UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
General Form for Registration of Securities
Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
THE KELLER MANUFACTURING COMPANY, INC.
(Exact name of registrant as specified in its charter)
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INDIANA 35-0435090
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 N. WATER ST.
CORYDON, INDIANA 47112
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 812-738-2222
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Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock - No Par Value
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TABLE OF CONTENTS
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Page Number
ITEM 1 Business
ITEM 2 Financial Information
ITEM 3 Properties
ITEM 4 Security Ownership of Certain Beneficial Owners and Management
ITEM 5 Directors and Executive Officers
ITEM 6 Executive Compensation
ITEM 7 Certain Relationships and Related Transactions
ITEM 8 Legal Proceedings
ITEM 9 Market Price of and Dividends on the Registrant's Common Equity
and Related Stockholder Matters
ITEM 10 Recent Sales of Unregistered Securities
ITEM 11 Description of Registrant's Securities to be Registered
ITEM 12 Indemnification of Directors and Officers
ITEM 13 Financial Statements and Supplementary Data
ITEM 14 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
ITEM 15 Financial Statements and Exhibits
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This Form 10 Registration Statement ("Registration Statement") contains certain
statements that are "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, as amended. Those statements appear in a number of places in this
Registration Statement and may include statements regarding the intent, belief
or current expectations of The Keller Manufacturing Company, Inc. (the
"Company") or its officers with respect to (i) the Company's strategic plans,
(ii) the policies of the Company regarding capital expenditures, financing and
other matters, and (iii) industry trends affecting the Company's financial
condition or results of operations. Readers of this Registration Statement are
cautioned that reliance on any forward-looking statement involves risks and
uncertainties. Although the Company believes that the assumptions on which the
forward-looking statements contained herein are based are reasonable, any of
those assumptions could prove to be inaccurate given the inherent uncertainties
as to the occurrence or nonoccurrence of future events. There can be no
assurance that the forward-looking statements contained in this Registration
Statement will prove to be accurate. The inclusion of a forward-looking
statement herein should not be regarded as a representation by the Company that
the Company's objective will be achieved.
Item 1. Business
General Development of Business
The Company's history dates back to 1866 when the "Keller Store" in Corydon,
Indiana was established. After that time, the Company entered into various
businesses, including operating an electrical light plant, manufacturing spokes
for farm wagons, operating a hub-mill, building barns, and producing wooden
porch furniture, wooden truck bodies, farm wagons and refrigerator boxes, as
well as end tables, magazine racks, chair parts and, by 1933, a drop leaf table.
The Company was incorporated in 1906 under the laws of the State of Indiana.
Over 300,000 wagons were built by the Company from 1901 - 1912. In 1942,
however, the invention of the farm tractor made the Company's wagon obsolete
thereby causing the Company to end its wagon production. In late 1943, the
Company developed household furniture, including breakfast room suites and
dinettes. In the early 1960's, the Company introduced its first bedroom group. A
new plant was built at Culpeper, Virginia in 1965 and a third plant was built in
1973 at New Salisbury, Indiana. In 1979, the Company leased four trucks and
trailers to deliver furniture directly to their furniture dealers. In 1996, the
Company formed Keller Dedicated Trucking, Inc. ("Keller Trucking"), a wholly
owned subsidiary of the Company. Its primary function is to provide delivery
services for the Company. Keller Trucking also transfers materials between
plants, provides delivery for some purchased merchandise and provides backhaul
services for other companies when available. Keller Trucking operated 24 trucks
in 1998 which delivered approximately 80% of the Company's finished products.
Narrative Description of Business
The Company designs and manufactures various styles of solid wood dining room
and bedroom furniture using lumber which it has kiln dried at its facilities.
The Company dedicates certain production facilities to specific product lines
and generally manufactures products in response to customer orders. The dining
room furniture consists of chairs, tables, chinas, buffet/hutches and servers.
The primary items manufactured for the bedroom are chests, dressers, night
stands, beds, entertainment decks, mirrors and entertainment centers. There are
eight different product lines made of oak, one line made of cherry, and one of
maple (the Company commonly refers to product lines as "groups" and the terms
will be used interchangeably herein). Some occasional items were added to the
product line in 1998 including end tables and cocktail tables and were offered
in two different finishes. Another new product line was introduced in the Fall
of 1998. This new line will be a product licensed by PGA TOUR(R) Licensing ("PGA
TOUR") and will be marketed as such. The licensing agreement between the PGA
TOUR and the Company gives the Company an exclusive license with respect to its
bedroom, dining room and casual dining furniture and a nonexclusive license with
respect to its occasional furniture to use the verbiage "PGA TOUR" and "SENIOR
PGA TOUR" and the graphics associated with this verbiage in the design of said
furniture. The sale of the licensed products is limited to the United States,
its territories and possessions and the Commonwealth of Puerto Rico. The term of
the license extends to December 31, 2001, subject to certain events of default
which will grant the PGA TOUR the right of termination and subject to the
Company's option for an additional three year term subject to agreement of the
parties and the Company's satisfactory performance under the terms of the
license. The PGA TOUR group is an antique English style made of oak. The new
group is priced slightly higher than other groups offered due to the royalty
fees required for the PGA TOUR licensing. The signature product for the new
group is a golf locker.
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The Company's products are sold primarily in the middle to upper-middle price
range. Net sales from bedroom furniture have recently begun to exceed net sales
from dining room furniture. Bedroom furniture sales increased from 49% of total
furniture sales in 1996 to 51.1% in 1997 and 51.5% in 1998. Sales for occasional
furniture were less than 1% of total net sales in 1998 due to its recent
introduction. In 1998, the bedroom sets ranged in price from $1,599 to $4,099.
Dining room sets ranged from $1,099 to $4,999.
The Company sells its products nationwide through an exclusive sales force of
commissioned employees to approximately 1,600 national, regional and local
furniture chains, independent furniture retailers and warehouse showrooms.
According to Furniture Design & Manufacturing Magazine, Keller Manufacturing is
ranked 103rd in sales among furniture manufacturers in North America. In 1998,
the Company introduced two new programs to increase local sales; the Home
Display Program and the Multi-Media Plan. The Home Display Program is designed
to increase the Company's sales through the enhancement of the aesthetics
surrounding the Company's products at the retail outlets. If certain groups are
purchased for display by a retailer, the Company will provide accessories to
enhance the display. For example, with the purchase of certain dining room
groups for display the Company will provide a mirror, two pictures, place mats
and napkins, three floral arrangements and three bolts of border. All retailers
are eligible for this program and accessories have been shipped to 80 retailers
as of April 1, 1999. The Company's Multi-Media Plan is a pre-established fund
used to advertise and promote the Company's products. The Multi-Media Plan is
budgeted for $1,040,000 in 1999 and is included in the Company's advertising
budget. The Company also promotes its products at the International Home
Furnishings Center at High Point, North Carolina and San Francisco, California
by leasing showroom space to display its products at home furnishings trade
shows. The Company also enhances its name recognition through its sponsorship of
the PGA TOUR.
Raw Materials
The Company purchases lumber from approximately 50 suppliers with no single
supplier representing over 10% of purchases. There has been no difficulty
experienced in obtaining lumber. Material prices, however, have been steadily
increasing due to increased demand due to, in part, recent increases in sales of
home office furniture. The usage of #2 grade lumber, the Company's primary grade
of lumber, has continued to increase, causing its cost to increase. There are
three primary grades of hardwood; #1, #2 and #3. #1 is the highest quality with
the least defects while #3 has the greatest number of defects. The Company
purchases #2 grade lumber, cuts out any defects and uses this refined #2 in its
manufacturing process. This practice allows the Company to manufacture furniture
of comparable quality to furniture made from #1 grade lumber but on a more cost
efficient basis.
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Patents, Trademarks, Licenses or Franchises
The Company currently holds no patents, licenses or franchises. The Company logo
has been used for approximately forty years, but it is not considered to provide
any financial benefit to the Company.
Seasonal Effects
In the past three years the Company has experienced some seasonal effects on
sales. The slowest period for sales has been the second quarter. In 1998, April
sales were at 14% below the year's monthly average. May was slightly less than
average, and June was approximately 13% below the average. December, however,
was the slowest single month for sales, approximately 27% below 1998's monthly
average. December sales were low due to the strong pre-holiday sales that occur
prior to December. The third quarter is the strongest period for sales, because
dealers place orders in preparation for the Thanksgiving and Christmas holidays.
August was the strongest single month for sales, about 20% above the average.
Working Capital
The furniture manufacturing industry has no standard guideline for carrying
working capital and the Company does not require its retailers to maintain
minimum working capital. The Company meets dealer demand by scheduling cut
packages based on current and estimated sales mixes with high volume dealers
receiving priority on quick shipment of merchandise.
The Company offers extended payment terms to customers for damaged items that
are repairable. Each retailer is provided a list of items that are deemed as
replaceable and will be given an allowance for shop time to repair. Usually, any
defect to merchandise that would require larger than a 25% discount will be
returned to the Company. Since the Company has its own trucking subsidiary, it
is better equipped than the industry in general to receive returned merchandise
on a cost effective basis. Due to the high shipping costs by outside sources,
most of the industry offers discounts for dealers to keep defective merchandise.
Customers
The Company's ten largest customers accounted for approximately 34% of its net
sales in 1998. The Company's largest customer, Haverty's Furniture
("Haverty's"), accounted for approximately 13% of the Company's net sales in
1998 but no other customer accounted for 10% or more of the Company's net sales.
The loss of Haverty's or another large customer could have a material adverse
effect on the Company. Haverty's orders decreased $2,210,715 in 1998 due to a
reduction in the amount of floor space reserved for the Company's products at
Haverty's locations and a decrease in the number of the Company's products
carried by Haverty's. The reduction in Haverty's sales of the Company's
merchandise was a contributing factor in the Company's written sales orders
increasing only 1.5% and net sales only increasing 2.4% in 1998.
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Backlog
Backlog orders believed to be firm as of December 31, 1998, were $6,286,000
compared to $6,092,000 as of December 31, 1997. The Company expects the backlog
to remain fairly stable and estimates $6,000,000 for 1999. In the past, dealers
were allowed to submit blank orders to guarantee ship times but this practice
has been eliminated. Currently, all orders placed with the Company are expected
to be filled and shipped as ordered and are considered firm. The Company does,
however, allow modifications or cancellations of orders up to the time the
product is loaded for shipment. A cancellation at such a late stage is subject
to a monetary penalty and is relatively rare.
Competition
As the Company continues to expand its product line, it becomes more difficult
to identify a specific competitive market. The Company currently manufactures
and competes in lines of bedroom, dining room and occasional furniture, and
sells to retailers nationwide. The Company's products fall in the middle to
upper-middle price line. The Company's direct competitors include Kincaid
Furniture Co. ("Kincaid"), Cochrane Furniture ("Cocharne"), Sumter Cabinet Co.
("Sumter"), Mobel, Inc. ("Mobel"), Durham Furniture Inc. ("Durham"), Richardson
Brothers Co. ("Richardson Brothers") and Kimball Furniture ("Kimball"). Kincaid
is considered the Company's most direct competitor, and it's dining, bedroom and
occasional groups are the strongest competing products against the Company's
product lines. Cochrane and Sumter are the next most competitive companies. They
both compete in the dining and bedroom categories. Cochrane is strongest in the
dining room lines and Sumter is strongest in the bedroom lines. Both Mobel and
Durham compete directly with the Company in bedroom lines. Richardson Brothers
and Kimball both offer lines in dining room and bedroom categories but don't
offer the number of products within these groups as the aforementioned direct
competitors.
There are three principal methods of competition in the furniture manufacturing
industry:
1. Product Quality;
2. Price; and
3. Customer Service.
The Company has several attributes which it believes, when combined, afford it a
competitive advantage. The Company specializes in dining room and bedroom
furniture made of solid wood. Solid wood furniture is considered higher quality
than furniture made from composite materials. This is a valuable marketing tool
in selling to consumers. Moreover, the Company applies a protective finish to
its products which is more durable than that of most of its competitors. The
Company's products are priced competitively for high quality furniture and the
range of retail prices available for various product lines makes its products
available to a wide range of customers. The Company also believes it is
positioned to effectively compete in customer service areas. The Company's
entire product lines may be made available in three to five weeks. Products are
cut based on demand, which also improves the average delivery time. Moreover,
the Company manufactures most of its own parts and dries all of its own lumber.
All bendings for chairs, headrests and bows are also processed internally.
Finally, Keller Trucking delivers 80% of the Company's merchandise which is
shipped. This allows the furniture to be delivered faster and at a lower cost
than using outside resources. These factors allow the Company to produce quality
furniture at competitive prices.
Research and Technical Development
The Company's expenditures on research and development activities can be divided
into two categories, product development and tooling. Product development
consists of research and design with some design being outsourced. Tooling
entails the purchase of tools, patterns, equipment and labor associated with the
introduction of a new group. Product development expenses increased from $53,583
in 1995 to $56,756 in 1996. Tooling expenses for new products increased from
$342,534 in 1995 to $396,750 in 1996 due to additional tooling for the Culpeper
County groups and the introduction of the Cherry Legends group. The 1997 product
development expenses decreased slightly from 1996 to $54,171, and tooling
decreased considerably to $272,770. In 1998, product development cost remained
relatively stable, at $52,125, and tooling cost increased to $386,471. Tooling
costs consisted of $91,897 for occasional items and $294,574 for the
introduction of the PGA TOUR group.
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Environmental Matters
The Company has made no material expenditures due to fines or corrective actions
for environmental violations at any of its facilities. A project was implemented
in 1997 to install a new dust collection system at the Corydon, Indiana facility
to eliminate any potential Indiana Department of Environmental Management
("IDEM") violations for dust particles in the Mill Departments. The system
reduces the amount of solids found in the water drainage and keeps the Company
within the City of Corydon's Water Department's standards. The capital
expenditure of the dust system in 1998 was $404,917. Both the Corydon and New
Salisbury facilities have been granted air permits from the state of Indiana and
the Culpeper facility has applied for an air permit from Virginia.
Employees
The Company employed 732 individuals as of December 31, 1998, consisting of 630
hourly employees, 69 salaried employees, 24 salesmen and nine executive
officers. None of the Company's employees belong to a labor union. The Company
believes its relations with its employees are good.
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Item 2 Financial Information
Selected Financial Data
The following table sets forth selected consolidated financial data as of and
for the years ended December 31, 1998, 1997, 1996, 1995 and 1994 and are derived
from the audited, consolidated financial statements of the Company. These
selected financial data are not covered by the auditors' report and are
qualified in their entirety by reference to, and should be read in conjunction
with, "Management's Discussion and Analysis of Financial Condition and Results
of Operations," and the Consolidated Financial Statements of the Company and the
related notes thereto included herein.
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For the Year December 31,
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Statement of Income Data:
1998 1997 1996 1995 1994
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Net Sales $60,144,243 $58,736,617 $54,168,278 $50,329,631 $45,964,440
Cost Of Sales $43,076,105 $40,955,515 $38,948,486 $35,840,211 $34,071,972
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Gross Profit $17,068,138 $17,781,102 $15,219,792 $14,489,420 $11,892,468
Selling, General &
Administrative $7,897,383 $8,834,796 $7,561,206 $7,629,843 $6,873,755
Income Before Income Taxes $9,170,755 $8,946,306 $7,658,586 $6,859,577 $5,018,713
Income Taxes $3,514,750 $3,448,011 $2,988,903 $2,794,809 $2,080,382
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Net Income $5,656,005 $5,498,295 $4,669,683 $4,064,768 $2,938,331
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Net Income Per Share Of $0.97 $0.94 $0.79 $0.69 $0.50
Common Stock -
Weighted Average Number Of 5,853,954 5,847,325 5,883,603 5,882,229 5,910,918
Shares Outstanding
Cash Dividends Declared $0.18 $0.16 $0.14 $0.12 $0.09
Per Common Share
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December 31,
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Balance Sheet Data: 1998 1997 1996 1995 1994
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Working Capital(1) $22,158,510 $19,168,410 $15,963,428 $13,738,355 $11,219,918
Property, Plant & Equipment $9,798,174 $8,707,855 $7,844,115 $6,847,753 $5,722,883
Investment Security Available for Sale $500,000
Other Assets $1,760,759 $1,584,469 $1,340,321 $871,228 $784,465
Total Assets $39,471,045 $35,545,608 $31,137,030 $27,855,316 $22,895,043
Long Term Debt $0 $0 $0 $0 $0
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(1) Reflects the excess of current assets over current liabilities as set forth
in the Consolidated Financial Statements.
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Management's Discussion and Analysis of Financial Condition and Results of
Operation
The following discussion and analysis should be read in conjunction with the
Selected Financial Data and the Company's Consolidated Financial Statements and
Notes thereto included herein. In addition to the historical information
contained herein, the discussions in this Registration Statement may contain
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from those discussed herein.
Overview
The Company designs and manufactures various styles of solid wood dining room
and bedroom furniture using lumber which it has kiln dried at its facilities.
The Company dedicates certain production facilities to specific product lines
and generally manufactures products in response to customer orders. The dining
room furniture consists of chairs, tables, chinas, buffet/hutches and servers.
The primary items manufactured for the bedroom are chests, dressers, night
stands, beds, entertainment decks, mirrors, end tables, cocktail tables and
entertainment centers. There are eight different product lines made of oak, one
line made of cherry, and one of maple. Some occasional items were added to the
product line in 1998 which were offered in two different finishes. Another new
product line was introduced in the Fall of 1998. This new line will be licensed
by PGA TOUR(R) Licensing ("PGA TOUR") and will be marketed as such. The
licensing agreement between the PGA TOUR and the Company gives the Company an
exclusive license with respect to its bedroom, dining room and casual dining
furniture and a nonexclusive license with respect to its occasional furniture to
use the verbiage "PGA TOUR" and "SENIOR PGA TOUR" and the graphics associated
with this verbiage in the design of said furniture. The sale of the licensed
products is limited to the United States, its territories and possessions and
the Commonwealth of Puerto Rico. The term of the license extends to December 31,
2001, subject to certain events of default which will grant the PGA TOUR the
right of termination and subject to the Company's option for an additional three
year term subject to agreement of the parties and the Company's satisfactory
performance under the terms of the license. The PGA TOUR group is an antique
English style made of oak. The new group is priced slightly higher than other
groups offered due to the royalty fees required for the PGA TOUR licensing. The
signature product for the new group is a golf locker.
The Company's products are sold primarily in the middle to upper-middle price
range. Net sales from bedroom furniture have recently begun to exceed net sales
from dining room furniture. Bedroom furniture sales increased from 49% of total
furniture sales in 1996 to 51.1% in 1997 and 51.5% in 1998. Sales for occasional
furniture were less than 1% of total net sales in 1998 due to its recent
introduction. In 1998, the bedroom ranged in price from $1,599 to $4,099. Dining
room sets ranged from $1,099 to $4,999.
In 1999, the Company decided not to allow its dealers (retailers) to display the
Company's name, logo or products on their internet web sites. The Company plans
to bring its own web site online to display its products. Inquiries from this
web site will be directed to the Company's salesperson(s) which cover the area
from which the inquiry originated. Responses to these inquiries will include the
names and locations of the Company's dealers (retailers) in the area from which
the inquiry originated. The Company has no plans to begin direct sales to retail
customers at this time.
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Results of Operations
The following table sets forth, for the periods indicated, consolidated
statement of income data as a percentage of net sales. YEAR ENDED DECEMBER 31
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Year Ended December 31,
1998 1997 1996
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Net Sales 100.0% 100.0% 100.0%
Cost of Sales 71.9% 69.7% 71.6%
Gross Profit 28.1% 30.3% 28.4%
Selling, General & Administrative 14.0% 15.0% 13.1%
Income Before Taxes 14.1% 15.3% 15.3%
Income Taxes 5.5% 5.9% 5.9%
Net Income 8.6% 9.4% 9.4%
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Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net Sales. The Company had an approximate 2.4% increase in net sales from 1997
to 1998, and a 2.9% increase in the Company's net income for this period. The
1998 increase in net sales is less than the 1997 increase of 8.4%. This is due,
in part, to the decrease in Haverty's orders, as discussed in Item 1, Business,
under the Customers section. Labor costs were relatively steady with an annual
raise approximately equal to the annual rate of inflation.
Cost of Sales. Cost of sales as a percentage of net sales increased to 71.9% in
1998 from 69.7% in 1997 due mainly to increases in the cost of raw materials.
Total material costs increased by $1,720,000 in 1998, largely due to a 15%
increase in the cost of lumber.
Selling, General and Administrative Expenses. Selling, General and
Administrative expenses decreased from 15.0% of net sales in 1997 to 14.0% in
1998. There was a total decrease of about $940,000 from 1997 to 1998. There was
almost a $300,000 reduction in expenditures involving implementation of the EMS
Information System. These expenses included consulting fees and training of
employees in using the new system. Another factor contributing to the reduction
in 1998 was the recognition of a $340,000 flood loss in 1997. A third major
contributor to the reduction for 1998 was a $70,000 reduction in bad debt
expense, partially caused by a reduction in the allowance for doubtful accounts.
Net Income. As a result of the above factors, the Company recognized net income
for 1998 of approximately $5.6 million, compared to net income of approximately
$5.5 million in 1997.
