTANCE OF EQUIPMENT
(Check Appropriate Box)
Debtor's obligations and liabilities to Secured Party are absolute and
unconditional under all circumstances and regardless of any failure of operation
or Debtor's loss of possession of any item of Equipment or the cessation or
interruption of Debtor's business for any reason whatsoever.
[X] On 6/2/99, the EQUIPMENT BEING PURCHASED WITH THE PROCEEDS OF THIS
AGREEMENT WAS DELIVERED TO DEBTOR with all installation and other work
necessary for the proper use of the Equipment completed at a location
agreed upon by Debtor; the Equipment was inspected by Debtor and found
to be in satisfactory condition in all respects and delivery was
unconditionally accepted by Debtor.
<PAGE> 2
[ ] The EQUIPMENT BEING PURCHASED WITH THE PROCEEDS OF THIS AGREEMENT HAS
NOT YET BEEN DELIVERED TO OR ACCEPTED BY DEBTOR and, upon delivery,
Debtor agrees to execute such delivery and acceptance certificate as
Secured Party requires.
[ ] ALL OF THE EQUIPMENT WAS ACQUIRED BY DEBTOR PRIOR TO THE DATE HEREOF
and was previously delivered to and unconditionally accepted by Debtor.
Page 1 of 3 of Security Agreement dated 6-2-99 between Upright, Inc. (Debtor)
and Associates Commercial Corporation (Secured Party) which includes, without
limitation, an item of Collateral with the following security number:_____.
[Debtor's Initials]
<PAGE> 3
1. ADDITIONAL WARRANTIES AND AGREEMENTS. 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 Equipment 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 Equipment; the
Equipment is not currently and will not be used in conjunction with the storage,
transportation or disposal of substances considered to be toxic and/or hazardous
or in conjunction with any activity or for any use that would subject the
Equipment to seizure or confiscation by any governmental body; and the Equipment
is currently located at and will be kept by Debtor at the location set forth for
it on the reverse side of this Agreement and will not be removed from said
location without the prior written consent of Secured Party, except that if the
Equipment is of a type which is mobile and normally used by Debtor at more than
one location, Debtor may use the Equipment away from said location in the
regular course of Debtor's business provided that (a) if the Equipment is not
returned to said location within 30 days, Debtor will immediately thereafter,
and each 30 days thereafter until the Equipment is returned, report the then
current location of the Equipment to Secured Party in writing and (b) the
Equipment shall not be removed from the State(s) of use indicated on the reverse
side of this Agreement. Secured Party shall have the right to inspect the
Equipment at all reasonable times and from time to time.
Debtor further warrants and agrees that: the security interest in the Collateral
granted to and/or retained by Secured Party is and will continue to be superior
to any title to or interest in the Equipment 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 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 of Certificate of Origin or Certificate of Title
relating to the Equipment shall be immediately delivered to Secured Party and,
if a Certificate of Title or registration is required for any item of Equipment,
Debtor will cooperate with Secured Party in obtaining the Certificate of Title
or registration disclosing the interests of Debtor and Secured Party in the
Equipment; 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 Equipment and all taxes, assessments, license fees and other
public or private charges levied or assessed in conjunction with the operation
or use of the Equipment 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.
2. INSURANCE AND RISK OF LOSS. Debtor shall at all times bear all risk of loss
of, damage to or destruction of the Equipment. Debtor agrees to immediately
procure and maintain insurance on the Equipment, for the full insurable value
thereof and for the life of this Agreement, in the form of "All Risk" or similar
insurance (insuring the Equipment 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 insurer's 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 for which a charge is stated
in this Agreement or which is maintained by Debtor in accordance herewith,
including returned and unearned premiums, up to the amount owing hereunder by
Debtor. Secured Party will not have the right to cancel any such insurance
without Debtor's consent prior to the occurrence of an event of default and the
repossession, loss or destruction of the Equipment. 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.
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.
4. 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 insolvent or ceases to
do or is prohibited by any court order or governmental 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 Equipment
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 Equipment 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 Equipment, or attempts 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; (j) 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.
5. 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
Equipment and deliver it to Secured Party at a Place to be designated by Secured
Party
Page 2 of 3 of Security Agreement dated 6-2-99 between Upright, Inc. (Debtor)
and Associates Commercial Corporation (Secured Party) which includes, without
limitation, an item of Collateral with the following security number:_____.
[Debtor's Initials]
<PAGE> 4
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 Equipment 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 Equipment may be made at public or
private sale or through public auction at the option of Secured Party. Secured
Party may buy at any sale and become the owner of the Equipment.
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 given to Debtor 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. All notices
to Debtor relating to this Agreement will be considered received when delivered
in person (including by facsimile transmission) or mailed to Debtor at the
address of Debtor contained in this Agreement or at any address later designated
by Debtor to Secured Party in writing. The filing by Secured Party of any action
or proceeding with respect to the Equipment 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
Equipment 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 9 hereof and (c) all other legal and other
expenses incurred by Secured Party. Debtor agrees that it is liable for an will
promptly pay any deficiency resulting from 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.
6. POWER OF ATTORNEY AND FINANCING STATEMENT. DEBTOR HEREBY APPOINTS SECURED
PARTY OR ANY OFFICER, EMPLOYEE OR DESIGNEE OF SECURED PARTY OR ANY ASSIGNEE OF
SECURED PARTY (OR ANY DESIGNEE OF SUCH ASSIGNEE) AS DEBTOR'S ATTORNEY-IN-FACT
TO, IN DEBTOR'S OR SECURED PARTY'S NAME, TO: (a) PREPARE, EXECUTE AND SUBMIT ANY
NOTICE OR PROOF OF LOSS IN ORDER TO REALIZE THE BENEFITS OF ANY INSURANCE POLICY
INSURING THE EQUIPMENT; (b) PREPARE, EXECUTE AND FILE NAY INSTRUMENT WHICH, IN
SECURED PARTY'S OPINION, IS NECESSARY TO PERFECT AND/OR GIVE PUBLIC NOTICE OF
THE INTERESTS OF SECURED PARTY IN THE EQUIPMENT; AND (c) ENDORSE DEBTOR'S NAME
ON ANY REMITTANCE REPRESENTING PROCEEDS OF ANY INSURANCE RELATING TO THE
EQUIPMENT OR THE PROCEEDS OF THE SALE LEASE OR OTHER DISPOSITION OF THE
EQUIPMENT (WHETHER OR NOT THE SAME IS A DEFAULT HEREUNDER). This power is
coupled with an interest and is irrevocable so long as any indebtedness
hereunder remains unpaid. Debtor agrees to execute and deliver Secured Party,
upon Secured Party's request such documents and assurances as Secured Party
deems necessary or advisable for the confirmation or perfection of this Security
Agreement and Secured Party's rights hereunder, including such documents as
Secured Party may require for filing or recording. DEBTOR FURTHER AGREES TO PAY
A ONE-TIME UCC FILING FEE TO COVER SECURED PARTY'S COST FOR SUCH FILING(S) AND
OTHER DOCUMENTATION COST. IF PERMITTED BY LAW, DEBTOR AGREES THAT A CARBON,
PHOTOGRAPHIC OR OTHER REPRODUCTION OR THIS LEASE OR OF A FINANCING STATEMENT MAY
BE FILED AS A FINANCING
7. 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.
8. 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 OF THE MATURITY HEREOF. (H) If allowed by
law, "the reasonable fees of attorneys" retained by Secured Party shall include
the amount of any flat fee, retainer, contingent fee and/or the hourly charges
of any attorney retained by Secured Party in enforcing any of Secured Party's
rights hereunder in the prosecution or defense of any litigation related to this
Agreement or the transactions contemplated by this Agreement. (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."
9. ADDITIONAL TERMS AND ORAL AGREEMENTS. Debtor and Secured Party agree that
this is a three-page Agreement and each page hereof constitutes a part of this
Agreement. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES 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.
Debtor's Social Security or Federal Taxpayer Identification Number is 941099653
and Co-Debtor's is:___________
<PAGE> 5
Dated: 6/10/99 DEBTOR HEREBY ACKNOWLEDGES RECEIPT
OF AN EXACT COPY OF THIS AGREEMENT.
SECURED PARTY ASSOCIATES DEBTOR UPRIGHT, INC.
COMMERCIAL CORPORATION
By /s/ [illegible] By /s/ Alan Harper /s/ Graham D. Croot
--------------- ------------------- -------------------
Title VP Title Controller Authorised signatory
--------------- ------------------- -------------------
Address: 10100 Pioneer Boulevard, #315 Address: 1775 Park Street
Santa Fe Springs, AB 90670 Selma, CA 93662
Page 3 of 3 of Security Agreement dated 6-2-99 between Upright, Inc. (Debtor)
and Associates Commercial Corporation (Secured Party) which includes, without
limitation, an item of Collateral with the following security number:_____.
<PAGE> 6
[Logo]
PAYMENT ADJUSTMENT ADDENDUM TO PROMISSORY
NOTE AND SECURITY AGREEMENT BETWEEN
ASSOCIATES COMMERCIAL CORPORATION, AS SECURED PARTY AND
UPRIGHT, INC., AS DEBTOR
DATED 6/2, 1999.
ADJUSTMENT CLAUSE:
Base Monthly Payments have been calculated using a rate factor of (%) times
equipment cost. This factor is based on a Sixty (60) month U.S. Treasury Note
Yield of 5.35% as published in the Wall Street Journal on May 01, 1999. The Rate
Factor and Base Monthly Payments are fixed for a period of Thirty (30) days from
. Debtor agrees that, after this Thirty (30) Day Period (until the day of
contract commencement), the rate factor and monthly payment will be adjusted to
any increase in the aforementioned Sixty (60) month U.S. Treasury Note Yield as
of the first day of the month the contract commencement. If no sixty (60) month
U.S. Treasury Note Yield is published as of the first of the month, an average
of the published Fifty-Nine (59) month and Sixty-One (61) month U.S. Treasury
Note Yields will be used for adjustment purposes. The final rate factor and
monthly payments will be fixed on the day of contract commencement for the full
term.
Agreed to, this 2nd day of June, 1999
Upright, Inc.
DEBTOR
By: /s/ Alan Harper Title: Controller
------------------------ ------------------------
/s/ Graham D. Croot Authorized Signatory
------------------------ ------------------------
<PAGE> 7
[Logo] SCHEDULE A Page 1 of 3
Attached to and made SECURITY AGREEMENT dated 6-2-99
a part of a(n) (Name of document, such as Security
Agreement)
between UPRIGHT, INC.
(Debtor) and ASSOCIATES COMMERCIAL CORPORATION
(Secured Party)
(Described property fully, including year if appropriate, make, model, kind of
unit, serial number and any other pertinent information.)
ALL CONTEC INDUSTRIES OVERHEAD/ BRIDGE CRANES AND SUPPORT EQUIPMENT AT THE
MADERA FACILITY BUILDING #4, INCLUDING 5-TON S/NS 98-22310-1; 98-22310-2;
98-22310-3; 98-21488-1; 98-21488-2; 2-TON S/N 98-21489-15; ALL CONTEC INDUSTRIES
OVERHEAD/BRIDGE CRANES AND SUPPORT EQUIPMENT AT THE MADERA FACILITY BUILDING
#2-A INCLUDING 5-TON S/NS 98-21488-3; 98-21489-1; 98-21489-13; 3-TON S/NS
98-21489-4; 2 TONS S/NS 98-21489-2; 98-21489-3; 98-21489-5; 98-21489-6;
98-21489-7; 98-21489-8; 98-21489-9; 98-21489-10; 98-21489-11; 98-21489-12 AND
98-21489-14. ALL CRANE-PRO SERVICES OVERHEAD/BRIDGE CRANES AT THE MADERA
FACILITY SB60/SB80 BUILDING #2; AND ARE DESCRIBED IN MORE DETAILS HEREAFTER. ONE
(1) MAZAK FH-680 HORIZONTAL MACHINING CENTER, S/N-140455 WITH SIX PALLET CHANGER
AND ONE LOAD/UNLOAD STATION, 80 TOOLS, COOLANT SHOWER AND GUN, VISIPORT, PART
PROBING, 200-TOOL OFFSETS AND 3,000M ADDITIONAL MEMORY PLUS ALL ATTACHMENTS AND
ACCESSORIES. THE EQUIPMENT, TOGETHER WITH ALL REPLACEMENTS, ADDITIONS,
SUBSTITUTIONS AND ACCESSIONS THERETO, AS DESCRIBED ON THE TWO (2) PAGES
FOLLOWING.
(Debtor) Signature: /s/ Alan Harper
/s/ Graham D. Croot
<PAGE> 8
[Logo] SCHEDULE A Page 2 of 3
Attached to and made SECURITY AGREEMENT dated 6-2-99
a part of a(n) (Name of document, such as Security
Agreement)
Between UPRIGHT, INC.
(Debtor) and ASSOCIATES COMMERCIAL CORPORATION
(Secured Party)
(Described property fully, including year if appropriate, make, model, kind of
unit, serial number and any other pertinent information.)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VENDOR INVOICE NUMBER DESCRIPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Associated Compressor 37815 Compressor
Associated Compressor 37816 Air Dryers
Associated Compressor 37896 Metal Filters
Crane Pro Services Down Payment for Cranes
Crane Pro Services Down Payment for Cranes
Crane Pro Services SLE75852 Overhead Cranes
Crane Pro Services SLE76108 Overhead Cranes
Crane Pro Services SLE76406 Overhead Cranes
Associated Compressor 38738 Air Compressor
Contec Industries Down Pymnt for 3 5Ton Cranes
Contec Industries 23104 Cranes
Contec Industries 22310 Cranes
Contec Industries Down Pymnt for Overhead Cranes
Contec; Industries 21802 Overhead Cranes
Contec Industries 22306 Overhead Cranes
Contec Industries 21489 Overhead Cranes
Ace Electric 12893 Install Power for Cranes
Contec Industries Down Pymnt Bridge Cranes
Contec Industries 21803 Progress Pymnt for Bridge Cranes
Contec Industries 22307 Progress Pymnt for Bridge Cranes
Contec Industries 21488 Final Pymnt for Bridge Cranes
Ace Electric 12892 Install Power for Bridge Cranes
Mazak Corporation Down Pymnt 1 Horizontal Machine Cent
Mazak Corporation CMD 60640-A Progress Pymnt for HMC
Mazak Corporation CND 60640-B Progress Pymnt for HMC
Mazak Corporation CMD 60640-C Final Pymnt for HMC
Abell Tool Co. Inc. 99-19153 Weld Fixture 2770WF & 2771 WF
Manufacturing Services Inc. 7863 Weld Fixture 2888WF
Jaeckel Tool & Die 99045 Design & Build Weld Fixture
Fresno Oxygen 809688 Miller Delta Weld w/ Feeder
Tech-Tools 12616 Burnishing Tool
Gateway 2000 34560552 GP6 450 PC
Computer Discount Whse 9216564 HP 5000 Printer
Transcat 316791 Deadweight Tester
Tech-Tools 11171 Granite Surface Plate
Tech-Tools 10972 Digimatice Height Gage
Method Tool & Design 10 Weld Fixtures 2942,2947,2948
COB Enterprises 2238 Bench Trunion & WF 2837
COB Enterprises 2240 Bench Trunion & WF 2868
Jack Martin Tool & Die 5884 Weld Fixture 2867WF
Jack Martin Tool & Die 5885 Modify Weld Fixture 2867WF
</TABLE>
(Debtor) Signature: /s/ Alan Harper
/s/ Graham D. Croot
<PAGE> 9
[LOGO] Page 3 of 3
SCHEDULE A
Attached to and made SECURITY AGREEMENT dated 6-2-99
a part of a(n) (Name of document, such as Security
Agreement)
Between UPRIGHT, INC.
