AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1999
REGISTRATION STATEMENT NO. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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TITAN MOTORCYCLE CO. OF AMERICA
(Exact name of registrant as specified in its Charter)
NEVADA 86-0776876
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2222 WEST PEORIA AVENUE
PHOENIX, ARIZONA 85029
(602) 861-6977
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
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FRANCIS S. KEERY, CHIEF EXECUTIVE OFFICER
TITAN MOTORCYCLE CO. OF AMERICA
2222 WEST PEORIA AVENUE
PHOENIX, ARIZONA 85029
(602) 861-6977
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
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COPY TO:
STEVEN D. PIDGEON, ESQ.
SNELL & WILMER L.L.P.
ONE ARIZONA CENTER
PHOENIX, ARIZONA 85004-0001
(602) 382-6000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.[ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
================================================================================
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to be Registered Registered Per Share Offering Price Registration Fee
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 3,322,031 Shares(1) $ 2.25(2) $ 7,474,569.70 $ 2,077.93
- -----------------------------------------------------------------------------------------------------------
Total 3,322,031 Shares(1) $ 7,474,569.70 $ 2,077.93
===========================================================================================================
</TABLE>
(1) Shares of common stock that may be offered pursuant to this Registration
Statement consist of 2,924,064 shares issuable upon conversion of 4,000 shares
of Series A Convertible Preferred Stock and 397,967 shares issuable upon
exercise of certain warrants. For purposes of estimating the number of shares of
common stock to be included in this Registration Statement, we calculated (i)
175% of the number of shares of common stock issuable in connection with the
conversion of the Series A Convertible Preferred Stock, determined as if the
Series A Convertible Preferred Stock, together with twenty-four months of
accrued and unpaid dividends thereon (Series A Convertible Preferred Stock
holders are entitled to dividends, if declared by the Board, at a rate of $60.00
per year per share), were converted in full at the fixed conversion price of
$2.6812 on the date this Registration Statement is first filed plus (ii) 100% of
the number of shares of common stock issuable upon exercise of the warrants.
Pursuant to Rule 416 under the Securities Act of 1933, as amended, this
Registration Statement also covers such indeterminate additional shares of
common stock as may become issuable as a result of stock splits, stock dividends
or other similar transactions.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based upon the average of the high and low prices of
the common stock on October 11, 1999, as reported by the Nasdaq National Market.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 15, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
Titan Motorcycle Co. of America
3,322,031 Common Shares
This prospectus relates to shares of our common stock that may be sold by
the selling stockholders named under the section of this prospectus entitled
"Selling Stockholders." The selling stockholders may sell some or all of the
common stock through ordinary brokerage transactions, directly to market makers
of our shares, or through any of the other means described in the section
entitled "Plan of Distribution" beginning on page 10.
The selling stockholders will receive all of the proceeds from the sale of
the common stock, less any brokerage or other expenses of sale incurred by them.
We are paying for the costs of registering the shares covered by this
prospectus.
Our common stock is traded on the Nasdaq SmallCap Market under the symbol
"TMOT." The closing sales price of our common stock as reported by the Nasdaq
SmallCap Market on October 14, 1999 was $2.25 per share.
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BEFORE PURCHASING ANY OF THE SHARES COVERED BY THIS PROSPECTUS, CAREFULLY
READ AND CONSIDER THE RISK FACTORS INCLUDED IN THE SECTION ENTITLED "RISK
FACTORS" BEGINNING ON PAGE 1. YOU SHOULD BE PREPARED TO ACCEPT ANY AND ALL OF
THE RISKS ASSOCIATED WITH PURCHASING THE SHARES, INCLUDING A LOSS OF ALL OF YOUR
INVESTMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE SALE OF THE COMMON STOCK OR DETERMINED THAT THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS ILLEGAL FOR ANY
PERSON TO TELL YOU OTHERWISE.
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The date of this prospectus is ___________, 1999.
<PAGE>
TABLE OF CONTENTS
PAGE
----
TITAN MOTORCYCLE CO. OF AMERICA................................................1
RISK FACTORS...................................................................1
FORWARD LOOKING STATEMENTS.....................................................6
USE OF PROCEEDS................................................................7
SELLING STOCKHOLDERS...........................................................7
DESCRIPTION OF SECURITIES......................................................7
PLAN OF DISTRIBUTION..........................................................10
LEGAL OPINIONS................................................................11
EXPERTS.......................................................................11
WHERE YOU CAN FIND MORE INFORMATION...........................................12
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND IN ANY ACCOMPANYING PROSPECTUS SUPPLEMENT. NO
ONE HAS BEEN AUTHORIZED TO PROVIDE YOU WITH DIFFERENT INFORMATION.
THE COMMON STOCK IS NOT BEING OFFERED IN ANY JURISDICTION WHERE THE OFFER
IS NOT PERMITTED.
YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF THE DOCUMENTS.
<PAGE>
TITAN MOTORCYCLE CO. OF AMERICA
We design and manufacture high-end customized heavyweight motorcycles. We
build both highly customized, individually assembled motorcycles and high-end,
assembly-line produced motorcycles. A heavyweight motorcycle is a motorcycle
with an engine size or displacement of 651 cubic centimeters or greater. Our
products are distributed through a network of 61 domestic dealers and 20 foreign
dealers.
We currently maintain three product lines.
PREMIUM MOTORCYCLES: We manufacture seven premium models with a package of
over 200 custom options. Customers design their motorcycles by choosing colors,
paint design, finish, fenders and various performance and aesthetic
enhancements. Premium models are typically constructed and delivered in six to
ten weeks from the order date. Our premium models represented approximately
97.8% of our fiscal year 1998 revenues. The average retail selling price for our
premium models is approximately $35,000.
"PHOENIX BY TITAN" MOTORCYCLES: Our "Phoenix by Titan" line of motorcycles
was introduced in March 1999. We manufacture four "Phoenix by Titan" models with
six standard customization packages available through our dealerships. The
average retail selling price for the "Phoenix by Titan" models is approximately
$20,000 to $25,000.
APPAREL AND ACCESSORIES: We have recently developed a line of Titan apparel
and accessories. We are also developing a premium line of upgrade parts which
are compatible with Titan and other "V Twin" motorcycles.
We are a Nevada corporation, formed on January 10, 1995. Our principal
executive offices are located at 2222 West Peoria Avenue, Phoenix, Arizona and
our telephone number is (602) 861-6977.
RISK FACTORS
BEFORE PURCHASING ANY OF THE SHARES COVERED BY THIS PROSPECTUS, YOU SHOULD
CAREFULLY READ AND CONSIDER THE RISK FACTORS SET FORTH BELOW. YOU SHOULD BE
PREPARED TO ACCEPT ANY AND ALL OF THE RISKS ASSOCIATED WITH PURCHASING THE
SHARES, INCLUDING A LOSS OF ALL OF YOUR INVESTMENT.
WE HAVE A HISTORY OF LOSSES AND WE MAY LOSE MONEY IN THE FUTURE
Although we earned $237,479 in net income for the fiscal year 1998, we
incurred losses of $257,463 in fiscal year 1995, $95,496 in fiscal year 1996 and
$1.7 million in 1997. Through the twenty-six weeks ended July 3, 1999, we had
incurred net losses of $951,562. We expect to incur further losses through the
end of 1999 and may continue to incur losses after 1999. Given our history of
losses, we cannot assure you that we will ever be profitable.
WE MAY BE UNABLE TO REGAIN PROFITABILITY IF WE DO NOT INCREASE CONSUMER DEMAND
FOR OUR PRODUCTS
To regain profitability, we need to generate an increased level of market
acceptance for our products. Our success depends on our ability to meet the
following objectives, none of which we may achieve:
* increase consumer awareness of our products;
* establish a reputation for high quality;
* increase sales through our independent third party dealers; and
* expand our dealer network.
We cannot assure you that we will meet these objectives.
COMPLICATIONS IN THE ESTABLISHMENT AND INTEGRATION OF OUR NEW "PHOENIX BY TITAN"
LINE OF MOTORCYCLES COULD MATERIALLY ADVERSELY AFFECT OUR EXPENSES, GROSS
MARGINS AND OPERATING RESULTS
We recently introduced our "Phoenix by Titan" line of heavyweight
motorcycles. Unlike our custom motorcycles, we manufacture these motorcycles in
four models through an assembly line process. Six standard customization
packages are available through the dealerships for each of the four models.
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While initial orders have been substantial, there can be no assurance that we
will be able to accomplish the following goals:
* effectively manage any start up difficulties that we may experience;
* successfully adapt to an assembly line manufacturing process; and
* gain or maintain consumer acceptance of this product line.
Also, we cannot assure you that this line, which is less expensive, will
not take sales away from our higher end custom motorcycles or that we will not
face other difficulties in introducing this line. Any of these issues could
materially adversely affect our expenses, gross margins and operating results.
WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO SUCCESSFULLY IMPLEMENT OUR NEW
MANAGEMENT INFORMATION SYSTEM WHICH COULD RESULT IN A DISRUPTION OF OUR BUSINESS
AND COULD HAVE A NEGATIVE AFFECT ON OUR OPERATIONS
We recently installed a new management information system. This system will
monitor our inventory, production, billing and other operational aspects of our
business. We cannot assure you that we will be able to successfully operate and
utilize this new system which could result in a disruption of our business and
could have a negative affect on our operations.
WE SELL A DISCRETIONARY PRODUCT AND A DOWNTURN IN THE ECONOMY COULD NEGATIVELY
AFFECT OUR GROWTH AND PROFITABILITY
Motorcycles in the high-end customized heavyweight market are discretionary
purchase items. A recession or economic downturn may reduce consumer spending
and negatively affect our growth and profitability. An economic downturn could
result from a number of factors outside of our control, including:
* employment levels;
* business conditions;
* interest rates;
* inflation levels; and
* taxation rates.
COMPETITION IN OUR MARKET HAS INCREASED AND MAY RESULT IN PRICE REDUCTIONS,
REDUCED GROSS MARGINS AND A LOSS OF OUR MARKET SHARE
We operate in the high-end segment of the heavyweight cruiser market. The
overall heavyweight cruiser market has recently experienced an increase in
production capacity and new entrants. Some of our competitors have technical,
production, personnel and financial resources that exceed ours and we cannot
assure you that the competition will not materially adversely affect our
business, financial condition or results of operations. The increased
competition could result in price reductions, reduced gross margins and a loss
of our market share.
Major competitors in the heavyweight cruiser market are:
* Harley-Davidson(TM), the heavyweight cruiser market leader, which is
reportedly increasing its capacity to over 160,000 units from
approximately 148,000 units;
* BMW which entered the segment in 1997 with their "R1200C" model;
* Excelsior-Henderson, which recently entered the market with their
"Super X" model; and
* Polaris, which recently entered the market with their "Victory V92C"
model.
OUR PRODUCTS COULD CONTAIN DEFECTS CREATING PRODUCT RECALLS AND WARRANTY CLAIMS
WHICH COULD MATERIALLY ADVERSELY AFFECT OUR FUTURE SALES AND PROFITABILITY
Our products could contain unforeseen defects. These defects could create
product recalls or warranty claims that could increase our costs and affect
profitability. Significant and continuous defects could negatively impact the
goodwill and quality associated with our name. Defects could also give rise to
litigation which could result in our liability for judgments which could have a
significant impact on our business, operations and financial condition. Product
recalls resulting from unforeseen defects could subject us to a significant
financial commitment and have a significant impact on our business, operations
and financial condition.
2
<PAGE>
WE ARE SUBJECT TO CONTINGENT LIABILITIES UNDER A DEALER FLOOR PLAN FINANCING
PROGRAM WHICH COULD EXPOSE US TO SIGNIFICANT FINANCIAL OBLIGATIONS
Approximately 48 of our dealers receive floor plan financing for our
products through TransAmerica Commercial Finance Corporation. The dealers are
the obligors under these floor plan agreements and are responsible for all
principal and interest payments. However, we are subject to a standard
repurchase agreement which requires us to buy back any of our motorcycles at the
wholesale price if the dealer defaults and the motorcycles are repossessed by
TransAmerica. While we have only had to repurchase less than $500,000 worth of
our motorcycles since August of 1997, as of May 28, 1999, total outstanding
obligations of all 48 dealers was approximately $9,500,000. Our profitability
would be significantly negatively impacted if we were forced to repurchase a
large number of these motorcycles.
WE MAY NOT BE ABLE TO RAISE THE ADDITIONAL CAPITAL REQUIRED TO EXECUTE OUR
BUSINESS PLAN
We expect to continue to incur significant capital expenses in continuing
to expand our production lines, introduce new product lines and increase unit
capacity. Our current line of credit expires in April, 2000. Additional
financing may not be available on terms favorable to us, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be
able to execute our business plan or take advantage of our business
opportunities. In addition, if we elect to raise capital by issuing additional
shares of stock, existing stockholders may incur dilution.
A LARGE PORTION OF OUR REVENUE COMES FROM A SMALL NUMBER OF CUSTOMERS, THE LOSS
OF WHICH COULD MATERIALLY AND ADVERSELY AFFECT OUR OPERATING RESULTS
Francis S. Keery, our Chairman and Chief Executive Officer, and Patrick
Keery, our President, each own 33% of BPF Holdings, LLC, which currently owns
four motorcycle retail stores which are Titan dealers and carry our products.
The four stores are: Titan of Phoenix, Titan of Los Angeles, Titan of Las Vegas
and, most recently, Titan of Houston. In 1998, not including Titan of Houston
(which was then under different ownership), approximately 22.4% of the Company's
sales were to BPF-owned stores. The loss of the BPF dealerships would have a
material adverse affect on our operating results.
WE DEPEND HEAVILY ON THIRD PARTY PARTS SUPPLIERS AND ANY SIGNIFICANT ADVERSE
VARIATION IN QUANTITY, QUALITY OR COST WOULD NEGATIVELY AFFECT OUR OPERATIONS
We operate primarily as an assembler and rely heavily on a number of major
component manufacturers to supply us with almost all of our parts. Any
significant adverse variation in quantity, quality or cost would adversely
affect our volume and cost of production until we could identify alternative
sources of supply.
WE DEPEND ON FOREIGN VENDORS FOR CERTAIN COMPONENT PARTS WHICH EXPOSES US TO
RISKS THAT COULD MATERIALLY AND ADVERSELY AFFECT OUR OPERATING RESULTS
We depend on foreign vendors for certain component parts which exposes us
to additional risks. Our reliance on foreign vendors exposes us to risks such
as:
* currency fluctuations which may adversely affect the value of goods
purchased;
* trade restrictions;
* changes in tariffs; and
* difficulties in enforcing supply arrangements.
The occurrence of any of these risks could materially and adversely affect
our operating results.
WE DEPEND HEAVILY ON INDEPENDENT THIRD PARTY DEALERS AND OUR RESULTS OF
OPERATIONS COULD BE NEGATIVELY IMPACTED IF THE DEALERS FAIL TO ADEQUATELY
PROMOTE OUR PRODUCTS, IMAGE AND NAME
Failures by independent third party dealers to adequately promote our
products could negatively affect our results of operations. Our products are
sold primarily through independent dealers. As a result, we are unable to fully
3
<PAGE>
control the presentation, delivery and service of our products to the final
customer. We depend heavily on our dealers' willingness and ability to promote
our products, image and name.
OUR GROWTH DEPENDS ON OUR ABILITY TO EXPAND OUR DISTRIBUTION NETWORK AND SUPPORT
DEALERS AND WE CANNOT ASSURE YOU THAT THIS STRATEGY WILL BE SUCCESSFUL
We plan to expand our dealer network to implement our growth strategy. We
cannot assure you that we will be able to attract additional dealers or that
these dealers will be successful in selling our products.
We plan to support our dealers in the following ways:
* facilitating floor plan financing and incentives;
* providing continuing education about our products;
* supplying parts and accessories; and
* providing training to sales and service personnel.
Any difficulties in the continued execution of this plan may cause us to
lose dealers or experience difficulties in attracting new dealers and could
cause the distribution of our products to be adversely affected.
WE ARE ATTEMPTING TO ESTABLISH SALES OPERATIONS IN FOREIGN MARKETS WHICH
REQUIRES SIGNIFICANT MANAGEMENT ATTENTION AND FINANCIAL RESOURCES AND THIS
STRATEGY MAY NOT BE SUCCESSFUL
We are attempting to establish sales operations in foreign markets, and we
cannot assure you that we will be able to successfully manage the inherent risks
and complications associated with operating in foreign markets. These risks and
complications of operating in foreign markets include the following:
* selecting and monitoring dealers;
* establishing effective dealer training;
* transporting inventory;
* parts availability;
* changes in diplomatic and trade relationships;
* tariffs;
* currency exchange rates; and
* unexpected changes in regulatory requirements.
WE RELY ON COMPUTER HARDWARE AND SOFTWARE THAT COULD HAVE YEAR 2000 PROBLEMS AND
ADVERSELY AFFECT THE RESULTS OF OUR OPERATIONS
We rely on computer hardware, software and related technology, together
with data, in the operation of our business. This technology and data are used
in manufacturing and delivering our products and services, and in our internal
operations, such as billing and accounting. We completed an analysis of our
internal systems and the potential for issues associated with the year 2000
problem. We cannot assure you that this analysis completely identified, or that
we will successfully eliminate, all failures associated with the year 2000 which
could negatively impact our operations. Also, we cannot assure you that third
party customers, suppliers and dealers have successfully resolved their own year
2000 issues over which we have no control.
OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO KEEP OUR SENIOR EXECUTIVE OFFICERS
AND KEY EMPLOYEES
We rely considerably on the abilities of Francis S. Keery, our Chairman and
Chief Executive Officer and Patrick Keery, our President. We also depend to a
significant extent upon the performance of our executive management team. The
unavailability or loss of services of any of these individuals, or the failure
to attract and retain qualified personnel to replace them, could have a material
adverse affect on our business. We only have a non-competition agreement with
our Chief Financial Officer and we cannot assure you that his agreement will be
enforceable or effective in retaining him. Also, we cannot assure you that our
other executive officers will not leave us.
OUR FINANCIAL CONDITION AND OUR ABILITY TO FULLY IMPLEMENT OUR EXPANSION PLANS
COULD BE NEGATIVELY IMPACTED IF WE FAIL TO EFFECTIVELY MANAGE OUR GROWTH
Our rapid growth has placed, and is expected to continue to place, a
significant strain on our managerial and operational resources. Our failure to
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<PAGE>
effectively manage our growth could negatively impact our operations. Our
ability to support future growth will depend on our ability to find qualified
employees and suitable expansion space for our manufacturing operations and
improving our managerial and production capabilities. We cannot assure you that
we will be able to continue to manage future growth successfully.
WE ARE SUBJECT TO VARIOUS ENVIRONMENTAL REGULATIONS AND OUR FAILURE TO COMPLY
COULD NEGATIVELY IMPACT OUR OPERATIONS
We are subject to various federal, state and local environmental
regulations. Our failure to comply with these regulations could result in any
one or more of the following:
* restrictions on our ability to expand or modify our current operations
or facilities;
* significant expenditures in achieving compliance with the regulations;
* significant liabilities exceeding our available resources; and
* cessation of our operations.
Our business and assets could be materially adversely affected if
environmental regulations require that we modify our facilities or otherwise
limit our ability to conduct our operations. Any significant expenses incurred
as a result of environmental liabilities could have a material adverse affect on
our business, operating results and financial condition.
OUR FAILURE TO COMPLY WITH VARIOUS REGULATORY APPROVALS AND GOVERNMENTAL
REGULATIONS COULD NEGATIVELY IMPACT OUR OPERATIONS
Our motorcycles must comply with certain governmental approvals and
certifications regarding noise, emissions and safety characteristics. Our
failure to comply with these requirements could prevent us or delay us from
selling our products which would have a significant negative impact on our
operations.
OUR QUARTERLY RESULTS MAY FLUCTUATE SIGNIFICANTLY WHICH MAY RESULT IN THE
VOLATILITY OF OUR STOCK PRICE
Our quarterly operating results may fluctuate significantly as a result of
a variety of factors, many of which are outside of our control. These factors
include:
* manufacturing delays;
* the amount and timing of orders from dealers;
* disruptions in the supply of key components and parts;
* seasonal variations in the sale of our products; and
* general economic conditions.
WE COULD BE REQUIRED TO REDEEM OUR SERIES A CONVERTIBLE PREFERRED STOCK AT A
PREMIUM WHICH WOULD REQUIRE A LARGE EXPENDITURE OF CAPITAL AND COULD HAVE A
MATERIAL ADVERSE AFFECT ON OUR FINANCIAL CONDITION
The holders of our Series A Convertible Preferred Stock have the right to
force us to redeem their Series A Convertible Preferred Stock at a premium upon
the occurrence of certain events. The redemption of our Series A Convertible
Preferred Stock would require a large expenditure of capital and we may not have
sufficient funds to satisfy the redemption. In addition, you could face further
dilution of your ownership percentage as a result of a decline in the market
price of our common stock or in the event of certain defaults which would result
in an increase in the number of shares of common stock issuable upon conversion
of the Series A Convertible Preferred Stock. Any such event could adversely
affect the price of our stock and ability to raise additional capital.
WE MAY ISSUE ADDITIONAL STOCK AND DILUTE YOUR OWNERSHIP PERCENTAGE
Certain events over which you have no control could result in the issuance
of additional shares of our common stock, which would dilute your ownership
percentage. We may issue additional shares of common stock or preferred stock:
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<PAGE>
* to raise additional capital or finance acquisitions;
* upon the exercise or conversion of outstanding options, warrants and
shares of convertible preferred stock; or
* in lieu of cash payment of dividends.
There are currently outstanding convertible preferred stock, warrants, and
options to acquire up to 4,970,367 additional shares of common stock. If
converted or exercised, these securities will dilute your percentage ownership
of common stock. These securities, unlike common stock, provide for antidilution
protection upon the occurrence of stock dividends, combinations, capital
reorganizations and other events. If one or more of these events occurs, the
number of shares of common stock that may be acquired upon conversion or
exercise would increase.
OUR GOVERNING DOCUMENTS AND NEVADA LAW CONTAIN PROVISIONS THAT COULD PREVENT
TRANSACTIONS IN WHICH YOU WOULD RECEIVE A PREMIUM FOR YOUR STOCK
Our Articles of Incorporation and the Nevada Revised Statutes contain
provisions that could have the affect of delaying, deferring, or preventing a
change in control and the opportunity to sell your shares at a premium over
current market prices. Although these provisions are intended to protect us and
our stockholders from unwanted takeovers, their effect could hinder or prevent
transactions in which you might otherwise receive a premium for your common
stock over then-current market prices, and may limit your ability to approve
transactions which may be in your best interests. As a result, the mere
existence of these provisions could adversely affect the price of our common
stock.
FORWARD LOOKING STATEMENTS
This prospectus contains or incorporates forward-looking statements
including statements regarding, among other items, our business strategy, growth
strategy, and anticipated trends in our business. We may make additional written
or oral forward-looking statements from time to time in filings with the
Securities and Exchange Commission or otherwise. When we use the words
"believe," "expect," "anticipate," "project" and similar expressions, this
should alert you that this is a forward-looking statement. Forward-looking
statements speak only as of the date the statement is made. These
forward-looking statements are based largely on our expectations. They are
subject to a number of risks and uncertainties, some of which cannot be
predicted or quantified and are beyond our control. Future events and actual
results could differ materially from those set forth in, contemplated by, or
underlying the forward-looking statements. Statements in this prospectus, and in
documents incorporated into this prospectus, including those set forth in "Risk
Factors" describe factors, among others, that could contribute to or cause these
differences. In light of these risks and uncertainties, there can be no
assurance that the forward-looking information contained in this prospectus will
in fact transpire or prove to be accurate. All subsequent written and oral
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by this section.
USE OF PROCEEDS
We will not receive any proceeds from the sale of any shares offered by
this prospectus.
SELLING STOCKHOLDERS
The following table provides information about the selling stockholders.
The shares offered by this prospectus will be offered from time to time by the
selling stockholders named below, or by pledgees, donees, transferees or other
successors in interest to them.
The shares shown as owned and offered by Advantage Fund II Ltd. and Koch
Investment Group Limited under this prospectus may be issued upon conversion of
Series A Convertible Preferred Stock and exercise of warrants acquired by these
selling stockholders from us in a private placement on September 17, 1999. Under
the terms of the Series A Convertible Preferred Stock and the warrants, no
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<PAGE>
selling stockholder can convert Series A Convertible Preferred Stock or exercise
warrants to the extent such conversion or exercise would cause the selling
stockholder's beneficial ownership of our common stock (excluding shares
underlying unconverted Series A Convertible Preferred Stock and unexercised
warrants) to exceed 4.9% of the outstanding shares of common stock.
<TABLE>
<CAPTION>
Shares Percentage of
Maximum Owned After Common Stock Owned
Number of Offering After Offering
Shares Owned Shares to be (Assuming All (Assuming All
Name of Selling Prior to the Sold in the Shares Offered Shares Offered
Stockholders Offering Offering are Sold) are Sold)
--------------- ------------ ------------ -------------- ------------------
<S> <C> <C> <C> <C>
Advantage Fund II Ltd. 1,532,895(1) 2,472,773(2) 0 0%
Koch Investment Group
Limited 510,965(1) 824,258(2) 0 0%
Reedland Capital 20,000 20,000 0 0%
Partners
Richard Cohn 2,500 2,500 0 0%
Intellect Capital Corp. 2,500 2,500 0 0%
</TABLE>
- ----------
(1) Represents the number of shares issuable upon the conversion of Series A
Convertible Preferred Stock at the initial fixed conversion price of
$2.6812, including conversion of two years of accrued dividends thereon,
and exercise of warrants.
(2) In accordance with the registration rights agreements between us and these
selling stockholders, the number of shares shown as offered by this
prospectus represents 175% of the number of shares issuable upon conversion
of the Series A Convertible Preferred Stock as described in note (1) plus
the shares issuable upon exercise of the warrants.
As of the date of this prospectus, the selling stockholders do not hold any
other securities in Titan other than the shares being offered under this
prospectus and the Series A Convertible Preferred Stock and warrants described
in this prospectus. None of the selling stockholders has had any material
relationship with us within the past three years.
DESCRIPTION OF SECURITIES
We are authorized to issue up to 90,000,000 shares of common stock and
10,000,000 shares of preferred stock. As of October 15, 1999, 17,163,097 shares
of common stock were issued and outstanding. Additionally, as of October 15,
1999, we have outstanding options to purchase 1,143,000 shares of our common
stock, warrants to purchase 397,967 of our common stock and 4,000 shares of our
Series A Convertible Preferred Stock.
Our Board of Directors has the authority, without further action by the
stockholders, to issue a total of up to 10,000,000 preferred shares in one or
more series and to fix the rights, preferences, privileges and restrictions
granted to or imposed upon any series of unissued preferred shares and to
determine the number of shares constituting any series and the designation of
the series, without any further vote or action by the stockholders.
The following summary of certain provisions of the common stock and
preferred shares does not purport to be complete and is subject to, and is
qualified in its entirety by, our amended Articles of Incorporation, Restated
Bylaws, our Certificate of Designations with respect to our Series A Convertible
Preferred Stock, and by the provisions of applicable law.
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<PAGE>
COMMON STOCK
The holders of our common stock are entitled to one vote per share on all
matters on which stockholders are entitled to vote. Subject to the rights of
holders of any class or series of shares, including preferred shares, having a
preference over the common stock as to dividends or upon liquidation, the
holders of our common stock are also entitled to dividends as may be declared by
our Board of Directors out of funds that are lawfully available, and are
entitled upon liquidation to receive pro rata the assets that are available for
distribution to holders of common stock. Holders of the common stock have no
preemptive, subscription, or conversion rights. The common stock is not subject
to assessment and has no redemption provisions.
SERIES A CONVERTIBLE PREFERRED STOCK
We have 4,000 shares of Series A Convertible Preferred Stock authorized,
issued and outstanding. The Series A Convertible Preferred Stock is currently
convertible at any time into a maximum of 3,429,400 shares of our common stock
at a fixed conversion price of $2.6812 which represents the average market price
of our common stock for the ten days prior to the issuance of the Series A
Convertible Preferred Stock on September 17, 1999, the date we sold the Series A
Convertible Preferred Stock. Commencing September 17, 2000, the conversion price
is adjusted every six months to be the lesser of (a) 130% of the prior
conversion price or (b) 90% of the average market price for the ten days prior
to such adjustment date. The conversion price is subject to further adjustment
under certain other circumstances, including our inability to provide the Series
A Convertible Preferred Stockholders with common stock certificates on a timely
basis after receiving notice of their conversion, and our failure to pay any
applicable redemption price when due. Upon an adjustment of the conversion
price, the number of shares into which the Series A Convertible Preferred Stock
may be converted is correspondingly adjusted. The conversion price and number of
shares of common stock underlying the Series A Convertible Preferred Stock is
also subject to adjustment for stock splits, stock dividends, combinations,
capital reorganizations and similar events relating to our common stock.
Dividends at the rate of $60 per annum per share are payable in cash or, at
our option, may be added to the value of the Series A Convertible Preferred
Stock subject to conversion and to the $1,000 per share liquidation preference
of the Series A Convertible Preferred Stock.
If we are in compliance with various provisions, we have the right at any
time to redeem the Series A Convertible Preferred Stock at a premium (generally,
120% of its $1,000 per share liquidation value plus accrued and unpaid
dividends), and under certain circumstances, at the market value of the common
stock into which the Series A Convertible Preferred Stock would otherwise be
convertible. Assuming we are in compliance with various provisions, after the
third anniversary of issuance, we may redeem the Series A Convertible Preferred
Stock at its liquidation value plus accrued and unpaid dividends.
The holders of the Series A Convertible Preferred Stock have the right to
force us to redeem all or some of their Series A Convertible Preferred Stock at
the greater of the premium or converted market value described above under the
following circumstances:
* there is no closing bid price reported for our common stock for five
consecutive trading days;
* our common stock ceases to be listed for trading on the Nasdaq
SmallCap Market;
* the holders of our Series A Convertible Preferred Stock are unable,
for 30 or more days (whether or not consecutive) to sell their common
stock issuable upon conversion of the Series A Convertible Preferred
Stock pursuant to an effective registration statement;
* we default under any of the agreements relating to our sale of the
Series A Convertible Preferred Stock, including our failure to timely
deliver certificates for common stock upon conversion;
* certain business combination events;
* the adoption of any amendment to our Articles of Incorporation
materially adverse to the holders of the Series A Convertible
Preferred Stock without the consent of the holders of a majority of
the Series A Convertible Preferred Stock; and
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<PAGE>
* the holders of the Series A Convertible Preferred Stock are unable to
convert all of their shares because of limitations under exchange or
market rules that require stockholder approval of certain stock
issuances and we fail to obtain such approval.
Upon liquidation, the holders of the Series A Convertible Preferred Stock
will be entitled to receive, before any distribution to holders of our common
stock or any other class or series of our capital stock ranking junior to the
Series A Convertible Preferred Stock, liquidation distributions equal to $1,000
per share, plus any accrued and unpaid dividends.
The Series A Convertible Preferred Stock has no general voting rights.
However, holders of the Series A Convertible Preferred Stock have the right to
consent to the issuance of any capital stock that is senior to the Series A
Convertible Preferred Stock, and to any amendment to the terms of the Series A
Convertible Preferred Stock. In addition, pursuant to the purchase agreements
entered into in connection with the issuance of the Series A Convertible
Preferred Stock, without the consent of the holders of the Series A Convertible
Preferred Stock, we may not issue for approximately 12 months after issuance of
the Preferred Stock, any common stock (or securities convertible into common
stock), at a price below the market price of the common stock on the date of
issuance, except in certain specified instances. For approximately 18 months
after issuance, the holders of the Series A Convertible Preferred Stock also
have a right of first refusal to acquire any such equity securities except in
specified instances set forth in the purchase agreements.
WARRANTS
We also issued warrants in connection with the offering of our Series A
Convertible Preferred Stock. We issued warrants to purchase 372,967 shares of
common stock to the Series A Convertible Preferred Stockholders. We also issued
warrants to purchase 25,000 shares of common stock to Reedland Capital Partners
and its designees as partial compensation for their assistance in placing the
Series A Convertible Preferred Stock. The exercise price of the warrants is
$3.21744 per share. These warrants are the only warrants we currently have
outstanding. They warrants expire on September 17, 2004.
The exercise price and number of shares of common stock issuable upon
exercise of the warrants held by the Series A Convertible Preferred Stockholders
are subject to adjustment in certain events, including the issuance of common
stock (or securities convertible into common stock) at a price below the market
price.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is Signature Stock
Transfer, Inc.
CHARTER PROVISIONS AND EFFECTS OF NEVADA LAW
Our Articles of Incorporation authorize our Board of Directors to issue up
to 10,0000,000 shares of preferred stock from time to time in one or more
designated series. Our Board of Directors, without approval of the stockholders,
is authorized to establish the voting powers, designations, preferences,
limitations, restrictions and relative rights of each series of preferred stock,
including voting powers, preferences and relative rights that may be superior to
our common stock. As of October 15, 1999, 4,000 shares of preferred stock have
been designated Series A Convertible Preferred Stock and 4,000 shares of Series
A Convertible Preferred Stock were outstanding.
Sections 78.3791 through 78.3793 of the Nevada Revised Statutes generally
apply to any acquisition of outstanding voting securities of an issuing
corporation which results in the acquiror owning more than 20% of the issuing
corporation's then outstanding voting securities. An issuing corporation is any
Nevada corporation with at least 200 stockholders, at least 100 of which are
stockholders of record and Nevada residents, and which conducts business in
Nevada.
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The securities acquired in a covered acquisition are denied voting rights
unless a majority of the security holders of the issuing corporation approve the
granting of voting rights. If permitted by the issuing corporation's Articles of
Incorporation or bylaws then in effect, voting securities acquired in the
covered acquisition are redeemable by the issuing corporation at the average
price paid for the securities by the acquiror if the acquiring person has not
given timely notice to the issuing corporation or if the stockholders of the
issuing corporation vote not to grant voting rights to the acquiring person's
securities.
Unless the issuing corporation's Articles of Incorporation or bylaws then
in effect provide otherwise, if the acquiring person acquired securities having
50% or more of the voting power of the issuing corporation's outstanding
securities and the stockholders of the issuing corporation grant voting rights
to the acquiring person, then any stockholders of the issuing corporation who
voted against granting voting rights to the acquiring person may demand that the
issuing corporation purchase, for fair value, all or any portion of his
securities.
Our Articles of Incorporation and bylaws do not limit the effect of these
provisions.
PLAN OF DISTRIBUTION
The selling stockholders, their pledgees, donees, transferees or other
successors in interest may from time to time offer and sell all or a portion of
the shares in transactions on the Nasdaq SmallCap Market, or on any other
securities exchange or market on which the common stock is listed or traded, in
negotiated transactions or otherwise, at prices then prevailing or related to
the then-current market price or at negotiated prices. The selling stockholders
or their pledgees, donees, transferees or other successors in interest may sell
their shares directly or through agents or broker-dealers acting as principal or
agent, or in block trades or pursuant to a distribution by one or more
underwriters on a firm commitment or best-efforts basis. To the extent required,
the names of any agent or broker-dealer and applicable commissions or discounts
and any other required information with respect to any particular offer will be
set forth in an accompanying prospectus supplement. Each of the selling
stockholders and their pledgees, donees, transferees or other successors in
interest reserves the right to accept or reject, in whole or in part, any
proposed purchase of the shares to be made directly or through agents.
In connection with distributions of the shares, any selling stockholder may
enter into hedging transactions with broker-dealers and the broker-dealers may
engage in short sales of the shares in the course of hedging the positions they
assume with the selling stockholder. Any selling stockholder also may sell the
shares short and deliver the shares to close out such short positions. Any
selling stockholder also may enter into option or other transactions with
broker-dealers that involve the delivery of the shares to the broker-dealers,
which may then resell or otherwise transfer such shares. Any selling stockholder
also may loan or pledge the shares to a broker-dealer and the broker-dealer may
sell the shares so loaned or upon a default may sell or otherwise transfer the
pledged shares. These activities are limited by the purchase agreements between
us and the Series A Convertible Preferred Stockholders during periods when the
conversion price is subject to periodic adjustment.
The selling stockholders, any agents, dealers or underwriters that
participate with the selling stockholders in the resale of the shares of common
stock and the pledgees, donees, transferees or other successors in interest of
the selling stockholders may be deemed to be "underwriters" within the meaning
of the Securities Act, in which case any commissions received by such agents,
dealers or underwriters and a profit on the resale of the shares of common stock
purchased by them may be deemed underwriting commissions or discounts under the
Securities Act.
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In order to comply with the securities laws of particular states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers.
There is no assurance that the selling stockholders will sell any or all of
the shares.
Pursuant to registration rights agreements between us and the selling
stockholders, we have agreed to pay all expenses incurred in the registration of
the shares other than selling commissions and discounts, brokerage fees and
transfer taxes or any legal, accounting and other expenses incurred by the
selling stockholders.
In addition to selling their common stock under this prospectus, the
selling stockholders may:
* transfer their common stock in other ways not involving market makers
or established trading markets, including by gift, distribution, or
other transfer; or
* sell their common stock under Rule 144 of the Securities Act.
LEGAL OPINIONS
James, Driggs, Walch, Santoro, Kearney, Johnson & Thompson will pass upon
the validity of the common stock offered under this prospectus.
EXPERTS
The financial statements incorporated in this Registration Statement by
reference to the Annual Report on Form 10-KSB for the year ended January 2,
1999, have been so incorporated in reliance on the report of
PriceWaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting. The financial statements of
Titan Motorcycle Co. of America for the year ended December 31, 1997 appearing
in our Annual Report on Form 10-KSB for the fiscal year ended January 2, 1999
have been audited by Jones, Jensen & Company, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
These consolidated financial statements are incorporated herein by reference in
reliance upon the report given upon the authority of PriceWaterhouseCoopers LLP
and Jones, Jensen & Company, as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
GOVERNMENT FILINGS: We file annual, quarterly and special reports and other
information with the Securities and Exchange Commission. You may read and copy
any document that we file at the Commission's Public Reference Room at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional offices
located at 7 World Trade Center, 13th Floor, New York, New York 10048, and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Please call the Commission at 1-800-SEC-0330 for more
information about the Public Reference Rooms. Most of our filings are also
available to you free of charge at the Commission's web site at
http://www.sec.gov.
STOCK MARKET: Our common stock is listed on the Nasdaq SmallCap Market and
similar information can be inspected and copied at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
REGISTRATION STATEMENT: We have filed a registration statement under the
Securities Act with the Commission with respect to the common stock offered
under this prospectus. This prospectus is a part of the registration statement.
However, it does not contain all of the information contained in the
registration statement and its exhibits. You should refer to the registration
statement and its exhibits for further information about us and the common stock
offered under this prospectus.
INFORMATION INCORPORATED BY REFERENCE: The Commission allows us to
"incorporate by reference" the information we file with it, which means that we
can disclose important information to you by referring you to those documents.
The information incorporated by reference is an important part of this
prospectus, and information that we file later with the Commission will
automatically update and supersede this information. We have filed the following
documents with the Commission and they are incorporated by reference into this
prospectus:
* our Annual Report on Form 10-KSB for the fiscal year ended January 2,
1999, as amended by Amendment No. 1 thereto on Form 10-KSB/A;
* our Proxy Statement for the 1999 Annual Meeting of Stockholders, dated
April 12, 1999;
* our Quarterly Reports on Form 10-QSB for the fiscal quarters ended
April 3, 1999 and July 3, 1999;
* our Current Reports on Form 8-K, including Exhibits, filed January 8,
1999 and October 1, 1999; and
* the description of our capital stock contained in our registration
statement on Form 10-SB, including all amendments or reports filed for
the purpose of updating the description of our capital stock.
Please note that all other documents and reports filed under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act following the date of this prospectus and
prior to the termination of this offering will be deemed to be incorporated by
reference into this prospectus and to be made a part of it from the date of the
filing of our reports and documents.
You may request free copies of these filings by writing or telephoning us
at the following address:
Investor Relations
Titan Motorcycle Co. of America
2222 West Peoria Avenue
Phoenix, Arizona 85029
(602) 861-6977
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PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF INSURANCE AND DISTRIBUTION
The following are the estimated expenses in connection with the issuance
and distribution of the securities being registered, all of which will be paid
by Titan:
Securities and Exchange Commission Registration Fee $ 2,261
Nasdaq Listing Fee $ 7,500
Legal Fees and Expenses $ 10,000
Accounting Fees and Expenses $ 10,000
Transfer Agent Fees and Expenses $ 2,000
Miscellaneous $ 10,000
--------
TOTAL $ 41,761
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection 2 of Section 78.7502 of Chapter 78 of the Nevada Revised
Statutes (the "NRS") empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction or upon
a plea of nolo contendere or its equivalent does not, of itself, create a
presumption that the person did not act in good faith or in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation or that, with respect to any criminal action or proceeding, he had
reasonable cause to believe his actions were unlawful.
Subsection 2 of Section 78.7502 of the NRS empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted under similar
standards to those described above expect that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation or for amounts paid in settlement to
the corporation unless and only to the extent that the court in which such
action or suit was brought determines that, despite the adjudication of
liability, such person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
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Section 78.7502 of the NRS further provides that to the extent a director
or officer of a corporation has been successful in the defense of any action,
suit or proceeding referred to in subsections (1) and (2) or in the defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith. Section 78.751 of the NRS provides that any
indemnification provided for by Section 78.7502 of the NRS (by court order or
otherwise) shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled and that the scope of indemnification shall
continue as to directors, officers, employees or agents who have ceased to hold
such positions, and to their heirs, executors and administrators. Section 78.752
empowers the corporation to purchase and maintain insurance on behalf of a
director, officer, employee or agent of the corporation against any liability
asserted against him or incurred by him in any such capacity or arising out of
his status as such whether or not the corporation would have the power to
indemnify him against such liabilities under Section 78.7502.
Article 4.2 of our Articles of Incorporation provide that no director or
officer of ours shall be personally liable to us or any of our stockholders for
damages for breach of their fiduciary duty as a director or officer. This
provision, however, does not eliminate or limit the liability of our directors
or officers for:
* acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, or
* the payment of distributions in violation of Nevada Revised Statutes
Section 78.300.
Article VI of our bylaws provides for the indemnification of our directors,
officers, employees and agents in a manner substantially identical in scope to
that permitted under Section 78.7502 of the Nevada Revised Statutes. The Bylaws
provide that the expenses of officers and directors incurred in defending any
civil or criminal action, suit or proceeding shall be paid by us as they are
incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Restated Articles of Incorporation (incorporated by reference to
Exhibit 3.(I) to the Company's Registration Statement on Form
10-SB filed on June 16, 1998).
3.2 Bylaws, as amended and restated on September 10, 1999
(incorporated by reference to Exhibit 3 to the Company's Current
Report on Form 8-K filed October 1, 1999).
4.1 Certificate of Designations of the Series A Convertible Preferred
Stock (incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K filed October 1, 1999).
4.2 Warrant issued to Advantage Fund II Ltd., dated September 17,
1999 (incorporated by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K filed October 1, 1999).
4.3 Warrant issued to Koch Investment Group Limited, dated September
17, 1999 (incorporated by reference to Exhibit 4.3 to the
Company's Current Report on Form 8-K filed October 1, 1999).
4.4 Warrant issued to Reedland Capital Partners, dated September 17,
1999
4.5 Warrant issued to Mr. Richard Cohn, dated September 17, 1999
4.6 Warrant issued to Intellect Capital Corp., dated September 17,
1999
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4.7 Registration Rights Agreement with Advantage Fund II Ltd., dated
September 15, 1999 (incorporated by reference to Exhibit 4.5 to
the Company's Current Report on Form 8-K filed October 1, 1999).
4.8 Registration Rights Agreement with Koch Investment Group Limited,
dated September 15, 1999 (incorporated by reference to Exhibit
4.6 to the Company's Current Report on Form 8-K filed October 1,
1999).
5 Opinion of James, Driggs, Walch, Santoro, Kearney, Johnson &
Thompson regarding legality.
10.1 Subscription Agreement with Advantage Fund II Ltd., dated as of
September 15, 1999 (incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K filed October 1, 1999).
10.2 Subscription Agreement with Koch Investment Group Limited, dated
as of September 15, 1999 (incorporated by reference to Exhibit
10.2 to the Company's Current Report on Form 8-K filed October 1,
1999).
10.3 Loan Agreement with Wells Fargo Bank dated April 10, 1998.
10.4 First Amendment to Loan Agreement with Wells Fargo Bank dated
July 17, 1998.
10.5 Second Amendment to Loan Agreement with Wells Fargo Bank dated
August 21, 1998.
10.6 Third Amendment to Loan Agreement with Wells Fargo Bank dated
November 10, 1998.
10.7 Fourth Amendment to Loan Agreement with Wells Fargo Bank dated
January 22, 1999.
10.8 Fifth Amendment to Loan Agreement with Wells Fargo Bank dated
July 28, 1999.
10.9 Promissory Note with Oxford International Management dated
December 9, 1996.
10.10 Modification of Promissory Note with Oxford International
Management dated December 16, 1997.
10.11 Promissory Note with Oxford International Management dated July
22, 1999.
10.12 Authorized Dealer Sales and Service Agreement with Paragon Custom
Cycles, Inc. dated January 4, 1999.
10.13 Authorized Dealer Sales and Service Agreement with Pujol
Motorcycle Company, LLC dated January 4, 1999.
10.14 Authorized Dealer Sales and Service Agreement with Vegas
Motorcycle Company, LLC dated January 4, 1999.
10.15 Authorized Dealer Sales and Service Agreement with Titan
Motorcycle of Houston, LLC dated May 14, 1999.
10.16 Purchase Sale and Assignment Agreement with TransAmerica
Commercial Finance Corporation dated August 1, 1997.
10.17 Manufacturers/Distributors Financing Agreement with TransAmerica
Commercial Finance Corporation dated April 25, 1997.
10.18 Standard Commercial Industrial Triple Net Lease with Holualoa,
Peoria Avenue Industrial, LLC dated August 7, 1997.
10.19 First Amendment to Standard Industrial Triple Net Lease with
Holualoa, Peoria Avenue Industrial, LLC dated August 7, 1999.
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10.20 Lease for Term with Rough Ice, L.L.C. dated October 1, 1998
10.21 Floorplan Repurchase Agreement with Bombardier Capital, Inc.
dated August 5, 1998.
10.22 Letter Agreement with Thomas & Perkins dated August 1, 1998.
10.23 Letter Agreement with Thomas & Perkins dated February 5, 1999.
10.24 Promotional Agreement with Paisano Publications, Inc. dated
January 21, 1998.
10.25 Letter Agreement with Playboy Enterprises, Inc. dated June 17,
1998.
10.26 Non-Competition Agreement between Titan and Bob Lobban.
23.1 Consent of PriceWaterhouseCoopers LLP
23.2 Consent of Jones, Jensen & Company
23.3 Consent of James, Driggs, Walch, Santoro, Kearney, Johnson &
Thompson (included in Exhibit 5).
24 Power of Attorney (included on signature page of registration
statement).
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's Annual Report under Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report under Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Phoenix, State of Arizona, on October 15, 1999.
TITAN MOTORCYCLE CO. OF AMERICA
/s/ Francis S. Keery
----------------------------------------
Francis S. Keery, Chairman of the Board
of Directors and Chief Executive Officer
Know all men by these presents, that each person whose signature appears
below constitutes and appoints Francis S. Keery, Robert P. Lobban, Patrick
Keery, and Barbara S. Keery, and each of them, his true and lawful
attorneys-in-fact and agent, with full powers of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign any and all amendments to this registration statement on
Form S-3 and to sign any registration statement for the same offering that is to
be effective upon filing pursuant to Rule 462(b) of the Securities Act of 1933,
and to file the same, with all exhibits thereto, and other documents in
connection therewith with the Securities and Exchange Commission, granting under
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises as fully and to all intents and purposes as he might
or could do in person hereby ratifying and confirming all that said
attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Francis S. Keery Chairman of the Board of Directors October 15, 1999
- ------------------------ and Chief Executive Officer
Francis S. Keery (Principal Executive Officer)
/s/ Robert P. Lobban Chief Financial Officer (Principal October 15, 1999
- ------------------------ Financial Officer and Principal
Robert P. Lobban Accounting Officer)
/s/ Patrick Keery President and Director October 15, 1999
- ------------------------
Patrick Keery
/s/ Barbara S. Keery Vice President, Secretary and October 15, 1999
- ------------------------
Barbara S. Keery Director
/s/ Harry H. Birkenruth Director October 15, 1999
- ------------------------
Harry H. Birkenruth
/s/ H.B. Tony Turner Director October 15, 1999
- ------------------------
H.B. Tony Turner
II-5
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Restated Articles of Incorporation (incorporated by reference to
Exhibit 3.(I) to the Company's Registration Statement on Form
10-SB filed on June 16, 1998).
3.2 Bylaws, as amended and restated on September 10, 1999
(incorporated by reference to Exhibit 3 to the Company's Current
Report on Form 8-K filed October 1, 1999).
4.1 Certificate of Designations of the Series A Convertible Preferred
Stock (incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K filed October 1, 1999).
4.2 Warrant issued to Advantage Fund II Ltd., dated September 17,
1999 (incorporated by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K filed October 1, 1999).
4.3 Warrant issued to Koch Investment Group Limited, dated September
17, 1999 (incorporated by reference to Exhibit 4.3 to the
Company's Current Report on Form 8-K filed October 1, 1999).
4.4 Warrant issued to Reedland Capital Partners, dated September 17,
1999
4.5 Warrant issued to Mr. Richard Cohn, dated September 17, 1999
4.6 Warrant issued to Intellect Capital Corp., dated September 17,
1999
4.7 Registration Rights Agreement with Advantage Fund II Ltd., dated
September 15, 1999 (incorporated by reference to Exhibit 4.5 to
the Company's Current Report on Form 8-K filed October 1, 1999).
4.8 Registration Rights Agreement with Koch Investment Group Limited,
dated September 15, 1999 (incorporated by reference to Exhibit
4.6 to the Company's Current Report on Form 8-K filed October 1,
1999).
5 Opinion of James, Driggs, Walch, Santoro, Kearney, Johnson &
Thompson regarding legality.
10.1 Subscription Agreement with Advantage Fund II Ltd., dated as of
September 15, 1999 (incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K filed October 1, 1999).
10.2 Subscription Agreement with Koch Investment Group Limited, dated
as of September 15, 1999 (incorporated by reference to Exhibit
10.2 to the Company's Current Report on Form 8-K filed October 1,
1999).
10.3 Loan Agreement with Wells Fargo Bank dated April 10, 1998.
10.4 First Amendment to Loan Agreement with Wells Fargo Bank dated
July 17, 1998.
10.5 Second Amendment to Loan Agreement with Wells Fargo Bank dated
August 21, 1998.
10.6 Third Amendment to Loan Agreement with Wells Fargo Bank dated
November 10, 1998.
<PAGE>
10.7 Fourth Amendment to Loan Agreement with Wells Fargo Bank dated
January 22, 1999.
10.8 Fifth Amendment to Loan Agreement with Wells Fargo Bank dated
July 28, 1999.
10.9 Promissory Note with Oxford International Management dated
December 9, 1996.
10.10 Modification of Promissory Note with Oxford International
Management dated December 16, 1997.
10.11 Promissory Note with Oxford International Management dated July
22, 1999.
10.12 Authorized Dealer Sales and Service Agreement with Paragon Custom
Cycles, Inc. dated January 4, 1999.
10.13 Authorized Dealer Sales and Service Agreement with Pujol
Motorcycle Company, LLC dated January 4, 1999.
10.14 Authorized Dealer Sales and Service Agreement with Vegas
Motorcycle Company, LLC dated January 4, 1999.
10.15 Authorized Dealer Sales and Service Agreement with Titan
Motorcycle of Houston, LLC dated May 14, 1999.
10.16 Purchase Sale and Assignment Agreement with TransAmerica
Commercial Finance Corporation dated August 1, 1997.
10.17 Manufacturers/Distributors Financing Agreement with TransAmerica
Commercial Finance Corporation dated April 25, 1997.
10.18 Standard Commercial Industrial Triple Net Lease with Holualoa,
Peoria Avenue Industrial, LLC dated August 7, 1997.
10.19 First Amendment to Standard Industrial Triple Net Lease with
Holualoa, Peoria Avenue Industrial, LLC dated August 7, 1999.
10.20 Lease for Term with Rough Ice, L.L.C. dated October 1, 1998
10.21 Floorplan Repurchase Agreement with Bombardier Capital, Inc.
dated August 5, 1998.
10.22 Letter Agreement with Thomas & Perkins dated August 1, 1998.
10.23 Letter Agreement with Thomas & Perkins dated February 5, 1999.
10.24 Promotional Agreement with Paisano Publications, Inc. dated
January 21, 1998.
10.25 Letter Agreement with Playboy Enterprises, Inc. dated June 17,
1998.
10.26 Non-Competition Agreement between Titan and Bob Lobban.
23.1 Consent of PriceWaterhouseCoopers LLP
23.2 Consent of Jones, Jensen & Company
23.3 Consent of James, Driggs, Walch, Santoro, Kearney, Johnson &
Thompson (included in Exhibit 5).
24 Power of Attorney (included on signature page of registration
statement).
These securities have not been registered under the Securities Act of 1933 or
any state securities laws. These securities have been acquired for investment
and not with a view to distribution or resale, and may not be sold, mortgaged,
pledged, hypothecated or otherwise transferred without registration under the
Securities Act of 1933 and qualification under state securities laws, or an
opinion of counsel acceptable to the corporation that registration and
qualification is not required.
TITAN MOTORCYCLE CO. OF AMERICA
Common Stock Purchase Warrant
To Subscribe for and Purchase September 17, 1999
20,000 Shares of Common Stock of
TITAN MOTORCYCLE CO. OF AMERICA
THIS CERTIFIES that, for good and valuable consideration, the sufficiency
of which is hereby acknowledged, Reedland Capital Partners or its registered
assigns (the "Holder") is entitled to subscribe for and purchase from TITAN
MOTORCYCLE CO. OF AMERICA, a Nevada corporation (hereinafter called the
"Company"), up to 20,000 shares (subject to adjustment as hereinafter provided)
of fully paid and non-assessable Common Stock of the Company (the "Common
Stock"), subject to the provisions and upon the terms and conditions hereinafter
set forth at the price of $3.21744 per share (such price as may from time to
time be adjusted as provided herein is called the "Warrant Price"), at or prior
to 5:00 p.m. Pacific time on September 17, 2004 (the "Exercise Period").
This Warrant and any Warrant subsequently issued upon exchange or transfer
hereof are hereinafter collectively called the "Warrant."
Section 1. EXERCISE OF WARRANT. The rights represented by this Warrant may
be exercised by the Holder, in whole or in part (but not as to fractional
shares) at any time or from time to time during the Exercise Period by the
completion of the purchase form attached hereto and by the surrender of this
Warrant (properly endorsed) at the office of the Company as it may designate by
notice in writing to the Holder hereof at the address of the Holder appearing on
the books of the Company, and by payment to the Company of the Warrant Price in
cash or by certified or official bank check, for each share being purchased. In
the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or its nominee or other party designated in
the purchase form by the Holder hereof, shall be delivered to the Holder as soon
as practicable after the exercise of this Warrant, and in any event within five
(5) business days after the date on which the rights represented by this Warrant
shall have been so exercised; and, unless this Warrant has expired or has been
exercised in full, a new Warrant representing the number of shares (except a
remaining fractional share), if any, with respect to which this Warrant shall
not then have been exercised shall also be issued to the Holder within such
time. The person in whose name any certificate for shares of Common Stock is
<PAGE>
issued upon exercise of this Warrant shall for all purposes be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Warrant is made, except that, if the date of such
surrender and payment is a date on which the stock transfer books of the Company
are closed, such person shall be deemed to have become the holder of such shares
at the close of business on the next succeeding date on which the stock transfer
books are open. No fractional shares shall be issued upon exercise of this
Warrant and no payment or adjustment shall be made upon any exercise on account
of any cash dividends on the Common Stock issued upon such exercise. If any
fractional interest in a share of Common Stock would, except for the provision
of this Section 1, be delivered upon such exercise, the Company, in lieu of
delivery of a fractional share thereof, shall pay to the Holder an amount in
cash equal to the current market price of such fractional share as determined in
good faith by the Board of Directors of the Company. Current market price means
the closing price of the Common Stock on the relevant date as reported on the
Nasdaq SmallCap Market (or any national securities exchange, national market
including the Nasdaq National Market, or other quotation system on which the
Common Stock is then listed) or, if no prices are reported for that date, such
prices on the next preceding date for which closing prices were reported, or if
the Common Stock is not publicly traded, by such methods or procedures as may be
established from time to time by the Board of Directors of the Company in good
faith.
Section 2. STOCK SPLITS, CONSOLIDATION, MERGER, AND SALE. In the event that
before the issuance of the shares of Common Stock into which this Warrant may be
exercised the outstanding shares of Common Stock shall be split, combined, or
consolidated, by dividend, reclassification or otherwise, into a greater or
lesser number of shares of Common Stock or any other class or classes of stock,
as appropriate, the Warrant Price in effect immediately prior to such
combination or consolidation and the number of shares purchasable under this
Warrant shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately adjusted. If there shall be effected any
consolidation or merger of the Company with another corporation, or a sale of
all or substantially all of the Company's assets to another corporation, and if
the holders of Common Stock shall be entitled pursuant to the terms of any such
transaction to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such consolidation, merger or
sale, lawful and adequate provisions shall be made whereby the Holder of this
Warrant shall thereafter have the right to receive, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the exercise of such Warrant, such
shares of stock, securities or assets as may be issuable or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such Common Stock immediately theretofore so
receivable had such consolidation, merger or sale not taken place, and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the Holder to the end that the provisions hereof shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise of this Warrant.
<PAGE>
(a) STOCK TO BE RESERVED. The Company will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon the exercise of this Warrant as herein provided, such number of shares of
Common Stock as shall then be issuable upon the exercise of this Warrant.
(b) ISSUE TAX. The issuance of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without charge to the Holders of this
Warrant for any issuance tax in respect thereof provided that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the Holder of this Warrant, which shall be borne by the Holder.
(c) CLOSING OF BOOKS. The Company will not close its transfer books to
impair any issuance of the shares of Common Stock upon the exercise of this
Warrant.
Section 3. NOTICES OF RECORD DATES. In the event of:
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution (other than cash dividends out of
earned surplus), or any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or consolidation or merger of the
Company with or into any other corporation, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Company, then and in each such event the Company will give notice to the
Holder of this Warrant specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or right and stating the
amount and character of such dividend, distribution or right, and (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock will be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least ten (10) days and not more than
ninety (90) days prior to the date therein specified, and such notice shall
state that the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") or to a favorable vote of shareholders, if either
is required. Any failure to provide a notice hereunder shall not affect the
corporate action taken.
<PAGE>
Section 4. NO SHAREHOLDER RIGHTS OR LIABILITIES. This Warrant shall not
entitle the Holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision hereof, in the absence of affirmative action by the
Holder hereof to purchase shares of Common Stock, and no mere enumeration hereon
of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for the Warrant Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
Section 5. REPRESENTATIONS OF HOLDER. The Holder hereby represents and
acknowledges to the Company as of the date hereof and as of each exercise of
this Warrant that:
(a) this Warrant, the Common Stock issuable upon exercise of this Warrant
and any securities issued with respect to any of them by way of a stock dividend
or stock split or in connection with a recapitalization, merger, consolidation
or other reorganization will be "restricted securities" as such term is used in
the rules and regulations under the Securities Act; such securities have not
been and may not be registered under the Securities Act or any state securities
law; and such securities must be held indefinitely unless registration is
effected or transfer can be made pursuant to appropriate exemptions;
(b) the Holder has read, and fully understands, the terms of this Warrant
set forth on its face and the attachments hereto, including the restrictions on
transfer contained herein;
(c) the Holder is purchasing for investment for its own account and not
with a view to or for sale in connection with any distribution of this Warrant
or the Common Stock of the Company issuable upon exercise of this Warrant and it
has no intention of selling such securities in a public distribution in
violation of the federal securities laws or any applicable state securities
laws;
(d) the Holder is an "accredited investor" within the meaning of paragraph
(a) of Rule 501 of Regulation D promulgated by the Securities and Exchange
Commission and an "excluded purchaser" within the meaning of Section 25102(f) of
the California Corporate Securities Law of 1968; and
(e) the Company may affix the following legend (in addition to any other
legend(s), if any, required by applicable state corporate and/or securities
laws) to certificates for shares of Common Stock (or other securities) issued
upon exercise of this Warrant:
These securities have not been registered under the Securities Act of
1933 or any state securities laws. These securities have been acquired
for investment and not with a view to distribution or resale, and may
not be sold, mortgaged, pledged, hypothecated or otherwise transferred
without registration under the Securities Act of 1933 and
qualification under state securities laws, or an opinion of counsel
acceptable to the corporation that registration and qualification is
not required.
<PAGE>
Section 6. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
(a) The Holder may not transfer this Warrant without the written
consent of the Company and an opinion of counsel acceptable to the Company that
the transfer may be effected in compliance with exemptions under the Securities
Act and applicable state securities laws. The Holder may not transfer the Common
Stock underlying the Warrant unless there is an effective registration statement
in effect under the Securities Act and the transfer is qualified under
applicable state securities laws, or the Holder has delivered to the Company an
opinion of counsel acceptable to the Company that registration and qualification
is not required.
(b) The Company is obligated to cause a registration statement to be filed
under the Securities Act on or before October 15, 1999 pursuant to a
Registration Rights Agreement between the Company and Advantage Fund II Ltd. and
a Registration Rights Agreement between the Company and Koch Investment Group
Limited (the "Registration Statement"). The Company shall include in such
Registration Statement all of the Common Stock issuable upon conversion of the
Warrant.
(c) All fees, disbursements, and out-of-pocket expenses incurred in
connection with the filing of the Registration Statement under Paragraph (a) of
Section 6 and in complying with applicable securities and Blue Sky laws shall be
borne by the Company, provided, however, that any expenses of the individual
Holder or holders of the underlying securities, including but not limited to the
Holder or holders' attorneys' fees and discounts and commissions, shall be borne
by the Holder and holders of the Common Stock. The Company at its expense will
supply the Holder and any holder of Common Stock with copies of the Registration
Statement and the prospectus or offering circular included therein and other
related documents in such quantities as may be reasonably requested by the
Holder or holder of Common Stock.
(d) The Company shall have no obligation to register the Warrant but shall
be obligated to register the Common Stock issuable upon exercise of the Warrant
in accordance with Paragraph (b) of Section 6.
(e) The Company agrees that it will use its best efforts to keep such
Registration Statement effective until September 17, 2004 or such earlier date
as all Common Stock covered by such Registration Statement have been disposed of
pursuant thereto.
(f) The Holder agrees to cooperate with the Company and to provide the
Company on its request with all information concerning the Holder, the Warrant
issued hereunder, any Common Stock acquired upon exercise of the Warrant and the
means or methods of intended disposition of the Common Stock pursuant to the
Registration Statement that may reasonably be requested by the Company in order
for the Company to perform its obligation under this Section 6.
Section 7. LOST, STOLEN, MUTILATED, OR DESTROYED WARRANT. If this Warrant
is lost, stolen, mutilated, or destroyed, the Company may, on such terms as to
indemnity or otherwise as it may in its discretion reasonably impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated, or destroyed.
<PAGE>
Section 8. PRESENTMENT. Prior to due presentment of this Warrant, together
with a completed assignment form attached hereto for registration of transfer,
the Company may deem and treat the Holder as the absolute owner of the Warrant,
notwithstanding any notation of ownership or other writing thereon, for the
purpose of any exercise thereof and for all other purposes, and the Company
shall not be affected by any notice to the contrary.
Section 9. NOTICE. Notice or demand pursuant to this Warrant shall be
sufficiently given or made, if sent by first-class mail, postage prepaid,
addressed, if to the Holder of this Warrant, to the Holder at its last known
address as it shall appear in the records of the Company, and if to the Company,
at 2222 West Peoria Avenue, Phoenix, Arizona 85029, Attention: Chief Financial
Officer. The Company may alter the address to which communications are to be
sent by giving notice of such change of address in conformity with the
provisions of this Section 9 for the giving of notice.
Section 10. GOVERNING LAW. The validity, interpretation, and performance of
this Warrant shall be governed by the laws of the State of Arizona without
regard to principles of conflicts of laws.