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Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net Sales. The Company had an approximate 8.4% increase in net sales in 1997 as
compared to 1996 contributing to an 18% increase in the Company's net income in
that period. This increase in net sales was primarily due to the addition of
three new accounts; J.C. Penney, Mathis Brothers and Slumberland. There was also
a significant increase in sales with Haverty's due to the implementation of a
National Marketing Plan.
Cost of Sales. Cost of sales as a percentage of net sales decreased to 69.7% in
1997 from 1996's 71.6%. This was due to increased efficiencies. Materials
expenditures had the largest impact on cost of goods, decreasing 1.5% as a
percent of net sales from 1996 to 1997. This occurred despite a 37% increase in
the average price of all lumber purchased by the Company in that time period.
Labor costs were relatively steady with an annual raise approximately equal to
the annual rate of inflation.
Selling, General and Administrative Expenses. Selling, General and
Administrative Expenses for 1997 were up almost $1.3 million dollars from 1996.
This was, in large part, due to the additional expenses incurred in implementing
the EMS Information System, including consulting fees and training costs.
Another factor causing the increased expenses was the 1997 recognition of
$340,000 in flood losses, as discussed above.
Net Income. As a result of the above factors, the Company recognized net income
for 1997 of approximately $5.5 million, compared to net income of approximately
$4.7 million in 1996.
Liquidity and Capital Resources
The Company's principal source of cash is income from operations. The Company
has no material outstanding debt and is not expecting to incur any debt in the
near future. The Company's cash account has remained relatively steady from 1997
to 1998, however, accounts receivable increased by approximately $470,000 in
1998. This contributed to a rise in the Company's liquidity ratio (cash and
accounts receivable versus total current liabilities) in 1998 to 1.95 compared
to 1.60 in 1997 and 1.36 in 1996. The single greatest factor in increasing the
Company's liquidity, however, has been a greater than $800,000 decrease in
current liabilities for 1998. This decrease is due to three distinct
circumstances. First, the Company had recorded a $217,000 accrual for a payment
it had received from Smith's Home Furnishings. Smith's has filed for bankruptcy
protection, and the payment had been claimed to be a preferential transfer. In
1998, the Company received a ruling by the Bankruptcy Court that the payment was
not a preferential transfer, and, as a result, the Company eliminated the
accrual. Second, the Company's accrued payroll decreased $250,000. The decrease
was due to a calendar fluctuation from 1997 to 1998 in which an extra week was
reported in 1997. Third, the Company's healthcare costs decreased $135,000 in
1998 due to decreased employee claims. The increase in liquidity from 1996 to
1997 was the result of an increase of over $1.6 million in the Company's cash
account due to the Company's increased profitability from 1996 to 1997 of 18%.
Total capital expenditures for the Company were $2,630,027, $2,199,514 and
$2,118,816 for 1998, 1997 and 1996, respectively. Capital expenditures include
purchases of equipment, hardware, or software, expansion of facilities, purchase
of buildings and large maintenance projects. Major expenditures for the Company
are usually tracked separately for each of the three locations. In 1996, Corydon
spent $208,000 for replacement of the bedroom building's roof and $190,000 for
the implementation of EMS hardware and software. Also in 1996, the Culpeper
Plant spent $493,000 for a dust collection system and New Salisbury purchased a
wide belt sander for $177,000. The largest single capital expenditure for 1997
was for Phase I of a dust collection system at Corydon for $355,000. Also in
1997, Culpeper purchased a planer sander for $199,000, and New Salisbury
purchased a moulder and grinder for $211,000 and spent $220,000 on the
installation of EMS computers and software. In 1998, the largest expenses were
Corydon's purchases of Phase II and III of the dust collection system for
$405,000. Corydon also purchased a Computer Numerical Control Machine Center
("CNC Machine Center") for $278,000, and New Salisbury spent $345,000 on
construction of a new kiln. There were no significant projects at Culpeper in
1998.
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The estimated capital expenses for 1999 are $2,200,000 consisting mainly of new
equipment purchases for the three manufacturing facilities. Specific capital
expenditures and improvements include an expansion of the tempering room at the
New Salisbury facility at an estimated cost of $177,000. A new CNC Machine
Center is also being added at this facility and is expected to cost $250,000.
Corydon's rough mill is expected to undergo significant improvements including a
new planer, conveyor and modifications to its sorting line at an estimated cost
of $177,000. The Corydon facility is also expected to require steel
reinforcements to the building to continue operations. This is not expected to
affect production and the Company has no plans to move this operation. The
infrastructure at the Culpeper and New Salisbury facilities are considered to be
in good working condition and no material repairs are foreseen. Implementation
of the EMS Information Systems throughout the Company is estimated to cost
$300,000 in capital and expenses and is scheduled to be completed in fiscal
1999. This is discussed in further detail in the Year 2000 section below.
An area of focus for the Company has been a large-scale effort to improve the
yield in the cutting line departments of each plant. This is the Company's
greatest single internal opportunity for profit enhancement. As mentioned
earlier, continually rising lumber prices led to a flattening of net profits in
1998. It is important to keep the material costs in line with previous years for
the Company to continue to be profitable. A task force committee, including
representatives from each plant, has been formed with a goal of improving yield,
which would in turn require less raw lumber per finished item. Potential
improvements would result in a direct cost savings which in turn could have a
material impact on profits.
The Company believes that it cannot afford to increase prices by a margin
greater than the rate of inflation and still remain competitive. The Company's
total price increase for the years of 1996, and 1997 and 1998 was 7.0% compared
to cumulative inflation of 7.1% for the same three year period. The Company
believes that this pricing policy has not had a material adverse effect on its
net sales or revenues and has contributed to the Company remaining a viable
competitor.
Returns & Allowances have decreased from 2.07% in 1997 to 1.96% in 1998. This
has been the first decrease since 1994. The reduction was the result, in large
part, of greater salesman involvement with stores in reviewing damaged
merchandise. The salesmen have received more training in evaluating problems and
also have been given clearer guidelines on what is or is not allowable on
damaged items.
The product turnover ratio (net sales divided by inventories) decreased from 3.9
in 1997 to 3.7 in 1998. This was due largely to a $900,000 or a 5.8% increase in
inventory levels and only a small increase in sales of 2.4%. The primary reason
for the inventory increase is that New Salisbury has been producing the new PGA
TOUR group, which will not begin shipping until the second quarter of 1999. The
turnover ratios decreased to 3.9 in 1997 from 4.0 in 1996. The Company expects
the turnover ratio to increase by the end of 1999. The new EMS information
system in the three plants will help improve the match of finished parts. The
Assembly Department will improve its productivity due to the improved product
match resulting in reduced inventory levels.
<PAGE>
Selling expense has been fairly level the last few years. It was 10.4% of net
sales in 1998 compared to 10.6% in 1997, and 10.5% in 1996. Advertisement has
been done primarily at the regional level rather than the national level. The
new Multi-Media Plan mentioned earlier will continue to focus on regional
advertising. The Company also plans to continue its sponsorship of the PGA TOUR
and its displays at the trade shows held at High Point, North Carolina and San
Francisco, California.
The Company has had no material short term or long term debt since 1994 compared
to a 1997 18.2% industry average of long term debt in relation to net worth.
(Dunn & Bradstreet Business Scope Report, February 17, 1999. The information
regarding the furniture manufacturing industry contained in this report was as
of December 31, 1997.) This has helped the Company maintain its cash flow and
liquidity levels. Because of Keller's financial stability, the Company does not
currently anticipate the need to issue any new stock soon after becoming a
reporting company under the Securities Exchange Act of 1934, as amended, other
than stock bonus awards or pursuant to the exercise of employee stock options.
The Company anticipates funding its growth strategy with cash generated from
operations. This growth strategy entails growing at no more than 10% per year.
Expansion of current facilities or the construction of a new facility are not
currently part of the Company's growth strategy but the further utilization of
current facilities through additional shifts is currently contemplated.
The Company has available lines of credit totaling $5.0 Million. This includes a
$3.0 Million line of credit with NBD Bank of Corydon, Indiana which expires July
31, 1999. Interest is charged at the prime lending rate. The Company also has a
$2.0 Million line of credit available with Bank One of Louisville, Kentucky
which expires July 31, 1999. Interest is charged at LIBOR plus 2%. These lines
are not collateralized. As of March 31, 1999, these lines of credit were unused.
The Company believes that cash generated from its operations will be sufficient
to fund the Company's working capital and capital expenditure requirements for
the foreseeable future.
Inflation
To date, the Company believes that the effects of inflation have not had a
material adverse effect on its business, operations or financial condition.
Year 2000
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar ordinary business activities.
"Year 2000 compliant," as used in this discussion, means that a date-handling
problem relating to the Year 2000 date change that would cause computers,
software or other equipment to fail to correctly perform, process and handle
date-related data for the dates within and between the 20th and 21st centuries,
is not expected to interfere with normal business operations.
Since 1996 the Company has been steadily reengineering its information systems
to prepare for the conversion to the year 2000. This effort began with the
purchase of a comprehensive enterprise information system that is designed to be
year 2000 compliant. Implementation has been progressing well and is scheduled
to be completed by the fourth quarter of 1999. The Company has engaged a
consulting company to advise and assist it in the installation and
implementation of the system.
<PAGE>
In the event that all applications have not been replaced by the end of the
year, the Company intends for both the old and the new systems to be capable of
handling the Year 2000 issues. Another consulting company has been engaged to
ascertain that the old information system is Year 2000 compliant. The old system
is gradually being phased out as each application is replaced by the new system
but is still expected to be in operation on some peripheral applications at year
end.
The Company formed a Year 2000 Project Team in 1998 to identify and correct Year
2000 problems with hardware, software, and imbedded microprocessors throughout
the Company. This team is cross-functional and is composed of eleven people.
They have identified many suspected problems and are now involved in the testing
and correction of these problems. This team is also working with key suppliers
and third-party service providers to identify external weaknesses and provide
solutions to prevent the disruption of business activities. Their work is
proceeding well and is intended to be substantially completed by the middle of
1999. The Company is in the process of receiving readiness evaluations from key
suppliers, however, the Company does not have sufficient information to fully
evaluate their readiness at this time. The estimated percentages of completion
are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Present June 30, 1999
New system installation 73% 90%
Old system modification 80% 100%
Operating systems 96% 98%
Hardware and Imbedded Chips 92% 97%
</TABLE>
Through 1998, the Company has incurred capital costs on the Year 2000 project of
approximately $1,018,000 and expenses of approximately $353,000. Capital costs
for 1999 are budgeted at $196,000 and expenses are expected to be $100,000.
Almost all of these costs are associated with the new information system
software and hardware which was purchased primarily to provide management with
information and tools to better manage the Company and serve its customers. The
expenses relating to Year 2000 compliance are expected to be paid from existing
capital and the Company does not expect these costs to have a material adverse
effect on its future results of operations, liquidity, or capital resources.
Management believes that the most likely "worst-case" scenario will involve the
failure of business partners or service providers to be compliant, thereby
potentially causing temporary business interruptions and possibly affecting the
Company's normal operations. Management does not expect such disruptions to be
long-term, or for the disruptions to materially affect the operations of the
Company. The Company cannot guarantee, however, that Year 2000 issues of all
business partners will be corrected in a timely manner or that the failure of
its business partners to correct these issues would not have a material adverse
effect on its future results of operations or financial condition.
Management expects to have personnel and resources available to deal with any
Year 2000 problems that might occur. The basic contingency plan is to have both
the old and the new information systems ready for the Year 2000, and be ready to
switch critical applications if necessary. Other contingency actions under
consideration are arranging for alternate suppliers of critical items,
increasing levels of critical materials, and developing manual workarounds. The
Company believes it is taking the necessary steps to prevent major interruptions
to its business resulting from the Year 2000 issues.
<PAGE>
Risk Factors
The following factors may materially impact the business, operations, sales,
profitability or financial condition of the Company and readers of this
Registration Statement should consider these factors carefully.
1. Competition.
The furniture industry is characterized by highly intense competition. The
Company competes with many nationally recognized and financially successful
manufacturers of high quality furniture. Many companies with which the
Company competes, both domestic and foreign, have substantially larger
production capacities, distribution networks and greater financial
resources than the Company.
The furniture industry is a segmented industry whereby design, quality and
price place each manufacturer into one or more competitive market niches.
The Company competes in the middle to upper-middle price market, which
normally requires a larger number of items in the product line, smaller
production lot sizes and higher inventory requirements to maintain a
competitive delivery cycle. Certain of the Company's competitors may have
greater financial and other resources than the Company and may have greater
sales or brand recognition than the Company in particular industry
segments. Competition could materially adversely affect the Company's
operating results by forcing it to reduce its sales prices, offer enhanced
credit terms, increase customer discounts or incentives, increase spending
for co-operative advertising arrangements with customers or provide other
services.
2. Industry Conditions.
The furniture industry historically has been cyclical, with operating
results fluctuating sharply with the business cycle of the national
economy. During economic downturns, the furniture industry tends to
experience longer periods of recession and greater declines than does the
general economy. The Company believes that the industry is influenced
significantly by economic conditions generally and more specifically by
consumer behavior and confidence, the level of personal discretionary
spending, housing activity, interest rates and credit availability. These
factors affect not only the ultimate consumer, but also furniture
retailers, the industry's primary direct customers. The cyclical nature of
the industry has contributed historically to fluctuations in the Company's
results of operations, and such fluctuations can be expected to occur in
the future.
Year 2000 Risks
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the
Company's results of operations, liquidity and financial condition. Due to
the general uncertainty inherent in the Year 2000 problem, resulting in
part from the uncertainty of the Year 2000 readiness of third-party
suppliers and customers, the Company is unable to determine at this time
whether the consequences of Year 2000 failures will have a material impact
on the Company's results of operations, liquidity or financial condition.
The Company's efforts are expected to significantly reduce the Company's
level of uncertainty about the Year 2000 problem and, in particular, about
the Year 2000 compliance and readiness of its material external agents. The
Company believes that, with the implementation of new business systems and
the completion of its projects as scheduled, the possibility of significant
interruptions of normal operations should be reduced.
<PAGE>
3. Governmental Regulations and Environmental Considerations.
The Company's operations must meet extensive federal, state and local
regulatory standards in the areas of safety, health and environmental
pollution controls. Historically, these standards have not had a material
adverse effect on the Company's sales or operations. Under the provisions
of the Clean Air Act Amendments of 1990 (the "CAA"), in December 1995, the
United States Environmental Protection Agency promulgated hazardous air
emission standards for the wood furniture industry. These regulations,
known as the National Emission Standards for Hazardous Air Pollutants
("NESHAPs"), require the Company to reduce emissions of certain volatile
organic compounds. The Company is not aware of any material violations of
any federal, state or local environmental regulations. The Company expects
these regulations to become even more stringent in the future and cannot
predict the costs or effects on its operations which will result from its
compliance with these regulations.
4. Dependence on Key Management Personnel.
The Company is highly dependent on the services of its present executive
officers. If any of these officers should die or otherwise leave the employ
of the Company or become inactive in the Company's business, the loss of
such officer could have a material adverse effect on the Company's results
of operations or business prospects.
5. Fluctuations in Price and Supply of Raw Materials.
The Company is dependent upon outside suppliers for all of its raw material
needs and, therefore, is subject to price increases and delays in receiving
supplies of such materials. An increase in demand for raw materials could
increase delivery times for supplies and possibly further affect prices. No
assurance can be given that the Company will continue to have available
necessary raw materials at a reasonable price or that any increases in raw
material costs would not have a material adverse effect on the Company.
6. Potential Stock Price Volatility
Prior to this registration, there has been one brokerage firm, Hilliard &
Lyons, Inc. in Louisville, Kentucky making a market in the Company's
shares. There can be no guarantee that this firm will continue to make a
market in the Company's shares, nor can there be any assurance that an
active trading market will develop or be sustained in its absence.
The market price of the Company's shares could be subject to wide
fluctuations in response to variations in operating results from quarter to
quarter, changes in earnings estimates by analysts, market conditions in
the industry and general economic conditions. Furthermore, the stock market
has experienced significant price and volume fluctuations unrelated to the
operating performance of particular companies. These market fluctuations
may have a material adverse effect on the market price of the Common
Shares.
7. Dividend Policy
The Company has traditionally paid five (5) cash dividends per year to
holders of its common shares. The amount of these dividends for 1997, 1998
and the first quarter of 1999 is reflected in Item 9, Market Price and
Dividends on the Registrants Common Equity and Related Stockholder Matters,
herein. The Board of Directors, however, is not bound in any manner to
continue such dividends. Any future determination as to the payment of
dividends will be made at the discretion of the Board of Directors and will
depend upon the Company's operating results, financial condition, capital
requirements, general business conditions and such other factors as the
Board of Directors deems relevant.
(Remainder of this page intentionally left blank.)
<PAGE>
Item 3. Properties
The following table sets forth certain information concerning the Company's
manufacturing facilities. All manufacturing facilities and properties listed
below are owned by the Company.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Approximate Size
Location Description In Sq. Ft. Acres
- -------- ----------- ---------- -----
Corydon, Indiana Corporate Office 236,681 63.07
& Manufacturing
New Salisbury, Indiana Manufacturing 185,004 91.72
Culpeper, Virginia Manufacturing 185,660 60.18
</TABLE>
The Corydon, Indiana plant is the original facility that the Company has
operated from since its incorporation in 1906. In 1965, the Culpeper, Virginia
plant was built, and its twin plant in New Salisbury, Indiana was built in 1973.
The two newest locations have not had any significant changes to the structure
or size of the buildings. The Company, as a whole, at the end of 1998, was
estimated to be at 95% capacity for a single shift, 65% for a double shift.
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<PAGE>
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information with respect to beneficial ownership
of Common Stock of the Company as of March 31, 1999 by (i) each person who is
known by the Company to be a beneficial owner of more than 5% of the outstanding
shares of Common Stock, (ii) each of the Company's directors (iii) each
Executive Officer identified in the table under Item 6 (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address Number of Shares Percent of
of Beneficial Owner Beneficially Owned Shares Owned
- ------------------- ------------------ ------------
Robert A. Heazlitt 453,780 7.7%
- ------------------
5770 Wulff Run Rd.
Cincinnati, OH 45233
Nancy Keller 359,172 6.1%
- ------------
7050 Old Hwy. 135 SW
Corydon, IN 47112
Robert W. Byrd (1) 191,214 2.3%
- ------------------
5509 Foxcroft Rd.
Prospect, KY 40059
Marvin C. Miller (2) 113,646 2.0%
- --------------------
2176 Hwy. 337 NW
Corydon, IN 47112
John C. Schenkenfelder 47,850 *
- ----------------------
2333 Village Dr.
Louisville, KY 40205
Steven W. Robertson (3) 36,205 *
- -----------------------
31 Autumn Hill
Prospect, KY 40059
Gregory E. Fischer 5,000 *
- ------------------
7410 Woodhill Valley Rd.
Louisville, KY 40241
Bradford T. Ray 1,700 *
- ---------------
c/o Steel Technologies
15418 Shelbyville Rd.
Louisville, KY 40245
Danny L. Utz (4) 11,873 *
- ----------------
3944 Crandall-Lanesville Rd.
Lanesville, IN 47136
<PAGE>
Ronald W. Humin 10,626 *
- ---------------
7601 Tallwood Rd.
Prospect, KY 40059
Philip L. Jacobs 495 *
- ----------------
c/o Evans Furniture
4515 Shelbyville Road
St. Matthews, KY 40207
John Heishman (5) 40,716 *
- -----------------
165 Williams St.
Corydon, IN 47112
Scott Armstrong (6) 30,790 *
- -------------------
231 Sky Park Dr.
Corydon, IN 47112
Dan Conway (7) 5,531 *
- --------------
387 Country Club East Dr.
Corydon, IN 47112
Chris Brown (8) 3,627 *
- ---------------
3106 Pebble Hill Ct.
Sellersburg, IN 47192
All Directors & Executive Officers
as a Group 499,273 8.6%
<FN>
* Less than 1%.
(1) Includes 128,393 shares owned by Mr. Byrd's wife, 9,000 shares
held in trust for his son, 6,000 shares held in trust for his
daughter, 6,000 shares held in trust for his grandson and
3,000 shares held in trust for his granddaughter.
(2) All Shares are held jointly by Mr. Miller with his wife.
(3) All shares are held jointly by Mr. Robertson with his wife.
(4) All shares are held jointly by Mr. Utz with his wife.
(5) All shares are held jointly by Mr. Heishman with his wife.
(6) All shares are held jointly by Mr. Armstrong with his wife.
(7) All shares are held jointly by Mr. Conway with his wife.
(8) Includes, 1,229 shares held jointly with his wife.