(Debtor) and ASSOCIATES COMMERCIAL CORPORATION
(Secured Party)
(Described property fully, including year if appropriate, make, model, kind of
unit, serial number and any other pertinent information.)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
VENDOR INVOICE NUMBER DESCRIPTION
- --------------------------------------------------------------------------------
<S> <C> <C>
Veco Technologies 11346 Weld Fixture
Jack Martin Tool & Die 5888 Weld Fixture 2945WF
Kern-Tech 10577 Machining Fixture
McMaster Carr 8538052 Quiet Air Gun
Manufacturing Services Inc. 7864 Machining Fixture 2838MF
Kern-Tech 10591 Machining Fixture 2963MF
Kern-Tech 10558 Machining Fixture 2853MF
Kern-Tech 10587 Machining Fixture 2895MF
Kern-Tech 10588 Machining Fixture 2962MF
Kern-Tech 10578 Machining Fixture 2851MF
Kern-Tech 10586 Machining Fixture 2935, 2897, 2898,
2896
Kern-Tech 10603 Machining Fixture 2921
CNC Machine Service 8346 Machining Fixture 2856 & 2968
CNC Machine Service 8348 Machining Fixture 2903
Kern-Tech 10609 Machine Fixture 2894
Kern-Tech 10611 Machine Fixture 2870
Jack Martin Tool & Die 5882 Machine Fixture 2843 & 2869
CNC Machine Service 8331 Machine Fixture
Zep Manufacturing Co. 60966041 Dyna-Clean
Kasparian Paint Center 45707 Gun Washer
Tubelite Co., Inc. 6070224-01 Plotter Gerber Output Devices
Fresno Oxygen 809690 Lincoln CV655 Package Fir Model
Ideal Saw Work 5008 #510 Saw
Jaeckel Tool & Die 98624 Drill Jig
Jaeckel Toot & Die 98632 Drill Jig
Jaeckel Tool & Die 98653 Drill Jig
Dell Receivable L.P. 213105687 Dell Dimension Processor
Dell Receivable L.P. 212714356 Inspiron D300LT Processor
Dell Receivable L.P. 208880799 Inspiron D300GT Processor
Dell Receivable L.P. 211039326 Inspiron D300LT Processor
Dell Receivable L.P. 201681012 Inspiron D300GT Processor
Dell Receivable L.P. 198953184 Dell Dimension Processor
Dell Receivable L.P. 198255507 Dell Dimension Processor
Computer Discount Whse 9474284 HP LJ 5000N
Dell Receivable L.P. 207538083 Dell 6450 PII/MT Workstation
</TABLE>
(Debtor) Signature: /s/ Alan Harper
/s/ Graham D. Croot
<PAGE> 1
EXHIBIT 10.20
LEASE AGREEMENT
THIS LEASE AGREEMENT, made as of this _____ day of _________, 1999, by
and between FMCSR Holding Corp., having his principal office at 255 Bergen
Turnpike, Ridgefield Park, NJ 07660 (hereinafter referred to as the "LESSOR"),
and HORIZON HIGH REACH INC., 222 Bergen Turnpike, Ridgefield Park, NJ 07660 with
offices at 1540 E. Shaw #123 Fresno, California 93710 (hereinafter referred to
as the LESSEE").
WITNESSETH:
The LESSOR, in consideration of the rents herein reserved and of the
covenants and agreement herein contained to be kept, observed and performed, has
hereby leased to Lessee, for the term hereafter stated, premises located in the
Village of Ridgefield Park, County of Bergen and State of New Jersey, together
with building and certain improvements thereon, said premises being known,
designated and located at 222 Bergen Turnpike and consisting of office and
warehouse space of approximately 17,100 square feet (hereinafter "premises" or
"demised premises"). Said premises are further shown on "schedule A" attached
hereto and made a part hereof, and designated as leased premises on said
diagram.
<PAGE> 2
ARTICLE I
TERM OF LEASE - USE OF PREMISES
Section 1.1 Term
The term of this Lease shall be for a period of five (5) years
commencing on April 1, 1999 and terminating on March 31, 2004, unless sooner
terminated as hereinafter provided.
Section 1.2 - Use of Premise
The premises are to be used as an office, repair and service shop,
parts warehouse, crating, loading, unloading and related activities. No other
use shall be permitted without Lessor's express written consent, which shall not
be unreasonably withheld.
Section 1.3 - Parking
The Lessee shall share parking in the parking area in the front of its
premises with other tenants, excepting that for an area as designated on
attached site plan along the north side of its building, the Lessee shall have
the exclusive privilege to park automobiles, trucks and other motor vehicles. It
is understood that Lessor shall have no responsibility to monitor or control
parking. Parking in common areas for all motor vehicles other than automobiles
shall be permitted only with the express written consent of Lessor, which
reserves the right to charge an additional consideration therefor in the sum of
$100.00 per month per vehicle, in advance, (which shall be deemed additional
rent) and to designate the parking location for such other motor vehicles.
ARTICLE II
Section 2.1 - Rent
Lessee covenants and agrees to pay to Lessor, as basic rent for and
during the term hereof, the sum of SIX HUNDRED SIXTY THOUSAND ($660,000.00)
DOLLARS. Said rent shall be due and payable in sixty (60) monthly installments
due on the first day of the month in advance, without set-off or deduction of
any kind, in the amount of $11,000.00 PER MONTH. Rents shall be payable to
Lessor at the address hereinbefore set forth, or such other address as Lessor
shall hereinafter designate in writing.
Section 2.2 - Net Rent Provision
This Lease shall be deemed and construed to be a "net lease" except
that the Lessor shall pay the real estate taxes and the Lessee shall reimburse
Lessor for Lessee's share of tax increases as set forth in this lease. All basic
rent and all additional payments hereunder shall be made by
2
<PAGE> 3
Lessee to Lessor, free from charges, fees, impositions, expenses and deductions
of every nature whatsoever.
Section 2.3 - Payment of Taxes
During the term hereof, Lessee shall pay to Lessor, as additional rent,
the "Lessee's share" of tax increases imposed on the Lessor's entire premises to
the extent that said taxes have increased from the taxes in the base year of
1997. For the purpose of this Section, "taxes" shall mean all taxes and special
and extraordinary assessments. Lessee's share shall be calculated based upon the
ratio that building area leased to Lessee bears to square footage of all
buildings located on Lessor's entire premises. The ratio of said areas is
presently 47%.
Lessee's share of taxes shall be payable monthly on the first day of
each month in advance to Lessor. Lessor shall give notice to Lessee of any tax
increases, and Lessee's share thereof (computed on a cumulative basis from the
1997 base year) shall be paid to Lessor in 12 equal consecutive monthly
installments as additional rent. The first monthly installment shall be due and
payable on the first day of the next month after said notice. To the extent that
a tax charge shall relate to any time period prior to said notice, said charge
shall apply retroactively (but not earlier than the commencement date of the
lease term). The amount of any deficit in the payments made prior to the notice
of tax change shall be credited to or paid by Lessee on the first day of the
next month after said notice.
Lessor agrees to annually furnish to Lessee a copy of the tax bill(s),
upon Lessee's request therefor.
Notwithstanding the foregoing, in the event of any assessment imposed
upon the premises, payable over a term of years, Lessee shall pay Lessee's share
of same to Lessor as additional rent in monthly installments. The amount of each
monthly installment shall be computed based upon the amount of the assessment
divided by the number of months over which same shall be payable, together with
such interest thereon as may be due to the governmental entity imposing the
assessment. In the event that the assessment is imposed on Lessor's entire
premises, Lessee's share of the assessment shall be computed on the same
percentage basis as utilized to determine Lessee's share of tax increases.
Section 2.4 - Insurance and Indemnification
A. Lessee, at its own cost and expense, shall obtain and keep in full force
for Lessor's benefits, during the term hereof:
3
<PAGE> 4
1. General public liability insurance, insuring Lessor against any and
all liability or claim of liability arising out of, occasioned by or resulting
from any accident or otherwise in or about the leased premises, for injuries to
any person or persons, for limits of not less than One Million ($1,000,000.00)
Dollars for injuries to one person, and Three Million ($3,000,000.00) Dollars
for injuries to more that one person in any one accident or occurrence and for
loss or damage to the property of any person or persons for not less than One
Million ($1,000,000.00) Dollars.
2. All policies of insurance shall be of a reputable company or
companies authorized to do business in this State and such policies or
certificates evidencing same, shall be delivered to the Lessor together with
evidence of the payment of the premiums therefor, on or before the commencement
of the term hereof. At least thirty (30) days prior to the expiration or
termination date of any policy, the Lessee shall deliver a renewal or
replacement policy or certificate with proof of the payment of the premium
therefor. Lessee also agrees to and shall save, hold harmless and indemnify the
Lessor from and against any and all payments, expenses, costs, reasonable
attorney fees and from and against any and all claims and liability for losses
or damage to property or injuries to persons occasioned wholly or, if in part,
to the extent caused by or resulting from any acts or omissions by the Lessee or
Lessee's agents, employees, guests, licenses, invitees, subtenants, assignees or
successors, or for any cause or reason whatsoever arising out of or by reason of
occupancy by Lessee and the conduct of the Lessee's business, excepting,
however, losses. liabilities, expenses, and claims arising from the negligence,
willfulness conduct, or breach of this Lease by Lessor or Lessor's agents, or
employees.
B. Lessor shall keep the building on the demised premises insured
against loss or damage by fire, with extended coverage endorsement in an amount
reasonably satisfactory to Lessor. If for any reason it shall be impossible to
obtain fire and other hazard insurance on the buildings and improvements on the
leased premises, in an amount and in the form and with insurance companies
reasonably acceptable to Lessor, Lessor may, if Lessor so elects at any time
thereafter, terminate this lease and the term hereof, upon giving to Lessee
ninety (90) days notice in writing of Lessor's intention to do so, and upon the
giving of such notice, this Lease and the term thereof shall terminate. During
said period, Lessee shall have the right to attempt to obtain such reasonably
acceptable insurance. If same is obtained during said period, this Lease shall
not terminate.
4
<PAGE> 5
Additionally, if by reason of the use to which the premises are put by
Lessee or character of or the manner in which Lessee's business is carried on,
the insurance rates for fire and other hazards shall be increased, the Lessee
shall upon demand, pay to Lessor, as additional rent, the amounts by which the
premiums for such insurance are increased. Lessor agrees to provide evidence of
rate increase (s) and the reasons for same to Lessee.
Section 2.5 - Utilities
Lessee shall pay all charges for heating fuel, cooling, electric,
utilities, mechanical, trash removal, janitorial, snow removal, sewerage charges
and similar charges related to Lessee's possession and use of the premises.
Section 2.6 - Non-Payment of Additional Rent
In case the Lessee shall fail, refuse or neglect to make any of the
payments required in this Lease, then Lessor may, at its option, following
notice and five (5) days opportunity to cure, pay the same, and the amount or
amounts of money so paid, including reasonable attorneys fees and reasonable
expenses which might have been reasonably incurred because of, or in connection
with such payments, together with interest on all of such amounts, at the rate
of twelve (12%) percent per annum, shall be repaid by Lessee, upon the demand of
the Lessor, and the payment thereof may be collected or enforced by the Lessor
as additional rent in the same manner as though said amount were an installment
of rent specifically required by the terms of this Lease to be paid by Lessee to
Lessor, on the day when Lessor demands repayment thereof or reimbursement
therefor of or from the Lessee; but the election of Lessor to pay such charges
shall not waive the default thus committed by Lessee.
Section 2.7 - Late Charges
If Lessee shall fail to make payment of any base or additional rent
installment, or of any other charge due hereunder within ten (10) days of the
due date thereof, Lessee shall pay to Lessor a late charge equal to five (5%)
percent of the unpaid amount, which late charge shall be deemed additional rent.
Section 2.8 - Security
Lessee has deposited with Lessor the sum of Nine Thousand Eight Hundred
Nine Four ($9,894.56) Dollars and fifty-six Cents. All of said deposits shall be
held as security for the faithful performance and observance by Lessee of the
terms, provisions and
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conditions of this Lease. It is agreed that in the event Lessee defaults in
respect to any of the terms, provisions and conditions or this Lease, Lessor may
use or retain the whole or any part of the security so deposited to the extent
required for the payment of any rent and/or additional rent or any other sum as
to which Lessee is in default or for any sum which Lessor may expend or may be
required to expend by Lessee's default in respect to any of the terms, covenants
and conditions of this Lease. In the event that the Lessee shall fully and
faithfully comply with all of the terms, provisions, covenants and conditions of
this Lease, the security shall be returned to Lessee, without interest, after
the date designated at the end of the lease and after delivery of entire
possession of the demised premises to Lessor.
ARTICLE III
REPAIRS AND ALTERATIONS
Section 3.1 - Repairs
A. Lessee has examined the premises and has entered into this lease
without any representations on the part of the Lessor as to the condition
thereof. Lessee shall take good care of the premises and at Lessee's own cost
and expense maintain and make all repairs and replacements to the building, both
interior and exterior, including all systems thereof, that may be required
during the term of the Lease, except as may be hereinafter provided.
Notwithstanding the foregoing, and on the condition that same shall not have
been caused by the negligent or careless act or omission of Lessee, or its
servants, agents or employees, Lessor shall be responsible for structural and
roof repairs, and shall perform such repairs to the pavement (exclusive of snow
plowing) as may be necessary to provide reasonable use and access to the Demised
Premises by the Lessee. Lessee shall be responsible for all other repairs.
B. Lessee shall neither encumber nor obstruct the sidewalks, driveways,
entrances, etc. but shall keep and maintain same in a reasonably clean condition
free from debris, trash and refuse. No outside storage shall be permitted,
except as otherwise provided herein, nor shall any trash or debris be placed or
allowed to remain in the premises exterior except in acceptable receptacles to
be obtained by Lessee at its own expense. At the expiration of the term hereof,
Lessee shall deliver up the premises in good order and condition, wear and tear
from reasonable use thereof, and damage by the elements, excepted. Lessor shall
have the right to inspect the premises at reasonable times during business hours
upon reasonable notice to Lessee. In the event Lessee shall fail to make any
repairs which are Lessee's responsibility under this Lease, or if Lessee fails
to commence such repairs within twenty (20) days after written notice from
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Lessor, the said repairs may be done by Lessor at the cost and expense of
Lessee. In the case of Lessee's failure to pay therefor, the said cost and
expense shall be added to the next month's rent as additional rent and be due
and payable as such, and Lessor shall have the like remedies for the collection
thereof as it would have had in case of default in payment of the basic or
additional rent hereinabove reserved. This provision is in addition to the right
of Lessor to terminate this Lease by reason of any default on the part of
Lessee, as set forth in this Lease. Any act of repair or replacement by Lessor
or silence or absence of action, shall not operate as a waiver of any covenant
herein.
Section 3.2 - Alterations
No alterations, additions or improvements shall be made or installed in
or attached to the premises, without the prior written consent of Lessor which
shall not unreasonably be withheld. Lessor will respond to Lessee within ten
(10) days after Lessor's receipt of Lessee's written request for Lessor's
consent, which request must be accompanied by detailed plans (if necessary)
relating to the proposed alterations, additions or improvements. Notwithstanding
Lessor's consent, Lessee shall obtain all permits and approvals which may be
required in connection with the proposed alteration, addition or improvement.
Unless otherwise provided herein, all non-moveable alterations, additions or
improvements when made, installed in or attached to the premises shall belong
and become the property of Lessor and shall be surrendered with the premises and
as a part thereof upon the expiration of this Lease. Lessee shall be responsible
for the repair of any damage resulting from the removal of any property
permitted to be removed hereunder.
Section 3.3 - Waste
The Lessee covenants not to do or suffer any waste damage,
disfigurement or injury to the premises.