Section 11. SUCCESSORS, ASSIGNS. Subject to the restrictions on transfer by
Holder set forth in Section 6 hereof, all the terms and provisions of the
Warrant shall be binding upon and inure to the benefit of and be enforceable by
the respective successors and assigns of the parties hereto.
Section 12. AMENDMENT. This Warrant may be modified, amended, or terminated
by a writing signed by the Company and the Holder.
Section 13. SEVERABILITY. Should any part but not the whole of this Warrant
for any reason be declared invalid, such decision shall not affect the validity
of any remaining portion, which remaining portion shall remain in force and
effect as if this Warrant had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Warrant without including
therein any such part which may, for any reason, be hereafter declared invalid.
Section 14. NO IMPAIRMENT. The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder of this Warrant against impairment.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and delivered on and as of the day and year first above written by one of its
officers thereunto duly authorized.
TITAN MOTORCYCLE CO. OF AMERICA,
a Nevada corporation
Dated: __________________ ___________________________________
By: _______________________________
Title: ____________________________
The undersigned Holder agrees and accepts this Warrant and acknowledges
that it has read and confirms each of the representations contained in Section
5.
REEDLAND CAPITAL PARTNERS
___________________________________
By:________________________________
Title: ____________________________
<PAGE>
PURCHASE FORM
(To be executed by the Warrant Holder if he desires to exercise the Warrant in
whole or in part)
To: TITAN MOTORCYCLE CO. OF AMERICA
The undersigned, whose Social Security or other identifying number is
_______________, hereby irrevocably exercises the attached Warrant, agrees to
purchase ______________ shares of Common Stock, and tenders payment herewith to
the order of TITAN MOTORCYCLE CO. OF AMERICA in the amount of
$_____________________________.
The undersigned requests that certificates for such shares be issued as follows:
Name: ____________________________________
Address: _________________________________
_________________________________
_________________________________
Deliver to: ______________________________
Address: _________________________________
_________________________________
_________________________________
and, if the number of shares shall not be all the shares purchasable under the
Warrant, that a new Warrant for the balance remaining of the shares purchasable
under the attached Warrant be registered in the name of, and delivered to, the
undersigned at the address stated below:
Address: _________________________________
_________________________________
_________________________________
By this exercise,
The undersigned hereby reaffirms its representations and warrants set forth
forth in Section 5 of the Warrant as of the date hereof.
Dated:______________, _____ Signature: ________________________
(Signature must conform in all
respects to the name of the Warrant
Holder as specified on the face of
the Warrant, without alteration,
enlargement or any change whatsoever)
<PAGE>
ASSIGNMENT
(To be executed by the Warrant Holder if he desires to effect a transfer of the
Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________________________, whose Social Security or other
identification number is _________________________________ [residing/located] at
______________________________________________________ the attached Warrant, and
appoints ___________________________________________________________ residing at
________________________________________________________________________________
_____________________________________________ the undersigned's attorney-in-fact
to transfer said Warrant on the books of the Company, with full power of
substitution in the premises.
Dated:_______________, _____
In the presence of:
_________________________________ _____________________________________
(Signature must conform in all
respects to the name of the Warrant
Holder as specified on the face of
the Warrant, without alteration,
enlargement or any change whatsoever)
These securities have not been registered under the Securities Act of 1933 or
any state securities laws. These securities have been acquired for investment
and not with a view to distribution or resale, and may not be sold, mortgaged,
pledged, hypothecated or otherwise transferred without registration under the
Securities Act of 1933 and qualification under state securities laws, or an
opinion of counsel acceptable to the corporation that registration and
qualification is not required.
TITAN MOTORCYCLE CO. OF AMERICA
Common Stock Purchase Warrant
To Subscribe for and Purchase September 17, 1999
2,500 Shares of Common Stock of
TITAN MOTORCYCLE CO. OF AMERICA
THIS CERTIFIES that, for good and valuable consideration, the sufficiency
of which is hereby acknowledged, Mr. Richard Cohn or his registered assigns (the
"Holder") is entitled to subscribe for and purchase from TITAN MOTORCYCLE CO. OF
AMERICA, a Nevada corporation (hereinafter called the "Company"), up to 2,500
shares (subject to adjustment as hereinafter provided) of fully paid and
non-assessable Common Stock of the Company (the "Common Stock"), subject to the
provisions and upon the terms and conditions hereinafter set forth at the price
of $3.21744 per share (such price as may from time to time be adjusted as
provided herein is called the "Warrant Price"), at or prior to 5:00 p.m. Pacific
time on September 17, 2004 (the "Exercise Period").
This Warrant and any Warrant subsequently issued upon exchange or transfer
hereof are hereinafter collectively called the "Warrant."
Section 1. EXERCISE OF WARRANT. The rights represented by this Warrant may
be exercised by the Holder, in whole or in part (but not as to fractional
shares) at any time or from time to time during the Exercise Period by the
completion of the purchase form attached hereto and by the surrender of this
Warrant (properly endorsed) at the office of the Company as it may designate by
notice in writing to the Holder hereof at the address of the Holder appearing on
the books of the Company, and by payment to the Company of the Warrant Price in
cash or by certified or official bank check, for each share being purchased. In
the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or its nominee or other party designated in
the purchase form by the Holder hereof, shall be delivered to the Holder as soon
as practicable after the exercise of this Warrant, and in any event within five
(5) business days after the date on which the rights represented by this Warrant
shall have been so exercised; and, unless this Warrant has expired or has been
exercised in full, a new Warrant representing the number of shares (except a
remaining fractional share), if any, with respect to which this Warrant shall
<PAGE>
not then have been exercised shall also be issued to the Holder within such
time. The person in whose name any certificate for shares of Common Stock is
issued upon exercise of this Warrant shall for all purposes be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Warrant is made, except that, if the date of such
surrender and payment is a date on which the stock transfer books of the Company
are closed, such person shall be deemed to have become the holder of such shares
at the close of business on the next succeeding date on which the stock transfer
books are open. No fractional shares shall be issued upon exercise of this
Warrant and no payment or adjustment shall be made upon any exercise on account
of any cash dividends on the Common Stock issued upon such exercise. If any
fractional interest in a share of Common Stock would, except for the provision
of this Section 1, be delivered upon such exercise, the Company, in lieu of
delivery of a fractional share thereof, shall pay to the Holder an amount in
cash equal to the current market price of such fractional share as determined in
good faith by the Board of Directors of the Company. Current market price means
the closing price of the Common Stock on the relevant date as reported on the
Nasdaq SmallCap Market (or any national securities exchange, national market
including the Nasdaq National Market, or other quotation system on which the
Common Stock is then listed) or, if no prices are reported for that date, such
prices on the next preceding date for which closing prices were reported, or if
the Common Stock is not publicly traded, by such methods or procedures as may be
established from time to time by the Board of Directors of the Company in good
faith.
Section 2. STOCK SPLITS, CONSOLIDATION, MERGER, AND SALE. In the event that
before the issuance of the shares of Common Stock into which this Warrant may be
exercised the outstanding shares of Common Stock shall be split, combined, or
consolidated, by dividend, reclassification or otherwise, into a greater or
lesser number of shares of Common Stock or any other class or classes of stock,
as appropriate, the Warrant Price in effect immediately prior to such
combination or consolidation and the number of shares purchasable under this
Warrant shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately adjusted. If there shall be effected any
consolidation or merger of the Company with another corporation, or a sale of
all or substantially all of the Company's assets to another corporation, and if
the holders of Common Stock shall be entitled pursuant to the terms of any such
transaction to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such consolidation, merger or
sale, lawful and adequate provisions shall be made whereby the Holder of this
Warrant shall thereafter have the right to receive, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the exercise of such Warrant, such
shares of stock, securities or assets as may be issuable or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such Common Stock immediately theretofore so
receivable had such consolidation, merger or sale not taken place, and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the Holder to the end that the provisions hereof shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise of this Warrant.
<PAGE>
(a) STOCK TO BE RESERVED. The Company will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issue upon the exercise of this Warrant as herein provided, such number of
shares of Common Stock as shall then be issuable upon the exercise of this
Warrant.
(b) ISSUE TAX. The issuance of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without charge to the Holders of this
Warrant for any issuance tax in respect thereof provided that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the Holder of this Warrant, which shall be borne by the Holder.
(c) CLOSING OF BOOKS. The Company will not close its transfer books to
impair any issuance of the shares of Common Stock upon the exercise of this
Warrant.
Section 3. NOTICES OF RECORD DATES. In the event of:
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution (other than cash dividends out of
earned surplus), or any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or consolidation or merger of the
Company with or into any other corporation, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Company, then and in each such event the Company will give notice to the
Holder of this Warrant specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or right and stating the
amount and character of such dividend, distribution or right, and (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock will be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least ten (10) days and not more than
ninety (90) days prior to the date therein specified, and such notice shall
state that the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") or to a favorable vote of shareholders, if either
is required. Any failure to provide a notice hereunder shall not affect the
corporate action taken.
<PAGE>
Section 4. NO SHAREHOLDER RIGHTS OR LIABILITIES. This Warrant shall not
entitle the Holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision hereof, in the absence of affirmative action by the
Holder hereof to purchase shares of Common Stock, and no mere enumeration hereon
of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for the Warrant Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
Section 5. REPRESENTATIONS OF HOLDER. The Holder hereby represents and
acknowledges to the Company as of the date hereof and as of each exercise of
this Warrant that:
(a) this Warrant, the Common Stock issuable upon exercise of this Warrant
and any securities issued with respect to any of them by way of a stock dividend
or stock split or in connection with a recapitalization, merger, consolidation
or other reorganization will be "restricted securities" as such term is used in
the rules and regulations under the Securities Act; such securities have not
been and may not be registered under the Securities Act or any state securities
law; and such securities must be held indefinitely unless registration is
effected or transfer can be made pursuant to appropriate exemptions;
(b) the Holder has read, and fully understands, the terms of this Warrant
set forth on its face and the attachments hereto, including the restrictions on
transfer contained herein;
(c) the Holder is purchasing for investment for its own account and not
with a view to or for sale in connection with any distribution of this Warrant
or the Common Stock of the Company issuable upon exercise of this Warrant and it
has no intention of selling such securities in a public distribution in
violation of the federal securities laws or any applicable state securities
laws;
(d) the Holder is an "accredited investor" within the meaning of paragraph
(a) of Rule 501 of Regulation D promulgated by the Securities and Exchange
Commission and an "excluded purchaser" within the meaning of Section 25102(f) of
the California Corporate Securities Law of 1968; and
(e) the Company may affix the following legend (in addition to any other
legend(s), if any, required by applicable state corporate and/or securities
laws) to certificates for shares of Common Stock (or other securities) issued
upon exercise of this Warrant:
These securities have not been registered under the Securities Act of
1933 or any state securities laws. These securities have been acquired
for investment and not with a view to distribution or resale, and may
not be sold, mortgaged, pledged, hypothecated or otherwise transferred
without registration under the Securities Act of 1933 and
qualification under state securities laws, or an opinion of counsel
acceptable to the corporation that registration and qualification is
not required.
<PAGE>
Section 6. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
(a) The Holder may not transfer this Warrant without the written consent of
the Company and an opinion of counsel acceptable to the Company that the
transfer may be effected in compliance with exemptions under the Securities Act
and applicable state securities laws. The Holder may not transfer the Common
Stock underlying the Warrant unless there is an effective registration statement
in effect under the Securities Act and the transfer is qualified under
applicable state securities laws, or the Holder has delivered to the Company an
opinion of counsel acceptable to the Company that registration and qualification
is not required.
(b) The Company is obligated to cause a registration statement to be filed
under the Securities Act on or before October 15, 1999 pursuant to a
Registration Rights Agreement between the Company and Advantage Fund II Ltd. and
a Registration Rights Agreement between the Company and Koch Investment Group
Limited (the "Registration Statement"). The Company shall include in such
Registration Statement all of the Common Stock issuable upon conversion of the
Warrant.
(c) All fees, disbursements, and out-of-pocket expenses incurred in
connection with the filing of the Registration Statement under Paragraph (a) of
Section 6 and in complying with applicable securities and Blue Sky laws shall be
borne by the Company, provided, however, that any expenses of the individual
Holder or holders of the underlying securities, including but not limited to the
Holder or holders' attorneys' fees and discounts and commissions, shall be borne
by the Holder and holders of the Common Stock. The Company at its expense will
supply the Holder and any holder of Common Stock with copies of the Registration
Statement and the prospectus or offering circular included therein and other
related documents in such quantities as may be reasonably requested by the
Holder or holder of Common Stock.
(d) The Company shall have no obligation to register the Warrant but shall
be obligated to register the Common Stock issuable upon exercise of the Warrant
in accordance with Paragraph (b) of Section 6.
(e) The Company agrees that it will use its best efforts to keep such
Registration Statement effective until September 17, 2004 or such earlier date
as all Common Stock covered by such Registration Statement have been disposed of
pursuant thereto.
(f) The Holder agrees to cooperate with the Company and to provide the
Company on its request with all information concerning the Holder, the Warrant
issued hereunder, any Common Stock acquired upon exercise of the Warrant and the
means or methods of intended disposition of the Common Stock pursuant to the
Registration Statement that may reasonably be requested by the Company in order
for the Company to perform its obligation under this Section 6.
Section 7. LOST, STOLEN, MUTILATED, OR DESTROYED WARRANT. If this Warrant
is lost, stolen, mutilated, or destroyed, the Company may, on such terms as to
indemnity or otherwise as it may in its discretion reasonably impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated, or destroyed.
<PAGE>
Section 8. PRESENTMENT. Prior to due presentment of this Warrant, together
with a completed assignment form attached hereto for registration of transfer,
the Company may deem and treat the Holder as the absolute owner of the Warrant,
notwithstanding any notation of ownership or other writing thereon, for the
purpose of any exercise thereof and for all other purposes, and the Company
shall not be affected by any notice to the contrary.
Section 9. NOTICE. Notice or demand pursuant to this Warrant shall be
sufficiently given or made, if sent by first-class mail, postage prepaid,
addressed, if to the Holder of this Warrant, to the Holder at its last known
address as it shall appear in the records of the Company, and if to the Company,
at 2222 West Peoria Avenue, Phoenix, Arizona 85029, Attention: Chief Financial
Officer. The Company may alter the address to which communications are to be
sent by giving notice of such change of address in conformity with the
provisions of this Section 9 for the giving of notice.
Section 10. GOVERNING LAW. The validity, interpretation, and performance of
this Warrant shall be governed by the laws of the State of Arizona without
regard to principles of conflicts of laws.
Section 11. SUCCESSORS, ASSIGNS. Subject to the restrictions on transfer by
Holder set forth in Section 6 hereof, all the terms and provisions of the
Warrant shall be binding upon and inure to the benefit of and be enforceable by
the respective successors and assigns of the parties hereto.
Section 12. AMENDMENT. This Warrant may be modified, amended, or terminated
by a writing signed by the Company and the Holder.
Section 13. SEVERABILITY. Should any part but not the whole of this Warrant
for any reason be declared invalid, such decision shall not affect the validity
of any remaining portion, which remaining portion shall remain in force and
effect as if this Warrant had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Warrant without including
therein any such part which may, for any reason, be hereafter declared invalid.
Section 14. NO IMPAIRMENT. The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder of this Warrant against impairment.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and delivered on and as of the day and year first above written by one of its
officers thereunto duly authorized.
TITAN MOTORCYCLE CO. OF AMERICA,
a Nevada corporation
Dated: __________________ ______________________________________
By: __________________________________
Title: _______________________________
The undersigned Holder agrees and accepts this Warrant and acknowledges
that it has read and confirms each of the representations contained in Section
5.
RICHARD COHN
______________________________________
<PAGE>
PURCHASE FORM
(To be executed by the Warrant Holder if he desires to exercise the Warrant in
whole or in part)
To: TITAN MOTORCYCLE CO. OF AMERICA
The undersigned, whose Social Security or other identifying number is
_______________, hereby irrevocably exercises the attached Warrant, agrees to
purchase ______________ shares of Common Stock, and tenders payment herewith to
the order of TITAN MOTORCYCLE CO. OF AMERICA in the amount of
$_____________________________.
The undersigned requests that certificates for such shares be issued as follows:
Name: ____________________________________
Address: _________________________________
_________________________________
_________________________________
Deliver to: ______________________________
Address: _________________________________
_________________________________
_________________________________
and, if the number of shares shall not be all the shares purchasable under the
Warrant, that a new Warrant for the balance remaining of the shares purchasable
under the attached Warrant be registered in the name of, and delivered to, the
undersigned at the address stated below:
Address: _________________________________
_________________________________
_________________________________
By this exercise,
The undersigned hereby reaffirms its representations and warrants set forth
forth in Section 5 of the Warrant as of the date hereof.
Dated:______________, _____ Signature: ________________________
(Signature must conform in all
respects to the name of the Warrant
Holder as specified on the face of
the Warrant, without alteration,
enlargement or any change whatsoever)
<PAGE>
ASSIGNMENT
(To be executed by the Warrant Holder if he desires to effect a transfer of the
Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________________________, whose Social Security or other
identification number is _________________________________ [residing/located] at
______________________________________________________ the attached Warrant, and
appoints ___________________________________________________________ residing at
________________________________________________________________________________
_____________________________________________ the undersigned's attorney-in-fact
to transfer said Warrant on the books of the Company, with full power of
substitution in the premises.
Dated:_______________, _____
In the presence of:
_________________________________ _____________________________________
(Signature must conform in all
respects to the name of the Warrant
Holder as specified on the face of
the Warrant, without alteration,
enlargement or any change whatsoever)
These securities have not been registered under the Securities Act of 1933 or
any state securities laws. These securities have been acquired for investment
and not with a view to distribution or resale, and may not be sold, mortgaged,
pledged, hypothecated or otherwise transferred without registration under the
Securities Act of 1933 and qualification under state securities laws, or an
opinion of counsel acceptable to the corporation that registration and
qualification is not required.
TITAN MOTORCYCLE CO. OF AMERICA
Common Stock Purchase Warrant
To Subscribe for and Purchase September 17, 1999
2,500 Shares of Common Stock of
TITAN MOTORCYCLE CO. OF AMERICA
THIS CERTIFIES that, for good and valuable consideration, the sufficiency
of which is hereby acknowledged, Intellect Capital Corp. or its registered
assigns (the "Holder") is entitled to subscribe for and purchase from TITAN
MOTORCYCLE CO. OF AMERICA, a Nevada corporation (hereinafter called the
"Company"), up to 2,500 shares (subject to adjustment as hereinafter provided)
of fully paid and non-assessable Common Stock of the Company (the "Common
Stock"), subject to the provisions and upon the terms and conditions hereinafter
set forth at the price of $3.21744 per share (such price as may from time to
time be adjusted as provided herein is called the "Warrant Price"), at or prior
to 5:00 p.m. Pacific time on September 17, 2004 (the "Exercise Period").
This Warrant and any Warrant subsequently issued upon exchange or transfer
hereof are hereinafter collectively called the "Warrant."
Section 1. EXERCISE OF WARRANT. The rights represented by this Warrant may
be exercised by the Holder, in whole or in part (but not as to fractional
shares) at any time or from time to time during the Exercise Period by the
completion of the purchase form attached hereto and by the surrender of this
Warrant (properly endorsed) at the office of the Company as it may designate by
notice in writing to the Holder hereof at the address of the Holder appearing on
the books of the Company, and by payment to the Company of the Warrant Price in
cash or by certified or official bank check, for each share being purchased. In
the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or its nominee or other party designated in
the purchase form by the Holder hereof, shall be delivered to the Holder as soon
as practicable after the exercise of this Warrant, and in any event within five
(5) business days after the date on which the rights represented by this Warrant
shall have been so exercised; and, unless this Warrant has expired or has been
<PAGE>
exercised in full, a new Warrant representing the number of shares (except a
remaining fractional share), if any, with respect to which this Warrant shall
not then have been exercised shall also be issued to the Holder within such
time. The person in whose name any certificate for shares of Common Stock is
issued upon exercise of this Warrant shall for all purposes be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Warrant is made, except that, if the date of such
surrender and payment is a date on which the stock transfer books of the Company
are closed, such person shall be deemed to have become the holder of such shares
at the close of business on the next succeeding date on which the stock transfer
books are open. No fractional shares shall be issued upon exercise of this
Warrant and no payment or adjustment shall be made upon any exercise on account
of any cash dividends on the Common Stock issued upon such exercise. If any
fractional interest in a share of Common Stock would, except for the provision
of this Section 1, be delivered upon such exercise, the Company, in lieu of
delivery of a fractional share thereof, shall pay to the Holder an amount in
cash equal to the current market price of such fractional share as determined in
good faith by the Board of Directors of the Company. Current market price means
the closing price of the Common Stock on the relevant date as reported on the
Nasdaq SmallCap Market (or any national securities exchange, national market
including the Nasdaq National Market, or other quotation system on which the
Common Stock is then listed) or, if no prices are reported for that date, such
prices on the next preceding date for which closing prices were reported, or if
the Common Stock is not publicly traded, by such methods or procedures as may be
established from time to time by the Board of Directors of the Company in good
faith.
Section 2. STOCK SPLITS, CONSOLIDATION, MERGER, AND SALE. In the event that
before the issuance of the shares of Common Stock into which this Warrant may be
exercised the outstanding shares of Common Stock shall be split, combined, or
consolidated, by dividend, reclassification or otherwise, into a greater or
lesser number of shares of Common Stock or any other class or classes of stock,
as appropriate, the Warrant Price in effect immediately prior to such
combination or consolidation and the number of shares purchasable under this
Warrant shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately adjusted. If there shall be effected any
consolidation or merger of the Company with another corporation, or a sale of
all or substantially all of the Company's assets to another corporation, and if
the holders of Common Stock shall be entitled pursuant to the terms of any such
transaction to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such consolidation, merger or
sale, lawful and adequate provisions shall be made whereby the Holder of this
Warrant shall thereafter have the right to receive, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the exercise of such Warrant, such
shares of stock, securities or assets as may be issuable or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such Common Stock immediately theretofore so
receivable had such consolidation, merger or sale not taken place, and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the Holder to the end that the provisions hereof shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise of this Warrant.
<PAGE>
(a) STOCK TO BE RESERVED. The Company will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon the exercise of this Warrant as herein provided, such number of shares of
Common Stock as shall then be issuable upon the exercise of this Warrant.
(b) ISSUE TAX. The issuance of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without charge to the Holders of this
Warrant for any issuance tax in respect thereof provided that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the Holder of this Warrant, which shall be borne by the Holder.
(c) CLOSING OF BOOKS. The Company will not close its transfer books to
impair any issuance of the shares of Common Stock upon the exercise of this
Warrant.
Section 3. NOTICES OF RECORD DATES. In the event of:
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution (other than cash dividends out of
earned surplus), or any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all or
substantially all the assets of the Company to or consolidation or merger of the
Company with or into any other corporation, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Company, then and in each such event the Company will give notice to the
Holder of this Warrant specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or right and stating the
amount and character of such dividend, distribution or right, and (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock will be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least ten (10) days and not more than
ninety (90) days prior to the date therein specified, and such notice shall
state that the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") or to a favorable vote of shareholders, if either
is required. Any failure to provide a notice hereunder shall not affect the
corporate action taken.
<PAGE>
Section 4. NO SHAREHOLDER RIGHTS OR LIABILITIES. This Warrant shall not
entitle the Holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision hereof, in the absence of affirmative action by the
Holder hereof to purchase shares of Common Stock, and no mere enumeration hereon
of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for the Warrant Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
Section 5. REPRESENTATIONS OF HOLDER. The Holder hereby represents and
acknowledges to the Company as of the date hereof and as of each exercise of
this Warrant that:
(a) this Warrant, the Common Stock issuable upon exercise of this Warrant
and any securities issued with respect to any of them by way of a stock dividend
or stock split or in connection with a recapitalization, merger, consolidation
or other reorganization will be "restricted securities" as such term is used in
the rules and regulations under the Securities Act; such securities have not
been and may not be registered under the Securities Act or any state securities
law; and such securities must be held indefinitely unless registration is
effected or transfer can be made pursuant to appropriate exemptions;
(b) the Holder has read, and fully understands, the terms of this Warrant
set forth on its face and the attachments hereto, including the restrictions on
transfer contained herein;
(c) the Holder is purchasing for investment for its own account and not
with a view to or for sale in connection with any distribution of this Warrant
or the Common Stock of the Company issuable upon exercise of this Warrant and it
has no intention of selling such securities in a public distribution in
violation of the federal securities laws or any applicable state securities
laws;
(d) the Holder is an "accredited investor" within the meaning of paragraph
(a) of Rule 501 of Regulation D promulgated by the Securities and Exchange
Commission and an "excluded purchaser" within the meaning of Section 25102(f) of
the California Corporate Securities Law of 1968; and
(e) the Company may affix the following legend (in addition to any other
legend(s), if any, required by applicable state corporate and/or securities
laws) to certificates for shares of Common Stock (or other securities) issued
upon exercise of this Warrant:
These securities have not been registered under the Securities Act of
1933 or any state securities laws. These securities have been acquired
for investment and not with a view to distribution or resale, and may
not be sold, mortgaged, pledged, hypothecated or otherwise transferred
without registration under the Securities Act of 1933 and qualification
under state securities laws, or an opinion of counsel acceptable to the
corporation that registration and qualification is not required.
<PAGE>
Section 6. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
(a) The Holder may not transfer this Warrant without the written consent of
the Company and an opinion of counsel acceptable to the Company that the
transfer may be effected in compliance with exemptions under the Securities Act
and applicable state securities laws. The Holder may not transfer the Common
Stock underlying the Warrant unless there is an effective registration statement
in effect under the Securities Act and the transfer is qualified under
applicable state securities laws, or the Holder has delivered to the Company an
opinion of counsel acceptable to the Company that registration and qualification
is not required.
(b) The Company is obligated to cause a registration statement to be filed
under the Securities Act on or before October 15, 1999 pursuant to a
Registration Rights Agreement between the Company and Advantage Fund II Ltd. and
a Registration Rights Agreement between the Company and Koch Investment Group
Limited (the "Registration Statement"). The Company shall include in such
Registration Statement all of the Common Stock issuable upon conversion of the
Warrant.
(c) All fees, disbursements, and out-of-pocket expenses incurred in
connection with the filing of the Registration Statement under Paragraph (a) of
Section 6 and in complying with applicable securities and Blue Sky laws shall be
borne by the Company, provided, however, that any expenses of the individual
Holder or holders of the underlying securities, including but not limited to the
Holder or holders' attorneys' fees and discounts and commissions, shall be borne
by the Holder and holders of the Common Stock. The Company at its expense will
supply the Holder and any holder of Common Stock with copies of the Registration
Statement and the prospectus or offering circular included therein and other
related documents in such quantities as may be reasonably requested by the
Holder or holder of Common Stock.
(d) The Company shall have no obligation to register the Warrant but shall
be obligated to register the Common Stock issuable upon exercise of the Warrant
in accordance with Paragraph (b) of Section 6.
(e) The Company agrees that it will use its best efforts to keep such
Registration Statement effective until September 17, 2004 or such earlier date
as all Common Stock covered by such Registration Statement have been disposed of
pursuant thereto.
(f) The Holder agrees to cooperate with the Company and to provide the
Company on its request with all information concerning the Holder, the Warrant
issued hereunder, any Common Stock acquired upon exercise of the Warrant and the
means or methods of intended disposition of the Common Stock pursuant to the
Registration Statement that may reasonably be requested by the Company in order
for the Company to perform its obligation under this Section 6.
Section 7. LOST, STOLEN, MUTILATED, OR DESTROYED WARRANT. If this Warrant
is lost, stolen, mutilated, or destroyed, the Company may, on such terms as to
indemnity or otherwise as it may in its discretion reasonably impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated, or destroyed.
<PAGE>
Section 8. PRESENTMENT. Prior to due presentment of this Warrant, together
with a completed assignment form attached hereto for registration of transfer,
the Company may deem and treat the Holder as the absolute owner of the Warrant,
notwithstanding any notation of ownership or other writing thereon, for the
purpose of any exercise thereof and for all other purposes, and the Company
shall not be affected by any notice to the contrary.
Section 9. NOTICE. Notice or demand pursuant to this Warrant shall be
sufficiently given or made, if sent by first-class mail, postage prepaid,
addressed, if to the Holder of this Warrant, to the Holder at its last known
address as it shall appear in the records of the Company, and if to the Company,
at 2222 West Peoria Avenue, Phoenix, Arizona 85029, Attention: Chief Financial
Officer. The Company may alter the address to which communications are to be
sent by giving notice of such change of address in conformity with the
provisions of this Section 9 for the giving of notice.
Section 10. GOVERNING LAW. The validity, interpretation, and performance of
this Warrant shall be governed by the laws of the State of Arizona without
regard to principles of conflicts of laws.
Section 11. SUCCESSORS, ASSIGNS. Subject to the restrictions on transfer by
Holder set forth in Section 6 hereof, all the terms and provisions of the
Warrant shall be binding upon and inure to the benefit of and be enforceable by
the respective successors and assigns of the parties hereto.
Section 12. AMENDMENT. This Warrant may be modified, amended, or terminated
by a writing signed by the Company and the Holder.
Section 13. SEVERABILITY. Should any part but not the whole of this Warrant
for any reason be declared invalid, such decision shall not affect the validity
of any remaining portion, which remaining portion shall remain in force and
effect as if this Warrant had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Warrant without including
therein any such part which may, for any reason, be hereafter declared invalid.
Section 14. NO IMPAIRMENT. The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder of this Warrant against impairment.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and delivered on and as of the day and year first above written by one of its
officers thereunto duly authorized.
TITAN MOTORCYCLE CO. OF AMERICA,
a Nevada corporation
Dated: __________________ ___________________________________
By: _______________________________
Title: ____________________________
The undersigned Holder agrees and accepts this Warrant and acknowledges
that it has read and confirms each of the representations contained in Section
5.
INTELLECT CAPITAL CORP.
___________________________________
By: ______________________________
Title: ____________________________
<PAGE>
PURCHASE FORM
(To be executed by the Warrant Holder if he desires to exercise the Warrant in
whole or in part)
To: TITAN MOTORCYCLE CO. OF AMERICA
The undersigned, whose Social Security or other identifying number is
_______________, hereby irrevocably exercises the attached Warrant, agrees to
purchase ______________ shares of Common Stock, and tenders payment herewith to
the order of TITAN MOTORCYCLE CO. OF AMERICA in the amount of
$_____________________________.
The undersigned requests that certificates for such shares be issued as follows:
Name: ____________________________________
Address: _________________________________
_________________________________
_________________________________
Deliver to: ______________________________
Address: _________________________________
_________________________________
_________________________________
and, if the number of shares shall not be all the shares purchasable under the
Warrant, that a new Warrant for the balance remaining of the shares purchasable
under the attached Warrant be registered in the name of, and delivered to, the
undersigned at the address stated below:
Address: _________________________________
_________________________________
_________________________________
By this exercise,
The undersigned hereby reaffirms its representations and warrants set
forth forth in Section 5 of the Warrant as of the date hereof.
Dated:______________, _____ Signature: ________________________
(Signature must conform in all
respects to the name of the Warrant
Holder as specified on the face of
the Warrant, without alteration,
enlargement or any change whatsoever)
<PAGE>
ASSIGNMENT
(To be executed by the Warrant Holder if he desires to effect a transfer of the
Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ___________________________________________, whose Social Security or other
identification number is _________________________________ [residing/located] at
______________________________________________________ the attached Warrant, and
appoints ___________________________________________________________ residing at
________________________________________________________________________________
_____________________________________________ the undersigned's attorney-in-fact
to transfer said Warrant on the books of the Company, with full power of
substitution in the premises.
Dated:_______________, _____
In the presence of:
_________________________________ _____________________________________
(Signature must conform in all
respects to the name of the Warrant
Holder as specified on the face of
the Warrant, without alteration,
enlargement or any change whatsoever)
[LETTERHEAD OF JAMES, DRIGGS, WALCH, SANTORO, JOHNSON, KEARNEY & THOMPSON]
TITAN MOTORCYCLE CO. OF AMERICA
2222 West Peoria Avenue
Phoenix, Arizona 85029
Re: Issuance of Common Stock
Gentlemen:
We have acted as special Nevada counsel to Titan Motorcycle Co. of America,
a Nevada corporation (the "Company"), in connection with its Registration
Statement on Form S-3 (the "Registration Statement") filed under the Securities
Act of 1933, as amended (the "1933 Act"), relating to the registration of, and
covering the resale of the 3,322,031 shares of Common Stock (the Shares )
issuable upon exercise of (1) the Series A Convertible Preferred Stock, $.001
par value (the Preferred Stock ) and Common Stock Purchase Warrants (the
Investor Warrants ) which were issued to Advantage Fund II Ltd. and Koch
Investment Group Limited (the Investors ) pursuant to those two certain
Subscription Agreements, dated as of September 15, 1999, by and between the
Holders and the Company (the Subscription Agreements ), and (2) the Common Stock
Purchase Warrants (the Reedland Warrants ), which were issued to Reedland
Capital Partners ( Reedland ) and its designees pursuant to that certain
Engagement Letter between the Company and Reedland, dated August 20, 1999.
In rendering the opinions set forth herein, we have limited our factual
inquiry to (i) reliance on a certificate of the Secretary of the Company, (ii)
reliance on the facts and representations contained in the Registration
Statement, including, without limitation, those relating to the number of the
Company's Common Shares, without par value, which are authorized, issued or
reserved for issuance upon conversion or exercise of preferred shares, warrants
and options, and (iii) such documents, corporate records and other instruments
as we have deemed necessary or appropriate as a basis for the opinions expressed
below, including, without limitation, a certificate issued by the Secretary of
State of the State of Nevada dated September 8, 1999, attesting to the corporate
existence of the Company in the State of Nevada, and telephonic verification
with such Secretary of State with respect to the Company's continued valid
existence as of the date hereof.
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such copies. In rendering the
opinion expressed below, we have assumed that the Shares (i) will conform in all
material respects to the description thereof set forth in the Registration
Statement, (ii) were issued and delivered in accordance with the terms of the
Agreement, and (iii) were issued pursuant to an exemption from the registration
requirements of the 1933 Act pursuant to Section 4(2) of the 1933 Act.
Based upon the foregoing, and subject to the qualifications set forth
herein, we are of the opinion that the Shares to be issued upon the exercise of
the Preferred Stock, Investor Warrants, and Reedland Warrant will be validly
issued, fully paid, and nonassessable.
<PAGE>
The foregoing opinion is limited to the current internal laws of the State
of Nevada (without giving effect to any conflict of law principles thereof), and
we have not considered, and express no opinion on, the laws of any other
jurisdiction. This opinion is based on the laws in effect and facts in existence
on the date of this letter, and we assume no obligation to revise or supplement
this letter should the law or facts, or both, change.
This opinion is intended solely for the use of the Company in connection
with the registration of the Shares. It may not be relied upon by any other
person or for any other purpose, or reproduced or filed publicly by any person,
without the written consent of James, Driggs, Walch, Santoro, Kearney, Johnson &
Thompson; provided, however, that we hereby consent to the filing of this
opinion as Exhibit 5 to the Registration Statement and to the references to
James, Driggs, Walch, Santoro, Kearney, Johnson & Thompson contained in the
Registration Statement.
Very truly yours,
James, Driggs, Walch, Santoro,
Johnson, Kearney & Thompson
/s/ J. Douglas Driggs, Jr.
J. Douglas Driggs, Jr.
LOAN AGREEMENT
This Loan Agreement (this "Agreement") is entered into as of April 10, 1998
by and between Wells Fargo Bank, National Association ("Lender") and Titan
Motorcycle Co. of America, a Nevada corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. Any accounting term used herein unless otherwise
defined or set forth in this Agreement shall have the meanings customarily given
to such term in accordance with GAAP. For purposes of this Agreement, the
following terms shall have the respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment of or goods sold or leased for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Revolving Loans which would otherwise be available to
Borrower under the lending formula(s) provided for herein: (a) to reflect
events, conditions, contingencies or risks which, as determined by Lender in
good faith, do or may affect either (i) the Collateral or its value, (ii) the
assets, business or prospects of Borrower or any Obligor, or (iii) the security
interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof), or (b) to reflect Lender's
good faith belief that any collateral report or financial information furnished
by or on behalf of Borrower or any Obligor to Lender is or may have been
incomplete, inaccurate or misleading in any material respect, or (c) in respect
of any state of facts which Lender determines in good faith constitutes an Event
<PAGE>
of Default or may, with notice or passage of time or both, constitute an Event
of Default. As of the date of this Agreement, Lender is establishing an
Availability Reserve of 1% against Eligible Accounts by reason of possible
warranty claims against Borrower, and an Availability Reserve in the amount of
$800,000 against Eligible Inventory until a perpetual inventory system
satisfactory to Lender is put in place by Borrower.
1.3 "Cash Collateral Account" shall have the meaning set forth in SECTION
6.1 hereof.
1.4 "Collateral" shall mean all the property in which Borrower or an
Obligor grants or is required to grant to Lender a security interest or lien, as
described in SECTION 5 hereof.
1.5 "Eligible Accounts" shall mean Accounts created by Borrower which are
and continue to be acceptable to Lender based on the criteria set forth below.
In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and BONA FIDE sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of Borrower's business which transactions are completed in
accordance with the terms and provisions contained in any documents related
thereto;
(b) such Accounts are not unpaid more than ninety (90) days after the
date of the original invoice therefor, or, if such accounts are financed by
Transamerica under the Manufacturer's/Distributor's Finance Agreement (One Step)
dated April 25, 1997 (the "TMFC Agreement"), thirty (30) days after the date of
the original invoice therefor;
(c) such Accounts comply with the terms and conditions applicable
thereto contained in the Security Agreement executed in connection therewith;
(d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America, or, at Lender's
option, if: (1) the account debtor has delivered to Borrower an irrevocable
letter of credit issued or confirmed by a bank satisfactory to Lender,
sufficient to cover such Account, in form and substance satisfactory to Lender
and, if required by Lender, the original of such letter of credit has been
delivered to Lender or Lender's agent and the issuer thereof notified of the
assignment of the proceeds of such letter of credit to Lender, or (ii) such
Account is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender, or (iii) the account debtor
resides in a province of Canada which recognizes Lender's perfection and
enforcement rights as to Accounts by reason of the filing of a UCC-1 in the
state of Borrower's chief executive office, or (iv) such Account is financed by
Transamerica under the TMFC Agreement, so long as such agreement provides that
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<PAGE>
Borrower has no obligation to repurchase the underlying inventory if it has not
been repossessed by Transamerica and is not deliverable to Borrower in the
United States free and clear of any liens and encumbrances; or (v) such Account
is otherwise acceptable in all respects to Lender (subject to such lending
formula with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress billings, bill and hold
invoices or retainage invoices;
(g) the account debtor with respect to such Accounts has not asserted
a counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Accounts;
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer, employee or agent of
the account debtor with respect to such Accounts is an officer, employee or
agent of or affiliated with Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise. Titan of Las Vegas,
Titan of Los Angeles and Paragon Custom shall be deemed to be affiliates of
Borrower until such time as Transamerica agrees, in a writing satisfactory to
Lender, not to require Borrower to repurchase inventory previously sold to such
entities;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State or any political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State or any political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended, or any
similar State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(1) there are no proceedings or actions which are threatened or
pending against any account debtor with respect to such Accounts from such
account debtor which might result in any material adverse change in any such
account debtor's financial condition;
(m) such Accounts of a single account debtor or its affiliates do not
constitute more than twenty (20%) of all otherwise Eligible Accounts (but the
portion of the Accounts not in excess of such percentage may be deemed Eligible
Accounts);
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<PAGE>
(n) such Accounts are not owed by any account debtor who has Accounts
ineligible under paragraph (b) and which constitute more than twenty-five (25%)
percent of the total Accounts from such account debtor;
(o) such Accounts are owed by Titan of Oregon or other account debtors
who are dealers in motorized vehicles which have been approved and financed by
Transamerica under the TMFC Agreement; and
(p) such Accounts are owed by account debtors deemed creditworthy at
all times by Lender, as determined by Lender.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.6 "Eligible Inventory" shall mean Inventory owned by Borrower which is
and remains acceptable to Lender for lending purposes and is located at one of
the addresses set forth in Schedule I to this Agreement; provided however, that
if any such location is owned by a party other than Borrower, Lender shall have
obtained from the owner thereof an agreement relative to Lender's rights with
respect to such Inventory, in form and content satisfactory to Lender; and
provided further that in no event however shall Eligible Inventory include: (a)
inventory subject to a security interest or lien in favor of any person other
than Lender, except those permitted in this Agreement; and (b) inventory which
is not subject to the first priority, valid and perfected security interest of
Lender. General criteria for Eligible Inventory may be established and revised
from time to time by Lender in good faith. Any Inventory which is not Eligible
Inventory shall nevertheless be part of the Collateral.
1.7 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.8 "Event of Default" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.
1.9 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of SECTION 8.10 hereof, GAAP shall be determined on the basis of
such principles in effect on the date hereof and consistent with those used in
the preparation of the audited financial statements delivered to Lender prior to
the date hereof.
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<PAGE>
1.10 "General Intangibles" shall mean general intangibles (including, but
not limited to, tax and duty refunds, registered and unregistered patents,
trademarks, service marks, copyrights, trade names, applications for the
foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer
lists, licenses, whether as licensor or licensee, choses in action and other
claims and existing and future leasehold interests in equipment).
1.11 "Information Certificate" shall mean the Information Certificate of
Borrower constituting EXHIBIT A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Loan Documents and the financing arrangements provided for herein.
1.12 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.13 "Line of Credit" shall mean a revolving line of credit under which
Lender agrees to make Revolving Loans, subject to the terms and conditions of
this Agreement.
1.14 "Line of Credit Note" shall have the meaning set forth in Section 2.1
hereof.
1.15 "Loan Documents" shall mean, collectively, this Agreement and all
notes, guarantees, security agreements, subordination agreements, and other
agreements, documents and instruments now or at any time hereafter executed
and/or delivered by Borrower or any Obligor in connection with this Agreement,
as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.16 "Maximum Amount" shall mean the amount of $5,000,000.00.
1.20 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed with
respect thereto.
1.21 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Line of Credit or who is the owner
of any property which is security for the Line of Credit, or any of them, other
than Borrower. If Borrower is a partnership, each general partner is an Obligor.
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<PAGE>
1.22 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.23 "Revolving Loans" shall mean advances made by Lender to Borrower on a
revolving basis under the Line of Credit, as set forth in Section 2.1 hereof.
1.24 "Rights to Payment" shall mean all Accounts, General Intangibles,
contract rights, chattel paper, documents, instruments, letters of credit,
bankers acceptances and guaranties, and all present and future liens, security
interests, rights, remedies, title and interest in, to and in respect of
Accounts and other Collateral, and shall include without limitation, (a) rights
and remedies under or relating to guaranties, contracts of suretyship, letters
of credit and credit and other insurance related to the Collateral, (b) rights
of stoppage in transit, replevin, repossession, reclamation and other rights and
remedies of an unpaid vendor, lienor or secured party, (c) goods described in
invoices, documents, contracts or instruments with respect to, or otherwise
representing or evidencing, Accounts or other Collateral, including without
limitation, returned, repossessed and reclaimed goods, and (d) deposits by and
property of account debtors or other persons securing the obligations of account
debtors, monies, securities, credit balances, deposits, deposit accounts and
other property of Borrower now or hereafter held or received by or in transit to
Lender or any of its affiliates or at any other depository or other institution
from or for the account of Borrower, whether for safekeeping, pledge, custody,
transmission, collection or otherwise.
1.25 "Tangible Net Worth" shall mean, at any time, the aggregate of total
stockholders' equity less any intangible assets.
1.26 "Transamerica" means Transamerica Commercial Finance Corporation.
1.27 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a standard cost basis in
accordance with GAAP, or (b) market value.
1.28 "Working Amount" shall mean the average daily principal balance of the
outstanding Revolving Loans while this Agreement is in effect.
1.29 "Working Capital" shall mean, at any time, total current assets less
total current liabilities.
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<PAGE>
SECTION 2. CREDIT FACILITIES
2.1 LINE OF CREDIT
(a) LENDING FORMULA. Subject to and upon the terms and conditions
contained herein, Lender agrees to make Revolving Loans under a line of credit
(the "Line of Credit") from time to time in amounts requested by Borrower up to
an aggregate outstanding principal amount equal to the lesser of: (i) the
Maximum Amount; or (ii) the sum of:
(A) eighty five percent (85%) of the Net Amount of Eligible
Accounts so long as the dilution of Accounts, as described below, is 5% or
less, and eighty percent (80%) if such dilution is greater than 5%); PLUS
(B) the sum of (1) seventy percent (70%) of the Value of Eligible
Inventory consisting of finished goods, other than apparel, (2) fifty
percent (50%) of the Value of Eligible Inventory consisting of raw
materials, other than apparel, (3) the lesser of (y) fifty percent (50%) of
the Value of Eligible Inventory consisting of work-in-process, other than
apparel, and (z) $1,500,000.00, for the fiscal year ending December 31,
1998, and $2,000,000.00 for each fiscal year thereafter, and (4) thirty
percent (30%) of the Value of Eligible Inventory consisting of finished
goods apparel; LESS
(C) any Availability Reserves.
(b) REDUCTION OF LENDING FORMULA. Lender may, in its discretion, from
time to time, upon not less than five (5) days prior notice to Borrower, (i)
reduce the lending formula with respect to Eligible Accounts to the extent that
Lender determines in good faith that: (A) the dilution with respect to the
Accounts for any period (based on the ratio of (1) the aggregate amount of
reductions in Accounts other than as a result of payments in cash to (2) the
aggregate amount of total sales) has increased in any material respect or may be
reasonably anticipated to increase in any material respect above historical
levels, or (B) the general creditworthiness of account debtors has declined; or
(ii) reduce the lending formula with respect to Eligible Inventory to the extent
that Lender determines that: (A) the number of days of the turnover of the
Inventory for any period has adversely changed in any material respect, or (B)
the liquidation value of the Eligible Inventory, or any category thereof, has
decreased, or (C) the nature and quality of the Inventory has deteriorated. In
determining whether to reduce the lending formula(s), Lender may consider
events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts, Eligible Inventory or in establishing
Availability Reserves. In the event that the effect of any reserves established
by Lender subsequent to the date of this Agreement results in an effective
advance rate which is less than seventy five percent (75%) of the effective
advance rate determined on the basis of existing availability and reserves
already established as of the date of this Agreement, then Borrower shall have
the right to terminate this Agreement without payment of the early termination
fee described in paragraph 11.1(c) hereof.
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(c) OVERADVANCE. In the event that the outstanding amount of any
component of the Revolving Loans exceed the amounts available under the lending
formulas or the Maximum Amount, as applicable, such event shall not limit, waive
or otherwise affect any rights of Lender in that circumstance or on any future
occasions and Borrower shall, upon demand by Lender, which may be made at any
time or from time to time, immediately repay to Lender the entire amount of any
such excess(es) for which payment is demanded.
(d) LINE OF CREDIT NOTE. Borrower's obligation to repay Revolving
Loans made under the Line of Credit shall be evidenced by a promissory note
executed by Borrower, substantially in the form of Exhibit B hereto (the "Line
of Credit Note")
2.2 AVAILABILITY RESERVES. All Revolving Loans otherwise available to
Borrower pursuant to the lending formula(s) or sublimits, and subject to the
Maximum Amount and other applicable limits hereunder shall be subject to
Lender's continuing right to establish and revise Availability Reserves.
2.3 SUPPORT AGREEMENT. Frank Keery shall execute a Support Agreement in
favor of Bank, in form and content acceptable to Bank and Frank Keery.
2.4 SUBORDINATION OF DEBT. All obligations of Borrower to Oxford
International shall be subordinated in right of repayment to all obligations of
Borrower to Lender, as evidenced by and subject to the terms of subordination
agreements in form and substance satisfactory to Lender.
SECTION 3. INTEREST AND FEES
3.1 INTEREST. The outstanding principal balance of Revolving Loans shall
bear interest at the rate of interest set forth in the Line of Credit Note.
3.2 CLOSING FEE. Borrower shall pay to Lender as a closing fee the amount
of $7,500.00, which shall be fully earned as of and payable on the date hereof.
3.4 UNUSED LINE FEE. Borrower shall pay to Lender monthly an unused line
fee for the Line of Credit equal to a rate per annum of one quarter percent
(0.25%) of the amount by which the Maximum Amount exceeds the average daily
principal balance of the outstanding Revolving Loans during the immediately
preceding month (or part thereof) while this Agreement is in effect and for so
long thereafter as any of the Revolving Loans are outstanding, which fee shall
be payable on the first day of each month in arrears.
3.5 COMPUTATION AND PAYMENT. Interest (and fees computed on a per annum
basis) shall be computed on the basis of a 360-day year, actual days elapsed.
Interest shall be payable at times and place set forth in the Line of Credit
Note.
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SECTION 4. CONDITIONS PRECEDENT
4.1. INITIAL CREDIT. The obligation of Lender to extend any credit
contemplated by this Agreement is subject to the fulfillment to Lender's
satisfaction of all of the following conditions:
(a) APPROVAL OF LENDER COUNSEL. All legal matters incidental to the
extension of credit by Lender shall be satisfactory to counsel of Lender.
(b) DOCUMENTATION. Lender shall have received, in form and substance
satisfactory to Lender, each of the following, duly executed:
(i) This Agreement
(ii) The Line of Credit Note
(iii) Corporate Borrowing Resolution
(iv) UCC-1 Financing Statement(s)
(v) Security Agreement(s)
(vi) Lock Box Agreement
(vii) Support Agreement
(viii) The subordination agreement required by Section 2.4 hereof.
(ix) Agreement with Transamerica.
(x) Subordination Agreement from Ed Tucker Distributor, Inc.
(xi) Such other documents as Lender may require under any other
Section of this Agreement.
(c) FINANCIAL CONDITION. There shall have been no material adverse
change, as determined by Lender, in the financial condition or business of
Borrower or any Obligor, nor any material decline, as determined by Lender, in
the market value of any collateral required hereunder or a substantial or
material portion of the assets of Borrower or any Obligor.
(d) INSURANCE. Borrower shall have delivered to Lender evidence of
insurance coverage on all property, in form, substance, amounts, covering risks
and issued by companies satisfactory to Lender, and where required by Lender,
with loss payable endorsements in favor of Lender.
(e) APPRAISALS. Lender shall have obtained, at Borrower's cost, an
appraisal of Inventory, issued by an appraiser acceptable to Lender and in form,
substance and reflecting values satisfactory to Lender, in its discretion.
(f) SECURITY INTERESTS. Lender shall have received evidence, in form
and substance satisfactory to Lender, that Lender has valid perfected and first
priority security interests in and liens upon the Collateral and any other
property which is intended to be security for the Line of Credit or the
liability of any Obligor in respect thereof, subject only to the security
interests and liens permitted herein or in the other Loan Documents.
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(g) FIELD REVIEW. Lender shall have completed a field review of the
Records and such other information with respect to the Collateral as Lender may
require to determine the amount of Revolving Loans available to Borrower, the
results of which shall be satisfactory to Lender.
(h) OTHER DOCUMENTS. Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Loan Documents, including without limitation, acknowledgments by
lessors, mortgagees and warehousemen of Lender's security interests in the
Collateral, waivers by such persons of any security interests, liens or other
claims by such persons to the Collateral and agreements permitting Lender access
to, and the right to remain on, the premises to exercise its rights and remedies
and otherwise deal with the Collateral.
(i) AVAILABILITY. Borrower shall have a minimum of $500,000.00 of
availability for Revolving Loans in addition to the amount paid or to be paid to
Borrower's prior lender to retire Borrower's line of credit with such prior
lender and bringing all other obligations to a current status satisfactory to
Lender.
(j) LIFE INSURANCE. Borrower shall have collaterally assigned to
Lender its life insurance policies on Frank Keery and Patrick Keery.
(k) TAKE-OVER AUDIT. Lender shall have performed and be satisfied with
a "take-over" audit.
4.2. SUBSEQUENT CREDIT. The obligation of Lender to make each extension of
credit requested by Borrower hereunder shall be subject to the fulfillment to
Lender's satisfaction of each of the following conditions:
(a) COMPLIANCE. The representations and warranties contained herein
and each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Lender
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist. No
action seeking the dissolution or liquidation of Borrower has been approved by
the directors or shareholders of Borrower. There shall not exist or occur any
event or condition which Lender in good faith believes impairs, or is
substantially likely to impair, the prospect of payment or performance by
Borrower of its obligations under any of the Loan Documents.
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(b) DOCUMENTATION. Lender shall have received all additional documents
which may be required in connection with such extension of credit.
SECTION 5. GRANT OF SECURITY INTEREST
As security for all indebtedness of Borrower to Lenders pursuant to this
Agreement, Borrower grants to Lender security interests of first priority in the
following property and interests in property, whether now owned or hereafter
acquired or existing, and wherever located: all Rights to Payment, Inventory,
Equipment and Records, and all products and proceeds of any of the foregoing, in
any form, including without limitation, insurance proceeds and all claims
against third parties for loss or damage to or destruction of any or all of the
foregoing.
All of the foregoing shall be evidenced by and subject to the terms of such
documents as Lender shall reasonably require, all in form and substance
satisfactory to Lender. Borrower shall reimburse Lender, immediately upon
demand, for all costs and expenses incurred by Lender in connection with any of
the foregoing security, including without limitation filing and recording fees
and costs of appraisals and audits; provided, however, with respect to
collateral audits required by Lender, Borrower's responsibility for the costs
and expenses with respect thereto shall in no event exceed (i) $5,000 in
connection with each such audit, (ii) $20,000 in connection with no more than
four (4) audits conducted in the first twelve months of this Agreement, and
(iii) (A) $10,000 in connection with no more than two (2) audits conducted in
each twelve month period thereafter, if no Event of Default has occurred during
such subsequent twelve month period, or (B) if an Event of Default has so
occurred, $20,000 in connection with no more than four (4) such audits conducted
in such subsequent twelve month period. Nothing contained in the immediately
preceding sentence shall limit Lender's rights to conduct more frequent audits
at its own cost and expense or the terms of this Agreement applicable if an
Event of Default shall have occurred and be continuing.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 CASH COLLATERAL ACCOUNT.
(a) CASH COLLATERAL ACCOUNT. Borrower shall, at Borrower's expense and
in the manner requested by Lender from time to time, direct that remittances and
all other collections and proceeds of Accounts and other Collateral shall be
deposited into a lock box account maintained in Lender's name. In connection
therewith, Borrower shall execute such lockbox agreement as Lender shall
require. Borrower shall maintain with Lender, and Borrower hereby grants to
Lender a security interest in, a non--interest bearing deposit account over
which Borrower shall have no control ("Cash Collateral Account") and into which
the proceeds of all Borrower's Rights to Payment shall be deposited immediately
upon their receipt.
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(b) CALCULATIONS/CLEARANCE CHARGE. For purposes of calculating the
amount of the Revolving Loans available to Borrower, such payments will be
applied (conditional upon final collection) to the Line of Credit on the
business day of receipt by the Commercial Finance Division of interbranch
advices of deposit, if such advices are received within sufficient time (in
accordance with Lender's usual and customary practices as in effect from time to
time) to credit Borrower's loan account on such day, and if not, then on the
next business day. Lender shall be entitled to charge Borrower for one (1)
business day of 'clearance' at the interest rate then applicable to the Line of
Credit on all proceeds of Rights to Payment deposited into the Cash Collateral
Account, whether or not such proceeds are applied to reduce the outstanding
principal balance of the Line of Credit. This clearance charge is acknowledged
to constitute an integral part of the pricing of the Line of Credit, and shall
apply whether or not the amount of proceeds deposited exceeds the outstanding
principal balance of the Line of Credit. Notwithstanding the foregoing, Borrower
shall not be liable for clearance charges to the extent that a significant
positive balance in the Cash Collateral Account resulting from the deposit of
funds representing proceeds of equity or subordinated debt injections and not
proceeds of normal operations continues beyond a period of fifteen (15) days.
(c) IMMEDIATE DEPOSIT. Borrower and all of its affiliates,
subsidiaries, shareholders, directors, employees or agents shall, acting as
trustee for Lender, receive, as the property of Lender, any monies, checks,
notes, drafts, or any other payment relating to and/or proceeds of Accounts or
other Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to be
deposited in the Cash Collateral Account, or remit the same or cause the same to
be remitted, in kind, to Lender. In no event shall the same be commingled with
Borrower's own funds. Notwithstanding the foregoing or anything in the other
Loan Documents to the contrary (i) Borrower may open and maintain one or more
bank accounts outside the United States (collectively "Foreign Accounts") into
which Borrower may deposit the proceeds of cash sales of inventory that occur
outside the United States, and (ii) pay costs and expenses attributable to such
sales directly from the Foreign Account. Borrower shall take all actions
reasonably requested by Lender to ensure the perfection and first priority of
Lender's security interest in such proceeds of foreign sales and in such Foreign
Accounts and shall deliver to Lender copies of all monthly bank statements of
the Foreign Accounts and copies of all documents evidencing costs and expenses
attributable to foreign sales. In the event and at such time that Lender
determines that balances in such Foreign Accounts are sufficiently high to
warrant depositing funds therefrom directly into the Cash Collateral Account,
Borrower shall engage in appropriate foreign exchange transactions and arrange
for proceeds of such foreign sales to be so deposited into the Cash Collateral
Account.
6.2 STATEMENTS. Lender shall render to Borrower each month a statement
setting forth the balance in Borrower's loan account(s) maintained by Lender for
Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, Costs and expenses. Each such statement shall be subject to
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subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower and Lender as an account stated except to the extent that Lender
receives a written notice from Borrower of any specific exceptions of Borrower
thereto or Lender sends a correcting notice within sixty (60) days after the
date such statement has been mailed by the Lender. Until such time as Lender
shall have rendered to Borrower a written statement as provided above, the
balance in Borrower's loan account(s) shall be presumptive evidence of the
amounts due and owing to Lender by Borrower.
6.3 PAYMENTS. All amounts due under any of the Loan Documents shall be
payable to the Cash Collateral Account as provided in Section 6.1 hereof or such
other place as Lender may designate from time to time. Lender may apply payments
received or collected from Borrower or for the account of Borrower (including,
without limitation, the monetary proceeds of collections or of realization upon
any Collateral) to the Line of Credit, whether or not then due, in such order
and manner as Lender determines. At Lender's option, all principal, interest,
fees, costs, expenses and other charges provided for in this Agreement or the
other Loan Documents may be charged directly to the loan account(s) of Borrower.
Borrower shall make all payments due Lender free and clear of, and without
deduction or withholding for or on account of, any setoff, counterclaim,
defense, duties, taxes, levies, imposts, fees, deductions, withholding,
restrictions or conditions of any kind. If after receipt of any payment of, or
proceeds of Collateral applied to the payment of, any of Borrower's obligations
to Lender under this Agreement, Lender is required to surrender or return such
payment or proceeds to any person or entity for any reason, then the obligations
intended to be satisfied by such payment or proceeds shall be reinstated and
continue and this Agreement shall continue in full force and effect as if such
payment or proceeds had not been received by Lender. Borrower shall be liable to
pay to Lender, and does hereby indemnify and hold Lender harmless for the amount
of any payments or proceeds surrendered or returned. This Section 6.3 shall
remain effective notwithstanding any contrary action which may be taken by
Lender in reliance upon such payment or proceeds. This Section 6.3 shall survive
the payment of Borrower's obligations under the Loan Documents and the
termination of this Agreement.
6.4 USE OF PROCEEDS. Borrower shall use the initial proceeds of the
Revolving Loans provided by Lender to Borrower hereunder only for: * (a)
payments to each of the persons listed in the disbursement order furnished by
Borrower to Lender on or about the date hereof; and (b) costs, expenses and fees
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Documents. All other Revolving Loans made to
Borrower pursuant to the provisions hereof shall be used by Borrower only for
general operating, working capital and other proper corporate purposes of
Borrower not otherwise prohibited by the terms of this Agreement. None of the
proceeds will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin security or for the purposes of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any margin
security or for the any other purpose which might cause any of the Revolving
Loans to be considered a "purpose credit" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System, as amended.
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SECTION 7. REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Lender,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to
Lender subject to this Agreement.
7.1 LEGAL STATUS. Borrower is a corporation duly organized and existing and
in good standing under the laws of the State of Nevada, and is qualified or
licensed to do business, and is in good standing as a foreign corporation, if
applicable, in all jurisdictions in which such qualification or licensing is
required or in which the failure to so qualify or to be so licensed could have a
material adverse effect on Borrower.
7.2 AUTHORIZATION AND VALIDITY. The Loan Documents have been duly
authorized, and upon their execution and delivery in accordance with the
provisions hereof will constitute legal, valid and binding agreements and
obligations of Borrower or the party which executes the same, enforceable in
accordance with their respective terms.
7.3 NO VIOLATION. The execution, delivery and performance by Borrower of
each of the Loan Documents do not violate any provision of any law or
regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in a breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.
7.4 NO CLAIMS. There are no pending, or to the best of Borrower's knowledge
threatened, actions, claims, investigations, suits or proceedings before any
governmental authority, arbitrator, court or administrative agency which may
adversely affect the financial condition or operation of Borrower other than
those disclosed by Borrower to Lender in the Information Certificate.
7.5 CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of Borrower
dated February 28, 1998, heretofore delivered by Borrower to Lender is complete
and correct and presents fairly the financial condition of Borrower on an
interim basis as of such date; discloses all liabilities of Borrower that are
required to be reflected or reserved against under GAAP, whether liquidated or
unliquidated, fixed or contingent; and has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged or granted
a security interest in or encumbered any of its assets or properties except as
disclosed by Borrower to Lender in writing in the Information Certificate or as
permitted by this Agreement.
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7.6 INCOME TAX RETURNS. Except as set forth in the Information Certificate,
Borrower has no knowledge of any pending assessments or adjustments of its
income tax payable with respect to any year.
7.7 NO SUBORDINATION. There is no agreement, indenture, contract or
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower's obligations
subject to this Agreement to any other obligation of Borrower.
7.8 PERMITS, FRANCHISES. Borrower possesses, and will hereafter possess,
all permits, memberships, franchises, contracts and licenses required and rights
to all trademarks, trade names, if any, patents, and fictitious names necessary
to enable it to conduct the business in which it is now engaged in compliance
with applicable law.
7.9 ERISA. Borrower is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time ("ERISA"); Borrower has not violated any
provision of any defined employee pension benefit plan (as defined in ERISA)
maintained or contributed to by Borrower (each, a "Plan"); no Reportable Event
as defined in ERISA has occurred and is continuing with respect to any Plan
initiated by Borrower; Borrower has met its minimum funding requirements under
ERISA with respect to each Plan; and each Plan will be able to fulfill its
benefit obligations as they come due in accordance with the Plan documents and
under generally accepted accounting principles.
7.10 OTHER OBLIGATIONS. Borrower is not in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.
7.11 ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Lender in
writing prior to the date hereof, Borrower is in compliance in all material
respects with all applicable Federal or state environmental, hazardous waste,
health and safety statutes and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, the Federal Toxic Substances Control Act and the California Health and
Safety Code, as any of the same may be amended, modified or supplemented from
time to time. None of the operations of Borrower is the subject of any Federal
or state investigation evaluating whether any remedial action involving a
material expenditure is needed to respond to a release of any toxic or hazardous
waste or substance into the environment. Borrower has no material contingent
liability in connection with any release of any toxic or hazardous waste or
substance into the environment.
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SECTION 8. AFFIRMATIVE COVENANTS
Borrower covenants that so long as Lender remains committed to extend
credit to Borrower pursuant to the terms of this Agreement or any liabilities
(whether direct or contingent, liquidated or unliquidated) of Borrower to Lender
under any of the Loan Documents remain outstanding, and until payment in full of
all obligations of Borrower subject hereto, Borrower shall:
8.1 PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or
other liabilities due under any of the Loan Documents at the times and place and
in the manner specified therein, and immediately upon demand by Bank, the amount
by which the outstanding principal balance of Revolving Loans at any time
exceeds any limitation applicable thereto.
8.2 RECORDS AND PREMISES. Maintain proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to Collateral and the business of Borrower in accordance with GAAP.
From time to time as requested by Lender, at the cost and expense of Borrower
(except as otherwise expressly provided by this Agreement), allow Lender or its
designee complete access to all of Borrower's premises during normal business
hours and after notice to Borrower, or at any time and without notice to
Borrower if an Event of Default exists or has occurred and is continuing, for
the purposes of inspecting, verifying and auditing the Collateral and all of
Borrower's books and records, including, without limitation, the Records, and
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may request, and allow Lender during normal business hours
to use such of Borrower's personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing, and if an Event of Default exists or has
occurred and is continuing, for the collection of Accounts and realization of
other Collateral.