</FN>
</TABLE>
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<PAGE>
Item 5. Directors & Executive Officers
The following table sets forth-certain information regarding the directors and
executive officers of the Company as of March 31, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Director
Name Age Since Position
- ---- --- ----- --------
Robert W. Byrd (1) 63 1974 Chairman, President, CEO
& Director
Marvin C. Miller 59 1969 V.P. Information Systems, Secretary
& Director
John C. Schenkenfelder (1) 46 1992 Director
Steven W. Robertson 42 1990 Senior V.P. of Marketing & Sales,
& Director
Gregory E. Fischer 40 1998 Director
Bradford T. Ray 40 1997 Director
Danny L. Utz (1) 50 ---- V.P. Finance & Treasurer
Ronald W. Humin 60 1991 Director
Philip L. Jacobs 64 1984 Director
John Heishman 56 ---- V.P. Plant Operations
Scott Armstrong 36 ---- V.P. Marketing
Dan Conway 40 ---- V.P. Personnel
Chris Brown 39 ---- V.P. Engineering
<FN>
(1) Member of the Pension Investment Committee of the Board of Directors
</FN>
</TABLE>
Robert W. Byrd has served as Chairman of the Board since 1998 and as President
and Chief Executive Officer of the Company since July 1988. Mr. Byrd served as
Executive Vice President from January 1986 to July 1988 and has been employed
with Keller since 1974.
Marvin C. Miller has served as Vice President of Information Systems since
January 1996. Mr. Miller was Vice President of Engineering from January 1976 to
January 1996. Mr. Miller served as Plant Manager for New Salisbury from February
1974 to January 1976 and also at Corydon from February 1969 to February 1974.
Mr. Miller has worked for Keller since April 1964. At the April 23, 1999 meeting
of the Board of Directors, the Board created the position of Chief Operating
Officer which Mr. Miller will fill beginning in May of 1999.
John C. Schenkenfelder has served as First Vice President of Investments with
Paine Webber in Louisville, KY since 1990. He was previously employed with
Prudential Bache from 1980 to 1990.
Steven W. Robertson has served as Senior Vice President of Marketing and Sales
since December 1997. Mr. Robertson was V.P. of Marketing from 1989 to 1997. From
1986 to 1989 he served as Sales & Product Manager and was Product Engineer from
1981 to 1986. Mr. Robertson started with Keller in 1979 as a production
supervisor.
Gregory E. Fischer was a co-founder and President of SerVend International, Inc.
until the sale of the company to Monitowoc Company in 1998. Mr. Fischer was
employed with Monitowoc Company until his retirement in March of 1999.
Bradford T. Ray is currently President and Chief Operating Officer of Steel
Technologies, Inc. Mr. Ray has also been a director of Steel Technologies, Inc.
since 1989. He has been employed with Steel Technologies since 1981.
<PAGE>
Danny L. Utz has served as Vice President of Finance since January 1992. Mr. Utz
had been Treasurer/Controller from 1988 to 1992. He served as Office Manager
from 1983 to 1988. Mr. Utz started with Keller in 1973 as Accounts Payable
Manager and General Accountant.
Ronald W. Humin is President of Flexible Materials which manufactures flexible
veneer sheets, panels and edgebanding products which are sold to the furniture
manufacturing industry. Mr. Humin has been employed with Flexible Materials for
the past twenty-three years.
Philip L. Jacobs has served as President of Evans Furniture in Louisville, KY
since 1975, and has been employed with Evans Furniture since 1965.
John Heishman was promoted to Vice President of Manufacturing in 1998. He was
V.P. of Operations from 1996 to 1998. Mr. Heishman served as Plant Manager of
New Salisbury from 1976 to 1996. He had started as an employee with the Company
in 1961 in the Assembly Department and was promoted to Production Supervisor in
1965 and then to Superintendent in 1974.
Scott Armstrong has been Vice President of Marketing since 1996. Mr. Armstrong
served as Marketing Sales Manager from 1987 to 1994. From 1994 to 1996 he served
as Assistant Vice President of Marketing. He started with the Company in 1985 as
a Production Supervisor at Corydon.
Dan Conway has served as Vice President of Personnel since 1996. Mr. Conway was
Personnel Manager from 1988 to 1996 and started with the Company in 1984 as a
Production Supervisor. From 1982 to 1984, Mr. Conway was employed with John
Hancock Company as a Personal Financial Planning Agent.
Chris Brown has served as Vice President of Engineering since November 1996. He
was Plant Engineer from 1993 to November 1996. Mr. Brown started with the
Company in 1982 as Maintenance Manager/Project Engineer at the New Salisbury
Plant and was promoted to Process Engineer in 1987.
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<PAGE>
Item 6. Executive Compensation
There were a total of 10 executive officers for Keller Manufacturing in 1998.
The following table provides certain summary information concerning compensation
paid to or accrued by the Company's Chief Executive Officer and the four (4)
highest earning executive officers (the "Named Executive Officers") for all
services rendered in all capacities to the Company during the fiscal year ended
December 31, 1998.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Annual Compensation Long Term Compensation Awards
Name and Principal Other Annual Restricted
Position Year Salary ($) Bonus ($)(1) Compensation ($)(2) Stock Awards($)
- -------- ---- ---------- ------------ ------------------- ---------------
Robert W. Byrd 1998 $233,718 $159,257 $8,750 $18,359
CEO
John W. Hoback(3) 1998 $102,654 $84,475 $7,500 $22,108
VP Manufacturing
John Heishman 1998 $119,456 $77,550 $24,512
VP Plant Operations
Steven Robertson 1998 $101,261 $74,780 $7,500 $18,359
VP Marketing &
Sales
Marvin C. Miller 1998 $102,654 $72,704 $7,500 $18,310
VP Information
Systems
<FN>
(1) Reflects awards in both cash and Company stock
(2) Represents compensation paid to each individual as a Director of the
Company
(3) John W. Hancock retired from his positions as an executive officer and
director, effective as of December 31, 1998
</FN>
</TABLE>
Pension Plan Benefits
All executives were eligible for and were participants in 1998 in The Keller
Manufacturing Company, Inc. Employees' Pension Plan. An executive's retirement
benefit under the plan at normal retirement age is determined by the following
formula: 2/3 of 1% of the average monthly compensation (determined by taking the
five (5) highest annual earnings), multiplied by the number of years of service
with the Company; in addition, each Named Executive Officer who was a
participant in 1990 accrues a benefit of 1.5% of his or her monthly
compensation. The following are the annual retirement benefits payable upon
normal retirement accrued for each Named Executive Officer as of December 31,
1998, as determined by the actuaries for the plan:
<TABLE>
<CAPTION>
<S> <C>
Robert W. Byrd $41,073
John W. Hoback $35,314
John Heishman $50,636
Steven Robertson $46,039
Marvin C. Miller $44,748
</TABLE>
<PAGE>
Employment Agreements
The Company has no employment agreements with any of its Executive Officers.
Director Compensation
(1) There is a payment of $1,500.00 per meeting for each director that is
present at any such meeting, including a special year end meeting.
(2) There is a quarterly payment of $250.00 for each member of the Investment
Pension Program that attends quarterly meetings, including a special year
end meeting.
Stock Incentive Plans
A. Equity Incentive Plan
The Company maintains several long-term incentive award programs to reward
outstanding performance at various levels of employment. The awards consist of
stock only or some combination of stock and cash bonuses. The Company
anticipates that all of the various incentive programs will be combined into one
omnibus equity incentive plan called The Keller Manufacturing Co., Inc. Equity
Incentive Plan (the "Equity Plan"). The Equity Plan will be presented at the
July 23, 1999, meeting of the Board of Directors and, if approved, will become
effective immediately. All awards under the Equity Plan and its sub-programs,
each of which is discussed below, are approved by the Board of Directors.
Under the Board of Directors' Stock Bonus Awards Plan ("Directors Award"),
division heads, plant managers, and members of the Board of Directors are
eligible for stock bonus awards of up to 16,000 shares of common stock per year.
The Directors Award is intended to (i) reward managers and Board members for
outstanding measurable performance, and (ii) reward imaginative and effective
managers and Board members, and (iii) encourage others to similar performance.
The performance awarded must have resulted in a savings or a contribution of at
least $500,000 which performance is measured over a period not greater than four
(4) years.
The Bill Keller Achievement Award Program ("Keller Award") is granted to those
middle managers who make outstanding contributions to profit, growth and the
well being of the Company. Middle managers can earn stock awards valued at up to
$5,000 per year, with an annual limit of $10,000 worth of shares of Company
common stock.
The Keller Manufacturing Company, Inc. Incentive Program for Executive Personnel
("Executive Award") provides additional compensation to key executives whose
efforts are a significant factor in the profitability of the Company. Key
executives are those who have authority and responsibility for the major
functions of the organization and include the following positions:
Chairman of the Board
Chief Executive Officer
President
Vice President - Manufacturing
Vice President - Engineering
Vice President - Marketing
Vice President - Finance and Treasurer
Plant Manager - Corydon
Plant Manager - Culpeper
Plant Manager - New Salisbury
<PAGE>
The recipient of the Executive Award receives seventy-five percent (75%) of the
award in cash and twenty-five percent (25%) in Company common stock. The awards
are made in proportion to the qualifying executives' base salaries.
The Keller Manufacturing Company, Inc. Incentive Program for Key Middle
Management Personnel ("Middle Management Award") rewards middle managers who
make major contributions to the success of the Company. A committee consisting
of the vice presidents of the Company's major functions select a group of middle
managers to participate in the program based on an evaluation of their
performance. The committee also determines the amount of individual awards.
Eighty percent (80%) of the Middle Management Award is paid in Company Stock,
while twenty percent (20%) is paid in cash.
B. Stock Option Plan
On October 30, 1998, the Board of Directors approved The Keller Manufacturing
Company, Inc. Craftsman Stock Option Plan (the "Option Plan"), which will become
effective upon the filing of this Registration Statement. The purpose of the
Option Plan is to provide all employees of the Company with incentives that link
their personal interests with the long-term financial success of the Company.
All employees are eligible for non-qualified stock options, which will be
granted annually according to the following formula:
<TABLE>
<CAPTION>
<S> <C>
Shares/Year
-----------
Hourly Associates 50
Office Associates 50
Sales Associates 100
Salary Associates 100
Corporate Associates 150
Corporate Vice President Associates 250
Plant Managers Associates 250
Associates also Board Members 250
Corporate President 500
Chief Executive Officer 500
Chairman of the Board 500
</TABLE>
An individual who is both an employee and a Director will be granted options
based on his or her status as both employee and Director.
The Board of Directors has reserved 200,000 shares of the Company's Common Stock
for issuance under the Option Plan. The Option Plan will terminate not later
than January 1, 2004. A Committee will be appointed by the Board of Directors to
administer the Plan.
<PAGE>
Item 7. Certain Relationships and Related Transactions
Philip L. Jacobs, a director, is the President of Evans Furniture in Louisville,
Kentucky. Evans Furniture purchased $315,107 in furniture from the Company in
1998.
John C. Schenkenfelder, a director, is First Vice President of Investments with
Paine Webber in Louisville, Kentucky. Paine Webber handled $959,053 in purchases
and $214,527 in sales for the Company's Pension Investment Fund in 1998.
(Remainder of this page intentionally left blank.)
<PAGE>
Item 8. Legal Proceedings
In CLARK V. THE KELLER MANUFACTURING COMPANY, INC. AND RAY MENEFEE, filed on
December 29, 1998, in the United States District Court for the Eastern District
of Virginia, Richmond Division, the plaintiff claims racial harassment and
intentional infliction of emotional distress by the Company's employees. The
plaintiff seeks relief in the amount of $100,000 in compensatory damages, and
$1,000,000 in punitive damages, together with all costs and attorney's fees. In
BROWN V. THE KELLER MANUFACTURING COMPANY, INC., filed on September 30, 1998, in
the United States District court for the Southern District of Indiana, the
plaintiff claims sexual harassment by a Company employee, negligent retention
and supervision by the Company, negligent infliction of emotional distress,
constructive discharge and retaliatory actions by the Company in violation of
her rights protected by Title VII of the Civil Rights Act of 1964, as amended by
the Civil Rights Act of 1991. The plaintiff seeks compensatory damages,
consequential damages and punitive damages in such amount as to be determined at
trial, together with costs and attorney's fees. The Company intends to
vigorously contest these claims and believes that the outcome of the above
actions will not have a material adverse effect on its business, operations or
financial condition.
In addition to matters described in the foregoing paragraph, the Company is
involved in routine litigation incidental to the conduct of its business. The
Company believes that the outcome of these routine matters will not have a
material adverse effect on its business, operations or financial condition.
(Remainder of this page intentionally left blank.)
<PAGE>
Item 9. Market Price of and Dividends on the Registrants Common Equity and
Related Stockholder Matters
The Company's Common Stock has been traded over-the-counter through Hilliard &
Lyons, Inc. in Louisville, Kentucky. The following prices have been provided by
Hilliard & Lyons, Inc. based upon actual trades (selling price during the
applicable period).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1st Qtr 2nd Qtr. 3rd Qtr. 4th Qtr.
High Low High Low High Low High Low
--------------- ------------- ------------ --------------
1999 13 9/16 9 3/8
1998 18 2/3 16 1/2 18 14 5/8 15 11 1/2 12 5/8 10 1/4
1997 13 3/4 12 1/2 14 12 14 12 22 1/4 18 1/2
</TABLE>
As of December 31, 1998, there were 522 record shareholders of the Company's
Common Stock. As of March 31, 1999, there were 526 record shareholders of the
Company's Common Stock.
<TABLE>
<CAPTION>
Quarterly Dividends Per Share
<S> <C> <C> <C> <C> <C>
1st Qtr 2nd Qtr. 3rd Qtr. 4th Qtr. Total
--------- ------- --------- -------- -----
1999 .035
1998 .03 .03 .03 .06 .15
1997 .027 .027 .027 .054 .133
</TABLE>
Dividends generally are determined on an annual basis by the Board of Directors.
The following table shows the dividends declared and paid for each quarter of
the last two fiscal years and the first quarter of 1999.
The Company has traditionally paid quarterly dividends and a fifth special
dividend at year end. The Company expects this practice to continue, although
these dividends are payable at the discretion of the Board of Directors.
(Remainder of this page intentionally left blank.)
<PAGE>
Item 10. Recent Sales of Unregistered Securities
The Company has issued the following securities during the three-year period
ended April 30, 1999:
1) An aggregate of 28,166 Common Shares were issued to 78 Company upper and
middle managers as a stock bonus award on February 3, 1999, pursuant to the
Company's Executive Award and Middle Management Award programs. The
issuance of these Common Shares was not subject to registration under the
Securities Act as this transaction did not constitute a "sale" under the
Securities Act.
2) An aggregate of 2,300 Common Shares were issued to 23 Company middle
managers as a stock bonus award on January 22, 1999, pursuant to the
Company's Keller Award. The issuance of these Common Shares was not subject
to registration under the Securities Act as this transaction did not
constitute a "sale" under the Securities Act.
3) An aggregate of 300 Common Shares were issued to 1 Company upper manager as
a stock bonus award on January 22, 1999, pursuant to the Company's
Directors Award. The issuance of these Common Shares was not subject to
registration under the Securities Act as this transaction did not
constitute a "sale" under the Securities Act.
4) An aggregate of 22,219 Common Shares were issued to 73 Company middle and
upper managers as a stock bonus award in March 1998, pursuant to the
Company's Executive Award and Middle Management Award programs. The
issuance of these Common Shares was not subject to registration under the
Securities Act as this transaction did not constitute a "sale" under the
Securities Act.
5) An aggregate of 1,911 Common Shares were issued to 18 Company middle
managers as a stock bonus award on January 23, 1998, pursuant to the
Company's Keller Award. The issuance of these Common Shares was not subject
to registration under the Securities Act as this transaction did not
constitute a "sale" under the Securities Act.
6) An aggregate of 1,200 Common Shares were issued to 2 Company upper managers
as a stock bonus award on January 23, 1998, pursuant to the Company's
Directors Award. The issuance of these Common Shares was not subject to
registration under the Securities Act as this transaction did not
constitute a "sale" under the Securities Act.
7) An aggregate of 3,750 Common Shares were issued to 3 Company directors and
upper managers as a stock bonus award on July 31, 1997, pursuant to the
Company's Directors Award. The issuance of these Common Shares was not
subject to registration under the Securities Act as this transaction did
not constitute a "sale" under the Securities Act.
8) An aggregate of 38,751 Common Shares were issued to 70 Company middle and
upper managers as a stock bonus award in March 1997, pursuant to the
Company's Executive Award and Middle Management Award programs. The
issuance of these Common Shares was not subject to registration under the
Securities Act as this transaction did not constitute a "sale" under the
Securities Act.
9) An aggregate of 4,020 Common Shares were issued to 14 Company middle
managers as a stock bonus award on January 24, 1997, pursuant to the
Company's Keller Award. The issuance of these Common Shares was not subject
to registration under the Securities Act as this transaction did not
constitute a "sale" under the Securities Act.
<PAGE>
10) An aggregate of 11,769 Common Shares were issued to 11 Company directors
and upper managers as a stock bonus award on July 30, 1996, pursuant to the
Company's Directors Award. The issuance of these Common Shares was not
subject to registration under the Securities Act as this transaction did
not constitute a "sale" under the Securities Act.
11) An aggregate of 45,636 Common Shares were issued to 69 Company middle and
upper managers as a stock bonus award in March 1996, pursuant to the
Company's Executive Award and Middle Management Award programs. The
issuance of these Common Shares was not subject to registration under the
Securities Act as this transaction did not constitute a "sale" under the
Securities Act.
12) An aggregate of 4,800 Common Shares were issued to 15 Company middle
managers as a stock bonus award on January 26, 1996, pursuant to the
Company's Keller Award. The issuance of these Common Shares was not subject
to registration under the Securities Act as this transaction did not
constitute a "sale" under the Securities Act.
13) 22,500 Common Shares were sold to The Keller Pension Account on April 2,
1996, for $97,500. The sale of these Common Shares was exempt from
registration under the Securities Act of 1933, as amended, (the "Securities
Act") by reason of Rule 504 of Regulation D of the Securities and Exchange
Commission and Section 3(b) thereof.
The above share information reflects a 2 for 1 stock split effective as of
February 14, 1997 and a 3 for 2 stock split effective as of February 6, 1998.
(Remainder of this page intentionally left blank.)
<PAGE>
Item 11. Description of Registrant's Securities to be Registered
The authorized capital stock of the Company consists of 40 million Common
Shares, 5,851,767 of which were outstanding as of December 31, 1998, and held of
record by 522 shareholders.
The following summary of certain provisions of the Common Shares does not
purport to be complete and is subject to, and qualified in its entirety by, the
provisions of the Restated Articles of Incorporation and Bylaws of the Company,
which are included as an exhibit to this Registration Statement, and by the
provisions of applicable law.
Common Shares
The Company's Articles of Incorporation authorize the issuance of up to 40
million Common Shares. Holders of Common Shares are entitled to one vote for
each Common Share held on all matters submitted to a vote of shareholders and do
not have cumulative voting rights. Accordingly, holders of a majority of the
Common Shares entitled to vote in any election of directors may elect all of the
directors standing for election. The Company's Board of Directors are elected
for a staggered term, with three groups of directors, each group consisting of
one-third of the total number of directors, with each director serving a three
year term of office. Holders of Common Shares are entitled to receive ratably
such dividends, if any, as may be declared by the Company's Board of Directors
out of funds legally available therefor. Upon the liquidation, dissolution or
winding up of the Company, the holders of Common Shares are entitled to receive
ratably the net assets of the Company available after the payment of all debts
and other liabilities. Holders of Common Shares have no preemptive subscription,
redemption or conversion rights. The outstanding Common Shares are, when issued
and paid for, fully paid and nonassessable.
Certain Provisions of Indiana Law
As an Indiana corporation, the Company is governed by the provisions of the
Indiana Business Corporation Law ("BCL").
Voting Requirements for Certain Business Combinations. Chapter 43 of the BCL
establishes a five-year period beginning with the acquisition of 10% of the
voting power of the outstanding voting shares of a "resident domestic
corporation" (which definition includes the Company) during which certain
business transactions involving the acquiring shareholder are prohibited unless,
prior to the acquisition of such interest, the board of directors approves the
acquisition of such interest or the proposed business combination. After the
five-year period expires, a business combination involving the acquiring
shareholder may take place only upon approval by a majority of the disinterested
shares, or if the other shareholders receive a formula price based on the higher
of the highest price paid by the acquiring shareholder or the market value at
the time of the announcement of the proposed transaction, whichever is higher.
The minimum price for shares other than common shares is to be determined under
criteria similar to that for common shares, except the minimum price as defined
cannot be less than the highest preferential amount to which the shares are
entitled in the event of any liquidation, dissolution or winding up of the
corporation.
Changes of Control. Under Chapter 42 of the BCL, with certain exceptions, a
person proposing to acquire or acquiring voting shares of an "issuing public
corporation" (which definition includes only corporations having at least 100
shareholders, principal place of business, office or substantial assets within
Indiana, and in which more than 10% of its shareholders are Indiana residents,
10% of its shares are owned by Indiana residents, or which have 10,000 or more
shareholders who are Indiana residents) sufficient to entitle that person to
exercise voting power within any of the ranges of one-fifth to one-third of all
voting power, more than one-third but less than one-half of all voting power, or
a majority or more of all voting power (a "control share acquisition") may give
a notice of such fact to the corporation containing certain specified data. The
acquiring person may request that the directors call a special meeting of
shareholders for the purpose of considering the voting rights to be accorded the
shares so acquired ("control shares"), and the control shares have voting rights
only to the extent granted by a resolution approved by the shareholders. The
resolution must be approved by a majority of the votes entitled to be cast by
each voting group entitled to vote separately on the proposal, excluding shares
held by the acquiring person and shares held by management. Control shares as to
which the required notice has not been filed and any control shares not accorded
full voting rights by the shareholders may be redeemed at fair market value by
the corporation if it is authorized to do so by its articles of incorporation or
bylaws before a control share acquisition has occurred. The Company has not
adopted such a provision in its Articles or Bylaws. Shareholders are entitled to
dissenter's rights with respect to the control share acquisition in the event
that the control shares are accorded full voting rights and the acquiring person
has acquired control shares with a majority of all voting power.