ARTICLE IV
COMPLIANCE WITH LAWS
Section 4.1
Lessee shall promptly comply with all laws, ordinances, rules,
regulations, requirements and directives of the federal, state and municipal
governments or public authorities and of all their departments, bureaus and
subdivisions, applicable to and affecting the said premises, their use and
occupancy, for the correction, prevention and abatement of nuisances, violations
or other
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grievances in, upon or connected with the said premises, during the term hereof;
and shall promptly comply with all orders, regulations, requirements and
directives of the Board of Fire Underwriters or similar authority and of any
insurance companies which have issued or are about to issue policies of
insurance covering the said premises and its contents, for the prevention of
fire or other casualty, damage or injury, at the Lessee's own cost and expense,
provided, however, that Lessee shall not be responsible for pre-existing
violations. Should Lessee fail or neglect to comply as aforesaid with the
aforesaid statues, ordinances, rules, orders, regulations and requirements, or
any of them, or has not commenced steps to effect such compliance within fifteen
(15) days after written notice of same from Lessor, the Lessor or its agents may
enter said premises and make said repairs and comply with any and all of the
said statutes, ordinances, rules, orders, regulations or requirements at the
cost and expense of the Lessee, and in case of the Lessee's failure to pay
therefor, the said cost and expense shall be added to the next month's rent as
additional rent, and payable as such; and Lessor shall have the like remedies
for the collection thereof as it would have had in case of default in the
payment of the base or additional rent herein reserved. This provision is in
addition to the right of Lessor, if any, to terminate this Lease by reason of
any default on the part of Lessee.
Except as otherwise set forth in this lease, Lessee shall, at its own
expense, obtain a certificate of occupancy and all other required permits and
approval prior to commencement of premises occupancy. Horizon is responsible
only for complying with those laws that are applicable to Horizon's particular
use.
ARTICLE V
ASSIGNMENT, MORTGAGE, SUBLETTING
Section 5.01
Neither this lease, nor the term and estate hereby granted nor any part
hereof or thereof, nor the interest of Lessee in any sublease, or the rentals
thereunder, shall be assigned, mortgaged, pledged, encumbered or otherwise
transferred by Lessee, and neither the demised premises, nor any part thereof,
shall be encumbered in any manner by reason of any act or omission on the part
of Lessee or anyone claiming under or through Lessee, or shall be sublet,
offered or advertised for subletting, or be used or occupied or permitted to be
used or occupied, by anyone other than
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Lessee or for any purpose other than as permitted by this lease, without the
prior written consent of Lessor in every case, except as expressly otherwise
provided in this Article.
Section 5.02
If this lease be assigned, whether or not in violation of the
provisions of this Lease, Lessor may collect rent from the assignee. If the
demised premises or any part thereof be sublet or be used or occupied by any
party other than Lessee, whether or not in violation of this lease, Lessor may,
after default by Lessee and expiration of Lessee's time to cure such default, if
any, collect rent from the undertenant or occupant. In either event, Lessor may
apply the net amount collected to the rents herein reserved, but no such
assignment, underletting, occupancy or collection shall be deemed a waiver of
any of the provisions of this Lease, or the acceptance of the assignee,
undertenant or occupants as tenant, or a release of Lessee from the further
performance by Lessee of Lessee's obligations under this lease. The consent by
Lessor to assignment, mortgaging, underletting or use or occupancy by others
shall not in any way be considered to relieve Lessee from obtaining the express
written consent of Lessor to any other or further assignment, Mortgaging or
underletting or use or occupancy by others not expressly permitted by this
Article.
Section 5.03
Provided Lessee complies with the following conditions, Lessor shall
not unreasonably withhold its consent to the assignment of the lease or
subletting of the demised premises or a portion thereof.
a) Lessee shall submit in writing to Lessor (i) the name of the
proposed assignee or subtenant (ii) the nature and character of the proposed
assignee's or subtenant's business, (iii) the terms and conditions of the
proposed assignment or sublease and (iv) such reasonable financial information
as Lessor may request regarding the proposed assignment or sublease and (iv)
such reasonable financial information as Lessor may request regarding the
proposed assignee or subtenant;
b) If Lessee requests the right to sublease, the Lessor, at
Lessor's election, may (i) elect to sublease the demised premises directly from
Lessee upon the same terms and conditions offered to the proposed subtenant, or
(ii) cancel this lease, in which event Lessee agrees to surrender all of its
right, title and interest hereunder and Lessor may thereafter enter into a
direct lease with the proposed subtenant or with any other persons as Lessor may
desire, or
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(iii) consent to the subletting. Lessor's election under this subdivision (b)
shall be made within twenty (20) days after the information set forth in
subparagraph (a) hereof has been received by Lessor.
c) If Lessee has obtained consent to such proposed assignment or
subletting by any superior lessor and/or superior mortgagee, provided such
superior lessor and/or superior mortgagee requires consent thereto;
Section 5.04
The following shall constitute further conditions precedent to any
proposed sublease or assignment:
a) Lessee shall comply with the Industrial Site Recovery Act and
the regulations promulgated thereunder ("ISRA"), at Lessee's cost and expense;
b) Lessee shall promptly furnish to lessor true and complete
copies of all documents, submissions and correspondence, if any, provided by
Lessee to the Bureau of Industrial Site Evaluation ("Bureau") and all documents,
reports, directives and correspondence provided by the Bureau to Lessee, if any.
Lessee shall also promptly furnish to Lessor true and complete copies of all
sampling and test results obtained from samples and tests taken at and around
the premises, if any;
c) Lessee shall have received from the Bureau either (i) a
non-qualified approval of Lessee's negative declaration or (ii) a
non-applicability letter, for which Lessee shall promptly apply pursuant to
ISRA. If this condition shall not be satisfied, then Lessor shall have the right
to withhold consent to sublease or assignment.
Section 5.05
Lessee shall remain fully liable for the performance of all of Lessee's
obligations hereunder notwithstanding any subletting provided for herein, and
without limiting the generality of the foregoing, shall remain fully responsible
and liable to Lessor for all acts and omissions of any subtenant or anyone
claiming under or through any subtenant which shall be in violation of any of
the obligations of this lease and any such violation shall be deemed to be a
violation by Lessee.
Section 5.06
Without affecting any of Lessee's other obligations under this Lease,
if Lessor consents to any assignment or sublease, Lessee shall pay to Lessor as
additional rent, one-half of the
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difference between (A) all sums or other economic consideration received by
Lessee as a result of an assignment or subletting (other than payments
attributable to the amortization over the Lease term of the cost of leasehold
improvements which are part of the assigned or sublet portion of the premises
and have been paid for by Lessee), whether or not denominated as rental under
the assignment or sublease, and (B) all sums which Lessee is obligated to pay to
Lessor under this Lease (prorated to reflect obligations allocable to that
portion of the demised premises subject to such assignment or sublease). The
sums payable under this paragraph shall be paid to Lessor as and when paid by
any assignee or subtenant to Lessee. Lessee shall be allowed to first recover
its costs of procuring the transaction, including any concessions for tenant
improvements, brokerage commissions, legal expenses, and other related
transaction expenses.
Section 5.07
Notwithstanding any assignment and assumption by the assignee of the
obligations of Lessee hereunder, or Lessee's immediate or remote successor in
interest, the Lessee herein named shall remain liable jointly and severally (as
a primary obligor) with its assignee and all subsequent assignees for the
performance of Lessee's obligations hereunder.
Section 5.08
In the event that it shall be determined by a court of competent
jurisdiction that Lessor unreasonably withheld consent pursuant to this Article,
Lessee's sole remedy shall be for specific performance and Lessor shall not be
liable for damages of any kind arising from its failure to consent.
Section 5.09
It is understood and agreed that Lessor's consent to a proposed
assignment or sublease shall not be deemed to permit any further use change
subsequent to the assignment or sublease.
ARTICLE VI
EMINENT DOMAIN
Section 6.1
In the event that the entire demised premises, or any substantial
portion thereof or access thereto, shall be taken under eminent domain or
condemnation proceedings, or in lieu of any condemnation proceedings or actions
or in the context of a proposed taking, the Lessor shall
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grant an option to purchase and/or shall sell and convey the said premises or
any substantial portion thereof or access thereto to the governmental or other
public authority, agency, body or public utility, seeking to take the premises
or any substantial portion thereof, then this Lease, at the option of the
Lessor, or of Lessee if Lessee's business operations are substantially and
adversely effected, shall terminate, and the term hereof shall end as of such
reasonable date as the Lessor shall fix by notice in writing (which date shall
not be later than the date of such taking); and the Lessee shall have no claim
or right to claim or be entitled to any portion of any amount which may be
awarded as damages or paid as the result of such condemnation proceedings or
paid as the purchase price for such option, sale or conveyance in lieu of formal
condemnation proceedings or paid as the purchase price for such option, sale or
conveyance in lieu of formal condemnation proceedings, and all rights of the
Lessee to damages, if any, are hereby assigned to the Lessor, except that Lessee
may, if permitted by law, interpose and prosecute in any proceeding in respect
to the taking, independent of any claim of Lessor, claims for the reasonable
value of the Lessee's fixtures or personal property, for damages for
interruption or dislocation of Lessee's business and loss of good will and for
moving and relocation expenses. The Lessee agrees to execute and deliver any
instruments as may be reasonably deemed necessary or required to expedite any
condemnation proceedings or to effectuate a proper transfer of title to such
governmental or other public authority, agency, body or public utility seeking
to take or acquire the said lands and premises or any portion thereof, Lessee
covenants and agrees to vacate the said premises, remove all the Lessee's
personal property therefrom and deliver up peaceable possession thereof to
Lessor or to such other party designated by Lessor in the aforementioned notice.
Failure by Lessee to comply with any provisions in this clause shall subject
Lessee to such costs, expenses, damages and Lessee as the Lessor may incur by
reason of Lessee's breach hereof. In the event of any termination pursuant to
the terms hereof, all rent shall abate as of the date of termination and any
prepaid rent or additional rent shall be provided and refunded to Lessee.
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ARTICLE VII
FIRE AND OTHER CASUALTY
Section 7.1 - Casualty Loss Provisions
In case of fire or other casualty, Lessee shall give immediate notice
to Lessor. If the premises shall be partially damaged by fire, the elements or
other casualty, Lessor shall repair the same as speedily as practicable, and
Lessee's obligation to pay the rent hereunder while said repairs are being made
shall be abated in proportion to the extent of the interference with Lessee's
use of the premises. Notwithstanding the foregoing, in the event the premises be
so extensively and substantially damaged as to render them untenantable, the
rent shall cease until such time as the premises shall be made tenantable by
Lessor. If repairs will take more than four (4) months to complete, either party
shall have the option to terminate the lease.
In the event the premises are totally destroyed or so extensively
damaged as to require practically a rebuilding thereof, then the rent shall be
paid up and prorated to the time of such destruction and then and from thence
forth this Lease shall terminate.
In no event, however, shall the provisions of this paragraph become
effective or be applicable, if the fire or other casualty and damage shall be
the result of the carelessness, negligence or improper conduct of Lessee or the
Lessee's agents, employees, guests, licensees, invitees, subtenants, assignees
or successors. In such case, the Lessee's liability for the payment of the rent
and the performance of all the covenants, conditions and terms hereof on the
Lessee's part to be performed shall continue and the Lessee shall be liable to
the Lessor for the damage and loss suffered by Lessor, less any amounts received
by Lessor from insurance proceeds.
ARTICLE VIII
CONDITIONS OF LIMITATIONS
Section 8.01
This lease and the term and estate hereby granted are subject to the
limitation that whenever Lessee shall make an assignment of the property of
Lessee for the benefit of creditors, or whenever a petition shall be filed by or
against Lessee under the provisions of the United States Bankruptcy Act or under
the provisions of any law of like import, or whenever a
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permanent receiver of Lessee of or for the property of Lessee shall be
appointed, then Lessor (a) at any time after receipt of notice of the occurrence
of any such event, or (b) if such event occurs without the acquiescence of
Lessee, at any time after the event continues for thirty (30) days after notice
of same to Lessee, Lessor may give Lessee a notice of intention to end the term
of this lease at the expiration of five (5) days from the date of service of
such notice of intention, and upon the expiration of said five (5) day period
this lease and the term and estate hereby granted, whether or not the term shall
theretofore have commenced, shall terminate with the same effect as if that day
were the Expiration Date, but Lessee shall remain liable for damages as provided
in Article X.
Section 8.02
This lease and the term and estate hereby granted are subject to the
further limitations that:
a) whenever Lessee shall default in the payment of any
installment of fixed rent, or in the payment of any additional rent or any other
charge payable by Lessee to Lessor hereunder, on any day upon which the same
ought to be paid, and such default shall continue for five (5) days after Lessor
gives written notice to Lessee of said Default or
b) whenever Lessee shall do or permit anything to be done,
whether by action or inaction, contrary to any of Lessee's obligations
hereunder, and if such situation shall continue and shall not be remedied by
Lessee within thirty (30) days after Lessor shall have given to Lessee a notice
specifying the same; or, in the case of happening or default which cannot with
due diligence be cured within a period of thirty (30) days and the continuance
of which for the period required for cure will not subject Lessor to the risk of
criminal liability or termination of any superior lease or foreclosure of any
superior mortgage, if Lessee shall not (i) within said thirty (30) day period
advise Lessor of Lessee's situation, (ii) duly institute within said thirty (30)
day period, and thereafter diligently prosecute to completion all steps
necessary to remedy the same and (iii) complete such remedy within such time
after the date of the giving of said notice to Lessor as shall reasonably be
necessary; or
c) whenever any event shall arise whereby this lease or the
estate hereby granted or the unexpired balance of the term hereof would, by
operation of law or otherwise, devolve upon or pass to any person, firm or
corporation other than Lessee, except as expressly permitted by Article v; or
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d) whenever Lessee shall abandon the demised premises (unless as
a result of a casualty);
Then and in any of said cases, the occurrence of which shall be deemed
to be defaults of this lease, this lease and the term and estate hereby granted,
whether or not the term shall theretofore have commenced, shall terminate
without the necessity of any notice or any further notice, as the case may be,
except as may be set forth above, with the same effect as if that day were the
Expiration date, but Lessee shall remain liable for damages as provided in
Article X.
ARTICLE IX
RE-ENTRY BY LESSOR
Section 9.01
If Lessees shall default in the payment of any installment of fixed
rent, or of any additional rent, on any date upon which the same ought to be
paid, or if Lessee shall default or if this lease shall expire or be terminated
as in Article VIII provided, Lessor or Lessor's agents and employees may
immediately or at any time thereafter re-enter the demised premises, or any part
thereof, in the name of the whole, either by summary dispossess proceedings or
by any suitable action or proceeding at law, and may repossess same, and may
remove any persons therefrom, to the end that Lessor may have, hold and enjoy
the demised premises again as and of its first estate and interest therein. The
word "re-enter," as herein used, is not restricted to its technical legal
meaning. In the event of any termination of this lease under the provisions of
Article VIII or if Lessor shall re-enter the demised premises under the
provisions of this Article or in the event of the termination of this lease, or
of re-entry, by or under any summary dispossess or other proceeding or action or
any provision of law by reason of default hereunder on the part of Lessee,
Lessee shall thereupon pay to Lessor the fixed rent and additional rent payable
by Lessee to Lessor up to the time of such termination of this lease, or of such
recovery of possession of the Demised premises by Lessor, as the case may be and
shall also pay to Lessor damages as provided in Article X.
Section 9.02
In the event of a breach or threatened breach by Lessee of any of its
obligations under this lease, Lessor shall also have the right of injunction.