8.3 COLLATERAL REPORTING. Borrower shall provide Lender with the following
documents in a form satisfactory to Lender:
(a) on a weekly basis, or, at any time borrowing availability
hereunder is less than $750,000 or if an Event of Default has occurred and is
continuing, on a daily basis, a schedule of Accounts, including without
limitation, daily sales, credit and adjustment journals and cash receipts;
(b) on or before the first business day of each week for each
immediately preceding week and of each month for each immediately preceding
month (or more frequently as Lender may request), a borrowing base certificate,
and, on or before the first business day of each week for each immediately
preceding week until a perpetual inventory system satisfactory to Lender is in
place, results of a weekly physical inventory count of finished goods;
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(c) on or before the 15th day after and as of the end of each month,
(or more frequently as Lender may request but not more frequently than weekly),
(i) perpetual inventory reports, when a perpetual inventory system satisfactory
to Lender is in place (ii) inventory reports by category and (iii) agings of
accounts payable and accounts receivable;
(d) upon Lender's request, (i) copies of customer statements and
credit memos, remittance advices and reports, and copies of deposit slips and
bank statements, (ii) copies of shipping and delivery documents, and (iii)
copies of purchase orders, invoices and delivery documents for Inventory and
Equipment acquired by Borrower; provided, however, that with respect to
shipments involving aggregate amounts greater than $75,000 to any one dealer,
copies of invoices and shipping documents shall be accumulated and sent weekly
to Lender on or before the first business day of each week;
(e) upon Lender's request, Borrower shall, at Lender's expense, no
more than once in any twelve (12) month period, but at Borrower's expense and at
any time or times as Lender may request on or after an Event of Default, deliver
or cause to be delivered to Lender written reports or appraisals as to the
Collateral in form, scope and methodology acceptable to Lender and by an
appraiser acceptable to Lender, addressed to Lender or upon which Lender is
expressly permitted to rely;
(f) such other reports as to the Collateral as Lender shall reasonably
request from time to time.
Notwithstanding the foregoing, Lender may request more frequent reporting in
each circumstance described above at any time after the occurrence and during
the continuation of any Event of Default.
If any of Borrower's records of the Collateral are prepared or maintained by an
accounting service, contractor, shipper or other agent, Borrower hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
8.4 FINANCIAL STATEMENTS. Provide to Lender all of the following, in form
and detail satisfactory to Lender:
(a) not later than 90 days after and as of the end of each fiscal
year, a draft of the audited financial statement of Borrower, and not later than
120 days after and as of the end of each fiscal year, a final audited financial
statement of Borrower, prepared by independent certified public accountants
acceptable to Lender, to include balance sheet, income statement, statement of
cash flows, and footnotes, if any;
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(b) not later than 30 days after and as of the end of each month, a
financial statement of Borrower, prepared by Borrower, to include balance sheet,
income statement and statement of cash flows, and, if Borrower becomes subject
to S.E.C. filing requirements, not later than 30 days after filing with the
S.E.C., copies of all 10Q and 10K reports filed;
(c) contemporaneously with each annual and monthly financial statement
of Borrower required hereby, a certificate of the president or chief financial
officer of Borrower that the financial statements delivered pursuant thereto are
accurate and that there exists no Event of Default nor any condition, act or
event which with the giving of notice or the passage of time or both would
constitute an Event of Default; and
(e) as soon as practicable and in any event by the last day of each
fiscal year of Borrower, (1) a plan and financial forecast for Borrower's next
succeeding fiscal year including, without limitation, a forecasted balance
sheet, statement of income and statement of cash flows for each month of such
fiscal year, and (2) forecasted balance sheets, statements of income and
statements of cash flows for the second succeeding fiscal year; and as soon as
practicable, all material amendments, updates and revisions, if any, to the
information provided pursuant to this paragraph; and
(f) from time to time such other information as Lender may reasonably
request, which may include, without limitation, budgets, forecasts, projections
and other information respecting the Collateral and the business of Borrower.
8.5 COMPLIANCE. Preserve and maintain all licenses, permits, governmental
approvals, rights, privileges and franchises necessary for the conduct of its
business; conduct its business in an orderly and regular manner; and comply with
the provisions of all documents pursuant to which Borrower is organized and/or
which govern Borrower's continued existence and with the requirements of all
laws, rules, regulations and orders of any governmental authority applicable to
Borrower or its business.
8.6 INSURANCE. Maintain and keep in force insurance of the types and in
amounts customarily carried in lines of business similar to Borrower's,
including but not limited to fire, extended coverage, public liability, property
damage and workers' compensation, carried with companies and in amounts
satisfactory to Lender, and deliver to Lender from time to time at Lender's
request schedules setting forth all insurance then in effect. So long as no
Event of Default has occurred and is then continuing, Lender shall allow
Borrower to apply insurance proceeds received to repair, rebuilding or
restoration of Collateral, provided that: (a) an independent expert acceptable
to Lender and engaged by Borrower certifies to Lender that such repair,
rebuilding or restoration can be substantially completed within 180 days of the
casualty event and in no event later than one month before the maturity date of
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the Line of Credit Note and that the insurance proceeds, together with other
funds deposited by Borrower for such purpose, will be sufficient to effect such
repair, rebuilding or restoration; (b) Borrower, at its expense, shall promptly
prepare and submit to Lender all plans and specifications necessary for the
restoration and repair of the damaged Collateral, together with evidence
acceptable to Lander setting forth the total expenditure needed for the
restoration and repair; (c) the plans and specifications and all other aspects
of the proposed restoration and repair shall be subject to Lender's approval in
the exercise of its reasonable discretion; (d) Borrower shall first expend, or
deposit into an escrow account, any difference between the total cost of repair,
rebuilding and restoration and the amount of insurance proceeds; (e) Borrower
shall commence restoration and repair of the damaged. Collateral only after
Lender shall have notified Borrower in writing that the required safeguards,
proceeds and assignments described herein are in place and that the plans and
specifications and all other respects of the proposed restoration have been
approved by Lender, and Borrower shall thereafter proceed diligently with the
restoration and repair until completed; (f) all insurance proceeds shall be
deposited into an escrow account with an escrow agent acceptable to Lender in
its sole discretion, and disbursements shall be made from the escrow account for
the restoration and repair in accordance with a disbursement schedule approved
by Lender; and (g) all funds held in such escrow account shall be fully
available for disbursement to Lender on and after the occurrence of any Event of
Default. The Collateral as rebuilt or restored shall be of at least equal value
and substantially identical character as prior to the damage or destruction. The
application or release by Lender of any insurance proceeds shall not cure or
waive any default or notice of default under the Loan Documents or invalidate
any act done pursuant to the notice. If an Event of Default has occurred, Lender
may apply any insurance proceeds received by Lender at any time to payment of
the Borrower's Obligations to Lender under this Agreement, whether or not then
due, in any order and in such manner as Lender may determine, or Lender may hold
such proceeds as cash collateral for such Obligations.
8.7 FACILITIES. Keep all Borrower's properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that Borrower's
properties shall be fully and efficiently preserved and maintained.
8.8 TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation, Federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Lender's satisfaction, for eventual payment thereof in
the event Borrower is obligated to make such payment.
8.9 LITIGATION. Promptly give notice in writing to Lender of any litigation
pending or threatened in writing against Borrower with a claim in excess of
$75,000.
8.10 FINANCIAL CONDITION. Maintain Borrower's financial condition, measured
on a quarterly basis, as follows:
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(a) Working Capital not at any time less than $2,000,000.
(b) Tangible Net Worth not at any time less than $3,600,000 for the
fiscal quarters ending June 30, 1998 and September 30, 1998, and $4,000,000
thereafter.
(c) Capital expenditures, inclusive of capitalized lease expenditures,
not greater than $500,000 in any fiscal year.
8.11 NOTICE TO LENDER. Promptly (but in no event more than five (5) days
after the occurrence of each such event or matter) give written notice to Lender
in reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute such an Event of Default; (b) the occurrence and nature
of any Reportable Event or Prohibited Transaction, each as defined in ERISA, or
any funding deficiency with respect to any Plan; and (c) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any loss through liability or property damage, or through fire, theft or any
other cause affecting Borrower's property. Provide not less than thirty (30)
days prior written notice to Lender of any change in the name or the
organizational structure of Borrower.
8.12 FURTHER ASSURANCES. At the request of Lender at any time and from time
to time, duly execute and deliver, or cause to be duly executed and delivered,
such further agreements, documents and instruments, and do or cause to be done
such further acts as may be necessary or proper to evidence, perfect, maintain
and enforce the security interests and the priority thereof in the Collateral
and to otherwise effectuate the provisions or purposes of this Agreement or any
of the other Loan Documents, at Borrower's expense. Lender may at any time and
from time to time request a certificate from an officer of Borrower representing
that all conditions precedent to the making of Revolving Loans contained herein
are satisfied. In the event of such request by Lender, Lender may, at its
option, cease to make any further Revolving Loans until Lender has received such
certificate and, in addition, Lender has determined that such conditions are
satisfied. Where permitted by law, Borrower hereby authorizes Lender to execute
and file one or more UCC financing statements signed only by Lender.
8.13 YEAR 2000. Perform all acts reasonably necessary to (a) ensure that
Borrower and any business in which Borrower holds a substantial interest becomes
Year 2000 Compliant in a timely manner, (b) encourage all of its customers,
suppliers and vendors that are material to Borrower's business to become Year
2000 Compliant, (c) ascertain from such customers, suppliers and vendors their
preparedness to become Year 2000 Compliant in a timely manner and (c) ensure
that Borrower's business shall not be materially and adversely affected by any
lack of preparedness by such customers, suppliers and vendors. Such acts shall
include, without limitation, performing a comprehensive review and assessment of
all of Borrower's systems and adopting a detailed plan, with itemized budget,
for the remediation, monitoring and testing of such systems. As used herein,
"Year 2000 Compliant" shall mean, in regard to any entity, that all software,
hardware, firmware, equipment, goods or systems utilized by or material to the
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business operations or financial condition of such entity, will properly perform
date sensitive functions before, during and after the year 2000. Borrower shall,
immediately upon request, provide to Lender such certifications or other
evidence of Borrower's compliance with the terms hereof as Lender may from time
to time require.
8.14 PERPETUAL INVENTORY SYSTEM. Implement, by no later than July 1, 1998,
a fully functional perpetual inventory system satisfactory to Lender.
SECTION 9. NEGATIVE COVENANTS
Borrower further covenants that so long as Lender remains committed to
Borrower pursuant to the terms of this Agreement or any liabilities (whether
direct or contingent, liquidated or unliquidated) of Borrower to Lender under
any of the Loan Documents remain outstanding, and until payment in full of all
obligations of Borrower subject hereto, Borrower will not without the Lender's
prior written consent:
9.1 OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except the liabilities of Borrower to Lender and any other
liabilities of Borrower existing as of, and disclosed to Lender prior to, the
date hereof in the Information Certificate, and except for preferred stock
offerings and subordinated debt subject to subordination agreements in favor of,
and in form and content acceptable to, Lender.
9.2 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or consolidate
with any corporation or other entity in any transaction in which Borrower shall
not be the surviving entity or that involves amounts greater than $500,000.00;
make any substantial change in the conduct or nature of Borrower's business;
acquire all or substantially all of the assets of any corporation or other
entity in any transaction involving amounts greater than $500,000.00; nor sell,
lease, transfer or otherwise dispose of all or a substantial or material part of
its assets except in the ordinary course of business. Lender's consent to any
exceptions to this Section 9.2 shall not be unreasonably withheld.
9.3 GUARANTIES. Guarantee or become liable in any way as surety, endorser
(other than as endorser of negotiable instruments for deposit or collection in
the ordinary course of business), accommodation endorser or otherwise for, nor
pledge or hypothecate any assets of Borrower as security for, any liabilities or
obligations of any other person or entity, except as disclosed in the
Information Certificate plus, from and after the date hereof, in an additional
aggregate amount not to exceed $100,000.00.
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9.4 LOANS, ADVANCES. INVESTMENTS. Make any loans or advances to or
investments in any person or entity, except advances to employees in the
ordinary course of business not to exceed $100,000.00 outstanding at any time.
9.5 DIVIDENDS. DISTRIBUTIONS. Declare or pay any dividend or distribution,
either in cash or any property other than stock, on Borrower's stock now or
hereafter outstanding; nor redeem, retire, repurchase or otherwise acquire any
shares of any class of Borrower's stock now or hereafter outstanding. Lender's
consent to any exceptions to this Section 9.5 shall not be unreasonably
withheld.
9.6 PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a security
interest in, or lien upon, any of its assets of any kind, now owned or hereafter
acquired, except any of the foregoing in favor of Lender and except as set forth
in the Information Certificate. Lender's consent to any further exceptions under
this Section 9.6 shall not be unreasonably withheld.
9.7 NEW COLLATERAL LOCATION. Open any new location unless Borrower (a)
gives Lender thirty (30) days prior written notice of the intended opening of
any such new location, and (b) executes and delivers, or causes to be executed
and delivered, to Lender such agreements, documents, and instruments as Lender
may deem reasonably necessary or desirable to protect its interests in the
Collateral at such location, including without limitation, UCC-1 financing
statements.
SECTION 10. EVENTS OF DEFAULT
10.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees
or other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate (including the Information
Certificate) furnished to Lender in connection with, or any representation or
warranty made by Borrower or any other party under this Agreement or any other
Loan Document shall prove to be incorrect, false or misleading in any material
respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained in this Agreement (other than
those described in paragraphs 10.1(a) and 10.1(b)), and if such default is by
its nature curable, such default is not cured within twenty (20) days after the
occurrence thereof.
(d) Any default in the payment or performance of any obligation, or
any defined event of default, under the terms of any contract or instrument
(other than any of the Loan Documents) pursuant to which Borrower or any Obligor
22
<PAGE>
has incurred any debt or other liability to any person or entity, including
Lender, and, if the debt or other liability is owed to a party other than
Lender, the amount thereof exceeds $75,000.00.
(e) Any default in the payment or performance of any obligation, or
any defined event of default, under any of the Loan Documents other than this
Agreement.
(f) The filing of a notice of judgment lien against Borrower or any
Obligor; or the recording of any abstract of judgment against Borrower or any
Obligor in any county in which Borrower or such Obligor has an interest in real
property; or the service of a notice of levy and/or of a writ of attachment or
execution, or other like process, against the assets of Borrower or any Obligor;
or the entry of a judgment against Borrower or any Obligor; and with respect to
any of the foregoing, the amount in dispute is in excess of $75,000.00.
(g) Borrower or any Obligor shall become insolvent, or shall suffer or
consent to or apply for the appointment of a receiver, trustee, custodian or
liquidator of itself or any of its property, or shall generally fail to pay its
debts as they become due, or shall make a general assignment for the benefit of
creditors; Borrower or any Obligor shall file a voluntary petition in
bankruptcy, or seeking reorganization, in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform Act,
Title 11 of the United States Code, as amended or recodified from time to time
("Bankruptcy Code"), or under any state or federal law granting relief to
debtors, whether now or hereafter in effect; or any involuntary petition or
proceeding pursuant to the Bankruptcy Code or any other applicable state or
federal law relating to bankruptcy, reorganization or other relief for debtors
is filed or commenced against Borrower or any Obligor, or Borrower or any
Obligor shall file an answer admitting the jurisdiction of the court and the
material allegations of any involuntary petition; or Borrower or any Obligor
shall be adjudicated a bankrupt, or an order for relief shall be entered by any
court of competent jurisdiction under the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors.
(h) The dissolution or liquidation of Borrower.
(i) Frank Keery shall cease to be a voting member and the chairman of
the board of directors of Borrower.
(j) Any Obligor revokes or terminates its guarantee, endorsement or
other agreement in favor of Lender. Any creditor of Borrower which has executed
a subordination in favor of Lender revokes or terminates such subordination.
(k) The indictment of Borrower or any Obligor under any criminal
statute, or commencement of criminal or civil proceedings against Borrower or
any Obligor, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of any of the property of Borrower or
such Obligor.
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(1) Any member of Borrower's Senior Management shall cease, for any
reason, to be employed by Borrower on a full-time basis. Senior Management
means Frank Keery.
10.2 REMEDIES. If an Event of Default shall occur, (a) any indebtedness of
Borrower under any of the Loan Documents, any term thereof to the contrary
notwithstanding, shall at Lender's option and without notice become immediately
due and payable without presentment, demand, protest or notice of dishonor, all
of which are hereby expressly waived by Borrower; (b) the obligation, if any, of
Lender to permit further borrowings hereunder shall immediately cease and
terminate; and (c) Lender shall have all rights, powers and remedies available
under each of the Loan Documents, or accorded by law, including without
limitation the right to resort to any or all security for any credit
accommodation from Lender subject hereto and to exercise any or all of the
rights of a beneficiary or secured party pursuant to applicable law. All rights,
powers and remedies of Lender in connection with each of the Loan Documents may
be exercised at any time by Lender and from time to time after the occurrence of
an Event of Default, are cumulative and not exclusive, and shall be in addition
to any other rights, powers or remedies provided by law or equity.
SECTION 11. TERM OF AGREEMENT AND MISCELLANEOUS
11.1 TERM.
(a) MATURITY DATE. This Agreement and the other Loan Documents shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date two (2) years
from the date hereof. Upon the date of termination of the Loan Documents,
Borrower shall pay to Lender, in full, all outstanding and unpaid obligations
under this Agreement and the other Loan Documents and shall furnish cash
collateral to Lender in such amounts as Lender determines are reasonably
necessary to secure Lender from loss, cost, damage or expense, including
attorneys' fees and legal expenses, in connection with any contingent
obligations, including issued and outstanding checks or other payments
provisionally credited to the obligations and/or as to which Lender has not yet
received final and indefeasible payment. Interest shall be due until and
including the next business day, if the amounts so paid by Borrower to the bank
account designated by Lender are received in such bank account later than 12:00
noon, California time.
(b) CONTINUING OBLIGATIONS. No termination of this Agreement or the
other Loan Documents shall relieve or discharge Borrower of its respective
duties, obligations and covenants under this Agreement or the other Loan
Documents until all Borrower's obligations under this Agreement and the other
Loan Documents have been fully and finally discharged and paid, and Lender's
continuing security interest in the Collateral and the rights and remedies of
Lender hereunder, under the other Loan Documents and applicable law, shall
remain in effect until all such obligations have been fully and finally
discharged and paid.
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(c) EARLY TERMINATION FEE. If for any reason (other than as set forth
in paragraph 2.1(c) and in paragraph 11.1(d)) this Agreement is terminated by
Borrower action prior to the end of the then current term of this Agreement, in
view of the impracticality and extreme difficulty of ascertaining actual damages
and by mutual agreement of the parties as to a reasonable calculation of
Lender's lost profits as a result thereof, Borrower agrees to pay to Lender,
upon the effective date of such termination, an early termination fee in the
amount set forth below if such termination is effective in the period indicated:
AMOUNT PERIOD
------ ------
(i) 2% of the Working Amount Date hereof to and including first
anniversary date.
(ii) 1% of the Working Amount First anniversary date hereof to
but not including second anniversary
date.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing.
(d) NO EARLY TERMINATION FEE. No early termination fee shall be
payable if a group or division of Wells Fargo Bank (other than the workout
group), or an affiliate of Wells Fargo Bank extends credit to Borrower, which
credit refinances and/or replaces in full the credit facilities granted under
this Agreement.
11.2 NO WAIVER. No delay, failure or discontinuance of Lender in exercising
any right, power or remedy under any of the Loan Documents shall affect or
operate as a waiver of such right, power or remedy; nor shall any single or
partial exercise of any such right, power or remedy preclude, waive or otherwise
affect any other or further exercise thereof or the exercise of any other right,
power or remedy. Any waiver, permit, consent or approval of any kind by Lender
of any breach of or default under any of the Loan Documents must be in writing
and shall be effective only to the extent set forth in such writing.
11.3 NOTICES. All notices, requests and demands which any party is required
or may desire to give to any other party under any provision of this Agreement
must be in writing delivered to each party at the following address:
25
<PAGE>
BORROWER: Titan Motorcycle Co.
2222 West Peoria Avenue,
Phoenix, AZ 85029
Attention (to either or both of)
Frank Keery and/or
Robert Lobban
LENDER: WellsCredit
Wells Fargo Bank
100 W. Washington, Suite 100
Phoenix, AZ 85003
Attention: Tom Stoltz, Portfolio Manager
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery or overnight delivery service,
upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or
three (3) days after deposit in the U.S. mail, first class and postage prepaid;
(c) if sent by telecopy, upon actual receipt by either Frank Keery or Robert
Lobban (or any successor of such officers)
11.4 COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Lender
immediately upon demand the full amount of all payments, advances, changes,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Lender's in-house counsel>, incurred by
Lender in connection with Ca) the negotiation and preparation of this Agreement
and each of the other Loan Documents, in an amount not to exceed $15,000.00,
Lender's continued administration hereof and thereof, and the preparation of any
amendments and waivers hereto and thereto, (b) all out-of-pocket expenses and
costs heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and Borrower's
operations, plus a per diem charge for Lender's examiners in the field and
office at Lender's Commercial Finance Division's rate in effect from time to
time, (c) the enforcement of Lender's rights and/or the collection of any
amounts which become due to Lender under any of the Loan Documents, and Cd) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation any action for declaratory relief, and
including any of the foregoing incurred in connection with any bankruptcy
proceeding relating to Borrower.
11.5 SUCCESSORS, ASSIGNMENT. This Agreement shall be binding on and inure
to the benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties; provided however, that Borrower may not
assign or transfer its interest hereunder without the prior written consent of
Lender. Lender reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Lender's rights and
26
<PAGE>
benefits under each of the Loan Documents to other lending or financial
institutions for purposes of regulatory compliance and portfolio management. In
connection therewith, Lender may disclose all documents and information which
Lender now has or may hereafter acquire relating to any credit extended by
Lender to Borrower, Borrower or its business, any Obligor or the business of any
Obligor, or any Collateral required hereunder, to any assignee or participant
who shall agree to maintain the confidentiality of such documents and
information.
11.6 ENTIRE AGREEMENT, AMENDMENT. This Agreement and each other of the Loan
Documents constitute the entire agreement between Borrower and Lender with
respect to any extension of credit by Lender subject hereto and supersede all
prior negotiations, communications, discussions and correspondence concerning
the subject matter hereof. This Agreement may be amended or modified only by a
written instrument executed by each party hereto.
11.7 NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into
for the sole protection and benefit of the parties hereto and their respective
permitted successors and assigns, and no other person or entity shall be a third
party beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any other of the Loan Documents to which it
is not a party.
11.8 TIME. Time is of the essence of each and every provision of this
Agreement and each other of the Loan Documents.
11.9 SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
11.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, except to the extent that
Lender has greater rights or remedies under Federal law, whether as a national
bank or otherwise, in which case such choice of California law shall not be
deemed to deprive Lender of such rights and remedies as may be available under
Federal law.
11.11 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR
RELATED TO THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS.
11.12 ARBITRATION.
(a) ARBITRATION. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
27
<PAGE>
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan Documents, or any
past, present or future extensions of credit and other activities, transactions
or obligations of any kind related directly or indirectly to any of the Loan
Documents, including without limitation, any of the foregoing arising in
connection with the exercise of any self-- help, ancillary or other remedies
pursuant to any of the Loan Documents. Any party may by summary proceedings
bring an action in court to compel arbitration of a Dispute. Any party who fails
or refuses to submit to arbitration following a lawful demand by any other party
shall bear all costs and expenses incurred by such other party in compelling
arbitration of any Dispute.
(b) GOVERNING RULES. Arbitration proceedings shall be administered by
the American Arbitration Association ("AAA') or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in California
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. ss.91 or any similar applicable state law.
(c) NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No
provision hereof shall limit the right of any party to exercise self--help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to Compel arbitration or reference hereunder.
(d) ARBITRATOR QUALIFICATIONS AND POWERS; AWARDS. Arbitrators must be
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
28
<PAGE>
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.
(e) JUDICIAL REVIEW. Notwithstanding anything herein to the contrary,
in any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (A) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (B) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
California, and (C) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (1) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (2) whether the
conclusions of law are erroneous under the substantive law of the state of
California. Judgment confirming an award in such a proceeding may be entered
only if a court determines the award is supported by substantial evidence and
not based on legal error under the substantive law of the state of California.
(f) REAL PROPERTY COLLATERAL; JUDICIAL REFERENCE. Notwithstanding
anything herein to the contrary, no Dispute shall be submitted to arbitration if
the Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (1) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance, with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
(g) MISCELLANEOUS. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
29
<PAGE>
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
WELLS FARGO BANK,
TITAN MOTORCYCLE CO. NATIONAL ASSOCIATION
By: /s/ Francis S. Keery By: /s/ [illegible]
-------------------------------- ---------------------------------
Title: Chief Executive Officer Title: Vice President
----------------------------- ------------------------------
By:
--------------------------------
Title:
-----------------------------
30
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment") is entered into
as of July 17, 1998, by and between TITAN MOTORCYCLE CO. OF AMERICA, a Nevada
Corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Lender").
RECITALS
WHEREAS, Borrower is currently indebted to Lender pursuant to the terms and
conditions of that certain Loan Agreement between Borrower and Lender dated as
of April 10, 1998 ("Loan Agreement")
WHEREAS, Lender and Borrower have agreed to certain changes in the terms
and conditions set forth in the Loan Agreement and have agreed to amend the Loan
Agreement to reflect said changes.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree that the Loan Agreement
shall be amended as follows:
1. Paragraph 8.3 is hereby deleted in its entirety with the following
substituted therefor:
" 8.3 COLLATERAL REPORTING. Borrower shall provide Lender with the
following documents in a form satisfactory to Lender:
(a) on a weekly basis, or, at any time borrowing availability
hereunder is less than $500,000 or if an Event of Default has occurred and is
continuing, on a daily basis, a schedule of Accounts, including without
limitation, daily sales, credit and adjustment journals and cash receipts;
(b) on or before the third business day of each week for each
immediately preceding week and of each month for each immediately preceding
month (or more frequently as Lender may request), a borrowing base certificate,
and, on or before the third business day of each week for each immediately
preceding week until a perpetual inventory system satisfactory to Lender is in
<PAGE>
place, results of a weekly physical inventory count of finished goods; provided,
however, that so long as any weekly report provided by Borrower to Lender
hereunder covers periods coinciding with Borrower's month end and contains
corresponding monthly information, no separate monthly report need be delivered
by Borrower pursuant to this subparagraph (b);
(c) on or before the 15th day after and as of the end of each
month, (or more frequently as Lender may request but not more frequently than
weekly), (i) perpetual inventory reports, when a perpetual inventory system
satisfactory to Lender is in place (ii) inventory reports by category and (iii)
agings of accounts payable and accounts receivable; provided, however, that so
long as any weekly report provided by Borrower to Lender hereunder covers
periods coinciding with Borrower's month end and contains corresponding monthly
information, no separate monthly report need be delivered by Borrower pursuant
to this subparagraph (c);
(d) upon Lender's request, (i) copies of customer statements and
credit memos, remittance advices and reports, and copies of deposit slips and
bank statements, (ii) copies of shipping and delivery documents, and (iii)
copies of purchase orders, invoices and delivery documents for Inventory and
Equipment acquired by Borrower; provided, however, that with respect to
shipments involving aggregate amounts greater than $75,000 to any one dealer,
copies of invoices and shipping documents shall be accumulated and sent weekly
to Lender on or before the third business day of the immediately succeeding
week;
(e) upon Lender's request, Borrower shall, at Lender's expense,
no more than once in any twelve (12) month period, but at Borrower's expense and
at any time or times as Lender may request on or after an Event of Default,
deliver or cause to be delivered to Lender written reports or appraisals as to
the Collateral in form, scope and methodology acceptable to Lender and by an
appraiser acceptable to Lender, addressed to Lender or upon which Lender is
expressly permitted to rely;
(f) such other reports as to the Collateral as Lender shall
reasonably request from time to time."
2. Paragraph 8.14 is hereby deleted in its entirety with the following
substituted therefor:
" 8.14 PERPETUAL INVENTORY SYSTEM. Implement, by no later than July
31, 1998, a fully functional perpetual inventory system satisfactory to Lender."
3. Except as specifically provided herein, all terms and conditions of the
Loan Agreement remain in full force and effect, without waiver or modification.
2
<PAGE>
All terms defined in the Loan Agreement shall have the same meaning when used in
this Amendment. This Amendment and the Loan Agreement shall be read together, as
one document.
4. Borrower hereby remakes all representations and warranties contained in
the Loan Agreement and reaffirms all covenants set forth therein. Borrower
further certifies that as of the date of this Amendment and except as set forth
in this Amendment, there exists no Event of Default as defined in the Loan
Agreement, nor any condition, act or event which with the giving of notice or
the passage of time or both would constitute any such Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written above.
TITAN MOTORCYCLE CO. OF WELLS FARGO BANK,
AMERICA NATIONAL ASSOCIATION
By: /s/ Robert P. Lobban By: /s/ Gerald W. Widasky
-------------------------- -------------------------------
Title: Chief Financial Officer Title: Vice President
----------------------- ----------------------------
3
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment") is entered into
as of August 21, 1998, by and between TITAN MOTORCYCLE CO. OF AMERICA, a Nevada
corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Lender").
RECITALS
WHEREAS, Borrower is currently indebted to Lender pursuant to the terms and
conditions of that certain Loan Agreement between Borrower and Lender dated as
of April 10, 1998 ("Loan Agreement").
WHEREAS, Lender and Borrower have agreed to certain changes in the terms
and conditions set forth in the Loan Agreement and have agreed to amend the Loan
Agreement to reflect said changes.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree that the Loan Agreement
shall be amended as follows:
1. Paragraph 1.16 is hereby deleted in its entirety with the following
substituted therefor:
" 1.16 "Maximum Amount" shall mean the amount of $6,600,000.00."
2. Paragraph 2.1(c) is hereby amended by adding the following sentence to
the end thereof:
"Notwithstanding the foregoing, but still subject to the Maximum
Amount, Borrower shall be permitted to have a temporary overadvance
facility under the Line of Credit such that outstanding borrowings may
exceed the borrowing base provided for by this Agreement by an amount
not to exceed Eight Hundred Thousand Dollars ($800,000.00) during the
period beginning August 21, 1998, and ending on October 31, 1998."
<PAGE>
3. Paragraph 8.14 is hereby deleted in its entirety with the following
substituted therefor:
" 8.14 Perpetual Inventory System. Implement, by no later than November 30,
1998, a fully functional perpetual inventory system satisfactory to Lender."
4. Borrower shall pay to Lender an amendment fee in the amount of
$2,400.00, which shall be fully earned as of and payable on the date of this
Amendment.
5. The Line of Credit Note is replaced and superseded by the Line of Credit
Note in the form attached hereto as Exhibit A.
6. Except as specifically provided herein, all terms and conditions of the
Loan Agreement remain in full force and effect, without waiver or modification.
All terms defined in the Loan Agreement shall have the same meaning when used in
this Amendment. This Amendment and the Loan Agreement shall be read together, as
one document.
7. Borrower hereby remakes all representations and warranties contained in
the Loan Agreement and reaffirms all covenants set forth therein. Borrower
further certifies that as of the date of this Amendment and except as set forth
in this Amendment, there exists no Event of Default as defined in the Loan
Agreement, nor any condition, act or event which with the giving of notice or
the passage of time or both would constitute any such Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written above.
TITAN MOTORCYCLE CO. OF WELLS FARGO BANK,
AMERICA NATIONAL ASSOCIATION
By: /s/ Robert P. Lobban By: /s/ Gerald W. Widasky
-------------------------- -----------------------------
Title: Chief Financial Officer Title: Vice President
----------------------- --------------------------
2
THIRD AMENDMENT TO LOAN AGREEMENT
THIS THIRD AMENDMENT TO LOAN AGREEMENT (this "Amendment") is entered into
as of Nov. 10, 1998, by and between TITAN MOTORCYCLE CO. OF AMERICA, a Nevada
corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Lender").
RECITALS
WHEREAS, Borrower is currently indebted to Lender pursuant to the terms and
conditions of that certain Loan Agreement between Borrower and Lender dated as
of April 10, 1998, as amended ("Loan Agreement").
WHEREAS, Lender and Borrower have agreed to certain changes in the terms
and conditions set forth in the Loan Agreement and have agreed to amend the Loan
Agreement to reflect said changes.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree that the Loan Agreement
shall be amended as follows:
1. Paragraph 1.16 is hereby deleted in its entirety with the following
substituted therefor:
" 1.16 "Maximum Amount" shall mean the amount of $10,000,000.00."
2. Borrower shall pay to Lender an amendment fee in the amount of
$5,100.00, which shall be fully earned as of and payable on the date of this
Amendment.
3. The Line of Credit Note is replaced and superseded by the Line of Credit
Note in the form attached hereto as Exhibit A.
4. Except as specifically provided herein, all terms and conditions of the
Loan Agreement remain in full force and effect, without waiver or
1
<PAGE>
modification. All terms defined in the Loan Agreement shall have the same
meaning when used in this Amendment. This Amendment and the Loan Agreement shall
be read together, as one document.
5. Borrower hereby remakes all representations and warranties contained in
the Loan Agreement and reaffirms all covenants set forth therein. Borrower
further certifies that as of the date of this Amendment and except as set forth
in this Amendment, there exists no Event of Default as defined in the Loan
Agreement, nor any condition, act or event which with the giving of notice or
the passage of time or both would constitute any such Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written above.
TITAN MOTORCYCLE CO. OF WELLS FARGO BANK,
AMERICA NATIONAL ASSOCIATION
By: /s/ Robert P. Lobban By: /s/ Gerald W. Widasky
-------------------------- -----------------------------
Title: Chief Financial Officer Title: Vice President
----------------------- --------------------------
2
FOURTH AMENDMENT TO LOAN AGREEMENT
THIS FOURTH AMENDMENT TO LOAN AGREEMENT (this "Amendment") is entered into
as of January 22, 1999, by and between TITAN MOTORCYCLE CO. OF AMERICA, a Nevada
corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Lender").
RECITALS
WHEREAS, Borrower is currently indebted to Lender pursuant to the terms and
conditions of that certain Loan Agreement between Borrower and Lender dated as
of April 10, 1998 ("Loan Agreement").
WHEREAS, Lender and Borrower have agreed to certain changes in the terms
and conditions set forth the Loan Agreement and have agreed to amend the Loan
Agreement to reflect said changes.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree that the Loan Agreement
shall be amended as follows:
1. Paragraph 2.1(c) is hereby amended by adding the following at the end
thereof:
"Notwithstanding the foregoing, but still subject to the Maximum
Amount, Lender agrees to permit outstanding borrowings under the Line
of Credit to exceed the amount otherwise available under the lending
formulas set forth Section 2.1 of this Agreement by an amount not to
exceed Seven Hundred Fifty Thousand Dollars ($750,000.00) (the
"Overadvance") on the condition that the Overadvance (and availability
for borrowings thereunder) shall be reduced by and repaid (i) promptly
upon receipt by borrower of the net proceeds of any infusions of
equity or equity offerings, by amount equal to 50% of such net
proceeds, and (ii) to the extent not fully reduced and repaid pursuant
to clause (i) hereof, on
<PAGE>
Wednesday of each week in amounts of $125,000.00 each (or such lesser
amount as may be required on any such Wednesday to reduce to zero and
repay in full the Overadvance), commencing on May 5, 1999 until repaid
in full. Revolving Loans made under the Line of Credit shall be made
first under the applicable lending formulas against Eligible Inventory
and Eligible Accounts and then under the Overadvance, and repayments
of principal under the Line of Credit shall be applied, in inverse
order. Interest on the outstanding principal balance of the
Overadvance shall accrue at a rate per annum (computed on the basis of
a 360 day year) equal to 2.50% above the Prime Rate in effect from
time to time, and shall be payable at the times and place interest is
otherwise payable under the Line of Credit note. As a condition of
Lender's agreement herein, Borrower shall cause Frank Keery and
Barbara Keery to execute and deliver to Lender (contemporaneously with
the execution of this Amendment) a Continuing Guaranty in form and
content acceptable to Lender whereby Frank Keery and Barbara Keery
shall guarantee repayment of a portion of the Overadvance in the
principal amount of $375,000.00. Nothing in this Section shall
obligate Lender to permit any overadvance other than the Overadvance
or imply any such obligation." 2. Borrower shall pay to Lender a
non-refundable fee for the Overadvance in the amount of $7,500.00,
which shall be fully earned as of and payable on the date of this
Amendment.
3. Except as specifically provided herein, all terms and conditions of the
Loan Agreement remain in full force and effect without waiver or modification.
All terms defined in the Loan Agreement shall have the same meaning when used in
this Amendment. This Amendment and the Loan Agreement shall be read together, as
one document.
2
<PAGE>
4. Borrower hereby remakes all representations and warranties contained in
the Loan Agreement and reaffirms all covenants set forth therein. Borrower
further certifies that as of the date of this Amendment and except as Set forth
in this Amendment, there exists no Event of Default as defined in the Loan
Agreement, nor any condition, act or event which with the giving of notice or
the passage of time or both would constitute any such Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written above.
TITAN MOTORCYCLE CO. OF WELLS FARGO BANK,
AMERICA NATIONAL ASSOCIATION
By: /s/ Robert P. Lobban By: /s/ Gerald W. Widasky
-------------------------- -------------------------------
Title: Chief Financial Officer Title: Vice President
----------------------- ----------------------------
3
FIFTH AMENDMENT TO LOAN AGREEMENT
THIS FIFTH AMENDMENT TO LOAN AGREEMENT (the "Amendment") is made as of this
28th day of July, 1999 by and between TITAN MOTORCYCLE CO. OF AMERICA, a Nevada
corporation ("Borrower") WELLS FARGO CREDIT, INC., a Minnesota corporation
("Lender"), the successor-in-interest to Wells Fargo Bank, National Association,
a national banking association, and FRANCIS KEERY, a married man
("Shareholder").
WHEREAS, Borrower is currently indebted to Lender pursuant to the terms and
conditions of that certain Loan Agreement dated as of April 10, 1998 between
Borrower and Wells Fargo Bank, National Association ("Bank"), as amended (the
"Loan Agreement");
WHEREAS, due to lower than projected sales and delays with the proposed
private placement facility, Shareholder desires to make a $500,000 loan to
Borrower; and
WHEREAS, Lender desires to reduce the advance rates on certain Collateral
under the Loan Agreement and Borrower desires to have such advance rate
reductions occur in stages;
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower, Lender and
Shareholder, intending to be legally bound, agree as follows:
1. DEFINITIONS. Except as otherwise defined herein, all capitalized terms
used herein shall have the meanings ascribed thereto in the Loan Agreement.
2. SHAREHOLDER LOAN. On or before July 31, 1999, Shareholder shall make a
loan of $500,000 to Borrower, the proceeds of which are to be deposited in
Borrower's Cash Collateral Account at Bank. Concurrently therewith, Borrower and
Shareholder shall execute and deliver to Lender a Subordination Agreement in the
form attached hereto as Exhibit "A" incorporated herein by this reference (the
"Subordination Agreement").
3. ADVANCE RATES. Provided that Shareholder timely deposits the loan
proceeds into Borrower's operating account at the Bank and Borrower and
Shareholder execute and deliver the Subordination Agreement to Lender and,
further provided that no Event of Default, or act, omission or event that with
the giving of notice and/or passage of time would constitute an Event of
Default, has occurred and is continuing, and without limiting any other rights
available to Lender under the Loan Documents, Lender will not reduce the advance
rates set forth in Section 2.1 of the Loan Agreement prior to September 1, 1999.
Thereafter, provided that no Event of Default, or act, omission or event that
with the giving of notice and/or passage of time would constitute an Event of
Default, has occurred and is continuing, the advance rates will be reduced as
set forth on Exhibit "B" attached hereto and incorporated herein by this
reference. Notwithstanding anything to the contrary in this Section or in
<PAGE>
Exhibit "B", upon the consummation of any private placement facility of
$5,000,000 or more issued by Borrower, the advance rates for Eligible Accounts
and raw materials Eligible Inventory will automatically and without further
notice be reduced to eighty percent (80%) and forty-two percent (42%),
respectively.
4. RELEASE OF CLAIMS. In consideration of Lender's agreements contained
herein, Borrower and its successors and assigns each hereby fully release,
remise and forever discharge Lender and Bank and all of their past and present
officers, directors, agents, employees, servants, partners, shareholders,
attorneys and managers, and all of their respective heirs, personal
representatives, predecessors, successors and assigns, for, from and against any
and all claims, demands, causes of action, controversies, offsets, obligations,
losses, damages, and liabilities of every kind and character whatsoever,
including without limitation any action, omission, misrepresentation or other
basis of liability founded either in tort or contract and the duties arising
thereunder that Borrower, or any of its successors or assigns has had in the
past, or now has, or which may hereafter accrue, whether known or unknown,
whether currently existing or hereafter asserted, relating in any manner to, or
arising from or in connection with, the indebtedness evidenced by the Loan
Documents, any negotiations, loan administration, exercise of rights and
remedies, payment, offset with respect to, or other matter relating to such
indebtedness, any collateral securing payment and performance of such
indebtedness, or any matter preliminary to the execution and delivery by
Borrower and Lender of this Amendment, or any statement, action, omission or
conduct of Lender or Bank or any of their officers, directors, agents,
employees, servants, partners, shareholders, attorneys and managers relating in
any manner to such indebtedness, collateral or this Amendment; provided,
however, that the foregoing release and discharge shall not apply to the
obligations of Lender expressly set forth in this Amendment or first arising
after the date of this Amendment. Borrower acknowledges and agrees that Lender
is not and shall not be obligated in any way to continue or undertake any loan,
financing or other credit arrangement with Borrower, including without
limitation any renewal of the indebtedness evidenced by the Loan Documents,
beyond the maturity date thereof as set forth therein.
Borrower acknowledges that it is familiar with the provisions of Section 1542 of
the California Civil Code, which provides as follows:
A general release does not extend to claims which the creditor [releasor]
does not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his settlement
with the debtor [releasee].
Borrower has been advised by counsel with respect to the release of unknown
claims contained herein. Upon advice of such counsel, Borrower hereby waives and
relinquishes all of the rights and benefits which he may have under Section 1542
of the Civil Code of the State of California.
5. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
2
<PAGE>
6. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
combined shall constitute one and the same instrument.
7. SUCCESSORS AND ASSIGNS. This Amendment shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted
assigns.
8. TRANSACTION EXPENSES. Borrower agrees to pay any and all Costs and
expenses incurred by Lender in connection with this Amendment, including,
without limitation, attorneys' fees and disbursements of counsel to the Lender
for the services performed by such counsel in connection with the preparation of
this Amendment and the documents and instruments incidental hereto. Lender may
pay such costs and expenses directly as an advance under the Loan Agreement.
9. AMENDMENT. Except as otherwise amended hereby, all of the terms and
provisions of the Loan Agreement shall remain in full force and effect.
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK]
3
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed as of the date first above
written.
BORROWER:
TITAN MOTORCYCLE CO. OF
AMERICA, a Nevada corporation
By: /s/ Robert P. Lobban
--------------------------------
Name: Robert P. Lobban
------------------------------
Title: Chief Financial Officer
-----------------------------
LENDER:
WELLS FARGO CREDIT, INC., a
Minnesota corporation
By:
-------------------------------
Name:
------------------------------
Title:
----------------------------
SHAREHOLDER:
/s/ Francis Keery
------------------------------------
FRANCIS KEERY
4
PROMISSORY NOTE
$2,000,000.00 December 9, 1996
FOR VALUE RECEIVED, the undersigned, Titan Motorcycle Co. of America, of 2002 E.
Indian School Road, Phoenix, AZ 85016 promises to pay to the order of OXFORD
INTERNATIONAL MANAGEMENT the principal sum of up to Two Million ($2,000,000)
dollars, or the then outstanding balance, if less, together with interest
thereon from date hereof until paid, at the rate of Eight Percent (8%) per annum
as follows: ON DEMAND, BUT NOT BEFORE DECEMBER 9, 1997.
All or any part of the aforesaid principal sum may be prepaid at any time and
from time to time without penalty. Notwithstanding the foregoing, no such
prepayment may be made prior to December 9, 1997.
In the event of any default by the undersigned in the payment of principal or
interest when due or in the event of the suspension of actual business,
insolvency, assignment for the benefit of creditors, adjudication of bankruptcy,
or appointment of a receiver, of or against the undersigned, the unpaid balance
of the principal sum of this promissory note shall at the option of the holder
become immediately due and payable.
The maker and all other persons who may become liable for the payment hereof
severally waive demand, presentment, protest, notice of dishonor or nonpayment,
notice of protest, and any and all lack of diligence or delays in collection
which may occur, and expressly consent and agree to each and any extension or
postponement of time of payment hereof from time to time at or after maturity or
other indulgence, and waive all notice thereof.
In case suit or action is instituted to collect this note, or any portion
hereof, the maker promises to pay such additional sum, as the court may adjudge
reasonable, attorneys' fees in said proceedings.
This note is made and executed under, and is in all respects governed by, the
laws of the State of Arizona.
/s/ [illegible] /s/ Francis S. Keery
- ---------------------------------- ----------------------------------
Oxford International Management Titan Motorcycle Co. of America
MODIFICATION OF PROMISSORY NOTE
Where as the parties to a certain promissory note, between Titan Motorcycle Co.
of America and Oxford International Management, dated December 9, 1996, wish to
amend, or modify, the terms of said note, the following shall be incorporated,
joined to, and become a part of the original agreement.
"This promissory note shall be modified to show that the outstanding amounts of
the note shall not be due, or "called" until January 1, 2000. On this date,
one-third (1/3) of the outstanding amount shall become due. On January 1, 2001,
another one-third (1/3) of the amount outstanding, as of January 1, 2000, will
become due. The remaining one-third (1/3) of the amount outstanding, as of
January 1, 2000, will become due on January 1, 2002. Any remaining balance,
principal and/or interest would also be paid on January 1, 2002.
Further, in lieu of the above referenced payment schedule, the full balance due
(principal and interest) may be converted to equity, in the form of common stock
in Titan Motorcycle Co. of America, upon mutual agreement by both parties at any
time after January 1, 2000. The conversion price will be at a ten (10%) percent
discount to the market price of the common stock as of January 1,2000, or the
date of conversion, which ever is later."
The parties to the original promissory note, and this modification, further
agree that in the future, the original note can be further modified, extended,
or changed, in writing, as the parties may agree to, in writing.
Dated this 16th day of December, 1997
/s/ [illegible] /s/ Francis S. Keery
- ---------------------------------- ----------------------------------
Oxford International Management Titan Motorcycle Co. of America
PROMISSORY NOTE
July 22, 1999
FOR VALUE RECEIVED, the undersigned, Titan Motorcycle Co. of America, of 2002 E.
Indian School Road, Phoenix, AZ 85016 promises to pay to the order of OXFORD
INTERNATIONAL MANAGEMENT the principal sum of up to Two Million ($2,000,000)
Dollars and accrued interest at the rate of 12% per annum at the following pay
down rate:
January 1, 2001 - one third (1/3rd) of the outstanding principal balance
including any accrued interest to that date
January 1, 2002 - one half (1/2) of the then outstanding principal balance
including any accrued interest to that date.
January 1, 2003 - total of the then outstanding principal balance including
any accrued interest to that date.
All or any part of the aforesaid principal sum may be prepaid at any time and
from time to time without penalty at the full discretion of the borrower.
Further, in lieu of the above referenced payment schedule, the full balance due
(principal and interest) may be converted to equity, in the form of common stock
in Titan Motorcycle Co. of America, upon mutual agreement by both parties at any
time after January 1, 2000. The conversion price will be at a ten (10%) percent
discount to the market price of the common stocks as of January 1, 2000, or the
date of conversion, whichever is later.
In the event of any default by the undersigned in the payment of principal or
interest when due or in the event of the suspension of actual business,
insolvency, assignment for the benefit of creditors, adjudication of bankruptcy,
or appointment of receiver, of or against the undersigned, the unpaid balance of
the principal sum and any accrued interest owed of this promissory note shall,
at the option of the holder, become immediately due and payable.
The maker and all other persons who may become liable for the payment hereof
severally waive demand, presentment, protest, notice of dishonor or nonpayment,
notice of protest, and any and all lack of diligence or delays in collection
which may occur, and expressly consent and agree to each and any extension or
postponement of time of payment hereof from time to time at or after maturity or
other indulgence, and waive all notice thereof.
In case suit or action is instituted to collect this note, or any portion
hereof, the maker promises to pay such additional sum, as the court may adjudge
reasonable attorney's fees in said proceedings.
<PAGE>
This note is made and executed under, and is in all respects governed by, the
laws of the State of Arizona.
OXFORD INTERNATIONAL MANAGEMENT TITAN MOT CYCLE CO. OF AMERICA
By: By: /s/ Francis S. Keery
-------------------------------- --------------------------------
Title Title: Chairman, C.E.O.
------------------------------ -----------------------------
2
TITAN MOTORCYCLE CO. OF AMERICA(R)
AUTHORIZED DEALER SALES AND SERVICE
AGREEMENT
1. PARTIES TO AGREEMENT
This Agreement is made by and between TITAN Motorcycle Co. of America(R), 2222
West Peoria Avenue, Phoenix, AZ 85029, an Arizona corporation hereinafter called
TITAN and PARAGON CUSTOM CYCLES, INC. hereinafter called "DEALER". The purpose
of this Agreement is to appoint DEALER during the continuance of this Agreement
as an authorized independent dealer for TITAN brand products as hereinafter
designated and to establish the basic rules which will govern the relationship
between TITAN and DEALER.
2. DURATION OF AGREEMENT
This Agreement shall be in effect from the date of execution by TITAN to and
including December 31, 2000, unless sooner terminated as hereinafter provided.
No act by either party to this Agreement shall be construed as an extension or
renewal of this Agreement, except renewals or extensions in writing and signed
by both parties.
3. GRANTING OF DEALERSHIP
A. TITAN hereby grants to DEALER, during the continuance of this Agreement, the
non-exclusive privilege of purchasing for DEALER's own account for resale to
retail purchasers solely at DEALER's place(s) of business in the city or cities
and at the address or addresses indicated in Paragraph 1 above, those Titan
brand products specified in Appendix "A" to this Agreement and related parts and
accessories (hereinafter collectively called "Products") which are supplied by
TITAN. No obligation exists on the part of TITAN to sell any other of TITAN
products to DEALER
B. DEALER will not move its place(s) of business to any new or different
location other than that specified in Paragraph 1, or establish any additional
place o places of business for the sale, servicing or display of Products
without the prior written consent of Titan.
C. DEALER will not establish, directly or indirectly, an associate dealer or a
sub-dealer for the safe or service of new or used Products, or permit someone
else to act on DEALER's behalf or perform DEALER's obligations under this
Agreement in connection with the sale or service of new or used Products without
the prior written consent of an executive officer of TITAN.
4. AREA OF PRIMARY RESPONSIBILITY
A. TITAN and DEALER agree that DEALER's area of primary responsibility for the
sales and service of the Products shall be a twenty-five (25) mile radius of
DEALER's place(s) of business as specified in Paragraph 1 of this agreement.
<PAGE>
B. TITAN reserves the unrestricted right to sell the Products and grant the
privilege of using it's name and trademarks to other dealers or persons whether
located in DEALER's area of primary responsibility or elsewhere.
5. SALES PERFORMANCE
DEALER agrees, at its own cost and expense, to use its best efforts and due
diligence to energetically and aggressively develop and promote the sale of
Products, including each model and type thereof. DEALER and TITAN agree that
TITAN shall evaluate DEALER's development and promotion of the sale of Products,
both as a whole and separately for each model based on such reasonable criteria
as TITAN may determine from time to time, which may include but not be limited
to: (a) fair and reasonable sales objectives which may be established from time
to time by TITAN for DEALER after review with DEALER; (b) the ratio of sales of
Products by DEALER to sales of other makes of similar products as compared with
(i) such ratio on a local, state, and/or nationwide bases; (ii) the average
ratio for all TITAN dealers appointed by TITAN; (c) the development of DEALER's
sales performance over a reasonable period of time; and (d) particular
conditions in DEALER's area of primary responsibility, if any. affecting such
performance or potential sales performance. DEALER acknowledges and agrees to a
minimum sales objective of new TITAN motorcycles as indicated in Appendix C
throughout the term of this agreement.
6. OWNERSHIP AND MANAGEMENT
To induce TITAN to enter into this Agreement, DEALER represents that the
person(s) identified in Appendix "B" to this Agreement, are all of the owners
and persons executing managerial authority on behalf of DEALER. TITAN is
entering into this Agreement in reliance upon these representations. DEALER
agrees there will be no change in DEALER's owners or general managers without
TITAN's prior written consent.
7. PRICES, TERMS AND CONDITIONS
A. TITAN shall invoice Products sold to DEALER under this agreement at prices
and on terms and conditions established by TITAN and that are current at the
time of shipment to DEALER. Prices, terms and conditions of sale may be changed
by TITAN from time to time without prior notice or liability from TITAN to
DEALER. Unless otherwise expressly stated by TITAN, said prices to DEALER do not
include sales, use, excise, or similar taxes. DEALER warrants that all Products
purchased from TITAN are purchased for resale only in the ordinary course of
DEALER's business, at DEALER's place(s) of business as specified in Paragraph I
of this Agreement, and that DEALER has complied with all pertinent state and
local laws pertaining to the collection and payment by DEALER of all sales, use
and like taxes applicable to such resale transactions.
B. If DEALER is delinquent in payment of any indebtedness or obligation to TITAN
or if DEALER is in default with respect to any provisions of this Agreement,
then TITAN, at its sole discretion and in addition to any other rights and
remedies it may have under this Agreement or at law, may without further notice
suspend all pending orders and shipments until said delinquency is cured or
until said default is cured, as the case may be.
2
<PAGE>
C. DEALER agrees that TITAN may apply toward the payment of any indebtedness due
TITAN by DEALER, whether under this Agreement or otherwise, any credit owing to
DEALER by TITAN. D. DEALER agrees to permit floor checking of all TITAN brand
inventory in possession of DEALER by representatives of TITAN in order to assist
TITAN in product planning, distribution and production quantities and to
determine compliance by DEALER with warranty registration requirements.
8. SHIPMENT OF PRODUCTS
A. TITAN shall ship Products purchased by DEALER during the duration of this
Agreement by whatever mode of transportation TITAN shall select from whatever
geographic point TITAN may from time to time establish. All shipments of
Products shall be at DEALER's risk and DEALER shall be responsible for and shall
pay any and all transportation and/or handling charges resulting from shipment
of Products to DEALER, unless otherwise specified in writing by TITAN.
B. TITAN will endeavor as far as practical to make deliveries to DEALER in
accordance with DEALER's orders, but if for any cause TITAN fails to make
deliveries within the time stated in the order, or cancels any of such orders,
TITAN will not be liable to DEALER for any payment whatsoever by reason of such
failure to deliver, delays in making deliveries or cancellation, nor for any
loss of profits resulting directly or indirectly therefrom.
9. DISCONTINUANCE OR UNAVAILABILITY OF PRODUCTS
A. TITAN reserves for itself the right to discontinue the manufacture or sale of
any of the Products or to make changes in design, color or appearance or to add
improvements to particular Products at anytime, all without notice to DEALER and
without incurring any obligation to DEALER either with respect to any Products
previously ordered or purchased by DEALER or otherwise.
B. In the event of a Product shortage or Product introduction, TITAN shall have
the right to allocate or apportion said available Product or Products among its
customers as TITAN, in the exercise of its discretion, deems appropriate,
without incurring any liability to DEALER.
10. EQUAL REPRESENTATION
In the event DEALER sells other brands or lines of products which are
competitive with those Products purchased by DEALER from TITAN, DEALER agrees to
provide the Products with at least an equal representation to that provided
other competitive brands or lines.
11. DEALER BUSINESS FACILITIES
A. DEALER agrees to establish, staff, equip and maintain a salesroom and service
facility for the Products which will provide a first-class display of the full
line of Products and provide adequate service for the retail customer. Each such
facility will comply with reasonable written layout, appearance and size
standards established by TITAN from time to time. DEALER understands that TITAN
shall evaluate DEALER's compliance with such standard in determining its
performance under this Agreement.
3
<PAGE>
B. In carrying out its obligations under this Agreement, DEALER agrees to
maintain posted opening and closing hours, which business hours shall not be
less than that which is customary for similar business establishments in DEALERS
area of primary responsibility.
12. DEALER IDENTIFICATION
DEALER shall purchase, display and maintain, at DEALER's expense, signage
approved by TITAN, identifying the Products in a conspicuous location visible
outside DEALER's salesroom and service facilities, to the full extent permitted
by law. In the event of a prohibition by law, DEALER shall use its good faith
efforts to obtain an exception. DEALER shall further display and maintain during
the term of this Agreement such other authorized Product and service signs and
identification as are necessary to properly advertise DEALER's business in TITAN
products and service on a basis mutually satisfactory to both TITAN and DEALER.
DEALER agrees to place and maintain on the business premises signs and other
means of notification to the public that DEALER is an independent business
person, separate and distinct from TITAN.
13. FINANCIAL RESPONSIBILITY
A. DEALER shall at all times maintain and employ, in connection with its
business and operations under this Agreement, such working capital and net worth
together with a line of credit with a financing institution which will permit
DEALER to properly and fully carry out and perform DEALER's duties and
obligations under this Agreement, including an inventory of Products
commensurate with annually set objectives established by TITAN and DEALER. Such
working capital, net worth and/or line of credit shall be amounts not less than
minimum standards established by TITAN from time to time for dealers similarly
situated.
B. DEALER shall at all times maintain insurance coverage reasonably carried by
similarly situated dealers in such business, including without limitation,
general liability, property damage, and products liability to adequately protect
DEALER from loss resulting from the assembly, sale, service or repair of the
Products or arising out of any acts or omissions of the DEALER.
14. MODEL INVENTORY
Subject to the ability of TITAN to supply, DEALER agrees to purchase from Titan
and at all times maintain an inventory of then available models of Products,
which inventory shall at no time be less than the number of Products reasonably
established by TITAN from time to time after consultation with DEALER, such
initial minimum inventory being listed in Appendix D.
15. SERVICE PARTS
Dealer agrees to organize and maintain a complete parts department. DEALER at
all times will keep in DEALER's place(s) of business as specified in Paragraph 1
of this Agreement an inventory of service parts of an assortment and in
quantities that in TITAN's judgement is necessary to meet the current
anticipated requirements of owners of TITAN Products. DEALER agrees that it will
not sell or offer for sale or use in the repair or any Products, as a genuine
TITAN part, any part that is not in fact a genuine new TITAN part.
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16. EMPLOYEE TRAINING
DEALER wilt participate in and will make available to its employees training
courses, service schools, sales and management seminars and personnel
development programs as may be provided or required from time to time by TITAN.
DEALER agrees to have in its employ at all times during the continuance of this
Agreement at least one filly trained mechanic who has been trained in service
and repair of TITAN's Products.
17. REPORTS AND FINANCIAL INFORMATION
DEALER will provide TITAN, by the 30th day of the month following the end of
DEALER's calendar or fiscal business year, a complete and accurate financial and
operating statement covering DEALER's preceding calendar or fiscal year
operations and showing the true and accurate conditions of DEALER's business.
DEALER will also furnish to TITAN, on such forms and at such times as TITAN
reasonably may require, complete and accurate reports of DEALER's sales activity
and stock of Products then being held by DEALER.
18. ADVERTISING AND TRADE PRACTICES
A. DEALER agrees to develop, utilize and participate in various advertising and
sales promotion programs in fulfilling its responsibilities for selling,
promoting and advertising the Products. In so doing, DEALER agrees to (a)
maintain a trademark or tradename advertising listing or a display advertising
listing in the Yellow Pages of the principal telephone directory in its
marketing area; (b) make reasonable use of newspaper, direct mail, television,
radio or other appropriate advertising media as suggested by TITAN; (c)
participate in advertising or sales promotion programs offered from time to time
by TITAN and in accordance with the applicable provisions and rules thereof; and
(d) make every reasonable effort to build and maintain customer interest in
activities involving Products and confidence in DEALER, TITAN and the Products.
B. To assist DEALER in fulfilling his advertising and promotion
responsibilities, TITAN may, at its sole discretion, develop and offer from time
to time various advertising and sales promotion programs to promote the sale of
Products for the mutual benefit of TITAN and DEALER. TITAN may also provide to
DEALER from time to time advertising and sales promotion material for purchase
by DEALER. DEALER agrees to pay promptly for any such materials. TITAN may offer
other materials to DEALER from time to time at no charge.
C. DEALER agrees to at all times conduct its business in a manner that will
reflect favorably on the good name and reputation of the Products and TITAN.
DEALER expressly recognizes its obligation to avoid in every way any
discourteous, deceptive. misleading or unethical practice or advertising that is
or might be detrimental to the Products, TITAN, or the public. DEALER agrees,
when notified by TITAN of such objections, to immediately discontinue such
practice or advertising.
19. PRE-DELIVERY SERVICE
DEALER expressly recognizes its obligation to effectively assemble, inspect,
service and/or prepare Products in accordance with schedules or instructions
furnished from time to time by TITAN before delivery to the retail purchaser by
DEALER. DEALER agrees to uncrate, set up, inspect and test each new TITAN
Product at DEALER's place of business as specified in this Agreement, prior to
delivery to the retail purchaser, in accordance with the written instructions
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furnished from time to time by TITAN. DEALER agrees to make all necessary
repairs to such Products after receipt of a formal authorization from TITAN and
agrees that each such Product will be received directly by the retail purchaser
at DEALER's place(s) of business as specified in Paragraph 1 of this Agreement
in safe and lawful operating condition. Upon request, DEALER will furnish
evidence to TITAN of the performance of such pre-delivery services on forms
prescribed by TITAN. DEALER will report promptly in writing, to TITAN's Chief
Executive Officer any act or failure to act on the part of TITAN or any of its
personnel which DEALER believes was not fair and equitable towards it in the
establishment or performance of pre-delivery obligations.
20. REPAIR AND MAINTENANCE SERVICE
A. DEALER expressly recognizes its obligation to obtain necessary tools, and to
effectively perform repair or maintenance services required on Products, in
accordance with TITAN's current recommendations and specifications.
B. DEALER shall develop and maintain competent, qualified and efficient service
mechanics for the service and repair of the Products and shall employ said
persons in DEALER's service and repair facilities. DEALER shall not use service
or repair facilities or personnel other than its own in connection with the
service and repair of the Products without the prior written consent of an
executive officer of TITAN. DEALER shall comply with and maintain copies of
bulletins which may fl-cm time to time be issued by TITAN pertaining to the
service or the use or operation of the Products, and to the maintenance of
requisite tools to perform service work on the Products.
C. DEALER shall perform all Product services under this Agreement, including
pre-delivery, warranty and recall service, as an independent contractor. DEALER
agrees to post his labor rates in a conspicuous manner so that they are plainly
visible to his service customers. Service provided by DEALER shall include only
those services which are specifically requested by the customer or those
services approved in advance by the customer.
21. WARRANTY
A. TITAN makes no representations or warranties, express or implied, with
respect to the Products except as may be provided in a standard written or
printed warranty offered to the retail purchaser with respect to one or more of
the Products from time to time. THE FOREGOING IS EXCLUSIVE AND IN LIEU OF ALL
OTHER WARRANTIES EXCEPT TITLE, WHETHER EXPRESS OR IMPLIED, AND TITAN MAKES NO
WARRANTY OF MERCHANTABILITY OR FITNESS FOR PURPOSE TO DEALER. THE FULFILLING OF
THE TERMS OF THE PRINTED WARRANTY SHALL CONSTITUTE THE SOLE REMEDY OF DEALER AND
THE SOLE LIABILITY OF TITAN, WHETHER ON WARRANTY, CONTRACT OR NEGLIGENCE.
B. DEALER expressly recognizes its obligation to effectively perform warranty
work on Products whether delivered by DEALER or by another authorized dealer and
to fulfill the conditions of the warranty as applicable to particular Products
where indicated without charge to the retail purchaser. Within three (3)
business days after delivery of a new Product to a retail purchaser, DEALER
shall complete and send to TITAN a true and complete sales warranty registration
report on such Product in a manner then prescribed by TITAN, including the name
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and address of the owner. TITAN may utilize the information in the extent of a
recall of a Product, and/or to provide TITAN with useful marketing information.
C. DEALER will report promptly, in writing, to TITAN's Chief Executive Officer,
any act or failure to act on the part of TITAN or any of its personnel which
DEALER believes was not fair and equitable towards it in the performance of
warranty obligations or which resulted in DEALER not receiving reasonable and
adequate compensation for warranty labor and parts provided by DEALER.