<PAGE>
Other Provisions of the BCL. The BCL specifically authorizes directors, in
considering the best interest of a corporation, to consider both the long- and
short-term interests of the corporation, as well as the effects of any action on
shareholders, employees, suppliers and customers of the corporation, and
communities in which offices or other facilities of the corporation are located
and any other factors the directors consider pertinent. Under the BCL, directors
are not required to approve a proposed business combination or other corporate
action if they determine in good faith that the action is not in the best
interest of the corporation. In addition, the BCL states that directors are not
required to redeem any rights under or render inapplicable a shareholder rights
plan or to take or decline to take any other action solely because of the effect
such action or inaction might have on a proposed change of control of the
corporation or the amounts to be paid to shareholders upon such a change of
control. The Delaware Supreme Court has held that defensive measures in response
to a potential takeover must be "reasonable in relation to the threat posed."
The BCL explicitly provides that the different or higher degree of scrutiny
imposed in Delaware and certain other jurisdictions upon director actions taken
in response to potential changes in control will not apply.
The BCL requires directors to discharge their duties, based on the facts then
known to them, in good faith, with the care an ordinary, prudent person in a
like position would exercise under similar circumstances and in a manner the
director reasonably believes to be in the best interest of the corporation. A
director is not liable for any action taken as a director or for failure to take
any action unless the director has breached or failed to perform the duties of
the director's office in compliance with the foregoing standard and the breach
or failure to perform constitutes willful misconduct or recklessness.
Transfer Agent
The Transfer Agent for the Shares is Fifth Third Bank of Cincinnati, Ohio. Its
telephone number is 1-800-336-6782.
(Remainder of this page intentionally left blank.)
<PAGE>
Item 12. Indemnification of Directors and Officers
The BCL, the provisions of which govern the Company, empowers an Indiana
Corporation to indemnify present and former directors, officers, employees, or
agents or any person who may have served at the request of the corporation as a
director, officer, employee, or agent of another corporation ("Eligible
Persons") against liability incurred in any proceeding, civil or criminal, in
which the Eligible Person is made a party by reason of being or having been in
any such capacity, or arising out of his status as such, if the individual acted
in good faith and reasonably believed that (a) the individual was acting in the
best interests of the corporation, or (b) if the challenged action was taken
other than in the individual's official capacity as an officer, director,
employee or agent, the individual's conduct was at least not opposed to the
corporation's best interests, or (c) if in a criminal proceeding, either the
individual had reasonable cause to believe his conduct was lawful or no
reasonable cause to believe his conduct was unlawful.
The BCL further empowers a corporation to pay or reimburse the reasonable
expenses incurred by an Eligible Person in connection with the defense of any
such claim, including counsel fees; and, unless limited by its articles of
incorporation, the corporation is required to indemnify an Eligible Person
against reasonable expenses if he is wholly successful in any such proceeding,
on the merits or otherwise. Under certain circumstances, a corporation may pay
or reimburse an Eligible Person for reasonable expenses prior to final
disposition of the matter. Unless a corporation's articles of incorporation
otherwise provide, an Eligible Person may apply for indemnification to a court
which may order indemnification upon a determination that the Eligible Person is
entitled to mandatory indemnification for reasonable expense or that the
Eligible Person is fairly and reasonably entitled to indemnification in view of
all the relevant circumstances without regard to whether his actions satisfied
the appropriate standard of conduct.
Before a corporation may indemnify any Eligible Person against liability or
reasonable expenses under the BCL, a quorum consisting of directors who are not
parties to the proceeding must (1) determine that indemnification is permissible
in the specific circumstances because the Eligible Person met the requisite
standard of conduct (2) authorize the corporation to indemnify the Eligible
Person and (3) if appropriate, evaluate the reasonableness of expenses for which
indemnification is sought. If it is not possible to obtain a quorum of
uninvolved directors, the foregoing action may be taken by a committee of two or
more directors who are not parties to the proceeding, special legal counsel
selected by the Board or such a committee, or by the shareholders of the
corporation.
In addition to the foregoing, the BCL states that the indemnification it
provides shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any provision of the articles of incorporation
or bylaws, resolution of the board of directors or shareholders, or any other
authorization adopted after notice by a majority vote of all the voting shares
then issued and outstanding. The BCL also empowers an Indiana corporation to
purchase and maintain insurance on behalf of any Eligible Person against any
liability asserted against or incurred by him in any capacity as such, or
arising out of his status as such, whether or not the corporation would have had
the power to indemnify him against such liability.
See Section 7.1 of the Restated Articles of Incorporation of the Company
included with this Registration Statement as Exhibit 3.01 for a further
description of the Company's rights and obligations to indemnify its officers
and directors.
The Company has purchased an Executive Protection Insurance Policy which covers
certain Losses which officers and directors become legally obligated to pay on
account of certain claims for wrongful acts committed, attempted, or allegedly
committed or attempted by such officer or director within the periods covered by
the policy. The Executive Protection Insurance Policy has a $50,000 deductible
for each Loss and a $5,000,000 limitation for each loss and each policy period.
(Remainder of this page intentionally left blank.)
<PAGE>
Item 13. Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
Board of Directors
The Keller Manufacturing Company, Inc. and Subsidiary
Corydon, Indiana
We have audited the accompanying consolidated balance sheets of The Keller
Manufacturing Company, Inc. and subsidiary as of December 31, 1998 and 1997, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of The Keller
Manufacturing Company, Inc. and subsidiary as of December 31, 1998 and 1997 and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1998 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
January 27, 1999
<PAGE>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<S> <C> <C>
1998 1997
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,985,786 $ 3,902,289
Accounts receivable, less allowance for doubtful accounts of
$291,000 (1998) and $337,000 (1997) 6,284,517 5,815,324
Inventories 16,066,490 15,178,611
Current deferred tax asset 259,533 221,712
Income taxes receivable 278,862 93,584
Other current assets 536,924 41,764
----------- -----------
Total current assets 27,412,112 25,253,284
PROPERTY, PLANT AND EQUIPMENT - net 9,798,174 8,707,855
INVESTMENT SECURITY AVAILABLE FOR SALE 500,000
PREPAID PENSION COSTS 1,760,759 1,584,469
----------- -----------
TOTAL $39,471,045 $35,545,608
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,825,343 $ 2,210,098
Commissions, salaries and withholdings 1,582,327 1,777,379
Accrued vacation 435,591 492,000
Other current liabilities 1,410,341 1,605,397
----------- -----------
Total current liabilities 5,253,602 6,084,874
LONG-TERM LIABILITIES -
Deferred income taxes 1,085,054 1,018,683
----------- -----------
Total liabilities 6,338,656 7,103,557
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - no par value, authorized, 40,000,000 shares 696,825 608,937
Retained earnings 32,435,564 27,833,114
----------- -----------
Total stockholders' equity 33,132,389 28,442,051
----------- -----------
TOTAL $39,471,045 $35,545,608
=========== ===========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<S> <C> <C> <C>
1998 1997 1996
NET SALES $60,144,243 $58,736,617 $54,168,278
COST OF SALES 43,076,105 40,955,515 38,948,486
----------- ----------- -----------
GROSS PROFIT 17,068,138 17,781,102 15,219,792
SELLING, GENERAL AND ADMINISTRATIVE 7,897,383 8,834,796 7,561,206
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 9,170,755 8,946,306 7,658,586
INCOME TAXES 3,514,750 3,448,011 2,988,903
----------- ----------- -----------
NET INCOME $ 5,656,005 $ 5,498,295 $ 4,669,683
=========== =========== ===========
NET INCOME PER SHARE OF COMMON STOCK,
basic and dilutive -
based on weighted average number of shares
outstanding of 5,853,954 (1998), 5,847,325 (1997)
and 5,883,603 (1996) $ 0.97 $ 0.94 $ 0.79
=========== =========== ===========
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
(Remainder of this page intentionally left blank.)
<PAGE>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<S> <C> <C> <C> <C>
Common Stock
--------------------------- Retained
Shares Amount Earnings Total
BALANCE, JANUARY 1, 1996 $5,928,828 $1,200,367 $19,424,767 $20,625,134
Net income 4,669,683 4,669,683
Cash dividends declared ($.14 per share) (824,442) (824,442)
Stock issued as awards 16,869 73,949 73,949
Stock issued under employee
incentive plan 45,636 205,362 205,362
Redemption of common stock (158,514) (728,603) (728,603)
Sale of common stock 22,500 97,125 97,125
----------- ----------- ------------ ------------
BALANCE, DECEMBER 31, 1996 5,855,319 848,200 23,270,008 24,118,208
Net income 5,498,295 5,498,295
Cash dividends declared ($.16 per share) (935,189) (935,189)
Stock issued as awards 7,770 53,495 53,495
Stock issued under employee
incentive plan 38,751 232,506 232,506
Redemption of common stock (59,905) (525,264) (525,264)
----------- ----------- ------------ ------------
BALANCE, DECEMBER 31, 1997 5,841,935 608,937 27,833,114 28,442,051
Net income 5,656,005 5,656,005
Cash dividends declared ($.18 per share) (1,053,555) (1,053,555)
Stock issued as awards 3,111 38,369 38,369
Stock issued under employee
incentive plan 22,219 273,960 273,960
Redemption of common stock (15,498) (224,441) (224,441)
----------- ----------- ------------ ------------
BALANCE, DECEMBER 31, 1998 $5,851,767 $ 696,825 $32,435,564 $33,132,389
=========== =========== ============ ============
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
(Remainder of this page intentionally left blank.)
<PAGE>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<S> <C> <C> <C>
1998 1997 1996
OPERATING ACTIVITIES:
Net income $ 5,656,005 $ 5,498,295 $ 4,669,683
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 1,539,708 1,335,774 1,122,454
Deferred income taxes 28,550 (28,549) 201,185
Common stock awards 312,329 286,001 279,311
Changes in assets and liabilities:
Accounts receivable (469,193) 36,478 (626,810)
Inventories (887,879) (1,678,870) (740,608)
Other current assets (495,160) 3,079 (1,215)
Prepaid pension costs (176,290) (244,148) (469,093)
Accounts payable (384,755) 273,795 (489,856)
Commissions, salaries and withholdings (195,052) 47,318 443,999
Other current liabilities (251,465) (263,783) (103,449)
Income taxes receivable (185,278) (11,736) (376,803)
------------ ------------ ------------
Net cash provided by operating activities 4,491,520 5,253,654 3,908,798
------------ ------------ ------------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (2,630,027) (2,199,514) (2,118,816)
Purchase of investment security available for sale (500,000)
------------ ------------ ------------
Net cash used in investing activities (3,130,027) (2,199,514) (2,118,816)
------------ ------------ ------------
FINANCING ACTIVITIES:
Purchases of common stock (224,441) (525,264) (728,603)
Sale of common stock 97,125
Dividends paid (1,053,555) (896,811) (788,895)
------------ ------------ ------------
Net cash used in financing activities (1,277,996) (1,422,075) $1,420,373)
------------ ------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 83,497 1,632,065 369,609
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,902,289 2,270,224 1,900,615
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,985,786 $ 3,902,289 $ 2,270,224
============ ============ ============
CASH PAID DURING THE YEAR FOR:
Interest $ 9,059 $ 7,395 $ 2,292
============ ============ ============
Income taxes $ 3,602,000 $ 3,506,100 $ 3,030,155
============ ============ ============
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
- --------------------------------------------------------------------------------
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Business - The Company operates in one business segment, which is the
manufacturing of dining room and bedroom furniture. Sales are made to retailers
located in approximately 30 states across the United States on an unsecured
basis.
Basis of Presentation - The consolidated financial statements include the
accounts of The Keller Manufacturing Company, Inc. and its wholly-owned
subsidiary, Keller Dedicated Transportation Company. All significant
intercompany transactions and balances have been eliminated.
Revenue Recognition - Sales are recorded when goods are delivered to the
customer. The Company provides for estimated customer returns and allowances by
reducing sales in the period of the sale.
Significant Customers - The Company had one significant customer, which
accounted for $7,727,102 (13%), $9,937,000 (17%) and $7,997,615 (15%) of net
sales and percentage of total net sales in 1998, 1997 and 1996, respectively.
Cash and Cash Equivalents - Cash and cash equivalents are defined as cash in
banks and investment instruments having maturities of three months or less from
their acquisition date.
Inventories - Inventories are stated at the lower of cost (first-in, first-out
method) or market.
Property, Plant, and Equipment - Property, plant, and equipment are recorded at
cost. Depreciation is provided by the straight-line method over the estimated
useful lives of the depreciable assets. Estimated lives are 30-40 years for
buildings, and 3-15 years for machinery and equipment.
Investment - The investment security is an industrial revenue bond and is
classified as available for sale. The investment is reported at cost, which
approximates its fair value. The interest rate on the bond as of December 31,
1998 was 5.75%.
Income Taxes - The Company follows SFAS 109 - "Accounting for Income Taxes,"
which requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
consolidated financial statements or income tax return. In estimating future tax
consequences, SFAS 109 generally considers all expected future events other than
enactments of changes in the tax laws or rates.
Fair Value of Financial Instruments - The fair values of the Company's current
assets and current liabilities approximate their reported carrying values, due
to their short-term maturities.
Recent Accounting Pronouncements - In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standard No. 133
(SFAS 133), "Accounting for Derivative Instruments and Hedging Activities." This
statement is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. The impact of adoption of this pronouncement is not expected to
be material to the Company's financial position or results of operations.
Use of Estimates - Financial statements prepared in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements, and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from these estimates.
<PAGE>
2. INVENTORIES
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Raw materials $ 6,801,656 $ 6,108,409
Work in process 6,488,392 5,330,597
Finished goods 2,776,442 3,739,605
----------- -----------
Total $16,066,490 $15,178,611
=========== ===========
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Land $ 338,835 $ 338,835
Land improvements 515,177 432,845
Buildings 6,633,339 6,305,498
Machinery and equipment 11,985,601 9,848,751
Construction in progress 83,004
------------ ------------
Total cost 19,555,956 16,925,929
Less accumulated depreciation (9,757,782) (8,218,074)
------------ ------------
Net $ 9,798,174 $ 8,707,855
============ ============
</TABLE>
4. LINES OF CREDIT
At December 31, 1998, the Company has line of credit agreements that provide for
borrowings up to an aggregate of $5,000,000, with variable interest rates based
on prime (7.75% at December 31, 1998), through July 31, 1999. There were no
borrowings on the line of credit agreements at December 31, 1998 and 1997.
<PAGE>
5. INCOME TAXES
Income tax expense consists of:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
Currently payable:
Federal $2,963,270 $2,955,076 $2,369,560
State 522,930 521,484 418,158
---------- ---------- ----------
Total currently payable 3,486,200 3,476,560 2,787,718
---------- ---------- ----------
Deferred:
Federal $ 24,268 $ (24,267) $ 171,007
State 4,282 (4,282) 30,178
---------- ---------- ----------
Total deferred 28,550 (28,549) 201,185
---------- ---------- ----------
Total $3,514,750 $3,448,011 $2,988,903
========== ========== ==========
</TABLE>
The tax effect of temporary differences that give rise to significant portions
of the net deferred tax liability at December 31 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Current deferred tax asset -
Allowance for doubtful accounts $ 259,533 $ 221,712
---------- ----------
Noncurrent deferred tax liability:
Pension costs 704,304 633,788
Depreciation 253,803 255,371
Other 126,947 129,524
---------- ----------
Total noncurrent deferred tax liability 1,085,054 1,018,683
---------- ----------
Net deferred income tax liability $ 825,521 $ 796,971
========== ==========
</TABLE>
The difference between taxes computed at the federal statutory tax rate and the
Company's effective tax rate are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
Statutory federal income tax rate 34.0 % 34.0 % 34.0%
State taxes, net of federal income tax benefit 5.0 5.0 5.0
Other (0.7) (0.5) 0.1
------ ------ -----
Effective income tax rate 38.3 % 38.5 % 39.1%
====== ====== =====
</TABLE>
<PAGE>
6. PENSION PLANS
The Company has a defined benefit plan that provides retirement benefits for
substantially all employees. The Company funds the minimum amounts required to
be contributed under the Employee Retirement Income Security Act of 1974. The
following table sets forth the plan's funded status:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Change in benefit obligation:
Benefit obligation at beginning of year $ 10,689,931 $ 9,860,104
Service cost 395,693 343,521
Interest cost 748,295 714,858
Benefits paid (652,696) (580,392)
Actuarial loss 854,914 351,840
------------- -------------
Benefit obligation at end of year $ 12,036,137 $ 10,689,931
============= =============
Change in plan assets:
Fair value of plan assets at the beginning of year $ 11,371,412 $ 9,217,045
Actual return on plan assets 664,151 2,124,082
Employer contributions 389,043 610,677
Benefits paid (652,696) (580,392)
------------- -------------
Fair value of plan assets at the end of year $ 11,771,910 $ 11,371,412
============= =============
Funded status $ (264,227) $ 681,481
Unrecognized net actuarial loss 2,215,204 1,162,419
Unrecognized prior service cost (71,179) (87,828)
Unrecognized net asset being amortized over 15 years (119,039) (171,603)
------------- -------------
Prepaid benefit cost $ 1,760,759 $ 1,584,469
============= =============
Weighted-average assumptions as of December 31:
Discount rate 6.75 % 7.00 %
Expected return on plan assets 7.50 % 7.50 %
Rate of compensation increase 3.50 % 3.75 %
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
Components of net periodic benefit cost:
Service cost - benefits earned during the year $ 395,693 $ 343,521 $ 336,878
Interest cost on projected benefit obligation 729,347 695,651 656,179
Actual return on plan assets (664,151) (2,124,082) (630,441)
Net amortization and deferral (248,136) 1,451,439 67,401
---------- ------------ ----------
Net pension expense $ 212,753 $ 366,529 $ 430,017
========== ============ ==========
</TABLE>
In 1996, the Company implemented a defined contribution savings plan under the
provisions of Section 401(k) of the Internal Revenue Code that provides
retirement benefits to substantially all employees. The Company's contribution,
which is based upon the salary redirection contributions of the eligible
employees, totaled $35,429, $27,897 and $24,483 in 1998, 1997 and 1996,
respectively.
<PAGE>
7. LEASE COMMITMENTS
The Company has operating lease agreements for marketing space and trucking
equipment. The equipment lease requires additional rentals based upon miles
driven at varying fixed rates per mile and requires the Company to pay for
maintenance, tires, taxes, licenses and permits.
Minimum annual rental payments are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year Ended
December 31
1999 $ 817,767
2000 784,272
2001 780,189
2002 735,376
2003 583,822
2004 and thereafter 266,752
----------
Total $3,968,178
==========
</TABLE>
Total rental expense was $950,000 (including $98,000 of contingent rentals) for
1998, $936,000 (including $143,000 of contingent rentals) for 1997 and $893,000
(including $124,000 of contingent rentals) for 1996.
8. EMPLOYEE INCENTIVE AND AWARD PROGRAMS
The Company has incentive programs for executives and key middle management
personnel. The programs provide for payment of bonuses in cash and common stock
in amounts not to exceed 12% of the annual pre-tax profits of the Company before
interest expense and incentive expense. The bonus accrued for 1998, 1997 and
1996 was $1,215,738, $1,182,563 and $1,003,636, respectively, which included
28,166 (1998), 22,219 (1997) and 38,751 (1996) shares of common stock.
Additionally, the Company has award programs which involve the distribution of
common stock to employees based on outstanding service. The cost of these awards
for 1998, 1997 and 1996 was $38,369, $53,495 and $73,949, respectively, which
represents the value of 3,111 (1998), 7,770 (1997) and 16,869 (1996) shares of
common stock issued.
9. CONTINGENCY
A claim by a former employee alleging certain employment issues has been
asserted against the Company. The ultimate cost to the Company from the claim is
not possible to predict at this time and the claim may not be solved for a
number of years. It is the opinion of the Company's management, based upon the
information available at this time, that the expected outcome of this matter
will not have a material adverse effect on the consolidated results of
operations and financial condition of the Company.
10. EMPLOYEE HEALTH PLAN
The Company has a medical indemnity plan providing comprehensive major medical
benefits for eligible employees and retirees and members of their immediate
families (participants) and is subject to the provisions of the Employee
Retirement Income Security Act of 1974. The Company's contribution, which is
based upon the contributions of currently employed participants and any
additional amounts required to pay benefits for participants, totaled $818,311,
$573,291, and $594,846 in 1998, 1997 and 1996, respectively.
<PAGE>
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
(Remainder of this page intentionally left blank.)
<PAGE>
Item 15. Financial Statements and Exhibits
(a) Financial Statements:
Independent Auditors' Report.
Consolidated Balance Sheets as of December 31, 1998 and December
31, 1997.
Consolidated Statements of Income for the Years Ended December
31, 1998, 1997 and 1996.
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996.
Notes to Consolidated Financial Statements.