The special remedies to which Lessor may resort hereunder are cumulative and are
not intended to be exclusive of any other remedies
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or means of redress to which Lessor may lawfully be entitled at any time and
Lessor may invoke any remedy allowed at law or equity as if specific remedies
were not provided for herein.
Section 9.03
If this lease shall terminate under the provisions of Article VIII, or
if Lessor shall re-enter the demised premises under the provisions of this
Article, or in the event of the termination of this lease, or of re-entry, by or
under any summary dispossess or other proceeding or action or any provision of
law by reason of default hereunder on the part of Lessee, Lessor shall be
entitled to retain all monies, if any, paid by Lessee, whether as advance rent,
security or otherwise, but such monies shall be credited by Lessor against any
fixed rent or additional rent due from Lessee at the time of such termination or
re-entry or, at Lessor's option, against any damages payable by Lessee under
Article X or pursuant to law, with any excess to be returned to Lessee.
ARTICLE X
DAMAGES
Section 10.01
If this lease is terminated under the provisions of Article VIII, or if
Lessor shall re-enter the demised premises under the provision of Article IX, or
in the event of the termination of this lease, or of re-entry, by or under any
summary dispossess or other proceeding or action or any provision of law by
reason of default hereunder on the part of Lessee, Lessee shall pay to Lessor as
damages, at the election of Lessor, either the present value of:
a) a sum which at the time of such termination of this lease or
at the time of any such re-entry by Lessor, as the case may be, represents the
then value of the excess, if any, of
1) the present value of the aggregate of the fixed rent and the
additional rent payable hereunder which would have been payable by Lessee
(conclusively presuming the additional rent to be the same as was payable for
the year immediately preceding such termination) for the period commencing with
such earlier termination of this lease or the date of any such re-entry, as the
case maybe, and ending with the Expiration Date, had this lease not so
terminated or had Lessor not so re-entered the Demised Premises, over
2) the present value of the aggregate fair market rental value of
the Demised premises for the same period, or
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b) sums equal to the fixed rent and the additional rent (as above
presumed) payable hereunder which would have been payable by Lessee had this
lease not so terminated, or had Lessor not so re-entered the demised premises,
payable upon the due dates therefor specified herein following such termination
or such re-entry and until the expiration date; provided, however, that if
Lessor shall relet the Demised Premises during said period, Lessor shall credit
Lessee with the net rents received by Lessor from such reletting, such net rents
to be determined by first deducting from the gross rents as and when received by
Lessor from such reletting the expenses incurred or paid by Lessor in
terminating this lease or in re-entering the demised premises and in securing
possession thereof, as well as the expense of reletting, including altering and
preparing the demised premises for new Lessees, broker's commissions, and all
other expenses properly chargeable against the Demised Premises and the rental
therefrom; it being understood that any such reletting may be for a period
shorter or longer than the remaining term of this lease; but in no event shall
Lessee be entitled to receive any excess of such net rents over the sums payable
by Lessee to Lessor hereunder, nor shall Lessee be entitled in any suit for the
collection of damages pursuant to this Subsection to a credit in respect of any
net rents for a reletting, except to the extent that such net rents are actually
received by Lessor. If the Demised premises or any part thereof should be relet
in combination with other space, then proper apportionment on a square foot
basis shall be made for the rent received from such reletting and of the
expenses of reletting. If the Demised Premises or any part thereof be relet by
Lessor for the unexpired portion of the term of this lease, or any part thereof,
before presentation of proof of such damages to any court, commission or
tribunal, the amount of rent reserved upon such reletting shall, prima facie, be
the fair and reasonable rental value for the Demised Premises, or part thereof,
so relet during the term of the reletting. Lessor agrees to use reasonable
commercial efforts to relet the premises for the unexpired term of the Lease.
Section 10.02
Suit or suits for the recovery of such damages, or any installments
thereof, may be brought by Lessor from time to time at its election, and nothing
contained herein shall be deemed to require Lessor to postpone suit until the
date when the term of the Lease would have expired if it had not been so
terminated under the provisions of Article VIII, or under any provision of law,
or had Lessor not re-entered the demised Premises. Nothing herein contained
shall be construed to limit or preclude recovery by Lessor against Lessee of any
sums or damages to which, in
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addition to the damages particularly provided above, Lessor may lawfully be
entitled by reason of any default hereunder on the part of Lessee.
ARTICLE XI
MORTGAGE PRIORITY AND MECHANICS LIENS
Section 11.1 - Priority of Mortgages
This lease shall not be a lien against the said premises in respect to
any mortgages that may hereafter be placed upon said premises. The recording of
such mortgage or mortgages shall have preference and precedence and be superior
and prior in lien to this Lease, irrespective of the date of recording, and
Lessee agrees to execute any instruments, without cost, which may be deemed
necessary or desirable, to further effectuate the subordination of this Lease to
any such mortgages. A refusal by Lessee to execute such instruments shall
entitle the Lessor to damages or injunction.
Section 11.2 - Mechanic's Liens
Lessee shall not suffer or permit any mechanic's liens or other liens
to be filed against the premises by reason of work, labor, services or materials
supplied or claimed to have been supplied to Lessee or anyone holding through
Lessee and agrees to indemnify and save Lessor harmless against such liens. If
any such lien shall at any time be filed against the premises, Lessee shall
within thirty (30) days after notice of the filing, cause the same to be
discharged of record or secure a satisfactory bond in regard thereto at Lessee's
cost and expense. Failure to do so shall constitute an event of default under
this Lease.
ARTICLE XII
NON-LIABILITY OF LESSOR
Section 12.1
Lessor shall not be liable for any loss, damage or injury which may be
sustained by Lessee or any other person, as a consequence of the failure,
breakage, leakage or obstruction of the water, plumbing, steam, sewer, waste or
soil pipes, roof, drains, leaders, gutters, valleys, downspout or the like or of
the electrical, gas, power, conveyor, refrigeration, sprinkler, air-conditioning
or heating systems, elevators or hoisting equipment or by reason of the elements
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or resulting from the carelessness, negligence or improper conduct on the part
of Lessee, or Lessee's agents, employees, guests, licenses, invitees,
subtenants, assignees or successors attributable to any interference with,
interruption of or failure, beyond the reasonable control of Lessor, of any
services to be furnished or supplied by Lessor. Lessee shall indemnify, defend
and hold Lessor harmless from and against any claims for loss, damage or injury,
except if the liability results from the negligence, willful misconduct, or
breach of the Lease by the Lessor.
ARTICLE XIII
NON-WAIVER
Section 13.1
The various rights, remedies, options and elections of the parties,
expressed herein, are cumulative, and the failure of the Lessor or Lessee to
enforce strict performance by the other of the conditions and covenants of this
Lease or to exercise any election or option, or to resort to have recourse to
any remedy herein conferred or the acceptance by Lessor or payment by Lessee of
any installment of rent in any one or more instances, shall not be construed or
deemed to be a waiver or a relinquishment for the future by the Lessor or Lessee
of any such condition and covenants, options, elections or remedies, but the
same shall continue in full force and effect.
ARTICLE XIV
RIGHT TO EXHIBIT; ACCESS
Section 14.1
Lessee agrees to permit the Lessor and the Lessor's agents, employees
or other representatives to show the premises to mortgage holders, prospective
purchasers, lessees or mortgage lenders, at reasonable times upon reasonable
notice so as to not unreasonably interfere with Lessee's business and Lessee
agrees that on and after six (6) months next preceding the expiration of the
term hereof, Lessor or Lessor's agents, employees or other representatives shall
have the right to place notices on the front of said premises or any part
thereof, offering the premises for rent or for sale and the Lessor hereby agrees
to permit the same to remain thereon without hindrance or molestation. Lessor
shall also have the right to enter upon the premises at reasonable times for the
purpose of making repairs, alterations or maintenance. Lessee shall also
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permit Lessor to install, use and maintain pipes, ducts and conduits within the
walls, bearing columns and ceilings of the premises. This clause shall not be
deemed to create an obligation on the part of Lessor to perform the
aforementioned activities. Lessor shall provide reasonable notice before
entering the premises to make repairs (except in emergencies) and shall make
such repairs at such times and in such manner so as to minimize interference
with Lessee's use of the premises, insofar as reasonably practicable.
ARTICLE XV
NON-PERFORMANCE BY LESSOR
Section 15.1
Except as otherwise expressly provided in this Lease, this Lease and
the obligation of the Lessee to pay the rent hereunder and comply with the
covenants and conditions herein shall not be affected, curtailed, impaired or
excused because of Lessor's inability to supply any service or material called
for herein, by reason of any rule, order, regulation or preemption by any
governmental entity, authority, department, agency or subdivision or because of
strikes or other labor trouble or for any cause beyond the reasonable control of
the Lessor.
ARTICLE XVI
QUIET ENJOYMENT AND WAIVER OF SUBROGATION
Section 16.1 - Quiet Enjoyment
Lessor covenants and represents that Lessor is the owner of the
premises herein leased and has the right and authority to enter into, execute
and deliver this Lease; and does further covenant that the Lessee, on paying the
rent and performing the conditions and covenants herein contained, shall and
peaceably and quietly have, hold and enjoy the leased premises for the term
aforementioned.
Section 16.2 - Waiver of Subrogation
Lessee hereby waives all rights of recovery against Lessor, or its
agents, employees or other representatives, for any loss, damages or injury of
any nature whatsoever to property or person for which the Lessee is insured. The
Lessee shall obtain from its insurance carriers and will deliver to Lessor,
waivers of the subrogation rights under the respective policies.
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ARTICLE XVII
BROKERS
The parties hereby covenant and represent to each other that there were
no Brokers instrumental in negotiating and consummating this lease. The parties
hereby mutually agree to hold each other harmless against any claims for
commissions arising out of any communications or negotiations by each respective
party with any broker.
ARTICLE XVIII
SIGNS
The Lessee shall not place nor allow to be placed any signs of any kind
whatsoever, visible from the premises exterior, upon, in or about the said
premises or any part thereof, except after having obtained the prior written
approval of Lessor as to design, structure and location, which approval shall
not be unreasonably withheld or delayed. In case the Lessor or the Lessor's
agents, employees or representatives shall deem it necessary to remove any such
signs in order to paint or make any repairs, alterations or improvements in or
upon said premises or any part thereof (without creating any obligation herein
on the part of Lessor), they may be so removed, but shall be replaced as soon as
practicable at the Lessor's expense when the said repairs, alterations or
improvements shall have been completed, unless said repairs, alterations or
improvements were the responsibility of Lessee under the terms of this Lease.
Additionally, all signs installed by Lessee shall at all times conform with all
municipal ordinances or other laws and regulations applicable thereto.
ARTICLE XIX
ISRA COMPLIANCE
Lessee shall, at Lessee's own expense, comply with the Industrial Site
Recovery Act, and the regulations promulgated thereunder ("ISRA") with respect
to Lessee's occupancy of and activities upon the premises. Lessee shall, at
Lessee's own expense, make all submissions to, provide all information to, and
comply with all requirements of the Bureau of Industrial Site Evaluation ("the
Bureau") of the New Jersey Department of Environmental Protection and
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Energy (NJDEPE). Should the Bureau or any other division of NJDEPE determine
that a clean-up plan be prepared and that a clean-up be undertaken because of
any spills or discharges of hazardous substances or wastes at the premises which
occur during the term of this lease, then Lessee shall, at Lessee's own expense,
prepare and submit the required plans and financial assurances, and carry out
the approved plans. Lessee's obligations under this Article shall arise if there
is any closing, termination or transferring of operations of an industrial
establishment at the premises pursuant to ISRA. At no expense to Lessor, Lessee
shall promptly provide all information requested by Lessor for preparation of
non-applicability affidavits and shall promptly sign such affidavits when
requested by Lessor. Lessee shall indemnify, defend and save harmless Lessor
from all fines, suites, procedures, claims and action of any kind arising out of
or in any way connected with any spills or discharges of hazardous substances or
wastes at the premises which occur during the term of this Lease; and from all
fines, suits, procedures, claims and actions of any kind arising out of Lessee's
failure to provide all information, make all submissions and take all actions
required by the Bureau or any other division of NJDEPE. Where appropriate, and
to the extent required, Lessor will cooperate therewith, at no expense to
Lessor. Lessee's obligations and liabilities under this Article shall continue
for so long as Lessor remains responsible for any spills or discharges of
hazardous substances or wastes at the premises which occur during the term of
this lease. Lessee's failure to abide by the terms of this Article shall be
restrainable by injunction.
ARTICLE XX
LESSOR'S AND LESSEE'S PROPERTY
Section 20.1
All fixtures, equipment, improvements and appurtenances attached to or
built into the Demised Premises at the commencement of or during the term of
this lease, whether or not by or at the expense of Lessee, shall be and remain a
part of the premises, shall be deemed the property of Lessor, and shall not be
removed by Lessee, except as hereinafter in this Article expressly provided.
Section 20.2
All business and trade fixtures, machinery and equipment,
communications equipment and office equipment, whether or not attached to or
built into the premises, which are installed in
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the premises by or for the account of Lessee, without expense to Lessor, and
which can be removed without damage to the premises, and all furniture,
furnishings and other articles of moveable personal property owned by Lessee and
located in premises, (all of which are sometimes called "Lessee's Property")
shall be and shall remain the property of Lessee and may be removed by it at any
time during the term of this lease; provided that if any of Lessee's property is
removed, Lessee shall repair or pay the cost of repairing any damage to the
premises or to the building resulting from such removal.
Section 20.3
At or before the expiration date, or the date of any earlier
termination of this lease, or as promptly as practicable after such an earlier
termination date, Lessee, at its expense, shall remove from the premises all of
Lessee's property and shall repair any damage to the premises or the building
resulting from such removal.
Section 20.4
Any other items of Lessee's property which shall remain in the premises
after the expiration date of after a period of ten (10) day following, any
earlier termination date, may at the option of Lessor, be deemed to have been
abandoned, and in such case may either be retained by Lessor as its property or
may be disposed of without accountability, in such manner as Lessor may see fit,
at Lessee's expense.
ARTICLE XXI
NOTICES
All notices required under the terms of this Lease shall be given and
shall be complete by mailing such notices by certified or registered mail,
return receipt requested, to the address of the parties as shown at the head of
this Lease, or such other address as may be designated in writing, which notice
of change of address shall be given in the same manner. Copies of notices to
Lessor shall also be sent to John Selser Esq., 263 Main Street, Hackensack, NJ
07601.
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ARTICLE XXII
VALIDITY
The terms, conditions, covenants and provisions of this lease shall be
deemed to be severable. If any clause or provision herein contained shall be
adjudged to be invalid or unenforceable by a court of competent jurisdiction or
by operation of any applicable law, it shall not affect the validity of any
other clause or provision herein, but such other clauses or provisions shall
remain in full force and effect.
ARTICLE XXIII
SEVERABILITY
The terms, conditions, covenants and provisions of this lease shall be
deemed to be severable. If any clause or provision herein contained shall be
adjudged to be invalid or unenforceable by a court of competent jurisdiction or
by operation of any applicable law. it shall not affect the validity of any
other clause or provision herein, but such other clauses or provisions shall
remain in full force and effect.
ARTICLE XXIV
ENTIRE AGREEMENT
This lease contains the entire contract between the parties, and shall
inure to the benefit of and shall bind the respective parties hereto, and their
heirs, executors, successors and assigns.
ARTICLE XXV
CONSTRUCTION
This Lease and the rights and obligations of the parties hereto shall
be interpreted and construed in accordance with the laws of the State of New
Jersey.
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ARTICLE XXVI
ARTICLE HEADINGS
The article headings in this lease are utilized only as a matter of
convenience in reference and are not to be given any effect whatsoever in the
construction hereof.