D. DEALER shall process and dispose of warranty claims on the Products in
accordance with the procedure which may be prescribed from time to time by
TITAN, and TITAN shall have no obligation to recognize any warranty claims
unless the prescribed procedure is complied with by DEALER including, but not
limited to, the receipt by DEALER from TITAN of a written warranty work
authorization prior to the commencement of any reimbursable warranty work. In
support of DEALER's claim for warranty compensation, DEALER agrees to provide
TITAN with such supportive documents as TITAN may request.
E. DEALER expressly warrants that should any of the Products be modified by
DEALER or at DEALER's request, DEALER will attach to the Product prior to retail
sale a conspicuous statement which wilt clearly disclose the extent or nature of
the modification and the resultant warranty coverage, if any, which will then
apply to the Products.
F. DEALER expressly acknowledges that DEALER is performing warranty work on the
Products as an independent contractor and may be compensated for such services
separate and apart from the purchase price of the Products.
22. TRADEMARKS AND TRADE NAMES
TITAN and its related companies are exclusively entitled to the use of the
trademark "TITAN Motorcycle Company of America" and to the use of all trade
names and trademarks used in connection with the Products and the goodwill
attached thereto in the United States of America (thereinafter collectively
called the "Marks"). TITAN grants DEALER the non exclusive permission to
advertise and otherwise inform the general public of the fact that DEALER sells
the Products and is a "TITAN Motorcycle Company of America Dealer" at the
locations specified in Paragraph 1 of this Agreement, including the use of
outdoor signs, signs on buildings and other means of identification for such
specified location. DEALER will not use, or permit the use of the Marks either
as part of any corporate title, firm name or trade name unless TITAN shall first
consent thereto in writing. On termination of this Agreement, DEALER agrees to
immediately discontinue all use of the Marks and other means of identification
that might make it appear or imply that DEALER is still an authorized
representative of the Products including, without limitation. removal of any
listing in any telephone directory, display advertising or outdoor sign. TITAN
shall have the right, but not the obligation, to acquire any or all such signs
in possession of DEALER on date of termination at a price that is not in excess
of the price, if any, originally paid by DEALER. DEALER further agrees to
discontinue any use of the Marks or any semblance of same, as a part of its
business or corporate name and, if appropriate, file a change or discontinuance
of such name with the appropriate authorities. In the event DEALER fails to
comply with the terms and conditions of this Paragraph, TITAN shall have the
right to enter upon DEALER's premises and remove all such signs bearing the
TITAN designation or Marks without liability of TITAN to DEALER. DEALER agrees
to reimburse TITAN for all Costs and expenses, including without limitation,
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attorneys' fees, incurred by TITAN in effecting or enforcing compliance with
this Paragraph. The provisions of this Paragraph shall survive after termination
of this Agreement.
23. INDEPENDENT PERSON
DEALER is an independent business and the conduct of its business is within the
sole discretion of DEALER. This Agreement does not create the relationship of
principal and agent, master and servant, or employer and employee between TITAN
and DEALER. Nothing herein contained shall be construed or interpreted to grant
any authority to DEALER to commit or bind TITAN in any manner to any person.
DEALER shall be solely responsible for all the acts and omissions of DEALER, its
agents and employees. This Agreement is not intended to govern, control or
manage the day-to-day business activities of DEALER. DEALER agrees to defend,
indemnify and save TITAN and its suppliers harmless from any claim, demand,
damage, liability, cost or expense, including attorneys' fees and expenses
arising out of any acts or omissions of DEALER, its agents or employees.
24. SALE OF DEALER'S BUSINESS
A. DEALER may not sell, transfer or assign the whole or any part of DEALER's
rights or obligations under this Agreement, without TITAN's prior written
consent. DEALER shall give Titan at least thirty (30) days' prior written notice
of any such proposed sale, transfer, or assignment. TITAN's failure to object to
the proposed sale, transfer, or assignment following notice from DEALER shall
not constitute TITAN's consent.
B. Provided that this Agreement is still in effect, and provided further that
notice of termination or notice of nonrenewal has not been provided to DEALER
and is not then in effect between DEALER and TITAN, TITAN agrees to not
unreasonably refuse to enter into a new Sales and Service Agreement for the
remainder of the term provided in Paragraph 2 of this Agreement with a person
contracting to purchase DEALER's business as pertains to the Products, provided
that said purchaser as of the date of sale meets all then current requirements
established by TITAN for the appointment of new dealers.
25. EARLY TERMINATION OF AGREEMENT
A. This Agreement maybe terminated in its entirety or with respect to any of the
Products at any time without notice by mutual consent of DEALER and TITAN.
B. Either party may terminate this Agreement in its entirety or with respect to
any of the Products prior to the expiration date provided in Paragraph 2 hereof,
without cause, on a minimum of sixty (60) days' prior written notice from one
party to the other. If applicable State law should require notice of termination
of a fixed period of time greater than that provided by this Agreement for a
stated reason, then such required notice in the form prescribed shall be given
by the terminating party.
C. TITAN may immediately terminate this Agreement in its entirely or with
respect to any of the Products by written notice given to DEALER in the event of
any of the following: (1) death, incapacity, removal or resignation of DEALER or
any person in the employment thereof and in reliance upon whom this Agreement
was entered into by TITAN; (2) any sale or transfer of any substantial interest
in the managerial control and/or ownership of DEALER without TITAN's prior
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<PAGE>
written consent; (3) an unauthorized change made by DEALER in the location of
DEALER's place(s) of business as specified in this Agreement or the addition of
any place of business for Products; (4) discontinuance of the operation of
DEALER's business for a period of five (5) consecutive days, unless such
discontinuance is the result of a natural disaster; (5) the appointment of an
assignee, referee, receiver, or trustee for DEALER or upon its adjudication in
bankruptcy or the liquidation of DEALER; (6) any dispute, disagreement or
controversy between or among partners, managers, officers, or shareholders of
DEALER which, in the opinion of TITAN, adversely affects the operation,
management or business of DEALER or TITAN and is not resolved within thirty (30)
days after notice is given to DEALER by TITAN; (7) submission by DEALER to TITAN
of a fraudulent report, statement claim for reimbursement, refund or credit or
falsification of warranty claim or registration or of DEALER's retail labor rate
or providing of fraudulent statements relating to pre-delivery preparation,
testing, servicing, repairing or maintenance of the Products; (8) failure to
maintain DEALER's account on a current basis and in accordance with TITAN's
terms and conditions of sale; (9) failure by DEALER, within five (5) days
following notification by TITAN, to replace with cash or cashier's check any
check provided TITAN by DEALER which has been returned from the bank on which
the check was drawn without payment to; (10) conviction in any court of
competent jurisdiction of DEALER, or any principal officer or manger of DEALER,
of any crime tending to affect adversely the ownership, operation, management,
business or interest of the DEALER or TITAN; or (11) failure of DEALER to obtain
or maintain any license required by law.
D. The date of notice of termination shall be the date of mailing of such
notice. If any period of notice of the termination required hereunder is less
than that required by applicable laws, such period of notice shall be increased
and be deemed to be the minimum period required by such laws.
E. DEALER hereby acknowledges and agrees that in the event of a discontinuance
of the operation of DEALER's business for a period often (10) consecutive days,
for any reason whatsoever other than a natural disaster, such discontinuance
shall constitute a voluntary termination of this Agreement by DEALER. Upon
receipt of such notice, DEALER shall cooperate with TITAN, including without
limitation, executing such other documents as may be reasonably required by
TITAN, to effectuate the voluntary termination of this Agreement and DEALER's
business in TITAN's Products.
26. PROCEDURE ON TERMINATION
A. Upon termination or expiration and nonrenewal of this Agreement, DEALER will
immediately pay to TITAN all sums owing from DEALER to TITAN. Any amount due
TITAN by DEALER may be deducted from credits owing DEALER.
B. In the event of early termination or expiration and nonrenewal of this
Agreement, TITAN shall continue to fill orders from DEALER for such Products as
may be affected by the termination or nonrenewal up to the specified termination
or expiration date. TITAN shall have the right to impose reasonable limitations
on such orders for such Products during the notice period. On the specified date
of termination or expiration, all unfilled orders for such Products will be
automatically cancelled. Payment terms for such Products supplied by TITAN to
DEALER after notice of intention to terminate or upon expiration and nonrenewal
may be changed to cash, certified check or other terms determined by TITAN.
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C. After the effective date of termination of this Agreement, the acceptance of
orders from DEALER by TITAN, or the continuation of the sale by DEALER of
Products, or the referring of inquiries to DEALER by TITAN, or any business
relations either party has with the other will not be construed as a renewal of
this Agreement nor a waiver of the termination. If TITAN accepts any orders from
DEALER after termination of this Agreement, alt such transaction(s) will be
governed, unless the contrary intention appears, by the terms of this Agreement
applicable to such transactions.
27. COMPLIANCE WITH SAFETY, REGULATORY, AND EMISSION CONTROL REQUIREMENTS
A. DEALER agrees to comply with, and operate consistently with, all applicable
provisions of the National Traffic and Motor Vehicle Safety Act of 1966 and the
Federal Clean Air Act, as amended, including applicable rules and regulations
issued from time to time thereunder, and all other applicable federal, state and
local rules and regulations issued from time to time thereunder, and all other
applicable federal, state and local product safety, regulatory and emission
control requirements.
B. In the event that the laws of the state in which DEALER is located require
dealers of Products to install in new or used Products, prior to the retail sale
thereof, any safety devices or other equipment not installed or supplied as
standard equipment by TITAN, then DEALER, prior to its sale of any such TITAN
Product, shall properly install such equipment.
28. COMPLIANCE WITH SAFETY, REGULATORY AND EMISSION CONTROL REQUIREMENTS
DEALER hereby agrees to adopt, promote and implement safety programs developed
and provided by TITAN upon written notification from TITAN, DEALER agrees to
place and display safety notices and warnings and proper user information labels
on TITAN Products and in the dealership as appropriate, and to adhere to
established user recommendations and restrictions on the sale of TITAN Products
as directed by TITAN. DEALER agrees to promote and require safety awareness and
training of purchasers and users of TITAN Products in accordance with programs
and materials developed or provided by TITAN upon written notification by TITAN.
DEALER agrees to provide to customers safety notices and warnings and other
safety awareness materials prepared or provided by TITAN, and/or which may from
time to time be developed and provided by industry and/or safety associations,
regarding use of TITAN Products. DEALER agrees to require the reading or viewing
of such safety awareness materials by the customer in conjunction with the sale
of a TITAN Product as specified in writing by TITAN. DEALER agrees that
violation of its safety obligations described in this Paragraph constitutes
ground for TITAN action under this Agreement. TITAN retains the right, through
written notification, to amend the "DEALER SAFETY OBLIGATIONS" specified in this
Paragraph and to add such other Dealer Safety Obligations as may be necessary or
advisable.
29. DEALER'S SUCCESSOR ON DEATH OR INCAPACITY
Upon termination of this Agreement because of death or incapacity of the
principal of DEALER, TITAN will offer to a nominated successor of the principal
of DEALER acceptable to TITAN, or to spouse of the principal of DEALER,
continuation of this Agreement for the duration of the Agreement as provided in
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Paragraph 2 hereof, provided that: (i) DEALER, within fifteen (15) days of the
occurrence of such death or incapacity, gives notice to TITAN of such occurrence
and the name and qualifications of the DEALER's successor; (ii) The facilities
and capital of the dealership meet TITAN then current requirements; and, (iii)
The person to whom the continuation of the Agreement is offered provides written
notice to TITAN of acceptance within fifteen (15) days from the extension of the
offer by TITAN.
30. DISPUTE RESOLUTION
All controversies, claims and disputes arising in connection with this
Agreement, except any controversies, claims and disputes relating to amounts due
and unpaid to TITAN or relating to third party personal injury, shall be settled
by mutual consultation between the parties in good faith as promptly as
possible, but failing an amicable settlement shall be settled finally by
arbitration in accordance with the provisions of this Paragraph. Such
arbitration shall be conducted in Phoenix, Arizona in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and the
parties hereto agree that such arbitration shall be the sole and exclusive
method of resolving any and all such controversies, claims or disputes, except
those expressly excluded above. Judgement upon such award may be entered in the
Superior Court of the State of Arizona for the County of Maricopa, if the award
is rendered against DEALER. The prevailing party shall be entitled to recover
from the nonprevailing party all costs and expenses of the arbitration,
including reasonable attorney's fees.
31. SERVICE OF NOTICE
Any notice which may be required to be served by DEALER on TITAN, or by TITAN on
DEALER, shall be in writing and Sent by certified or registered mail,
return-receipt requested, addressed to the party for whom intended at its last
known address. Each party will promptly advise the other, in writing, of any
change of address.
32. GENERAL PROVISIONS
DEALER agrees that it neither has nor may acquire by performance under the terms
and provisions of this Agreement, any vested right in the sales and service
responsibility assigned to it hereunder and any investments made by DEALER in
the performance hereof are made with the knowledge that this Agreement may
expire and not be renewed or be terminated as herein provided. This Agreement is
the entire agreement between the parties and terminates and supersedes all prior
agreements, verbal or written, between the parties. Neither trade usage nor
course of dealing shall serve to modify, amend or change this Agreement. This
Agreement may be altered or amended in writing only and must be signed by an
executive officer of TITAN. Both parties shall be excused from nonperformance in
the case of FORCE MAJEURE or other causes beyond the control of the parties. The
paragraph headings contained herein are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement. It is understood
that this is a general form of agreement designated for use in any State. Should
any provision of this Agreement or the application thereof to any particular
person or circumstance be contrary to or prohibited by applicable laws or
regulations, such provision shall be inapplicable and deemed omitted and the
remaining provisions of this Agreement will be valid and binding and of like
effect as though such provisions were not included herein. TITAN has a right to
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amend, modify or change this Agreement in case of legislation, government
regulation or changes in circumstances beyond the control of TITAN that might
affect materially the relationship between TITAN and DEALER. This Agreement and
the rights and obligations arising thereunder shall be governed by and construed
according to the laws of the State of Arizona.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate the
day and year hereinafter written.
DEALER TITAN MOTORCYCLE CO. OF AMERICA
Signature: /s/ Barbara S. Keery Signature: /s/ Robert P. Lobban
-------------------------- -----------------------------
Position/Title: Partner Position/Title: CFO
--------------------- ------------------------
Signature: Dated: 1/4/99
-------------------------- ---------------------------------
Position/Title:
---------------------
Dated: 12/30/98
------------------------------
Circle One: Corporation Partnership Individual
This Agreement shall be executed on behalf of DEALER by the owner in case of a
sole proprietorship, by general partner in case of a partnership, or by a duly
authorized officer in case of a corporation, showing position or title of person
signing.
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APPENDIX "A"
THE DEFINITION OF PRODUCTS IN THIS AGREEMENT SHALL
INCLUDE:
MOTORCYCLE MODELS:
"SIDEWINDER" SX & RM
"ROADRUNNER" SX & RM
"ROADRUNNER SPORT" RM
"GECKO" SX & RM
"COYOTE"
<PAGE>
APPENDIX "B"
OWNERS AND MANAGERS
1. THE FOLLOWING PERSONS ARE THE BENEFICIAL AND RECORD OWNERS OF DEALER:
IF A CORPORATION,
NUMBER AND
NAME AND ADDRESS OF EACH CLASS OF SHARES
RECORD OR BENEFICIAL OWNER OF -------------------- PERCENTAGE OWNERSHIP OF
DEALER NUMBER CLASS RECORD IN DEALER
- ----------------------------- ------ ----- -----------------------
BPF, LLC 100%
2. THE FOLLOWING PERSONS ARE DEALER'S OFFICERS:
NAME AND ADDRESS TITLE
- ---------------- -------
PATRICK KEERY PARTNER
FRANCIS KEERY PARTNER
BARBARA KEERY PARTNER
BRYANT CRAGUN PARTNER
3. THE FOLLOWING PERSONS FUNCTION AS GENERAL MANAGER OF DEALER AND, AS SUCH, ARE
AUTHORIZED TO MAKE ALL DECISIONS ON BEHALF OF DEALER WITH RESPECT TO DEALER'S
OPERATIONS:
NAME AND ADDRESS TITLE
- ---------------- -------
JOE KLEIMAN MANAGER
<PAGE>
APPENDIX "C"
MINIMUM ANNUAL QUANTITY OF NEW TITAN MOTORCYCLES
TO BE PURCHASED
FROM
TITAN BY DEALER
TWENTY (20) UNIT PER YEAR
APPENDIX "D"
MINIMUM MODEL FLOOR INVENTORY OF TITAN. PRODUCTS
TO BE CONTINUOUSLY CARRIED BY DEALER
TWENTY (20) UNITS TO BE DETERMINED BY DEALER
TITAN MOTORCYCLE CO. OF AMERICA(R)
AUTHORIZED DEALER SALES AND SERVICE
AGREEMENT
1. PARTIES TO AGREEMENT
This Agreement is made by and between TITAN Motorcycle Co. of America(R), 2222
West Peoria Avenue, Phoenix, AZ 85029, an Arizona corporation hereinafter called
TITAN and PUJOL MOTORCYCLE COMPANY, LLC hereinafter called "DEALER". The purpose
of this Agreement is to appoint DEALER during the continuance of this Agreement
as an authorized independent dealer for TITAN brand products as hereinafter
designated and to establish the basic rules which will govern the relationship
between TITAN and DEALER.
2. DURATION OF AGREEMENT
This Agreement shall be in effect from the date of execution by TITAN to and
including December 31, 2000, unless sooner terminated as hereinafter provided.
No act by either party to this Agreement shall be construed as an extension or
renewal of this Agreement, except renewals or extensions in writing and signed
by both parties.
3. GRANTING OF DEALERSHIP
A. TITAN hereby grants to DEALER, during the continuance of this Agreement, the
non-exclusive privilege of purchasing for DEALER's own account for resale to
retail purchasers solely at DEALER's place(s) of business in the city or cities
and at the address or addresses indicated in Paragraph 1 above, those Titan
brand products specified in Appendix "A" to this Agreement and related parts and
accessories (hereinafter collectively called "Products") which are supplied by
TITAN. No obligation exists on the part of TITAN to sell any other of TITAN
products to DEALER
B. DEALER will not move its place(s) of business to any new or different
location other than that specified in Paragraph 1, or establish any additional
place o places of business for the sale, servicing or display of Products
without the prior written consent of Titan.
C. DEALER will not establish, directly or indirectly, an associate dealer or a
sub-dealer for the safe or service of new or used Products, or permit someone
else to act on DEALER's behalf or perform DEALER's obligations under this
Agreement in connection with the sale or service of new or used Products without
the prior written consent of an executive officer of TITAN.
4. AREA OF PRIMARY RESPONSIBILITY
A. TITAN and DEALER agree that DEALER's area of primary responsibility for the
sales and service of the Products shall be a twenty-five (25) mile radius of
DEALER's place(s) of business as specified in Paragraph 1 of this agreement.
<PAGE>
B. TITAN reserves the unrestricted right to sell the Products and grant the
privilege of using it's name and trademarks to other dealers or persons whether
located in DEALER's area of primary responsibility or elsewhere.
5. SALES PERFORMANCE
DEALER agrees, at its own cost and expense, to use its best efforts and due
diligence to energetically and aggressively develop and promote the sale of
Products, including each model and type thereof. DEALER and TITAN agree that
TITAN shall evaluate DEALER's development and promotion of the sale of Products,
both as a whole and separately for each model based on such reasonable criteria
as TITAN may determine from time to time, which may include but not be limited
to: (a) fair and reasonable sales objectives which may be established from time
to time by TITAN for DEALER after review with DEALER; (b) the ratio of sales of
Products by DEALER to sales of other makes of similar products as compared with
(i) such ratio on a local, state, and/or nationwide bases; (ii) the average
ratio for all TITAN dealers appointed by TITAN; (c) the development of DEALER's
sales performance over a reasonable period of time; and (d) particular
conditions in DEALER's area of primary responsibility, if any. affecting such
performance or potential sales performance. DEALER acknowledges and agrees to a
minimum sales objective of new TITAN motorcycles as indicated in Appendix C
throughout the term of this agreement.
6. OWNERSHIP AND MANAGEMENT
To induce TITAN to enter into this Agreement, DEALER represents that the
person(s) identified in Appendix "B" to this Agreement, are all of the owners
and persons executing managerial authority on behalf of DEALER. TITAN is
entering into this Agreement in reliance upon these representations. DEALER
agrees there will be no change in DEALER's owners or general managers without
TITAN's prior written consent.
7. PRICES, TERMS AND CONDITIONS
A. TITAN shall invoice Products sold to DEALER under this agreement at prices
and on terms and conditions established by TITAN and that are current at the
time of shipment to DEALER. Prices, terms and conditions of sale may be changed
by TITAN from time to time without prior notice or liability from TITAN to
DEALER. Unless otherwise expressly stated by TITAN, said prices to DEALER do not
include sales, use, excise, or similar taxes. DEALER warrants that all Products
purchased from TITAN are purchased for resale only in the ordinary course of
DEALER's business, at DEALER's place(s) of business as specified in Paragraph I
of this Agreement, and that DEALER has complied with all pertinent state and
local laws pertaining to the collection and payment by DEALER of all sales, use
and like taxes applicable to such resale transactions.
B. If DEALER is delinquent in payment of any indebtedness or obligation to TITAN
or if DEALER is in default with respect to any provisions of this Agreement,
then TITAN, at its sole discretion and in addition to any other rights and
remedies it may have under this Agreement or at law, may without further notice
suspend all pending orders and shipments until said delinquency is cured or
until said default is cured, as the case may be.
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C. DEALER agrees that TITAN may apply toward the payment of any indebtedness due
TITAN by DEALER, whether under this Agreement or otherwise, any credit owing to
DEALER by TITAN. D. DEALER agrees to permit floor checking of all TITAN brand
inventory in possession of DEALER by representatives of TITAN in order to assist
TITAN in product planning, distribution and production quantities and to
determine compliance by DEALER with warranty registration requirements.
8. SHIPMENT OF PRODUCTS
A. TITAN shall ship Products purchased by DEALER during the duration of this
Agreement by whatever mode of transportation TITAN shall select from whatever
geographic point TITAN may from time to time establish. All shipments of
Products shall be at DEALER's risk and DEALER shall be responsible for and shall
pay any and all transportation and/or handling charges resulting from shipment
of Products to DEALER, unless otherwise specified in writing by TITAN.
B. TITAN will endeavor as far as practical to make deliveries to DEALER in
accordance with DEALER's orders, but if for any cause TITAN fails to make
deliveries within the time stated in the order, or cancels any of such orders,
TITAN will not be liable to DEALER for any payment whatsoever by reason of such
failure to deliver, delays in making deliveries or cancellation, nor for any
loss of profits resulting directly or indirectly therefrom.
9. DISCONTINUANCE OR UNAVAILABILITY OF PRODUCTS
A. TITAN reserves for itself the right to discontinue the manufacture or sale of
any of the Products or to make changes in design, color or appearance or to add
improvements to particular Products at anytime, all without notice to DEALER and
without incurring any obligation to DEALER either with respect to any Products
previously ordered or purchased by DEALER or otherwise.
B. In the event of a Product shortage or Product introduction, TITAN shall have
the right to allocate or apportion said available Product or Products among its
customers as TITAN, in the exercise of its discretion, deems appropriate,
without incurring any liability to DEALER.
10. EQUAL REPRESENTATION
In the event DEALER sells other brands or lines of products which are
competitive with those Products purchased by DEALER from TITAN, DEALER agrees to
provide the Products with at least an equal representation to that provided
other competitive brands or lines.
11. DEALER BUSINESS FACILITIES
A. DEALER agrees to establish, staff, equip and maintain a salesroom and service
facility for the Products which will provide a first-class display of the full
line of Products and provide adequate service for the retail customer. Each such
facility will comply with reasonable written layout, appearance and size
standards established by TITAN from time to time. DEALER understands that TITAN
shall evaluate DEALER's compliance with such standard in determining its
performance under this Agreement.
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B. In carrying out its obligations under this Agreement, DEALER agrees to
maintain posted opening and closing hours, which business hours shall not be
less than that which is customary for similar business establishments in DEALERS
area of primary responsibility.
12. DEALER IDENTIFICATION
DEALER shall purchase, display and maintain, at DEALER's expense, signage
approved by TITAN, identifying the Products in a conspicuous location visible
outside DEALER's salesroom and service facilities, to the full extent permitted
by law. In the event of a prohibition by law, DEALER shall use its good faith
efforts to obtain an exception. DEALER shall further display and maintain during
the term of this Agreement such other authorized Product and service signs and
identification as are necessary to properly advertise DEALER's business in TITAN
products and service on a basis mutually satisfactory to both TITAN and DEALER.
DEALER agrees to place and maintain on the business premises signs and other
means of notification to the public that DEALER is an independent business
person, separate and distinct from TITAN.
13. FINANCIAL RESPONSIBILITY
A. DEALER shall at all times maintain and employ, in connection with its
business and operations under this Agreement, such working capital and net worth
together with a line of credit with a financing institution which will permit
DEALER to properly and fully carry out and perform DEALER's duties and
obligations under this Agreement, including an inventory of Products
commensurate with annually set objectives established by TITAN and DEALER. Such
working capital, net worth and/or line of credit shall be amounts not less than
minimum standards established by TITAN from time to time for dealers similarly
situated.
B. DEALER shall at all times maintain insurance coverage reasonably carried by
similarly situated dealers in such business, including without limitation,
general liability, property damage, and products liability to adequately protect
DEALER from loss resulting from the assembly, sale, service or repair of the
Products or arising out of any acts or omissions of the DEALER.
14. MODEL INVENTORY
Subject to the ability of TITAN to supply, DEALER agrees to purchase from Titan
and at all times maintain an inventory of then available models of Products,
which inventory shall at no time be less than the number of Products reasonably
established by TITAN from time to time after consultation with DEALER, such
initial minimum inventory being listed in Appendix D.
15. SERVICE PARTS
Dealer agrees to organize and maintain a complete parts department. DEALER at
all times will keep in DEALER's place(s) of business as specified in Paragraph 1
of this Agreement an inventory of service parts of an assortment and in
quantities that in TITAN's judgement is necessary to meet the current
anticipated requirements of owners of TITAN Products. DEALER agrees that it will
not sell or offer for sale or use in the repair or any Products, as a genuine
TITAN part, any part that is not in fact a genuine new TITAN part.
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16. EMPLOYEE TRAINING
DEALER wilt participate in and will make available to its employees training
courses, service schools, sales and management seminars and personnel
development programs as may be provided or required from time to time by TITAN.
DEALER agrees to have in its employ at all times during the continuance of this
Agreement at least one filly trained mechanic who has been trained in service
and repair of TITAN's Products.
17. REPORTS AND FINANCIAL INFORMATION
DEALER will provide TITAN, by the 30th day of the month following the end of
DEALER's calendar or fiscal business year, a complete and accurate financial and
operating statement covering DEALER's preceding calendar or fiscal year
operations and showing the true and accurate conditions of DEALER's business.
DEALER will also furnish to TITAN, on such forms and at such times as TITAN
reasonably may require, complete and accurate reports of DEALER's sales activity
and stock of Products then being held by DEALER.
18. ADVERTISING AND TRADE PRACTICES
A. DEALER agrees to develop, utilize and participate in various advertising and
sales promotion programs in fulfilling its responsibilities for selling,
promoting and advertising the Products. In so doing, DEALER agrees to (a)
maintain a trademark or tradename advertising listing or a display advertising
listing in the Yellow Pages of the principal telephone directory in its
marketing area; (b) make reasonable use of newspaper, direct mail, television,
radio or other appropriate advertising media as suggested by TITAN; (c)
participate in advertising or sales promotion programs offered from time to time
by TITAN and in accordance with the applicable provisions and rules thereof; and
(d) make every reasonable effort to build and maintain customer interest in
activities involving Products and confidence in DEALER, TITAN and the Products.
B. To assist DEALER in fulfilling his advertising and promotion
responsibilities, TITAN may, at its sole discretion, develop and offer from time
to time various advertising and sales promotion programs to promote the sale of
Products for the mutual benefit of TITAN and DEALER. TITAN may also provide to
DEALER from time to time advertising and sales promotion material for purchase
by DEALER. DEALER agrees to pay promptly for any such materials. TITAN may offer
other materials to DEALER from time to time at no charge.
C. DEALER agrees to at all times conduct its business in a manner that will
reflect favorably on the good name and reputation of the Products and TITAN.
DEALER expressly recognizes its obligation to avoid in every way any
discourteous, deceptive. misleading or unethical practice or advertising that is
or might be detrimental to the Products, TITAN, or the public. DEALER agrees,
when notified by TITAN of such objections, to immediately discontinue such
practice or advertising.
19. PRE-DELIVERY SERVICE
DEALER expressly recognizes its obligation to effectively assemble, inspect,
service and/or prepare Products in accordance with schedules or instructions
furnished from time to time by TITAN before delivery to the retail purchaser by
DEALER. DEALER agrees to uncrate, set up, inspect and test each new TITAN
Product at DEALER's place of business as specified in this Agreement, prior to
delivery to the retail purchaser, in accordance with the written instructions
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furnished from time to time by TITAN. DEALER agrees to make all necessary
repairs to such Products after receipt of a formal authorization from TITAN and
agrees that each such Product will be received directly by the retail purchaser
at DEALER's place(s) of business as specified in Paragraph 1 of this Agreement
in safe and lawful operating condition. Upon request, DEALER will furnish
evidence to TITAN of the performance of such pre-delivery services on forms
prescribed by TITAN. DEALER will report promptly in writing, to TITAN's Chief
Executive Officer any act or failure to act on the part of TITAN or any of its
personnel which DEALER believes was not fair and equitable towards it in the
establishment or performance of pre-delivery obligations.
20. REPAIR AND MAINTENANCE SERVICE
A. DEALER expressly recognizes its obligation to obtain necessary tools, and to
effectively perform repair or maintenance services required on Products, in
accordance with TITAN's current recommendations and specifications.
B. DEALER shall develop and maintain competent, qualified and efficient service
mechanics for the service and repair of the Products and shall employ said
persons in DEALER's service and repair facilities. DEALER shall not use service
or repair facilities or personnel other than its own in connection with the
service and repair of the Products without the prior written consent of an
executive officer of TITAN. DEALER shall comply with and maintain copies of
bulletins which may fl-cm time to time be issued by TITAN pertaining to the
service or the use or operation of the Products, and to the maintenance of
requisite tools to perform service work on the Products.
C. DEALER shall perform all Product services under this Agreement, including
pre-delivery, warranty and recall service, as an independent contractor. DEALER
agrees to post his labor rates in a conspicuous manner so that they are plainly
visible to his service customers. Service provided by DEALER shall include only
those services which are specifically requested by the customer or those
services approved in advance by the customer.
21. WARRANTY
A. TITAN makes no representations or warranties, express or implied, with
respect to the Products except as may be provided in a standard written or
printed warranty offered to the retail purchaser with respect to one or more of
the Products from time to time. THE FOREGOING IS EXCLUSIVE AND IN LIEU OF ALL
OTHER WARRANTIES EXCEPT TITLE, WHETHER EXPRESS OR IMPLIED, AND TITAN MAKES NO
WARRANTY OF MERCHANTABILITY OR FITNESS FOR PURPOSE TO DEALER. THE FULFILLING OF
THE TERMS OF THE PRINTED WARRANTY SHALL CONSTITUTE THE SOLE REMEDY OF DEALER AND
THE SOLE LIABILITY OF TITAN, WHETHER ON WARRANTY, CONTRACT OR NEGLIGENCE.
B. DEALER expressly recognizes its obligation to effectively perform warranty
work on Products whether delivered by DEALER or by another authorized dealer and
to fulfill the conditions of the warranty as applicable to particular Products
where indicated without charge to the retail purchaser. Within three (3)
business days after delivery of a new Product to a retail purchaser, DEALER
shall complete and send to TITAN a true and complete sales warranty registration
report on such Product in a manner then prescribed by TITAN, including the name
and address of the owner. TITAN may utilize the information in the extent of a
recall of a Product, and/or to provide TITAN with useful marketing information.
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C. DEALER will report promptly, in writing, to TITAN's Chief Executive Officer,
any act or failure to act on the part of TITAN or any of its personnel which
DEALER believes was not fair and equitable towards it in the performance of
warranty obligations or which resulted in DEALER not receiving reasonable and
adequate compensation for warranty labor and parts provided by DEALER.
D. DEALER shall process and dispose of warranty claims on the Products in
accordance with the procedure which may be prescribed from time to time by
TITAN, and TITAN shall have no obligation to recognize any warranty claims
unless the prescribed procedure is complied with by DEALER including, but not
limited to, the receipt by DEALER from TITAN of a written warranty work
authorization prior to the commencement of any reimbursable warranty work. In
support of DEALER's claim for warranty compensation, DEALER agrees to provide
TITAN with such supportive documents as TITAN may request.
E. DEALER expressly warrants that should any of the Products be modified by
DEALER or at DEALER's request, DEALER will attach to the Product prior to retail
sale a conspicuous statement which wilt clearly disclose the extent or nature of
the modification and the resultant warranty coverage, if any, which will then
apply to the Products.
F. DEALER expressly acknowledges that DEALER is performing warranty work on the
Products as an independent contractor and may be compensated for such services
separate and apart from the purchase price of the Products.
22. TRADEMARKS AND TRADE NAMES
TITAN and its related companies are exclusively entitled to the use of the
trademark "TITAN Motorcycle Company of America" and to the use of all trade
names and trademarks used in connection with the Products and the goodwill
attached thereto in the United States of America (thereinafter collectively
called the "Marks"). TITAN grants DEALER the non exclusive permission to
advertise and otherwise inform the general public of the fact that DEALER sells
the Products and is a "TITAN Motorcycle Company of America Dealer" at the
locations specified in Paragraph 1 of this Agreement, including the use of
outdoor signs, signs on buildings and other means of identification for such
specified location. DEALER will not use, or permit the use of the Marks either
as part of any corporate title, firm name or trade name unless TITAN shall first
consent thereto in writing. On termination of this Agreement, DEALER agrees to
immediately discontinue all use of the Marks and other means of identification
that might make it appear or imply that DEALER is still an authorized
representative of the Products including, without limitation. removal of any
listing in any telephone directory, display advertising or outdoor sign. TITAN
shall have the right, but not the obligation, to acquire any or all such signs
in possession of DEALER on date of termination at a price that is not in excess
of the price, if any, originally paid by DEALER. DEALER further agrees to
discontinue any use of the Marks or any semblance of same, as a part of its
business or corporate name and, if appropriate, file a change or discontinuance
of such name with the appropriate authorities. In the event DEALER fails to
comply with the terms and conditions of this Paragraph, TITAN shall have the
right to enter upon DEALER's premises and remove all such signs bearing the
TITAN designation or Marks without liability of TITAN to DEALER. DEALER agrees
to reimburse TITAN for all Costs and expenses, including without limitation,
attorneys' fees, incurred by TITAN in effecting or enforcing compliance with
this Paragraph. The provisions of this Paragraph shall survive after termination
of this Agreement.
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23. INDEPENDENT PERSON
DEALER is an independent business and the conduct of its business is within the
sole discretion of DEALER. This Agreement does not create the relationship of
principal and agent, master and servant, or employer and employee between TITAN
and DEALER. Nothing herein contained shall be construed or interpreted to grant
any authority to DEALER to commit or bind TITAN in any manner to any person.
DEALER shall be solely responsible for all the acts and omissions of DEALER, its
agents and employees. This Agreement is not intended to govern, control or
manage the day-to-day business activities of DEALER. DEALER agrees to defend,
indemnify and save TITAN and its suppliers harmless from any claim, demand,
damage, liability, cost or expense, including attorneys' fees and expenses
arising out of any acts or omissions of DEALER, its agents or employees.
24. SALE OF DEALER'S BUSINESS
A. DEALER may not sell, transfer or assign the whole or any part of DEALER's
rights or obligations under this Agreement, without TITAN's prior written
consent. DEALER shall give Titan at least thirty (30) days' prior written notice
of any such proposed sale, transfer, or assignment. TITAN's failure to object to
the proposed sale, transfer, or assignment following notice from DEALER shall
not constitute TITAN's consent.
B. Provided that this Agreement is still in effect, and provided further that
notice of termination or notice of nonrenewal has not been provided to DEALER
and is not then in effect between DEALER and TITAN, TITAN agrees to not
unreasonably refuse to enter into a new Sales and Service Agreement for the
remainder of the term provided in Paragraph 2 of this Agreement with a person
contracting to purchase DEALER's business as pertains to the Products, provided
that said purchaser as of the date of sale meets all then current requirements
established by TITAN for the appointment of new dealers.
25. EARLY TERMINATION OF AGREEMENT
A. This Agreement maybe terminated in its entirety or with respect to any of the
Products at any time without notice by mutual consent of DEALER and TITAN.
B. Either party may terminate this Agreement in its entirety or with respect to
any of the Products prior to the expiration date provided in Paragraph 2 hereof,
without cause, on a minimum of sixty (60) days' prior written notice from one
party to the other. If applicable State law should require notice of termination
of a fixed period of time greater than that provided by this Agreement for a
stated reason, then such required notice in the form prescribed shall be given
by the terminating party.
C. TITAN may immediately terminate this Agreement in its entirely or with
respect to any of the Products by written notice given to DEALER in the event of
any of the following: (1) death, incapacity, removal or resignation of DEALER or
any person in the employment thereof and in reliance upon whom this Agreement
was entered into by TITAN; (2) any sale or transfer of any substantial interest
in the managerial control and/or ownership of DEALER without TITAN's prior
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written consent; (3) an unauthorized change made by DEALER in the location of
DEALER's place(s) of business as specified in this Agreement or the addition of
any place of business for Products; (4) discontinuance of the operation of
DEALER's business for a period of five (5) consecutive days, unless such
discontinuance is the result of a natural disaster; (5) the appointment of an
assignee, referee, receiver, or trustee for DEALER or upon its adjudication in
bankruptcy or the liquidation of DEALER; (6) any dispute, disagreement or
controversy between or among partners, managers, officers, or shareholders of
DEALER which, in the opinion of TITAN, adversely affects the operation,
management or business of DEALER or TITAN and is not resolved within thirty (30)
days after notice is given to DEALER by TITAN; (7) submission by DEALER to TITAN
of a fraudulent report, statement claim for reimbursement, refund or credit or
falsification of warranty claim or registration or of DEALER's retail labor rate
or providing of fraudulent statements relating to pre-delivery preparation,
testing, servicing, repairing or maintenance of the Products; (8) failure to
maintain DEALER's account on a current basis and in accordance with TITAN's
terms and conditions of sale; (9) failure by DEALER, within five (5) days
following notification by TITAN, to replace with cash or cashier's check any
check provided TITAN by DEALER which has been returned from the bank on which
the check was drawn without payment to; (10) conviction in any court of
competent jurisdiction of DEALER, or any principal officer or manger of DEALER,
of any crime tending to affect adversely the ownership, operation, management,
business or interest of the DEALER or TITAN; or (11) failure of DEALER to obtain
or maintain any license required by law.
D. The date of notice of termination shall be the date of mailing of such
notice. If any period of notice of the termination required hereunder is less
than that required by applicable laws, such period of notice shall be increased
and be deemed to be the minimum period required by such laws.
E. DEALER hereby acknowledges and agrees that in the event of a discontinuance
of the operation of DEALER's business for a period often (10) consecutive days,
for any reason whatsoever other than a natural disaster, such discontinuance
shall constitute a voluntary termination of this Agreement by DEALER. Upon
receipt of such notice, DEALER shall cooperate with TITAN, including without
limitation, executing such other documents as may be reasonably required by
TITAN, to effectuate the voluntary termination of this Agreement and DEALER's
business in TITAN's Products.
26. PROCEDURE ON TERMINATION
A. Upon termination or expiration and nonrenewal of this Agreement, DEALER will
immediately pay to TITAN all sums owing from DEALER to TITAN. Any amount due
TITAN by DEALER may be deducted from credits owing DEALER.
B. In the event of early termination or expiration and nonrenewal of this
Agreement, TITAN shall continue to fill orders from DEALER for such Products as
may be affected by the termination or nonrenewal up to the specified termination
or expiration date. TITAN shall have the right to impose reasonable limitations
on such orders for such Products during the notice period. On the specified date
of termination or expiration, all unfilled orders for such Products will be
automatically cancelled. Payment terms for such Products supplied by TITAN to
DEALER after notice of intention to terminate or upon expiration and nonrenewal
may be changed to cash, certified check or other terms determined by TITAN.
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C. After the effective date of termination of this Agreement, the acceptance of
orders from DEALER by TITAN, or the continuation of the sale by DEALER of
Products, or the referring of inquiries to DEALER by TITAN, or any business
relations either party has with the other will not be construed as a renewal of
this Agreement nor a waiver of the termination. If TITAN accepts any orders from
DEALER after termination of this Agreement, alt such transaction(s) will be
governed, unless the contrary intention appears, by the terms of this Agreement
applicable to such transactions.
27. COMPLIANCE WITH SAFETY, REGULATORY, AND EMISSION CONTROL REQUIREMENTS
A. DEALER agrees to comply with, and operate consistently with, all applicable
provisions of the National Traffic and Motor Vehicle Safety Act of 1966 and the
Federal Clean Air Act, as amended, including applicable rules and regulations
issued from time to time thereunder, and all other applicable federal, state and
local rules and regulations issued from time to time thereunder, and all other
applicable federal, state and local product safety, regulatory and emission
control requirements.
B. In the event that the laws of the state in which DEALER is located require
dealers of Products to install in new or used Products, prior to the retail sale
thereof, any safety devices or other equipment not installed or supplied as
standard equipment by TITAN, then DEALER, prior to its sale of any such TITAN
Product, shall properly install such equipment.
28. COMPLIANCE WITH SAFETY, REGULATORY AND EMISSION CONTROL REQUIREMENTS
DEALER hereby agrees to adopt, promote and implement safety programs developed
and provided by TITAN upon written notification from TITAN, DEALER agrees to
place and display safety notices and warnings and proper user information labels
on TITAN Products and in the dealership as appropriate, and to adhere to
established user recommendations and restrictions on the sale of TITAN Products
as directed by TITAN. DEALER agrees to promote and require safety awareness and
training of purchasers and users of TITAN Products in accordance with programs
and materials developed or provided by TITAN upon written notification by TITAN.
DEALER agrees to provide to customers safety notices and warnings and other
safety awareness materials prepared or provided by TITAN, and/or which may from
time to time be developed and provided by industry and/or safety associations,
regarding use of TITAN Products. DEALER agrees to require the reading or viewing
of such safety awareness materials by the customer in conjunction with the sale
of a TITAN Product as specified in writing by TITAN. DEALER agrees that
violation of its safety obligations described in this Paragraph constitutes
ground for TITAN action under this Agreement. TITAN retains the right, through
written notification, to amend the "DEALER SAFETY OBLIGATIONS" specified in this
Paragraph and to add such other Dealer Safety Obligations as may be necessary or
advisable.
29. DEALER'S SUCCESSOR ON DEATH OR INCAPACITY
Upon termination of this Agreement because of death or incapacity of the
principal of DEALER, TITAN will offer to a nominated successor of the principal
of DEALER acceptable to TITAN, or to spouse of the principal of DEALER,
continuation of this Agreement for the duration of the Agreement as provided in
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Paragraph 2 hereof, provided that: (i) DEALER, within fifteen (15) days of the
occurrence of such death or incapacity, gives notice to TITAN of such occurrence
and the name and qualifications of the DEALER's successor; (ii) The facilities
and capital of the dealership meet TITAN then current requirements; and, (iii)
The person to whom the continuation of the Agreement is offered provides written
notice to TITAN of acceptance within fifteen (15) days from the extension of the
offer by TITAN.
30. DISPUTE RESOLUTION
All controversies, claims and disputes arising in connection with this
Agreement, except any controversies, claims and disputes relating to amounts due
and unpaid to TITAN or relating to third party personal injury, shall be settled
by mutual consultation between the parties in good faith as promptly as
possible, but failing an amicable settlement shall be settled finally by
arbitration in accordance with the provisions of this Paragraph. Such
arbitration shall be conducted in Phoenix, Arizona in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and the
parties hereto agree that such arbitration shall be the sole and exclusive
method of resolving any and all such controversies, claims or disputes, except
those expressly excluded above. Judgement upon such award may be entered in the
Superior Court of the State of Arizona for the County of Maricopa, if the award
is rendered against DEALER. The prevailing party shall be entitled to recover
from the nonprevailing party all costs and expenses of the arbitration,
including reasonable attorney's fees.
31. SERVICE OF NOTICE
Any notice which may be required to be served by DEALER on TITAN, or by TITAN on
DEALER, shall be in writing and Sent by certified or registered mail,
return-receipt requested, addressed to the party for whom intended at its last
known address. Each party will promptly advise the other, in writing, of any
change of address.
32. GENERAL PROVISIONS
DEALER agrees that it neither has nor may acquire by performance under the terms
and provisions of this Agreement, any vested right in the sales and service
responsibility assigned to it hereunder and any investments made by DEALER in
the performance hereof are made with the knowledge that this Agreement may
expire and not be renewed or be terminated as herein provided. This Agreement is
the entire agreement between the parties and terminates and supersedes all prior
agreements, verbal or written, between the parties. Neither trade usage nor
course of dealing shall serve to modify, amend or change this Agreement. This
Agreement may be altered or amended in writing only and must be signed by an
executive officer of TITAN. Both parties shall be excused from nonperformance in
the case of FORCE MAJEURE or other causes beyond the control of the parties. The
paragraph headings contained herein are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement. It is understood
that this is a general form of agreement designated for use in any State. Should
any provision of this Agreement or the application thereof to any particular
person or circumstance be contrary to or prohibited by applicable laws or
regulations, such provision shall be inapplicable and deemed omitted and the
remaining provisions of this Agreement will be valid and binding and of like
effect as though such provisions were not included herein. TITAN has a right to
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amend, modify or change this Agreement in case of legislation, government
regulation or changes in circumstances beyond the control of TITAN that might
affect materially the relationship between TITAN and DEALER. This Agreement and
the rights and obligations arising thereunder shall be governed by and construed
according to the laws of the State of Arizona.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate the
day and year hereinafter written.
DEALER TITAN MOTORCYCLE CO. OF AMERICA
------ -------------------------------
Signature: /s/ Barbara S. Keery Signature: /s/ Robert P. Lobban
-------------------------- -----------------------------
Position/Title: Partner Position/Title: CFO
--------------------- ------------------------
Signature: Dated: 1/4/99
-------------------------- ---------------------------------
Position/Title:
---------------------
Dated: 12/30/98
------------------------------
Circle One: Corporation Partnership Individual
This Agreement shall be executed on behalf of DEALER by the owner in case of a
sole proprietorship, by general partner in case of a partnership, or by a duly
authorized officer in case of a corporation, showing position or title of person
signing.
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APPENDIX "A"
THE DEFINITION OF PRODUCTS IN THIS AGREEMENT SHALL
INCLUDE:
MOTORCYCLE MODELS:
"SIDEWINDER" SX & RM
"ROADRUNNER" SX & RM
"ROADRUNNER SPORT" RM
"GECKO" SX & RM
"COYOTE"
<PAGE>
APPENDIX "B"
OWNERS AND MANAGERS
1. THE FOLLOWING PERSONS ARE THE BENEFICIAL AND RECORD OWNERS OF DEALER:
IF A CORPORATION,
NUMBER AND
NAME AND ADDRESS OF EACH CLASS OF SHARES
RECORD OR BENEFICIAL OWNER OF -------------------- PERCENTAGE OWNERSHIP OF
DEALER NUMBER CLASS RECORD IN DEALER
- ----------------------------- ------ ----- -----------------------
BPF, LLC 100%
2. THE FOLLOWING PERSONS ARE DEALER'S OFFICERS:
NAME AND ADDRESS TITLE
- ---------------- -------
PATRICK KEERY PARTNER
FRANCIS KEERY PARTNER
BARBARA KEERY PARTNER
BRYANT CRAGUN PARTNER
3. THE FOLLOWING PERSONS FUNCTION AS GENERAL MANAGER OF DEALER AND, AS SUCH, ARE
AUTHORIZED TO MAKE ALL DECISIONS ON BEHALF OF DEALER WITH RESPECT TO DEALER'S
OPERATIONS:
NAME AND ADDRESS TITLE
- ---------------- -------
JEFF LIPET MANAGER
<PAGE>
APPENDIX "C"
MINIMUM ANNUAL QUANTITY OF NEW TITAN MOTORCYCLES
TO BE PURCHASED
FROM
TITAN BY DEALER
TWENTY (20) UNIT PER YEAR
APPENDIX "D"
MINIMUM MODEL FLOOR INVENTORY OF TITAN. PRODUCTS
TO BE CONTINUOUSLY CARRIED BY DEALER
TWENTY (20) UNITS TO BE DETERMINED BY DEALER
TITAN MOTORCYCLE CO. OF AMERICA(R)
AUTHORIZED DEALER SALES AND SERVICE
AGREEMENT
1. PARTIES TO AGREEMENT
This Agreement is made by and between TITAN Motorcycle Co. of America(R), 2222
West Peoria Avenue, Phoenix, AZ 85029, an Arizona corporation hereinafter called
TITAN and VEGAS MOTORCYCLE COMPANY, LLC hereinafter called "DEALER". The purpose
of this Agreement is to appoint DEALER during the continuance of this Agreement
as an authorized independent dealer for TITAN brand products as hereinafter
designated and to establish the basic rules which will govern the relationship
between TITAN and DEALER.
2. DURATION OF AGREEMENT
This Agreement shall be in effect from the date of execution by TITAN to and
including December 31, 2000, unless sooner terminated as hereinafter provided.
No act by either party to this Agreement shall be construed as an extension or
renewal of this Agreement, except renewals or extensions in writing and signed
by both parties.
3. GRANTING OF DEALERSHIP
A. TITAN hereby grants to DEALER, during the continuance of this Agreement, the
non-exclusive privilege of purchasing for DEALER's own account for resale to
retail purchasers solely at DEALER's place(s) of business in the city or cities
and at the address or addresses indicated in Paragraph 1 above, those Titan
brand products specified in Appendix "A" to this Agreement and related parts and
accessories (hereinafter collectively called "Products") which are supplied by
TITAN. No obligation exists on the part of TITAN to sell any other of TITAN
products to DEALER
B. DEALER will not move its place(s) of business to any new or different
location other than that specified in Paragraph 1, or establish any additional
place o places of business for the sale, servicing or display of Products
without the prior written consent of Titan.
C. DEALER will not establish, directly or indirectly, an associate dealer or a
sub-dealer for the safe or service of new or used Products, or permit someone
else to act on DEALER's behalf or perform DEALER's obligations under this
Agreement in connection with the sale or service of new or used Products without
the prior written consent of an executive officer of TITAN.
4. AREA OF PRIMARY RESPONSIBILITY
A. TITAN and DEALER agree that DEALER's area of primary responsibility for the
sales and service of the Products shall be a twenty-five (25) mile radius of
DEALER's place(s) of business as specified in Paragraph 1 of this agreement.
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B. TITAN reserves the unrestricted right to sell the Products and grant the
privilege of using it's name and trademarks to other dealers or persons whether
located in DEALER's area of primary responsibility or elsewhere.
5. SALES PERFORMANCE
DEALER agrees, at its own cost and expense, to use its best efforts and due
diligence to energetically and aggressively develop and promote the sale of
Products, including each model and type thereof. DEALER and TITAN agree that
TITAN shall evaluate DEALER's development and promotion of the sale of Products,
both as a whole and separately for each model based on such reasonable criteria
as TITAN may determine from time to time, which may include but not be limited
to: (a) fair and reasonable sales objectives which may be established from time
to time by TITAN for DEALER after review with DEALER; (b) the ratio of sales of
Products by DEALER to sales of other makes of similar products as compared with
(i) such ratio on a local, state, and/or nationwide bases; (ii) the average
ratio for all TITAN dealers appointed by TITAN; (c) the development of DEALER's
sales performance over a reasonable period of time; and (d) particular
conditions in DEALER's area of primary responsibility, if any. affecting such
performance or potential sales performance. DEALER acknowledges and agrees to a
minimum sales objective of new TITAN motorcycles as indicated in Appendix C
throughout the term of this agreement.
6. OWNERSHIP AND MANAGEMENT
To induce TITAN to enter into this Agreement, DEALER represents that the
person(s) identified in Appendix "B" to this Agreement, are all of the owners
and persons executing managerial authority on behalf of DEALER. TITAN is
entering into this Agreement in reliance upon these representations. DEALER
agrees there will be no change in DEALER's owners or general managers without
TITAN's prior written consent.
7. PRICES, TERMS AND CONDITIONS
A. TITAN shall invoice Products sold to DEALER under this agreement at prices
and on terms and conditions established by TITAN and that are current at the
time of shipment to DEALER. Prices, terms and conditions of sale may be changed
by TITAN from time to time without prior notice or liability from TITAN to
DEALER. Unless otherwise expressly stated by TITAN, said prices to DEALER do not
include sales, use, excise, or similar taxes. DEALER warrants that all Products
purchased from TITAN are purchased for resale only in the ordinary course of
DEALER's business, at DEALER's place(s) of business as specified in Paragraph I
of this Agreement, and that DEALER has complied with all pertinent state and
local laws pertaining to the collection and payment by DEALER of all sales, use
and like taxes applicable to such resale transactions.
B. If DEALER is delinquent in payment of any indebtedness or obligation to TITAN
or if DEALER is in default with respect to any provisions of this Agreement,
then TITAN, at its sole discretion and in addition to any other rights and
remedies it may have under this Agreement or at law, may without further notice
suspend all pending orders and shipments until said delinquency is cured or
until said default is cured, as the case may be.
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C. DEALER agrees that TITAN may apply toward the payment of any indebtedness due
TITAN by DEALER, whether under this Agreement or otherwise, any credit owing to
DEALER by TITAN.
D. DEALER agrees to permit floor checking of all TITAN brand inventory in
possession of DEALER by representatives of TITAN in order to assist TITAN in
product planning, distribution and production quantities and to determine
compliance by DEALER with warranty registration requirements.
8. SHIPMENT OF PRODUCTS
A. TITAN shall ship Products purchased by DEALER during the duration of this
Agreement by whatever mode of transportation TITAN shall select from whatever
geographic point TITAN may from time to time establish. All shipments of
Products shall be at DEALER's risk and DEALER shall be responsible for and shall
pay any and all transportation and/or handling charges resulting from shipment
of Products to DEALER, unless otherwise specified in writing by TITAN.
B. TITAN will endeavor as far as practical to make deliveries to DEALER in
accordance with DEALER's orders, but if for any cause TITAN fails to make
deliveries within the time stated in the order, or cancels any of such orders,
TITAN will not be liable to DEALER for any payment whatsoever by reason of such
failure to deliver, delays in making deliveries or cancellation, nor for any
loss of profits resulting directly or indirectly therefrom.
9. DISCONTINUANCE OR UNAVAILABILITY OF PRODUCTS
A. TITAN reserves for itself the right to discontinue the manufacture or sale of
any of the Products or to make changes in design, color or appearance or to add
improvements to particular Products at anytime, all without notice to DEALER and
without incurring any obligation to DEALER either with respect to any Products
previously ordered or purchased by DEALER or otherwise.
B. In the event of a Product shortage or Product introduction, TITAN shall have
the right to allocate or apportion said available Product or Products among its
customers as TITAN, in the exercise of its discretion, deems appropriate,
without incurring any liability to DEALER.
10. EQUAL REPRESENTATION
In the event DEALER sells other brands or lines of products which are
competitive with those Products purchased by DEALER from TITAN, DEALER agrees to
provide the Products with at least an equal representation to that provided
other competitive brands or lines.
11. DEALER BUSINESS FACILITIES
A. DEALER agrees to establish, staff, equip and maintain a salesroom and service
facility for the Products which will provide a first-class display of the full
line of Products and provide adequate service for the retail customer. Each such
facility will comply with reasonable written layout, appearance and size
standards established by TITAN from time to time. DEALER understands that TITAN
shall evaluate DEALER's compliance with such standard in determining its
performance under this Agreement.
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B. In carrying out its obligations under this Agreement, DEALER agrees to
maintain posted opening and closing hours, which business hours shall not be
less than that which is customary for similar business establishments in DEALERS
area of primary responsibility.
12. DEALER IDENTIFICATION
DEALER shall purchase, display and maintain, at DEALER's expense, signage
approved by TITAN, identifying the Products in a conspicuous location visible
outside DEALER's salesroom and service facilities, to the full extent permitted
by law. In the event of a prohibition by law, DEALER shall use its good faith
efforts to obtain an exception. DEALER shall further display and maintain during
the term of this Agreement such other authorized Product and service signs and
identification as are necessary to properly advertise DEALER's business in TITAN
products and service on a basis mutually satisfactory to both TITAN and DEALER.
DEALER agrees to place and maintain on the business premises signs and other
means of notification to the public that DEALER is an independent business
person, separate and distinct from TITAN.
13. FINANCIAL RESPONSIBILITY
A. DEALER shall at all times maintain and employ, in connection with its
business and operations under this Agreement, such working capital and net worth
together with a line of credit with a financing institution which will permit
DEALER to properly and fully carry out and perform DEALER's duties and
obligations under this Agreement, including an inventory of Products
commensurate with annually set objectives established by TITAN and DEALER. Such
working capital, net worth and/or line of credit shall be amounts not less than
minimum standards established by TITAN from time to time for dealers similarly
situated.
B. DEALER shall at all times maintain insurance coverage reasonably carried by
similarly situated dealers in such business, including without limitation,
general liability, property damage, and products liability to adequately protect
DEALER from loss resulting from the assembly, sale, service or repair of the
Products or arising out of any acts or omissions of the DEALER.
14. MODEL INVENTORY
Subject to the ability of TITAN to supply, DEALER agrees to purchase from Titan
and at all times maintain an inventory of then available models of Products,
which inventory shall at no time be less than the number of Products reasonably
established by TITAN from time to time after consultation with DEALER, such
initial minimum inventory being listed in Appendix D.
15. SERVICE PARTS
Dealer agrees to organize and maintain a complete parts department. DEALER at
all times will keep in DEALER's place(s) of business as specified in Paragraph 1
of this Agreement an inventory of service parts of an assortment and in
quantities that in TITAN's judgement is necessary to meet the current
anticipated requirements of owners of TITAN Products. DEALER agrees that it will
not sell or offer for sale or use in the repair or any Products, as a genuine
TITAN part, any part that is not in fact a genuine new TITAN part.
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16. EMPLOYEE TRAINING
DEALER wilt participate in and will make available to its employees training
courses, service schools, sales and management seminars and personnel
development programs as may be provided or required from time to time by TITAN.
DEALER agrees to have in its employ at all times during the continuance of this
Agreement at least one filly trained mechanic who has been trained in service
and repair of TITAN's Products.
17. REPORTS AND FINANCIAL INFORMATION
DEALER will provide TITAN, by the 30th day of the month following the end of
DEALER's calendar or fiscal business year, a complete and accurate financial and
operating statement covering DEALER's preceding calendar or fiscal year
operations and showing the true and accurate conditions of DEALER's business.
DEALER will also furnish to TITAN, on such forms and at such times as TITAN
reasonably may require, complete and accurate reports of DEALER's sales activity
and stock of Products then being held by DEALER.
18. ADVERTISING AND TRADE PRACTICES
A. DEALER agrees to develop, utilize and participate in various advertising and
sales promotion programs in fulfilling its responsibilities for selling,
promoting and advertising the Products. In so doing, DEALER agrees to (a)
maintain a trademark or tradename advertising listing or a display advertising
listing in the Yellow Pages of the principal telephone directory in its
marketing area; (b) make reasonable use of newspaper, direct mail, television,
radio or other appropriate advertising media as suggested by TITAN; (c)
participate in advertising or sales promotion programs offered from time to time
by TITAN and in accordance with the applicable provisions and rules thereof; and
(d) make every reasonable effort to build and maintain customer interest in
activities involving Products and confidence in DEALER, TITAN and the Products.
B. To assist DEALER in fulfilling his advertising and promotion
responsibilities, TITAN may, at its sole discretion, develop and offer from time
to time various advertising and sales promotion programs to promote the sale of
Products for the mutual benefit of TITAN and DEALER. TITAN may also provide to
DEALER from time to time advertising and sales promotion material for purchase
by DEALER. DEALER agrees to pay promptly for any such materials. TITAN may offer
other materials to DEALER from time to time at no charge.
C. DEALER agrees to at all times conduct its business in a manner that will
reflect favorably on the good name and reputation of the Products and TITAN.
DEALER expressly recognizes its obligation to avoid in every way any
discourteous, deceptive. misleading or unethical practice or advertising that is
or might be detrimental to the Products, TITAN, or the public. DEALER agrees,
when notified by TITAN of such objections, to immediately discontinue such
practice or advertising.
19. PRE-DELIVERY SERVICE
DEALER expressly recognizes its obligation to effectively assemble, inspect,
service and/or prepare Products in accordance with schedules or instructions
furnished from time to time by TITAN before delivery to the retail purchaser by
DEALER. DEALER agrees to uncrate, set up, inspect and test each new TITAN
Product at DEALER's place of business as specified in this Agreement, prior to
delivery to the retail purchaser, in accordance with the written instructions
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furnished from time to time by TITAN. DEALER agrees to make all necessary
repairs to such Products after receipt of a formal authorization from TITAN and
agrees that each such Product will be received directly by the retail purchaser
at DEALER's place(s) of business as specified in Paragraph 1 of this Agreement
in safe and lawful operating condition. Upon request, DEALER will furnish
evidence to TITAN of the performance of such pre-delivery services on forms
prescribed by TITAN. DEALER will report promptly in writing, to TITAN's Chief
Executive Officer any act or failure to act on the part of TITAN or any of its
personnel which DEALER believes was not fair and equitable towards it in the
establishment or performance of pre-delivery obligations.
20. REPAIR AND MAINTENANCE SERVICE
A. DEALER expressly recognizes its obligation to obtain necessary tools, and to
effectively perform repair or maintenance services required on Products, in
accordance with TITAN's current recommendations and specifications.
B. DEALER shall develop and maintain competent, qualified and efficient service
mechanics for the service and repair of the Products and shall employ said
persons in DEALER's service and repair facilities. DEALER shall not use service
or repair facilities or personnel other than its own in connection with the
service and repair of the Products without the prior written consent of an
executive officer of TITAN. DEALER shall comply with and maintain copies of
bulletins which may fl-cm time to time be issued by TITAN pertaining to the
service or the use or operation of the Products, and to the maintenance of
requisite tools to perform service work on the Products.
C. DEALER shall perform all Product services under this Agreement, including
pre-delivery, warranty and recall service, as an independent contractor. DEALER
agrees to post his labor rates in a conspicuous manner so that they are plainly
visible to his service customers. Service provided by DEALER shall include only
those services which are specifically requested by the customer or those
services approved in advance by the customer.
21. WARRANTY
A. TITAN makes no representations or warranties, express or implied, with
respect to the Products except as may be provided in a standard written or
printed warranty offered to the retail purchaser with respect to one or more of
the Products from time to time. THE FOREGOING IS EXCLUSIVE AND IN LIEU OF ALL
OTHER WARRANTIES EXCEPT TITLE, WHETHER EXPRESS OR IMPLIED, AND TITAN MAKES NO
WARRANTY OF MERCHANTABILITY OR FITNESS FOR PURPOSE TO DEALER. THE FULFILLING OF
THE TERMS OF THE PRINTED WARRANTY SHALL CONSTITUTE THE SOLE REMEDY OF DEALER AND
THE SOLE LIABILITY OF TITAN, WHETHER ON WARRANTY, CONTRACT OR NEGLIGENCE.
B. DEALER expressly recognizes its obligation to effectively perform warranty
work on Products whether delivered by DEALER or by another authorized dealer and
to fulfill the conditions of the warranty as applicable to particular Products
where indicated without charge to the retail purchaser. Within three (3)
business days after delivery of a new Product to a retail purchaser, DEALER
shall complete and send to TITAN a true and complete sales warranty registration
report on such Product in a manner then prescribed by TITAN, including the name
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and address of the owner. TITAN may utilize the information in the extent of a
recall of a Product, and/or to provide TITAN with useful marketing information.
C. DEALER will report promptly, in writing, to TITAN's Chief Executive Officer,
any act or failure to act on the part of TITAN or any of its personnel which
DEALER believes was not fair and equitable towards it in the performance of
warranty obligations or which resulted in DEALER not receiving reasonable and
adequate compensation for warranty labor and parts provided by DEALER.