(b) Exhibits: See Index to Exhibits.
(Remainder of this page intentionally left blank.)
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE KELLER MANUFACTURING COMPANY, INC.
(Registrant)
Date: April 30, 1999
By:
-----------------------------------
Danny L. Utz, Vice President of
Finance and Treasurer
*print name and title of the signing officer under his signature.
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
<S> <C> <C>
Sequential Numbering System
Number Assigned in Page Number of
Regulation S-K Item 601 Description of Exhibit Exhibit
- -------------------------------- ---------------------- ---------------------------
(2) No Exhibit
(3) 3.01 Restated Articles of
Incorporation of the
Company
3.02 Articles of Amendment of
the Restated Articles of
Incorporation of the
Company
3.03 Articles of Amendment of
the Restated Articles of
Incorporation of the
Company
3.04 Bylaws of the Company
(4) 4.01 Shareholders Rights
Agreement, dated as of
December 18, 1998, by and
between the Company and
J.J.B. Hilliard, W.L. Lyons,
Inc. as Rights Agent
(9) No Exhibit
(10) 10.01 Lease of Space in
International Home
Furnishings Center dated as
of May 1, 1999, by and
between the Company and
International Home
Furnishings Center, Inc.
10.02 Lease Agreement by
and between 1355 Market dba
San Francisco Mart
and the Company.
10.03 Effective Management
Systems, Inc. Software
License, Professional
Services and Support
Purchase Agreement dated as
of July 6, 1998, by and
between the Company and
Effective Management
Systems, Inc.
10.04 Extended Hour Support
Agreement by and between
the Company and Effective
Management Systems, Inc.
10.05 Form of Lease Agreement by
and between the Company and
Trailer Leasing Company
10.06 Form of Ryder Truck Rental,
Inc. Truck Lease and Service
Agreement by and between
the Company and Ryder Truck
Rental, Inc. with
accompanying schedules
10.07 Schedules to Exhibits 10.05
and 10.06
10.08 The Keller Manufacturing
Company, Inc. Craftsman
Stock Option Plan
10.09 The Keller Manufacturing
Company, Inc. Board of
Directors' Stock Bonus
Awards Plan
10.10 The Keller Manufacturing
Company, Inc. Incentive
Program for Executive
Personnel
10.11 License Agreement by and
between the Company and
PGA TOUR Licensing
10.12 Sponsorship Agreement by
and between the Company
and PGA TOUR, Inc.
(11) No Exhibit
(12) No Exhibit
(16) No Exhibit
(21) 21.01 Subsidiaries of the Company
(24) No Exhibit
(27) 27.01 Financial Data Schedule
(99) No Exhibit
</TABLE>
RESTATED
ARTICLES OF INCORPORATION
OF
THE KELLER MANUFACTURING COMPANY, INC.
This corporation ("Corporation") is governed by the applicable provisions
of the Indiana Business Corporation Law ("Act").
ARTICLE I
Name
The name of the Corporation is The Keller Manufacturing Company, Inc.
ARTICLE II
Purpose
The purpose for which the Corporation is formed is to operate a furniture
manufacturing business and, in general, to transact any and all lawful business
for which corporations may be incorporated under the laws of the State of
Indiana.
ARTICLE III
Term of Existence
The Corporation shall have perpetual existence.
ARTICLE IV
Shares
Section 4.1. Number. The total number of shares which the Corporation-shall
have authority to issue is Two Million (2,000,000) shares.
Section 4.2. Classes. There shall be one (1) class of shares of the
Corporation, which shall be designated as "Common Shares".
<PAGE>
Section 4.3. Relative Rights, Preferences, Limitations and Restrictions of
Common Shares. All Common Shares shall have the same rights, preferences,
limitations and restrictions.
Section 4.4. Voting Rights of Common Shares. Each holder of Common Shares
shall be entitled to one (1) vote for each share owned of record on the books of
the Corporation on each matter submitted to a vote of the holders of Common
Shares.
ARTICLE V
Registered Office and Registered Agent
Section 5.1. Registered Office. The street address of the Corporation's
registered office is 624 N. Water Street, Corydon, Indiana 47112.
Section 5.2. Registered Agent. The name of the Corporation's registered
agent at such registered
office is Robert W. Byrd.
ARTICLE VI
Board of Directors
The total number of directors shall be that specified in or fixed in
accordance with the bylaws. In the absence of a provision in the bylaws
specifying the number of directors or setting forth the manner in which such
number shall be fixed, the number of directors shall be nine (9). If the number
of directors shall be nine (9) or more, the bylaws may provide for staggering of
the Board of Directors into two (2) or three (3) groups, as provided in the Act.
ARTICLE VII
Indemnification of Directors and Officers
Section 7.1. Rights to Indemnification and Advancement of Expenses. The
Corporation shall indemnify every director made a party to a proceeding because
such person is or was a director, as a matter of right, against all liability
incurred by such individual in connection with the' proceeding; provided that it
is determined in the specific case that indemnification of such individual is
permissible in the circumstances because such individual has met the standard of
conduct for indemnification specified in the Indiana Business Corporation Law,
as amended (the "BCL"). The Corporation shall pay for or reimburse the
reasonable expenses incurred by a director in connection with any such
proceeding in advance of final disposition thereof in accordance with the
procedures and subject to the conditions specified in the BCL. The Corporation
shall indemnify a director who is wholly successful, on the merits or otherwise,
in the defense of any such proceeding, as a matter of right, against reasonable
expenses incurred by the individual in connection with the proceeding without
the requirement of a determination as set forth in the first sentence of this
Section 7.1. Upon demand by a director for indemnification or advancement of
expenses, as the case may be, the Corporation shall expeditiously determine
whether the director is entitled thereto in accordance with this Article and
procedures specified in the BCL. Every individual who is or was an officer of
the Corporation shall be indemnified, and shall be entitled to an advancement of
expenses, to the same extent as if such individual is or was a director. The
indemnification provided under this Article shall be applicable to any
proceeding arising from acts or omissions occurring before or after the adoption
of this Article.
<PAGE>
Section 7.2. Other Rights Not Affected. Nothing contained in this Article
shall limit or preclude the exercise or be deemed exclusive of any right under
the law, by contract or otherwise, relating to indemnification of or advancement
of expenses to any individual who is or was a director, officer, employee or
agent of the Corporation, or the ability of the Corporation to otherwise
indemnify or advance expenses to any such individual. It is the intent of this
Article to provide indemnification to directors and officers to the fullest
extent now or hereafter permitted by law consistent with the terms and
conditions of this Article. Therefore, indemnification shall be provided in
accordance with the Article irrespective of the nature of the legal or
equitable, theory upon which a claim is made, including without limitation
negligence, breach of duty, mismanagement, corporate waste, breach of contract,
breach of warranty, strict liability, violation of federal or state securities
laws, violation of the Employee Retirement Income Security Act of 1974, as
amended, or violation of any other state or federal law.
Section 7.3. Definitions. For purposes of this Article VII:
(i) The term "director" means an individual who is or was a member of
the Board of Directors of the Corporation or an individual who, while a
director of the Corporation, is or was serving at the Corporation's request
as a director, officer, partner, trustee, employee, or agent of another
foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise, whether for profit or not. A
director is considered to be serving an employee benefit plan at the
Corporation's request if the director's duties to the Corporation also
impose duties on, or otherwise involve services by, the director to the
plan or to participants in or beneficiaries of the plan. The term
"director" includes, unless the context requires otherwise, the estate or
personal representative of a director.
(ii) The term "expenses" includes all direct and indirect costs
(including, without limitation, counsel fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery
service fees, all other disbursements or out-of-pocket expenses) actually
incurred in connection with the investigation, defense, settlement or
appeal of a proceeding or establishing or enforcing a right to
indemnification under this Article, applicable law or otherwise.
(iii) The term "liability" means the obligation to pay a judgment,
settlement, penalty, fine, excise tax (including an excise tax assessed
with respect to an employee benefit plan), or reasonable expenses incurred
with respect to a proceeding.
(iv) The term "party" includes an individual who was, is or is
threatened to be made a named defendant or respondent in a proceeding.
<PAGE>
(v) The term "proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal.
ARTICLES OF AMENDMENT
OF THE
RESTATED ARTICLES OF INCORPORATION
OF
THE KELLER MANUFACTURING COMPANY, INC.
The undersigned officers of The Keller Manufacturing Company, Inc. (hereinafter
referred to as the "Corporation") existing pursuant to the provisions of the
Indiana Business Corporation Law (hereinafter referred to as the "BCL"),
desiring to give notice of corporation action effectuating amendment of certain
provisions of its Restated Articles of Incorporation, certify the following
facts:
ARTICLE I.
--------------------
The name of the Corporation is The Keller Manufacturing Company, Inc.
ARTICLE II.
--------------------
Section 1. Text of the Amendment
The exact text of Article 4, Section 1 of the Restated Articles of
Incorporation of the Corporation, as amended (hereinafter referred to as the
"Amendment") now is as follows:
Article 4, Section 1:
The total number of shares which the Corporation shall have authority
to issue is Forty Million (40,000,000) shares.
<PAGE>
Section 2 Date of Amendment's Adoption.
The date of the adoption of the amendment is January 22, 1999.
ARTICLE III.
Manner of Adoption and Vote
Section 1. Action by Directors.
The Board of Directors of the Corporation, at meetings thereof, duly
called, constituted and held on December 18, 1998, at which a quorum of such
Board of Directors was present, duly adopted a resolution proposing to the
Shareholders of the Corporation entitled to vote in respect of the Amendment
that the provisions and terms of Article 4, Section 1 of its Restated Articles
of Incorporation be amended so as to read as set forth in the Amendment; and
called a meeting of such shareholders, to be held January 22, 1999, to adopt or
reject the Amendment, unless the same were so approved prior to such date by
unanimous written consent.
Section 2. Action by Shareholders:
The Shareholders of the Corporation entitled to vote in respect of the
Amendment, at a meeting thereof, duly called, constituted and held on January
22, 1999, at which a quorum of such shareholders was present adopted the
Amendment.
All holders of Common Shares of the Corporation were entitled to vote
as a class in respect of the Amendment.
The number of shares entitled to vote in respect of the Amendment, the
number of shares voted in favor of the adoption of the Amendment, and the number
of shares voted against such adoption are as follows:
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Shares outstanding: 5,844,367
Shares entitled to vote: 5,844,367
Shares represented at Meeting: 4,581,774
Shares voted in favor: 4,197,971
Shares voted against: 356,391
Shares abstaining: 27,412
</TABLE>
The number of votes cast for the amendment was sufficient for its
approval.
Section 3. Compliance With Legal Requirements:
The manner of the adoption of the Amendment, and the vote by which it
was adopted, constitute full legal compliance with the provisions of the BCL,
the Restated Articles of Incorporation, and the Bylaws of the Corporation.
IN WITNESS WHEREOF, the undersigned officers execute these Articles of
Amendment of the Restated Articles of Incorporation of the Corporation, and
hereby verify, subject to the penalties of perjury, that the facts contained
herein are true, this ________ day of _________________, 1999.
The Keller Manufacturing Company, Inc.
By:_________________________________
(Signature)
------------------------------------
Robert W. Byrd
Chairman of the Board, President and CEO
ARTICLES OF AMENDMENT
OF THE
RESTATED ARTICLES OF INCORPORATION
OF
THE KELLER MANUFACTURING COMPANY, INC.
The undersigned officers of The Keller Manufacturing Company, Inc.
(hereinafter referred to as the "Corporation") existing pursuant to the
provisions of the Indiana Business Corporation Law (hereinafter referred to as
the "BCL"), desiring to give notice to corporate action effectuating amendment
of certain provisions of its Restated Articles of Incorporation, certify the
following facts:
ARTICLE I
The name of the Corporation is The Keller Manufacturing Company, Inc.
ARTICLE II
Section 1. Text of the Amendment.
The exact text of Article 4, Section 1 of the Restated Articles of
Incorporation of the Corporation, as amended (hereinafter referred to as the
"Amendment"), now is as follows:
Article 4, Section 1:
The total number of shares which the Corporation shall have authority to
issue is Eight Million (8,000,000) shares.
Section 2. Date of Amendment's Adoption.
The date of the adoption of the amendment is January 27, 1995.
ARTICLE III
Manner of Adoption and Vote
Section 1. Action by Directors.
The Board of Directors of the Corporation, at meetings thereof, duly
called, constituted and held on December 16, 1994, at which a quorum of such
Board of Directors was present, duly adopted a resolution proposing to the
Shareholders of the Corporation entitled to vote in respect of the Amendment
that the provisions and terms of Article 4, Section 1 of its Restated Articles
of Incorporation be amended so as to read as set forth in the Amendment; and
called a meeting of such shareholders, to be held January 27, 1995, to adopt or
reject the Amendment, unless the same were so approved prior to such date by
unanimous written consent.
<PAGE>
Section 2. Action by Shareholders.
The Shareholders of the Corporation entitled to vote in respect of the
Amendment, at a meeting thereof, duly called, constituted and held on January
27, 1995, at which a quorum of such shareholders was present adopted the
Amendment.
All holders of Common Shares of the Corporation were entitled to vote as a
class in respect to the Amendment.
The number of shares entitled to vote in respect of the Amendment, the
number of shares voted in favor of the adoption of the Amendment, and the number
of shares voted against such adoption are as follows:
<TABLE>
<CAPTION>
<S> <C>
Shares outstanding: 1,971,062
Shares entitled to vote: 1,971,062
Shares represented at Meeting: 1,516,674
Shares voted in favor: 1,516,136
Shares voted against: 0
</TABLE>
The number of votes cast for the amendment was sufficient for its approval.
Section 3. Compliance With Legal Requirements.
The manner of the adoption of the Amendment, and the vote by which it was
adopted, constitute full legal compliance with the provisions of the BCL, the
Restated Articles of Incorporation, and the Bylaws of the Corporation.
<PAGE>
IN WITNESS WHEREOF, the undersigned officers execute these Articles
of Amendment of the Restated Articles of Incorporation of the Corporation, and
hereby verify, subject to the penalties of perjury, that the facts contained
herein are true, this 27th day of January, 1995.
The Keller Manufacturing Company, Inc.
By:
---------------------------------------
(Signature)
Robert W. Byrd, President and CEO
(Printed Name and Title)
This instrument was prepared by Harry L. Gonso, Attorney at Law, ICE MILLER
DONADIO & RYAN, 3400 One American Square, Box 82001, Indianapolis, Indiana
46282.
BYLAWS
OF
THE KELLER MANUFACTURING COMPANY, INC.
ARTICLE I
Certificates for Shares
Section 1. Certificates. Each holder of shares of the Corporation shall
be entitled to a certificate signed (manually or in facsimile) by the President
or a Vice President and the Secretary or an Assistant Secretary, setting forth
(a) the name of the Corporation and that it was organized under the laws of the
State of Indiana, (b) the name of the person to whom issued, (c) the number and
class of shares represented, (d) if the Corporation has more than one class of
shares or more than one series within a class of shares, a conspicuous statement
that the Corporation will furnish to the holder of the certificate, on request
in writing and without charge, a summary of the designations, relative rights,
preferences, and limitations applicable to each such class of shares, and the
variations in rights, preferences, and limitations determined for each series,
if any, within a class (and the authority of the Board of Directors to determine
variations for future series, if any), and (e) such other information as may be
required by law. The form of such certificate shall be prescribed by resolution
of the Board of Directors.
Section 2. Lost or Destroyed Certificates. If a certificate of any
shareholder is lost or destroyed, a new certificate may be issued to replace
such lost or destroyed certificate. Unless waived by the Board of Directors, the
shareholder shall make an affidavit or affirmation of the fact that his
certificate is lost or destroyed, shall advertise the same in such manner as the
Board of Directors may requires, and shall give the Corporation a bond of
indemnity in the amount and form which the Board of Directors may prescribe.
Section 3. Transfer of Shares. Shares of the Corporation shall be
transferable only on the books of the Corporation, subject to any transfer
restrictions imposed thereon by the Articles of Incorporation, these Bylaws, or
an agreement among shareholders and the Corporation, upon presentation of the
certificate representing the same, endorsed by an appropriate person or persons
and accompanied by (a) reasonable assurance that those endorsements are genuine
and effective, and (b) a request to register such transfer. Transfers of shares
shall be otherwise subject to the provisions of the Indiana Business Corporation
Law (the "Act") and Article 8 of the Indiana Uniform Commercial Code, Ind. Code
Chapter 26-1-8, as amended.
Section 4. Recognition of Shareholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends and to vote as such owner
notwithstanding any equitable or other claim to, or interest in, such shares on
the part of any other person.
<PAGE>
ARTICLE II
Meetings of Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders of
the Corporation shall be held on the last Friday in January of each year, or on
such other date as may be designated by the Board of Directors.
Section 2. Special Meetings. Special meetings of the shareholders may
be called by the Chairman of the Board and Chief Executive Officer or by the
Board of Directors. A special shareholders' meeting shall be called upon written
demand containing a description of the purpose or purposes thereof and given in
accordance with the Act by the holders of at least twenty-five percent (25%) of
the votes entitled to be cast on any issue proposed to be considered at such
meeting.
Section 3. Notice of Meetings. Written notice stating the date, time
and place of any shareholders' meeting and, in the case of special shareholders'
meetings or when otherwise required by law, a description of the purpose or
purposes for which any such meeting is called, shall be delivered or mailed by
the Secretary of the Corporation to each shareholder of record entitled to vote
at such meeting, at such address as appears upon the records of the Corporation
and at least ten (10), but no more than sixty (60), days before the date of such
meeting, on being notified of the date, time and place thereof by the person or
persons calling the meeting.
Section 4. Waiver of Notice. A shareholder may waive notice of any
meeting, before or after the date and time stated in the notice, if in writing
and delivered to the Corporation for inclusion in the minutes or filing with the
corporate records. Attendance at any meeting in person or by proxy, (a) waives
objection to lack of notice or defective notice of the meeting, unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting; and (b) waives objection to consideration
of a particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to considering
the matter when it is presented.
Section 5. Voting Rights. Voting rights of shares of the Corporation
are specified in the Articles of Incorporation of the Corporation and the Act.
Section 6. Record Date. The Board of Directors may fix a record date,
which may be a future date, for the purpose of determining the shareholders
entitled to notice of a shareholders' meeting, to demand a special meeting, to
vote, or to take any other action; provided that such record date may not exceed
seventy (70) days before the meeting or action requiring a determination of
shareholders. In the absence of action by the Board of Directors to fix a record
date as herein provided, the record date shall be the fourteenth (14th) day
prior to the date of the meeting.
<PAGE>
Section 7. Voting by Proxy. A shareholder entitled to vote at any meeting
of shareholders may vote either in person or by proxy appointed to vote or
otherwise act for the shareholder pursuant to a written appointment form
executed by the shareholder or a duly authorized attorney-in-fact of such
shareholder. An appointment of a proxy is effective when received by the
Secretary or other officer or agent authorized to tabulate votes. The general
proxy of a fiduciary shall be given the same effect as the general proxy of any
other shareholder.
Section 8. Voting Lists. After a record date for a shareholders'
meeting has been fixed, the Secretary shall prepare an alphabetical list of the
names of all shareholders entitled to notice of such meeting, arranged by voting
group and showing the address and number of shares held by each shareholder. The
list shall be kept on file at the principal office of the Corporation or at a
place identified in the meeting notice in the city where the meeting will be
held, and shall be available for inspection by any shareholder entitled to vote
at such meeting at any time during regular business hours, beginning five (5)
days before the date of the meeting through the meeting. The list shall also be
made available at the meeting.
Section 9. Quorum. At any meeting of shareholders, a majority of the
votes entitled to be cast on a matter at such meeting constitutes a quorum, and
if a quorum exists, action on a matter is approved if the votes cast favoring
the action exceed the votes cast opposing the action, unless a greater number is
required by law, the Articles of Incorporation or these Bylaws.
Section 10. Action by Consent. Any action required or permitted to be
taken at a shareholders' meeting may be taken without a meeting but with the
same effect as a unanimous vote at a meeting, if the action is taken by all the
shareholders entitled to vote on the action, and the action is evidenced by one
(1) or more written consents describing the action taken, signed by all
shareholders entitled to vote on the action, and delivered to the Corporation
for inclusion in the minutes or filing with the corporate records. If not
otherwise determined pursuant to Section 6 of this Article II, the record date
for determining shareholders entitled to take action without a meeting is the
date the first shareholder signs the consent to such action.
Section 11. Presence. Any or all shareholders may participate in any
annual or special shareholders' meeting by, or through the use of, any means of
communication by which all shareholders participating may simultaneously hear
each other during the meeting. A shareholder participating in a meeting by this
means is deemed to be present in person at the meeting.
ARTICLE III
Board of Directors
Section 1. Duties and Qualifications. All corporate powers shall be
exercised under the authority of the Board of Directors. The directors shall
select the officers of the Corporation, and see that these officers manage the
affairs of the Corporation to the benefit of, the shareholders and the economic
well-being and continuity of the Corporation. Directors shall give counsel, make
judgments and oversee the commitment of corporate resources.
<PAGE>
Directors need not be residents of the State of Indiana but must be
shareholders of the Corporation.