ARTICLE XXVII
RENEWAL OPTION
Lessor hereby grants an option to renew this lease for a term of five
(5) years after the expiration of its original term (i.e., from April 1, 2004 to
March 31, 2009) on the same terms as this lease, except that the rental during
said renewal term shall be determined as herein set forth. The within option
grant is subject to Lessee not being in default at time of option exercise and
having paid on a timely basis all sums due to Lessor or otherwise during the
prior twelve (12) months.
This option may be exercised by Lessee by giving Lessor written notice
thereof via certified mail, return receipt requested, which notice must be
received by Lessor on or before June 30, 2003, after which date this option
(unless so exercised) shall be null and void. Rental during the option period
shall be at ELEVEN THOUSAND FIVE HUNDRED ($11,500.00) DOLLARS PER MONTH. Lessee
may rescind and cancel its renewal option exercise by written notice of same
delivered to Lessor on or before August 15, 2003. In such case, on January 31,
2004, the Lease shall terminate and Lessee shall vacate the premises. The
foregoing right of Lessee to rescind and cancel the renewal option shall be
Lessee's sole and exclusive remedy. Failure of Lessee to cancel and rescind in
strict compliance with the foregoing shall be deemed to constitute a waiver of
said right by Lessee and an acceptance by Lessee of the rental amount determined
by Lessor.
Lessee further understands and agrees that they are bound and
responsible for ALL ARTICLES and OBLIGATIONS of this lease for the period of
November 1, 1997 to April 1, 1999 (Period of last lease option expiration with
continued occupancy by Lessee).
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands a
and seals, or caused these presents to be signed by their proper corporate
officers and their corporation seals to be affixed, as of the day and year first
above written.
WITNESS: FMCSR HOLDING CORP.
/s/ [illegible] date: 3/22/99 /s/ Frank Casagrande date:3/22/99
- ------------------------------------- -------------------------------------
FRANK CASAGRANDE (LESSOR)
ATTEST: HORIZON HIGH REACH INC. (LESSEE)
/s/ Jennifer L. Mathis date: 4/1/99 /s/ Rick Penkert date:4/1/99
- ------------------------------------ ------------------------------------
[NOTARY PUBLIC SEAL] TITLE: GM - VP
------------------------------
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FMCSR 3-22-99
1st Floor + Yard Area
[Floor Plan]
27
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FMCSR 3-22-99
2nd Floor Office Space
[Floor Plan]
28
<PAGE> 1
EXHIBIT 10.21
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES. This Lease ("LEASE"), dated for reference purposes only,
May 24, 1999, is made by and between Industrial Boxboard Company ("LESSOR") and
Horizon High Reach, Inc. ("LESSEE"), (collectively the "PARTIES," or
individually a "PARTY").
1.2 (a) PREMISES. That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 2249 B Davis Ct., located in the City of
Hayward, County of Alameda, State of California, with zip code 94545, as
outlined on Exhibit ___ attached hereto ("PREMISES"). The "BUILDING" is that
certain building containing the Premises and generally described as (describe
briefly the nature of the Building): A steel industrial manufacturing/warehouse
building containing a total of 117,000 sq. ft. of which the premises are 24,290
sq. ft., including the ground floor office space. In addition to Lessee's rights
to use and occupy the Premises as hereinafter specified, Lessee shall have non
exclusive rights to the Common Areas (as defined in Paragraph 2.7 below) as
hereinafter specified, but shall not have any rights to the roof, exterior walls
or utility raceways of the Building or to any other buildings in the Industrial
Center. The Premises, the Building, the Common Areas, the land upon which they
are located, along with all other buildings and improvements thereon, are herein
collectively referred to as the "INDUSTRIAL CENTER." (Also see Paragraph 2.)
1.2 (b) PARKING. 40 unreserved vehicle parking spaces ("UNRESERVED
PARKING SPACES"); and 0 reserved vehicle parking spaces ("RESERVED PARKING
SPACES"). (Also see Paragraph 2.6.)
1.3 TERM. 5 years and 0 months ("ORIGINAL TERM") commencing July 1,
1999 ("COMMENCEMENT DATE") and ending June 30, 2004 ("EXPIRATION DATE"). (Also
see Paragraph 3.)
1.4 EARLY POSSESSION. June 15, 1999 ("EARLY POSSESSION DATE"). (Also
see Paragraphs 3.2 and 3.3.)
1.5 BASE RENT. $11,000.00 per month ("BASE RENT"), payable on the 1st
day of each month commencing July 1, 1999. (Also see Paragraph 4.)
[X] If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum pgh. 56, attached hereto.
1.6 (a)BASE RENT PAID UPON EXECUTION. $11,000.00 as Base Rent for the
period July 1-31, 1999.
1.6 (b) LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES. 20.76 percent
(____%) ("LESSEE'S SHARE") as determined by [X] prorata square footage of the
Premises as compared to the total square footage of the Building or [ ] other
criteria as described in Addendum ________.
1.7 SECURITY DEPOSIT. $11,000.00 ("SECURITY DEPOSIT"). (Also see
Paragraph 5.)
1.8 PERMITTED USE. As set forth in Paragraph 49 in the Addendum to
Lease ("PERMITTED USE"). (Also see Paragraph 6.)
1.9 INSURING PARTY. Lessor is the "INSURING PARTY". (Also see
Paragraph 8.)
1.10 (a) REAL ESTATE BROKERS. The following real estate broker(s)
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
[X] James V. Mealey represents Lessor exclusively ("LESSOR'S BROKER");
[X] Sutherland Co. represents Lessee exclusively ("LESSEE'S BROKER");
or
[ ] ________________ represents both Lessor and Lessee
("DUAL AGENCY"). (Also see Paragraph 15.)
1.10 (b) PAYMENT TO BROKERS. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate shares
as they may mutually designate in writing, a fee as set forth in a separate
written agreement between Lessor and said Broker(s) (or in the event there is no
separate written agreement between Lessor and said Broker(s), the sum of
$_______________) for brokerage services rendered by said Broker(s) in
connection with this transaction.
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to
be guaranteed by
_________________________________________________________________ ("GUARANTOR").
(Also see Paragraph 37.)
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or
Addenda consisting of Paragraphs 49 through 68 and Exhibits A through _____, all
of which constitute a part of this Lease.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental and/or Common Area Operating
Expenses, is an approximation which Lessor and Lessee agree is reasonable and
the rental and Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is
not subject to revision whether or not the actual square footage is more or
less.
[Initials]
<PAGE> 2
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler systems, lighting, air conditioning
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the Commencement
Date. If a non-compliance with said warranty exists as of the Commencement Date,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify same at Lessor's expense. If Lessee does
not give Lessor written notice of a non-compliance with this warranty within
thirty (30) days after the Commencement Date, correction of that non compliance
shall be the obligation of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants that any improvements (other than those constructed by Lessee or at
Lessee's direction) on or in the Premises, which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the Commencement Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Commencement Date. Said warranties shall not apply to any
Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. If the Premises do not comply with said warranties, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of
such non compliance, take such action, at Lessor's expense, as may be reasonable
or appropriate to rectify the non compliance. Lessor makes no warranty that the
Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable
Laws (as defined in Paragraph 2.4).
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges (a) that it has
been advised by the Broker(s) to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances, and regulations and any
covenants or restrictions of record (collectively, "APPLICABLE LAWS") and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility theretofore as the same relate to Lessee's occupancy of the
Premises and/or the terms of this Lease, and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to said matters other than as set forth in this Lease.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
this Paragraph 2 shall be of no force or effect if immediately prior to the date
set forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises.
Lessee shall, at Lessee's sole cost and expense, correct any non-compliance of
the Premises with said warranties.
2.6 VEHICLE PARKING. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said number.
Said parking spaces shall be used for parking by vehicles no larger than
full-size passenger automobiles or pick-up trucks, herein called "PERMITTED SIZE
VEHICLES." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease, provide the
parking facilities required by Applicable Law.
2.7 COMMON AREAS--DEFINITION. The term "COMMON AREAS" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general
non-exclusive use of Lessor, Lessee and other lessees of the Industrial Center
and their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.
2.8 COMMON AREAS--LESSEE'S RIGHTS. Lessor hereby grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Lessor under the terms hereof or under the terms of any rules and regulations
or restrictions governing the use of the Industrial Center. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Any such storage shall be permitted only by the prior written
consent of Lessor or Lessor's designated agent, which consent may be revoked at
any time. In the event that any unauthorized storage shall occur then Lessor
shall have the right, without notice, in addition to such other rights and
remedies that it may have, to remove the property and charge the cost to Lessee,
which cost shall be immediately payable upon demand by Lessor.
2.9 COMMON AREAS--RULES AND REGULATIONS. Lessor or such other person(s)
as Lessor may appoint shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to establish, modify,
amend and enforce reasonable Rules and Regulations with respect thereto in
accordance with Paragraph 40. Lessee agrees to abide by and conform to all such
Rules and Regulations, and to cause its employees, suppliers, shippers,
customers, contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees of the Industrial Center.
2.10 COMMON AREAS--CHANGES. Lessor shall have the right, in Lessor's
sole discretion, from time to time:
-2-
MULTI-TENANT-GROSS [Initials]
(c) American Industrial Real Estate
Association 1993
<PAGE> 3
(a) To make changes to the Common Areas, including, without limitation,
changes in the location, size, shape and number of driveways, entrances, parking
spaces, parking areas, loading and unloading areas, ingress, egress, direction
of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the Industrial
Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Industrial Center as Lessor may, in
the exercise of sound business judgment, deem to be appropriate.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after the
Early Possession Date but prior to the Commencement Date, the obligation to pay
Base Rent shall be abated for the period of such early occupancy. All other
terms of this Lease, however, (including but not limited to the obligations to
pay Lessee's Share of Common Area Operating Expenses and to carry the insurance
required by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original
Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by the
Commencement Date, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease, or the obligations of
Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not,
except as otherwise provided herein, be obligated to pay rent or perform any
other obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within ten (10) days after
the end of said sixty (60) day period, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided further,
however, that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. Except as may be otherwise
provided, and regardless of when the Original Term actually commences, if
possession is not tendered to Lessee when required by this Lease and Lessee does
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to the period
during which the Lessee would have otherwise enjoyed under the terms hereof, but
minus any days of delay caused by the acts, changes or omissions of Lessee.
4. RENT.
4.1 BASE RENT. Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time, to Lessor in lawful money of the
United States, without offset or deduction, on or before the day on which it is
due under the terms of this Lease. Base Rent and all other rent and charges for
any period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other persons or at such other addresses as Lessor may from time to
time designate in writing to Lessee.
4.2 COMMON AREA OPERATING EXPENSES. Lessee shall pay to Lessor during
the term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the
following provisions:
(a) "COMMON AREA OPERATING EXPENSES" are defined, for purposes of this
Lease, as all costs incurred by Lessor relating to the ownership and operation
of the Industrial Center, including, but not limited to, the following:
(i) Any increase above the Base Real Property Taxes (as
defined in Paragraph 10.2(b)) for the Building and the Common Areas.
(ii) Any "Insurance Cost Increase" (as defined in Paragraph
8.1).
(iii) The cost of insurance carried by Lessor with respect to
the Common Areas.
(iv) Any other services to be provided by Lessor that are
stated elsewhere in this Lease to be a Common Area Operating Expense.
(b) Any Common Area Operating Expenses and Real Property Taxes that are
specifically attributable to the Building or to any other building in the
Industrial Center or to the operation, repair and maintenance thereof, shall be
allocated entirely to the Building or to such other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Industrial Center.
(c) The inclusion of the improvements, facilities and services set
forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon
Lessor to either have said improvements or facilities or to provide those
services unless the Industrial Center already has the same, Lessor already
provides the services, or Lessor has agreed elsewhere in this Lease to provide
the same or some of them.
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(d) Lessee's Share of Common Area Operating Expenses shall be payable
by Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by Lessor from time to time of Lessee's Share of annual
Common Area Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate, during each 12-month period of the Lease
term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to
Lessee within sixty (60) days after the expiration of each calendar year a
reasonably detailed statement showing Lessee's Share of the actual Common Area
Operating Expenses incurred during the preceding year. If Lessee's payments
under this Paragraph 4.2(d) during said preceding year exceed Lessee's Share as
indicated on said statement, Lessee shall be credited the amount of such
overpayment against Lessee's Share of Common Area Operating Expenses next
becoming due. If Lessee's payments under this Paragraph 4.2(d) during said
preceding year were less than Lessee's Share as indicated on said statement,
Lessee shall pay to Lessor the amount of the deficiency within ten (10) days
after delivery by Lessor to Lessee of said statement.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon Lessee's execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefore
deposit monies with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional monies with Lessor as an addition to the Security Deposit so that the
total amount of the Security Deposit shall at all times bear the same proportion
to the then current Base Rent as the initial Security Deposit bears to the
initial Base Rent set forth in Paragraph 1.5. Lessor shall not be required to
keep all or any part of the Security Deposit separate from its general accounts.
Lessor shall, at the expiration or earlier termination of the term hereof and
after Lessee has vacated the Premises, return to Lessee (or, at Lessor's option,
to the last assignee, if any, of Lessee's interest herein), that portion of the
Security Deposit not used or applied by Lessor. Unless otherwise expressly
agreed in writing by Lessor, no part of the Security Deposit shall be considered
to be held in trust, to bear interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.
6. USE.
6.1 PERMITTED USE.
(a) Lessee shall use and occupy the Premises only for the Permitted Use
set forth in Paragraph 1.8, or any other legal use which is reasonably
comparable thereto, and for no other purpose. Lessee shall not use or permit the
use of the Premises in a manner that is unlawful, creates waste or a nuisance,
or that disturbs owners and/or occupants of, or causes damage to the Premises or
neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee, Lessee's assignees or subtenants, and
by prospective assignees and subtenants of Lessee, its assignees and subtenants,
for a modification of said Permitted Use, so long as the same will not impair
the structural integrity of the improvements on the Premises or in the Building
or the mechanical or electrical systems therein, does not conflict with uses by
other lessees, is not significantly more burdensome to the Premises or the
Building and the improvements thereon, and is otherwise permissible pursuant to
this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall within
five (5) business days after such request give a written notification of same,
which notice shall include an explanation of Lessor's reasonable objections to
the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS SUBSTANCE" as
used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either; (i) potentially injurious to the public health, safety or welfare, the
environment, or the Premises; (ii) regulated or monitored by any governmental
authority; or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products or by-products thereof. Lessee
shall not engage in any activity in or about the Premises which constitutes a
Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Requirements (as defined in
Paragraph 6.3). "REPORTABLE USE" shall mean (i) the installation or use of any
above or below ground storage tank, (ii) the generation, possession, storage,
use, transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority, and (iii) the presence
in, on or about the Premises of a Hazardous Substance with respect to which any
Applicable Laws require that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor's prior consent, but upon notice to Lessor and in compliance
with all Applicable Requirements, use any ordinary and customary materials
reasonably required to be used by Lessee in the normal course of the Permitted
Use, so long as such use is not a Reportable Use and does not expose the
Premises or neighboring properties to any meaningful risk of contamination or
damage or expose Lessor to any liability therefor. In addition, Lessor may (but
without any obligation to do so) condition its consent to any Reportable Use of
any Hazardous Substance by Lessee upon Lessee's giving Lessor such additional
assurances as Lessor, in its reasonable discretion, deems necessary to protect
itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefor, including but not limited to
the installation (and, at Lessor's option, removal on or before Lease expiration
or earlier termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of an additional
Security Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises or the Building, other than as previously consented to by
Lessor, Lessee shall immediately give Lessor written notice thereof, together
with a copy of any statement, report, notice, registration, application, permit,
business plan, license, claim, action, or proceeding given to, or received from,
any governmental authority or private party concerning the presence, spill,
release, discharge of, or exposure to, such Hazardous Substance including but
not limited to all such documents as may be involved in any Reportable Use
involving the Premises. Lessee shall not cause or permit any Hazardous Substance
to be spilled or released in, on, under or about the Premises (including,
without limitation, through the plumbing or sanitary sewer system).