D. DEALER shall process and dispose of warranty claims on the Products in
accordance with the procedure which may be prescribed from time to time by
TITAN, and TITAN shall have no obligation to recognize any warranty claims
unless the prescribed procedure is complied with by DEALER including, but not
limited to, the receipt by DEALER from TITAN of a written warranty work
authorization prior to the commencement of any reimbursable warranty work. In
support of DEALER's claim for warranty compensation, DEALER agrees to provide
TITAN with such supportive documents as TITAN may request.
E. DEALER expressly warrants that should any of the Products be modified by
DEALER or at DEALER's request, DEALER will attach to the Product prior to retail
sale a conspicuous statement which wilt clearly disclose the extent or nature of
the modification and the resultant warranty coverage, if any, which will then
apply to the Products.
F. DEALER expressly acknowledges that DEALER is performing warranty work on the
Products as an independent contractor and may be compensated for such services
separate and apart from the purchase price of the Products.
22. TRADEMARKS AND TRADE NAMES
TITAN and its related companies are exclusively entitled to the use of the
trademark "TITAN Motorcycle Company of America" and to the use of all trade
names and trademarks used in connection with the Products and the goodwill
attached thereto in the United States of America (thereinafter collectively
called the "Marks"). TITAN grants DEALER the non exclusive permission to
advertise and otherwise inform the general public of the fact that DEALER sells
the Products and is a "TITAN Motorcycle Company of America Dealer" at the
locations specified in Paragraph 1 of this Agreement, including the use of
outdoor signs, signs on buildings and other means of identification for such
specified location. DEALER will not use, or permit the use of the Marks either
as part of any corporate title, firm name or trade name unless TITAN shall first
consent thereto in writing. On termination of this Agreement, DEALER agrees to
immediately discontinue all use of the Marks and other means of identification
that might make it appear or imply that DEALER is still an authorized
representative of the Products including, without limitation. removal of any
listing in any telephone directory, display advertising or outdoor sign. TITAN
shall have the right, but not the obligation, to acquire any or all such signs
in possession of DEALER on date of termination at a price that is not in excess
of the price, if any, originally paid by DEALER. DEALER further agrees to
discontinue any use of the Marks or any semblance of same, as a part of its
business or corporate name and, if appropriate, file a change or discontinuance
of such name with the appropriate authorities. In the event DEALER fails to
comply with the terms and conditions of this Paragraph, TITAN shall have the
right to enter upon DEALER's premises and remove all such signs bearing the
TITAN designation or Marks without liability of TITAN to DEALER. DEALER agrees
to reimburse TITAN for all Costs and expenses, including without limitation,
attorneys' fees, incurred by TITAN in effecting or enforcing compliance with
this Paragraph. The provisions of this Paragraph shall survive after termination
of this Agreement.
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23. INDEPENDENT PERSON
DEALER is an independent business and the conduct of its business is within the
sole discretion of DEALER. This Agreement does not create the relationship of
principal and agent, master and servant, or employer and employee between TITAN
and DEALER. Nothing herein contained shall be construed or interpreted to grant
any authority to DEALER to commit or bind TITAN in any manner to any person.
DEALER shall be solely responsible for all the acts and omissions of DEALER, its
agents and employees. This Agreement is not intended to govern, control or
manage the day-to-day business activities of DEALER. DEALER agrees to defend,
indemnify and save TITAN and its suppliers harmless from any claim, demand,
damage, liability, cost or expense, including attorneys' fees and expenses
arising out of any acts or omissions of DEALER, its agents or employees.
24. SALE OF DEALER'S BUSINESS
A. DEALER may not sell, transfer or assign the whole or any part of DEALER's
rights or obligations under this Agreement, without TITAN's prior written
consent. DEALER shall give Titan at least thirty (30) days' prior written notice
of any such proposed sale, transfer, or assignment. TITAN's failure to object to
the proposed sale, transfer, or assignment following notice from DEALER shall
not constitute TITAN's consent.
B. Provided that this Agreement is still in effect, and provided further that
notice of termination or notice of nonrenewal has not been provided to DEALER
and is not then in effect between DEALER and TITAN, TITAN agrees to not
unreasonably refuse to enter into a new Sales and Service Agreement for the
remainder of the term provided in Paragraph 2 of this Agreement with a person
contracting to purchase DEALER's business as pertains to the Products, provided
that said purchaser as of the date of sale meets all then current requirements
established by TITAN for the appointment of new dealers.
25. EARLY TERMINATION OF AGREEMENT
A. This Agreement maybe terminated in its entirety or with respect to any of the
Products at any time without notice by mutual consent of DEALER and TITAN.
B. Either party may terminate this Agreement in its entirety or with respect to
any of the Products prior to the expiration date provided in Paragraph 2 hereof,
without cause, on a minimum of sixty (60) days' prior written notice from one
party to the other. If applicable State law should require notice of termination
of a fixed period of time greater than that provided by this Agreement for a
stated reason, then such required notice in the form prescribed shall be given
by the terminating party.
C. TITAN may immediately terminate this Agreement in its entirely or with
respect to any of the Products by written notice given to DEALER in the event of
any of the following: (1) death, incapacity, removal or resignation of DEALER or
any person in the employment thereof and in reliance upon whom this Agreement
was entered into by TITAN; (2) any sale or transfer of any substantial interest
in the managerial control and/or ownership of DEALER without TITAN's prior
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written consent; (3) an unauthorized change made by DEALER in the location of
DEALER's place(s) of business as specified in this Agreement or the addition of
any place of business for Products; (4) discontinuance of the operation of
DEALER's business for a period of five (5) consecutive days, unless such
discontinuance is the result of a natural disaster; (5) the appointment of an
assignee, referee, receiver, or trustee for DEALER or upon its adjudication in
bankruptcy or the liquidation of DEALER; (6) any dispute, disagreement or
controversy between or among partners, managers, officers, or shareholders of
DEALER which, in the opinion of TITAN, adversely affects the operation,
management or business of DEALER or TITAN and is not resolved within thirty (30)
days after notice is given to DEALER by TITAN; (7) submission by DEALER to TITAN
of a fraudulent report, statement claim for reimbursement, refund or credit or
falsification of warranty claim or registration or of DEALER's retail labor rate
or providing of fraudulent statements relating to pre-delivery preparation,
testing, servicing, repairing or maintenance of the Products; (8) failure to
maintain DEALER's account on a current basis and in accordance with TITAN's
terms and conditions of sale; (9) failure by DEALER, within five (5) days
following notification by TITAN, to replace with cash or cashier's check any
check provided TITAN by DEALER which has been returned from the bank on which
the check was drawn without payment to; (10) conviction in any court of
competent jurisdiction of DEALER, or any principal officer or manger of DEALER,
of any crime tending to affect adversely the ownership, operation, management,
business or interest of the DEALER or TITAN; or (11) failure of DEALER to obtain
or maintain any license required by law.
D. The date of notice of termination shall be the date of mailing of such
notice. If any period of notice of the termination required hereunder is less
than that required by applicable laws, such period of notice shall be increased
and be deemed to be the minimum period required by such laws.
E. DEALER hereby acknowledges and agrees that in the event of a discontinuance
of the operation of DEALER's business for a period often (10) consecutive days,
for any reason whatsoever other than a natural disaster, such discontinuance
shall constitute a voluntary termination of this Agreement by DEALER. Upon
receipt of such notice, DEALER shall cooperate with TITAN, including without
limitation, executing such other documents as may be reasonably required by
TITAN, to effectuate the voluntary termination of this Agreement and DEALER's
business in TITAN's Products.
26. PROCEDURE ON TERMINATION
A. Upon termination or expiration and nonrenewal of this Agreement, DEALER will
immediately pay to TITAN all sums owing from DEALER to TITAN. Any amount due
TITAN by DEALER may be deducted from credits owing DEALER.
B. In the event of early termination or expiration and nonrenewal of this
Agreement, TITAN shall continue to fill orders from DEALER for such Products as
may be affected by the termination or nonrenewal up to the specified termination
or expiration date. TITAN shall have the right to impose reasonable limitations
on such orders for such Products during the notice period. On the specified date
of termination or expiration, all unfilled orders for such Products will be
automatically cancelled. Payment terms for such Products supplied by TITAN to
DEALER after notice of intention to terminate or upon expiration and nonrenewal
may be changed to cash, certified check or other terms determined by TITAN.
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C. After the effective date of termination of this Agreement, the acceptance of
orders from DEALER by TITAN, or the continuation of the sale by DEALER of
Products, or the referring of inquiries to DEALER by TITAN, or any business
relations either party has with the other will not be construed as a renewal of
this Agreement nor a waiver of the termination. If TITAN accepts any orders from
DEALER after termination of this Agreement, alt such transaction(s) will be
governed, unless the contrary intention appears, by the terms of this Agreement
applicable to such transactions.
27. COMPLIANCE WITH SAFETY, REGULATORY, AND EMISSION CONTROL REQUIREMENTS
A. DEALER agrees to comply with, and operate consistently with, all applicable
provisions of the National Traffic and Motor Vehicle Safety Act of 1966 and the
Federal Clean Air Act, as amended, including applicable rules and regulations
issued from time to time thereunder, and all other applicable federal, state and
local rules and regulations issued from time to time thereunder, and all other
applicable federal, state and local product safety, regulatory and emission
control requirements.
B. In the event that the laws of the state in which DEALER is located require
dealers of Products to install in new or used Products, prior to the retail sale
thereof, any safety devices or other equipment not installed or supplied as
standard equipment by TITAN, then DEALER, prior to its sale of any such TITAN
Product, shall properly install such equipment.
28. COMPLIANCE WITH SAFETY, REGULATORY AND EMISSION CONTROL REQUIREMENTS
DEALER hereby agrees to adopt, promote and implement safety programs developed
and provided by TITAN upon written notification from TITAN, DEALER agrees to
place and display safety notices and warnings and proper user information labels
on TITAN Products and in the dealership as appropriate, and to adhere to
established user recommendations and restrictions on the sale of TITAN Products
as directed by TITAN. DEALER agrees to promote and require safety awareness and
training of purchasers and users of TITAN Products in accordance with programs
and materials developed or provided by TITAN upon written notification by TITAN.
DEALER agrees to provide to customers safety notices and warnings and other
safety awareness materials prepared or provided by TITAN, and/or which may from
time to time be developed and provided by industry and/or safety associations,
regarding use of TITAN Products. DEALER agrees to require the reading or viewing
of such safety awareness materials by the customer in conjunction with the sale
of a TITAN Product as specified in writing by TITAN. DEALER agrees that
violation of its safety obligations described in this Paragraph constitutes
ground for TITAN action under this Agreement. TITAN retains the right, through
written notification, to amend the "DEALER SAFETY OBLIGATIONS" specified in this
Paragraph and to add such other Dealer Safety Obligations as may be necessary or
advisable.
29. DEALER'S SUCCESSOR ON DEATH OR INCAPACITY
Upon termination of this Agreement because of death or incapacity of the
principal of DEALER, TITAN will offer to a nominated successor of the principal
of DEALER acceptable to TITAN, or to spouse of the principal of DEALER,
continuation of this Agreement for the duration of the Agreement as provided in
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Paragraph 2 hereof, provided that: (i) DEALER, within fifteen (15) days of the
occurrence of such death or incapacity, gives notice to TITAN of such occurrence
and the name and qualifications of the DEALER's successor; (ii) The facilities
and capital of the dealership meet TITAN then current requirements; and, (iii)
The person to whom the continuation of the Agreement is offered provides written
notice to TITAN of acceptance within fifteen (15) days from the extension of the
offer by TITAN.
30. DISPUTE RESOLUTION
All controversies, claims and disputes arising in connection with this
Agreement, except any controversies, claims and disputes relating to amounts due
and unpaid to TITAN or relating to third party personal injury, shall be settled
by mutual consultation between the parties in good faith as promptly as
possible, but failing an amicable settlement shall be settled finally by
arbitration in accordance with the provisions of this Paragraph. Such
arbitration shall be conducted in Phoenix, Arizona in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and the
parties hereto agree that such arbitration shall be the sole and exclusive
method of resolving any and all such controversies, claims or disputes, except
those expressly excluded above. Judgement upon such award may be entered in the
Superior Court of the State of Arizona for the County of Maricopa, if the award
is rendered against DEALER. The prevailing party shall be entitled to recover
from the nonprevailing party all costs and expenses of the arbitration,
including reasonable attorney's fees.
31. SERVICE OF NOTICE
Any notice which may be required to be served by DEALER on TITAN, or by TITAN on
DEALER, shall be in writing and Sent by certified or registered mail,
return-receipt requested, addressed to the party for whom intended at its last
known address. Each party will promptly advise the other, in writing, of any
change of address.
32. GENERAL PROVISIONS
DEALER agrees that it neither has nor may acquire by performance under the terms
and provisions of this Agreement, any vested right in the sales and service
responsibility assigned to it hereunder and any investments made by DEALER in
the performance hereof are made with the knowledge that this Agreement may
expire and not be renewed or be terminated as herein provided. This Agreement is
the entire agreement between the parties and terminates and supersedes all prior
agreements, verbal or written, between the parties. Neither trade usage nor
course of dealing shall serve to modify, amend or change this Agreement. This
Agreement may be altered or amended in writing only and must be signed by an
executive officer of TITAN. Both parties shall be excused from nonperformance in
the case of FORCE MAJEURE or other causes beyond the control of the parties. The
paragraph headings contained herein are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement. It is understood
that this is a general form of agreement designated for use in any State. Should
any provision of this Agreement or the application thereof to any particular
person or circumstance be contrary to or prohibited by applicable laws or
regulations, such provision shall be inapplicable and deemed omitted and the
remaining provisions of this Agreement will be valid and binding and of like
effect as though such provisions were not included herein. TITAN has a right to
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amend, modify or change this Agreement in case of legislation, government
regulation or changes in circumstances beyond the control of TITAN that might
affect materially the relationship between TITAN and DEALER. This Agreement and
the rights and obligations arising thereunder shall be governed by and construed
according to the laws of the State of Arizona.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate the
day and year hereinafter written.
DEALER TITAN MOTORCYCLE CO. OF AMERICA
------ -------------------------------
Signature: /s/ Barbara S. Keery Signature: /s/ Robert P. Lobban
-------------------------- -----------------------------
Position/Title: Partner Position/Title: Chief Financial Officer
--------------------- ------------------------
Signature: Dated: 1/4/99
-------------------------- ---------------------------------
Position/Title:
---------------------
Dated: 12/30/98
------------------------------
Circle One: Corporation Partnership Individual
This Agreement shall be executed on behalf of DEALER by the owner in case of a
sole proprietorship, by general partner in case of a partnership, or by a duly
authorized officer in case of a corporation, showing position or title of person
signing.
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APPENDIX "A"
THE DEFINITION OF PRODUCTS IN THIS AGREEMENT SHALL
INCLUDE:
MOTORCYCLE MODELS:
"SIDEWINDER" SX & RM
"ROADRUNNER" SX & RM
"ROADRUNNER SPORT" RM
"GECKO" SX & RM
"COYOTE"
<PAGE>
APPENDIX "B"
OWNERS AND MANAGERS
1. THE FOLLOWING PERSONS ARE THE BENEFICIAL AND RECORD OWNERS OF DEALER:
IF A CORPORATION,
NUMBER AND
NAME AND ADDRESS OF EACH CLASS OF SHARES
RECORD OR BENEFICIAL OWNER OF -------------------- PERCENTAGE OWNERSHIP OF
DEALER NUMBER CLASS RECORD IN DEALER
- ----------------------------- ------ ----- -----------------------
BPF, LLC 100%
2. THE FOLLOWING PERSONS ARE DEALER'S OFFICERS:
NAME AND ADDRESS TITLE
- ---------------- -------
PATRICK KEERY PARTNER
FRANCIS KEERY PARTNER
BARBARA KEERY PARTNER
BRYANT CRAGUN PARTNER
3. THE FOLLOWING PERSONS FUNCTION AS GENERAL MANAGER OF DEALER AND, AS SUCH, ARE
AUTHORIZED TO MAKE ALL DECISIONS ON BEHALF OF DEALER WITH RESPECT TO DEALER'S
OPERATIONS:
NAME AND ADDRESS TITLE
- ---------------- -------
PETE CICCARRONE MANAGER
<PAGE>
APPENDIX "C"
MINIMUM ANNUAL QUANTITY OF NEW TITAN MOTORCYCLES
TO BE PURCHASED
FROM
TITAN BY DEALER
TWENTY (20) UNIT PER YEAR
APPENDIX "D"
MINIMUM MODEL FLOOR INVENTORY OF TITAN. PRODUCTS
TO BE CONTINUOUSLY CARRIED BY DEALER
TWENTY (20) UNITS TO BE DETERMINED BY DEALER
TITAN MOTORCYCLE CO. OF AMERICA(R)
AUTHORIZED DEALER SALES AND SERVICE
AGREEMENT
1. PARTIES TO AGREEMENT
This Agreement is made by and between TITAN Motorcycle Co. of America R, 2222
West Peoria Avenue, Phoenix, AZ 85029, an Arizona corporation hereinafter called
TITAN and TITAN MOTORCYCLE OF HOUSTON, LLC hereinafter called "DEALER". The
purpose of this Agreement is to appoint DEALER during the continuance of this
Agreement as an authorized independent dealer for TITAN brand products as
hereinafter designated and to establish the basic rules which will govern the
relationship between TITAN and DEALER.
2. DURATION OF AGREEMENT
This Agreement shall be in effect from the date of execution by TITAN to and
including December 31, 2000, unless sooner terminated as hereinafter provided.
No act by either party to this Agreement shall be construed as an extension or
renewal of this Agreement, except renewals or extensions in writing and signed
by both parties.
3. GRANTING OF DEALERSHIP
A. TITAN hereby grants to DEALER, during the continuance of this Agreement, the
non-exclusive privilege of purchasing for DEALER's own account for resale to
retail purchasers solely at DEALER's place(s) of business in the city or cities
and at the address or addresses indicated in Paragraph 1 above, those Titan
brand products specified in Appendix "A" to this Agreement and related parts and
accessories (hereinafter collectively called "Products") which are supplied by
TITAN. No obligation exists on the part of TITAN to sell any other of TITAN
products to DEALER
B. DEALER will not move its place(s) of business to any new or different
location other than that specified in Paragraph 1, or establish any additional
place o places of business for the sale, servicing or display of Products
without the prior written consent of Titan.
C. DEALER will not establish, directly or indirectly, an associate dealer or a
sub-dealer for the safe or service of new or used Products, or permit someone
else to act on DEALER's behalf or perform DEALER's obligations under this
Agreement in connection with the sale or service of new or used Products without
the prior written consent of an executive officer of TITAN.
4. AREA OF PRIMARY RESPONSIBILITY
A. TITAN and DEALER agree that DEALER's area of primary responsibility for the
sales and service of the Products shall be a twenty-five (25) mile radius of
DEALER's place(s) of business as specified in Paragraph 1 of this agreement.
<PAGE>
B. TITAN reserves the unrestricted right to sell the Products and grant the
privilege of using it's name and trademarks to other dealers or persons whether
located in DEALER's area of primary responsibility or elsewhere.
5. SALES PERFORMANCE
DEALER agrees, at its own cost and expense, to use its best efforts and due
diligence to energetically and aggressively develop and promote the sale of
Products, including each model and type thereof. DEALER and TITAN agree that
TITAN shall evaluate DEALER's development and promotion of the sale of Products,
both as a whole and separately for each model based on such reasonable criteria
as TITAN may determine from time to time, which may include but not be limited
to: (a) fair and reasonable sales objectives which may be established from time
to time by TITAN for DEALER after review with DEALER; (b) the ratio of sales of
Products by DEALER to sales of other makes of similar products as compared with
(i) such ratio on a local, state, and/or nationwide bases; (ii) the average
ratio for all TITAN dealers appointed by TITAN; (c) the development of DEALER's
sales performance over a reasonable period of time; and (d) particular
conditions in DEALER's area of primary responsibility, if any. affecting such
performance or potential sales performance. DEALER acknowledges and agrees to a
minimum sales objective of new TITAN motorcycles as indicated in Appendix C
throughout the term of this agreement.
6. OWNERSHIP AND MANAGEMENT
To induce TITAN to enter into this Agreement, DEALER represents that the
person(s) identified in Appendix "B" to this Agreement, are all of the owners
and persons executing managerial authority on behalf of DEALER. TITAN is
entering into this Agreement in reliance upon these representations. DEALER
agrees there will be no change in DEALER's owners or general managers without
TITAN's prior written consent.
7. PRICES, TERMS AND CONDITIONS
A. TITAN shall invoice Products sold to DEALER under this agreement at prices
and on terms and conditions established by TITAN and that are current at the
time of shipment to DEALER. Prices, terms and conditions of sale may be changed
by TITAN from time to time without prior notice or liability from TITAN to
DEALER. Unless otherwise expressly stated by TITAN, said prices to DEALER do not
include sales, use, excise, or similar taxes. DEALER warrants that all Products
purchased from TITAN are purchased for resale only in the ordinary course of
DEALER's business, at DEALER's place(s) of business as specified in Paragraph I
of this Agreement, and that DEALER has complied with all pertinent state and
local laws pertaining to the collection and payment by DEALER of all sales, use
and like taxes applicable to such resale transactions.
B. If DEALER is delinquent in payment of any indebtedness or obligation to TITAN
or if DEALER is in default with respect to any provisions of this Agreement,
then TITAN, at its sole discretion and in addition to any other rights and
remedies it may have under this Agreement or at law, may without further notice
suspend all pending orders and shipments until said delinquency is cured or
until said default is cured, as the case may be.
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<PAGE>
C. DEALER agrees that TITAN may apply toward the payment of any indebtedness due
TITAN by DEALER, whether under this Agreement or otherwise, any credit owing to
DEALER by TITAN. D. DEALER agrees to permit floor checking of all TITAN brand
inventory in possession of DEALER by representatives of TITAN in order to assist
TITAN in product planning, distribution and production quantities and to
determine compliance by DEALER with warranty registration requirements.
8. SHIPMENT OF PRODUCTS
A. TITAN shall ship Products purchased by DEALER during the duration of this
Agreement by whatever mode of transportation TITAN shall select from whatever
geographic point TITAN may from time to time establish. All shipments of
Products shall be at DEALER's risk and DEALER shall be responsible for and shall
pay any and all transportation and/or handling charges resulting from shipment
of Products to DEALER, unless otherwise specified in writing by TITAN.
B. TITAN will endeavor as far as practical to make deliveries to DEALER in
accordance with DEALER's orders, but if for any cause TITAN fails to make
deliveries within the time stated in the order, or cancels any of such orders,
TITAN will not be liable to DEALER for any payment whatsoever by reason of such
failure to deliver, delays in making deliveries or cancellation, nor for any
loss of profits resulting directly or indirectly therefrom.
9. DISCONTINUANCE OR UNAVAILABILITY OF PRODUCTS
A. TITAN reserves for itself the right to discontinue the manufacture or sale of
any of the Products or to make changes in design, color or appearance or to add
improvements to particular Products at anytime, all without notice to DEALER and
without incurring any obligation to DEALER either with respect to any Products
previously ordered or purchased by DEALER or otherwise.
B. In the event of a Product shortage or Product introduction, TITAN shall have
the right to allocate or apportion said available Product or Products among its
customers as TITAN, in the exercise of its discretion, deems appropriate,
without incurring any liability to DEALER.
10. EQUAL REPRESENTATION
In the event DEALER sells other brands or lines of products which are
competitive with those Products purchased by DEALER from TITAN, DEALER agrees to
provide the Products with at least an equal representation to that provided
other competitive brands or lines.
11. DEALER BUSINESS FACILITIES
A. DEALER agrees to establish, staff, equip and maintain a salesroom and service
facility for the Products which will provide a first-class display of the full
line of Products and provide adequate service for the retail customer. Each such
facility will comply with reasonable written layout, appearance and size
standards established by TITAN from time to time. DEALER understands that TITAN
shall evaluate DEALER's compliance with such standard in determining its
performance under this Agreement.
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B. In carrying out its obligations under this Agreement, DEALER agrees to
maintain posted opening and closing hours, which business hours shall not be
less than that which is customary for similar business establishments in DEALERS
area of primary responsibility.
12. DEALER IDENTIFICATION
DEALER shall purchase, display and maintain, at DEALER's expense, signage
approved by TITAN, identifying the Products in a conspicuous location visible
outside DEALER's salesroom and service facilities, to the full extent permitted
by law. In the event of a prohibition by law, DEALER shall use its good faith
efforts to obtain an exception. DEALER shall further display and maintain during
the term of this Agreement such other authorized Product and service signs and
identification as are necessary to properly advertise DEALER's business in TITAN
products and service on a basis mutually satisfactory to both TITAN and DEALER.
DEALER agrees to place and maintain on the business premises signs and other
means of notification to the public that DEALER is an independent business
person, separate and distinct from TITAN.
13. FINANCIAL RESPONSIBILITY
A. DEALER shall at all times maintain and employ, in connection with its
business and operations under this Agreement, such working capital and net worth
together with a line of credit with a financing institution which will permit
DEALER to properly and fully carry out and perform DEALER's duties and
obligations under this Agreement, including an inventory of Products
commensurate with annually set objectives established by TITAN and DEALER. Such
working capital, net worth and/or line of credit shall be amounts not less than
minimum standards established by TITAN from time to time for dealers similarly
situated.
B. DEALER shall at all times maintain insurance coverage reasonably carried by
similarly situated dealers in such business, including without limitation,
general liability, property damage, and products liability to adequately protect
DEALER from loss resulting from the assembly, sale, service or repair of the
Products or arising out of any acts or omissions of the DEALER.
14. MODEL INVENTORY
Subject to the ability of TITAN to supply, DEALER agrees to purchase from Titan
and at all times maintain an inventory of then available models of Products,
which inventory shall at no time be less than the number of Products reasonably
established by TITAN from time to time after consultation with DEALER, such
initial minimum inventory being listed in Appendix D.
15. SERVICE PARTS
Dealer agrees to organize and maintain a complete parts department. DEALER at
all times will keep in DEALER's place(s) of business as specified in Paragraph 1
of this Agreement an inventory of service parts of an assortment and in
quantities that in TITAN's judgement is necessary to meet the current
anticipated requirements of owners of TITAN Products. DEALER agrees that it will
not sell or offer for sale or use in the repair or any Products, as a genuine
TITAN part, any part that is not in fact a genuine new TITAN part.
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<PAGE>
16. EMPLOYEE TRAINING
DEALER wilt participate in and will make available to its employees training
courses, service schools, sales and management seminars and personnel
development programs as may be provided or required from time to time by TITAN.
DEALER agrees to have in its employ at all times during the continuance of this
Agreement at least one filly trained mechanic who has been trained in service
and repair of TITAN's Products.
17. REPORTS AND FINANCIAL INFORMATION
DEALER will provide TITAN, by the 30th day of the month following the end of
DEALER's calendar or fiscal business year, a complete and accurate financial and
operating statement covering DEALER's preceding calendar or fiscal year
operations and showing the true and accurate conditions of DEALER's business.
DEALER will also furnish to TITAN, on such forms and at such times as TITAN
reasonably may require, complete and accurate reports of DEALER's sales activity
and stock of Products then being held by DEALER.
18. ADVERTISING AND TRADE PRACTICES
A. DEALER agrees to develop, utilize and participate in various advertising and
sales promotion programs in fulfilling its responsibilities for selling,
promoting and advertising the Products. In so doing, DEALER agrees to (a)
maintain a trademark or tradename advertising listing or a display advertising
listing in the Yellow Pages of the principal telephone directory in its
marketing area; (b) make reasonable use of newspaper, direct mail, television,
radio or other appropriate advertising media as suggested by TITAN; (c)
participate in advertising or sales promotion programs offered from time to time
by TITAN and in accordance with the applicable provisions and rules thereof; and
(d) make every reasonable effort to build and maintain customer interest in
activities involving Products and confidence in DEALER, TITAN and the Products.
B. To assist DEALER in fulfilling his advertising and promotion
responsibilities, TITAN may, at its sole discretion, develop and offer from time
to time various advertising and sales promotion programs to promote the sale of
Products for the mutual benefit of TITAN and DEALER. TITAN may also provide to
DEALER from time to time advertising and sales promotion material for purchase
by DEALER. DEALER agrees to pay promptly for any such materials. TITAN may offer
other materials to DEALER from time to time at no charge.
C. DEALER agrees to at all times conduct its business in a manner that will
reflect favorably on the good name and reputation of the Products and TITAN.
DEALER expressly recognizes its obligation to avoid in every way any
discourteous, deceptive. misleading or unethical practice or advertising that is
or might be detrimental to the Products, TITAN, or the public. DEALER agrees,
when notified by TITAN of such objections, to immediately discontinue such
practice or advertising.
19. PRE-DELIVERY SERVICE
DEALER expressly recognizes its obligation to effectively assemble, inspect,
service and/or prepare Products in accordance with schedules or instructions
furnished from time to time by TITAN before delivery to the retail purchaser by
DEALER. DEALER agrees to uncrate, set up, inspect and test each new TITAN
Product at DEALER's place of business as specified in this Agreement, prior to
delivery to the retail purchaser, in accordance with the written instructions
5
<PAGE>
furnished from time to time by TITAN. DEALER agrees to make all necessary
repairs to such Products after receipt of a formal authorization from TITAN and
agrees that each such Product will be received directly by the retail purchaser
at DEALER's place(s) of business as specified in Paragraph 1 of this Agreement
in safe and lawful operating condition. Upon request, DEALER will furnish
evidence to TITAN of the performance of such pre-delivery services on forms
prescribed by TITAN. DEALER will report promptly in writing, to TITAN's Chief
Executive Officer any act or failure to act on the part of TITAN or any of its
personnel which DEALER believes was not fair and equitable towards it in the
establishment or performance of pre-delivery obligations.
20. REPAIR AND MAINTENANCE SERVICE
A. DEALER expressly recognizes its obligation to obtain necessary tools, and to
effectively perform repair or maintenance services required on Products, in
accordance with TITAN's current recommendations and specifications.
B. DEALER shall develop and maintain competent, qualified and efficient service
mechanics for the service and repair of the Products and shall employ said
persons in DEALER's service and repair facilities. DEALER shall not use service
or repair facilities or personnel other than its own in connection with the
service and repair of the Products without the prior written consent of an
executive officer of TITAN. DEALER shall comply with and maintain copies of
bulletins which may fl-cm time to time be issued by TITAN pertaining to the
service or the use or operation of the Products, and to the maintenance of
requisite tools to perform service work on the Products.
C. DEALER shall perform all Product services under this Agreement, including
pre-delivery, warranty and recall service, as an independent contractor. DEALER
agrees to post his labor rates in a conspicuous manner so that they are plainly
visible to his service customers. Service provided by DEALER shall include only
those services which are specifically requested by the customer or those
services approved in advance by the customer.
21. WARRANTY
A. TITAN makes no representations or warranties, express or implied, with
respect to the Products except as may be provided in a standard written or
printed warranty offered to the retail purchaser with respect to one or more of
the Products from time to time. THE FOREGOING IS EXCLUSIVE AND IN LIEU OF ALL
OTHER WARRANTIES EXCEPT TITLE, WHETHER EXPRESS OR IMPLIED, AND TITAN MAKES NO
WARRANTY OF MERCHANTABILITY OR FITNESS FOR PURPOSE TO DEALER. THE FULFILLING OF
THE TERMS OF THE PRINTED WARRANTY SHALL CONSTITUTE THE SOLE REMEDY OF DEALER AND
THE SOLE LIABILITY OF TITAN, WHETHER ON WARRANTY, CONTRACT OR NEGLIGENCE.
B. DEALER expressly recognizes its obligation to effectively perform warranty
work on Products whether delivered by DEALER or by another authorized dealer and
to fulfill the conditions of the warranty as applicable to particular Products
where indicated without charge to the retail purchaser. Within three (3)
business days after delivery of a new Product to a retail purchaser, DEALER
shall complete and send to TITAN a true and complete sales warranty registration
report on such Product in a manner then prescribed by TITAN, including the name
and address of the owner. TITAN may utilize the information in the extent of a
recall of a Product, and/or to provide TITAN with useful marketing information.
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C. DEALER will report promptly, in writing, to TITAN's Chief Executive Officer,
any act or failure to act on the part of TITAN or any of its personnel which
DEALER believes was not fair and equitable towards it in the performance of
warranty obligations or which resulted in DEALER not receiving reasonable and
adequate compensation for warranty labor and parts provided by DEALER.
D. DEALER shall process and dispose of warranty claims on the Products in
accordance with the procedure which may be prescribed from time to time by
TITAN, and TITAN shall have no obligation to recognize any warranty claims
unless the prescribed procedure is complied with by DEALER including, but not
limited to, the receipt by DEALER from TITAN of a written warranty work
authorization prior to the commencement of any reimbursable warranty work. In
support of DEALER's claim for warranty compensation, DEALER agrees to provide
TITAN with such supportive documents as TITAN may request.
E. DEALER expressly warrants that should any of the Products be modified by
DEALER or at DEALER's request, DEALER will attach to the Product prior to retail
sale a conspicuous statement which wilt clearly disclose the extent or nature of
the modification and the resultant warranty coverage, if any, which will then
apply to the Products.
F. DEALER expressly acknowledges that DEALER is performing warranty work on the
Products as an independent contractor and may be compensated for such services
separate and apart from the purchase price of the Products.
22. TRADEMARKS AND TRADE NAMES
TITAN and its related companies are exclusively entitled to the use of the
trademark "TITAN Motorcycle Company of America" and to the use of all trade
names and trademarks used in connection with the Products and the goodwill
attached thereto in the United States of America (thereinafter collectively
called the "Marks"). TITAN grants DEALER the non exclusive permission to
advertise and otherwise inform the general public of the fact that DEALER sells
the Products and is a "TITAN Motorcycle Company of America Dealer" at the
locations specified in Paragraph 1 of this Agreement, including the use of
outdoor signs, signs on buildings and other means of identification for such
specified location. DEALER will not use, or permit the use of the Marks either
as part of any corporate title, firm name or trade name unless TITAN shall first
consent thereto in writing. On termination of this Agreement, DEALER agrees to
immediately discontinue all use of the Marks and other means of identification
that might make it appear or imply that DEALER is still an authorized
representative of the Products including, without limitation. removal of any
listing in any telephone directory, display advertising or outdoor sign. TITAN
shall have the right, but not the obligation, to acquire any or all such signs
in possession of DEALER on date of termination at a price that is not in excess
of the price, if any, originally paid by DEALER. DEALER further agrees to
discontinue any use of the Marks or any semblance of same, as a part of its
business or corporate name and, if appropriate, file a change or discontinuance
of such name with the appropriate authorities. In the event DEALER fails to
comply with the terms and conditions of this Paragraph, TITAN shall have the
right to enter upon DEALER's premises and remove all such signs bearing the
TITAN designation or Marks without liability of TITAN to DEALER. DEALER agrees
to reimburse TITAN for all Costs and expenses, including without limitation,
attorneys' fees, incurred by TITAN in effecting or enforcing compliance with
this Paragraph. The provisions of this Paragraph shall survive after termination
of this Agreement.
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23. INDEPENDENT PERSON
DEALER is an independent business and the conduct of its business is within the
sole discretion of DEALER. This Agreement does not create the relationship of
principal and agent, master and servant, or employer and employee between TITAN
and DEALER. Nothing herein contained shall be construed or interpreted to grant
any authority to DEALER to commit or bind TITAN in any manner to any person.
DEALER shall be solely responsible for all the acts and omissions of DEALER, its
agents and employees. This Agreement is not intended to govern, control or
manage the day-to-day business activities of DEALER. DEALER agrees to defend,
indemnify and save TITAN and its suppliers harmless from any claim, demand,
damage, liability, cost or expense, including attorneys' fees and expenses
arising out of any acts or omissions of DEALER, its agents or employees.
24. SALE OF DEALER'S BUSINESS
A. DEALER may not sell, transfer or assign the whole or any part of DEALER's
rights or obligations under this Agreement, without TITAN's prior written
consent. DEALER shall give Titan at least thirty (30) days' prior written notice
of any such proposed sale, transfer, or assignment. TITAN's failure to object to
the proposed sale, transfer, or assignment following notice from DEALER shall
not constitute TITAN's consent.
B. Provided that this Agreement is still in effect, and provided further that
notice of termination or notice of nonrenewal has not been provided to DEALER
and is not then in effect between DEALER and TITAN, TITAN agrees to not
unreasonably refuse to enter into a new Sales and Service Agreement for the
remainder of the term provided in Paragraph 2 of this Agreement with a person
contracting to purchase DEALER's business as pertains to the Products, provided
that said purchaser as of the date of sale meets all then current requirements
established by TITAN for the appointment of new dealers.
25. EARLY TERMINATION OF AGREEMENT
A. This Agreement maybe terminated in its entirety or with respect to any of the
Products at any time without notice by mutual consent of DEALER and TITAN. B.
Either party may terminate this Agreement in its entirety or with respect to any
of the Products prior to the expiration date provided in Paragraph 2 hereof,
without cause, on a minimum of sixty (60) days' prior written notice from one
party to the other. If applicable State law should require notice of termination
of a fixed period of time greater than that provided by this Agreement for a
stated reason, then such required notice in the form prescribed shall be given
by the terminating party.
C. TITAN may immediately terminate this Agreement in its entirely or with
respect to any of the Products by written notice given to DEALER in the event of
any of the following: (1) death, incapacity, removal or resignation of DEALER or
any person in the employment thereof and in reliance upon whom this Agreement
was entered into by TITAN; (2) any sale or transfer of any substantial interest
in the managerial control and/or ownership of DEALER without TITAN's prior
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written consent; (3) an unauthorized change made by DEALER in the location of
DEALER's place(s) of business as specified in this Agreement or the addition of
any place of business for Products; (4) discontinuance of the operation of
DEALER's business for a period of five (5) consecutive days, unless such
discontinuance is the result of a natural disaster; (5) the appointment of an
assignee, referee, receiver, or trustee for DEALER or upon its adjudication in
bankruptcy or the liquidation of DEALER; (6) any dispute, disagreement or
controversy between or among partners, managers, officers, or shareholders of
DEALER which, in the opinion of TITAN, adversely affects the operation,
management or business of DEALER or TITAN and is not resolved within thirty (30)
days after notice is given to DEALER by TITAN; (7) submission by DEALER to TITAN
of a fraudulent report, statement claim for reimbursement, refund or credit or
falsification of warranty claim or registration or of DEALER's retail labor rate
or providing of fraudulent statements relating to pre-delivery preparation,
testing, servicing, repairing or maintenance of the Products; (8) failure to
maintain DEALER's account on a current basis and in accordance with TITAN's
terms and conditions of sale; (9) failure by DEALER, within five (5) days
following notification by TITAN, to replace with cash or cashier's check any
check provided TITAN by DEALER which has been returned from the bank on which
the check was drawn without payment to; (10) conviction in any court of
competent jurisdiction of DEALER, or any principal officer or manger of DEALER,
of any crime tending to affect adversely the ownership, operation, management,
business or interest of the DEALER or TITAN; or (11) failure of DEALER to obtain
or maintain any license required by law.
D. The date of notice of termination shall be the date of mailing of such
notice. If any period of notice of the termination required hereunder is less
than that required by applicable laws, such period of notice shall be increased
and be deemed to be the minimum period required by such laws.
E. DEALER hereby acknowledges and agrees that in the event of a discontinuance
of the operation of DEALER's business for a period often (10) consecutive days,
for any reason whatsoever other than a natural disaster, such discontinuance
shall constitute a voluntary termination of this Agreement by DEALER. Upon
receipt of such notice, DEALER shall cooperate with TITAN, including without
limitation, executing such other documents as may be reasonably required by
TITAN, to effectuate the voluntary termination of this Agreement and DEALER's
business in TITAN's Products.
26. PROCEDURE ON TERMINATION
A. Upon termination or expiration and nonrenewal of this Agreement, DEALER will
immediately pay to TITAN all sums owing from DEALER to TITAN. Any amount due
TITAN by DEALER may be deducted from credits owing DEALER.
B. In the event of early termination or expiration and nonrenewal of this
Agreement, TITAN shall continue to fill orders from DEALER for such Products as
may be affected by the termination or nonrenewal up to the specified termination
or expiration date. TITAN shall have the right to impose reasonable limitations
on such orders for such Products during the notice period. On the specified date
of termination or expiration, all unfilled orders for such Products will be
automatically cancelled. Payment terms for such Products supplied by TITAN to
DEALER after notice of intention to terminate or upon expiration and nonrenewal
may be changed to cash, certified check or other terms determined by TITAN.
9
<PAGE>
C. After the effective date of termination of this Agreement, the acceptance of
orders from DEALER by TITAN, or the continuation of the sale by DEALER of
Products, or the referring of inquiries to DEALER by TITAN, or any business
relations either party has with the other will not be construed as a renewal of
this Agreement nor a waiver of the termination. If TITAN accepts any orders from
DEALER after termination of this Agreement, alt such transaction(s) will be
governed, unless the contrary intention appears, by the terms of this Agreement
applicable to such transactions.
27. COMPLIANCE WITH SAFETY, REGULATORY, AND EMISSION CONTROL REQUIREMENTS
A. DEALER agrees to comply with, and operate consistently with, all applicable
provisions of the National Traffic and Motor Vehicle Safety Act of 1966 and the
Federal Clean Air Act, as amended, including applicable rules and regulations
issued from time to time thereunder, and all other applicable federal, state and
local rules and regulations issued from time to time thereunder, and all other
applicable federal, state and local product safety, regulatory and emission
control requirements.
B. In the event that the laws of the state in which DEALER is located require
dealers of Products to install in new or used Products, prior to the retail sale
thereof, any safety devices or other equipment not installed or supplied as
standard equipment by TITAN, then DEALER, prior to its sale of any such TITAN
Product, shall properly install such equipment.
28. COMPLIANCE WITH SAFETY, REGULATORY AND EMISSION CONTROL REQUIREMENTS
DEALER hereby agrees to adopt, promote and implement safety programs developed
and provided by TITAN upon written notification from TITAN, DEALER agrees to
place and display safety notices and warnings and proper user information labels
on TITAN Products and in the dealership as appropriate, and to adhere to
established user recommendations and restrictions on the sale of TITAN Products
as directed by TITAN. DEALER agrees to promote and require safety awareness and
training of purchasers and users of TITAN Products in accordance with programs
and materials developed or provided by TITAN upon written notification by TITAN.
DEALER agrees to provide to customers safety notices and warnings and other
safety awareness materials prepared or provided by TITAN, and/or which may from
time to time be developed and provided by industry and/or safety associations,
regarding use of TITAN Products. DEALER agrees to require the reading or viewing
of such safety awareness materials by the customer in conjunction with the sale
of a TITAN Product as specified in writing by TITAN. DEALER agrees that
violation of its safety obligations described in this Paragraph constitutes
ground for TITAN action under this Agreement. TITAN retains the right, through
written notification, to amend the "DEALER SAFETY OBLIGATIONS" specified in this
Paragraph and to add such other Dealer Safety Obligations as may be necessary or
advisable.
29. DEALER'S SUCCESSOR ON DEATH OR INCAPACITY
Upon termination of this Agreement because of death or incapacity of the
principal of DEALER, TITAN will offer to a nominated successor of the principal
of DEALER acceptable to TITAN, or to spouse of the principal of DEALER,
continuation of this Agreement for the duration of the Agreement as provided in
10
<PAGE>
Paragraph 2 hereof, provided that: (i) DEALER, within fifteen (15) days of the
occurrence of such death or incapacity, gives notice to TITAN of such occurrence
and the name and qualifications of the DEALER's successor; (ii) The facilities
and capital of the dealership meet TITAN then current requirements; and, (iii)
The person to whom the continuation of the Agreement is offered provides written
notice to TITAN of acceptance within fifteen (15) days from the extension of the
offer by TITAN.
30. DISPUTE RESOLUTION
All controversies, claims and disputes arising in connection with this
Agreement, except any controversies, claims and disputes relating to amounts due
and unpaid to TITAN or relating to third party personal injury, shall be settled
by mutual consultation between the parties in good faith as promptly as
possible, but failing an amicable settlement shall be settled finally by
arbitration in accordance with the provisions of this Paragraph. Such
arbitration shall be conducted in Phoenix, Arizona in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and the
parties hereto agree that such arbitration shall be the sole and exclusive
method of resolving any and all such controversies, claims or disputes, except
those expressly excluded above. Judgement upon such award may be entered in the
Superior Court of the State of Arizona for the County of Maricopa, if the award
is rendered against DEALER. The prevailing party shall be entitled to recover
from the nonprevailing party all costs and expenses of the arbitration,
including reasonable attorney's fees.
31. SERVICE OF NOTICE
Any notice which may be required to be served by DEALER on TITAN, or by TITAN on
DEALER, shall be in writing and Sent by certified or registered mail,
return-receipt requested, addressed to the party for whom intended at its last
known address. Each party will promptly advise the other, in writing, of any
change of address.
32. GENERAL PROVISIONS
DEALER agrees that it neither has nor may acquire by performance under the terms
and provisions of this Agreement, any vested right in the sales and service
responsibility assigned to it hereunder and any investments made by DEALER in
the performance hereof are made with the knowledge that this Agreement may
expire and not be renewed or be terminated as herein provided. This Agreement is
the entire agreement between the parties and terminates and supersedes all prior
agreements, verbal or written, between the parties. Neither trade usage nor
course of dealing shall serve to modify, amend or change this Agreement. This
Agreement may be altered or amended in writing only and must be signed by an
executive officer of TITAN. Both parties shall be excused from nonperformance in
the case of FORCE MAJEURE or other causes beyond the control of the parties. The
paragraph headings contained herein are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement. It is understood
that this is a general form of agreement designated for use in any State. Should
any provision of this Agreement or the application thereof to any particular
person or circumstance be contrary to or prohibited by applicable laws or
regulations, such provision shall be inapplicable and deemed omitted and the
remaining provisions of this Agreement will be valid and binding and of like
effect as though such provisions were not included herein. TITAN has a right to
11
<PAGE>
amend, modify or change this Agreement in case of legislation, government
regulation or changes in circumstances beyond the control of TITAN that might
affect materially the relationship between TITAN and DEALER. This Agreement and
the rights and obligations arising thereunder shall be governed by and construed
according to the laws of the State of Arizona.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate the
day and year hereinafter written.
DEALER TITAN MOTORCYCLE CO. OF AMERICA
------ -------------------------------
Signature: /s/ Barbara S. Keery Signature: /s/ Robert P. Lobban
-------------------------- -----------------------------
Position/Title: Position/Title: CFO
--------------------- ------------------------
Signature: Dated: 5/14/99
-------------------------- ---------------------------------
Position/Title:
---------------------
Dated: 5/14/99
------------------------------
Circle One: Corporation Partnership Individual
This Agreement shall be executed on behalf of DEALER by the owner in case of a
sole proprietorship, by general partner in case of a partnership, or by a duly
authorized officer in case of a corporation, showing position or title of person
signing.
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<PAGE>
APPENDIX "A"
THE DEFINITION OF PRODUCTS IN THIS AGREEMENT SHALL
INCLUDE:
MOTORCYCLE MODELS:
"SIDEWINDER" SX & RM
"ROADRUNNER" SX & RM
"ROADRUNNER SPORT" RM
"GECKO" SX & RM
"COYOTE"
<PAGE>
APPENDIX "B"
OWNERS AND MANAGERS
1. THE FOLLOWING PERSONS ARE THE BENEFICIAL AND RECORD OWNERS OF DEALER:
IF A CORPORATION,
NUMBER AND
NAME AND ADDRESS OF EACH CLASS OF SHARES
RECORD OR BENEFICIAL OWNER OF -------------------- PERCENTAGE OWNERSHIP OF
DEALER NUMBER CLASS RECORD IN DEALER
- ----------------------------- ------ ----- -----------------------
BPF, LLC 100%
2. THE FOLLOWING PERSONS ARE DEALER'S OFFICERS:
NAME AND ADDRESS TITLE
- ---------------- -------
PATRICK KEERY PARTNER
FRANCIS KEERY PARTNER
BARBARA KEERY PARTNER
BRYANT CRAGUN PARTNER
3. THE FOLLOWING PERSONS FUNCTION AS GENERAL MANAGER OF DEALER AND, AS SUCH, ARE
AUTHORIZED TO MAKE ALL DECISIONS ON BEHALF OF DEALER WITH RESPECT TO DEALER'S
OPERATIONS:
NAME AND ADDRESS TITLE
- ---------------- -------
MATT BLEVINS MANAGER
<PAGE>
APPENDIX "C"
MINIMUM ANNUAL QUANTITY OF NEW TITAN MOTORCYCLES
TO BE PURCHASED
FROM
TITAN BY DEALER
TWENTY (20) UNIT PER YEAR
APPENDIX "D"
MINIMUM MODEL FLOOR INVENTORY OF TITAN. PRODUCTS
TO BE CONTINUOUSLY CARRIED BY DEALER
TWENTY (20) UNITS TO BE DETERMINED BY DEALER
PURCHASE, SALE AND ASSIGNMENT AGREEMENT
THIS PURCHASE, SALE AND ASSIGNMENT AGREEMENT (the "Agreement") is made and
entered into this 1st day of August, 1997, by and between TRANSAMERICA
COMMERCIAL FINANCE CORPORATION, a Delaware corporation, with its principal place
of business at Two Continental Towers, 1701 Golf Rd., Rolling Meadows, Illinois,
60008 (the "Buyer"), and TITAN MOTORCYCLE COMPANY OF AMERICA, an Arizona
corporation, with its principal place of business at 2222 West Peoria, Phoenix,
Arizona 85029 (the "Seller").
WHEREAS, Seller is the owner and holder of certain Loan Documents (as defined
below) and Seller desires to sell and assign to Buyer certain of its right,
title and interest in, to and arising under the Loan Documents; and
WHEREAS, Buyer desires to purchase and take an assignment of such Loan Documents
on the terms and conditions set forth herein; and
NOW THEREFORE, in consideration of the premises and the mutual undertakings
herein, the parties agree as follows:
1. DEFINITIONS
A. "Closing" means the payment in full of the Purchase Price to Seller and
the transfer to Buyer of all property and rights of Seller contemplated herein.
B. "Collateral" means all assets of a Dealer as of the Purchase Date in
which Seller has a security interest to secure the performance of a Dealer's
obligations with respect to the Represented Value under the Loan Documents,
including without limitation all Inventory and proceeds thereof.
C. "Dealer" means any person, firm or corporation identified on the
attached Exhibit A that purchased Inventory from Seller at wholesale prior to
the Purchase Date.
D. "Final Date" means September 15, 1997.
E. "Inventory" means all Titan motorcycles of a Dealer which were sold at
wholesale by Seller to such Dealer prior to the Purchase Date as identified by
model and serial number on the attached Exhibit A, and all proceeds thereof.
F. "Loan Documents" mean those portions of any documentation between Seller
and Dealer and any "credit file" or other file Seller may have with respect to
each Dealer evidencing or relating to the Represented Value for such Dealer
including without limitation Seller's right to payment for the sale of Inventory
to a Dealer or the security interest granted to Seller by Dealer to secure such
extensions of credit and any guaranties of such extensions of credit. The Loan
Documents may include but shall not be limited to inventory financing
agreements, notes, trust receipts, invoices evidencing the sale or shipment of
<PAGE>
goods, program letters, chattel paper, certificates of title, manufacturer's
statement of origin, Uniform Commercial Code financing statements, rights under
insurance policies, subordination agreements, personal or corporate guaranties,
amendments or other writings entered into between Seller and Dealer or executed
by either of them on or prior to the Purchase Date.
G. "Purchase Date" means the first day of August, 1997, or any other date
agreed on by the parties in writing.
H. "Purchase Price" means the aggregate amount of the Represented Values on
the Purchase Date, which shall equal ____________________ ($____).
I. "Represented Value" means the aggregate amount of the Seller's right to
principal payments from each Dealer under the terms of the Loan Documents as of
the Purchase Date as listed on Exhibit A attached hereto and the right to
payment of all interest and charges after the Purchase Date which are or will be
due in connection therewith.
2. AGREEMENT TO PURCHASE, SELL AND ASSIGN
A. Subject to the Closing, Seller shall on the Purchase Date, and hereby
does sell, assign, transfer and convey to Buyer on the Purchase Date and Buyer
shall and hereby does agree to purchase and accept, all of Seller's right, title
and interest in, to and arising under the Loan Documents to the extent of the
Represented Value and the Collateral (collectively, the "Rights").
B. On or before the Closing, Seller shall deliver to Buyer copies of all of
the applicable Loan Documents.
C. As soon as practicable after Closing, Seller shall mark its books and
records to indicate that the Rights have been sold and assigned to Buyer.
D. If requested by Buyer after the earlier of (i) the Final Date or (ii)
with respect to any particular Dealer, an acceptable Dealer audit, Seller shall
execute any assignment, amendment, continuation or termination or any UCC
financing statement in any jurisdiction reasonably necessary to carry out the
intent of this Agreement, including an assignment of its UCC financing statement
for each Dealer, with respect to the Collateral.
3. FURTHER RIGHTS
A. Immediately after Closing, the Seller shall join with Buyer in sending a
notice in a form similar to the attached Exhibit B to inform each Dealer of this
Agreement and Seller's assignment to Buyer hereunder of the Rights. Each Dealer
shall be directed to make all payments to Buyer for amounts owed with respect to
the Represented Value after the Purchase Date.
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<PAGE>
B. Upon request of Buyer after Closing, Seller shall execute any further
documents reasonably necessary to effectuate the Purchase, Sale and Assignment,
as well as to carry out any further intent of this Agreement.
C. If it becomes necessary for Buyer to demonstrate the validity of Buyer's
right or interest in, to or under the Rights, in a court of law or otherwise,
Seller agrees to immediately deliver to Buyer, upon request, the original Loan
Documents or certified copies of the same and any other evidence to assist Buyer
in proving its interest in, to and under the Rights. Buyer shall return such
Loan Documents to Seller as soon as possible.
4. PURCHASE DATE
On the Purchase Date, Buyer shall pay the Seller the Purchase Price in full
and by funds wired to Seller's account.
5. DEALER AUDITS
A. During the period of time between the Purchase Date and the Final Date,
Buyer may visit the place of business of each Dealer to confirm the amount of
the Represented Value in connection with each Dealer, that such Represented
Value is fully collateralized, to determine if the Dealer is in default under
the terms of the Loan Documents and to determine if any breach of the Seller's
representations, covenants or warranties thereunder has occurred (the "Dealer
Audit"). Specifically, during each Dealer Audit, Seller authorizes Buyer to
contact Dealer to verify that the amount of the Represented Value in relation to
that Dealer is true and correct, or, at its sole option, Buyer may request
written confirmation from Dealer of the Dealer's Represented Value. Furthermore,
during the Dealer Audit, Buyer may verify that the items of Inventory securing
the Represented Value are present at each Dealer's place of business and have
not been sold.
B. As Buyer performs its Dealer Audits, Buyer shall determine whether Loan
Documents applicable to a Dealer shall be accepted for purchase by Buyer (an
"Approved Dealer") or whether Loan Documents applicable to a Dealer shall not be
accepted for purchase by Buyer (an "Unapproved Dealer"). Buyer shall communicate
the results of its Dealer Audits to Seller no later than the Final Date. Buyer
may not conclude that a Dealer is Unapproved Dealer unless the conclusion is
commercial reasonable, which shall mean that either: (i) the Dealer is in
default under any of its Loan Documents, (ii) the amount of the Represented
Value cannot be confirmed; (iii) all of the items of Inventory securing the
Represented Value are not a Dealer's location; or (iv) the Dealer does not meet
TCFC's credit criteria for an on-going financing facility.
With respect to any Unapproved Dealer, Buyer shall notify Seller as soon as
possible of the specific reason(s) why the Dealer is an Unapproved Dealer.
C. If in the course of performing the Dealer Audits, Buyer determines that:
3
<PAGE>
(i) A Dealer is an Unapproved Dealer, or;
(ii) Seller has materially breached any of its representations,
warranties or covenants set forth in Section 7 herein,
Seller shall, upon demand, repurchase all of Buyer's right, title and interest
in, to and under the Rights for any such Dealer(s), by paying Buyer, in full and
by check, an amount equal to the Represented Value relating to such Dealer(s),
less any payment(s) received by the Buyer with respect to the Represented Value
of such Dealer(s). On the date Seller repurchases the Rights, Buyer shall
deliver to Seller a certificate signed by Buyer's Group Credit Manager that
certifies the amounts, if any, received by Buyer with respect to all repurchased
Rights. Concurrently, with Buyer receiving Seller's payment in full for
repurchased Rights, Buyer shall assign to Seller, without recourse or warranty,
with the exception of a limited warranty that the Rights are free and clear of
all claims, liens and encumbrances created by Buyer, all of Buyer's right, title
and interest in, to and under the Rights for any such Dealer(s). At any time on
Seller's demand, Buyer shall sign any documents and take any steps reasonably
necessary to assign the repurchased Rights and Loan Documents back to Seller by
documents that are reasonably acceptable to Buyer.
6. COLLECTION UNDER THE LOAN DOCUMENTS
After the Purchase Date, Buyer shall collect from each Dealer all amounts
due under the Loan Documents with respect to the Represented Value in accordance
with the terms thereof. Buyer may, at any time, without notice to or further
consent of Seller, renew and extend the time of payments, and compromise or
adjust claims arising under the terms of the Loan Documents or the Collateral
covered thereby and waive or modify performance of such terms and conditions of
the Loan Documents with each Dealer as Buyer, in its sole discretion, may
determine to be reasonable. No such renewal, extension, compromise, adjustment,
waiver or modification shall affect the liability of Seller hereunder, including
without limitation Seller's liability for the representations, warranties and
covenants herein; provided, however, if Buyer materially alters or irrevocably
eliminates, the right to payment of the Represented Value or any security
interest in the Inventory related thereto, without the prior written consent of
Seller, Seller shall not be obligated to repurchase such Rights.
7. SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Seller hereby represents, warrants and covenants to Buyer that as of the
Purchase Date and until the Purchase Price has been repaid in full to Buyer.
A. The Loan Documents comply with all applicable federal, state and local
laws and regulations.
B. Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Arizona and has full power, authority
and legal right to execute and deliver this Agreement and to perform and observe
4
<PAGE>
the terms and provisions hereof and thereof, without resulting in any conflict
with or breach of any instrument or agreement to which Seller is a party or by
which it is bound, nor to the best of Seller's knowledge will the transfer be in
violation of any governmental regulation, decree or rule of any kind which
Seller may be subject to. To the best of Seller's knowledge, no litigation or
administrative proceeding is pending which would restrain, set aside or
invalidate the transactions or the sale and assignment of the Rights
contemplated by Seller and Buyer herein.
C. Seller has taken all necessary action or authorized the execution and
delivery of this Agreement and the performance of all the terms and conditions
hereunder.
D. All information provided or to be provided to Buyer by Seller in
connection with or pursuant to this Agreement is materially true and correct.
E. Seller has good and marketable title to all of the Rights and writings
described hereunder, free and clear of all liens, claims or security interests,
and possesses the right to transfer and assign the Rights to Buyer. On or before
Closing, Seller shall take any and all actions necessary to complete the
Purchase, Sale and Assignment, and thereby sell, transfer and assign its right,
title and interest in the Rights to Buyer.
F. Each of the Loan Documents and all instruments and documents pertaining
thereto, and all related security, constitute bona fide transactions and
obligations entered into by each Dealer with Seller, and are valid, binding and
legally enforceable under the current laws of the states in which they
originated (subject to bankruptcy laws and any other laws that generally protect
the rights of debtors) and are not subject to any defense, offset or
counterclaim to or by any Dealer. No settlement, payment or compromise has been
made, entered into or agreed to be entered into by Seller that would change the
Represented Value due Seller from any Dealer under any of the Loan Documents as
of the Purchase Date, the Final Date or at any time thereafter.
G. The Loan Documents evidence a perfected first priority purchase money
security interest in each item of Inventory.
H. No Inventory securing the Loan Documents has been repossessed or is the
subject of any insurance claim presently pending. None of the Dealers are
materially in default under the terms of any of the related Loan Documents.
I. Seller has not received any notice of charges made or notice of any
complaint filed against Seller stating that Seller is not in compliance with any
law, regulation or order applicable to or affecting the Loan Documents.
J. All taxes assessable against or relating to the Loan Documents which are
due or may become due on or before the Purchase Date to any governmental
authority having the right to assess such taxes, have been paid, or will be paid
by Seller.
5
<PAGE>
K. Buyer shall have no obligation to finance any Dealer's purchase of
Inventory if Buyer, in its sole discretion, determines that a Dealer does not
meet Buyer's then current credit criteria, which may change from time to time at
Buyer's sole discretion.
L. In the event of material breach of any of the representations,
warranties and covenants in this Section 7 or of any other term or condition of
this Agreement, Seller will promptly, upon receipt of notice from Buyer to do
so, pay Buyer an amount equal to the damages suffered by Buyer as a result
including, but not limited to, the amount of any Represented Value which remains
owing from a dealer(s) and any other charges relating thereto. Alternatively, at
Buyer's sole discretion, Buyer may request Seller to repurchase all of the
Rights related to any such breach and pay in full and by check, an amount equal
to the Represented Value for such Dealer, less any payments received by Seller,
plus interest from the Purchase Date at the rate set forth in the Loan
Documents, and upon receipt of such payment in full, Buyer shall assign to
Seller, without recourse and without warranty, such related Rights. At any time,
on Seller's request, Buyer shall sign any documents and take any steps
reasonably necessary to assign the repurchased Rights and Loan Documents back to
Seller by documents that are reasonably acceptable to Buyer.
M. Seller will save, defend, and hold Buyer harmless from any damage, loss,
claim or expense as a result of the breach of any of Seller's representations,
warranties or covenants contained herein, or due to Seller's failure to meet any
obligations under the provisions of this Agreement.
8. TRANSFER OF TITLE FROM SELLER TO BUYER
A. The obligation of Buyer to Close under this Agreement is subject to the
following conditions:
(i) That the representations, warranties and covenants of Seller
contained in this Agreement shall be true and correct on the Purchase Date
hereof, and;
(ii) That Seller will have delivered to Buyer on or prior to the
Purchase Date the instruments, documents and materials described in Section 2
herein, in a form reasonably satisfactory to Buyer.
B. The obligation of Seller to transfer its right, title and interest under
the Loan Documents on the Purchase Date is subject to the Buyer having delivered
to Seller the full amount of the Purchase Price in the form of a cashier's check
or funds wired to Seller's designated bank account.
9. SURVIVAL OF WARRANTIES
All representations and warranties made herein shall be deemed to have been
made as of the date of this Agreement and the Closing Date. Seller's
representations and warranties shall continue in effect notwithstanding the
6
<PAGE>
Closing or any examination, audits or investigations made at any time by or on
behalf of Buyer, for a period not to exceed the greater of the original term of
each of the Loan Documents or the period of any statute of limitations
applicable to each of the Loan Documents pursuant to its original terms.
10. NOTICES
A. All notices, demands and requests required or permitted to be given
under the provisions of this Agreement shall be deemed duly given if delivered
or mailed by registered or certified mail, postage prepaid, and pending written
notice to the other of a different address, addressed as follows:
(i) If to Buyer:
Richard Strickler,
Vice-President
TRANSAMERICA COMMERCIAL FINANCE CORPORATION
304 Inverness Way South
Suite 400
Englewood, CO 80112
(ii) If to Seller:
Frank Keery, C.E.O.
TITAN MOTORCYCLE COMPANY OF AMERICA
2222 West Peoria
Phoenix, Arizona 85029
With a copy to:
Richard Keyt
Gallagher & Kennedy, P.A.
2600 North Central Avenue
Phoenix, Arizona 85004
B. Notices shall be deemed received: if delivered, when delivered; or, if
mailed, on the earlier of delivery or the fifth business day following the date
of mailing.
11. POWER OF ATTORNEY
Seller irrevocably appoints and designates Buyer, by any officer or
employee, as its attorney-in-fact in its behalf and in the name of seller to
endorse the name of Seller upon any check or other instrument payable to Seller
or its order which may be received by Buyer for payments due under the Loan
Documents after the Purchase Date. Seller agrees that in the event Seller
7
<PAGE>
receives any payments representing amounts due from any Dealer after the
Purchase Date, Seller shall promptly endorse such check or other instrument of
payment to the order of Buyer and forward it to Buyer.
12. ASSIGNMENTS
Seller's and Buyer's obligations and duties herein shall bind their
successors and assigns. Seller's and Buyer's rights and benefits herein shall
run to their successors and assigns. Seller and Buyer may not assign this
Agreement.
13. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted in
accordance with, the internal laws (as opposed to conflicts of laws provisions)
of the State of Illinois, Buyer's principal place of business.
14. HEADINGS AND EXHIBITS
The Section headings herein are for convenience only and shall not be
deemed to explain, limit or amplify the provisions of this Agreement.
15. ENTIRE AGREEMENT
This Agreement contains all the terms agreed upon by the parties with
respect to the subject matter hereof and supersedes all prior agreements, oral
or written, and can only be amended by a writing that is duly signed by both
parties.
16. SEVERABILITY
Wherever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or be deemed invalid under
applicable law in any respect, such provision shall be ineffective to the extent
of such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
17. REIMBURSEMENT
In the event attorney's fees and other costs or expenses are incurred by
either party to enforce the obligations of the other party under the terms of
this Agreement, the prevailing party shall be reimbursed in full by the other
party for such attorney's reasonable fees and other reasonable costs or
expenses.
8
<PAGE>
18. CONFIDENTIALITY
Buyer shall regard and preserve as confidential all documents and
information delivered to Buyer hereunder and all trade secrets and other
confidential information, including, but not limited to, customer lists, pricing
information, technical and non-technical information, inventions, processes and
products, including information relating, but not limited to, the whole ro any
portion or phase of any scientific or technical information, research, know-how,
discoveries, inventions, development, design, process, procedure, compositions,
formula or improvements, machines, computer programs and other software, any
present or future business plans, marketing information, merchandising
information, licensing information or financial information obtained by Buyer
hereunder or arising out of the property transferred to Buyer; provided such
information has not been published or disseminated by Seller, has not otherwise
become a matter of general public knowledge pertaining to Seller's business, or
is requested pursuant to a subpoena or other court order. All such information
shall be deemed confidential. Buyer shall not, without the prior written consent
of Seller, use for Buyer's benefit or purposes, or disclose to others at any
time any trade secret or other confidential information connected with the
business or developments of Seller, except as reasonably necessary for Buyer to
realize the benefits arising from the property it purchases hereunder. If the
transactions contemplated hereunder do not Close, Buyer shall return to Seller,
within ten days of Seller's demand, all originals and copies of all information
and documents delivered to Buyer hereunder.
19. HOLD HARMLESS
A. Buyer will save, defend and hold Seller harmless from and indemnify
Seller against any damages, loss, claim or expense as a result of the breach of
any of Buyer's representation, warranties or covenants contained herein, or due
to Buyer's failure to meet any obligations under the provisions of this
Agreement.
B. Seller will save, defend and hold Buyer harmless from and indemnify
Buyer against any damages, loss, claim or expense as a result of the breach of
any of Seller's representations, warranties or covenants contained herein, or
due to Seller's failure to meet any obligations under the provisions of this
Agreement.
IN WITNESS WHEREOF, Seller and Buyer have executed this Purchase, Sale and
Assignment Agreement by their duly authorized representative on the day and year
written above.
ATTEST: TITAN MOTORCYCLE COMPANY OF AMERICA
("SELLER")
/s/ Barbara S. Keery (Seal)
- -----------------------------
Secretary By: /s/ Francis S. Keery
------------------------------------
Title: C.E.O.
---------------------------------
ATTEST: TRANSAMERICA COMMERCIAL FINANCE
CORPORATION ("BUYER")
_______________________ By: /s/ Richard M. Strickler
------------------------------------
Title: Vice President
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9
MANUFACTURER'S/DISTRIBUTOR'S FINANCING AGREEMENT (ONE-STEP)
(CONSUMER PRODUCTS)
This Manufacturer's/Distributor's Financing Agreement is entered into as of
the 25 day of April, 1997 by and between Titan Motorcycle Co. of America, a
Arizona corporation ("Company") and TRANSAMERICA COMMERCIAL FINANCE CORPORATION,
a Delaware corporation, ("TCFC"), to set forth some of the terms and conditions
under which TCFC will provide financing for certain of the Company's dealers.
In consideration of the matters and mutual agreements herein contained,
TCFC and Company agree as follows:
1. DEFINITIONS.
(a) "Approval" herein shall mean TCFC's agreement, whether orally, in
writing or by electronic transmission, to finance the sale of Inventory by
Company to Dealer.
(b) "Dealer" herein shall mean any person, firm or corporation which
buys Inventory at wholesale from Company and sells Inventory.
(c) "Inventory" herein shall mean any and all products manufactured or
sold at wholesale by Company.
(d) "Invoice" herein shall mean an invoice, bill of sale or other
evidence, whether in writing or electronically transmitted, of the sale or
delivery of Inventory by Company to Dealer.
(e) "Wholesale Instrument" shall mean an Invoice, billing statement,
inventory schedule or other evidence of indebtedness, including the books and
records of TCFC, arising out of the financing by TCFC of an Invoice.
2. WHOLESALE FINANCING PROGRAM.
If Company requests an Approval or sends to TCFC an Invoice, then the
Dealer related to such Approval or Invoice shall be eligible for wholesale
financing, and TCFC may, from time to time in Its sole discretion. issue such
Approvals and advance against such Invoices, all under the terms of this
Agreement. If TCFC issues an Approval, Company shall deliver an original Invoice
to TCFC. Provided TCFC receives the Invoice within thirty (30) days of the date
TCFC Issued the Approval, TCFC shall pay Company the amount of the Invoice,
subject to the terms of the financing program then In effect between Company and
TCFC. If the Invoice is not received within said 30-day period, or is not
acceptable in form or content once received, TCFC has the right, without notice
to Company, to cancel the Approval related to said Invoice. Prior to funding any
Approval, TCFC has the right to cancel said Approval upon oral or written notice
to Company should Dealer be in default of any of its obligations to TCFC and
provided that Company has not shipped Inventory in reliance on TCFC's Approval.
Advances on Invoices and Approvals for such advances issued by TCFC as provided
<PAGE>
hereunder shall constitute an acceptance of the terms and conditions hereof by
Company and TCFC as to each such advance, and no other act or notice shall be
required on the part of TCFC or Company to entitle such advances and Approvals
to the benefits of this Agreement. TCFC may deduct, set-off, withhold and/or
apply any sums or payments due from Company to TCFC, under this Agreement
against any sums or payments due from TCFC to Company from any advance to be
made by TCFC against any Invoice.
3. PURCHASE OF INVENTORY.
(a) If TCFC shall repossess or come into possession of any Inventory,
or any part thereof, covered by any Invoice. Company agrees to purchase such
Inventory from TCFC * and wherever located. Company shall pay TCFC, within
thirty (30) days of request therefor and in good funds, the original amount of
such Invoice (the "Purchase Price"). In addition to the Purchase Price, Company
shall pay TCFC for ** all out of pocket charges actually Incurred by TCFC in
taking possession or in the repossession of such Inventory, Including but not
limited to shipping, storage, fees. Company shall not assert any interest in or
title to such Inventory until it has paid TCFC the Purchase Price and other
charges as specified herein in full and in cash.
(b) If an Invoice delivered to TCFC by Company does not identify the
inventory covered thereunder by serial number, but only by model number, and
Company cannot prove to TCFC's reasonable satisfaction that an item of Inventory
is covered by a particular Invoice, then for purposes of determining the age or
price of an item of Inventory under this Agreement, the item of Inventory shall
be deemed to be covered by the most recent Invoice which has an item with the
same model number as the item of Inventory tendered for purchase.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY.
(a) Company represents and warrants that at the time of TCFC'S
approval of and/or advance against any Invoice as provided hereunder, that: (i)
all Invoices issued by Company represent valid obligations of Dealer, are
legally enforceable according to their terms and relate to bonafide, original
acquisition sales of Inventory by Company to Dealer without any claim, offset or
defense to payment by Dealer and that Dealer requested that the acquisition of
Inventory be financed by TCFC; (ii) Company's title to all Inventory is free and
clear of all liens and encumbrances when transferred to Dealer and Company
transfers to Dealer all its right, title and interest in and to the Inventory;
(iii) the Inventory is in new and unused condition; it is of the kind, quality
and condition represented or warranted to Dealer; it meets or exceeds all
applicable federal, state and local safety, construction and other standards;
and if it is a type of Inventory customarily crated or boxed, such crate or box
is factory sealed.
- ----------
* New and Unused condition but subject to wear and tear incident to display
and demonstration.
** One half
2
<PAGE>
(b) In the event of breach of any of the foregoing representations or
warranties, Company shall purchase from TCFC the Wholesale Instrument relating
to the Invoice or Inventory with respect to which the warranty was breached.
Company shall pay within thirty (30) days and in good funds, the original amount
of the Invoice, plus all charges owing by Dealer with respect thereto, and all
of TCFCs out of pocket costs and expenses actually Incurred in connection with
such breach.
5. COVENANTS OF THE COMPANY. Company covenants as follows:
(a) All Inventory financed by TCFC shall be subject to applicable
product warranties of Company, and Company agrees to perform, or cause to be
performed, all repairs, modifications and/or other acts required by Company
pursuant to said product warranties. All expenses of performance under this
section shall be paid by Company.
(b) If Company accepts the return from any Dealer of any Inventory
covered by any Wholesale Instrument, voluntarily or otherwise, whether or not
any substitution is made for such returned Inventory, Company will reimburse
TCFC for the original amount of the Invoice, within thirty (30) days of the
return. In the event that Dealer shall be entitled to the payment by Company of
any rebates, reserves or incentives. Company shall advise TCFC of the amount and
nature of the payment and shall obtain TCFC'S approval (which will not be
unreasonably withheld) prior to remitting such funds to Dealer.
6. WAIVERS.
(a) Company waives notice of non-payment; protest and dishonor and
notice of protest and dishonor of any Wholesale Instrument; notice of TCFC's
acceptance of this Agreement; and all other notices to which Company might
otherwise be entitled to by law. TCFC may, at any time or times, without notice
to or further consent of Company, renew and extend the time of payment of
Wholesale Instruments and compromise or adjust claims on Wholesale Instruments
or Inventory covered thereby and waive or modify performance of such terms and
conditions of its financing arrangement with Dealers, as TCFC may determine to
be reasonable, and no such renewal, extension, compromise, adjustment, waiver or
modification shall affect the liability of Company hereunder.
(b) The failure of either party at any time to require performance by
the other party of any provision of this Agreement shall in no way affect the
right of such party to require performance of that provision. Any waiver by
either party of any breach of any provision of this Agreement shall not be
construed as a waiver of any continuing or succeeding breach of any such
provision, or a waiver of any right under this Agreement.
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<PAGE>
7. MISCELLANEOUS.
(a) This Agreement has been duly authorized and executed by Company
and TCFC and shall be binding upon and inure to the benefit of the successors or
assigns of the parties hereto. Company may not assign this Agreement without the
prior written consent of TCFC.
(b) This Agreement constitutes the entire agreement between the
parties concerning the subject matter hereof, and all prior writings,
discussions and/or agreements are superseded by, and merged into, the terms and
provisions of this Agreement. No modification or amendment to this Agreement
shall be valid or binding unless reduced to writing and executed by the parties
hereto. Notwithstanding the foregoing, the parties acknowledge that there may be
other agreements between them coveting related matters such as financing program
terms, manufacturer sponsored rate programs, interest free period programs and
electronic invoice transmission which shall continue in full force and effect.
This Agreement shall not be deemed to create, or Intend, a joint venture,
partnership, or agency relationship between Company and TCFC.
(c) Any written notice given under this Agreement shall be deemed
sufficiently given to a party hereto three (3) days after it is mailed by
certified mail. return receipt requested, to such party at its address set forth
after its signature below.
(d) This Agreement shall be governed by and construed in accordance
with the internal laws (as opposed to the conflicts of law provisions) of the
State of Illinois, the principal place of business of TCFC.
(e) The respective acts arid obligations of the parties under this
Agreement shall be performed Solely by said parties; provided, however, if any
act or obligation hereunder is performed by any party's subsidiary, affiliate or
agent, then such performance shall be deemed to be the act or obligation of
Company or TCFC, as applicable.
(f) Any amounts not paid when due under this Agreement shall accrue
interest at the rate of 1-1/2% per month until paid in full. Company further
agrees to pay all reasonable out of pocket costs and expenses, including
attorneys fees, actually incurred by TCFC in enforcing any of the provisions of
this Agreement.
(g) Either party hereto may cancel this Agreement at any time upon
thirty (30) days notice in writing of its intention to cancel. Notwithstanding
the foregoing, either party may elect to terminate the Agreement immediately
upon notice to the other party if such other party Is in default under the terms
of the Agreement, is insolvent, in receivership or is not paying its debts when
due. The termination of this Agreement shall in no manner affect, limit or
modify the obligations of Company as to Invoices approved or advanced against by
TCFC prior to the effective date of termination, or other obligations incurred
prior to such date.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on APRIL 25, 1997.
TRANSAMERICA COMMERCIAL
FINANCE CORPORATION TITAN MOTORCYCLE CO. OF AMERICA
(COMPANY)
By: By:
-------------------------------- --------------------------------
(Authorized Signature) (Authorized Signature)
Print Name: Christopher C. Meals Print Name: Patrick F. Keery
Title: Vice President Credit Title: President
Address: Address:
Two Continental Towers
1701 Golf Road 2222 West Peoria
Rolling Meadows, Illinois 60008 Phoenix, AZ 85029
Attention; Vice President Operations Attn: Patrick F. Keery
5
<PAGE>
CERTIFIED COPY OF JOINT RESOLUTIONS
OF BOARD OF DIRECTORS
AND SHAREHOLDERS (MFR/DIST)
The undersigned, Barbara Keery hereby certifies to Transamerica Commercial
Finance Corporation that: (s)he is the duly elected, qualified and acting
SECRETARY of TITAN MOTORCYCLE CO. OF AMERICA a corporation duly existing and in
good standing under the laws of the State of ARIZONA (the "Corporation"); as
such officer (s)he has custody of the corporate records of the Corporation,
including the minutes of the meetings of, and actions taken by consent of, its
Board of Directors and shareholders; (i) at a joint meeting of said Board of
Directors and shareholders duly called, convened and held, at which there was
present and acting throughout a quorum of the Board of Directors and all of the
shareholders, or (ii) pursuant to a written consent duly executed by all
directors and shareholders of the Corporation, the following resolutions were
duly adopted by both the Board of Directors of the Corporation and all of the
Corporation's shareholders; and said resolutions have not been amended or
rescinded, and presently are in full force and effect and do not in any manner
contravene the charter or by-laws of the Corporation:
RESOLVED, that this Corporation is hereby authorized to establish and
maintain financing arrangements with TRANSAMERICA COMMERCIAL FINANCE
CORPORATION, and its successors and assigns ("TCFC"), in such amounts and
upon such terms as any officer of this Corporation (including any such
officers successors in office) may approve, such approval to be
conclusively evidenced by the execution by any officer (including any such
officer's successors in office) or agent of this Corporation, or any parson
now or hereafter designated by any of them (each such officer, agent and
other person, an "Authorized Person"), of any agreement or other document
or documents which provide for such financing arrangements.
FURTHER RESOLVED, that each Authorized Person is authorized and
directed to do the following in the name and on behalf of this Corporation,
namely, (a) to incur obligations pursuant to such financing arrangements,
directly or Indirectly, with TCFC at any time and from time to time, (b) to
execute and deliver such agreements, powers of attorney, program letters,
guaranties, and other agreements, instruments, financial reports,
certifications and other documents, and all renewals, extensions,
supplements and modifications thereof, as TCFC shall require to establish
and continua such financing arrangements, in each case upon such terms as
any officer of this Corporation (including any such officer's successors in
office) may approve, such approval to be conclusively evidenced by the
execution thereof by any Authorized Person, and (c) to do all such other
acts and things as any Authorized Person deems necessary or advisable to
establish and continue such financing arrangements and to carry out the
intent of these resolutions and the transactions contemplated herein, with
all such acts and things previously done by them to establish and continue
financing arrangements for this Corporation with TCFC being hereby ratified
and approved.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has set his or her hand as such
Secretary or Assistant Secretary and the corporate seal of the Corporation on
April 25, 1997.
(Corporate Seal) ________________________________________
(Signature of Secretary or
Assistant Secretary)
Confirmed by the Assistant
Secretary, Secretary, President
(if also a Director) or a
Director of the Corporation: Print Name: Barbara Keery
___________________________________
Print Name: Patrick F. Keery
Title/Position: President
If same person signs in the capacity of both the President and Secretary his/her
signatures must be witnessed by a non-related third party.
WITNESS:
___________________________________
Print Name:________________________
7
STANDARD COMMERCIAL-INDUSTRIAL TRIPLE NET LEASE
BASIC TERMS SHEET
This Basic Terms Sheet to that certain Standard Commercial-Industrial
Triple Net Lease between the parties listed below is for the convenience of the
parties in quickly referencing certain of the basic terms of the Lease. It is
not intended to serve as a complete summary of the Lease. In the event of any
inconsistency between this Basic Terms Sheet and the Lease, the applicable Lease
provision shall prevail and control.
DATE OF LEASE (See PARAGRAPH 1): August 7, 1997
NAME OF LESSOR (See PARAGRAPH 1): Holualoa Peoria Avenue Industrial,
LLC, an Arizona limited liability
company
NAME OF LESSEE (See PARAGRAPH 1): Titan Motorcycle Co. of America,
a Nevada corporation
LESSEE'S TELEPHONE NUMBER: (602) 861-6977
ADDRESS OF PREMISES (See PARAGRAPH 2): 2222 W. Peoria Avenue, Suite A,
Phoenix, Arizona
APPROXIMATE GROSS RENTABLE
AREA OF PREMISES (See PARAGRAPH 12): 18,048 square feet
LESSEE'S PERCENTAGE OF INSURANCE,
REAL PROPERTY TAX AND CAM
AMOUNTS (See PARAGRAPH 12): 29.35%
LEASE COMMENCEMENT DATE (See SECTION 3.1): The business day following full
execution of this Lease.
LEASE EXPIRATION DATE (See SECTION 3.1): March 31, 2004
MONTHLY BASE RENT (See PARAGRAPH 4): SEE ADDENDUM
ADDITIONAL RENT 1. Rental Tax (See SECTION 4.1)
2. Insurance Amount (See SECTION
8.10)
3. Real Property Tax Amount
(SECTION 10.1)
4. CAM Amount (See PARAGRAPH 11)
<PAGE>
LESSEE'S SECURITY DEPOSIT (See PARAGRAPH 5): $9,800
LESSEE'S PERMITTED USE (See SECTION 6.1): Assembly and sales of motorcycle
parts and related general office
and administration (see SECTION
6.1(A) for a more complete
description)
ADDRESS FOR LESSOR: Holualoa Peoria Avenue Industrial,
LLC
c/o Wessex Service Companies
2828 N. Central Avenue
Suite #1060
Phoenix, Arizona 85004
Attn: Susan Maher
LESSOR: LESSEE:
HOLUALOA PEORIA AVENUE INDUSTRIAL, TITAN MOTORCYCLE CO. OF AMERICA,
LLC, an Arizona limited liability company INC., a Nevada corporation
By: Holualoa Arizona, Inc.
an Arizona corporation
Its: Manager
By: /s/ Sandra M. Alter By: /s/ Francis S. Keery
---------------------------------- ------------------------------
Its: Authorized Agent Name: Francis S. Keery
--------------------------------- ----------------------------
Name: Sandra M. Alter Its: CEO
-------------------------------- -----------------------------
Date: 8/7/97 Date: 8/7/99
-------------------------------- ----------------------------
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STANDARD COMMERCIAL-INDUSTRIAL TRIPLE NET LEASE
1. PARTIES. This Lease, dated AUGUST 7, 1997, for reference purposes only, is
made by and between HOLUALOA PEORIA AVENUE INDUSTRIAL, LLC, an Arizona limited
partnership ("Lessor"), and TITAN MOTORCYCLE CO. OF AMERICA, INC., a Nevada
corporation ("Lessee").
2. PREMISES. Lessor hereby leases to Lessee and Lessee leases from Lessor for
the term, at the rental, and upon all the conditions set forth herein, the
premises demised by this Lease, located at 2222 W. PEORIA AVENUE, SUITE A (the
"Premises"), together with a nonexclusive tight to use the parking and common
areas (collectively, the "Common Areas"), surrounding the Premises and within
the project commonly known as Peoria Avenue Industrial (the "Project"). The
location of the Premises and the parameters of the Common Areas and the Project
are shown on Exhibit "A" attached hereto. All dimensions and areas quoted herein
or in any exhibit attached hereto are approximate and are based on gross
rentable area, rather than solely on areas designed for the exclusive use and
occupancy of tenants.
3. TERM.
3.1. TERM. The term of this Lease shall COMMENCE ON THE BUSINESS DAY
FOLLOWING FULL EXECUTION OF THIS LEASE ("Commencement Date") and END ON MARCH
31, 2004 ("Expiration Date"), unless sooner terminated pursuant to any provision
hereof ("Term"). Lessor shall deliver possession of the Premises to Lessee on
the Commencement Date.
3.2. INTENTIONALLY DELETED.
4. RENT.
4.1. MONTHLY BASE RENT. Lessee shall pay to Lessor a monthly base rental as
set forth in the Addendum hereto. The monthly base rental due hereunder shall be
payable to Lessor by the first day of each month during the Term at the address
stated herein or to such other persons or at such other places as Lessor may
designate in writing and shall be paid in lawful money of the United Slates of
America. The Lessee further agrees to pay Lessor, in addition to the rent as
provided herein, all privilege, sales, excise, rental and other taxes (except
income taxes) imposed now or hereinafter imposed by any governmental authority
upon the rentals and all other amounts herein provided to be paid by the Lessee.
Said payment shall be in addition to and accompanying each monthly rental
payment made by Lessee to Lessor.
The base rental set forth in this SECTION 4.1 is a negotiated figure and
shall govern whether or not the actual gross rentable square footage of the
Premises is the same as set forth in PARAGRAPH 12 hereof. Lessee shall have no
right to withhold, deduct or offset any amount from the base monthly rental or
any other sum due hereunder even if the actual gross rentable square footage of
the Premises is less than that set forth in PARAGRAPH 12. Rent for any period
during the Tern, which is for less than one month shah be a pro rata portion of
the monthly installment.
<PAGE>
4.2. INTENTIONALLY DELETED.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof NINE
THOUSAND EIGHT HUNDRED AND NO/100 DOLLARS ($9,800.00) as security for Lessee's
faithful performance of Lessee's obligations hereunder. If Lessee fails to pay
rent or other charges due hereunder, or otherwise defaults with respect to any
provision of the Lease, Lessor may use, apply, or retain all or any portion of
said deposit for the payment of any rent or other charge in default or for the
payment of any other sum for which Lessor may become obligated by reason of
Lessee's default, or to compensate Lessor for any loss or damage which Lessor
may suffer thereby. If Lessor so uses or applies all or any portion of said
deposit, Lessee shall within ten (10) days after written demand therefor deposit
cash with Lessor in an amount sufficient to restore said deposit to the full
amount hereinabove stated, and Lessee's failure to do so shall be a material
breach of this Lease. Lessor shall not be required to keep said deposit separate
from its general accounts. If Lessee performs all of Lessee's obligations
hereunder, said deposit, or so much thereof as has not theretofore been applied
by Lessor, shall be returned, without payment of interest or other increment for
its use, to Lessee (or, at Lessor's option, to the last assignee, if any, of
Lessee's interest hereunder) at the expiration of the Term and after Lessee has
vacated the Premises. Any mortgagee of Lessor, purchaser of the Project, or
beneficiary of a deed of trust shall be relieved and released from any
obligation to return said deposit in the event such mortgagee, beneficiary of
deed of trust or purchaser becomes the owner of the Project by reason of
foreclosure or trustee's sale (including deed in lieu thereof) or proceeding in
lieu of foreclosure or trustees sale unless said deposit shall have been
actually delivered so such mortgagee, beneficiary of deed of trust or purchaser.
Such release, however, shall not relieve the person or entity who owned the
Project immediately prior to acquisition of title by such mortgagee, beneficiary
of deed of trust or purchaser of any obligation he or it may have to return said
deposit.
6. USE.
6.1. PERMITTED USES.
(a) The Premises are to be used only for THE DESIGN, ASSEMBLY, SALES
AND DISTRIBUTION OF NEW MOTORCYCLES, MOTORCYCLE PARTS AND MOTORCYCLE
ACCESSORIES. IN ADDITION, THE OPERATION WILL INCLUDE WELDING, ASSEMBLY,
PAINTING, MACHINING, TESTING, POLISHING AND OTHER ALLIED ACTIVITIES, AND RELATED
GENERAL OFFICE AND ADMINISTRATION ("Permitted Use") and for no other business or
purpose whatsoever without the prior written consent of Lessor. No act shall be
done in or about the Premises that is unlawful. Lessee shall not commit or allow
to be committed any waste upon the Premises, or any public or private nuisance
or other act or thing which unreasonably disturbs the quiet enjoyment of any
other lessee in the Project, taking into account, however, Lessee's Permitted
Use of the Premises. If any of Lessee's machines or equipment unreasonably
disturb any other lessee in the Project, then Lessee shall provide adequate
insulation, or take such other action as may be necessary to eliminate the noise
or disturbance. Lessee, at its expense, shall comply with all laws relating to
its use and occupancy of the Premises and shall observe such reasonable rules
and regulations as may be adopted and made available to Lessee by Lessor from
2
<PAGE>
time to time for the safety, cars and cleanliness of the Premises or the Project
and for the preservation of good order therein.
(b) Lessee warrants that the operation of its business shall be
conducted in strict compliance with all applicable recorded private covenants,
conditions and restrictions and all applicable federal, state and local
environmental, safety and other pertinent laws, rules, regulations and
ordinances and that any alterations necessary to the Premises by reason of such
covenants, conditions, restrictions, laws, rules, regulations and ordinances,
including, without limitation, The Americans With Disabilities Act shall be at
Lessee's sole cost and expense. Lessee represents and warrants to Lessor that
there is no risk to Lessee, Lessee's visitors and others using the Premises
arising from Lessee's operations. Lessee shall indemnify, defend and hold
harmless Lessor from and against any claim, liability, expense, lawsuit, loss or
other damage, including reasonable attorneys' fees, arising from or relating to
Lessee's use of the Premises or Lessees activities within the Project or any
violations of the Americans with Disabilities Act due to the use of the Premises
by Lessee, its employees, subtenants, agents, guests or invitees.
6.2. CONDITION OF PREMISES. Lessee hereby accepts the Premises in their
condition existing as of the date of the execution hereof or in the condition
described on the attached EXHIBIT "B," whichever is applicable, subject to all
applicable laws, ordinances and regulations governing and regulating the use of
the Premises, and subject to all matters disclosed thereby, Lessee acknowledges
that neither Lessor nor Lessor's agents has made any representation or warranty
as to the suitability of the Premises for the conduct of Lessee's business and
that Lessee and its agents and contractors have been provided with an
opportunity to thoroughly inspect the Premises and the Project
6.3. HAZARDOUS MATERIALS.
(a) As used herein, the term "Hazardous Material" shall mean any
substance or material which has been determined by any state, federal or local
governmental authority to be capable of posing a risk of injury to health,
safety or property, including all of those materials and substances designated
as hazardous or toxic by the city in which the Premises arc located, the U.S.
Environmental Protection Agency, the Consumer Product Safety Commission, the
U.S. Food and Drug Administration, the Arizona Department of Environmental
Quality, the Pima County Department of Environmental Quality, or any other
governmental agency now or hereafter authorized to regulate materials and
substances in the environment.
(b) Lessee agrees not to introduce any Hazardous Material in, on or
adjacent to the Premises or in, on or adjacent to the Project without (i)
obtaining Lessor's prior written approval, (ii) providing Lessor with thirty
(30) days prior written notice of the exact amount, nature, and manner of
intended use of such Hazardous Materials, and (iii) complying with all
applicable federal, state and local laws, rules, regulations, policies and
authorities relating to the storage, use, disposal and clean-up of Hazardous
Materials, including, but not limited to, the obtaining of all proper permits.
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<PAGE>
(c) Lessee shall immediately notify Lessor of any inquiry, test,
investigation, or enforcement proceeding by, against or directed at Lessee or
the Premises concerning a Hazardous Material. Lessee acknowledges that Lessor,
as the owner of the Premises, shall have the right, at its election, in its own
name to negotiate, defend, approve, and appeal, at Lessee's expense, any action
taken or order issued by any applicable governmental authority with regard so a
Hazardous Material released onto the Premises or the Project by Lessee.
(d) If Lessee's storage, use or disposal of any Hazardous Material in,
on or adjacent to the Premises or the Project results in any contamination of
the Premises, the Project, the soil, surface or groundwater thereunder or the
air above and around the Premises and the Project (i) requiring remediation
under federal, state or local statutes, ordinances, regulations or policies, or
(ii) at levels, in excess of de minimum levels, which are unacceptable to
Lessor, in Lessor's reasonable discretion, Lessee agrees so clean-up the
contamination immediately, at Lessee's sole cost and expense. Lessee further
agrees so indemnify, defend and hold Lessor harmless from and against any
claims, suits, causes of action, costs, damages, loss and fees, including
attorneys' fees and costs, arising out of or in connection with (i) any clean-up
work, inquiry or enforcement proceeding relating to Hazardous Materials
currently or hereafter used, stored or disposed of by Lessee or its agents,
employees, contractors or invitees on or about the Premises or the Project, and
(ii) the use, storage, disposal or release by Lessee or its agents, employees,
contractors or invitees of any Hazardous Materials on or about the Premises or
the Project.
(e) Notwithstanding any other right of entry granted to Lessor under
this Lease, Lessor shall have the right to enter the Premises or to have
consultants enter the Premises throughout the Term at reasonable times and upon
reasonable prior notice to Lessee for the purpose of determining: (1) whether
the Premises are in conformity with federal, state and local statutes,
regulations, ordinances and policies, including those pertaining to the
environmental condition of the Premises; (2) whether Lessee has complied with
this PARAGRAPH 6; and (3) the corrective measures, if any, required of Lessee to
ensure the safe use, storage and disposal of Hazardous Materials. Lessee agrees
to provide access and reasonable assistance for such inspections. Such
inspections may include, but are not limited to, entering the Premises with
machinery for the purpose of obtaining laboratory samples. Lessor shall not be
limited in the number of such inspections during the Term. If, during such
inspections, it is found that Lessee's use of Hazardous Materials constitutes a
violation of this Lease, Lessee shall reimburse Lessor for the cost of such
inspections within ten (10) days of receipt of a written statement therefor. If
such consultants determine that the Premises are contaminated with Hazardous
Material as a result of a release(s) by Lessee or are in violation of any
applicable environmental law, and such violation did not exist prior to the
Commencement Date, Lessee shall, in a timely manner, at its expense, remove such
Hazardous Materials or otherwise comply with the recommendations of such
consultants to the reasonable satisfaction of Lessor and any applicable
governmental agencies. If Lessee fails to do so, Lessor, at its sole discretion,
may, in addition to all other remedies available to Lessor under this Lease and
at law and in equity, cause the violation and/or contamination to be remedied at
Lessee's sole cost and expense. The right granted to Lessor herein to inspect
the Premises shall not create a duty on Lessor's part to inspect the Premises,
or liability of Lessor for Lessee's use, storage or disposal of Hazardous
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<PAGE>
Materials, it being understood that Lessee shall be solely responsible for all
liability in connection therewith.
(f) Lessee shall surrender the Premises to Lessor upon the expiration
or earlier termination of this Lease free of Hazardous Materials (other than
those, if any, existing as of the Commencement Date) and in a condition which
complies will, all governmental statutes, ordinances, regulations and policies,
recommendations of consultants hired by Lessor, and such other reasonable
requirements as may be imposed by Lessor.
(g) Lessee's obligations under this PARAGRAPH 6 and all
indemnification obligations of Lessee under this Lease shall survive the
expiration or earlier termination of this Lease.
7. MAINTENANCE, REPAIRS AND ALTERATIONS.
7.1. LESSOR'S OBLIGATIONS. Subject to the provisions of PARAGRAPH 9 and
except for damage caused by any negligent or intentional actor omission of
Lessee, Lessee's agents, employees or invitees and except for Lessor's right to
include certain costs as Total Common Area Charges pursuant to PARAGRAPH 11,
Lessor, at Lessor's expense, shall keep in good order, condition, and repair the
foundations, exterior and load bearing walls, and the exterior roof of the
Premises (including the structural support thereof). Lessee expressly waives the
benefits 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 Premises in good order, condition, and
repair.
7.2. LESSEE'S OBLIGATIONS.
(a) Lessee shall, at its expense throughout the Term, maintain,
service, replace, and keep in good repair the interior of the Premises except
those items for which Lessor is specifically made responsible under SECTION 7.1,
and mechanical equipment of the Premises, and all other aspects of the Premises
including such items as floors, ceilings, walls, doors, glass, plumbing, paint,
heating, ventilating and air conditioning equipment, partitions, electrical
equipment, wires, and electrical fixtures, and surrender same upon the
expiration of the Term in the same condition as received, ordinary wear and tear
excepted. Lessee shall give Lessor prompt written notice of any defects or
breakage in the structure, equipment, fixtures, or of any unsafe condition upon
or within the Premises. Maintenance, repairs, and replacements to the
mechanical, plumbing, electrical, and heating, ventilating and air conditioning
systems serving the Premises shall be performed by licensed contractors,
acceptable to Lessor in its reasonable discretion.
(b) Lessee shall enter into and keep in force during the Term a
preventive maintenance contract with a licensed heating and air conditioning
contractor acceptable to Lessor providing for the regular inspection and
maintenance of the heating, ventilating and air conditioning equipment serving
the Premises.
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(c) On the last day of the Tern, or on any sooner termination, Lessee
shall surrender the Premises to Lessor in the same condition as received, broom
clean, ordinary wear and tear and damage by fire or other casualty excepted.
Lessee shall repair any damage to the Premises occasioned by the removal of its
trade fixtures, finishings and equipment pursuant to SECTION 7.3, which repair
shall include without limitation the patching and filling of holes and repair of
structural damage.
7.3. ALTERATIONS AND ADD-ONS.
(a) Alterations, improvements, additions, utility installations or
removal of any fixtures may not be made to the Premises without the prior
written consent of Lessor, and any alterations, improvements, additions or
utility installations to the Premises, excepting movable furniture and machinery
and trade fixtures, shall, at Lessor's option, become part of the realty and
belong to Lessor upon the expiration or earlier termination of this Lease.
However, this shall not prevent Lessee from installing trade fixtures,
machinery, or other trade equipment in conformance with all applicable
ordinances, regulations and laws. Lessee shall keep the Premises, the building
in which the Premises are located, and the land on which the Premises are
situated free from any liens arising out of any work performed for, material
furnished to, or obligations incurred by the Lessee. It is further understood
and agreed that under no circumstance is the Lessee to be deemed the agent of
the Lessor for any alteration, repair, or construction within the Premises, the
same being done at the sole expense of the Lessee. All contractors, materialmen,
mechanics, and laborers are hereby charged with notice that they must look only
to the Lessee for the payment of any charge for work done and materials
furnished upon the Premises during the Term.
(b) Upon the expiration or sooner termination of the Tern, Lessee
shall, upon written demand by Lessor, at Lessee's sole expense, with due
diligence, remove any alteration, addition or improvement made by Lessee,
designated by Lessor to be removed (except the Leasehold Improvements described
in EXHIBIT "B"), and repair any damage to the Premises caused by such removal.
Lessee shall remove all of its movable property and trade fixtures which can be
removed without damage to the Premises at the expiration or earlier termination
of this Lease and shall pay Lessor for all damages from injury to the Premises
or Project resulting from such removal.
8. INSURANCE; INDEMNITY.
8.1. LESSEE'S LIABILITY INSURANCE. Lessee shall, at Lessee's expense,
obtain and keep in force during the Term a policy of commercial general
liability insurance written on an occurrence basis insuring Lessee against any
liability arising out of the use, occupancy, or maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be primary and not
contributing with any insurance maintained by Lessor, shall have a combined
single limit of liability of $2,000,000 and shall name Lessor as an additional
insured. The limits of said insurance shall not, however, limit the liability of
Lessee hereunder. Said insurance shall have a Lessor's Protective Liability
endorsement attached thereto, and shall contain a contractual liability
endorsement covering all indemnification obligations of Lessee hereunder. If
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Lessee shall fail to procure and maintain said insurance, Lessor may, but shall
not be required to, procure and maintain the same, but at the expense of Lessee.
8.2. LESSEE'S PROPERTY INSURANCE. Lessee shall, at Lessees expense, obtain
and keep in force during the Tenn a policy or policies of insurance covering
loss or damage to Lessees personal property, merchandise, stock in trade,
fixtures and equipment located on the Premises from time to time, in the amount
of the full replacement value thereof, providing protection against all perils
included within the classification of fire, extended coverage, vandalism,
malicious mischief, special extended perils (special form).
8.3. LESSOR'S LIABILITY INSURANCE. Lessor shall obtain and keep in force
during the Term a policy of commercial general liability insurance written on an
occurrence basis insuring Lessor against any liability arising out of the
ownership, use, occupancy, or maintenance of the Project including the Common
Areas. Such insurance shall have a combined single limit of liability of at
least $2,000,000.
8.4. LESSOR'S PROPERTY INSURANCE. Lessor shall obtain and keep in force
during the Term a policy or policies of insurance covering loss or damage to the
Project, in the amount of the fall replacement value thereof, exclusive of
footings and foundations, providing protection against all perils included
within the classification of fire, extended coverage, vandalism, malicious
mischief, special extended perils (special form). Lessee understands and agrees
that the insurance described in this SECTION 8.4 will not cover Lessees personal
property, merchandise, stock in trade, trade fixtures and equipment
8.5. BUSINESS INTERRUPTION INSURANCE. Lessor may, at its option, obtain and
keep in force during the Tern a policy of business interruption insurance in an
amount sufficient to cover any loss of income from the Project fora period of
twelve (12) months.
8.6. INSURANCE POLICIES. Insurance required hereunder shall be in companies
rated "A-XII" or better by A. M. Best Co., in Best's Key guide. On or prior so
the Commencement Date, Lessee shall deliver to Lessor copies of policies of
liability insurance required under SECTION 8.1 and policies of casualty
insurance required by SECTION 8.2 or certificates evidencing the existence and
amounts of such insurance, and in the case of the liability insurance policy
indicating that Lessor has been named an additional insured thereunder. All such
policies and certificates of insurance shall state explicitly that such
insurance shall not be cancelable or subject to reduction of coverage or other
modification except upon at least thirty (30) day's advance written notice by
the insurer to Lessor. Lessee shall furnish Lessor with renewals or "binders"
thereof not less than ten (10) days prior to the cancellation or termination of
any such policy, failing which, if Lessor does not receive such renewals or
"binders" within one (1) business day after written request to Lessee, Lessor
may order such insurance and charge the cost thereof to Lessee, which amount
shall be payable by Lessee upon demand. Lessee shall not do or permit to be done
anything which shall invalidate the insurance policies referred to in SECTIONS
8.2 and 8.3. Either party may provide any required insurance under a so-called
blanket policy or policies covering other parties and locations and may maintain
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the required coverage by a so-called umbrella policy or policies, so long as the
required coverage is not thereby diminished.
8.7. WAIVER OF SUBROGATION. Lessee and Lessor each hereby waives any and
all rights of recovery against the other, or against the officers, partners,
employees, agents, and representatives of the other, for loss of or damage to
such waiving party or its property or the property of others under its control,
where such loss or damage is insured against and actually covered under any
property insurance policy in forte at the time of such loss or damage, but such
waiver extends only to the extent of the actual insurance coverage. Lessee and
Lessor shall, upon obtaining the policies of insurance required hereunder, give
notice to the insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Lease.
8.8. INDEMNITY. Lessee shall indemnify, defend and hold harmless Lessor and
its managers, members, agents and employees from and against any and all claims,
losses, costs, liabilities and damages, including, without limitation,
attorneys' fees and costs, arising from Lessee's use of the Premises, or from
the conduct of Lessee's business or from any activity, work, or things done,
permitted, or suffered by Lessee in or about the Premises, and shall further
indemnify, defend and hold harmless Lessor from and against any and all claims
arising from any breach or default in the performance of any obligation on
Lessees part to be performed under the terms of this Lease or arising from any
negligence of the Lessee, or any of the Lessee's agents, contractors or
employees, and from and against all costs, attorneys' fees, expenses, and
liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon. Lessee, as a material part of the consideration to
Lessor, hereby assumes all risk of damage to property or injury to persons, in,
upon, or about the Premises arising from any cause and Lessee hereby waives all
claims in respect thereof against Lessor. Lessor shall indemnify, defend and
hold harmless Lessee and its officers, directors, shareholders, agents and
employees from and against any and all claims, losses, costs, liabilities and
damages, including, without limitation, attorneys' fees and costs, arising from
any accident, injury or damage occurring on the Common Areas, but only if and to
the extent such claim, loss, cost, liability or damage is covered by Lessor's
liability insurance provided for in SECTION 8.3 (or would have been covered by
such insurance if Lessor fails to maintain same), and shall farther indemnify,
defend and hold harmless Lessee from and against any and all claims arising from
any breach or default in the performance of any obligation on Lessor's part to
be performed under the terms of this Lease, and from and against all costs,
attorneys' fees, expenses and liabilities incurred in the defense of any such
claim or any action or proceeding brought thereon.
8.9. EXEMPTION OF LESSOR FROM LIABILITY.
(a) Lessee hereby agrees that Lessor and its agents shall not be
liable for injury to Lessee's business or any loss of income therefrom or for
damage to the goods, wares, merchandise, or other property of Lessee, Lessee's
employees, invitees, customers, or any other person in or about the Premises,
nor shall Lessor be liable for injury to the person of Lessee, Lessee's
employees, agents or contractors, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
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leakage, obstruction, or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or light fixtures, or from any other cause whether
said damage or injury results from conditions arising upon the Premises or upon
other portions of the building of which the Premises are a part, or from other
sources or places, and regardless of whether the cause of such damage or injury
or the means of repairing the same is inaccessible to Lessee. Lessor shall not
be liable for any damages arising from any actor neglect of any other lessee, if
any, of the building in which the Premises are located.
(b) No individual partners, shareholders, directors, officers,
employees or agents of Lessor or individual, member of a joint venture, tenancy
in common, firm or partnership, general or limited, which may be the Lessor or
any successor in interest shall be subject to personal liability with respect to
any of the covenants or conditions of this Lease. The Lessee shall look solely
to the equity of the Lessor in the Project, and the rents, issues and profits
derived therefrom, and to no other assets of Lessor, for the satisfaction of the
remedies of the Lessee in the event of a breach by the Lessor. Lessee will not
seek recourse against the individual partners, shareholders, directors,
officers, employees or agents of Lessor or an individual, member of a joint
venture, tenancy in common, firm or partnership, general or limited, which may
be the Lessor or any successor in interest or any of their personal assets for
such satisfaction. It is mutually agreed that this clause is and shall be
considered an integral part of this Lease.
8.10. LESSEE'S PROPORTIONATE SHARE OF INSURANCE PREMIUMS. Lessee shall pay
during the Term, as additional rent and in addition to all other charges due
hereunder, Lessee's proportionate share (calculated in the manner described in
PARAGRAPH 12) of the premiums for the insurance required or permitted to be
carried by Lessor hereunder (the "Insurance Amount"), whether the Insurance
Amount shall be the result of the nature of Lessee's occupancy, any actor
omission of Lessee, requirements of the holder of a mortgage or deed of trust
covering the Premises, increased valuation of the Premises or the Project, or
otherwise. Lessee shall pay Lessor in advance its monthly estimated share of the
Insurance Amount together with all applicable rental taxes due thereon, within
ten (10) days after receipt of an invoice from Lessor setting forth Lessors
estimate of such amount. Within ninety (90) days following the end of each
calendar year during the Term, or as soon thereafter is reasonably possible,
Lessor shall furnish Lessee with a statement of all of Lessor's insurance costs
for the Project for the previous calendar year indicating the computation of
Lessee's proportionate share of such costs for such calendar year and the
payments made by Lessee during such calendar year. If Lessee's aggregate
estimated monthly payments actually paid to Lessor for the calendar year are
greater than Lessee's proportionate share of all of Lessor's insurance costs for
the Project for such calendar year, Lessor shall promptly pay the excess to
Lessee or shall apply the excess to any past due amounts owing from Lessee to
Lessor if the payments made are less than Lessees proportionate share, Lessee
shall pay the difference so Lessor within ten (10) days of its receipt of such
statement.
9. DAMAGE OR DESTRUCTION.
9.1. RECONSTRUCTION OF PREMISES. If during the Term all or past of the
Premises should be destroyed partially or totally by fire or other casualty,
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this Lease shall continue thereafter in fall force and effect, except as
hereinafter provided, and the Lessor shall cause the reconstruction of the
Premises within the one hundred eighty (180) days following such destruction to
substantially the same condition in which it existed at the time immediately
preceding such destruction. Lessee's obligation to pay rental to Lessor
hereunder shall abate from the date of such destruction until completion of such
reconstruction and the Term hereof shall be automatically extended for a period
of time equivalent to that during which rent is abated as aforesaid. Should the
Premises be partially damaged or destroyed, rent shall be abated in the same
proportion as the destruction affects Lessee's ability to occupy and use the
Premises for its intended purposes. Notwithstanding the foregoing, Lessor or
Lessee shall have thirty (30) days following the total destruction of the
Premises or the partial destruction of the Premises to the extent of fifty
percent (50%) or greater of the full replacement value thereof, exclusive of
footings and foundations, to elect in writing not to commence reconstruction,
repair or replacement of the Premises. In the event of such an election by
Lessor, this Lease shall be deemed terminated and of no farther force or effect.
If Lessor determines that reconstruction of the Premises cannot be completed
within one hundred eighty (180) days following such destruction, Lessor shall
notify Lessee of such fact and this Lease shall thereupon be deemed terminated
and of no farther force or effect.
9.2. FORCE MAJEURE. If Lessor is bona fide delayed or hindered in or
prevented from the performance of any term, covenant or act required in SECTION
9.1 by reason of strikes, labor troubles, inability to procure materials or
services, power failure, sabotage, rebellion, war, act of God, or other reason
of a like nature, any of which must be beyond the reasonable control of Lessor,
financial inability excepted, then the performance of that term, covenant or act
is excused for the period of the delay and the reconstruction period shall be
deemed correspondingly extended.
9.3. ABATEMENT SOLE REMEDY. Except for abatement of rent, if any, Lessee
shall have no claim against Lessor for any damage suffered by reason of any such
damage, destruction, repair or restoration of the Premises.
10. REAL PROPERTY TAXES.
10.1. PAYMENT OF LESSEE'S PROPORTIONATE SHARE OF TAXES. Lessor shall pay
all real property taxes applicable to the Premises; provided, however, that
Lessee shall pay, as additional rent hereunder and in addition to all other
charges due hereunder, Lessee's proportionate share (as defined in PARAGRAPH 12)
of real property taxes applicable to the Project (the "Real Property Tax
Amount"). Lessee shall pay Lessor in advance its monthly estimated share of the
Real Property Tax Amount, together with all applicable rental taxes due thereon,
within ten (10) days after receipt of an invoice from Lessor setting forth
Lessor's estimate of such amount. Within ninety (90) days following the end of
each calendar year during the Term or as soon thereafter as is reasonably
possible, Lessor shall furnish Lessee with a statement of all real property
taxes relating to the Project for the previous calendar year indicating the
computation of Lessee's proportionate share of such real property taxes for such
calendar year and the payments made by Lessee during such calendar year. If
Lessee's aggregate estimated monthly payments actually paid to Lessor for the
calendar year are greater than Lessee's proportionate share of all real property
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taxes relating to the Project for such calendar year, Lessor shall promptly pay
the excess to Lessee or shall apply the excess to any past due amounts owing
from Lessee to Lessor; if the payments made are less than Lessee's proportionate
share, Lessee shall pay the difference to Lessor within ten (10) days of its
receipt of such statement. If the Term does not commence or expire concurrently
with the commencement or expiration of the tax year, Lessee's liability for real
property taxes for the such partial year shall be prorated on an annual basis.
10.2. DEFINITION OF "REAL PROPERTY TAX". As used herein, the term "real
property tax" shall include any form of assessment, fee, levy, penalty or tax
(other than inheritance or estate taxes), imposed by any authority having the
direct or indirect power to tax or assess, including any city, county, state, or
federal government, any school, agricultural, lighting, drainage, or other
improvement district thereof, as against any legal or equitable interest of
Lessor in the Premises, the Project and the real property of which the Premises
and the Project are a part.
10.3. PERSONAL PROPERTY TAXES.
(a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment, and all other personal
property of Lessee contained in the Premises or elsewhere. When possible, Lessee
shall cause said trade fixtures, furnishings, equipment, and all other personal
property to be assessed and billed separately from the real property of Lessor.
(b) If any of Lessee's personal property shall be assessed and billed
with Lessor's real property, Lessee shall pay Lessor the taxes attributable to
Lessee within ten (10) days after receipt of a written statement setting forth
the taxes applicable to Lessees property.
11. COMMON AREA CHARGES.
11.1. GENERALLY. In addition to the rental and other charges herein
provided to be paid by Lessee to Lessor, Lessee shall pay to Lessor, as
additional rent and as Lessee's share of the cost of maintaining, operating,
repairing and managing the Project, Lessee's proportionate share (as defined in
PARAGRAPH 12) of the Total Common Area Charges (as hereinafter defined) for any
calendar year during the Term (the "CAM Amount"). Lessee shall pay Lessor in
advance its monthly estimated proportionate share (as described in PARAGRAPH 12)
of the Total Common Area Charges, together with all applicable rental taxes due
thereon, within ten (10) days after receipt of an invoice from Lessor setting
forth Lessor's estimate of such amount. Within ninety (90) days following the
end of each calendar year during the Term or as soon thereafter as is reasonably
possible, Lessor shall furnish Lessee with a statement of all Total Common Area
Charges for the Project for the previous calendar year indicating the
computation of Lessee's proportionate share of the Total Common Area Charges for
such calendar year and the payments made by Lessee during such calendar year
(the "Actual Statement"). If Lessee's aggregate estimated monthly payments
actually paid to Lessor for the calendar year are greater than Lessee's
proportionate share of the Total Common Area Charges for such calendar year,
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Lessor shall promptly pay the excess to Lessee or shall apply the excess to any
past due amounts owing from Lessee to Lessor, if the payments made are less than
Lessee's proportionate share, Lessee shall pay the difference to Lessor within
ten (10) days of its receipt of such statement Total Common Area Charges shall
consist of all costs and expenses of every type associated with the management,
repair, maintenance, and insuring of the Common Areas including, without
limitation, costs and expenses for the following: gardening and landscaping;
utilities, water and sewer charges; premiums for liability, property damage and
casualty insurance and workman's compensation insurance; all personal property
taxes levied on or attributable to personal property used in connection with the
Common Areas; straight line depreciation on personal property owned by Lessor
which is consumed in the operation or maintenance of the Common Areas; rental or
lease payments paid by Lessor for rented or leased personal property used in the
operation or maintenance of Common Areas; fees for required licenses and
permits; refuse disposal charges; repairing, resurfacing, repaving, maintaining,
painting, lighting, cleaning, refuse removal, security and similar items; repair
and maintenance of exterior roofs and exterior painting of the Project (except
the initial painting of the exterior of the Project after the Commencement
Date); fees paid to property managers; and other similar costs and expenses
relating to the Common Areas. Said Total Common Area Charges shall farther
include all charges for regular preventive maintenance service, repair and
maintenance of mechanical equipment including, without limitation, healing,
ventilating and air conditioning equipment, which serves the Common Areas, the
cost of lighting, maintenance and repair of the Project identification signs,
and the cost of repairing and maintaining the plumbing, electrical and other
off-Premises facilities serving the Premises or the Project. Notwithstanding the
foregoing to the contrary, Total Common Area Charges shall include costs of a
capital nature (including, without limitation, capital improvements, capital
replacements, capital repairs, capital equipment and capital tools) only to the
extent of the amortization on a straight-line basis of the same over the useful
life (together with interest at the rate of twelve percent (12%) per annum on
the unamortized balance), but only if the same are: (i) reasonably intended to
produce a reduction in operating charges or energy consumption; or (ii) required
after the date of this Lease under any governmental law or regulation that was
not applicable to the Project or any portion thereof at the Commencement Date;
or (iii) for the repair or replacement of any equipment needed to operate the
Project at the same quality level as prior to the replacement.
11.2. LESSEE'S AUDIT RIGHT. If Lessee disputes the amount of Total Common
Area Charges set forth in any Actual Statement delivered by Lessor, Lessee shall
have the right, to be exercised, if at all, not later than six (6) months
following receipt of such Actual Statement, to cause Lessor's books and records
with respect to the preceding calendar year to be audited by a certified public
accountant mutually acceptable to Lessor and Lessee. The amounts payable under
Section 11.1 by Lessor to Lessee or by Lessee to Lessor, as the case maybe,
shall be appropriately adjusted on the basis of such audit. If such audit
discloses a liability for farther refund by Lessor to Lessee in excess of five
percent (5%) of the payments previously made by Lessee for such calendar year,
Lessor shall pay for the cost of the audit; otherwise, Lessee shall pay for the
cost of the audit. If Lessee fails to request an audit within the six (6) month
period, such Actual Statement shall be conclusively binding upon Lessor and
Lessee.
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12. PROPORTIONATE SHARE. For purposes of SECTIONS 8.10 and 10.1 and PARAGRAPHS
11 AND 13, Lessee's proportionate share to be used to calculate the Insurance
Amount, the Real Property Tax Amount the CAM Amount and Lessee's responsibility
for any utilities supplied to the Premises which are not separately metered
shall be a fraction, the numerator of which is the total first floor gross
rentable square footage of the Premises, and the denominator of which is the
total first floor gross rentable square footage of the entire Project, from time
to time. The parties agree that as of the Commencement Date, Lessee's
proportionate share will be 29.35 PERCENT, which figure is derived by dividing
18,048 SQUARE FEET by 61,492 SQUARE FEET. Lessees proportionate share as of the
Commencement Date, as described above, is a negotiated figure and shall govern
whether or not the actual rentable square footage of the Premises and/or the
entire Project as of the Commencement Date is the same as that described above.
13. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, and other utilities and services supplied to the Premises, together
with any taxes thereon. If any utility supplied to the Premises is not
separately metered, Lessee shall pay its proportionate share of the cost thereof
as Total Common Area Charges.
14. ASSIGNMENT AND SUBLETTING.
14.1. LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law, assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessees interest in this Lease or in the Premises,
without Lessor's prior written consent. Any attempted assignment, transfer,
mortgage, encumbrance, or subletting without such consent shall be void, and
shall constitute a breach of this Lease. Lessor shall not unreasonably withhold
its consent to an assignment or sublease by Lessee.
14.2. NO RELEASE OF LESSEE. Regardless of Lessor's consent, no subletting
or assignment shall release Lessee of Lessees obligation or alter the primary
liability of Lessee to pay the rent and to perform all other obligations to be
performed by Lessee hereunder. The acceptance of rent by Lessor from any other
person shall not be deemed to be a waiver by Lessor of any provision hereof.
Consent to one assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting.
15. DEFAULTS; REMEDIES.
15.1. DEFAULTS. The occurrence of anyone or more of the following events
shall constitute a material default and breach of this Lease by Lessee:
(a) The abandonment of the Premises by Lessee. For purposes hereof,
Lessee shall not be deemed to have abandoned the Premises merely by vacating the
same, so long as Lessee continues to comply with all of its obligations under
this Lease, including its obligation to pay rent and other sums due hereunder.
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(b) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder within ten (10) days after
written notice from Lessor that the same is due. Notwithstanding the foregoing
to the contrary, Lessor shall not be required to give notice to Lessee that rent
or any other payment required to be made by Lessee hereunder is due more than
once in any twelve (12) month period. Thereafter, without notice, the failure by
Lessee to make any such payment with ten (10) days of the date when due shall
constitute a material default and breach of this Lease by Lessee.
(c) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Lessee,
other than described in Subsection (b) above, where such failure shall continue
for a period of thirty (30) days after written notice thereof from Lessor to
Lessee; provided, however, if the nature of such failure is such that it cannot
reasonably be cured within the thirty (30) day period, then Lessee shall have
such additional time as is reasonably required to cure such failure, but in no
event more than ninety (90) days after written notice thereof from Lessor to
Lessee, provided Lessee commences to cure during the thirty (30) day period and
proceeds to cure with diligence and continuity.
(d) (i) The making by Lessee of any general assignment or general
arrangement for the benefit of creditors; (ii) the filing by or against Lessee
of a petition to have Lessee adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy (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 Lessees
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 Lessees
interest in this Lease, where such seizure is not discharged within thirty (30)
days.
(e) The chronic delinquency by Lessee in the payment of monthly
rental, or any other periodic payment required to be paid by Lessee under this
Lease. "Chronic delinquency" shall mean failure by Lessee to pay monthly rental,
or any other periodic payment required to be paid by Lessee under this Lease,
within ten (10) days as described in SECTION 15.1(B) above, for any three (3)
months (consecutive or nonconsecutive) during any twelve (12) month period. In
the event of the chronic delinquency, at Lessor's option, Lessor shall have the
additional right to require that monthly rental be paid by Lessee
quarter-annually, in advance, for the remainder of the Term.
(f) A guarantor, if any, of this Lease revokes or otherwise
terminates, or purports to revoke or otherwise terminate (by option of law or
otherwise), any guaranty of all or any portion of Lessee's obligations under
this Lease.
(g) Any default or breach by Lessee under the Standard
Commercial-Industrial Triple Net Lease, dated December 16, 1996, between Lessor
and Lessee concerning Suites B, C, D, E of the Project.
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15.2. REMEDIES. In the event of any such material default or breach by
Lessee, Lessor may as any time thereafter, with or without notice or demand and
without limiting Lessor in the exercise of any other right or remedy which
Lessor may have by reason of such default or breach:
(a) Terminate this Lease by any lawful means, in which case Lessee
shall immediately surrender possession of the Premises to Lessor. In such event,
Lessor shall be entitled to recover from Lessee all damages incurred by Lessor
by reason of Lessee's default including, but not limited to, the cost of
recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of die Premises, reasonable attorneys fees,
and any real estate commission actually paid; the "worth at the time of award"
established by the court having jurisdiction thereof of the amount by which the
unpaid rent and other charges due for the balance of the Term after the time of
Lessee's default exceeds the amount of such rental loss for the same period that
Lessee proves by clear and convincing evidence could have been reasonably
avoided; and that portion of the leasing commission paid by Lessor applicable to
the unexpired term of this Lease. Unpaid installments of rent or other sums
shall bear interest from the date due at the rate of 15% per annum. For purposes
of this SECTION 15.2(A), "worth at the time of award" of the amount referred to
above shall be computed by discounting each amount by a rate equal to the prime
rate (or its equivalent) of Bank One, Arizona at the time of the award, but in
no event more than an annual rete of ten percent (10%).
(b) Re-enter the Premises, without terminating this Lease, and remove
any property from the Premises, in which case Lessor shall be entitled to
enforce all of Lessor's rights and remedies under this Lease, including the
right to recover the rent and all other amounts due hereunder as they become
due. No re-entry or taking possession of the Premises by Lessor pursuant to this
SECTION 15.2 or other action on Lessor's part shall be construed as an election
to terminate the Lease unless a written notice of such intention is given to
Lessee or unless the termination thereof is decreed by a court of competent
jurisdiction. Lessor's election not to terminate this Lease pursuant to this
SECTION 15.2(B) or pursuant to any other provision of this Lease shall not
preclude Lessor from subsequently electing to terminate this Lease or pursuing
any of its other remedies.
(c) Maintain Lessee's right to possession, in which case this Lease
shall continue in effect, whether or not Lessee shall have abandoned the
Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent
and all other amounts due hereunder as they become due.
(d) Pursue any other or additional remedy now or hereafter available
to Lessor under the laws or judicial decisions of the State of Arizona,
including, without limitation, the imposition of a landlords lien against any
property located within the Premises.
The remedies set forth herein shall be deemed cumulative and not
exclusive.
15.3. DEFAULT BY LESSOR. Lessor shall not be deemed in default unless
Lessor fails to perform obligations required of Lessor within a reasonable time,
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but in no event later than thirty (30) days after written notice by Lessee to
Lessor and to the holder of any mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Lessee in
writing specifying wherein Lessor has failed to perform such obligations;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance, then Lessor shall not be in
default if Lessor commences performance within such 30- day period and
thereafter diligently prosecutes the same to completion. If Lessor does not
perform, Lessor's mortgagee may perform in Lessor's place and Lessee must accept
such performance. Except in the event of an actual or constructive eviction, in
no event shall Lessee have the right to terminate this Lease as a result of
Lessor's default, and Lessee's remedies shall be limited to damages and/or an
injunction. Notwithstanding the preceding sentence to the contrary, if Lessor or
its mortgagee fails to perform as required above in this SECTION 15.3, then
Lessee shall be permitted to make reasonable repairs to the Premises as set
forth in the default notice referred to above from Lessee. In the event Lessee
exercises its rights hereunder, Lessor will reimburse Lessee the reasonable cost
thereof within thirty (30) days following receipt of a copy of the invoice and
lien waiver from the contractor performing such repairs. In the event Lessor
fails to reimburse Lessee the cost of such repairs within thirty (30) days
following Lessor's receipt of an invoice and lien waiver, then Lessee shall be
permitted to withhold from the next installment of monthly base rental an amount
equal to the lesser of (i) the reasonable cost for such repairs, or (ii)
twenty-five percent (25%) of the monthly base rental otherwise due and payable
for such month. In the event the reasonable cost of such repairs is greater than
twenty-five percent (25%) of the monthly base rental payable for the month in
question, then Lessee shall be permitted to withhold from future installments of
monthly base rental an amount equal to twenty-five percent (25%) of the monthly
base rental on a monthly basis until such time as the amount withheld equals the
cost incurred by Lessee in making such repairs.
15.4 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 so, processing
and accounting charges, and late charges which may be imposed on Lessor by the
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or any other sum due from Lessee shall not be received by
Lessor or Lessor's designee on or before the expiration of any applicable cure
period, Lessee shall pay to Lessor a late charge equal to five percent (5%) of
such overdue amount. The parties hereby agree that such late charge represents
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 with respect to such overdue amount nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder.
16. CONDEMNATION. If less than twenty percent (20%) of the gross rentable floor
area of the Premises is 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 terminates to the part so taken as of the date
one (1) day prior to the earlier of the date when the condemning authority takes
tide or possession. If twenty percent (20%) or more of the floor area of the
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Premises is taken by condemnation, either Lessor or Lessee may terminate this
Lease by providing the other with written notice thereof within ten (10) days
following the date when the condemning authority takes title or possession,
whichever first occurs. If neither Lessor or Lessee elects to 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 rent
shall be reduced in the proportion that the gross rentable floor area taken bean
to the total gross rentable floor area of the original 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 in value or the leasehold or for the taking of the fee, or as
severance damages; provided, however, that Lessee shall be entitled to any award
for loss or damage to Lessee's trade fixtures and removable property. In the
event that this Lease is not terminated by reason of such condemnation, Lessor
shall, to the extent of severance damages actually received by Lessor in
connection with such condemnation, repair any damage to the Premises caused by
such condemnation except to the extent that Lessee has been reimbursed therefor
by the condemning authority. Lessee shall pay any amount in excess of such
severance damages required to complete such repair. Lessor shall notify Lessee
within ten (10) days after becoming aware of a potential condemnation.
17. GENERAL PROVISIONS.
17.1. ESTOPPEL CERTIFICATE.
(a) Lessee shall at any time upon not less than ten (10) days prior
written notice from Lessor execute, acknowledge and deliver to Lessor a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
date to which the rent and other charges art paid in advance, if any; (ii)
acknowledging that there are not, to Lessee's knowledge, any uncured defaults on
the part of Lessor hereunder, or specifying such defaults if any are claimed;
and (iii) setting forth such other statements with respect to this Lease as may
be reasonably requested by Lessor. Any such statement may be conclusively relied
upon by any prospective purchaser or encumbrancer of the Project.
(b) Lessee's failure to deliver such statement within such time shall
be conclusive upon Lessee (i) that this Lease is in full force and effect,
without modification except as may be represented by Lessor, (ii) that there are
no uncured defaults in Lessor's performance, and (iii) that not more than one
month's rent has been paid in advance.
(c) If Lessor desires to finance or refinance the Project, or any part
thereof Lessee hereby agrees to deliver to any lender designated by Lessor such
financial statements of Lessee as may be reasonably required by such lender.
Such statements shall include the past three years' financial statements of
Lessee. All such financial statements shall be received by Lessor in confidence
and shall be used only for the purposes herein set forth.