Section 2. Number and Terms of Office. There shall be nine (9)
directors of the Corporation, whose terms shall be staggered by dividing the
total number of directors into three (3) groups, each containing one-third (1/3)
of the total. At each annual meeting of shareholders, three (3) directors shall
be elected for a term of three (3) years to succeed those whose terms expire.
Despite the expiration of a director's term, the director continues to serve
until a successor is elected and qualifies or until there is a decrease in the
number of directors. Directors may be removed in accordance with the Act.
Section 3. Vacancies. If a vacancy occurs on the Board of Directors,
including a vacancy resulting from an increase in the number of directors, the
Board of Directors may fill the vacancy, or, if the directors remaining in
office constitute fewer than a quorum of the Board, they may fill the vacancy by
the affirmative vote of a majority of all such directors remaining in office.
Section 4. Annual Meeting. Unless otherwise agreed upon, the Board of
Directors shall meet immediately following the annual meeting of the
shareholders, at the place where such meeting of shareholders was held, for the
purpose of election of officers of the Corporation and consideration of any
other business which may be brought before the meeting. No notice shall be
necessary for the holding of this annual meeting.
Section 5. Other Meetings. Regular meetings of the Board of Directors
may be held pursuant to a resolution of the Board to such effect. No notice
shall be necessary for any regular meeting. Special meetings of the Board of
Directors may be held upon the call of the C.E.O. or of any two (2) members of
the Board and upon twenty-four (24) hours' notice specifying the date, time and
place of the meeting, which notice may be either oral or written, given to each
director in person, by telephone, telegraph, teletype or other form of wire or
wireless communication, by first class, certified or registered United States
mail, postage prepaid, or by private courier service, fees prepaid or billed to
sender. Notice of a special meeting may be waived in writing before the time of
the meeting, at the time of the meetings or after the time of the meeting. The
waiver must be signed by the director entitled to the notice and filed with the
minutes or corporate records. Attendance at or participation in a meeting
waives any required notice of such meeting, unless the directors at the
beginning of the meeting (or promptly upon the director's arrival) objects
to holding the meeting or transaction business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
Section 6. Quorum. A majority of the fixed number of directors elected
and qualified, from time to time, shall he necessary to constitute a quorum for
the transaction of any business, and if a quorum is present when a vote is taken
the affirmative vote of a majority of the directors present is the act of the
Board of Directors.
Section 7. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting,
if the action is taken by all members of the Board. The action must be evidenced
by one (1) or more written consents describing the action taken, signed by each
director and included in the minutes or filed with the corporate records
reflecting the action taken. Action of the Board taken by consent is effective,
unless the consent specifies a prior or subsequent effective date, when the last
director signs the consent.
<PAGE>
Section 8. Committees. The Board of Directors may create one (1) or
more committees and appoint members of the Board of Directors to serve on them.
Each committee may have one (1) or more members, who shall serve at the pleasure
of the Board of Directors. The creation of a committee and appointment of
members to it must be approved by the greater of (a) a majority of all the
directors in office when the action is taken, or (b) the number of directors
required under Section 6 of this Article III to take action. All rules
applicable to action by the Board of Directors apply to committees and their
members as well. The Board of Directors may specify the authority which a
committee may exercise; provided, however, a committee may not (a) authorize
distributions, except a committee may authorize or approve a reacquisition of
shares if done according to a formula or method prescribed by the Board of
Directors, (b) approve or propose to shareholders action that must be approved
by shareholders, (c) fill vacancies on the Board of Directors or on any of its
committees, (d) amend the Articles of Incorporation, (e) adopt, amend, or repeal
bylaws, or (f) approve a plan of merger not requiring shareholder approval.
Section 9. Presence. The Board of Directors may permit any or all
directors to participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.
ARTICLE IV
Offices
Section 1. Offices and Qualification Therefor. The officers of the
Corporation shall consist of a Chairman of the Board, Chief Executive Officer, a
President, Vice Presidents, a Secretary, a Treasurer and such assistant officers
as the Board of Directors or the C.E.O. shall designate. The same individual may
simultaneously hold more than one (1) office of the Corporation.
Section 2. Terms of Office. Each officer of the Corporation shall be
elected annually by the Board of Directors at its annual meeting and shall hold
office for a term of one (1) year and until his successor shall be duly elected
and qualified.
Section 3. Vacancies. Whenever any vacancies shall occur in any of the
offices of the Corporation for any reason, the same may be filled by the Board
of Directors at any meeting thereof, and any officer so elected shall hold
office until the next annual meeting of the Board of Directors and until his
successor shall be duly elected and qualified.
<PAGE>
Section 4. Removal. Any officer of the Corporation may be removed, with
or without cause, by the Board of Directors at any time.
Section 5. Compensation. Each officer of the Corporation shall receive
such compensation for his service in such office as may be fixed by action of
the Board of Directors, duly recorded.
ARTICLE V
Powers and Duties of Officers
Section 1. Chairman and Chief Executive Officer. The Chairman of the
Board of Directors shall be the Chief Executive Officer of the Corporation, and
shall discharge all of the usual functions of a chief executive of a
corporation. Subject to the general control of the Board of Directors, he shall
manage and direct the affairs, personnel, strategies and resources of the
Corporation. He shall advise and counsel with the President and the other
officers of the Corporation.
Section 2. President. The President shall be the Chief Operating
Officer of the Corporation, and shall discharge the usual functions of a chief
operating officer. He shall direct and manage the responsibility delegated to
him by the Chief Executive Officer.
He shall assist the Chairman of the Board of Directors and Chief
Executive Officer and operate as such in his absence.
The President shall have such other powers and duties as these Bylaws
or the Board of Directors may prescribe and authorize. Shares of other
corporations owned by this Corporation maybe voted by the President or by such
proxies as the President shall designate. The President shall have authority to
execute, with the Secretary, powers of attorney appointing other corporations,
partnerships or individuals as the agents of the Corporation, subject to law,
the Articles of Incorporation and these Bylaws.
Section 3. Vice Presidents. The Vice President (or in the event there
be more than one Vice President, the Vice Presidents in the order designated at
the time of their election, or if the absence of any designation, then in the
order of their election) shall have all the powers of, and perform all the
duties incumbent upon, the President during the President's absence or
disability and shall have such other powers and duties as these Bylaws or the
Board of Directors may prescribe.
Section 4. Secretary. The Secretary shall (a) attend all meetings of
the shareholders and of the Board of Directors, (b) be responsible for preparing
a true and complete minutes of the proceedings of such meetings, (c) be
responsible for authenticating records of the Corporation, and (d) perform a
like duty, when required, for all standing committees appointed by the Board of
Directors. If required, the Secretary shall attest the execution by the
Corporation of deeds, leases, agreements and other official documents. The
Secretary shall attend to the giving and serving of all notices of the
Corporation required by these Bylaws, shall custody of the books (except books
of account) and records of the Corporation, and in general shall perform all
duties pertaining to the office of Secretary and such other duties as these
Bylaws or the Board of Directors, may prescribe.
<PAGE>
Section 5. Treasurer. The Treasurer shall keep correct and complete
records of account, showing accurately at all times the financial condition of
the Corporation. The Treasurer shall have charge and custody of, and be
responsible for, all funds, notes, securities and other valuables which may
from time to time come into the possession of the Corporation. The Treasurer
shall deposit, or cause to be deposited, all funds of the Corporation with such
depositories as the Board of Directors shall designate. The Treasurer shall
furnish at meetings of the Board of Directors, or whenever requested, a
statement of the financial condition of the Corporation, and in general shall
perform all duties pertaining to the office of Treasurer and such other duties
as these Bylaws or the Board of Directors may prescribe.
Section 6. Assistant Officers. The Board of Directors may from time to
time designate and elect assistant officers who shall have such powers and
duties as the officers whom they are elected to assist shall specify and
delegate to them, and such other powers and duties as these Bylaws or the Board
of Directors may prescribe. An Assistant Secretary may, in the event of the
absence or the disability of the Secretary, attest the execution of all
documents by the Corporation.
ARTICLE VI
Miscellaneous
Section 1. Corporate Seal. The Corporation shall have no seal.
Section 2. Execution of Contracts and Other Documents. Unless otherwise
authorized or directed by the Board of Directors, all written contracts and
other documents entered into by the Corporation shall be executed on behalf of
the Corporation by the President or a Vice President, and, if required, attested
by the Secretary or an Assistant Secretary.
Section 3. Accounting Year. The accounting year of the Corporation
shall begin on January 1 of each year and end on the December 31 immediately
following.
Section 4. Records. The Corporation shall keep as permanent records
minutes of all meetings of the shareholders, the Board of Directors, and all
committees of the Board of Directors, and a record of all actions taken without
a meeting by the shareholders, the Board of Directors, and all committees of the
Board of Directors. The Corporation or its agent shall maintain a record of the
shareholders in a form that permits preparation of a list of the names and
addresses of all shareholders, in alphabetical order showing the number of
shares held by each. The Corporation shall maintain its records in written form
or in a form capable of conversion into written form within a reasonable time.
The Corporation shall keep a copy of the following records at its principal
office: (a) the Articles of Incorporation then currently in effect, (b) the
Bylaws then currently in effect, (c) minutes of all shareholders' meetings, and
records of all actions taken by shareholders without a meeting, for the past 3
years, (d) all written communications to shareholders generally during the past
3 years, including annual financial statements furnished upon request of the
shareholders, (e) a list of the names and business addresses of the current
directors and officers, and (f) the most recent annual report filed with the
Indiana Secretary of State.
<PAGE>
ARTICLE V11
Amendment
Subject to law and the Articles of Incorporation, the power to make,
alter, amend or repeal all or any part of these Bylaws is vested in the Board of
Directors. The affirmative vote of a majority of all the directors shall be
necessary to effect any such changes in these Bylaws.
CONFORMED
RIGHTS AGREEMENT
between
THE KELLER MANUFACTURING COMPANY, INC.
and
J.J.B. Hilliard, W.L. Lyons, Inc.
as Rights Agent
Dated as of December 18, 1998
<PAGE>
RIGHTS AGREEMENT
This Agreement is made and entered into as of December 18, 1998, to become
effective as of January 22, 1999, between The Keller Manufacturing Company,
Inc., an Indiana corporation (the "Company"), and J.J.B. Hilliard, W.L. Lyons,
Inc., an _________ corporation, (the "Rights Agent").
RECITALS
The Board of Directors of the Company has authorized and declared a
dividend of one common share purchase right (a "Right") for each Common Share
(as hereinafter defined) of the Company outstanding as of the Close of Business
on January 22, 1999 (the "Record Date"), each Right representing the right to
purchase one Common Share (as hereinafter defined), upon the terms and subject
to the conditions herein set forth, and has further authorized and directed the
issuance of one Right with respect to each Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date (as such terms are hereinafter
defined). The Rights Agent has agreed to accept its appointment as such, and to
carry out the duties imposed on it hereunder.
In consideration of the premises and the mutual agreements herein set
forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any person (as such term is
hereinafter defined) who or which, together with all Affiliates and
Associates (as such terms are hereinafter defined) of such person,
shall be the Beneficial Owner (as such term is hereinafter defined) of
25% or more of the Common Shares of the Company then outstanding, but
shall not include the Company, any Subsidiary (as such term is
hereinafter defined) of the Company, any employee benefit plan of the
Company or any Subsidiary of the Company, or any entity holding Common
Shares for or pursuant to the terms of any such plan. Notwithstanding
the foregoing, no Person shall become an "Acquiring Person" (i) as the
result of an acquisition of Common Shares by the Company which, by
reducing the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person to 25% or more of
the Common Shares of the Company then outstanding; provided, however,
that if a person shall become the Beneficial Owner of 25% or more of
the Common Shares of the Company then outstanding by reason of share
purchases by the Company and shall, after such share purchases by the
Company, become the Beneficial Owner of any additional Common Shares
of the Company, then such Person shall be deemed to be an "Acquiring
Person" or (ii) if (1) within five Business Days after such Person
would otherwise have become or, if such Person did so inadvertently,
after such Person discovers that such Person would otherwise have
become, an Acquiring Person (but for the operation of this subclause
(ii)), such Person notifies the Board of Directors that such Person
did so inadvertently, and (2) within two Business Days after such
notification (or such greater period of time as may be determined by
action of the Board, but in no event greater than five Business Days),
such Person divests itself of a sufficient number of shares of Common
Stock so that such Person is the Beneficial Owner of such number of
shares of Common Stock that such Person no longer would be an
Acquiring Person.
<PAGE>
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and shall
be deemed to "beneficially own" any securities:
(i) which such Person or any of such person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering
of securities), or upon the exercise of conversion rights,
exchange rights, rights (other than these Rights), warrants or
options, or otherwise; provided, however, that a Person shall not
be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made
by or on behalf of such Person or any of such Person's Affiliates
or Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided however, that a
Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security if the agreement, arrangement or
understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a
public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations promulgated
under the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or indirectly,
by any other Person with which such Person or any of such
Person's Affiliates or Associates has any agreement, arrangement
or understanding (other than customary agreements with and
between underwriters and selling group members with respect to a
bona fide public offering of securities) for the purpose of
acquiring, holding, voting (except to the extent contemplated by
the proviso to Section 1(c)(ii)(B)) or disposing of any
securities of the Company.
<PAGE>
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
(d) "Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in the State of Indiana
are authorized or obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M.,
Eastern Standard Time, on such date; provided, however, that if such
date is not a Business Day it shall mean 5:00 P.M., Eastern Standard
Time, on the next succeeding Business Day.
(f) "Common Shares" when used with reference to the Company shall
mean the shares of the Company designated in its Articles of
Incorporation as "Common Shares". "Common Shares" when used with
reference to any Person other than the Company shall mean the capital
stock or other equity interest with the greatest voting power of such
other Person or, if such other Person is a Subsidiary of another
Person, the Person or Persons which ultimately control such first
mentioned Person.
(g) "Distribution Date" shall have the meaning set forth in
Section 3 hereof.
(h) "Exchange Date" shall have the meaning set forth in Section 7
hereof.
(i) "Final Expiration Date" shall have the meaning set forth in
Section 7 hereof.
(j) "Person" shall mean any individual, firm, corporation or
other entity, and shall include any successor (by merger or otherwise)
of such entity.
(k) "Purchase Price" shall have the meaning set forth in Section
7 hereof, subject to adjustment as provided in Section 11 hereof.
<PAGE>
(l) "Redemption Date" shall have the meaning set forth in Section
7 hereof.
(m) "Shares Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring
Person has become such.
(n) "Subsidiary" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting
equity securities or other equity interest is owned, directly or
indirectly, by such Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable.
Section 3. Issuance of Right Certificates.
3.1 Until the earlier of (a) the tenth business day after the Shares
Acquisition Date or (b) the tenth business day (or such later date as may
be determined by action of the Board of Directors prior to such time as any
person becomes an Acquiring Person) after the date of the commencement by
any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of the Company or
any entity holding Common Shares for or pursuant to the terms of any such
plan) of, or of the first public announcement of the intention of any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any
entity holding Common Shares for or pursuant to the terms of any such plan)
to commence, a tender or exchange offer the consummation of which would
result in any person becoming the Beneficial Owner of Common Shares
aggregating 25% or more of the then outstanding Common Shares, including
any such date which is after the date of this Agreement and prior to the
issuance of the Rights (the earlier of such dates being herein referred to
as the "Distribution Date"), (i) the Rights will be evidenced by the
certificates for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be Right Certificates)
and not by separate Right Certificates, and (ii) the Rights Certificates
will not be transferable except as a part of the transfer of certificates
for Common Shares, and until the Distribution Date (or the earlier of the
Redemption Date or the Final Expiration Date), the surrender for transfer
of any certificate for Common Shares outstanding on the Record Date, with
or without a copy of the Summary of Rights attached thereto, shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby. As soon as practicable after the Distribution Date,
the Company will prepare and execute, the Rights Agent will countersign,
and the Company will send or cause to be sent (and the Rights Agent will,
if requested, send) by first-class, insured, postage-prepaid mail, to each
record holder of Common Shares as of the Close of Business on the
Distribution Date, at the address of such holder shown on the records of
the Company, a separate Right Certificate, in substantially the form of
Exhibit A hereto (a "Right Certificate"), evidencing one Right for each
Common Share so held. Following the Close of Business on the Distribution
Date, the Rights will be evidenced solely by such Right Certificates.
<PAGE>
3.2 On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Common Shares,
in substantially the form of Exhibit B hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Shares
as of the Close of Business on the Record Date, at the address of such
holder shown on the records of the Company.
3.3 Certificates for Common Shares issued after the Record Date but
prior to the earliest of the Distribution Date, the Redemption Date or the
Final Expiration Date (whether as an original issuance of Common Shares or
as a transfer or re-registration of outstanding Common Shares) shall have
impressed on, printed on, written on or otherwise affixed to them the
following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between The Keller
Manufacturing Company, Inc. and J.J.B. Hilliard, W.L. Lyons, Inc.,
dated as of December 18, 1998, and effective as of January 22, 1999
(the "Rights Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal
executive offices of The Keller Manufacturing Company, Inc. Under
certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer
be evidenced by this certificate. The Keller Manufacturing Company,
Inc. will mail to the holder of this certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.
As described in the Rights Agreement, Rights issued to any Person who
becomes an Acquiring Person (as defined in the Rights Agreement) shall
become null and void.
3.4 With respect to such certificates containing the foregoing legend,
until the Distribution Date, the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such certificates
alone, and the surrender for transfer of any such certificates shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby. In the event that the Company purchases or acquires
any Common Shares prior to the Distribution Date, any Rights associated
with such Common Shares shall be deemed canceled and retired so that the
Company shall not be entitled to exercise any Rights associated with the
Common Shares which are no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase Common Shares and of assignment to be printed on
the reverse thereof) shall be substantially the same as Exhibit A hereto and
may, have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of the National Association of
Securities Dealers, Inc. or any stock exchange on which the Rights may from time
to time be listed or quoted, or to conform to usage. Subject to the provisions
of Sections 11, 13, and 22 hereof, the Right Certificates shall entitle the
holders thereof to purchase such number of Common Shares as shall be set forth
therein at the price per Common Share set forth therein (the "Purchase Price"),
but the amount and type of securities purchasable upon the exercise of each
Right and the Purchase Price thereof shall be subject to adjustment as provided
herein.
<PAGE>
Section 5. Countersignature and Registration.
5.1 The Right Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its President, or any of its Vice Presidents,
either manually or by facsimile signature, shall have affixed thereto the
Company's seal or a facsimile thereof, and shall be attested by the
Secretary or any Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned
by the Rights Agent and shall not be valid for any purpose unless
countersigned in case any officer of the Company who shall have signed any
of the Right Certificates shall cease to be such officer of the Company
before countersignature by the Rights Agent and issuance and delivery by
the Company, such Right Certificates, nevertheless, may be countersigned by
the Rights Agent and issued and delivered by the Company with the same
force and effect as though the person who signed such Right Certificates
had not ceased to be such officer of the Company; and any Right Certificate
may be signed on behalf of the Company by any person who, at the actual
date of the execution of such Right Certificate, shall be a proper officer
of the Company to sign such Right Certificate, although at the date of the
execution of this Rights Agreement any such person was not such an officer.
5.2 Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or such other office designated
for such purpose, books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number
of Rights evidenced on its face by each of the Right Certificates and the
date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
6.1 Subject to the provisions of Section 14 hereof, at any time after
the Close of Business on the Distribution Date, and at or prior to the
Close of Business on the earlier of the Redemption Date or the Final
Expiration Date, any Right Certificate or Right Certificates (other than
Right Certificates representing Rights that have become void pursuant to
Section 7.5 hereof or that have been exchanged pursuant to Section 24
hereof) may be transferred, split up, combined or exchanged for another
Right Certificate or Right Certificates entitling the registered holder to
purchase a like number of Common Shares as the Right Certificate or Right
Certificates by the surrender of the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged at the
office of the Rights Agent designated for such purpose. Neither the Rights
Agent nor the Company shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Right Certificate until the
registered holder shall have completed and signed the certificate contained
in the form of assignment on the reverse side of such Right Certificate and
shall have provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliate or Associates
thereof as the Company shall reasonably request. Thereupon the Rights Agent
shall countersign and deliver to the Person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Right Certificates.
<PAGE>
6.2 Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Right Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them, and,
at the Company's request, reimbursement to the Company and the Rights Agent
of all reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate if mutilated, the
Company will make and deliver a new Right Certificate of like tenor to the
Rights Agent for delivery to the registered holder in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
7.1 The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or
in part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side
thereof duly executed, to the Rights Agent at the office of the Rights
Agent designated for such purpose, together with payment of the Purchase
Price for each Common Share as to which the Rights are exercised, at or
prior to the earliest of (a) the close of business on January 22, 2009 (the
"Final Expiration Date"), (b) the time at which the Right's are redeemed as
provided in Section 23 hereof (the "Redemption Date"), or (c) the time at
which such Rights are exchanged as provided in Section 24 hereof (the
"Exchange Date").
7.2 The Purchase Price for each Common Share pursuant to the exercise
of a Right shall initially be $40.00, shall be subject to adjustment from
time to time as provided in Sections 11 and 13 hereof and shall be payable
in lawful money of the United States of America in accordance with Section
7.3 below.