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(c) INDEMNIFICATION. Lessee shall indemnity, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys' and
consultants' fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's
obligations under this Paragraph 6.2(c) shall include, but not be limited to,
the effects of any contamination or injury to person, property or the
environment created or suffered by Lessee, and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations under this Lease with respect to
Hazardous Substances, unless specifically so agreed by Lessor in writing at the
time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH REQUIREMENTS. Lessee shall, at Lessee's
sole cost and expense, fully, diligently and in a timely manner, comply with all
"APPLICABLE REQUIREMENTS," which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating in any manner to the Premises (including
but not limited to matters pertaining to (i) industrial hygiene, (ii)
environmental conditions on, in, under or about the Premises, including soil and
groundwater conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill, or release
of any Hazardous Substance), now in effect or which may hereafter come into
effect. Lessee shall, within five (5) days after receipt of Lessor's written
request, provide Lessor with copies of all documents and information, including
but not limited to permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in
writing (with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or involving
failure by Lessee or the Premises to comply with any Applicable Requirements.
6.4 INSPECTION; COMPLIANCE WITH LAW. Lessor, Lessor's agents,
employees, contractors and designated representatives, and the holders of any
mortgages, deeds of trust or ground leases on the Premises ("Lenders") shall
have the right to enter the Premises at any time in the case of an emergency,
and otherwise at reasonable times, for the purpose of inspecting the condition
of the Premises and for verifying compliance by Lessee with this Lease and all
Applicable Requirements (as defined in Paragraph 6.3), and Lessor shall be
entitled to employ experts and/or consultants in connection therewith to advise
Lessor with respect to Lessee's activities, including but not limited to
Lessee's installation, operation, use, monitoring, maintenance, or removal of
any Hazardous Substance on or from the Premises. The costs and expenses of any
such inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee, is found to exist
or to be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In such case, Lessee shall upon request reimburse Lessor or
Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. MAINTENANCE, REPAIRS, UTILITY INSTALLATIONS, TRADE FIXTURES AND ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition and repair (whether or not such portion of
the Premises requiring repair, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises), including, without limiting the generality
of the foregoing, all equipment or facilities specifically serving the Premises,
such as plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities, boilers, fired or unfired pressure vessels, fire hose connections if
within the Premises, fixtures, interior walls, interior surfaces of exterior
walls, ceilings, floors, windows, doors, plate glass, and skylights, but
excluding any items which are the responsibility of Lessor pursuant to Paragraph
7.2 below. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain a contract, with copies to Lessor, in customary form and substance for
and with a contractor specializing and experienced in the inspection,
maintenance and service of the heating, air conditioning and ventilation system
for the Premises. However, Lessor reserves the right, upon notice to Lessee, to
procure and maintain the contract for the heating, air conditioning and
ventilating systems, and it Lessor so elects, Lessee shall reimburse Lessor,
upon demand, for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days' prior
written notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and put
the Premises in good order, condition and repair, in accordance with Paragraph
13.2 below.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement
pursuant to Paragraph 4.2, shall keep in good order, condition and repair the
foundations, exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipe and hose (if located in the
Common Areas) or other automatic fire extinguishing system including fire alarm
and/or smoke detection systems and equipment, fire hydrants, parking lots,
walkways, parkways, driveways, landscaping, fences, signs and utility systems
serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises. Lessee expressly waives
the benefit of any statute now or hereafter in effect which would otherwise
afford Lessee the right to make repairs at Lessor's expense or to terminate this
Lease because of Lessor's failure to keep the Building, Industrial Center or
Common Areas in good order, condition and repair.
7.3 UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY INSTALLATIONS" is
used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating,
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ventilating and air conditioning equipment, plumbing, and fencing in, on or
about the Premises. The term "TRADE FIXTURES" shall mean Lessee's machinery and
equipment which can be removed without doing material damage to the Premises.
The term "ALTERATIONS" shall mean any modification of the improvements on the
Premises which are provided by Lessor under the terms of this Lease, other than
Utility Installations or Trade Fixtures. "LESSEE-OWNED ALTERATIONS AND/OR
UTILITY INSTALLATIONS" are defined as Alterations and/or Utility Installations
made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).
Lessee shall not make nor cause to be made any Alterations or Utility
Installations in, on, under or about the Premises without Lessor's prior written
consent. Lessee may, however, make non-structural Utility Installations to the
interior of the Premises (excluding the roof) without Lessor's consent but upon
notice to Lessor, so long as they are not visible from the outside of the
Premises, do not involve puncturing, relocating or removing the roof or any
existing walls, or changing or interfering with the fire sprinkler or fire
detection systems and the cumulative cost thereof during the term of this Lease
as extended does not exceed $2,500.00.
(b) CONSENT. Any Alterations or Utility Installations that Lessee shall
desire to make and which require the consent of the Lessor shall be presented to
Lessor in written form with detailed plans. All consents given by Lessor,
whether by virtue of Paragraph 7.3(a) or by subsequent specific consent, shall
be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and be in compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor. Lessor may, (but without obligation
to do so) condition its consent to any requested Alteration or Utility
Installation that costs $2,500.00 or more upon Lessee's providing Lessor with a
lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation.
(c) LIEN PROTECTION. Lessee shall pay when due all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense, defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof
against the Lessor or the Premises. If Lessor shall require, Lessee shall
furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to one
and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's attorneys' fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so.
7.4 OWNERSHIP, REMOVAL, SURRENDER, AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their removal and
to cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owned by Lessee, but considered a part of
the Premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee-Owned
Alterations and Utility Installations. Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee-Owned Alterations or Utility Installations be removed by
the expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by the
and of the last day of the Lease term or any earlier termination date, clean and
free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease. Except
as otherwise agreed or specified herein, the Premises, as surrendered, shall
include the Alterations and Utility Installations. The obligation of Lessee
shall include the repair of any damage occasioned by the installation,
maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment, and
Lessee-Owned Alterations and Utility Installations, as well as the removal of
any storage tank installed by or for Lessee, and the removal, replacement, or
remediation of any soil, material or ground water contaminated by Lessee, all as
may then be required by Applicable Requirements and/or good practice. Lessee's
Trade Fixtures shall remain the property of Lessee and shall be removed by
Lessee subject to its obligation to repair and restore the Premises per this
Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUM INCREASES.
(a) As used herein, the term "INSURANCE COST INCREASE" is defined as
any increase in the actual cost of the insurance applicable to the Building and
required to be carried by Lessor pursuant to Paragraphs 8.2(b), 8.3(a) and
8.3(b), ("REQUIRED INSURANCE"), over and above the Bass Premium, as hereinafter
defined, calculated on an annual basis. "Insurance Cost Increase" shall include,
but not be limited to, requirements of the holder of a mortgage or deed of trust
covering the Premises, increased valuation of the Premises, and/or a general
premium rate increase. The term "Insurance Cost Increase" shall not, however,
include any premium increases resulting from the nature of the occupancy of any
other lessee of the Building. If the parties insert a dollar amount in Paragraph
1.9, such amount shall be considered the "BASE PREMIUM." If a dollar amount has
not been inserted in Paragraph 1.9 and if the Building has been previously
occupied during the twelve (12) month period immediately preceding the
Commencement Date, the "Base Premium" shall be the annual premium applicable to
such twelve (12) month period. If the Building was not fully occupied during
such twelve (12) month period, the "Base Premium" shall be the lowest annual
premium reasonably obtainable for the Required Insurance as of the Commencement
Date, assuming the most nominal use possible of the Building. In no event,
however, shall Lessee be responsible for any portion of the premium cost
attributable to liability insurance coverage in excess of $1,000,000 procured
under Paragraph 8.2(b).
(b) Lessee shall pay any Insurance Cost increase to Lessor pursuant to
Paragraph 4.2. Premiums for policy periods commencing prior to, or extending
beyond, the term of this Lease shall be prorated to coincide with the
corresponding Commencement Date or Expiration Date.
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8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force during the
term of this Lease a Commercial General Liability policy of insurance protecting
Lessee, Lessor and any Lender(s) whose names have been provided to Lessee in
writing (as additional insureds) against claims for bodily injury, personal
injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured-Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an "INSURED CONTRACT"
for the performance of Lessee's indemnity obligations under this Lease. The
limits of said insurance required by this Lease or as carried by Lessee shall
not, however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by Lessee shall be primary to and not
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only.
(b) CARRIED BY LESSOR. Lessor shall also maintain liability insurance
described in Paragraph 8.2(a) above, in addition to and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.
8.3 PROPERTY INSURANCE--BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and to any Lender(s), insuring against loss or damage to
the Premises. Such insurance shall be for full replacement cost, as the same
shall exist from time to time, or the amount required by any Lender(s), but in
no event more than the commercially reasonable and available insurable value
thereof if, by reason of the unique nature or age of the improvements involved,
such latter amount is less than full replacement cost. Lessee-Owned Alterations
and Utility Installations, Trade Fixtures and Lessee's personal property shall
be insured by Lessee pursuant to Paragraph 8.4. If the coverage is available and
commercially appropriate, Lessor's policy or policies shall insure against all
risks of direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender or included in the Base Premium),
including coverage for any additional costs resulting from debris removal and
reasonable amounts of coverage for the enforcement of any ordinance or law
regulating the reconstruction or replacement of any undamaged sections of the
Building required to be demolished or removed by reason of the enforcement of
any building, zoning, safety or land use laws as the result of a covered loss,
but not including plate glass insurance. Said policy or policies shall also
contain an agreed valuation provision in lieu of any co-insurance clause, waiver
of subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located.
(b) RENTAL VALUE. Lessor shall also obtain and keep in force during the
term of this Lease a policy or policies in the name of Lessor, with loss payable
to Lessor and any Lender(s), insuring the loss of the full rental and other
charges payable by all lessees of the Building to Lessor for one year (including
all Real Property Taxes, insurance costs, all Common Area Operating Expenses and
any scheduled rental increases). Said insurance may provide that in the event
the Lease is terminated by reason of an insured loss, the period of indemnity
for such coverage shall be extended beyond the date of the completion of repairs
or replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any co-insurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income, Real
Property Taxes, insurance premium costs and other expenses, if any, otherwise
payable, for the next 12-month period. Common Area Operating Expenses shall
include any deductible amount in the event of such loss.
(c) ADJACENT PREMISES. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas
other buildings in the Industrial Center if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
(d) LESSEE'S IMPROVEMENTS. Since Lessor is the Insuring Party, Lessor
shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures and Lessee-Owned
Alterations and Utility Installations in, on, or about the Premises similar in
coverage to that carried by Lessor as the Insuring Party under Paragraph 8.3(a).
Such insurance shall be full replacement cost coverage with a deductible not to
exceed $1,000 per occurrence. The proceeds from any such insurance shall be used
by Lessee for the replacement of personal property and the restoration of Trade
Fixtures and Lessee-Owned Alterations and Utility Installations. Upon request
from Lessor, Lessee shall provide Lessor with written evidence that such
insurance is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duty licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be required by a Lender, as set
forth in the most current issue of "Best's Insurance Guide." Lessee shall not do
or permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor,
within seven (7) days after the earlier of the Early Possession Date or the
Commencement Date, certified copies of, or certificates evidencing the existence
and amounts of, the insurance required under Paragraph 8.2(a) and 8.4. No such
policy shall be cancelable or subject to modification except after thirty (30)
days' prior written notice to Lessor. Lessee shall at least thirty (30) days
prior to the expiration of such policies, furnish Lessor with evidence of
renewals or "insurance binders" evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages (whether in contract or in tort) against
the other, for loss or damage to their property arising out of or incident to
the perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.
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8.7 INDEMNITY. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnity, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee's business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the ease of claims made against Lessor) litigated and/or reduced to
judgment. In case any action or proceeding be brought against Lessor by reason
of any of the foregoing matters, Lessee upon notice from Lessor shall defend the
same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or neglect of any other
lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center. Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee's business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined in Paragraph 9.1(d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50%) or more of the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any lessees of the
Building) of the Building shall, at the option of Lessor, be deemed to be
Premises Total Destruction.
(c) "INSURED LOSS" shall mean damage or destruction to the Premises,
other than Lessee-Owned Alterations and Utility Installations and Trade
Fixtures, which was caused by an event required to be covered by the insurance
described in Paragraph 8.3(a) irrespective of any deductible amounts or coverage
limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PREMISES PARTIAL DAMAGE--INSURED LOSS. If Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. In the event, however, that there is a
shortage of insurance proceeds and such shortage is due to the fact that, by
reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefor. If Lessor receives said funds or adequate assurance thereof
within said ten (10) day period, Lessor shall complete them as soon as
reasonably possible and this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee within ten (10) days thereafter
to make such restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds, in which case this Lease shall remain in full
force and effect. If Lessor does not receive such funds or assurance within such
ten (10) day period, and if Lessor does not so elect to restore and repair, then
this Lease shall terminate sixty (60) days following the occurrence of the
damage or destruction. Unless otherwise agreed, Lessee shall in no event have
any right to reimbursement from Lessor for any funds contributed by Lessee to
repair any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs if made by either
Party.
9.3 PARTIAL DAMAGE--UNINSURED LOSS. If Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect), Lessor may at Lessor's
option, either (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the repair of such damage totally at Lessee's expense and without
reimbursement from Lessor. Lessee shall provide Lessor with the required funds
or satisfactory assurance thereof within thirty (30) days following such
commitment from Lessee. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not give
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such notice and provide the funds or assurance thereof within the times
specified above, this Lease shall terminate as of the date specified in Lessor's
notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 9.7.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (i) the date which is ten (10) days after Lessee's
receipt of Lessor's written notice purporting to terminate this Lease, or (ii)
the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor's expense repair such damage as soon as reasonably possible and
this Lease shall continue in full force and effect. If Lessee fails to exercise
such option and provide such funds or assurance during such period, then this
Lease shall terminate as of the date set forth in the first sentence of this
Paragraph 9.5.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base Rent,
Common Area Operating Expenses and other charges, if any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired, but not in excess of
proceeds from insurance required to be carried under Paragraph 8.3(b). Except
for abatement of Base Rent, Common Area Operating Expenses and other charges, if
any, as aforesaid, all other obligations of Lessee hereunder shall be performed
by Lessee, and Lessee shall have no claim against Lessor for any damages
suffered by reason of any such damage, destruction, repair, remediation or
restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after the receipt of such notice, this Lease
shall continue in full force and effect. "Commence" as used in this Paragraph
9.6 shall mean either the unconditional authorization of the preparation of the
required plans, or the beginning of the actual work on the Premises, whichever
occurs first.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue in full force and effect, but subject
to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor may at
Lessor's option either (i) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) if the
estimated cost to investigate and remediate such condition exceeds twelve (12)
times the then monthly Bass Rent or $100,000 whichever is greater, give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of
the occurrence of such Hazardous Substance Condition of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the excess costs of (a) investigation and remediation of such
Hazardous Substance Condition to the extent required by Applicable Requirements,
over (b) an amount equal to twelve (12) times the then monthly Base Rent or
$100,000, whichever is greater, Lessee shall provide Lessor with the funds
required of Lessee or satisfactory assurance thereof within thirty (30) days
following said commitment by Lessee. In such event this Lease shall continue in
full force and effect, and Lessor shall proceed to make such investigation and
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time period specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.8 TERMINATION--ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment
made by Lessee to Lessor and so much of Lessee's Security Deposit as has not
been, or is not then required to be, used by Lessor under the terms of this
Lease.