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17.2. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only
the owner or owners at the time in question of the fee title or a lessee's
interest in a ground lease of the Premises. In the event of any transfer of such
title or interest, Lessor herein named (and in case of any subsequent transfers
the then grantor) shall be relieved from and after the date of such transfer of
all liability as respects Lessor's obligations thereafter to be performed,
provided that any funds in the hands of Lessor or the then grantor at the time
of such transfer, in which Lessee has an interest, shall be delivered to the
grantee. The obligations contained in this Lease to be performed by Lessor
shall, subject as aforesaid, be binding on Lessor's successors and assigns, only
during their respective periods of ownership.
17.3. 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.
17.4. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein
provided, any amount due to Lessor not paid when due shall bear interest at the
rate of 15% per annum from the date due. Payment of such interest shall not
excuse or cure any default by Lessee under this Lease.
17.5. TIME OF ESSENCE. Time is of the essence.
17.6. CAPTIONS. Section and paragraph captions not a part hereof.
17.7. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains
all agreements of the parties with respect to any matter mentioned herein. No
prior agreement or understanding pertaining to any such matter shall be
effective. This Lease may be modified in writing only, signed by the pasties in
interest at the time of the modification.
17.8. NOTICES AND PAYMENTS. All notices and demands which may be required
or permitted to be given to either party hereunder shall be in writing, and all
such notices and demands hereunder shall be sent by certified United States
mail, return receipt requested, postage prepaid, or hand delivered to the
addresses set out below or to such other person or place as each party may from
time to time designate in a notice to the other. All payments due hereunder
shall be sent by first class United States mail, postage prepaid or hand
delivered to the address of the Lessor set out below or to such other person or
place as Lessor may from time to time designate in a notice to Lessee. Notices
and payments shall be deemed given and made upon actual receipt. Any notice,
demand or payment required or permitted to be given or made hereunder shall be
addressed to Lessor and Lessee, respectively, at the addresses set forth below:
If to Lessor: Holualoa Peoria Avenue Industrial, LLC
2813 E. Camelback Road, Suite 430
Phoenix, Arizona 85016
Attn: Sandy Alter
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Holualoa Peoria Avenue Industrial, LLC
c/o Wessex Companies
2828 N. Central Avenue, Suite 1060
Phoenix, Arizona 85004
Attn: Susan Mahr
Holualoa Peoria Avenue Industrial, LLC
75-5706 Hanama Place, Suite 104
Kailua-Kona, Hawaii 96740
Attn: Lynn Taube
If to Lessee: Titan Motorcycle Co. of America
2222 W. Peoria Avenue
Phoenix, Arizona 85029
Attn: Frank Keery, CEO
17.9. MORTGAGEE PROTECTION
(a) If, in connection with obtaining financing for the Project or any
portion thereof, Lessor's lender shall request reasonable modifications to this
Lease as a condition to such financing, Lessee shall not unreasonably withhold,
delay or defer its consent to such modifications, provided such modifications do
not materially adversely affect Lessee's rights or increase Lessee's obligations
under this Lease.
(b) Lessee agrees to give to any trust deed or mortgage holder
("Holder"), by prepaid certified mail, return receipt requested, at the same
time as it is given to Lessor, a copy of any notice of default given to Lessor,
provided that prior to such notice Lessee has been notified, in writing, (by way
of notice of assignment of rents and leases, or otherwise) of the address of
such Holder. Lessee further agrees that if Lessor shall have failed to cure such
default within the time provided for in this Lease, then the Holder shall have
an additional twenty (20) days after expiration of such period, or after receipt
of such notice from Lessee (if such notice to the Holder is required by this
SECTION 17.9(B)), whichever shall lass occur, within which to cure such default
or if such default cannot be cured within that time, then such additional time
as may be necessary if within such twenty (20) days, any Holder has commenced
and is diligently pursuing the remedies necessary to cure such default
(including but not limited to commencement of foreclosure proceedings, if
necessary, to effect such cure), in which event this Lessee shall not be
terminated.
17.10. WAIVERS. No waiver by Lessor of any provision hereof shall be deemed
a waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to or approval of any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder by
Lessor shall not be a waiver of any preceding breach by Lessee of any provision
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hereof, other than the failure of Lessee to pay the particular rent so accepted,
regardless of Lessor's knowledge of such preceding breach at the time of
acceptance of such rent.
17.11. RECORDING. Lessee shall not record this Lease without Lessor's prior
written consent, and such recordation shall, at the option of Lessor, constitute
a non-curable default of Lessee hereunder. At Lessee's request, Lessor shall
execute and allow the recordation of a short form memorandum of this Lease, in
form reasonably acceptable to Lessor, but only if prior to execution thereof by
Lessor, Lessee executes and delivers to Lessor, in recordable form, a properly
acknowledged quitclaim deed or other instrument extinguishing all of Lessee's
rights and interests in and to the Project and the Premises, and designating
Lessor as the grantee, which deed or other instrument shall be held by Lessor
and may be recorded by Lessor upon the termination or expiration of this Lease.
17.12. HOLDING OVER. If Lessee remains in possession of the Premises or any
part thereof after the expiration of the Term hereof, without the written
consent of Lessor, such occupancy shall be a tenancy at sufferance, for which
Lessee shall pay a monthly base real of one hundred twenty-five percent (125%)
of the monthly base rental in effect immediately prior to the expiration of the
Term plus all other charges payable hereunder, and upon all the terms hereof
applicable to such a tenancy at sufferance.
17.13. 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.
17.14. COVENANTS AND CONDITIONS. Each provision of this Lease performable
by Lessee shall be deemed both a covenant and a condition.
17.15. BINDING EFFECT; CHOICE or LAW. Subject to any provision hereof
restricting assignment or subletting and subject to the provision of SECTION
17.2, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State of
Arizona.
17.16. SUBORDINATION.
(a) This Lease, at Lessor's option and upon written notice to Lessee,
shall be automatically subordinate to any ground lease, mortgage, deed of trust,
or any other hypothecation for security now or hereafter placed upon the Project
and to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof; provided,
however, as to any ground lease, mortgage, deed of trust, or any other
hypothecation for security hereafter placed upon the Project, such subordination
shall be conditioned upon the ground lessor, mortgagee, beneficiary under deed
of trust or holder of any other hypothecation recording a non-disturbance
agreement in favor of Lessee in such party's customary form. If Lessor or any
mortgagee, trustee, or ground lessor shall elect to have this Lease prior to the
lien of a mortgage, deed of trust or ground lease, and shall give written notice
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thereof to Lessee, this Lease shall be automatically deemed prior to such
mortgage, deed of trust or ground lease, whether this Lease is dated prior or
subsequent to the date of said mortgage, deed of trust, or ground lease or the
date of recording thereof.
(b) Lessee agrees to execute any commercially reasonable documents
required to further evidence or effectuate such subordination or to make this
Lease prior to the lien of any mortgage, deed of trust or ground lease, as the
case may be, and failing to do so within ten (10) days after written demand,
does hereby make, constitute, and irrevocably appoint Lessor as Lessee's
attorney in fact and in Lessees name, place and stead, to do so.
17.17. ATTORNEYS' FEES. If either party brings an action to enforce the
terms hereof or declare rights hereunder, the prevailing party shall be entitled
to its reasonable attorneys' fees in any such action, on trial or appeal, to be
paid by as fixed by the court.
17.18. LESSOR'S ACCESS. Lessor and Lessor's agents shall have the right to
enter the Premises at reasonable times and upon reasonable prior notice to
Lessee between 8 a.m. and 5 p.m. weekdays for the purpose of inspecting the
same, showing the same to prospective purchasers, lenders, consultants and other
professionals and making such alterations, repairs, improvements, or additions
to the Premises or to the building of which they are a part as Lessor may
reasonably deem necessary or desirable. In connection with such entry and in
connection with carrying out any of its responsibilities hereunder or its
privileges as the owner of the Project, Lessor shall be entitled to erect such
scaffolding and other necessary structures or equipment as reasonably may be
required by the character of the work to be performed, provided that Lessor
shall not unreasonably interfere with the conduct of Lessee's business. Except
as specifically provided herein to the contrary, no entry by Lessor hereunder
nor any work performed by Lessor to the Premises or the Project shall entitle
Lessee to terminate this Lease or to a reduction or abatement of rent or other
amounts owed by Lessee hereunder nor to any claim for damages. Lessor may at any
time place on or about the Premises any ordinary "For Sale," and during the last
six (6) months of the Term, "For Lease" signs. Lessor and Lessor's agent shall
have the right to enter the Premises at any time in the case of an emergency.
17.19. SIGNS AND AUCTIONS. Lessee shall not place any sign upon the
Premises or conduct any auction from the Premises without Lessor's prior written
consent.
17.20. MERGER. The voluntary or other surrender of this Lease by Lessee or
a mutual cancellation thereof shall, at the option of Lessor, terminate all or
any existing subtenancies or may, at the option of Lessor, operate as an
assignment to Lessor of any or all of such subtenancies.
17.21. AUTHORITY. If Lessee is a corporation, a limited liability company,
partnership or other entity, each individual executing this Lease on behalf of
said entity represents and warrants that he is duly authorized to execute and
deliver this Lease on behalf of said entity, and that this Lease is binding upon
said entity in accordance with its terms. If Lessee is a corporation, a limited
company, partnership or other entity, Lessee shall deliver to Lessor, upon
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Lessees execution of this Lease, evidence reasonably satisfactory to Lessor of
the authority of the person(s) signing this Lease on behalf of Lessee to do so
and that Lessee has approved entering into this Lease. Such evidence may include
a certified copy of a resolution of the Board of Directors or members or
partners of said entity authorizing or ratifying the execution of this Lease by
a specific person(s) or other similar evidence. In the absence of such evidence,
the individual(s) executing this Lease guarantees payment and fall performance
of this Lease.
17.22. NSF CHECKS. There will be a 350.00 service charge payable to Lessor
on all NSF checks, which charge shall be in addition to, and not in substitution
for, any late charges and interest due hereunder.
18. PARKING AND COMMON AREAS. The Lessee, its agents, employees and invitees
shall be entitled to park in common with other lessees of Lessor providing that
it agrees not to overburden the parking facilities of the Project and agrees to
cooperate with the Lessor and other lessees in the use of the parking
facilities. Lessor specifically reserves the right, in its absolute discretion,
to determine whether parking facilities are becoming overburdened and in such
event to allocate the parking spaces among the Lessee and other lessees, their
agents, employees, and business invitees using the parking facilities in
proportion to each such lessees share of the space within the Project All
loading operations for receipt or shipment of goods, wares and merchandise by
the Lessee shall be done in the rear of the Premises or in such area therein
which is specifically designated in writing by the Lessor.
19. SAFETY. Lessee shall maintain on the Premises at all times during the Term
hereof an adequate number, size and type of fire extinguishers as are
appropriate to Lessee's business. Lessee will at all times adhere to good safety
practices or as may be required by safety inspectors. No goods, merchandise or
materials shall be kept, stored or sold by Lessee on or about the Premises which
are in any way hazardous. Lessee, at its sole expense, shall comply with any and
all requirements of any insurance organization or company necessary for the
maintenance of reasonable fire and public liability insurance covering the
Premises, the Projector any portion thereof,
20. ATTORNMENT. In the event any proceedings are brought for foreclosure, or in
the event of the exercise of the power of sale under any mortgage or deed of
trust covering the Premises, the Lessee shall attorn to the purchaser upon any
such foreclosure or sale and recognize such purchaser as the Lessor under this
Lease.
21. NO ACCESS TO ROOF. Lessee shall have no right of access to the roof of the
Premises or the building in which the Premises are located and shall not
install, repair or replace any aerial, fan, air conditioner or other device on
the roof of the Premises or the building in which the Premises are located
without the prior written consent of Lessor. Any aerial, fan, air conditioner or
device installed without such written consent shall be subject to removal, at
Lessee's expense, without notice, at any time.
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22. SUCCESSORS AND ASSIGNS. Subject to any provisions hereof restricting
assignment or subletting and subject to the provisions of SECTION 17.2, the
covenants and conditions herein contained, inure to and bind the heirs,
successors, executors, administrators and assigns of the parties hereto.
23. FINANCIAL STATEMENTS. Within fifteen (15) days after Lessor's request,
Lessee shall deliver to Lessor the current financial statements of Lessee, and
financial statements of the two (2) years prior to the current financial
statements year, including a balance sheet and profit and loss statement for the
most recent prior year, all prepared in accordance with generally accepted
accounting principles consistently applied. Such financial statement, balance
sheet and profit and loss statement shall be certified as accurate by Lessee or
a properly authorized representative of Lessee if Lessee is a corporation,
partnership or other business entity. Lessor shall keep such financial
statements of Lessee confidential and shall not copy or disclose their contents
except to Lessor's manager, members, lenders, and prospective purchasers of the
Project
24. NO ACCORD OR SATISFACTION. No payment by Lessee or receipt by Lessor of a
lesser amount than the monthly rent and other sums due hereunder shall be deemed
to be other than on account of the earliest rent or other sums due, nor shall
any endorsement or statement on any check or accompanying any check or payment
be deemed an accord and satisfaction; and Lessor may accept such check or
payment without prejudice to Lessor's right to recover the balance of such rent
or other sum or pursue any other remedy provided in this Lease.
25. ACCEPTANCE. This Lease shall only become effective and binding upon full
execution hereof by Lessor and delivery of a fully executed copy to Lessee.
26. INABILITY TO PERFORM. This Lease and the obligations of the Lessee hereunder
shall not be affected or impaired because the Lessor is unable to fulfill any of
its obligations hereunder or is delayed in doing so, if such inability or delay
is caused by reason of strike, labor troubles, acts of God, or any other cause
beyond the reasonable control of the Lessor.
27. INTENTIONALLY DELETED.
28. ALTERATIONS AND COMMON AREAS. Lessor shall have the right to make changes in
the Common Areas or any part thereof, including, without limitation, changes in
the location of driveways, entrances, exits, vehicular parking spaces and the
direction of nit flow, and designation of restricted areas, as Lessor deems
necessary or advisable for the proper and efficient operation and maintenance of
the Common Areas. Notwithstanding the foregoing, Lessor shall not make changes
in the Common Areas which materially and adversely affect access to, or
visibility of, the Premises, except temporarily during periods of construction.
29. REVISIONS OF EXHIBIT "A". It is expressly agreed that the depiction of the
Premises, the Project and the Common Areas on Exhibit "A" does not constitute a
representation, covenant, or warranty of any kind by Lessor, and Lessor reserves
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the right to change the size, location, type and number of buildings within the
Project and the location, type, design and dimensions of the Common Areas.
30. OTHER TENANTS. Lessor reserves the absolute right to permit such other
tenancies and businesses in the Project as Lessor, in the exercise of its sole
business judgment, shall determine to best promote the interests of the Project
Lessee is not relying on the understanding, nor does Lessor represent, any
specific lessee or number of lessees shall during the Term occupy any space in
the Project Lessee hereby waives all defenses arising from, and Lessor shall not
be liable for damages arising from, any actor neglect of any other lessee or
from Lessor's acts or omissions in enforcing any provision of its lease against
another lessee, whether or not Lessor has notice of the offending lessee's
disturbing or unlawful actor the opportunity to cure the disturbance by invoking
its powers under such other lease.
31. NAME OF PROJECT. Lessor shall have the right to change the name of the
Project upon not less than thirty (30) days prior written notice to Lessee.
Lessee agrees that the name of the Project shall be the sole property of and
belong to Lessor. From and after the termination or expiration of the Term for
any reason whatsoever, Lessee shall cease using the name of the Project for any
purpose.
32. JOINT OBLIGATION. If there be more than one Lessee, the obligations
hereunder imposed shall be join: and several.
33. CONSENTS AND APPROVALS. Except as specifically otherwise stated herein, all
consents or approvals requested of Lessor hereunder may be granted or denied by
Lessor in its sole and absolute discretion.
34. BASIC TERMS SHEET. The Basic Terms Sheet to which this Lease is attached is
for the convenience of the parties in quickly referencing certain of the basic
terms of the Lease. It is not intended to serve as a complete summary of the
Lease. In the event of any inconsistency between the Basic Terms Sheet and the
Lease, the applicable Lease provision shall prevail and control.
35. TRIPLE NET LEASE. Lessee acknowledges that this is a Triple Net Lease and
that Lessee shall do all acts and make all payments connected with or arising
out of its use and occupation of the Premises to the end that Lessor shall
receive all rent provided for herein free and undiminished by any expenses,
charges, fees, taxes and assessments, and Lessor shall not be obligated to
perform any acts or be subject so any liabilities or to make any payments,
except as otherwise specifically and expressly provided in this Lease.
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The parties hereto have executed this Lease on the dates specified immediately
adjacent to their respective signatures.
THIS LEASE HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FAR HIS APPROVAL.
NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE LESSOR OR ITS AGENTS OR
EMPLOYEES AS TO THE LEGAL EFFECT OR TAX CONSEQUENCES OF THIS LEASE OR THE
TRANSACTION RELATING THERETO.
LESSOR: LESSEE:
Holualoa Peoria Avenue Industrial, LLC, Titan Motorcycle Co. of America, Inc.,
an Arizona limited liability company a Nevada corporation
By: Holualoa Arizona, Inc.
an Arizona corporation
Its: Manager
By: /s/ Sandra M. Alter By: /s/ Francis S. Keery
---------------------------------- ----------------------------------
Name: Sandra M. Alter Name: Francis S. Keery
-------------------------------- --------------------------------
Title: Authorized Agent Title: CEO
------------------------------- -------------------------------
Date: 8/7/97 Date: 8/7/97
-------------------------------- --------------------------------
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EXHIBIT "A"
[Description of Location]
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EXHIBIT "B"
[ATTACH WORK LETTER, IF APPLICABLE, RELATING TO TENANT IMPROVEMENTS TO
BE MADE TO PREMISES.]
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ADDENDUM TO STANDARD COMMERCIAL-INDUSTRIAL
TRIPLE NET LEASE
This Addendum to Standard Commercial-Industrial Triple Net Lease
("Addendum") is attached to and incorporated into that certain Standard
Commercial-Industrial Triple Net Lease, dated as of August 7, 1997, between
Holualoa Peoria Avenue Industrial, LLC, an Arizona limited liability company
("Lessor"), and Titan Motorcycle Co. of America, Inc., a Nevada corporation
("Lessee") (the "Lease"). In the event of any inconsistency between the terms of
the Lease and this Addendum, the terms of this Addendum shall control. As
hereinafter used, the term "Lease" means the Lease as amended by this Addendum.
36. INTENTIONALLY DELETED.
37. HVAC AND MECHANICAL EQUIPMENT. Notwithstanding the terms of PARAGRAPH 7
of the Lease to the contrary, during the first twelve (12) months of the Term,
Lessor, shall, at its expense, maintain, service, replace and keep in good
repair the heating, ventilating and air conditioning equipment and all
mechanical equipment serving the Premises; provided, however, the foregoing
obligation of Lessor shall in no event include any of the Leasehold Improvements
described on EXHIBIT "B" to the Lease.
38. MONTHLY BASE RENT. The monthly base rental shall commence February 1,
1998 (the "Rental Start Date"). Monthly base rental for the ten (10) month
period commencing on the Rental Start Date shall be Seven Thousand Three Hundred
Nine and no/100 Dollars ($7,309.00) triple net; monthly base rental for the
twenty (20) month period after the ten (10) month period following the Rental
Start Date shall be Eight Thousand Five Hundred Seventy-Three and no/100 Dollars
($8,573.00) triple net; and monthly base rental for the second twenty (20) month
period after the ten (10) month period following the Rental Start Date shall be
Nine Thousand Eight Hundred Thirty-Six and no/100 Dollars ($9,836.00) triple
net. Lessee shall have the right to occupy the Premises from the Commencement
Date until the Rental Start Date rent free.
39. EXTENSION OPTION.
39.1 Lessor hereby grants to Lessee one (1) option (the "Extension
Option") to extend the Term of the Lease for an additional period of five (5)
years (the "Option Term"), on the same terms, covenants and conditions as
provided for in this Lease during the initial Term, except: (a) the monthly base
rent payable during the Option Term shall be the "fair market rental rate" for
the Premises as defined and determined in accordance with the Fair Market Rental
Rate Rider attached to this Lease as EXHIBIT "C," provided, however, in no event
shall the monthly base rent payable during the Option Term be less than the
Adjusted Monthly Base Rent in effect from time to time, determined pursuant to
SECTION 39.4 below; (b) Lessor shall have no further right to extend the Term;
and (c) the terms of EXHIBIT "B" shall be inapplicable to the Option Term.
<PAGE>
39.2 The Extension Option must be exercised, if at all, by written
notice ("Extension Notice") delivered by Lessee to Lessor no later than the date
which is one hundred eighty (180) days prior to the expiration of the initial
Term. The Extension Option shall, at Lessor's sole option, not be deemed to be
properly exercised if, at the time such Extension Option is exercised or on the
scheduled commencement date for the Option Term, Lessee is then in default or
Lessee has been chronically delinquent during the initial Term as described in
SECTION 15.1(E) of the Lease.
39.3 Notwithstanding the determination of fair market rental rate
pursuant to EXHIBIT "C" or of Adjusted Monthly Base Rent pursuant to SECTION
39.4, in no event shall the monthly base rent payable during any month of the
Option Term be less than the monthly base rent payable during the previous
month.
39.4 Adjusted Monthly Base Rent shall be determined in accordance with
the following formula on the first day of each of the five (5) years of the
Option Term (the "Adjustment Date(s)") and shall be in effect for the subsequent
12 months:
Adjusted Monthly Base Rent = monthly base rent as of the day prior to
applicable Adjustment Date x (CPI-2/CPI-1).
In applying the above, the following definitions shall be used:
39.4.1 "PRECEDING YEAR OF THE LEASE TERM" means the 12 months
preceding the applicable Adjustment Date.
39.4.2 "BUREAU" means the U.S. Department of Labor, Bureau of
Labor Statistics or any successor agency that shall issue the indices or data
referred to in SECTION 39.1.13.
39.4.3 "CPI" means the monthly indices of the Consumer Price
Index, All Urban Consumers (CPI-U), U.S. City Average, All Items (1982-84 equals
100), issued by the Bureau.
39.4.4 "CPI-l" means the monthly CPI for the calendar month three
(3) months before the commencement of the Preceding Year of the Lease Term.
39.4.5 "CPI-2" means the monthly CPI for the calendar month three
(3) months before the applicable Adjustment Date.
39.4.6 If at the time of the computations provided for in SECTION
39.4, no CPI is compiled and published by any agency of the federal government,
the statistics reflecting cost of living increases, as compiled by any
2
<PAGE>
institution or organization or individual generally recognized as an authority
by financial and insurance institutions and acceptable to Lessor, shall be used
as a basis for such adjustments.
39.4.7 If Adjusted Monthly Base Rent exceeds the fair market
rental rate for the Premises, Lessor shall notify Lessee in writing of the
Adjusted Monthly Base Rent. Such notice shall include all the data used by
Lessor in calculating the Adjusted Monthly Base Rent. In the event that Adjusted
Monthly Base Rent is not determined prior to the commencement of any year during
the Option Term, Lessee shall continue to pay to Lessor the monthly base rent
last in effect until Lessee is notified of the Adjusted Monthly Base Rent and
that the same exceeds the fair market rental rate for the Premises. Upon such
notice, Lessee shall commence paying Adjusted Monthly Base Rent at the time the
next monthly base rent payment is due, at which time Lessee shalt also reimburse
Lessor for the difference between the amount of rental paid during such interim
period and the amount of the Adjusted Monthly Base Rent for said period.
40. Intentionally Deleted.
41. Intentionally Deleted.
42. Covenant of Quiet Enjoyment. Lessor covenants that so long as Lessee
fulfills the conditions and covenants required of it to be performed under this
Lease, Lessee will have peaceful and quiet possession of the Premises during the
term hereof.
43. Brokers. Lessor and Lessee represent and warrant to each other that
they have not had any dealings with any real estate brokers, finders or agents
in connection with this Lease. Lessor and Lessee agree to indemnity, defend
(with counsel selected by the indemnified party and reasonably acceptable to the
indemnifying party) and hold the other party and the other parties' nominees,
successors and assigns harmless from any and all claims, costs, commissions,
fees, or damages by any person or firm whom the indemnifying party authorized or
employed, or acted by implication to authorize or employ, to act for the
indemnifying party in connection with this Lease.
LESSOR:
Holualoa Peoria Avenue Industrial, LLC,
an Arizona limited liability company
By: Holualoa Arizona, Inc., an Arizona
corporation
Its: Manager
By: /s/ [illegible]
----------------------------------
Its: Authorized Agent
---------------------------------
LESSEE:
Titan Motorcycle Co. of America, Inc.,
a Nevada corporation
By: /s/ Francis S. Keery
----------------------------------
Its: CEO
---------------------------------
3
<PAGE>
EXHIBIT "B"
WORK LETTER AGREEMENT
This Work Letter Agreement supplements the Standard Commercial-Industrial
Triple Net Lease (the "Lease"), dated and executed concurrently herewith, by and
between Lessor and Lessee, covering certain premises described in the Lease (the
"Premises"). All terms not defined herein shall have the same meaning as set
forth in the Lease.
1. Construction of Leasehold Improvements.
1.1. LEASEHOLD IMPROVEMENTS. Lessee shall furnish and install within
the Premises those items of general construction (including any distribution to
the Premises of any utilities and heating, ventilating and air conditioning
service as is required to serve the Premises) shown on the plans and
specifications finally approved by Lessor and Lessee pursuant to PARAGRAPH 2
below (the "Leasehold Improvements") in compliance with all applicable codes and
regulations. The Leasehold Improvements shall be constructed substantially in
accordance with the preliminary specifications and architectural renderings to
be agreed to by the parties in writing (the "Preliminary Plans"). The Leasehold
Improvements shall be constructed pursuant to this Work Letter Agreement by a
general contractor chosen by Lessee, with the prior written consent of Lessor
("Lessee's Contractor"). Lessee's Contractor shall not be changed without the
prior written consent of Lessor.
1.2. CONSTRUCTION REPRESENTATIVES. Lessor hereby appoints Sandy Alter
as Lessor's representative ("Lessor's Representative") to act for Lessor in all
matters covered by this EXHIBIT "B." Lessee hereby appoints Frank Keery as
Lessee's representative ("Lessee's Representative") to act for Lessee in all
matters covered by this EXHIBIT "B." All communications with respect to the
matters covered by this EXHIBIT "B" shall be made to Lessor's Representative or
Lessee's Representative, as the case may be. Either party may change its
representative under this EXHIBIT "B" at any time by written notice to the other
party.
2. Construction Plans for Premises.
2.1. PREPARATION OF SPACE PLANS. Lessee's Contractor shall prepare
preliminary space plans for the Premises. Lessee's Contractor shall also prepare
detailed space plans sufficient to convey the architectural design of the
Premises and layout of the Leasehold Improvements therein ("Space Plans"). The
Space Plans shall be submitted to Lessor for Lessor's reasonable approval. If
Lessor shall disapprove of any portion of the Space Plans, Lessor shall advise
Lessee in writing of such disapproval and the reasons therefor. Lessee shall
then submit to Lessor for Lessor's reasonable approval, a redesign of the Space
Plans, incorporating those revisions required by Lessor.
2.2. PREPARATION OF FINAL PLANS. Based on the approved Space Plans,
Lessee shall cause an architect selected by Lessee and reasonably approved by
<PAGE>
Lessor (the "Architect") to prepare complete architectural plans, drawings and
specifications and complete engineering, mechanical, structural and electrical
working drawings for all of the Leasehold Improvements for the Premises
(collectively, the "Final Plans") showing: (a) the subdivision (including
partitions and walls), layout, lighting, finish and decoration work (including
carpeting and other floor coverings) desired by Lessee for the Premises; (b) all
internal and external communications and utility facilities which will require
conduiting or other improvements from the shell of the building of which the
Premises are a part (the "Building") and/or within common areas; and (c) all
other specifications for the Leasehold Improvements. The Final Plans shall be
approved in the same manner as provided in SECTION 2.1 above for approval of
Space Plans. Lessor need not approve Final Plans that would require material
alterations of the Building shell.
2.3. REQUIREMENTS OF LESSEE'S FINAL PLANS. Lessee's Final Plans shall
include locations and complete dimensions and shall: (a) be compatible with the
Building shell and with the design, construction and equipment of the Building;
(b) be compatible with and of at least equal quality to the existing
improvements in the Building; and (c) comply with all applicable laws and
ordinances, and the rules and regulations of all governmental authorities having
jurisdiction, and all applicable insurance regulations.
2.4. CHANGES TO SHELL OF BUILDING. If the approved Final Plans or any
amendment thereof or supplement thereto shall require material alterations of
the Building shell (without implying any obligation on Lessor to approve of the
same), such alterations shall be performed by Lessee's Contractor as part of the
Leasehold Improvements and the cost of the Building shell work caused by such
alterations shall be charged against the Allowance.
2.5. APPROVALS. Lessee shall be solely responsible for obtaining
approval of the Final Plans by all governmental agencies having jurisdiction,
including all necessary permits and the temporary and permanent certificate of
occupancy (or other required, equivalent approval from the local governmental
authority permitting occupancy of the Premises). Lessor shall reasonably
cooperate with Lessee in obtaining such approvals.
3. ALLOWANCE FOR LEASEHOLD IMPROVEMENTS.
3.1. ALLOWANCE. Lessee shall receive from Lessor an allowance (the
"Allowance") of up to, but not exceeding, $76,500.00, which Allowance shall be
used solely to contribute toward payment of the Work Cost (as defined below) of
the Leasehold Improvements. All items of Leasehold Improvements, whether or not
the cost thereof is covered by the Allowance, shall become the property of
Lessor upon expiration or earlier termination of the Lease and shall remain on
the Premises at all times during the Term of this Lease, except as otherwise
provided in SECTION 7.3 of the Lease.
3.2. EXCESS WORK COSTS. In the event that the actual Work Costs exceed
the Allowance, Lessee shall pay such excess and Lessor shall have no
responsibility therefor. If prior to or during the construction of the Leasehold
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<PAGE>
Improvements, Lessor reasonably estimates that the Work Cost will exceed the
Allowance by more than $50,000.00, Lessor may, at its option, require Lessee to
post a payment and performance bond or other surety satisfactory to Lessor for
the estimated excess Work Cost. Such excess shall be paid in accordance with
SECTION 3.4 below. If the Allowance exceeds the Work Cost, Lessee shall not be
entitled to any payment, rent reduction or credit therefor.
3.3. CHANGES. In the event that changes to the Space Plans or Final
Plans are requested by Lessee or required by any governmental agency subsequent
to Lessor's approval thereof, such changes and the costs thereof shall be
forwarded to Lessor for approval (which approval shall not be unreasonably
withheld) prior to incorporation into the work. After Lessors approval of the
changes and the costs thereof, the changes shall be incorporated into the work
by means of a change order.
3.4. PAYMENT OF ALLOWANCE. The Allowance shall be paid by Lessor in
accordance with this SECTION 3.4. Lessee or Lessee's Contractor shall provide
Lessor by the fifteenth (15th) day of each calendar month with an invoice
prepared by Lessee's Contractor (or Lessee's Architect with respect to design
costs) setting forth the Work Cost payable since the last such invoice. Such
invoice shall be accompanied by (i) a certificate from Lessee's Architect or
Lessee's Contractor certifying that the Work Cost set forth in such invoice is
accurate and that all Work Costs set forth in prior invoices have been paid,
(ii) copies of all invoices from subcontractors setting forth the Work Cost on
Lessee's Contractor's invoice, (iii) receipts from such subcontractors
acknowledging payment of the Work Cost set forth in prior invoices, and (iv)
copies of lien waivers, or conditional lien waivers, in both Lessor's and
Lessee's favor, from Lessee's Contractor and subcontractors (such waivers shall
be conditional with respect to the Work Cost set forth in the invoice which they
are accompanying and final with respect to the Work Cost on prior invoices).
Lessor's approval of all such invoices shall not be unreasonably withheld,
conditioned, or delayed. Lessor shall pay to Lessee's Contractor, or to Lessee's
Architect with respect to design costs, within ten (10) calendar days of receipt
of all of the foregoing, the Work Cost set forth on the invoice, less the amount
of the retention as described in SECTION 4.1 below, to the extent Lessor, in its
reasonable judgment, deems such Work Cost to be accurate. Upon exhaustion of the
Allowance it shall become Lessee's responsibility to pay the Work Cost as set
forth on such invoices, also within such ten (10) calendar day period, and
Lessee shall provide Lessor promptly upon Lessors request with reasonable
evidence of such payment. Upon final completion of all work to be undertaken by
Lessee (including all punchlist items), which final completion shall be
certified by the Architect and which final completion shall occur not later than
two (2) years after the Lease Commencement Date, Lessee shall execute and
deliver to Lessor a written acknowledgment that the Leasehold Improvements are
approved by Lessee and a written certificate setting forth the amount and nature
of all costs and expenses billed to Lessee in connection with the design, permit
approval and construction of the Leasehold Improvements. Within ten (10) days
after Lessor's receipt of such certificate, accompanied by copies of all related
bills, invoices, receipts and final conditional lien waivers of all lien rights,
in recordable form, from Lessee's Contractor and all subcontractors, Lessor
shall pay to Lessee the remaining amount of such cost and expenses, including
the actual hold back provided in the construction contract, up to and including,
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<PAGE>
but not exceeding, the Allowance. Lessee shall receive no payment, rent
reduction or credit for any unused portion of the Allowance. Lessor shall not be
obligated to pay any portion of the Allowance for Work Cost incurred after the
date that is two (2) years after the Lease Commencement Date.
4. CONSTRUCTION.
4.1. CONSTRUCTION CONTRACT. Not less than ten (10) days prior to
commencement of construction of the Leasehold Improvements, Lessee shall enter
into a construction contract with Lessee's Contractor, which contract shall
provide for the retention of not less than ten percent (10%) of the monthly
progress payments, and shall otherwise be approved in writing by Lessor, which
approval shall not be unreasonably withheld or delayed. Lessee shall be solely
responsible for the performance of the work of the Leasehold Improvements to be
performed by Lessee's Contractor and any and all subcontractors, suppliers and
the like performing services for Lessee and/or Lessee's Contractor.
4.2. CONSTRUCTION SCHEDULE. Prior to commencement of construction of
any Leasehold Improvements, Lessee shall furnish to Lessor's Construction
Representative for approval in writing a schedule setting forth projected
completion dates.
4.3. PROSECUTION OF LEASEHOLD IMPROVEMENTS. Following Lessor's
approval of the Final Plans, and Lessee and Lessee's Contractor's selection of
subcontractors (as approved by Lessor) and execution of the construction
contract pursuant to SECTION 4.1 above, Lessee shall direct Lessee's Contractor
and such subcontractors to immediately commence and diligently complete
construction of the Leasehold Improvements; provided, however, Lessee shall have
up to two years after the Lease Commencement Date to finally complete
construction of the Leasehold Improvements. All Leasehold Improvements work
shall be carried out in accordance with reasonable rules and regulations
promulgated by Lessor. Such work shall be performed diligently, in a
first-class, workmanlike manner and in accordance with all applicable laws.
Prior to commencing such work, Lessee shall furnish Lessor with sufficient
evidence that Lessee and Lessee's Contractor are carrying worker's compensation
insurance in statutorily-required amounts, comprehensive general liability
insurance and all other insurance in compliance with the Lease. Lessor shall
have the right to enter the Premises at all times to inspect the work and to
post notices of nonresponsibility. Lessee shall ensure lien-free completion of
the Premises, and Lessee shall comply with all provisions of the Lease regarding
liens, including PARAGRAPH 15 thereof.
5. WORK COST. "Work Cost" means: (a) all design and engineering fees
incurred in connection with the preparation of the Preliminary Plans, Space
Plans and Final Plans (including the cost of Lessor's consulting engineers and
other consultants); (b) costs of permits, fees and taxes; (c) testing and
inspecting costs; (d) the actual costs and charges for material and labor,
contractor's profit and contractor's general overhead incurred by Lessee in
having the Leasehold Improvements done; and (e) all other costs expended in the
construction of the Leasehold Improvements.
4
<PAGE>
LESSOR:
Holualoa Peoria Avenue Industrial, LLC,
an Arizona limited liability company
By: Holualoa Arizona, Inc., an Arizona
corporation
Its: Manager
By: /s/ [illegible]
-------------------------------
Its: Authorized Agent
------------------------------
LESSEE:
Titan Motorcycle Co. of America, Inc.,
a Nevada corporation
By: /s/ Francis S. Keery
-------------------------------
Its: CEO
------------------------------
5
<PAGE>
EXHIBIT "C"
FAIR MARKET RENTAL RATE RIDER
This Fair Market Rental Rate Rider ("Rider") supplements the Standard
Commercial-Industrial Triple Net Lease to which it is attached (the "Lease").
Any term not defined herein shall have the same meaning as set forth in the
Lease.
1. The term "fair market rental rate" as used in the Lease shall mean the
annual amount per rentable square foot, projected during the relevant period,
that a willing, comparable, non-equity tenant (excluding sublease and assignment
transactions) would pay, and a willing, comparable landlord of a comparable
quality commercial-industrial building located in Phoenix, Arizona would accept,
at arm's length for lease extensions or renewals (including what Lessor is
accepting in current lease extension or renewal transactions for the Project),
for space of comparable size, quality and floor height as the Premises, taking
into account the age, quality and layout of the existing improvements in the
Premises, and taking into account items that professional real estate appraisers
customarily consider, including, but not limited to, rental rates, space
availability, and tenant size, but excluding consideration of tenant improvement
allowances, free rent and any other lease concessions, if any, then being
charged or granted by Lessor or the landlords of such similar buildings, except
if such lease concessions are then being offered in connection with lease
renewals.
2. In the event where a determination of fair market rental rate is
required under the Lease, Lessor shall provide written notice of Lessor's
determination of the fair market rental rate not later than forty-five (45) days
after the last day upon which Lessee may timely exercise the right giving rise
to the necessity for such fair market rental rate determination. Lessee shall
have fifteen (15) days ("Lessee's Review Period") after receipt of Lessor's
notice of the fair market rental rate within which to accept such fair market
rental rate or to reasonably object thereto in writing and respond with Lessee's
determination of fair market rental rate. Failure of Lessee to so object to the
fair market rental rate submitted by Lessor in writing within Lessee's Review
Period shall conclusively be deemed Lessee's approval and acceptance thereof. In
the event Lessee objects to the fair market rental rate submitted by Lessor
within Lessee's Review Period, Lessor and Lessee shall attempt in good faith to
agree upon such fair market rental rate using their best good faith efforts. If
Lessor and Lessee fail to reach agreement on such fair market rental rate within
fifteen (15) days following Lessee's Review Period (the "Outside Agreement
Date"), then each party's determination shall be submitted to appraisal in
accordance with the provisions of PARAGRAPH 3 below.
3. (a) Lessor and Lessee shall each appoint one (1) independent appraiser
who shall by profession be a M.A.I. certified real estate appraiser who shall
have been active over the five (5) year period ending on the date of such
appointment in the leasing of commercial-industrial properties in the area. The
determination of the appraisers shall be limited solely to the issue of whether
Lessors or Lessee's submitted fair market rental rate for the Premises is the
closest to the actual fair market rental rate for Premises as determined by the
<PAGE>
appraisers, taking into account the requirements specified in PARAGRAPH 1 above.
Each such appraiser shall be appointed within fifteen (15) days after the
Outside Agreement Date.
(b) The two (2) appraisers so appointed shall within fifteen (15) days of
the date of the appointment of the last appointed appraiser agree upon and
appoint a third appraiser who shall be qualified under the same criteria set
forth hereinabove for qualification of the initial two (2) appraisers.
(c) The three (3) appraisers shall within thirty (30) days of the
appointment of the third appraiser reach a decision as to whether the parties
shall use Lessor's or Lessee's determination of fair market rental rate, and
shall notify Lessor and Lessee thereof in wilting.
(d) The decision of the majority of the three (3) appraisers shall be
binding upon Lessor and Lessee. If either Lessor or Lessee fails to appoint an
appraiser within the time period specified in SECTION 3(A) hereinabove, the
appraiser appointed by one of them shall reach a decision based upon the same
procedures as set forth above (i.e., by selecting either Lessors or Lessee's
submitted fair market rental rate), and shall notify Lessor and Lessee thereof,
and such appraiser's decision shall be binding upon Lessor and Lessee.
(e) If the two (2) appraisers fail to agree upon and appoint a third
appraiser, both appraisers shall be dismissed and the matter to be decided shall
be forthwith submitted to arbitration under the provisions of the American
Arbitration Association Arbitration Rules for the Real Estate Industry based
upon the same procedures as set forth above (i.e., by selecting either Lessor's
or Lessee's submitted fair market rental rate).
(f) The cost of appraisal (and, if necessary, arbitration) shall be paid by
Lessor and Lessee equally.
2
FIRST AMENDMENT TO
STANDARD COMMERCIAL-INDUSTRIAL TRIPLE NET LEASE
This First Amendment to Standard Commercial-Industrial Triple Net Lease
("First Amendment") is made between Holualoa Peoria Avenue Industrial, LLC, an
Arizona limited liability company ("Lessor"), and Titan Motorcycle Co. of
America, Inc., a Nevada corporation ("Lessee") with respect to the following
recitals:
RECITALS
A. Lessor and Lessee entered into that certain Standard
Commercial-Industrial Triple Net Lease, dated December 16, 1996 (the "Lease")
for certain premises located at 2222 West Peoria Avenue, Suites B, C, D and E,
Phoenix, Arizona (the "Premises").
B. On August 7, 1997, Lessor and Lessee entered into a separate Standard
Commercial-Industrial Triple Net Lease (the "Expansion Lease") for certain
premises located at 2222 West Peoria Avenue, Suite A, Phoenix, Arizona (the
"Expansion Premises").
C. Lessor and Lessee wish to amend the Lease as set forth below.
AGREEMENT
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lessor and Lessee agree as
follows:
1. INCORPORATION OF RECITALS. The foregoing recitals are affirmed by the
parties as true and correct and are incorporated hereby by this reference.
2. TERM. The Lease is amended by extending the Term for a twenty-four month
period to end on March 31, 2004 (the "Extension Period").
3. MONTHLY BASE RENT. The monthly base rental shall be as specified in the
Lease except that the monthly base rental for the Extension Period shall be
Twenty Thousand Nine Hundred Six and no/100 Dollars ($20,906.00) triple net.
4. DEFAULT. Any default by Lessee under the Expansion Lease shall
constitute a material default and breach of the Lease by Lessee.
5. FULL FORCE AND EFFECT. Except as expressly amended hereby, the Lease
shall remain in full force and effect.
<PAGE>
Dated: August 7, 1997.
LESSOR: LESSEE:
Holualoa Peoria Avenue Industrial, Titan Motorcycle Co. of America, Inc.,
LLC, an Arizona limited liability a Nevada corporation company
By: Holualoa Arizona, Inc., By: /s/ Francis S. Keery
an Arizona corporation ------------------------------------
Its: Manager Name: Francis S. Keery
----------------------------------
Its: CEO
-----------------------------------
Date: 8/7/97
----------------------------------
By: /s/ Sandra M. Alter
----------------------------------
Name: Sandra M. Alter
--------------------------------
Its: Authorized Agent
---------------------------------
Date: 8/7/97
--------------------------------
2
LEASE FOR TERM
ROUGH ICE, L.L.C., AN ARIZONA LIMITED LIABILITY COMPANY, hereinafter called
Landlord" and TITAN MOTORCYCLE CO. OF AMERICA hereinafter called Tenant agree as
follows:
WITNESSETH:
1. THE LEASED PREMISES
In consideration of the rents and covenants hereinafter stated, Landlord
does hereby let and lease to Tenant the portion of the real property located at
2225 West Mountain View Road, Described as Units(s) 14 & 15.
2. TERM
The term of this Lease shall be for two (2) years, commencing on Oct. 1,
1998, and terminating on Sept. 30, 2000, at midnight.
3. RENTAL
The Tenant agrees to pay to Landlord, as rent:
1ST year: the sum of $1,728.00 per month plus rental tax
2nd year the sum of $1,728.00 per month plus rental tax
3RD YEAR OPTION TO RENT at $1,872.00 per month plus rental tax
given tenant is not in default of any terms or conditions of this lease
agreement, for each month of the lease term, plus any tax (other than income
tax) levied with respect to this transaction, and any rental payment is payable,
in advance, on the 1st day of each month, commencing on Oct. 1, 1998 and
continuing on the 1st day of each month thereafter during the term of this
Lease. Tenant must notify landlord 60 days prior to this lease termination of
intent to exercise this option. All rental payments shall be paid to Landlord at
2115 West Mountain View, Phoenix, Arizona 85021, unless Landlord otherwise
directs Tenant in writing.
<PAGE>
4. INITIAL RENT PAYMENT
Upon execution of this lease, the Tenant shall pay the landlord the first
months rent and security deposit equaling one months rent for a total of
$3,456.00 Dollars, plus all sales tax (1.9%). The security deposit may be
applied to rent, damages or any other breach at the termination of this lease.
This lease shall be construed to be a modified gross lease.
5. USE OF PREMISES
Tenant agrees to use the premises exclusively for a MOTORCYCLE AND PARTS
MACHINING AND PROTOTYPE AND RELATED BUSINESS. Any other uses of premises shall
not commence without prior consent of Landlord, which consent will not be
unreasonably withheld. Tenant agrees to comply with all applicable Federal,
State and Municipal laws, rules, ordinances, regulations and orders with respect
to the occupancy and use of the leased premises.
6. ACCEPTANCE OF LEASED PREMISES
The landlord shall maintain roof and exterior walls.
Other than the foregoing maintenance, all tenant improvements, build-outs
and utility service shall be the sole responsibility of Tenant. The Tenant
agrees to accept the leased premises in an AS IS condition. From and after the
commencement of the term of this Lease, Landlord shall not be obligated to make
any repairs or to maintain the improvements on the leased premises, except for
the items detailed above in this Section 6.
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<PAGE>
7. REPAIRS AND ALTERATIONS
Except as provided in paragraph 6 next above, during the term of this
Lease, Tenant, at their own cost and expense, shall keep and maintain the leased
premises, and buildings and improvements thereon, both inside and outside, in
good order, condition and repair, hereby waiving all right to demand any repairs
at the expense of Landlord. Tenant's covenant to repair shall include the
agreement that the tenant shall promptly replace any broken plate glass windows
and repair or replacement of HVAC, filters, electric and plumbing service.
Tenant shall have the right, at their sole cost and expense, at any time, and
from time to time, to make alterations and improvements to the building on the
leased premises as they may see fit; provided, however, that no structural
alterations shall be made without the written consent of the Landlord.
Alterations to the roof are prohibited and will result in termination of lease
and forfeiture of deposits. Any alterations, improvements or structures, other
than trade fixtures, shall immediately become the property of, and title shall
vest in, Landlord.
8. UTILITY CHARGE
In addition to the rent herein agreed to be paid, Tenant agrees to pay,
before delinquency, all charges for all utilities used by Tenant, or charged to
said leased premises, including (without limiting the generality of the
foregoing):
* Electric power as charged by assigned meter;
* Any water used in excess of rest rooms;
* Garbage pickup
Tenant agrees not to permit any charges of any kind to accumulate or become
a lien against the premises.
3
<PAGE>
9. TAXES AND ASSESSMENTS
Landlord shall pay all real property taxes and assessments levied on the
premises. Tenant shall pay all personal property taxes and assessments and all
business taxes and license fees.
10. MECHANICS AND OTHER LIENS
Tenant agrees that Tenant will pay when due all proper charges for labor
and materials used by or furnished to Tenant in connection with the alteration,
improvement or repair of the leased premises. Tenant further agrees to keep the
leased premises free from any lien of any kind created by or due to Tenant's
action or omission.
11. INSURANCE AND INDEMNITY
Tenant agrees to provide, pay for, and maintain public liability insurance
with both Landlord and Tenant named as the additional insured, in amounts
reasonably acceptable to Landlord, from time to time, with respect to bodily
injury, death, accident and property damage, insurance for the protection of
Landlord for any liability that may arise from any accident, or any injury to
any person or damage to property of others on the leased premises, or any injury
to persons or property arising out of or resulting from the conduct of Tenant,
its employees or agents in amounts acceptable to Landlord and insurance against
loss or damage to the leased premises caused by fire and lightning and against
such risks as are included in the standard extended coverage endorsement and
vandalism endorsement in an amount acceptable to Landlord. Said initial coverage
amount shall be One Million ($1,000,000.00) Dollars. Tenant shall also insure
the buildings on the premises against loss from fire or hazard in the initial
amount of $100,000.00. Tenant covenants and agrees to indemnify and save and
hold Landlord harmless from any and all loss, cost and damages arising or
growing out of Tenant's use or occupancy of the demised premises, including but
not limited to damage by fire, rain and pests.
4
<PAGE>
12. REMOVAL OF TRADE FIXTURES
If Tenant is not then in default, it shall have the right, upon the
expiration of the term hereof, to remove any personal property and equipment of
Tenant, from the leased premises whether or not such personal property and
equipment be attached to the leased premises; provided, however, Tenant shall be
liable to Landlord for any damages caused to the leased premises by such removal
and shall pay the same to Landlord promptly upon demand.
13. SURRENDER OF PREMISES UPON EXPIRATION OF TERM
Upon the expiration of the term of this Lease or its earlier termination,
Tenant will forthwith surrender and deliver said leased premises and all
improvements thereon to Landlord, in good condition and repair.
14. WAIVER
Neither any consent nor waiver by Landlord of any provision of this Lease
or of any default by Tenant shall constitute a waiver of any other provision of
this Lease or an excuse for any other default.
15. WARRANTIES OF LANDLORD
Landlord warrants and agrees to defend the title to the leased premises and
to reimburse Tenant for all damages, expenses and costs suffered or incurred by
Tenant as a result of any defect in Landlord's title to the premises.
16. ASSIGNING AND SUB-LETTING
Tenant shall not assign this Lease or any interest therein without the
written consent of Landlord being first obtained, which consent shall not be
unreasonably withheld. Any such assignment, however, made in accordance with the
foregoing shall not release the original named Tenant or guarantors hereunder,
5
<PAGE>
but Tenant and any such guarantor shall continue to be liable for all
obligations, covenants, and provisions hereof to the end of the term hereof. In
the event of any such assignment made with the consent of Landlord, any assignee
shall also assume and be bound by, and be personally liable for all undischarged
liabilities, obligations and promises of the named Tenant hereunder. Acceptance
or taking possession of the leased premises by any such assignee shall be
conclusive evidence of such assumption and liability and Tenant shall evidence
such assumption and liability on the part of said assignee by appropriate
written instrument delivered to Landlord.
17. TERMINATION IF LEGAL PROCEEDINGS FILED
If the Tenant shall at any time during the term of this Lease become
insolvent, or shall be adjudged a bankrupt, or shall sign over its estate or
effects for payment of debts, or if any sheriff, marshal, constable, or other
officer takes possession thereof by virtue of any execution or attachment, or if
a Receiver or Trustee shall be appointed of the property of Tenant, or if this
Lease, by operation of law, other than by operation of the tenant's will or
living trust, shall devolve upon or pass to any person or persons other than
Tenant, then and in each of said cases it shall and may be lawfull for the
Landlord, at its election to enter into and upon said leased premises, or
property, or any part thereof, or the whole thereof, and to have, hold, possess
and enjoy the same as Landlord's former estate, discharged from these presents,
and this Lease shall thereupon be terminated, anything herein contained to the
contrary notwithstanding, unless Tenant takes action to cause the seizure or
other action to be lifted and prosecutes such action with diligence.
6
<PAGE>
18. ATTORNEYS' FEES
If Landlord shall commence any legal proceedings against Tenant for the
recovery of rent or to recover possession or for relief because of any default
by Tenant and shall prevail therein, Tenant shall in each and every such
instance pay to Landlord all expenses thereof including reasonable attorneys'
fees. If landlord should employ the services of an attorney to give notice of
default of any terms hereunder, then tenant shall compensate landlord for such
expenses in an amount of not less that $250.00 for each such occurrence.
If any person not a party to this lease shall institute an action against a
party in which the other party shall be made a party defendant, the party shall
indemnify and hold the other party harmless from all liabilities by reason
thereof, including reasonable attorneys' fees and all costs incurred by other
party in such action.
19. DEFAULT OF TENANT
If at any time the rental or any money payments here under, or any part
thereof, shall remain unpaid for a period of ten (10) days after the same
becomes due, Landlord shall give written notice to Tenant of such default and
intent to terminate the Lease in ten (10) days and shall allow Tenant to cure
such default by making the rental or any money payments due together with a late
charge of $500.00 dollars per each month's (or portion of a month) delinquency,
plus the money due and any attorneys' fees detailed in Section 18. If the
default is not corrected after this period, Landlord has all remedies available
at law including the lockout provisions of ARS ss.33-361. If at any time Tenant
is otherwise in breach of the Lease, Landlord shall give notice of such default
to Tenant. If Tenant shall fail to pay the rental or any money payment plus the
late charge, or fail to fulfill or perform any of the other agreements and
provisions hereof obligatory upon Tenant, and if said nonpayment, nonfulfillment
or nonperformance shall continue for a period of ten (10) days after written
7
<PAGE>
notice thereof, Tenant shall be considered in default hereunder, and upon such
default it shall be lawful and optional for Landlord to declare a termination of
this Lease and to reenter upon said premises and to again repossess and enjoy
the same and all improvements thereon, and thereupon this Lease shall terminate;
and in addition thereto, upon such default Landlord shall be entitled to
whatever remedies Landlord may have at law for the collection of any unpaid
rental hereunder or for damages hereunder or for damages that Landlord may have
sustained on account of Tenant's nonfulfillment or nonperformance of the
agreements and provisions hereof or for any other sums that may be due according
to the terms hereof.
20. ENTRY OF PREMISES BY LANDLORD
Landlord and its agents at any and all reasonable times shall have the
right to go upon the leased premises for the purpose of ascertaining whether
Tenant is complying with the term of this Lease or for any other necessary and
proper purpose.
21. HEADINGS
The captions used as headings for the various paragraphs are for
convenience only, and are not to be considered a part of this Lease, or used in
determining the intent or context thereof.
22. NOTICES AND DEMAND
Any notices or demands which shall be required or permitted by law or by
any of the provisions of this Lease, shall be in writing, and if the same is to
be served upon Landlord may be personally delivered to Landlord, or may be
deposited in the United States mail, certified, return receipt requested,
postage prepaid, addressed to Landlord at 2115 West Mountain View Road, Phoenix,
Arizona 85021 or at the place where the last installment of rental was payable
or at such other address as Landlord may designate in writing. If such notices
or demands are to be served upon Tenant, such notices or demands may be
8
<PAGE>
personally delivered to Tenant or may be deposited in the United States mail,
certified, return receipt requested, postage prepaid, addressed to Tenant at the
demised premises, or at such other address as Tenant may designate in writing.
If, at any time or from time to time, there shall be more than one Landlord, or
more than one Tenant, service upon any one of them shall constitute service and
shall be binding upon all of them.
All such notices or demands shall be deemed to have been fully given, made,
or sent when delivered personally to the other party, or three (3) days after
being mailed.
23. BINDING UPON SUCCESSORS, ETC.
The covenants and agreements herein contained shall extend to and be
binding upon the heirs, executors, administrators, successors and assigns of the
parties hereto, subject however to the provisions hereof with respect to
assignment by Tenant.
24. ZONING
Tenant acknowledges that Tenant is familiar with the requirements imposed
upon the owners or occupiers of the leased premises by the Zoning Department of
the City of Phoenix and Tenant agrees to promptly comply with all such
requirements.
25. GOOD FAITH AND DILIGENT RESPONSE
Each party shall act reasonably and in good faith toward the other party in
the performance of this Lease.
Whenever a party to this Lease has the right to withhold consent to the act
or omission of the other party, the party with the right to withhold consent
shall not unreasonably withhold consent. Should the party with the right to
withhold consent fail to give written notice to the other party within fourteen
(14) days after a request for consent, specifying in detail the reasons for
withholding consent, the consent will be deemed to have been given.
9
<PAGE>
IN WITNESS WHEREOF, LANDLORD AND TENANT have executed this Lease and
agreement by setting their hands hereto on this 1st day of October, 1998.
ROUGH ICE, L.L.C.
LANDLORD: TENANT
__________________________________ BY: /s/ Francis S. Keery
TERRY SIMS, MEMBER ------------------------------------
TITLE: CEO
---------------------------------
__________________________________ BY:
DAVID HEJNA, MEMBER ------------------------------------
TITLE:
---------------------------------
STATE OF ARIZONA )
) SS.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this _____ day of
__________, 1998, by TERRY SIMS AND DAVID HEJNA.
________________________________________
My Commission Expires: Notary Public
_________________________________
STATE OF ARIZONA )
) SS.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this ____ day of
________, 1998, by __________ AND _________.
________________________________________
My Commission Expires: Notary Public
_________________________________
11
BOMBARDIER CAPITAL INC. FLOORPLAN REPURCHASE
BOMBARDIER CAPITAL LTD. AGREEMENT ("Agreement")
1. Recitals. The undersigned vendor (the "Vendor") intends to sell at wholesale
to retail dealers or distributors various products which now or in the future
may exist (the "Merchandise"). Certain dealers or distributors in Canada may
require financial assistance from Bombardier Capital Ltd. ("BCL"), and certain
dealers or distributors in the United States may require financial assistance
from Bombardier Capital Inc. ("BCI") in order to make such purchases from
Vendor. Retail dealers or distributors requiring such financial assistance are
hereafter individually referred to as a "Buyer" and collectively as "Buyers,"
and BCI and BCL are each hereafter referred to as "BCG"; provided, however, that
in all instances where the Buyer is located in Canada, BCG shall mean BCL, and
in all instances where the Buyer is located in the United States, BCG shall mean
BCI. To induce BCG to finance the acquisition of Merchandise by any Buyer, and
in consideration of the financing enabling Vendor to sell Merchandise to Buyers,
Vendor agrees that whenever a Buyer requests the shipment of Merchandise from
Vendor and requests that BCG finance its purchase of the Merchandise in
accordance with any plan of financing offered by BCG from time to time, Vendor
may deliver to BCG a Wholesale Instrument (as hereafter defined) describing the
Merchandise requested to be financed by BCG. As used herein, "Wholesale
Instrument" shall mean, note, invoice, bill of sale, conditional sales contract,
installment sales contracts, chattel mortgage, lease. trust receipt, chattel
paper, security interest, or other evidence of indebtedness or obligation of
payment arising out of the sale or delivery of Merchandise to a Buyer.
2. Warranties and Representations. By delivery of a Wholesale Instrument to BCG,
Vendor shall evidence and warrant the following:
(a) That Vendor transfers to the Buyer all right, title, and interest in
and to the Merchandise, contingent upon BCG's financing the
transaction;
(b) That Vendor's title to the Merchandise is free and clear of all liens
and encumbrances when transferred to the Buyer except for liens in
favor of BCG;
(c) That the Merchandise has been the subject of a bona fide order by the
Buyer placed with Vendor and accepted by Vendor and that the Buyer has
requested that the transaction be financed by BCG;
(d) That the Merchandise is new, unused, and free of any defects; and
(e) That the Merchandise has been shipped to the Buyer no more than ten
days prior to the Wholesale Instrument date, and that the Wholesale
Instrument date is no more than twenty (20) days prior to delivery of
the Wholesale Instrument to BCG.
<PAGE>
In the event Vendor breaches any of the foregoing warranties, Vendor will
immediately upon demand pay to BCG, in cash, an amount equal to the outstanding
balance owed to BCG with respect to such Merchandise, plus the costs and
expenses, if any, incurred by BCG in the enforcement of this Agreement.
3. Acceptance of Wholesale Instrument. This Agreement shall in no way bind BCG
to finance the acquisition of any Merchandise, but shall apply only to
transactions accepted by BCG in its sole discretion. BCG's final acceptance of a
transaction shall be indicated only by BCG's issuance to Vendor of a draft or
other instrument in an amount equal to the Merchandise Cost (as hereafter
defined).
4. Payment of Wholesale Instrument. The amount due from BCG in connect ion with
any Wholesale Instrument shall be the original wholesale price for the
Merchandise covered by such Wholesale Instrument, minus any discount agreed to
by the Vendor and BCG (the "Merchandise Cost").
5. Repurchase Obligations. If BCG pays the Wholesale Instrument (whether by
check, draft, notice of set off authorized hereunder, or any other means),
Vendor will repurchase such Merchandise from BCG on the following terms and
conditions, whenever and for whatever reason Vendor comes into possession of the
Merchandise or BCG demands repurchase:
(a) Vendor will accept delivery of and repurchase the Merchandise, or any
portion of the Merchandise that may from time to time be delivered, in
a condition that is new and unused except for normal wear and tear
resulting from display or demonstration, at such location(s) as BCG
may reasonably designate;
(b) Vendor will pay to BCG within thirty (30) days of Vendor's receipt of
possession of the Merchandise or within ten (10) days of BCG's
repurchase demand, whichever occurs first, an amount equal to the
total unpaid balance owed to BCG on the Merchandise plus any
reasonable expenses, charges, or penalties incurred by BCG in
connection with obtaining possession of the Merchandise, or in
connection with storage of the Merchandise subsequent to repurchase
demand, as well as all applicable duties and Canadian federal and
provincial taxes (including, but not limited to, goods and services
taxes) (the "Repurchase Price");
(c) The Repurchase Price shall be payable to BCG in lawful money of (i)
the United States if the Merchandise was financed by BCI or (ii)
Canada if the Merchandise was financed by BCL.
(d) Vendor's Obligation to repurchase Merchandise shall terminate on the
365th day after the date of Manufacturer's Wholesale Instrument
covering such Merchandise.
2
<PAGE>
In the event Vendor defaults in the payment of the Repurchase Price when due,
interest shall immediately commence accruing on the unpaid portion of the
Repurchase Price at the rate of eighteen percent (18%) per annum until fully
paid. It is the intention of BCG to conform to all applicable laws governing the
rates of interest that may be charged. If the amount contracted for, charged, or
received, BCG exceeds the maximum amount permitted by law, it is agreed that
such excess will be considered an error and canceled immediately and, if already
paid, shall be refunded to Vendor or, at BCG's option, applied to other
outstanding liabilities of Vendor to BCG. Merchandise repossessed by or in the
possession of BCG may be sold or disposed of by BCG, its agents or affiliates,
without prior repurchase demand.
6. Bailment and Transfer of Repurchased Merchandise. Until such time as BCG has
received payment of the Repurchase Price, any Merchandise subject to this
Agreement, or portion thereof, is held by Vendor solely as bailee for BCG and is
subject to the superior possessory right of BCG. Immediately upon demand from
BCG, Vendor shall surrender possession of any Merchandise pursuant to the
instructions of BCG. Contemporaneously with full and final payment to BCG of the
Repurchase Price; the bailment shall terminate and BCG shall transfer to Vendor
any right, title, and interest BCG may have in and to the Merchandise; provided,
however, that BCG makes no representation or warranty in connection with such
transfer that BCG has any right in and to the Merchandise other than a right of
possession.
7. Set Off and Extensions. Upon notice to Vendor, BCG may deduct, set off,
withhold, or apply any sums or payments due from Vendor to BCG against any sums
due from BCG to Vendor. If BCG is entitled to a set off under the terms of this
Agreement at the time BCG receives a Wholesale Instrument from Vendor, or before
such Wholesale Instrument falls due, then, to the extent of such entitlement,
BCG's notice of set off delivered to Vendor shall constitute payment of the
Wholesale Instrument. BCG may extend the time for payment of, modify,
restructure, or defer the obligations of any Buyer without notice to Vendor and
without altering Vendor's obligations hereunder.
8. Waiver. Vendor waives notice of non-payment, protest, and dishonor of any
Wholesale Instrument, and all other notices Vendor might otherwise be entitled
to by law. Vendor waives any rights Vendor may have to require BCG to proceed
against the Buyer or to pursue any other remedy in BCG's power. BCG's delay in
or failure to exercise any rights granted hereunder shall not operate as a
waiver of those rights. Any delay by BCG in repossessing Merchandise that is
subject to this Agreement shall not waive or modify Vendor's obligations
hereunder, so long as BCG pursues repossession in good faith. In the event BCG
is unable to enforce its security interest in any Merchandise as a result of
bankruptcy proceedings or other litigation, mediation or arbitration affecting
the Merchandise, any expiration of Vendor's repurchase obligations shall be
stayed effective the commencement date of such bankruptcy proceedings or other
litigation, mediation or arbitration. Such stay shall continue in effect for no
less than sixty (60) days subsequent to the dismissal or other termination of
the proceedings giving rise to the stay.