7.3 Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount
equal to any applicable transfer tax required to be paid by the holder of
such Right Certificate in accordance with Section 9 hereof by certified
check, cashier's check or money order payable to the order of the Company,
the Rights Agent shall thereupon promptly (a) (i) requisition from any
transfer agent of the Common Shares certificates for the number of Common
Shares to be purchased (and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests), or (ii) requisition from
the Company's depositary agent, if any, depositary receipts representing
such number of Common Shares as are to be purchased, in which case
certificates for the Common Shares represented by such receipts shall be
deposited by the transfer agent with the depositary agent (and the Company
hereby directs its depositary agent to comply with such request), (b) when
appropriate, requisition from the Company the amount of cash to be paid in
lieu of issuance of fractional shares in accordance with Section 14 hereof,
(c) after receipt of such certificates (or depositary receipts), cause the
same to be delivered to or upon the order of the registered holder of such
Right Certificate, registered in such name or names as may be designated by
such holder and (d) when appropriate, after receipt, deliver such cash to
or upon the order of the registered holder of such Right Certificate. In
addition, in the case of an exercise of the Rights by a holder pursuant to
Section 7.5, the Rights Agent shall return such, Right Certificate to the
registered holder thereof after imprinting, stamping or otherwise
indicating thereon that the rights represented by such Right Certificate no
longer include the rights provided by Section 7.5 of the Rights Agreement.
<PAGE>
7.4 In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right
Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent to the registered holder of
such Right Certificate or to his duly authorized assigns, subject to the
provisions of Section 14 hereof.
7.5 In the event
(a) any person shall become an Acquiring Person, or
(b) during such time as there is an Acquiring Person, there shall
be any reclassification of securities (including any reverse stock
split) or recapitalization or reorganization of the Company which has
the effect, directly or indirectly of increasing by more than 1% the
proportionate share of the outstanding shares of any class of equity
securities of the Company or any of its Subsidiaries beneficially
owned by any Acquiring Person or any Affiliate or Associate thereof,
each holder of a Right shall, for a period of sixty days after the
later of the occurrence of any such event or the effective date of the
registration statement referred to in Section 9.4 hereof, have a right
to receive, upon exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of Common Shares for which a
Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of such Common Shares, such number of Common
Shares of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the number of Common
Shares for which a Right is then exercisable and dividing that product
by (y) 50% of the then current per share market price of the Company's
Common Shares (determined pursuant to Section 11.4 hereof) on the date
such Person became an Acquiring Person. In the event that any Person
shall become an Acquiring Person and the Rights shall then be
outstanding, the Company shall not take any action which would
eliminate or diminish the benefits intended to be afforded by the
Rights.
<PAGE>
From and after the occurrence of the earlier of the events
described in clauses (a) and (b) above, any Rights that are or were
acquired or beneficially owned by such Acquiring Person (or any
Associate or Affiliate of such Acquiring Person) shall be void and any
holder of such Rights shall thereafter have no right to exercise such
Rights under any provision of this Agreement. No Right Certificate
shall be issued pursuant to Section 3 that represents Rights
beneficially owned by an Acquiring Person whose Rights would be void
pursuant to the preceding sentence or any Associate or Affiliate
thereof; no Right Certificate shall be issued at any time upon the
transfer of any Rights to an Acquiring Person whose Rights would be
void pursuant to the preceding sentence or any Associate or Affiliate
thereof or to any nominee of such Acquiring Person, Associate or
Affiliate; and any Right Certificate delivered to the Rights Agent for
transfer to an Acquiring Person whose Rights would be void pursuant to
the preceding sentence or any Associate or Affiliate thereof shall be
cancelled.
In case any event described in clauses (a) and (b) above shall occur,
then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 25 hereof,
a notice of the occurrence of such event, which notice shall describe
such event and the consequences of such event to holders of Rights
under this Section 7.5.
In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit the
exercise in full of the Rights in accordance with this Section 7.5,
the Company shall take all such action as may be necessary to
authorize additional Common Shares for issuance upon exercise of the
Rights; provided, however, that if the Company is unable to cause the
authorization of a sufficient number of additional Common Shares,
then, in the event the Rights become so exercisable, the Board of
Directors may, but shall not be required to, with respect to each
Right, (i) to the extent permitted by Indiana law, pay cash in an
amount equal to the Purchase Price, in lieu of issuing Common Shares
and requiring payment therefor; or (ii) issue debt or other equity
securities, or a combination thereof, having a value (as determined by
a majority of the members of the Board of Directors after considering
the advice of a nationally recognized investment banking firm selected
by a majority of the members of the Board of Directors of the Company)
equal to the Current Value of the Common Shares (as defined
hereinafter), and require the payment of the Purchase Price; or (iii)
deliver any combination of cash, property, Common Shares and/or
securities having a value (as determined by a majority of the members
of the Board of Directors after considering the advice of a nationally
recognized investment banking firm selected by a majority of the
members of the Board of Directors of the Company) equal to the Current
Value of the Common Shares, and require payment of all or any
requisite portions of the Purchase Price. The "Current Value of the
Common Shares" shall be the product of the current per share market
price of the Common Shares (determined pursuant to Section 11.4 on the
date of the occurrence of the event described above in clauses (a) and
(b) of this Section 7.5) multiplied by the number of Common Shares for
which the Right otherwise would be exercisable if there were
sufficient Common Shares available. To the extent that the Company
determines that some action need be taken pursuant to clauses (i),
(ii) or (iii) of the proviso of this Section 7.5, the Board of
Directors may suspend the exercisability of the Rights for a period of
up to 60 days following the date on which the event described in
clauses (a) and (b) of this Section 7.5 shall have occurred, in order
to seek any authorization of additional Common Shares and/or to decide
the appropriate form of distribution to be made pursuant to the above
proviso and to determine the value thereof. In the event of such
suspension, the Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended.
<PAGE>
7.6 The exercise of Rights under Section 7.5 shall only result in the
loss of rights under Section 7.5 to the extent so exercised, and shall not
otherwise affect the rights represented by the Rights under this Rights
Agreement, including the rights represented by Section 13.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Right Certificates to the Company, or shall, at the written
request of the Company, destroy such cancelled Right Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 9. Registration of Common Shares.
9.1 The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Common Shares delivered upon
exercise of Rights shall, at the time of delivery of the certificates for
such Common Shares (subject to payment of the Purchase Price), be duly and
validly authorized and issued and fully paid and nonassessable shares.
9.2 The Company covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates
or of any Common Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Right Certificates to a person other
than, or the issuance or delivery of certificates or depositary receipts
for the Common Shares in a name other than that of, the registered holder
of the Right Certificate evidencing Rights surrendered for exercise or to
issue or to deliver any certificates or depositary receipts for Common
Shares upon the exercise of any Rights until any such tax shall have been
paid (any such tax being payable by the holder of such Right Certificate at
the time of surrender) or until it has been established to the Company's
reasonable satisfaction that no such tax is due.
<PAGE>
9.3 The Company covenants and agrees that it will prepare and file, as
soon as practicable after the Distribution Date, a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), on an
appropriate form with respect to the Common Shares issuable upon exercise
of the Rights, (ii) use its best efforts to cause the registration
statement to become effective as soon as practicable after filing, and
(iii) use its best efforts to cause the registration statement to remain
effective (with a prospectus at all times meeting the requirements of the
Securities Act and the rules and regulations thereunder) until the earlier
of the exercise of all of the Rights and the Expiration Date. The Company
will also take all actions required to comply with the state securities
laws applicable to the Rights and the Common shares issuable upon exercise
of the Rights. The Company may temporarily suspend, for a period of time
not to exceed 90 days, the exercisability of the Rights in order to prepare
and file the registration statement. Upon any such suspension, the Company
shall issue a public announcement and notice to the Rights Agent stating
that the exercisability of the Rights has been temporarily suspended, and
the Company shall issue a public announcement and notice to the Rights
Agent when the suspension is no longer in effect. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction in which any requisite registration or
qualification has not been obtained or any requisite notice of exemption
has not been filed.
Section 10. Record Date. Each person in whose name any certificate for
Common Shares is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the Common Shares represented
thereby on, and such certificate shall be dated, the date upon which the Right
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any applicable transfer taxes) was made; provided however,
that if the date of such surrender and payment is a date upon which the Common
Shares transfer books of the Company are closed, such person shall be deemed to
have become the record holder of such succeeding Business Day on which the
Common Shares transfer books of the Company are open. Prior to the exercise of
the Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Common Shares for which the Rights shall
be exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number of Common Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
<PAGE>
11.1 In the event the Company shall at any time after the date of this
Agreement (a) declare a dividend on the Common Shares payable in Common
Shares, (b) subdivide the outstanding Common Shares, (c) combine the
outstanding Common Shares into a smaller number of Common Shares or (d)
issue any securities in a reclassification of the Common Shares (including
any such reclassification in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation), the Purchase
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, and
the number and kind of shares issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after
such time shall be entitled to receive the aggregate number and kind of
shares which, if such Right had been exercised immediately prior to such
date and at a time when the Common Shares transfer books of the Company
were open, such holder would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification. The adjustments provided for in this Section 11.1 shall
be made successively whenever such a dividend is declared or paid or such a
subdivision, combination or consolidation is effected.
11.2 In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Common Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Common Shares (or shares having the same rights,
privileges and preferences as the Common Shares ("equivalent common
shares")) or securities convertible into Common Shares or equivalent common
shares at a price per Common Share or equivalent common share (or having a
conversion price per share, if a security convertible into Common Shares or
equivalent common shares) less than the then current per share market price
of the Common Shares (as defined in Section 11.4) on such record date, the
Purchase Price to be in effect after such record date shall be determined
by multiplying the purchase price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Common Shares outstanding on such record date plus the number of Common
Shares which the aggregate offering price of the total number of Common
Shares and/or equivalent common shares so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price and the denominator of
which shall be the number of Common Shares outstanding on such record date
plus the number of additional Common Shares and/or equivalent common shares
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall
be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent. Common Shares owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed;
and in the event that such rights, options or warrants are not so issued,
the Purchase Price shall be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
<PAGE>
11.3 In case the Company shall fix a record date for the making of a
distribution to all holders of the Common Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Common Shares) or subscription rights or warrants
(excluding those referred to in Section 11.2 hereof), the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the then current per share market
price of the Common Shares on such record date, less the fair market value
(as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one
Common Share and the denominator of which shall be such current per share
market price of the Common Shares, provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of the Company to be issued upon
exercise of one Right. Such adjustments shall be made successively whenever
such a record date is fixed; and in the event that such distribution is not
so made, the Purchase Price shall again be adjusted to be the Purchase
Price which would then be in effect if such record date had not been fixed.
<PAGE>
11.4 (a) For the purpose of any computation hereunder, the "current
per share market price" of any security (a "Security" for the purpose of
this Section 11.4(a)) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the 30 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to
such date; provided, however, that in the event that the current per share
market price of the Security is determined during a period following the
announcement by the issuer of such Security of (i) a dividend or
distribution on such Security payable in shares of such Security or
securities convertible into such shares, or (ii) any subdivision,
combination or reclassification of such Security and prior to the
expiration of 30 Trading Days after the ex-dividend date for such dividend
or distribution or the record date for such subdivision, combination of
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price
per share equivalent of such Security. The closing price for each day shall
be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction,
reporting system with respect to securities listed or admitted to trading
on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
the Security is listed or admitted to trading or, if the Security is not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such other system then in use, or, if on any such date the
Security is not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a
market in the Security selected by the Board of Directors of the Company.
The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Security is listed or admitted to trading
is open for the transaction of business or, if the Security is not listed
or admitted to trading on any national securities exchange, a Business Day.
(b) For the purpose of any computation hereunder, the "current
per share market price" of the Common Shares shall be determined in
accordance with the method set forth in Section 11.4(a). If the Common
Shares are publicly held and not so listed or traded, "current per
share market price" shall mean the fair value per share as determined
in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights
Agent.
11.5 No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments which by reason of
this Section 11.5 are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the nearest
one-hundredth of a Common Share or one-thousandth of any other share or
security as the case may be. Notwithstanding the first sentence of this
Section 11.5, any adjustment required by this Section 11 shall be made no
later than the earlier of (a) three years from the date of the transaction
which requires such adjustment or (b) the date of the expiration of the
right to exercise any Rights.
<PAGE>
11.6 If, as a result of an adjustment made pursuant to Section 11.1
hereof, the holder of any Right thereafter exercised shall become entitled
to receive any securities of the Company other than Common Shares,
thereafter the number of such other securities so receivable upon exercise
of any Right shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Shares contained in Sections 11.1 through 11.3,
inclusive, and the provisions of Sections 7, 9, 10 and 13 with respect to
the Common Shares shall apply on like terms to any such other securities.
11.7 All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Common Shares
purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
11.8 Unless the Company shall have exercised its election as provided
in Section 11.9, upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11.2 and 11.3, each Right outstanding
immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number
of Common Shares (calculated to the nearest one one-hundredth of a Common
Share) obtained by (a) multiplying (x) the number of Common Shares covered
by a Right immediately prior to this adjustment by (y) the Purchase Price
in effect immediately prior to such adjustment of the Purchase Price and
(b) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
11.9 The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of Common Shares purchasable upon the exercise of
a Right. Each of the Rights outstanding after such adjustment of the number
of Rights shall be exercisable for the number Common Shares for which a
Right was exercisable immediately prior to such adjustment. Each Right held
of record prior to such adjustment of the number of Rights shall become
that number of Rights (calculated to the nearest one-thousandth) obtained
by dividing the Purchase Price in effect immediately prior to adjustment of
the Purchase Price by the Purchase Price in effect immediately after
adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of
the adjustment to be made. This record date may be the date on which the
purchase price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the
date of the public announcement. If Right Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section 11.9,
the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed
to such holders of record in substitution and replacement for the Right
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after
such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein and shall be
registered in the names of the holders of record of Right Certificates on
the record date specified in the public announcement.
<PAGE>
11.10 Irrespective of any adjustment or change in the Purchase Price
or the number of Common Shares issuable upon the exercise of the Rights,
the Right Certificates theretofore and thereafter issued may continue to
express the Purchase Price and the number of Common Shares which were
expressed in the initial Right Certificates issued hereunder.
11.11 In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of
such event the issuing to the holder of any Right exercised after such
record date of the Common Shares and other securities of the Company, if
any, issuable upon such exercise over and above the Common Shares and other
securities of the Company, if any, issuable upon such exercise on the basis
of the Purchase Price in effect prior to such adjustment; provided however,
that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such
adjustment.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Shares a copy of
such certificate and (c) mail a brief summary thereof to each holder of a Right
Certificate. The Rights Agent shall be fully protected in relying on such
certificate and shall not be deemed to have knowledge of any adjustment unless
and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
13.1 In the event, directly or indirectly, (a) the Company shall
consolidate with, or merge with and into, any other Person, (b) any Person
shall consolidate with the Company, or merge with and into the Company and
the Company shall be the continuing or surviving corporation of such merger
and, in connection with such merger, all or part of the Common Shares shall
be changed into or exchanged for securities of any other Person (or the
Company) or cash or any other property, or (c) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one or more transactions, assets or earning power
aggregating 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to any other person other than the
Company or one or more of its wholly owned Subsidiaries, then, and in each
such case, proper provision shall be made so that (i) each holder of a
Right (except as otherwise provided herein) shall thereafter have the right
to receive, upon the exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of Common Shares for which a Right
is then exercisable, in accordance with the terms of this Agreement and in
lieu of such Common Shares, such number of freely tradeable Common Shares
of such other Person (including the Company as successor thereto or as the
surviving corporation), free and clear of any liens, rights of call or
first refusal, encumbrances or other adverse claims, as shall equal the
result obtained by (A) multiplying the then current Purchase Price by the
number of Shares for which a Right is then exercisable and dividing that
product by (B) 50% of the then current per share market price of the Common
Shares of such other Person (determined pursuant to Section 11.14 hereof)
on the date of consummation of such consolidation, merger, sale or
transfer; (ii) the issuer of such Common Shares shall thereafter be liable
for, and shall assume, by virtue of such consolidation, merger, sale or
transfer, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" shall thereafter be deemed to refer to
such issuer; and (iv) such issuer shall take such steps (including, but not
limited to, the reservation of a sufficient number of its Common Shares in
accordance with Section 9 hereof) in connection with such consummation as
may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to the Common
Shares thereafter deliverable upon the exercise of the Rights.
<PAGE>
13.2 The Company shall not consummate any such consolidation, merger,
sale or transfer unless prior thereto the Company and such issuer shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in Section 13.1 hereof and further
providing that, as soon as practicable after the date of any consolidation,
merger, sale or transfer of assets mentioned in Section 13.1 hereof, such
issuer at its own expense shall:
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form,
will use its best efforts to cause such registration statement to
become effective as soon as practicable after such filing and
will use its best efforts to cause such registration statement to
remain effective (with a prospectus at all times meeting the
requirements of the Securities Act and the rules and regulations
thereunder) until the Expiration Date;
(ii) use its best efforts to qualify or register the Rights
and the securities purchasable upon exercise of the Rights under
the blue sky laws of such jurisdictions as may be necessary or
appropriate; and
(iii) deliver to holders of the Rights historical financial
statements for such issuer and each of its Affiliates which
comply in all material respects with the requirements for
registration on Form 10 under the Exchange Act.
13.3 The Company shall not enter into any transaction of the kind
referred to in this Section 13 if at the time of such transaction there are
any rights, warrants, instruments or securities outstanding or any
agreements or arrangements which, as a result of the consummation of such
transaction, would eliminate or substantially diminish the benefits
intended to be afforded by the Rights. The provisions of this Section 13
shall similarly apply to successive mergers or consolidations or sales or
other transfers.
Section 14. Fractional Rights and Fractional Shares.
<PAGE>
14.1 The Company shall not be required to issue fractions of Rights or
to distribute Right Certificates which evidence fractional Rights. In lieu
of such fractional Rights, there shall be paid to the registered holders of
the Right Certificates with regard to which such fractional Rights would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section
14.1, the current market value of a whole Right shall be the closing price
of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable. The closing
price for any day shall be the last sale price, regular way, or, in case no
such sale takes place on such day the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the New York Stock Exchange or, if the Rights are
not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are
not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such
other system then in use or, if on any such date the Rights are not quoted
by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date no
such market maker is making a market in the Rights, the fair value of the
Rights on such date as determined in good faith by the Board of Directors
of the Company shall be used.
14.2 The Company shall not be required to issue fractions of Common
Shares upon exercise of the Rights or to distribute certificates which
evidence fractional Common Shares. In lieu of fractional Common Shares, the
Company shall pay to the registered holders of Right Certificates at the
time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one Common Share. For
the purposes of this Section 14.2, the current market value of a Common
Share shall be the closing price of a Common Share (as determined pursuant
to the second sentence of Section 11.4(a) hereof) for the Trading Day
immediately prior to the date of such exercise.
14.3 The holder of a Right by the acceptance of the Right expressly
waives such holder's right to receive any fractional Rights or any
fractional shares upon exercise of a Right except as provided above.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any person subject to, this Agreement.
<PAGE>
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common
Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the office of the Rights Agent designated for such
purpose, duly endorsed or accompanied by a proper instrument of
transfer;
(c) the Company and the Rights Agent may deem and treat the
person in whose name the Right Certificate (or, prior to the
Distribution Date, the associated Common Shares certificate) is
registered as the absolute owner thereof and of the Rights evidenced
thereby (notwithstanding any of ownership or writing on the Right
Certificates or the associated Common Shares certificate made by
anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or a beneficial interest in a Right or other
Person as a result of its inability to perform any of its obligations
under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation
or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such
obligation; provided, however, the Company must use its best efforts
to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Shareholder. No holder,
as such, of any Right Certificate shall be deemed for any purpose to be the
holder of the Common Shares or any other securities of the Company which may at
any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Right Certificate be construed to
confer upon the holder of any Right Certificate as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by such Right
Certificate shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
<PAGE>
The Rights Agent shall be protected and shall incur no liability for, or in
respect of any action taken, suffered or omitted by it in connection with, its
administration of this Agreement in reliance upon any Right Certificate or
certificate for the Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person or persons, or
otherwise upon the advice of counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21 hereof. In case
at the time such successor Rights Agent shall succeed to the agency created by
this Agreement any of the Right Certificates shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound.
<PAGE>
20.1 The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
20.2 Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering
any action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by any one of the Chairman
of the Board, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
20.3 The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
20.4 The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be
deemed to have been made by the Company only.
20.5 The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right
Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant
to Section 7.5 hereof) or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in Section 3,
11, 13, 23 or 24, or the ascertaining of the existence of facts that would
require any such change or adjustment (except with respect to the exercise
of Rights evidenced by Right Certificates after actual notice that such
change or adjustment is required); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any Common Shares to be issued pursuant to this Agreement or
any Right Certificate or as to whether any Common Shares will, when issued,
be validly authorized and issued, fully paid and nonassessable.
20.6 The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out of performing by the
Rights Agent of the provisions of this Agreement.
<PAGE>
20.7 The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the President, any Vice President,
the Secretary or the Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it
shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions. Any application by the Rights Agent
for written instructions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be taken or omitted by
the Rights Agent under this Rights Agreement and the date on and/or after
which such action shall be taken or such omission shall be effective. The
Rights Agent shall not be liable for any action taken by, or omission of,
the Rights Agent in accordance with a proposal included in any such
application on or after the date specified in such application (which date
shall not be less than five Business Days after the date any such officer
of the Company actually receives such application, unless any such officer
shall have consented in writing to an earlier date) unless, prior to taking
any such action (or the effective date in the case of an omission), the
Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.