9.9 WAIVER OF STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2(a), applicable to the Industrial Center, and except as
otherwise provided in Paragraph 10.3, any increases in such amounts over the
Base Real Property Taxes shall be included in the calculation of Common Area
Operating Expenses in accordance with the provisions of Paragraph 4.2.
10.2 REAL PROPERTY TAX DEFINITIONS.
(a) As used herein, the term "REAL PROPERTY TAXES" shall include any
form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license fee, commercial rental tax, improvement bond or
bonds, levy or tax (other than inheritance, personal income or estate taxes)
imposed upon the Industrial Center by any authority having the direct or
indirect power to tax, including any city, state or federal government, or any
school, agricultural, sanitary, fire, street, drainage, or
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other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Industrial Center or any portion thereof, Lessor's
right to rent or other income therefrom, and/or Lessor's business of leasing the
Premises. The term "REAL PROPERTY TAXES" shall also include any tax, fee, levy,
assessment or charge, or any increase therein, imposed by reason of events
occurring, or changes in Applicable Law taking effect, during the term of this
Lease, including but not limited to a change in the ownership of the Industrial
Center or in the improvements thereon, !he execution of this Lease, or any
modification, amendment or transfer thereof, and whether or not contemplated by
the Parties.
(b) As used herein, the term "BASE REAL PROPERTY TAXES" shall be the
amount of Real Property Taxes, which are assessed against the Premises, Building
or Common Areas in the calendar year during which the Lease is executed. In
calculating Real Property Taxes for any calendar year, the Real Property Taxes
for any real estate tax year shall be included in the calculation of Real
Property Taxes for such calendar year based upon the number of days which such
calendar year and tax year have in common.
10.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in Real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
10.4 JOINT ASSESSMENT. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.
10.5 LESSEE'S PROPERTY TAXES. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center. When
possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. UTILITIES. Lessee shall pay directly for all utilities and services supplied
to the Premises, including but not limited to electricity, telephone, security,
gas and cleaning of the Premises, together with any taxes thereon. If any such
utilities or services are not separately metered to the Premises or separately
billed to the Premises, Lessee shall pay to Lessor a reasonable proportion to be
determined by Lessor of all such charges jointly metered or billed with other
premises in the Building, in the manner and within the time periods set forth in
Paragraph 4.2(d).
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent given under and subject to the terms of
Paragraph 36.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of twenty-five
percent (25%) or more of the voting control of Lessee shall constitute a change
in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such
Net Worth of Lessee as it was represented to Lessor at the time of full
execution and delivery of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said transaction or transactions constituting such reduction, at whichever time
said Net Worth of Lessee was or is greater, shall be considered an assignment of
this Lease by Lessee to which Lessor may reasonably withhold its consent. "NET
WORTH OF LESSEE" for purposes of this Lease shall be the net worth of Lessee
(excluding any Guarantors) established under generally accepted accounting
principles consistently applied.
(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1, or a non-curable Breach without
the necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment or subletting as a non-curable Breach, Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)
days' written notice ("LESSOR'S Notice"), increase the monthly Base Rent for the
Premises to the greater of the then fair market rental value of the Premises, as
reasonably determined by Lessor, or one hundred ten percent (110%) of the Base
Rent then in effect. Pending determination of the new fair market rental value,
if disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice,
with any overpayment credited against the next installment(s) of Base Rent
coming due, and any underpayment for the period retroactively to the effective
date of the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall be
subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or any
deduction for depreciation or obsolescence, and considering the Premises at its
highest and best use and in good condition) or one hundred ten percent (110%) of
the price previously in effect, (ii) any index-oriented rental or price
adjustment formulas contained in this Lease shall be adjusted to require that
the base index be determined with reference to the index applicable to the time
of such adjustment, and (iii) any fixed rental adjustments scheduled during the
remainder of the Lease term shall be increased in the same ratio as the new
rental bears to the Base Rent in effect immediately prior to the adjustment
specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
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12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting shall
not (i) be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, nor (iii) after the primary liability of Lessee for
the payment of Bass Rent and other sums due Lessor hereunder or for the
performance of any other obligations to be performed by Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable under this Lease or the sublease and without
obtaining their consent, and such action shall not relieve such persons from
liability under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's obligation under
this Lease, Lessor may proceed directly against Lessee, any Guarantors or anyone
else responsible for the performance of the Lessee's obligations under this
Lease, including any sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be in
writing, accompanied by information relevant to Lessor's determination as to the
financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000 or ten percent (10%) of the monthly Base Rent applicable to
the portion of the Premises which is the subject of the proposed assignment or
sublease, whichever is greater, as reasonable consideration for Lessor's
considering and processing the request for consent. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by reason of
accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other then
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph 12.2(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased by an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
Security Deposit increase a condition to Lessor's consent to such transaction.
(h) Lessor, as a condition to giving its consent to any assignment or
subletting, may require that the amount and adjustment schedule of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment schedule for property similar to the Premises as then constituted, as
determined by Lessor.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of the foregoing
provision or any other assignment of such sublease to Lessor, nor by reason of
the collection of the rents from a sublessee, be deemed liable to the sublessee
for any failure of Lessee to perform and comply with any of Lessee's obligations
to such sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessees, upon receipt of a written notice from Lessor
stating that a breach exists in the performance of Lessee's obligations under
this Lease, to pay to Lessor the rents and other charges due and to become due
under the sublease. Sublessee shall rely upon any such statement and request
from Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior defaults
or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further
assign or sublet all or any part of the Premises without Lessor's prior written
consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.
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13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said default. A "DEFAULT" by Lessee is
defined as a failure by Lessee to observe, comply with or perform any of the
terms, covenants, conditions or rules applicable to Lessee under this Lease. A
"BREACH" by Lessee is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is specified
herein, the failure by Lessee to cure such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent, Lessee's Share of Common Area
Operating Expenses, or any other monetary payment required to be made by Lessee
hereunder as and when due, the failure by Lessee to provide Lessor with
reasonable evidence of insurance or surety bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease which endangers
or threatens life or property, where such failure continues for a period of
three (3) days following written notice thereof by or on behalf of Lessor to
Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, if applicable) of (i) compliance with Applicable Requirements per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37,
(v) the subordination or non-subordination of this Lease per Paragraph 30, (vi)
the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in Subparagraphs 13.1(a), (b) or (c), above, where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee; provided, however, that if the nature of Lessee's
Default is such that more than thirty (30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this Subparagraph 13.1(e) is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement of Lessee or
of any Guarantor, given to Lessor by Lessee of any Guarantor, was materially
false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurances of security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its own
option, may require all future payments to be made under this Lease by Lessee to
be made only by cashier's check. In the event of a Breach of this Lease by
Lessee (as defined in Paragraph 13.1), with or without further notice or demand,
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District
in which the Premises are located at the time of award plus one percent (1%).
Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach of
this Lease shall not waive Lessor's right to
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recover damages under this Paragraph 13.2. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall have
the right to recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Lessor may reserve the right to recover all or any part
thereof in a separate suit for such rent and/or damages. If a notice and grace
period required under Subparagraph 13.1(b), (c) or (d) was not previously given,
a notice to pay rent or quit, or to perform or quit, as the case may be, given
to Lessee under any statute authorizing the forfeiture of leases for unlawful
detainer shall also constitute the applicable notice for grace period purposes
required by Subparagraph 13.1(b), (c) or (d). In such case, the applicable grace
period under the unlawful detainer statue shall run concurrently after the one
such statutory notice, and the failure of Lessee to cure the Default within the
greater of the two (2) such grace periods shall constitute both an unlawful
detainer and a Breach of this Lease entitling Lessor to the remedies provided
for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
recover the rent as it becomes due, provided Lessee has the right to sublet or
assign, subject only to reasonable limitations. Lessor and Lessee agree that the
limitations on assignment and subletting in this Lease are reasonable. Acts of
maintenance or preservation, efforts to relet the Premises, or the appointment
of a receiver to protect the Lessor's interest under this Lease, shall not
constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the state wherein the Premises are located.
(d) The expiration or termination of this Lease and/or the termination
of Lessee's right to possession shall not relieve Lessee from liability under
any indemnity provisions of this Lease as to matters occurring or accruing
during the term hereof or by reason of Lessee's occupancy of the Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "INDUCEMENT Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor, as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or deed of trust covering the
Premises. Accordingly, if any installment of rent or other sum due from Lessee
shall not be received by Lessor or Lessor's designee within ten (10) days after
such amount shall be due, then, without any requirement for notice to Lessee,
Lessee shall pay to Lessor a late charge equal to six percent (6%) of such
overdue amount. The parties hereby agree that such late charge represents a fair
and reasonable estimate of the costs Lessor will incur by reason of late payment
by Lessee. Acceptance of such late charge by Lessor shall in no event constitute
a waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor falls within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by any Lender(s) whose name and address shall have been furnished to
Lessee in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessee's parking, is taken by condemnation,
Lessee may, at Lessee's option, to be exercised in writing within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in the same proportion as the rentable floor area of the Premises taken
bears to the total rentable floor area of the Premises. No reduction of Base
Rent shall occur if the condemnation does not apply to any portion of the
Premises. Any award for the taking of all or any part of the Premises under the
power of eminent domain or any payment made under threat of the exercise of such
power shall be the property of Lessor, whether such award shall be made as
compensation for diminution of value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any compensation, separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is
not terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above Lessee's Share of the legal and
other expenses incurred by Lessor in the condemnation matter, repair any damage
to the Premises caused by such condemnation authority. Lessee shall be
responsible for the payment of any amount in excess of such net severance
damages required to complete such repair.
15. BROKERS' FEES.
15.1 PROCURING CAUSE. The Broker(s) named in Paragraph 1.10 is/are
the procuring cause of this Lease.
15.2 ADDITIONAL TERMS. Unless Lessor and Broker(s) have otherwise
agreed in writing, Lessor agrees that: (a) if Lessee exercises any Option (as
defined in Paragraph 39.1) granted under this Lease or any Option subsequently
granted, or (b) if
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Lessee acquires any rights to the Premises or other premises in which Lessor has
an interest, or (c) if Lessee remains in possession of the Premises with the
consent of Lessor after the expiration of the term of this Lease after having
failed to exercise an Option, or (d) if said Brokers are the procuring cause of
any other lease or sale entered into between the Parties pertaining to the
Premises and/or any adjacent property in which Lessor has an interest, or (e) if
Base Rent is increased, whether by agreement or operation of an escalation
clause herein, then as to any of said transactions, Lessor shall pay said
Broker(s) a fee in accordance with the schedule of said Broker(s) in effect at
the time of the execution of this Lease.
15.3 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by operation of
law, shall be deemed to have assumed Lessor's obligation under this Paragraph
15. Each Broker shall be an intended third party beneficiary of the provisions
of Paragraph 1.10 and of this Paragraph 15 to the extent of its interest in any
commission arising from this Lease and may enforce that right directly against
Lessor and its successors.
15.4 REPRESENTATIONS AND WARRANTIES. Lessee and Lessor each represent
and warrant to the other that it has had no dealings with any person, firm,
broker or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnity, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses, and/or attorneys' fees
reasonably incurred with respect thereto.
16. TENANCY AND FINANCIAL STATEMENTS.
16.1 TENANCY STATEMENT. Each Party (as "RESPONDING PARTY") shall within
ten (10) days after written notice from the other Party (the "REQUESTING PARTY")
execute, acknowledge and deliver to the Requesting Party a statement in writing
in a form similar to the then most current "TENANCY STATEMENT" form published by
the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.
16.2 FINANCIAL STATEMENT. If Lessor desires to finance, refinance, or
sell the Premises or the Building, or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements of Lessee and such Guarantors as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "LESSOR" as used herein shall mean the owner or
owners at the time in question of the fee title to the Premises. In the event of
a transfer of Lessor's title or interest in the Premises or in this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor hereunder,
other than late charges, not received by Lessor within ten (10) days following
the date on which it was due, shall bear interest from the date due at the prime
rate charged by the largest state chartered bank in the state in which the
Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. Each Broker shall be an intended third party beneficiary
of the provisions of this Paragraph 22.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by
messenger or courier service) or may be sent by regular, certified or registered
mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
transmission during normal business hours, and shall be deemed sufficiently
given if served in a manner specified in this Paragraph 23. The addresses noted
adjacent to a Party's signature on this Lease shall be that Party's address for
delivery or mailing of notice purposes. Either Party may by written notice to
the other specify a different address for notice purposes, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for the purpose of mailing or delivering notices to Lessee. A
copy of all notices required or permitted to be given to Lessor hereunder shall
be concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail, the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone or facsimile
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confirmation of receipt of the transmission thereof, provided a copy is also
delivered via delivery or mail. If notice is received on a Saturday or a Sunday
or a legal holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or any other term, covenant or condition hereof. Lessor's consent
to, or approval of, any such act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. Regardless of Lessor's
knowledge of a Default or Breach at the time of accepting rent, the acceptance
of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of
any provision hereof. Any payment given Lessor by Lessee may be accepted by
Lessor on account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to two hundred percent
(200%) of the Base Rent applicable during the month immediately preceding such
expiration or earlier termination. Nothing contained herein shall be construed
as a consent by Lessor to any holding over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the Parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the form hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term "PREVAILING PARTY" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach.
Broker(s) shall be intended third party beneficiaries of this Paragraph 31.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents shall
have the right to enter the Premises at any time, in the case of an emergency,
and otherwise at reasonable times for the purpose of showing the same to
prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary "For Sale" signs and Lessor may at any time
during the last one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. All such activities of Lessor
shall be without abatement of rent or liability to Lessee.
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33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the exterior of the Premises or
the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign on
the Premises by or for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building, and the right to install advertising signs on the
Building, including the roof, which do not unreasonably interfere with the
conduct of Lessee's business; Lessor shall be entitled to all revenues from such
advertising signs.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably withheld or
delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. In addition to the deposit
described in Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Lessee without interest. Lessor's consent to any act, assignment of
this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the impositions by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. GUARANTOR.
37.1 FORM OF GUARANTY. If there are to be any Guarantors of this Lease
per Paragraph 1.11, the form of the guaranty to be executed by each such
Guarantor shall be in the form most recently published by the American
Industrial Real Estate Association, and each such Guarantor shall have the same
obligations as Lessee under this lease, including but not limited to the
obligation to provide the Tenancy Statement and information required in
Paragraph 16.
37.2 ADDITIONAL OBLIGATIONS OF GUARANTOR. It shall constitute a Default
of the Lessee under this Lease if any such Guarantor fails or refuses, upon
reasonable request by Lessor to give: (a) evidence of the due execution of the
guaranty called for by this Lease, including the authority of the Guarantor (and
or the party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and resolution of its board of directors authorizing the making of
such guaranty, together with a certificate of incumbency showing the signatures
of the persons authorized to sign on its behalf, (b) current financial
statements of Guarantor as may from time to time be requested by Lessor, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect,
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.
39. OPTIONS.
39.1 DEFINITION. As used in this Lease, the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to Lessee
in this Lease is personal to the original Lessee named in Paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later option cannot be exercised unless
the prior Options to extend or renew this Lease have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
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(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three
(3) or more notices of separate Defaults under Paragraph 13.1 during the twelve
(12) month period immediately preceding the exercise of the Option, whether or
not the Defaults are cured.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a)
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during any twelve (12) month period, whether or not the Defaults are cured, or
(iii) if Lessee commits a Breach of this Lease.