9 Financial Statements. Vendor will deliver to BCG Vendor financial statement
for the fiscal year then most recently ended not later than twenty (20) days
after the preparation of such financial statement, but in no event later than
one-hundred-twenty (120) days after the expiration of each of Vendor's fiscal
3
<PAGE>
years. In addition, Vendor will promptly deliver to BCG such interim financial
Statements as BCG may reasonably request from time to time. All of Vendor's
financial statements shall be prepared in accordance with generally accepted
accounting principals.
10. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of BCG and Vendor. All of BCG's
obligations hereunder may be performed by any of BCG's subsidiary and/or
affiliated companies, and all of the promises Vendor makes hereunder shall inure
jointly and severally to BCG and each of BCG's subsidiary and/or affiliated
companies as the same may exist from time to time. If BCG finances the
acquisition of any Merchandise sold or shipped to a Buyer by any subsidiary,
affiliated company, and/or distributor of Vendor, Vendor agrees that all of
Vendor's promises and obligations shall remain in force as if such Merchandise
had been sold or shipped by Vendor. BCG may assign its rights and obligations
under this Agreement without prior notice to Vendor. Vendor may not assign its
rights and obligations under this Agreement without the prior written consent of
BCG.
11. Termination. Either party may terminate this Agreement by written notice to
the other party, the termination to be effective thirty days after the date of
delivery thereof, but such termination shall not affect Vendor's liability with
respect to financial transactions entered into by BCG with any Buyer of Vendor's
Merchandise prior to the effective date of termination, including, without
limitation, transactions that will not be completed until after the effective
date of termination.
12. Louisiana. With respect to transactions financed by BCG for Buyers located
in the State of Louisiana, upon BCG'S payment for each item of Merchandise,
Vendor hereby assigns and grants to BCG without warranty or recourse any
vendor's privilege and lien on that item granted under Louisiana law to the
fullest extent as if BCG had actually sold the Merchandise to the Buyer;
provided, however, that nothing contained in this Agreement shall be deemed a
representation or warranty by Vendor that any valid or enforceable vendor's lien
or privilege exists under Louisiana law.
13. Miscellaneous. Vendor does not intend to enter into a joint venture with BCG
and nothing contained in this Agreement shall be construed to establish a joint
venture between BCG and Vendor. Notwithstanding any repurchase of Merchandise by
Vendor pursuant to this Agreement, BCG shall retain a right superior to that of
Vendor to collect any amounts owed by the Buyer to BCG in connection with such
Merchandise.
14. Merger and Modification. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof. Any contingent
liabilities and/or indebtedness arising under any repurchase agreement
previously executed by the parties hereto shall remain due and owing under and
pursuant to this Agreement. This Agreement is specifically not intended to
discharge any indebtedness owing under any previously executed repurchase
agreement. No course of dealing, course of performance, or trade usage and no
parol evidence of any nature shall be used to supplement or modify the terms of
this Agreement. If at any time one or more provisions of this Agreement becomes
invalid, illegal, or unenforceable in whole or in part in any jurisdiction, the
validity, legality, and enforceability of the remaining provisions shall not in
4
<PAGE>
any way be affected or impaired. This Agreement may not be modified except by
written agreement signed by all parties hereto. Vendor agrees to provide to BCG
such further writings, certificates, or other documentation as BCG may
reasonably request in order to fulfill the intent of this Agreement.
15. Notices. All notices, other than repurchase demands, required or permitted
to be delivered hereunder shall be in writing, and shall be deemed received
three (3) days after mailed postage prepaid, certified mail, return receipt
requested, to the business addresses for the parties as written below, or to
such other addresses as the parties may designate in writing from time to time.
All repurchase demands shall be in writing and shall be deemed received three
(3) days after sent by fax or regular mail, postage prepaid, to the Vendor's
address shown below, or to such other address as Vendor may designate in writing
from time to time.
16. Counterparts and Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and such counterparts
shall together constitute but one and the same agreement. The section headings
in this Agreement are inserted for convenience of reference only and shall not
limit or otherwise effect the meaning of any provision thereof.
17. English. The parties declare that they have requested that this Agreement be
drawn up in the English language only. Les parties aux presentes declarent
qu'elles ont exige que le present contrat soit redige en langue anglaise,
seulement.
Notice of the acceptance of this Agreement is hereby waived.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by Vendor's undersigned agents, duly authorized.
Date: August 5, 1998 VENDOR:
Titan Motorcycle Co. of America
----------------------------------------
[Insert Name of Company]
By: /s/ Francis S. Keery By: /s/ Robert P. Lobban
-------------------------------- ------------------------------------
Title: Chief Executive Officer Title: CFO
----------------------------- ---------------------------------
[If a Corporation, two authorized Address: 2222 West Peoria Avenue
officers must sign.] Phoenix, AZ 85029
5
<PAGE>
CERTIFICATE OF CORPORATE SECRETARY
The undersigned, Secretary of Titan Motorcycle Co. of America (the
"Corporation") hereby certifies to BCG, its successors and assigns, that the
foregoing FLOORPLAN REPURCHASE AGREEMENT was approved, and the execution thereof
by Francis S. Keery and Robert P. Lobban, acting on behalf of the Corporation
was authorized, by resolution of the board of directors of the Corporation duly
adopted at a valid meeting of the board of directors of the Corporation held on
August 4, 1998, which resolution has not been amended or revoked and remains in
full forte and effect. I further certify that the signatures appearing above are
in fact the signatures of the persons so authorized. In witness whereof, I have
subscribed my name and attached the seal of the Corporation hereto this 5th day
of August, 1998.
/s/ Barbara S. Keery
----------------------------------------
Secretary [seal]
ACCEPTED:
By: BOMBARDIER CAPITAL INC. By: BOMBARDIER CAPITAL LTD.
By: /s/ Michael S. Schirmer By:
--------------------------------- ---------------------------------
Name: Michael S. Schirmer Name:
------------------------------- -------------------------------
Title: Operations Manager Title:
------------------------------ ------------------------------
Attn: Manufacturer Accounts Region Attn: Manufacturer Accounts Region
P.O. Box 991 5571 Saint Joseph Street
1600 Mountain View Drive Valcourt, Quebec
Colchester, Vermont Canada JOE 2L0
U.S.A. 05446-0991
6
THOMAS & PERKINS
August 1, 1998
Mr. Frank Keery, CEO
Titan Motorcycle Company of America, Inc.
2222 West Peoria Avenue
Phoenix, AZ 85029
Dear Frank:
This letter will set forth the agreement reached between Titan Motorcycle
Company of America, Inc., (hereafter "Company") and Thomas & Perkins, Inc.
(hereafter "Agency") referring to advertising, public relations, and marketing
communications counsel to be provided by Agency to Company subject to the
following terms and conditions:
1. This agreement shall be effective beginning August 1, 1998. It may be
canceled by either party upon sixty (60) days advance written notice to the
other.
2. During the term of this Agreement and up to six months after its
cancellation, Agency agrees it will not perform services for any other
provider or manufacturer of motorcycles nor accept as a client any party
requesting services that would or could be in conflict with the interests
and objectives of the services to be provided to Company in the Company's
sole discretion without Company's prior written consent.
3. Company considers all data, knowledge and other information regarding
Company (collectively the "Information"), which is submitted or transferred
to the Agency, to be confidential, proprietary, and/or trade secret
information of the Company. Such Information and material shall be the sole
and exclusive property of the originating party. Agency agrees to take
every precaution to safeguard and treat the Information as confidential,
proprietary, and/or trade secret: and further agrees that it will not
disclose, publish or reveal (collectively, "Disclosure") any of the
Information received from the Company to any other party whatsoever, except
with the specific prior written consent of the Company. Notwithstanding the
foregoing, it shall not be a breach of this paragraph to provide any such
information or material upon lawful court order, provided the other party
has been given such prior notice as is reasonable and an opportunity to
object to disclosure. Agency agrees that it will not reproduce or make use
of, either directly or indirectly, any of the information which is received
or has been received by the Company, other than for the purpose for which
such Information has been disclosed, except with the specific prior written
consent of the Company. Agency agrees to return all such information to
Company upon request by the Company or termination of this Agreement.
<PAGE>
4. The following advertising services shall he made available to the Company.
Company shall utilize said services at its sole discretion.
a. Development and effectuation of advertising and/or promotion
strategies and plans.
b. Development of advertising conceptual theme and concept.
c. Development of graphics including logo, ad design & layout, signage
and other items related to an advertising campaign which are approved
by Company and in accordance with Company's graphic standards.
d. Developing of media plans/strategies, researching respective budgets
and other related costs to the execution of those plans.
e. Development and effectuation of an advertising campaign or program.
f. Development of a brochure system, direct mail program and collateral
communications media to facilitate marketing Company and its products
or services.
g. Development of homepage communications to be placed on the Internet.
5. The following marketing communications/public relations services shall be
made available to the Company. Company shall utilize said services at its
sole discretion.
a. Development and effectuation of a public relations and marketing
communications program as agreed upon by the parties.
b. Development of a brochure system, direct mail program and collateral
communications media to help market Company.
c. Providing counsel to Company on other aspects of its public relations,
sales promotions and marketing communications program.
d. Researching budgets on collateral media and other aspects of the
public relations and marketing communications program.
e. Directing research-related activities for measurement of opinions,
attitudes and perceptions.
6. Unless otherwise agreed by the parties in writing, the following Agency
compensation and charges shall be applicable:
a. A monthly fee of $6,000 for account management services, traffic
services, media services, account planning, creative services which
include conceptual development, copyrighting, art direction, creative
direction, pre-press, print production management, and broadcast
producer services.
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i. Should the scope of the relationship change and require more or
less agency hours than currently planned and approved by Company
or Company's ability to allocate more resources to marketing,
then adjustments to the monthly fee structure will be mutually
agreed upon by both parties and incorporated.
ii. For the sake of establishing value, the Agency's average hourly
rate is discounted by twenty-five percent (25%) to a rate of $70
for Company. Company will receive well in excess of the few hours
accounted for under the above monthly fee.
iii. Agency compensation may be exchanged for shares of restricted
common stock of the Company. The Agency will bill the Company on
monthly basis. The per share price of the shares will be
determined by each calendar quarter average trading price
discounted by fifteen (15%) percent. To determine the number of
shares to be issued, the amount of fees billed for the quarter is
divided by the determined price er share. For example, if the
fees for the quarter were $20,000 and the average trading price
of the Company's share was $10.00 per share, the 15% discount is
then applied to the average price per share for the quarter and
would equal $8.50. The fee of $20,000 is divided by $8.50 to
determine the number of shares to be issued which would equal, in
this example, 2353 shares. Fractional shares will be rounded up
to the next whole share.
The Company reserves the right to pay due compensation in cash as
opposed to stock at its sole discretion.
b. Net expenses incurred by Agency on behalf of Company which include,
but are not limited to: communications (long distance telephone and
postage); transportation and other travel expenses, including mileage;
and messenger service.
c. All outside expenses incurred by Agency for Company will be billed at
actual cost, unless otherwise agreed upon by both parties.
d. All media placement charges are billed at NET. There is no media
mark-up.
e. All photocopies (black and white and color), special "comp" materials,
and computer access and storage (Syquest disks) charges.
7. All creative services work developed for the Company by the Agency must be
authorized by a signed cost estimate provided by the Agency. Should the
scope or direction of the project change, the Company will receive a
3
<PAGE>
revised cost estimate for its approval before the Agency proceeds with
work. The Company will also receive various weekly reports which shall be
hand-delivered or sent by electronic media detailing current activity in
which the Agency is engaged on behalf of the Company. The reports may note
action the Agency is taking on behalf of the Company. The Agency will not
proceed with the noted action until notified by the Company to do so.
8. All materials prepared by Agency for Company will be shown to and approved
by Company prior to Agency's release, printing, media insertions or
external release. Agency shall not be responsible for any errors in
materials approved by Company.
9. Company shall defend, indemnify and hold Agency harmless from and against
and all claims, demands, Suits and/or judgments including all reasonable
costs, expenses, and attorneys' fees based upon or arising out of Agency's
and/or Company's use of any information or material supplied to Agency by
company which ultimately is claimed or proven, and which was known by
Company, to be in violation of any federal, state, or local law, regulation
or order; or which violates the copyright or proprietary rights of a third
party; or which is claimed or proven to contain matter that is libelous or
scandalous; or invades any person's right to privacy, publicity, or other
personal right. Company also agrees to reimburse Agency for all attorneys'
and expert witness fees and expenses incurred in defending against or
investigating any such claim including any such fees or expenses on appeal,
but Company shall have no liability for such fees and expenses if it
accepts the defense of Agency within ten days of the lender. The Agency
agrees to indemnify the Company for all claims against the Company arising
out of the Agency's conduct related to this Agreement. Nothing herein shall
be construed to release Agency from responsibility for any loss, damage,
injury or liability arising from failure to perform services furnished
under this agreement according to ordinary advertising and public relations
business standards.
10. In the event of cancellation of this agreement by either party, all fees,
charges, and expenses billable, billed and incurred by Agency shall be paid
immediately by Company.
11. Company and Agency intend that all property rights to any and all
materials, text, documents, booklets, manuals, references, guides,
brochures, advertisements, music, sketches, drawings, photographs,
specifications, data, and any other recorded information created by Agency
and paid for by Company pursuant to this Agreement, in preliminary and
final forms and on any media whatsoever (collectively, the "Materials"),
shall belong to Company. To the extent permitted by the U.S. Copyright Act,
17 USC ss. 101 ET SEQ., the Materials are a work-made-for-hire, and all
ownership of copyright in the Materials shall vest in Company at the time
the Materials are created. To the extent that the Materials are not a
work-made-for-hire, Agency hereby sells, assigns and transfers all right,
title and interest in and to the Materials to Company, including the right
to secure copyright and other intellectual property rights throughout the
world and to have and to hold such copyright and other intellectual
property rights in perpetuity. As an exception, original artwork or
photographs, contracted outside the Agency, that have not been initially
negotiated (at the time of their creation) by Agency on behalf of Company
for full copyright privileges and ownership of the Company, shall remain
the exclusive property of their creators.
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<PAGE>
12. It is agreed the Company will pay the Agency for services rendered within
thirty (30) days of receiving Agency's invoice. The Agency will bill the
Company for its media placement in the month that it is placed, which
traditionally occurs prior to the Agency receiving actual invoices from the
various media vendors with whom it placed media with on behalf of the
Company. This practice is done to facilitate timely payment to media
vendors to ensure the Agency's ability to appropriately leverage effective
placement and rates in serving the Company's objectives. It is also
acknowledged that the Agency will not pay vendors it has contracted for
work in behalf of the Company until the Company has paid the Agency (per
section 13). A finance charge equal in amount to 12% annually will be
charged each month by Agency on any unpaid balance due on invoices
submitted by Agency to Company which exceed forty-five (45) days from the
date of invoice. As security for any sum due on programs, projects or plans
undertaken by the Agency for the Company, Agency shall have the right to
retain possession of all advertising/marketing communications-related
materials of Company currently within the possession of the Agency until
the dispute is mutually resolved by both parties. Should a dispute occur,
the Company will, in writing, inform the Agency of its concern. The Company
will not be obligated to pay related invoices until the parties have
mutually resolved the dispute.
13. SEQUENTIAL LIABILITY: Company acknowledges that, in placing its advertising
with various media, the Agency will contract with such media on the basis
of "sequential liability" pursuant to which the Agency shall be solely
liable for payment to the extent that proceeds have cleared to the Agency
from the Company as advertiser for advertising published or broadcast in
accordance with the media contract. As advertiser, the Company will remain
solely liable for sums owing but not cleared to the Agency in respect of
such advertising. Accordingly, the Company hereby authorizes and agrees
that the Agency may contract with media on its behalf on the basis of
sequential liability, and that it will be solely liable to media and
respect to payments for such space or time to the extent such payments have
not cleared the Agency. To the foregoing extent, the Agency will act as
agent for the Company as disclosed principal in entering into contracts
with media, and a copy of this paragraph may be presented to media and/or
other third parties as evidence of the Agency's authority to act in such
capacity for such purposes.
14. If it becomes necessary for either party to commence any action or
proceeding against the other party in order to enforce the provisions
hereof, or to recover damages as a result of a breach of any of the
provisions hereof the prevailing party shall be entitled to recover all
reasonable costs incurred in connection therewith including reasonable
attorney's fees.
15. This agreement shall be interpreted and construed in accordance with the
laws of the State of Arizona.
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16. Any notice, demand or communication under or in connection with this
agreement which either party desires or is required to give to the other,
shall be deemed delivered when deposited in the United States mail first
class postage prepaid, or when personally served upon the other party.
17. This agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successor and assigns. Neither party
shall have a right to assign its rights or obligations under this agreement
without the prior written consent of the other. This agreement contains the
entire understanding of the parties with respect to the subject matter
herein contained. The parties may, from time to time during this agreement,
modify, vary, or alter any of the provisions of this agreement by a writing
executed by both parties.
18. Agency agrees to maintain accurate and satisfactory records and books in
accordance with sound accounting principles. Said books and records shall
present fairly all costs and expenses utilized either directly or
indirectly in computing any charges to the Company under this agreement.
Upon thirty (30) days' written notice. Agency shall allow the Company's
auditors access to the records and books to determine whether the Agency is
in compliance with the provisions of this agreement. The records and books
will be made available during the term of the agreement, and for a period
of twenty four (24) months thereafter.
19. Agency warrants and agrees that it will do the following throughout the
term of this Agreement:
a. Comply with all applicable laws, rules and regulations, whether
federal, state or local, including without limitation, the federal and
any state Occupational Safety and Health Act and worker's compensation
acts.
b. Pay all business, payroll, property, income and other taxes due upon
or in connection with the operation of its independent business.
c. Provide any and all insurance coverage necessary to protect its
independent business and Company from all applicable risks, including
but not limited to (i) workers' compensation coverage, (ii)
unemployment insurance coverage, (iii) automobile insurance and (iv)
comprehensive general liability insurance.
d. Refrain from doing anything which would tend to discredit, dishonor,
reflect adversely upon or in any way injure the good name or business
of Company.
20. In the event of any one or more of the following events, Company shall be
deemed to be in default under this agreement and Company shall be obligated
to pay Agency any and all fees, damages, expenses, and losses actually
incurred by Agency as a result of such default:
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<PAGE>
a. Company's failure to pay bills submitted to it by Agency after sixty
(60) days from the date said bills are received by Company;
b. Upon Company's breach of any of the other terms and conditions of this
agreement; or
c. Upon the bankruptcy or insolvency of Company.
21. The individuals who sign this agreement on behalf of the respective parties
hereby represent and warrant that they have the right, power, legal
capacity and appropriate corporate authority to enter this agreement on
behalf of the corporation for which they sign below, if any.
If the foregoing accurately sets forth your understanding of our agreement,
kindly indicate your approval by signing and dating the duplicate original of
this letter and return it to me. This letter is for your files.
Sincerely,
THOMAS & PERKINS, INC.
Approved and accepted:
/s/ [illegible] By /s/ Francis S. Keery
------------------------------- -------------------------------
Title: President Title: CEO
Date: 8/7/98 Date: August 31, 1998
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<PAGE>
Addendum to Contract
Original Agreement - August 1, 1998
Titan Motorcycle Company of America, Inc.
Web site development or electronic media development services include
development, launch and maintenance of electronic media, including but not
limited to Internet web sites, marketing CD-ROMs, kiosks, intranets, extranets,
custom software, floppy presentation mailers, virtual reality tours, simulated
product, demonstrations, data base design and building, three dimensional
renderings and animation.
In connection with the Agency's web site development for the Company, all
non-compiled program code, scripts, and run-time code developed by the Agency,
including but not limited to javascript, Pen code, Python ".py" code, databases
(but not database engines), and HTML code that reside in the Company's root web
Site directory (the "Root Directory Code"), to the extent owned by the Agency,
shall remain the Agency's property. Upon final payment of all development fees
and the reimbursement of all costs associated therewith, the Root Directory Code
shall become jointly owned by the Agency and the Company. Each owner shall have
the right to use, reuse and modify the Root Directory Code at their own
discretion, provided, however, the Company may not transfer or assign its rights
in and to the Root Directory Code, or any part thereof, without the prior,
written consent of the Agency, which consent may be withheld in the Agency's
discretion. The Agency may reuse the formatting and design elements inherent in
the Root Directory Code and any other code developed for the Company at its
discretion, but may not use any of the Company's copyrighted or proprietary
material which may be contained within the Root Directory Code, without the
prior, written consent of the Company, which consent may be withheld in the
Company's discretion. Notwithstanding anything to the contrary set forth herein
or elsewhere, all software used in web site development residing outside of the
Company's root web site directory, including but not limited to database
engines, server software and third party software, to the extent owned by the
Agency, shall remain the sole property of the Agency and nothing herein shall be
construed to convey or create any rights therein to the Company.
As another exception, in connection with the Agency's development of software
for the Company other than in connection with web site development for the
Company, all source code for compiled programs, including but not limited to
Macromedia Shockwave, Macromedia Flash, Macromedia Director, Python ".pyc" flies
and Java shall remain the property of the Agency. Upon final payment of all
development fees and the reimbursement of all costs associated therewith, Agency
hereby grants to the Company an irrevocable license to use, reuse and modify all
compiled flies created by the Agency for the Company, at the Company's
discretion. This license shall be strictly construed so as not to transfer any
other rights other than those specifically described herein, and shall not be
transferable without the prior, written consent of the Agency, which consent may
be withheld in the Agency's discretion.
8
<PAGE>
Thomas & Perkins, Inc., Approved and accepted by:
By______________________________ By______________________________
Title:__________________________ Title:__________________________
Date:___________________________ Date:___________________________
9
THOMAS & PERKINS
February 5, 1999
Mr. Frank Keery, CEO
Titan Motorcycle Company of America, Inc.
2222 West Peoria Avenue
Phoenix, AZ 85029
Dear Frank:
It was good to talk to you today. This letter confirms that Thomas & Perkins has
agreed to be paid in shares of restricted common stock (in lieu of cash) for our
services in developing, designing and programming a website for Titan Motorcycle
Company of America. The cost of this website development is approximately
$83,000, as detailed in our estimates. We agreed that the payment in stock will
be made at the end of each phase -- in other words, three stock payments will be
according to the schedule of phases noted in our plan. Each phase payment will
use the same share value noted below.
We have verbally agreed that we will use today's closing price of $4.125 per
share in our calculations. Per our contract, the per share price of the shares
will be discounted by fifteen (15%) percent. When this discount is applied, the
cost per share equals $3.51.
$83,000 divided by $3.51 equals 23,647 shares of Titan stock. Please send us the
original stock certificates via registered mail or another safe mode of
transportation as we conclude each phase. The shares should be made out to
Thomas & Perkins, Inc.
Frank, we are excited to be shareholders in your dynamic company. Please call me
if you have any questions.
Sincerely,
/s/ Bryan J. Thomas
- -----------------------------
Bryan J. Thomas
President
PROMOTIONAL AGREEMENT BETWEEN TITAN MOTORCYCLE CO. OF
AMERICA (TITAN) AND PAISANO PUBLICATIONS INC. (PAISANO)
PAISANO agrees to supply to TITAN a total of $500,000 worth of promotional
services over a two-year period beginning January 1, 1998 through December 31,
1999. These services will be selected purely at the discretion of TITAN.
TITAN will pay for these services by:
a) Transferring 60,000 shares of it's restricted treasury common stock to
PAISANO.
b) Supplying $250,000 worth of TITAN motorcycles at regular dealer pricing
and terms. Motorcycles will be supplied in two increments, the first $125,000
worth by December 31, 1997 and the second $125,000 worth in December 1998. Any
invoice overages on these shipments will be invoiced and payment due at time of
shipping.
PAISANO agrees to at all times maintain a continuous stock of new TITAN
motorcycles offered for sale on the showroom floor of their Easyriders,
Columbus, Ohio retail store (or any other such PAISANO owned retail store as
they may choose).PAISANO further agrees that it shall exercise it's best
efforts, consistent with good business practices to ensure that a mutually
agreeable inventory of new TITAN motorcycles is continuously maintained
throughout the two year agreement period.
TITAN agrees to sell five (5) TITAN motorcycles to PAISANO with delayed payment
terms. Payment for these five (5) motorcycles will be made by PAISANO the sooner
of the first of January, February, March, April, and May of 1998 or the date the
specific motorcycle is sold.
Promotional services provided under this agreement will be at the following cost
rates:
a) Magazine ad space (full page, four color, full bleed)
Easyriders Magazine - $13,966 per insertion
VQ - 2,763 per insertion
Quick Throttle - 1,789 per insertion
In the Wind - 2,474 per insertion
b) Annual Buyers guide -- Ten (10) pages at best preferential rate minus
fifteen percent (15%) agency discount. Placement in book to be first among other
advertisers inclusive of front cover and first nine pages.
c) Rodeo and Convention circuit services -- at best discount granted to
most favored Paisano customers.
d) Other magazines, special editions, events, etc. -- at best discount
granted to most favored Paisano customers.
<PAGE>
Should, in TITAN'S sole discretion the full $500,000 not be spent by the end of
this agreement, PAISANO agrees to carryover any unused balance into the calendar
year 2000 at the same rates as indicated in this agreement.
TITAN and PAISANO further agree to use their joint efforts to place a maximum
number of feature articles in PAISANO publications with TITAN and TITAN
MOTORCYCLES as their primary subject matter. Included would be a separate
monthly listing of TITAN'S exhibition truck schedule and similar such TITAN
promotional information.
AGREED UPON BY:
/s/ Brian Wood, President 1/21/98
- ---------------------------------- --------------
Brian Wood Date
President
Paisano Publications, Inc.
/s/ Francis S. Keery 1/27/98
- ---------------------------------- --------------
Francis S. Keery Date
Chairman, CEO
Titan Motorcycle Co. of America
2
PLAYBOY ENTERPRISES, INC.
June 17, 1998
Mr. Patrick Keery
President
TITAN MOTORCYCLE COMPANY OF AMERICA
2222 West Peoria Avenue
Phoenix, AZ 85029
RE: PLAYBOY 45TH ANNIVERSARY LIMITED EDITION MOTORCYCLES
Dear Mr. Keery:
This letter, when the enclosed copy has been signed, dated and returned by
you, will evidence the agreement between Playboy Enterprises, Inc. ("Licensor")
and Titan Motorcycle Company of America ("Licensee") concerning the manufacture,
sale and distribution of motorcycles bearing trademarks and images owned by
Licensor as described below. Our agreement is as follows.
1. Licensee acknowledges that Licensor owns the marks PLAYBOY, RABBIT HEAD
DESIGN, PLAYBOY 2000, and the image of MARILYN MONROE (ON THE KNEES) in
SILHOUETTE and other images from the Playboy art and photo archives (the
trademarks and images are collectively referred to herein as the
"Trademarks" and "Images" respectively) and recognizes and acknowledges
that the Trademarks and Images are internationally well-known and
recognized by the general public and are associated in the public mind with
Licensor and are designations in which Licensor has acquired a considerable
and valuable goodwill.
2. Except as hereinafter provided, Licensor hereby grants to Licensee and
Licensee hereby accepts, a non-sublicensable, non-exclusive, non-assignable
right (the "License") to utilize the Trademarks and Images in the design,
manufacture, advertisement, distribution and sale of Playboy 45th
anniversary limited edition motorcycles (the "Products") through, and only
through, retail stores located in, and only in, the United States, Canada
and Japan (the "Territory") or to wholesalers which will sell the Products
to, and only to, retail stores located in the Territory. Under no
circumstances may Licensee advertise, sell or distribute the Products
outside of the Territory. Other countries may be added to the Territory on
a case-by-case basis and only upon the prior written approval of Licensor.
<PAGE>
3. Licensee may manufacture and produce no more than one hundred (100) Units
of the Products for sale and distribution plus two (2) units which must be
manufactured and produced at the start of production and which must be
called PLAYBOY PROOFS (the "Proofs"). However, no more than twenty (20)
units of the Products may be distributed and sold into Japan. The first
Proof shall be numbered "1 of 2" and the second Proof shall be numbered "2
of 2." Both Proofs shall be given to Licensor free of charge no later than
September 31, 1998.
4. Licensee's rights under this agreement will commence June 1, 1998 and will
expire not later than December 31, 1999 unless sooner terminated as
provided under this agreement.
5. For all purposes under this agreement, a "License Quarter" shall be each
consecutive three (3) month period except that the first (1st) License
Quarter shall be the four (4) month period commencing on June 1, 1998 and
ending at midnight central standard time on September 30, 1998, and if the
expiration or termination of the License and this agreement is effective
other than on December 31, 1999, then the final period of less than four
(4) or three (3) months ending on the effective date of such expiration or
termination shall be deemed to be a License Quarter.
6. Subject to Licensor's prior approval as hereinafter required, Licensee
shall commence the design, manufacture, advertising, promotion, sale and
distribution of or for the Products as soon as practicable after June 1,
1998, but in no event later than September 1, 1998. If Licensee fails to do
so by such date, Licensor may treat such failure as an incurable default
under this agreement.
7. Within forty-five (45) days after the end of each License Quarter,
including the "Sell-Off Period" (if any), Licensee shall pay to Licensor
the following royalties ("Earned Royalties"):
a. Two and one-half percent (2 1/2%) of "Net Sales" of the first twenty
(20) units of the Products sold (specifically excluding the Proofs),
but in no event will the Earned Royalties for such first twenty (20)
units be less than Seven Hundred and Seventy-Five United States
Dollars (U.S.$775) per unit of the Products sold.
b. Five percent (5%) of Net Sales of the remaining units of the Products
sold, but in no event will the Earned Royalties for the twenty-first
(21st) through thirtieth (30th) units of the Products sold be less
than One Thousand Five Hundred and Fifty United States Dollars
(U.S.$1,550) per unit of such twenty-first (21st) through thirtieth
(30th) units of the Products sold.
c. Five Percent (5%) of Net Sales of the Products on units thirty-one
(31) through one hundred (100). Licensor and Licensee shall negotiate
in good faith the establish a minimum Earned Royalty for each such
unit sold. In the event Licensor and Licensee do not or cannot
establish such minimum on or before ten (10) business days after the
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<PAGE>
sale of the thirtieth (30th) unit, the minimum Earned Royalty for each
such unit will be One Thousand Five Hundred United States Dollars
(U.S.$1,500) per unit sold.
Net Sales shall mean the invoice price charged by Licensee for the
Products less: (i) refunds, credits and allowances actually made or
allowed to customers for returned Products; (ii) customary trade
discounts (including anticipations) afforded to and actually taken by
customers against payment for the Products; and (iii) value added tax
assessed on sales (only where applicable).
8. Along with each Earned Royalty payment remitted to Licensor, Licensee shall
furnish to Licensor or its designee a complete and accurate statement in a
format acceptable to Licensor and certified to be true by the Chief
Financial Officer of Licensee (hereinafter referred to as the "Statement")
showing for such License Quarter: (a) a listing of Licensee's accounts in
the Territory and the units and description of all of the Products sold and
distributed to each such account or otherwise disposed of by Licensee; (b)
the computations of Net Sales on all such sales; and (c) the computation of
Earned Royalties and the amount of Earned Royalties due and payable.
9. a. The Products to be sold and distributed will be of the highest
quality. The Products will not be sold or distributed until Licensee
has confirmed that Licensor has approved the Products, including any
and all packaging, artwork, printing, advertising, sales, marketing
and promotional materials, fixtures and displays (or any other items
bearing the Trademarks or Images intended for use in connection with
this agreement). Licensee shall submit samples of the Products and all
marketing materials to Licensor for its approval prior to the sale,
distribution or advertising thereof. If, within five (5) business days
of Licensor's receipt of such samples, Licensor has not responded,
then Licensor shall be deemed to have disapproved of such samples. If,
however, Licensor has approved of such samples, then the Products and
marketing materials thereafter will conform to the approved samples.
b. Licensee's policy of sale or distribution of the Products will never
reflect adversely upon the good name of Licensor. Licensee shall not
obtain any right, title or interest whatsoever in or to the Trademarks
and Images by virtue of its use of the Trademarks and Images under
this agreement or otherwise and all additional goodwill associated
with the Trademarks and Images which is created through Licensee's use
of such Trademarks and Images shall inure solely to the benefit of
Licensor.
c. Licensee shall affix or imprint legibly on the Products or packaging
for the Products such trademark and copyright notices, legends and
disclaimers a Licensor directs. The Products shall contain no
advertising unless approved in advance by Licensor.
3
<PAGE>
d. All rights not specifically granted to Licensee under this agreement
are reserved by Licensor.
10. Licensee shall: (i) keep accurate books of account and records (including
but not limited to utilization of consecutively numbered invoices which
reconcile to each Statement and Licensee's general ledger) covering all
transactions relating to or arising out of this agreement (which books and
records shall be maintained separately from Licensee's documentation
relating to other items manufactured or sold by Licensee) and (ii) permit
Licensor or its nominees, employees, agents or representatives to have full
access to, to inspect such books and records at all reasonable hours of the
day, to conduct an examination of and to copy (at Licensor's expense) all
such books and records. Licensee shall maintain in good order and condition
all such books and records for a period of two (2) years after the
expiration or termination of this agreement or, in the event of a dispute
between the parties hereto, until such dispute is resolved, whichever date
is later. Receipt or acceptance by Licensor of any Statement furnished
pursuant hereto or any sums paid by Licensee hereunder shall not preclude
Licensor from questioning the correctness thereof at any time, and if one
or more inconsistencies or mistakes are discovered by Licensor in such
Statement, it or they shall be rectified in an amended Statement received
by Licensor no later than ten (10) days after the date of receipt by
Licensee of notice of that which should be rectified.
11. If any inspection or examination referred to in Paragraph 10. hereof
discloses, or Licensor or Licensee otherwise discovers, an underpayment of
Earned Royalties, the amount of such underpayment shall be paid by Licensee
to Licensor no later than thirty (30) days after receipt of notice or
knowledge thereof by Licensee. In the event of such an underpayment by
Licensee in excess of nine percent (9%), then Licensor may elect to treat
such occurrence as an incurable default by Licensee under this agreement.
If such inspection or examination: (i) discloses or Licensor or Licensee
otherwise discovers an overpayment of Earned Royalties the amount of such
overpayment shall be credited against future payment of any Earned
Royalties or, in the event of the expiration or termination of this
agreement and there is or are no such future payments, such amount shall be
paid by Licensor to Licensee not later than thirty (30) days after the
discovery thereof by Licensor, subject to Licensor's rights of setoff,
recoupment and counterclaim or (ii) reveals that for the period covered by
such inspection or examination there is an error of five percent (5%) or
more in the Earned Royalties previously reported on the Statement(s) as
being due from Licensee, all expenses involved in the conducting of such
inspection or examination shall be borne by Licensee. Licensee shall pay to
Licensor the amount of such expenses no later than ten (10) days after
Licensee's receipt of Licensor's invoice therefor. If such error is less
than five percent (5%), such expenses shall be borne by Licensor.
12. Upon the expiration or termination of this agreement, and provided Licensee
is in full compliance with the terms and conditions of this letter
agreement, and provided Licensee is not in arrears in the payment of any
Earned Royalties, Licensee may, for a period of five (5) months after the
effective date of expiration or termination (the "Sell-Off Period"),
4
<PAGE>
dispose of, through Licensee's existing, recognized network of
distribution, any remaining inventory of the Products that have been
approved by Licensor and that are in process or on hand at the effective
date of such expiration or termination. Any new promotional, marketing or
other materials used during the Sell-Off Period are subject to the
approvals and conditions set forth in Paragraph 9. above. It is expressly
understood and agreed by Licensee that the Sell-Off Period shall be
considered a separate accounting period for the purpose of computing Earned
Royalties due to Licensor for sales during such period. Such sales during
the Sell-Off Period shall not be applied against any Earned Royalties due
or payable prior to the Sell-Off Period.
13. Licensor shall have the option, in regard to any Products which remain
unsold after the Sell-Off Period has ended, to require Licensee to, at
Licensee's cost, either: (i) sell such remaining inventory to Licensor at
cost; (ii) destroy such remaining inventory, in which case a certificate of
destruction will be provided to Licensor signed by an authorized
representative of Licensee; or (iii) remove from such inventory and
destroy, at Licensee's sole cost all Trademarks and Images and provide
Licensor with evidence of such removal and destruction.
14. Licensee will obtain and maintain, at Licensee's own expense, product
liability insurance satisfactory to Licensor in the minimum amount of
Twenty Million United States Dollars (U.S.$20,000,000) of primary and
umbrella coverage from one or more insurance companies, each with a Best's
rating of "A" (or better), and qualified to transact business in the
Territory (each such insurance policy shall name each of the Indemnitees as
additional insureds by reason of the indemnity contained in Paragraph 15.a.
hereof and shall evidence the insurer's agreement that such insurance shall
not be amended, canceled, terminated or permitted to lapse without thirty
(30) days' prior written notice to Licensor), and provide Licensor with a
certificate of such insurance upon execution of this agreement by Licensee
and on each anniversary date of the grant or issuance of each such policy
during the terms of this agreement and the Sell-Off Period evidencing that
each such policy has not been altered with respect to the Indemnitees in
any way whatsoever nor permitted to lapse for any reason, and evidencing
the payment of premium of each such policy. Licensee will cause each such
policy to be in full force and effect prior to the commencement of any
design, manufacture, advertising, promotion, sale, distribution or dealing
with any or all of the Products whatsoever and will cause each such policy
to remain in effect for 10 years after the -- expiration or termination of
this agreement. Failure by Licensee to obtain the required insurance prior
to such commencement or failure by Licensee to adequately maintain such
insurance during .the term of this agreement and the Sell-Off Period shall
be an incurable default by Licensee under this agreement.
15. a. Except as provided in Paragraph 15.b. below, Licensee will indemnify,
defend and hold Licensor, its parent, subsidiaries and affiliates, and
its and their respective officers, directors, employees and
shareholders harmless from any claims, suits, losses, injuries or
damages (including without limitation attorneys' fees and litigation
expenses) arising out of
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or in connection with: (a) the design, manufacture, advertising,
promotion, sale or distribution of or any other dealing whatsoever
with the Products or Materials; (b) any alleged action or failure to
act whatsoever by Licensee; (c) any alleged defect in any or all of
the Products; (d) any alleged non-conformity to or non-compliance with
any law pertaining to the design, quality, safety, advertising,
promotion or marketing of any or all of the Products or advertising
material; or (e) any breach by Licensee of any of its obligations
hereunder.
b. Licensor will indemnify, defend and hold Licensee harmless against any
claims or suits arising solely and directly out of the authorized use
by Licensee of the Trademarks, Images or material received from
Licensor as set forth under this agreement provided prompt notice is
given to Licensor of any such claim or suit, but in no event shall
such indemnification include consequential or incidental damages.
Licensor shall have the option to settle or to undertake and conduct
the defense of any suit so brought. Licensee expressly represents and
agrees that no compromise or settlement of any claim or suit or any
preliminary negotiations with respect to any such compromise or
settlement, shall be made or entered into by Licensee except with and
under the special written consent and instructions of Licensor.
Licensee will cooperate fully with Licensor in defending any such
action.
16. a. Except as otherwise provided in this agreement, if Licensee shall
violate any of the terms or conditions hereof or default on any of its
duties, obligations or warranties hereunder, Licensor shall have the
right and option, but not the duty, to terminate the License and this
agreement upon not less than ten (10) days' prior written notice, but
no neglect or failure to serve such notice shall be deemed to be a
waiver of any such violation or default. Such termination shall become
effective unless such violation or default described in such notice
shall be completely remedied to the satisfaction of Licensor within
such ten (10) day period.
b. Notwithstanding the provisions of Paragraph 16.a. hereof, if such
violation or default: (a) is of a kind that a remedy or cure cannot
effectively restore the prior circumstances; or (b) is described in
this agreement as an incurable default, then the License and this
agreement shall terminate upon receipt by Licensee of written notice
thereof without any period of remedy or cure whatsoever. The
termination of the License and this agreement shall be without
prejudice to any rights that Licensor otherwise has against Licensee
under this agreement or under law.
17. The expiration or termination of this agreement shall not relieve Licensee
of any obligations incurred prior or subsequent to such expiration or
termination; nor shall expiration or termination impair or prejudice any of
the rights of Licensor or Licensee, respectively, accruing prior or
subsequent thereto.
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18. Not more than ninety (90), but not less than thirty (30) days prior to the
expiration of this agreement, or within ten (10) days after (i) receipt of
notice of termination or (ii) the happening of any event that terminates
this agreement where no such notice may be required, Licensee shall furnish
to Licensor a complete and accurate statement showing the number and
description of all Products on hand. Licensor or its authorized agents
shall have the right to conduct a physical inspection and take inventory to
ascertain or verify such inventory and statement. Licensor retains all
other legal and equitable rights it may have in the circumstances, which
rights are hereby reserved.
19. If Licensee files a petition in bankruptcy or is adjudicated a bankrupt or
if a petition in bankruptcy is filed against Licensee, or if Licensee shall
become insolvent or shall agree to make or makes an assignment for the
benefit of creditors or an arrangement pursuant to any bankruptcy law, or
if Licensee discontinues business, or it a receiver is appointed for
Licensee, this agreement will automatically terminate without the necessity
of any notice whatsoever. If this agreement is so terminated, Licensee or
its receivers, representatives, agents or the like shall have no right to
sell, exploit or enter into any deal with respect to the Products except
with and under the special written consent and instruction of Licensor.
20. If any term or provision of this agreement or its application to any
circumstances shall be adjudged illegal, unenforceable or invalid and such
adjudication has become final and non-appealable, such provision or
application shall be deemed deleted without affecting the remainder of this
agreement.
21. Nothing herein contained shall be construed to place the parties in the
relationship as partners or joint venturers and Licensee will have no power
to obligate or bind Licensor in any manner whatsoever.
22. This agreement represents the entire understanding of the parties. None of
the terms of this agreement can be waived or modified except by an express
agreement in writing assigned by the parties and there are no
representations, promises, warranties, covenants or undertakings other than
those contained in this agreement. No custom or practice of the parties at
variance with the terms hereof shall constitute a waiver of Licensor's
right to demand exact compliance with any of the terms or the delay by
either party in enforcing, any of its rights under this agreement shall not
be deemed as constituting a waiver or a modification thereof and either
party may, within the time provided by applicable law, commence appropriate
proceedings to enforce any or all such rights. No person firm, group or
corporation other than Licensee, Licensor, their subsidiaries and
affiliates shall be deemed to have acquired any rights by reason of
anything contained in this agreement.
23. Licensor, in entering into this agreement, is relying upon the skills,
reputation and personnel of Licensee. This agreement and all rights, and
duties under this agreement are personal to Licensee and shall not, without
the prior written consent of Licensor, be assigned, mortgaged or otherwise
encumbered by Licensee.
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24. Licensor may assign this agreement to any of its subsidiaries or affiliates
or to any entity that succeeds to the interest of Licensor in the
Trademarks or Images without the consent of Licensee and shall have the
right to nominate any other person, company or corporation to receive
royalty income or to undertake the obligations of Licensor under the terms
of this agreement whether or not this agreement is so assigned.
25. a. In this agreement where the consent or approval of Licensor is
required to any action of Licensee, such consent or approval shall
only be effective if granted in writing by Licensor.
b. Unless otherwise expressly indicated in this agreement, each notice,
request, approval, consent, payment and Statement (hereinafter
referred to as a "Submission") specifically provided for in this
agreement shall be in writing and shall be considered effective or
received the earliest of: (i) five (5) days after the date when such
Submission is mailed by certified or registered mail with postage
prepaid to the party hereto at the address set forth below; (ii) two
(2) business days after the date when such Submission is sent by
overnight courier service addressed to such party at such address or
the date indicated as received on the overnight courier service
confirmation receipt, whichever is earlier; (iii), except for
payments, when such Submission is sent by facsimile addressed to such
party at such address and the sender thereof requests and receives
written confirmation from such party that such Submission has been
received and is legible; or (iv) when such Submission is actually
received by such party at such address:
Licensor at: 680 North Lake Shore Drive
Chicago, IL 60611
Attention: David Oates
With a copy to: 680 North Lake Shore Drive
Chicago, Illinois 60611
Attention: General Counsel
Licensee at: 2222 West Peoria
Phoenix, AZ 85029
Attn: Mr. Patrick Keery, President
or Mr. Frank Keery, Chairman
26. This agreement shall be governed by and interpreted under the laws of the
State of Illinois without regard to its conflicts of laws provisions.
Licensee hereby submits to personal jurisdiction in Cook County, Illinois.
The parties hereto agree that any and all disputes arising out of or
relating in any way to this agreement shall be litigated only in courts
sitting in Cook County, Illinois.
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If the above is acceptable to you, please sign, date and return the
enclosed copy of this letter.
ACCEPTED AND AGREED TO: Very truly yours,
TITAN MOTORCYCLE COMPANY OF AMERICA PLAYBOY ENTERPRISES, INC.
By: /s/ Francis S. Keery By: /s/ [illegible]
------------------------------- -------------------------------
Title: CEO Title: V.P.
---------------------------- ----------------------------
Date: 6/18/97 Date: 6/17/98
----------------------------- -----------------------------
9
NONCOMPETITION AND NONDISCLOSURE AGREEMENT
NONDISCLOSURE AND NONCOMPETITION AGREEMENT dated as of November 10, 1997,
between Robert P. Lobban ("Employee") and TITAN MOTORCYCLE COMPANY OF AMERICA,
INC., a Nevada corporation (the "Company").
RECITALS:
A. Employee is to become an employee of the Company and will derive
substantial benefits as a result of being employed by the Company.
B. Employee's delivery to the Company of this Agreement is a condition to
the Company's agreeing to employ Employee.
C. As an inducement to the employment of Employee, the parties hereto
desire to enter into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and premises contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. NONDISCLOSURE.
(a) CONFIDENTIAL INFORMATION. Employee acknowledges and agrees that
the Confidential Information constitutes valuable, special, confidential and
unique assets of the Company. For purposes of this Agreement, "Confidential
Information" means any proprietary information, technical data, trade secrets or
know-how of the Company, its subsidiaries or its affiliates, including without
limitation research, product plans, products, services, customer lists and
customers (including without. limitations customers of the Company with whom
Employee becomes acquainted during the term of Employee's employment or on whom
Employee calls during such term), employee lists and employees, markets,
software, developments, inventions, processes, formulas, technology, designs,
drawings, engineering, marketing, finances, production methods, pricing
information, purchasing information, or other business information of the
Company, its subsidiaries or its affiliates. Confidential Information does, not
include items which (i) become lawfully available to the public other than as a
result of a disclosure by Employee or Employee's representatives or agents, (ii)
was lawfully available on a nonconfidential basis prior to its disclosure by
Employee or Employee's representatives or agents, or (iii) lawfully becomes
available on a nonconfidential basis from a source other than Employee or
Employee's representatives or agents.
<PAGE>
(b) NONDISCLOSURE. Employee shall hold the Confidential Information in
trust and the strictest confidence for the Company at all times. Employee shall
not, either during or after the term of his or her employment, use to the
detriment of the Company, or for the benefit of any other person or otherwise
misuse the Confidential Information. Employee shall not directly or indirectly
disclose, divulge, or communicate the Confidential Information to any person
without the prior written consent of the Company. Employee acknowledges that the
Confidential Information that employee acquired or developed while Employee was
an employee of the Company is the property of the Company, and Employee shall
treat the confidential information as a fiduciary of the Company. Employee
agrees not to reproduce or remove from the Company any Company business records
or the Confidential Information, without the prior written consent of the
president or the chief executive officer of the Company or a duly authorized
designee thereof.
(c) FORMER EMPLOYER INFORMATION. Employee shall not, during employment
with the Company, improperly use or disclose any proprietary information or
trade secrets of any former or concurrent employer or other person. Employee
shall not bring onto the premises. of the Company any unpublished document or
proprietary information belonging to any such employer or person, unless
consented to in writing by such employer or person.
(d) THIRD-PARTY INFORMATION. Employee acknowledges and agrees that the
Company has received and in the future will receive from third parties their
confidential or proprietary information subject to a duty on the Company's part
to maintain the confidentiality of such information and to use it only for
certain limited purposes. Employee shall, hold all such confidential or
proprietary information in trust and the strictest confidence. Employee shall
not disclose to any person or use such information, except if necessary in
carrying out Employee's work for the Company consistent with the Company's
agreement with such third party.
2. INVENTIONS.
(a) INVENTIONS RETAINED AND LICENSED. Employee has attached hereto, as
Exhibit A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by Employee prior
to Employee's employment with the Company, which belong to Employee, which
relate to the Company's proposed business, products or research and development,
and which are not assigned to the Company hereunder (collectively referred to as
"Prior Inventions"). If no such list is attached, Employee represents that there
are no such Prior Inventions. If in the course of Employee's employment with the
Company, Employee incorporates into a Company product, process or machine a
Prior Invention owned by Employee or in which Employee has an interest, the
Company is hereby granted and shall have a nonexclusive, royalty-free,
irrevocable, perpetual, worldwide license to make, have made, modify, use and
sell such Prior Invention as part or in connection with such product, process or
machine.
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(b) ASSIGNMENT OF INVENTIONS. Employee agrees that Employee will
promptly make full written disclosure to the Company, will hold in trust for the
sole right and benefit of the Company, and hereby assigns to the Company, or its
designee, all Employee's right, title and interest in and to any and all
inventions, original works of authorship, developments, concepts, improvements
or trade secrets, whether or not patentable or registrable under copyright or
similar laws, which Employee may solely or jointly conceive or develop or reduce
to practice, or cause to be conceived or developed or reduced to practice,
during the period of time Employee is in the employ of the Company
(collectively, "Inventions"). Employee further acknowledges that all original
works of authorship which are made by Employee (solely or jointly with others)
within the scope of, and during the period of Employee's employment with the
Company and which are protectible by copyright are "works made for hire," as
that term is defined in the United States Copyright Act. Employee agrees to keep
and maintain adequate and current written records of all Inventions made by
Employee (solely or jointly with others) during the term of Employee's
employment with the Company. The records will be in the form of notes, sketches,
drawings, and any other format that may be specified by the Company. The records
will be available to and remain the sole property of the Company at all times.
(c) PATENT AND COPYRIGHT REGISTRATIONS. Employee agrees to assist the
Company, or its designee, at the Company's expense, in every proper way to
secure the Company's rights in the Inventions and any copyrights, patents or
other intellectual property rights relating thereto in any and all countries.
Such assistance shall include the disclosure to the Company of all pertinent
information and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments which the Company
shall deem necessary in order to apply for -and obtain such rights and in order
to assign and convey to the Company, its successors, assigns and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and any
copyrights, patents or other intellectual property rights relating thereto.
Employee's obligation to execute or cause to be executed, any such instrument or
papers shall continue after the termination of this Agreement. In anticipation
of the possibility that the Company might be unable in the future because of
Employee's mental or physical incapacity or for any other reason to secure
Employee's signature to apply for or to pursue any application for any United
States or foreign patents or copyright registrations covering Inventions or
original works of authorship assigned to the Company as above, Employee hereby
irrevocably designates and appoints the Company and its duly authorized officers
and agents as Employee's agent and attorney in fact, to act for and in
Employee's behalf and stead to execute and file any such applications and to do
all other lawfully permitted acts to further the prosecution and issuance of
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<PAGE>
copyright registrations thereon with the same legal force and effect as if
executed by Employee.
3. CONFLICTING EMPLOYMENT. During the term of Employee's employment with
the Company, Employee not engage in any other employment, occupation, consulting
or other business activity directly related to the business in which the Company
is involved. Employee shall not engage in any other activities that conflict
with Employee's obligations to the Company.
4. LEAVING THE COMPANY. At the time of leaving the employ of the Company,
Employee shall deliver to the Company (and shall not keep in Employee's
possession, recreate or deliver to anyone else) any and all devices, records,
data, notes, reports, proposals, lists, correspondence, specifications,
drawings, blueprints, sketches, materials, equipment, other documents or
property, or reproductions of any aforementioned items developed by Employee
pursuant to Employee's employment with the Company or otherwise belonging to the
Company, its successors or assigns. If Employee leaves the employ of the
Company, Employee hereby grants consent to notification by the Company to
Employee's new employer about Employee's rights and obligations under this
Agreement.
5. COVENANT NOT TO COMPETE.
(a) GENERAL. Employee represents, acknowledges and covenants as
follows:
(i) Concurrently with execution of this Agreement, Employee is
becoming an employee of the Company.
(ii) This covenant shall be given the interpretation customarily
and usually given to covenants given in connection with employment, to the end
that the value of the business of the Company and the goodwill held by and
inuring to the benefit of the Company shall not be derogated.
(iii) The restrictions and covenants hereinafter set forth are
reasonable and necessary in order to protect the legitimate interests of the
Company, taking into account all of the terms and conditions thereof and the
circumstances extant at the present time.
(b) COVENANTS. Employee covenants and agrees that for the period
commencing on the date hereof and terminating on the date which is one (1) year
after the date upon which Employee's employment with the Company is terminated
for any reason, within any county in which the Company or any subsidiary or
affiliate of the Company conducts business, or in any other county in any state
of the United States, or any country or political subdivision in the world,
shall not directly or indirectly:
4
<PAGE>
(i) Enter the employ of, manage, operate, control or render any
services to, any person engaged in any business competitive with the business of
the Company (other than the Company or a subsidiary or affiliate of the
Company);
(ii) Act as advisor or consultant to any person engaged in the
business in which the Company is engaged (other than the Company or a subsidiary
or affiliate of the Company);
(iii) Induce any of the Company's customers to patronize any
other person who competes with the business of the Company, or interfere, in any
manner, with the Company's relationships with its customers;
(iv) Interfere in any manner with the Company's relationships
with its suppliers, distributors, retailers or agents;
(v) Solicit, induce, recruit or encourage any of the Company's
employees to leave their employment, or take away such employees, or attempt any
of the foregoing,
(vi) Engage in such business on his own account;
(vii) Own, hold a financial interest in, participate in, or
otherwise be or become interested in such business, directly or indirectly, as
an individual, owner, proprietor, partner, shareholder, director, officer,
manager, principal, agent, employee, trustee, consultant, independent contractor
or any other relationship or capacity (other than the Company or a subsidiary or
affiliate of the Company);
(viii) Disparage the Company.
For purposes of this Agreement, "the business of the Company" and "such
business" shall mean the business of designing, manufacturing, assembling and
selling motorcycles and parts, accessories and other items used in connection
with or pertaining to motorcycles. Notwithstanding the foregoing provisions of
this Section, nothing contained In this Section shall be deemed to prohibit
Employee from acquiring, solely as an investment, less than 2% of the
outstanding publicly-traded shares of capital stock of any corporation.
6. ENFORCEMENT.
(a) INADEQUATE LEGAL REMEDIES. Employee acknowledges and agrees that
the purposes of this Agreement include without limitation the preservation and
protection of the Company's valuable intangible and intellectual property
rights, the value of which is not easily susceptible to measurement. Employee
further acknowledges and agrees, therefore, that no remedy at law exists
5
<PAGE>
adequately to protect the Company in the event Employee breaches any of the
covenants contained herein. Accordingly, if the Company institutes any
proceeding to enforce any provision hereof, Employee hereby waives the claim or
defense that the Company has an adequate remedy at law.
(b) REMEDIES. If Employee commits a breach, or threatens to commit a
breach, of any of the provisions of this Agreement, the Company shall have the
following rights and remedies:
(i) The right and remedy to have the provisions hereof
specifically enforced by any court having equity jurisdiction, including the
right to enjoin the acts of Employee which constitute a breach of such covenant
by temporary restraining order, injunction pendente lite and permanent
injunction, and, where applicable and necessary to provide complete relief to
the Company, by mandatory injunction.
(ii) The right and remedy to require Employee to account for and
pay over to the Company all compensation, profits, monies, accruals, increments
or other benefits (collectively, "Benefits") derived or received by Employee as
the result of any transactions constituting a breach of any of the provisions of
this Section. Employee hereby agrees to account for and pay over such Benefits
to the Company.
(iii) In furtherance of and in addition to the foregoing, for
each separately identifiable breach of a covenant set forth herein, Employee
shall be obligated to pay to the Company as liquidated damages, and not as a
penalty, the sum of $5,000. In the case of a continuing violation, each day
thereof shall constitute a separately identifiable breach.
Each of the rights and remedies enumerated above shall be independent of the
other, and shall be severally enforceable, and all of such rights and remedies
shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or in equity.
7. SEVERABILITY.
(a) GENERAL. If any of the covenants contained herein, or any part
thereof, is hereafter construed to be invalid or unenforceable, then (at the
election of the Company) the same shall not affect the remainder of the covenant
or covenants, which shall be given full effect, without regard to the invalid
portions.
(b) AUTOMATIC REFORMATION. If a court of competent jurisdiction shall
find that any of the covenants contained herein, or any part thereof, is
excessively broad as to geographic area, time, duration, scope, activity or
subject, the parties agree that such covenant shall be construed solely in a
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<PAGE>
manner that shall limit or reduce it (or any particular aspect or aspects
thereof) so as to render the covenant enforceable to the maximum extent
compatible with then applicable law. The court making such finding is hereby
authorized, and shall have the power, to so limit or reduce such provision. In
its limited or reduced form, said provision shall then be enforceable.
(c) TOLLING. In the event of any breach or violation of the
restrictions contained herein, the time period specified herein shall abate
during the time of any violation or breach hereof, and that portion remaining at
the time of commencement of any violation shall not begin to run until such
violation has been fully and finally cured.
(d) INDEPENDENCE. The covenants contained herein shall be construed as
constituting agreements independent of any other agreements. given or made in
connection with this Agreement, so that the existence. of any claim or cause of
action by any party to any of the other agreements against the Company, whether
predicated on this Agreement or any of the other agreements, or otherwise, shall
not constitute a defense to the enforcement by the Company of such covenants.
8. NO OTHER AGREEMENTS; CONSIDERATION. Employee represents and warrants
that Employee is not a party to any other agreement which will interfere with
Employee's full compliance herewith. Employee also represents and warrants that
a significant portion of Employee's compensation constitute part of the
consideration for the covenants and agreements made by Employee herein.
9. NON-ALIENATION. The covenants, agreements and representations of
Employee contained herein are personal in nature, and Employee shall not,
without the prior written consent of the Company, assign, delegate or transfer
this Agreement or any rights or obligations hereunder, except that this
Agreement shall insure to the benefit of and be binding upon Employee's estate,
heirs and personal representatives. The Company shall be entitled to assign,
delegate, or transfer this Agreement or any of the Company's rights or
obligations hereunder to any person. In the case and to the extent of any such
assignment, delegation or transfer by the Company, this Agreement shall subject
to the provisions hereof, be binding upon and insure to the benefit of such
person, and such person shall discharge and perform all the obligations of the
Company hereunder. Employee shall not have any right to pledge, hypothecate,
anticipate or in any way create a lien upon any interest of Employee in or
arising under this Agreement. No benefits arising or payable hereunder shall be
assignable by Employee in anticipation of payment either by voluntary or
involuntary acts, or by operation of law.
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<PAGE>
10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts. Each counterpart shall be deemed an original instrument. All
counterparts collectively shall be a single Agreement, binding on all of the
parties hereto, notwithstanding that all of the parties are not signatory to the
original or the same counterparts.
11. BINDING EFFECT. Subject to the provisions hereof restricting
assignment, this Agreement shall be binding upon and inure to the benefit of the
parties hereto, their legal representatives, successors and assigns.
12. APPLICABLE LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona without giving
effect to any choice of law provision or rule (whether of the State of Arizona
or any other jurisdiction) that would cause the application of the law of any
jurisdiction other than the State of Arizona. The parties agree that each of
them is and shall remain subject to the exclusive in personam, in rem and
subject matter jurisdiction of the courts of the State of Arizona (including the
Federal District Court for the District of Arizona) for all purposes pertaining
to this. Agreement and all documents and instruments executed in connection or
in any way pertaining thereto.
13. HEADINGS. Title or captions contained in this Agreement are inserted
only as a matter of convenience and for reference. Such titles and captions
shall not be construed to define, limit, extend or describe the scope of this
Agreement nor the intent of any provision thereof.
14. GENDER AND NUMBER. Whenever required by the context hereof, the
singular shall include the plural and vice versa, and the masculine gender shall
include the feminine and neuter genders and vice versa.
15. FURTHER INSTRUMENTS. Each party hereby agrees that it shall, from time
to time and at such time as may be required, take such further actions and
execute such further documents as may be reasonably required and necessary to
effectuate the provisions hereof.
16. ATTORNEYS' FEES. In case of any action or proceeding to compel
compliance with, or for a breach of, any of the terms and conditions of this
Agreement, the prevailing party shall be entitled to recover from the
non-prevailing party costs of such action or proceedings, including without
limitation reasonable attorneys' fees, costs and disbursements.
17. TIME OF ESSENCE. Time is of the essence hereof.
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18. COMPUTATION OF TIME. In computing any period of time pursuant to this
Agreement, the day or date of the act, notice, event or default from which the
designated period of time begins to run will not be included. The last day of
the period so computed will be included, unless it is a Saturday, Sunday or a
legal holiday in the State of Arizona, in which event the period runs until the
end of the next day which is not a Saturday, Sunday or such legal holiday.
19. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties. This Agreement supersedes any prior agreement or
understanding among the parties and may not be modified or amended in any manner
other than as set forth herein.
20. SURVIVAL. It is the express intention land agreement of the parties
that all covenants, agreements, statements, representation and warranties made
in this Agreement shall survive the execution and delivery of this Agreement.
21. WAIVERS. No modification or waiver of any provision of this Agreement
shall be effective unless the same be in writing executed, by the party to be
charged with such modification or waiver. Neither the. waiver by a party of a
breach of or a default under any of the provisions of this Agreement, nor the
failure of a party on one or more occasions to enforce any of the provisions of
this Agreement or to exercise any right, remedy or privilege hereunder shall
thereafter be construed as a waiver of any subsequent breach or default of a
similar nature, or as a waiver of any such provisions, rights remedies or
privileges hereunder.
22. EXERCISE OF RIGHTS. No failure or delay on the part of a party in
exercising any right, power or privilege hereunder and no course of dealing
between the parties shall operate as a waiver or abandonment thereof, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein expressly provided are
cumulative and not exclusive of any other rights or remedies which party would
otherwise have at law or in equity otherwise.
23. LIMITATION ON BENEFITS ON THIS AGREEMENT. It is the explicit intention
of the parties that (a) no person or entity other than the parties (or their
respective successors and assigns as permitted hereunder) is or shall be
entitled to bring any action or enforce any provision of this Agreement against
any party, and (b) the covenants, undertakings and agreements set forth in this
Agreement shall be solely for the benefit of, and shall be enforceable only by,
the parties (or their respective successors and assigns as permitted hereunder).
24. NOTICES. Notices and other communications hereunder shall be sufficient
if in writing and if sent by registered or certified mail, by express courier or
9
<PAGE>
by hand-delivery to Employee at the last address Employee has filed in writing
with the Company or to the Company at its principal executive offices, or at
such other address as such party may advise the other party in writing.
25. AMENDMENT. This Agreement may be amended, supplemented or modified only
by a written instrument signed by all of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
EMPLOYEE:
Signature: /s/ Robert P. Lobban
-----------------------------
Print Name: Robert P. Lobban
----------------------------
COMPANY:
TITAN MOTORCYCLE COMPANY OF AMERICA,
INC., a Nevada corporation
By /s/ Sandra Lahood
-------------------------------------
Its
10
Consent of PriceWaterhouseCoopers, LLP, Independent Accountants
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated April 2, 1999 relating to the
financial statements, which appears in the 1999 Annual Report to Shareholders of
Titan Motorcycle Co. of America, which is incorporated by reference in Titan
Motorcycle Co. of America's Annual Report on Form 10-KSB for the year ended
January 2, 1999. We also consent to the incorporation by reference of our report
dated April 2, 1999 relating to the financial statement schedules, which appear
in such Annual Report on Form 10-KSB. We also consent to the references to us
under the heading "Experts" in such Registration Statement.
/s/ PriceWaterhouseCoopers, LLP
Phoenix, Arizona
October 15, 1999
[LETTERHEAD OF JONES, JENSEN & COMPANY]
CONSENT OF JONES, JENSEN & COMPANY, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related prospectus of Titan Motorcycle Co.
of America for the registration of 3,322,031 shares of its common stock and to
the incorporation by reference therein of our report dated March 12, 1998, with
respect to the consolidated financial statements of Titan Motorcycle Co. of
America included in its Annual Report (Form 10-KSB) for the fiscal year ended
December 31, 1997, filed with the Securities and Exchange Commission.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
October 12, 1999