40. RULES AND REGULATIONS. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations') which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall. within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. OFFER. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
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LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR
ATTORNEY'S REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO
EVALUATE THE CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF
ASBESTOS, UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO
REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL
REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKERS OR THEIR
CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH
IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN
COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE
SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM
THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
<TABLE>
<S> <C>
Executed at: Executed at:
----------------------------- ------------------------
on: on:
------------------------------------- ----------------------------------
BY LESSOR: BY LESSEE:
- ----------------------------------------- in accordance with addendum 2
INDUSTRIAL BOXBOARD COMPANY HORIZON HIGH REACH & EQUIPMENT
- ----------------------------------------- ------------------------------------
By: /s/ John Hunter By: /s/ Rick Penkert
-------------------------------------- --------------------------------
Name Printed: John Hunter Name Printed: Rick Penkert
---------------------------- -----------------------
Title: President Title: GM - VP
---------------------------------- -----------------------------
By: By:
-------------------------------------- --------------------------------
Name Printed: Name Printed:
---------------------------- -----------------------
Title: Title:
----------------------------------- -----------------------------
Address: 2249 Davis Ct. Address: 2249 B Davis Ct.
-------------------------------- -----------------------------
Hayward, CA 94545 Hayward, CA 94545
- ----------------------------------------- --------------------------------------
Telephone: (510) 785-6500 Telephone: ( )
----------------------- -----------------
Facsimile: ( ) Facsimile: ( )
--------------------- ------------------
BROKER: BROKER:
Executed at: Executed at:
----------------------------- -----------------------
on: on:
-------------------------------------- --------------------------------
By: By:
-------------------------------------- --------------------------------
Name Printed: Name Printed:
---------------------------- ----------------------
Title: Title:
----------------------------------- -----------------------------
Address: . Address:
--------------------------------- ---------------------------
Telephone: (510) Telephone: ( )
------------------------- ------------------
Facsimile: ( ) Facsimile: ( )
---------------------- ------------------
</TABLE>
NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilizing the
most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 South Flower
Street, Suite 600, Los Angeles, CA 90017. (213) 687-8777.
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ADDENDUM TO LEASE
This Addendum is an integral part of the Lease, and, in the event of any
inconsistency between this Addendum and the Lease Form, the terms of this
Addendum shall control. Unless otherwise defined, all terms used in this
Addendum shall have the same meanings as given them in the Lease Form.
49. PERMITTED USE. All equipment leasing and sale business, including the
storage, cleaning, maintenance and repairs of said equipment and office uses
related thereto, or other industrial uses which, in Lessor's sole reasonable
judgment, are compatible with Lessor's use of the Industrial Center.
50. PREMISES. In addition to the portions of the Building set forth in Paragraph
1.2(a), the Premises include approximately 1.5 acres, more or less, of yard
area, and the parking areas shown on the attached and initialed Exhibit A.
However, the concrete vault off the westerly office area is not a portion of the
Premises.
51. LESSOR'S WORK. Prior to the Commencement Date, Lessor, at Lessor's sole cost
and expense, shall complete the following work ("Lessor's Work") in the
Premises.
(a) Repair and make secure the existing side demising wall and construct a
rear demising wall separating the Premises from Lessor's portion of the
Building. The new demising wall shall be constructed similar to the existing
demising wall and will provide a 3'x6'8" door with lockset hardware in said wall
to provide Lessee with access to the power panel located on the east wall of
Lessor's portion of the Building.
(b) Place the unpaved yard area in a smooth and level condition.
(c) Place all loading doors, electrical, plumbing and HVAC in good operating
order and condition.
(d) Touch-up paint and repair and clean carpet in office area.
(e) Remove all of Lessor's property currently occupying the warehouse/
manufacturing area of the Premises. Lessor's ability to complete Lessor's Work
by the Commencement Date is dependent upon the execution of this Lease by the
Parties no later than June 4, 1999. From the date of Lessee's occupancy of the
Premises, Lessee agrees not to interfere with Lessor or Lessor's employees and
contractors in the performance of Lessor's Work and will cooperate with Lessor
to permit completion of Lessor's Work as agreed herein.
52. UTILITIES. The provisions of Paragraph 4.2 to the contrary notwithstanding,
Lessee shall pay, promptly upon receipt of bill from Lessor, one-half of the
cost of landscape maintenance for the Building. Landscape water is provided by
an on-site well at no cost to Lessee. Electrical and gas service are separately
metered to Lessee. Lessor represents that there is a single water meter
servicing the Industrial Center and that Lessor's cost for domestic water over
the past 16 months has averaged $87 per month. Lessee agrees to pay, promptly
upon receipt of bill from Lessor, the cost of domestic water to the Building, in
excess of $87 per month.
53. FORKLIFT TRUCKS. Portions of the property outside to the east of the
Building have been recently repaved with asphalt. The Parties acknowledge that
forklift trucks, especially those with hard rubber tires, can damage asphalt
paving. Lessee shall be responsible for repairing any such damage that its use
of forklift trucks may cause.
54. LESSOR'S ENTRY. The provisions of this Lease to the contrary
notwithstanding, Lessor shall have the following rights of entry:
(a) To the front main entry door, hall and stairs to the second floor, at
all times;
(b) To the vault off the westerly end of the offices, occasionally;
(c) Through the driveway area marked on Exhibit A, occasionally.
55. IMPROVEMENTS BY LESSEE.
55.1 Lessor hereby grants Lessee the right to make, at Lessee's sole cost and
expense, the following improvements to the Premises ("Lessee's Work").
(a) Install a window between the office entry reception area and the office
adjacent in the west;
(b) Build a 12'x20' break room in the front right hand corner of the
warehouse area;
(c) Build a 10'x12' parts office beside the existing warehouse office;
(d) Install a chain link fence inside the warehouse area at Lessee's
discretion to secure parts and scaffold;
(e) Place rock in the unpaved area of the yard, as required;
(f) Pour concrete pad in the unpaved area of the yard (or the wash pad and
run electrical, as required, from the pump area;
<PAGE> 20
Addendum To Lease Page 2
(g) Paint the inside of shop at a future date;
(h) Paint the side of the building area inside the yard and parking area
with colors to match the existing building areas;
(i) Install additional lighting in the shop area;
(j) Replace chain link and slats in the gate area;
(k) Install a company sign on the front upper portion of the building.
55.2 Lessee shall comply with the provisions of Paragraph 7.3 of the Lease in
its pursuit of Lessee's Work, and Lessee shall not impede access to the second
floor offices during its pursuit of Lessee's Work.
55.3 Notwithstanding Paragraph 7.4 or any other provision of the Lease to the
contrary, in connection with the surrender of the Premises at the expiration of
the term of the Lease (or upon any earlier termination), Lessee shall restore
those portions of the Premises which Lessee is required to maintain to
substantially the same condition as upon the Commencement Date, reasonable wear
and tear and damage from other causes beyond the reasonable control of Lessee
excepted; provided, however, Lessee shall not be required to remove Lessee's
Work (except for items 55.1(d) [chain link fence] and 55.1(k) [Lessee's company
sign], which two items Lessee shall remove) and shall be required to remove only
those Lessee-Owned Alterations and Utility Installations for which Lessee
received written notice of a removal requirement from Lessor at least ninety
(90) days prior to the expiration of the Term.
56. RENT ESCALATIONS.
56.1 At the commencement of the thirty-first (31st) month of the term of this
Lease, the monthly rent payable under Paragraph 1.5 of the Lease shall be
adjusted by the increase, if any, from the Commencement Date of this Lease, in
the Consumer Price Index of the Bureau of Labor Statistics of the U.S.
Department of Labor for Urban Wage Earners and Clerical Workers, San
Francisco-Oakland Bay Area, California (1967=100), "All Items" herein referred
to as "CPI," which increase shall be limited to no more than six percent (6%)
per annum.
56.2 The monthly rent payable in accordance with Paragraph 56.1 shall be
calculated as follows: the rent payable for the first month of the term of this
Lease, as set forth in paragraph 1.5, shall be multiplied by a fraction the
numerator of which shall be the C.P.I. for the calendar month during which the
adjustment is to take effect, and the denominator of which shall be the C.P.I.
of the calendar month in which the original Lease term commences. Subject to the
maximum allowable increase of six percent (6%) per annum, the sum so calculated
shall constitute the new monthly rent hereunder, but in no event shall such new
monthly rent be less than the rent payable for the month immediately preceding
the date for rent adjustment.
56.3 In the event the computation and/or publication of the C.P.I. shall be
transferred to any other governmental department or bureau of agency or shall be
discontinued, then the index most nearly the same as the C.P.I. shall be used to
make such calculation. In the event that Lessor and Lessee cannot agree on such
alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with the rules of said
Association and the decision of the arbitrators shall be binding upon the
parties. The cost of said Arbitrators shall be paid equally by Lessor and
Lessee.
57. OPTION TO EXTEND TERM. Lessor hereby grants to Lessee the option to extent
the term of this Lease ("Option") for one (1) period of five (5) years,
commencing when the primary term expires, upon each and all of the following
terms and conditions.
(a) Lessee gives to Lessor, and Lessor actually receives on a date which is
prior to the date that the option period would commence by at least six (6)
months, a written notice of the exercise of the Option, time being of the
essence. If said notification of the exercise of the Option is not so given and
received, the Option shall automatically expire;
(b) All the terms and conditions of this Lease, except where specifically
modified by this Option, shall apply;
(c) The monthly rent for the Option period shall be the monthly rent
payable for the last month of the primary term adjusted at the commencement of
the Option Term and again at the commencement of the thirty-first (31st) month
of the Option Term in accordance with the provisions of Paragraph 56 herein.
58. Notwithstanding Paragraph 6.3 or any other provision of the Lease to the
contrary, the term "Applicable Requirements" shall not include the
recommendations of Lessor's engineers and/or consultants.
59. Notwithstanding Paragraph 6.3 or any other provision of the Lease to the
contrary, Lessee shall have no obligation to (i) remedy or cure any instance of
noncompliance in the Premises or the Building (including the land thereunder),
with the Applicable Requirements existing as of the Commencement Date, (ii)
remedy, cure, or comply with any Applicable Requirement relating to the release
of hazardous materials or toxic substances and wastes in the Premises or the
Building (including the land thereunder), except to the extent such release
results from the activities of Lessee, or (iii) make or pay for any improvements
or alterations to the Premises or the Building in order to comply with any
Applicable Requirements, except to the extent such improvements and alterations
are necessitated by Lessee's particular use of the Premises or alterations or
improvements made or requested by Lessee.
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Addendum To Lease Page 3
60. Notwithstanding Paragraph [illegible] or any other provision of the Lease to
the contrary, except for the provisions of Paragraph 53 hereof, Lessee shall, at
its sole cost and expense, be responsible for the maintenance of the interior of
the Premises and the lighting and alarm systems, which Lessee shall keep in good
order, condition and repair, and the routine maintenance of the heating,
air-conditioning and ventilation systems (the "HVAC"). Lessee shall have no
repair or maintenance obligation regarding any other portion of the Building, or
its systems or equipment, which maintenance and repair shall be performed by
Lessor at Lessor's sole expense. Lessor shall pay the cost of replacing the HVAC
units serving the Premises, should either need replacement. Lessee and Lessor
shall equally split the cost of repairs to the HVAC units. Notwithstanding this
Paragraph 60, or any other provision of the Lease to the contrary, in the event
Lessee causes damage to the Premises or Building beyond ordinary wear and tear,
Lessee shall be responsible for the cost of repairing such damage to the extent
insurance proceeds are not available for the cost of repair.
61. Except as provided in Paragraph 8.6 of the Lease, Lessee shall not be deemed
to have waived any claims pursuant to Paragraph 8.7 or Paragraph 8.8 or any
other provision of the Lease, with respect to any claims, costs, liabilities,
damages or expenses arising from the negligence or willful misconduct of
Landlord or its agents, contractors or employees, or Landlord's breach of the
Lease.
62. Except with respect to an uninsured loss caused by the negligent or willful
act of Lessee, in the event of any damage to the Premises that otherwise would
be convered by Paragraph 9 of the Lease, Lessee shall have the right to
terminate this Lease if the damage in the Premises cannot reasonably be repaired
(or are not actually repaired) within one hundred twenty (120) days following
the date of the casualty. Lessee shall exercise the right, if at all, within
thirty (30) days following the date of the casualty, and if Lessee so terminates
this Lease, such termination shall be effective as of the date of the casualty.
63. Notwithstanding Paragraph 12.1 or any other provision of the Lease to the
contrary, a merger, sale of stock, sale of asset, consolidation, financing or
other corporate restructuring in which the surviving entity has a net worth not
less than that of Lessee immediately before such transaction, or any transfer of
Lessee's interest (or any portion thereof) under the Lease to an affiliate of
Lessee, shall not constitute an assignment or subletting requiring the consent
of Lessor, provided that Lessee shall give prompt notice of any such transaction
to Lessor and the use of the Premises made by any such successor entity shall
conform to the Permitted Use.
64. Notwithstanding Paragraph 13 or any other provision of the Lease to the
contrary, Lessee shall not be in default with respect to any monetary obligation
under the Lease, and shall have no obligation to pay any late charges or
interest with respect thereto, until after five (5) business days have elapsed
following Lessee's receipt of written notice (by means of an invoice or other
form of written notice) of delinquency, and Lessee shall not be in default of
any non-monetary obligation until after thirty (30) days have elapsed following
Lessee's receipt of written notice of default (specifying the nature of the
default), unless thirty (30) days is not reasonably sufficient to cure such
default, in which event Lessee shall not be in default so long as Lessee
commences the cure within thirty (30) days and thereafter diligently completes
the cure of such default.
65. Notwithstanding Paragraph 26 or any other provision of the Lease to the
contrary, Holdover Rent shall be equal to 125% of the Base rent in effect
immediately prior to the holdover.
66. As a condition precedent to Lessee's agreement to be bound by Paragraph 30
of the Lease, Lessor shall provide Lessee with commercially reasonable
non-disturbance agreement in favor of Lessee for any future ground lessors,
mortgage holders or lien holders then in existence. Said non-disturbance
agreements shall be in recordable form and may be recorded at Lessee's election
and expense. Lessor represents that as of the date hereof, there are no ground
lessors, mortgage holders or lien holders affecting the Industrial Center.
67. Lessor hereby consents to Lessee's storage of waste oil containment drums on
the Premises, which storage shall be in accordance with the Applicable
Requirements.
68. Notwithstanding Paragraph 4.2 of the Lease to the contrary, Lessee shall not
be responsible for any portion of the cost of Common Area Operating Expenses,
except as provided in Paragraph 52 herein and as follows: Lessee shall be
responsible for 20.76% of (i) increases above the Base Real Property Taxes, (ii)
any Insurance Cost Increase and (iii) utilities for the Common Areas.
<PAGE> 22
EXHIBIT A
[Floor Plan]
[Initials]
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-27-1999
<PERIOD-START> JUN-29-1998
<PERIOD-END> JUN-27-1999
<CASH> 13,328
<SECURITIES> 0
<RECEIVABLES> 42,435
<ALLOWANCES> 618
<INVENTORY> 38,748
<CURRENT-ASSETS> 98,986
<PP&E> 150,819
<DEPRECIATION> 35,812
<TOTAL-ASSETS> 224,020
<CURRENT-LIABILITIES> 44,277
<BONDS> 142,348
0
25
<COMMON> 60
<OTHER-SE> 28,308
<TOTAL-LIABILITY-AND-EQUITY> 224,020
<SALES> 200,197
<TOTAL-REVENUES> 200,197
<CGS> 146,814
<TOTAL-COSTS> 40,665
<OTHER-EXPENSES> 194
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,110
<INCOME-PRETAX> 414
<INCOME-TAX> 211
<INCOME-CONTINUING> 203
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 203
<EPS-BASIC> 3
<EPS-DILUTED> 3
</TABLE>