<PAGE>
20.8 The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for
any other legal entity.
20.9 The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
20.10 No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnification against such risk or liability is
not reasonably assured to it.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon 30 days notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Shares by registered or certified mail, and to the holders
of the Right Certificates by first-class mail. If the Rights Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who shall, with such notice, submit his Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (i) a corporation organized and doing business under the laws of the
United States or the State of Indiana (or of any other state of the United
States so long as such corporation is authorized to do business as a banking
institution), validly existing and which is authorized under such laws to
exercise corporate trust or stock transfer powers and is subject to supervision
or examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50
million or (ii) a subsidiary of a corporation described in clause (i) of this
sentence. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Shares,
and mail a notice thereof in writing to the registered holders of the Right
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
<PAGE>
Section 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Right Certificates made in accordance with the
provisions of this Agreement.
Section 23. Redemption.
23.1 The Board of Directors of the Company may, at its option, at any
time prior to the tenth business day after any Person becomes an Acquiring
Person, redeem all but not less than all the then outstanding Rights at a
redemption price of $.01 per Right, appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the
"Redemption Price").
23.2 In addition, in the exercise of its sole discretion the Board of
Directors of the Company may redeem all but not less than all of the then
outstanding Rights at the Redemption Price following the occurrence of a
Shares Acquisition Date but prior to any event described in Section 13.1
either (a) in connection with any event specified in Section 13.1 in which
all holders of Common Shares are treated alike and not involving (other
than as a holder of Common Shares being treated like all other such
holders) an Acquiring Person or an Affiliate or Associate of an Acquiring
Person or any other Person in which such Acquiring Person, Affiliate or
such Associate has any interest, or any other Person acting directly or
indirectly on behalf of or in association with any such Acquiring Person,
Affiliate or Associate, or (b) following the occurrence of an event set
forth in, and the expiration of any period during which the holder of
Rights may exercise the rights under Section 7.5 if and for as long as the
Acquiring Person is not thereafter the Beneficial Owner 25% or more of the
outstanding Common Shares, and at the time of redemption there are no other
persons who are Acquiring Persons.
<PAGE>
23.3 Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, and without any further,
action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be
to receive the Redemption Price. Within 10 days after the action of the
Board of Directors ordering the redemption of the Rights, the Company shall
give notice of such redemption to the holders of the then outstanding
Rights by mailing such notice to all such holders at their last addresses
as they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the
Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any
Rights at any time in any manner other than that specifically set forth in
this Section 23, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.
Section 24. Exchange.
24.1 The Board of Directors of the Company may, at its option, at any
time after any person becomes an Acquiring Person, exchange all or part of
the then outstanding and exercisable Rights (which shall not include Rights
that have become void pursuant to the provisions of Section 7.5 hereof) for
Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio
being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any
such Subsidiary, or any entity holding Common Shares for or pursuant to the
terms of any such plan), together with all Affiliates and Associates of
such person, becomes the Beneficial Owner of more than 50% of the Common
Shares then outstanding.
24.2 Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to Section 24.1 and
without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of
such Rights shall be to receive that number of Common Shares equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio.
The Company shall promptly give public notice of any such exchange;
provided, however, that the failure to give, or any defect in, such notice
shall not affect the validity of such exchange. The Company promptly shall
mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights
Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such
notice of exchange will state the method by which the exchange of the
Common Shares for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other
than Rights which have become void pursuant to the provisions of Section
7.5 hereof) held by each holder of Rights.
<PAGE>
24.3 The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, the Company shall pay to
the registered holders of the Right Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole Common
Share. For the purposes of this Section 24.4, the current market value of a
whole Common Share, shall be the closing price of a Common Share (as
determined pursuant to the second sentence of Section 11.4(a) hereof) for
the Trading Day immediately prior to the date of exchange pursuant to this
Section 24.
Section 25. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
The Keller Manufacturing Company, Inc.
701 North Water Corydon, IN 47112
Attention: Robert W. Byrd
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
J.J.B. Hilliard, W.L. Lyons, Inc.
Hilliard Lyons Center
P.O. Box 32760
Louisville, KY 40232-2760
Attention: Jim Stuckert
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
<PAGE>
Section 26. Supplements and Amendments. The Company may from time to time
supplement or amend this Agreement without the approval of any holders of Right
Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein, or to make any other provisions with respect to the Rights
which the Company may deem necessary or desirable, including but not limited to
extending the Final Expiration Date, any such supplement or amendment to be
evidenced by a writing signed by the Company and the Rights Agent; provided,
however, that from and after such time as any Person becomes an Acquiring
Person, this Agreement shall not be amended in any manner which would adversely
affect the interests of the holders of Rights. Without limiting the foregoing,
the Company may at any time prior to such time as any Person becomes an
Acquiring Person amend this Agreement to lower the thresholds set forth in
Sections 1(a) and 3.1 to not less than the greater of (i) the sum of .001% and
the largest percentage of the outstanding Common Shares then known by the
Company to be beneficially owned by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any
Subsidiary of the Company, or any entity holding Common Shares for or pursuant
to the terms of any such plan) and (ii) 10%.
Section 27. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 28. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right, remedy
or claim under this Agreement and this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Shares).
Section 29. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent Jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Section 30. Governing Law. This Agreement and each Right Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
Indiana and for all purposes shall be governed by and construed in accordance
with the laws of such State applicable to contracts to be made and performed
entirely within such State.
Section 31. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 32. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
THE KELLER MANUFACTURING COMPANY, INC.
By: /s/ Robert W. Byrd
Attest:
By: /s/
----------------------
J.J.B. HILLIARD, W.L. LYONS, INC.
By: /s/ James W. Stuckert
Attest:
By: /s/ Mary K. Bowling
<PAGE>
Exhibit A
Form of Right Certificate
Certificate No. R- Rights
---------
NOT EXERCISABLE AFTER JANUARY 22, 2009, OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET
FORTH IN THE RIGHTS AGREEMENT.
Right Certificate
THE KELLER MANUFACTURING COMPANY, INC.
This certifies that , or registered assigns,
is the registered owner of the number rights set forth above, each above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of December 18, 1998 and effective
as of January 22, 1999 (the "Rights Agreement"), between The Keller
Manufacturing Company, Inc., an Indiana corporation (the "Company"), and J.J.B.
Hilliard, W.L. Lyons, Inc. (the "Rights Agent"), to purchase from the Company at
any time after the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 P.M., Eastern Standard Time, on January 22, 2009,
at the office of the Rights Agent designated for such purpose, or at the office
of its successor as Rights Agent, one fully paid and non-assessable Common Share
(the "Common Shares") of the Company, at a purchase price of $40.00 per Common
Share (the "Purchase Price"), upon presentation and surrender of this Right
Certificate with the Form of Election to purchase duly executed. The number of
Rights evidenced by this Right Certificate (and the number of Common Shares
which may be purchased upon exercise hereof) set forth above, and the Purchase
Price set forth above, are the number and Purchase Price as of January 22, 1999,
based on the Common Shares as constituted at such date. As provided in the
Rights Agreement, the Purchase Price and the number Common Shares which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations the Company and the holders of the Right
Certificates. Copies of the Rights Agreement are on file at the principal
executive offices of the Company and the above-mentioned offices of the Rights
Agent.
<PAGE>
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Common Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Company at a redemption price of
$.01 per Right or (ii) may be exchanged in whole or in part for the Company's
Common Shares.
No fractional Common Shares will be issued upon the exercise of any
Right or Rights evidenced hereby, but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Common Shares
or of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action or to receive notice of
meetings or other actions affecting shareholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise
until the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purchase until it shall have been countersigned by the Rights Agent.
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company,
and its corporate seal. Dated as of , 19 .
ATTEST: THE KELLER MANUFACTURING COMPANY,
INC.
By:
- ---------------------------- ------------------------------
Countersigned:
- ----------------------------
By:-------------------------
Authorized Signature
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such holder
desires to transfer the Right Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint
Attorney, to transfer the within Right
Certificate on the books of the within-named Company, with full power of
substitution.
Dated: ____________________, 19___
-----------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
CERTIFICATE
-----------
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
-----------------------------
Signature
<PAGE>
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Right Certificate.)
To THE KELLER MANUFACTURING, INC.:
The undersigned hereby irrevocably elects to exercise Rights
represented by this Right Certificate to purchase the Common Shares issuable
upon the exercise of such Rights and requests that certificates for such Common
Shares be issued in the name of:
Please insert social security or other identifying number:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated: , 19
-----------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
-----------------------------
Signature
NOTICE
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
<PAGE>
Exhibit B
SUMMARY OF RIGHTS TO PURCHASE
COMMON SHARES
On December 18, 1998, the Board of Directors of The Keller Manufacturing
Company, Inc. (the "Company") declared a dividend of one common share purchase
right (a "Right") for each outstanding Common Share of the Company. The dividend
is payable to shareholders of record on January 22, 1999 (the "Record Date").
Each Right entitles the registered holder to purchase from the Company one
Common Share (the "Common Shares") at a price of $40.00 per Common Share (the
"Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") between the
Company and J.J.B. Hilliard, W.L. Lyons, Inc. as Rights Agent (the "Rights
Agent").
Until the earlier to occur of (i) 10 business days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") have acquired beneficial ownership of 25% or more of the
outstanding Common Shares or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any Person
becomes an Acquiring Person) after the commencement of, or announcement of an
intention to make, a tender offer or exchange offer the consummation of which
would result in the beneficial ownership by a person or group of 25% or more of
such outstanding Common Shares (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Share certificates outstanding as of the Record Date, by such Common
Share certificate with a copy of this Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Share certificates issued after the Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares outstanding as of the Record Date, even without such notation or a
copy of this Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and each separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on January 22, 2009 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
<PAGE>
The Purchase Price payable, and the number of Common Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Common
Shares, (ii) upon the grant to holders of the Common Shares of certain rights or
warrants to subscribe for or purchase Common Shares at a price, or securities
convertible into Common Shares with a conversion price, less than the then
current market price of the common Shares or (iii) upon the distribution to
holders of the Common Shares of evidences of indebtedness or assets (excluding
regular periodic cash dividends paid out of earnings or retained earnings or
dividends payable in Common Shares) or of subscription rights or warrants (other
than those referred to above).
The Rights provide that in the event that any person becomes an
Acquiring Person, each holder of a Right, other than Rights beneficially owned
by the Acquiring Person (which will thereafter be void), will thereafter have
the right to receive upon exercise that number of Common Shares having a market
value of two times the exercise price of the Right, in lieu of such Common
Shares, subject to the availability of a sufficient number of authorized but
unissued Common Shares (such right being called the "Subscription Right"). The
Subscription Right will be exercisable for a 60-day period after the effective
date of a registration statement under the Securities Act of 1933, as amended,
covering the Common Shares. The Rights also provide that in the event that the
Company is acquired in a merger or other business combination transaction or 50%
or more of its consolidated assets or earning power are sold, each holder of a
Right will thereafter have the right to receive, upon the exercise thereof at
the then current exercise price of the Right, that number of shares of common
stock of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right (such right being
called the "Merger Right"). Each holder of a Right (other than an Acquiring
Person) will continue to have the Merger Right whether or not such holder
exercises the Subscription Right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 25% or more of the outstanding
Common Shares and prior to the acquisition by such Person or group of more than
50% outstanding Common Shares, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such person or group which have
become void), in whole or in part, at an exchange ratio of one Common Share per
Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Common Shares will be issued and in lieu
thereof, an adjustment in cash will be made based on the market price of the
Common Shares on the last trading day prior to the date of exercise.
<PAGE>
At any time prior to the close of business on the tenth day following
the acquisition by a person or group of affiliated or associated persons of
beneficial ownership of 25% or more of the outstanding Common Shares, the Board
of Directors of the Company may redeem the Rights in whole, but not in part, at
a price of $.01 per Right (the "Redemption Price"). The redemption of the Rights
may be made effective at such time, on such basis and with such conditions as
the Board of Directors in its sole discretion may establish. Additionally the
Company may, following the time that a person has become an Acquiring Person,
redeem the then outstanding Rights in whole, but not in part, at the Redemption
Price provided that such redemption is (i) in connection with a merger or other
business combination transaction or series of transactions involving the Company
in which all holders of Common Shares are treated alike but not involving an
Acquiring Person or any person who was an Acquiring Person or (ii) following an
event giving rise to, and the expiration of the exercise period for, the
Subscription Right if and for as long as no person beneficially owns securities
representing 25% or more of the Company's outstanding Common Shares. Immediately
upon any redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, except that from and
after such time as any Person becomes an Acquiring Person no such amendment may
adversely affect the interests of the holders of the Rights. Without limiting
the foregoing, the Company may at any time prior to such time as any Person
becomes an Acquiring Person amend the Rights Agreement to lower the 25%
thresholds set forth in Sections 1(a) and 3.1 of the Rights Agreement to not
less than the greater of (i) the sum of .001% and the largest percentage of the
outstanding Common Shares then known by the Company to be beneficially owned by
any Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any Subsidiary of the Company, or any entity
holding Common Shares for or pursuant to the terms of any such plan) and (ii)
10%.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Page
----
Section 1. Certain Definitions 1
Section 2. Appointment of Rights Agent 4
Section 3. Issuance of Right Certificates 4
Section 4. Form of Right Certificates 5
Section 5. Countersignature and Registration 6
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates 6
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights 7
Section 8. Cancellation and Destruction of Right Certificates 10
Section 9. Registration of Common Shares 10
Section 10. Record Date 11
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights 11
Section 12. Certificate of Adjusted Purchase Price or Number of Shares 16
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power 16
Section 14. Fractional Rights and Fractional Shares 17
Section 15. Rights of Action 18
Section 16. Agreement of Right Holders 19
Section 17. Right Certificate Holder Not Deemed a Shareholder 19
Section 18. Concerning the Rights Agent 19
Section 19. Merger or Consolidation or Change of Name of Rights Agent 20
<PAGE>
Section 20. Duties of Rights Agent 20
Section 21. Change of Rights Agent 22
Section 22. Issuance of New Right Certificates 23
Section 23. Redemption 23
Section 24. Exchange 24
Section 25. Notices 25
Section 26. Supplements and Amendments 26
Section 27. Successors 26
Section 28. Benefits of this Agreement 26
Section 29. Severability 26
Section 30. Governing Law 26
Section 31. Counterparts 26
Section 32. Descriptive Headings 26
</TABLE>
LEASE OF SPACE IN INTERNATIONAL HOME FURNISHINGS CENTER
<TABLE>
<CAPTION>
<S> <C>
IHFC: International Home Furnishings LESSEE: Keller Manufacturing Company, Inc.
Center, Inc. P.O. Box 8
Post Office Box 828 Corydon, IN 47112
High Point, North Carolina 27261
ADDRESS FOR NOTICES
</TABLE>
DESCRIPTION OF PREMISES: Space No. W747 plus bays W748, W749, W750, W751 and
W753 in the International Home Furnishings Center, High Point, North Carolina.
TERM: 5 years
COMMENCEMENT DATE: May 1, 1999
EXPIRATION DATE: April 30, 2004
ANNUAL RENTAL:
7,154 sq. ft. @ $15.50 per sq. ft. per yr. $110,887.00
ADDITIONAL OR SUPPLEMENTAL TERMS AND PROVISIONS:
This lease is contingent upon Lessee making a professionally designed showroom
statement both interiorly and exteriorly.
IHFC, by this Agreement, leases to Lessee and Lessee leases from IHFC, the
Premises described above, at the rental, for the term and upon the other terms
and conditions contained on this page and in IHFC's Standard Terms and
Conditions of Lease (IHFC Form No. 900103) which are incorporated by reference
in and made a part of this lease.
IHFC and Lessee have caused this Lease to be executed by their duly
authorized officers, this the 14th day of December, 1998.
<TABLE>
<CAPTION>
<S> <C>
IHFC: LESSEE:
International Home Furnishings Center, Inc. Keller Manufacturing Company, Inc.
By:_________________________________ __________________________________
Vice President Legal form of business: Corporation, Partnership
or individual and state of principal office
By:________________________________
Name Title
Attest:_______________________________ President, Vice President, General Partner, Owner
Secretary
Attest:______________________________ Corporate Seal
Secretary if Lessee is a Corporation
</TABLE>
<PAGE>
STANDARD TERMS AND CONDITIONS OF LEASE
IHFC(R) FORM NO. 900103
1.0
PREMISES Section 1.1. Description. Lessee acknowledges receipt of a
drawing or floor plan showing the exact location of the
Premises in the International Home Furnishings
Center(R)showroom complex owned and operated by IHFC(R)(the
"Home Furnishings Center"). The Home Furnishings Center is
more particularly described on a map or plat prepared by
Davis-Martin-Powell and Associates, Inc. and designated Job
No. S-18512, a copy of which is on file at the office of
IHFC(R)and is incorporated in this Lease by reference. The
lease of the Premises includes the right of access to the
Premises through the common areas of the Home Furnishings
Center.
Section 1.2. Relocation. Lessee acknowledges and agrees that
it is essential to the orderly and efficient operation of
the Home Furnishings Center by IHFC(R) that IHFC(R) have the
right from time to time to relocate lessees in order to
achieve optimum utilization of all space in the Home
Furnishings Center. Consequently, IHFC(R) shall be entitled
to relocate Lessee as provided in this section if IHFC(R)
determines that relocation of Lessee is in the best interest
of the Home Furnishings Center in the conduct of its
business. IHFC(R) shall exercise its right to relocate
Lessee in the following manner: (a) the premises to which
Lessee is to be relocated (the "New Premises") shall be
selected by IHFC(R) and shall be equivalent (as determined
by IHFC(R) in its sole discretion) in size and value to the
Premises; (b) IHFC(R) shall notify Lessee of its intent to
relocate Lessee within a time period prior to the
commencement of the next regularly scheduled Market such
that the Lessee has a reasonable period of time (as
determined by IHFC(R) in its sole discretion) to refixture,
redecorate, and prepare to show at that Market and identify
the proposed New Premises; (c) within ten (10) days after
notice of relocation by IHFC(R), Lessee, at its option, may
terminate this Lease by written notice to IHFC(R); (d) if
Lessee fails to terminate this Lease as provided in (c)
above, the New Premises shall be substituted for the
original Premises. This Lease shall continue in full force
and effect without any other change, and IHFC(R), at its
expense, shall move Lessee's property to the New Premises
and shall pay the costs (less a reasonable allowance for
depreciation) of replacing (as nearly as possible) all
installations and improvements of Lessee which cannot be
moved to the New Premises.
2.0
TERM Section 2.1. Commencement and Expiration Date. The
Commencement Date and Expiration Date of the Lease term are
the dates set forth on the first page of this Lease.
Section 2.2. Holding Over. If Lessee remains in possession
of the Premises after the expiration or termination of this
Lease, Lessee shall be only a tenant at will but its
occupancy shall otherwise be subject to all of the terms and
provisions of this Lease, except that Lessee shall pay per
diem rent for each day Lessee occupies the premises, in an
amount equal to one hundred fifty percent (150%) of the then
prevailing annual rates for comparable space charged by
IHFC(R) to new tenants, prorated on a daily basis.
<PAGE>
3.0
RENT Section 3.1. Annual Rental. Lessee shall pay to IHFC(R)
without offset or deduction the Annual Rental for the
Premises set forth on the first page of this Lease, in
semiannual installments, each such semiannual installment
being due and payable in advance on or before the first day
of November and on or before the first day of May (the
"Rental Payment Dates") of each calendar year during the
Lease term, except as provided in Section 3.2.
Section 3.2. No Reduction. If the Commencement Date is a day
other than a Rental Payment Date, Lessee acknowledges and
agrees that by receiving possession of the Premises on the
Commencement Date, Lessee will be able to show its
merchandise at the next ensuing Market and will receive the
same benefits as would have been the case had the Lease term
commenced on the Rental Payment Date next preceding the
actual Commencement Date. Lessee therefore agrees to pay a
full semiannual rental payment for the period of time
beginning with the Commencement Date and ending on the day
before the next Rental Payment Date.
Section 3.3. Rent Adjustment. In addition to the Annual
Rental provided for in Section 3.1, Lessee agrees to pay
IHFC(R), for each Lease Year, an amount determined by
multiplying the Annual Rental by a percentage equal to the
cumulative percentage increase, if any, in the CPI,
determined as follows:
(a) "CPI" means the Consumer Price Index, All Urban
Consumers - U.S. City Average - All items (1982-4=100)
as published by the Bureau of Labor Statistics of the
United States Department of Labor;
(b) If the Commencement Date is a Rental Payment Date, A
Lease Year is the annual period commencing on the
Commencement Date and on each anniversary thereof. If
the Lease Term commences on any other date, a Lease
Year is the annual period commencing on the Rental
Payment Date next preceding the Commencement Date, and
on each anniversary thereof;
(c) The cumulative percentage increase in the CPI shall be
the percentage increase, if any, in the CPI for the
sixth month prior to the Lease Year in question over
the CPI for the same month next preceding the
Commencement Date;
(d) If the CPI ceases to use the 1982-4 average equaling
100 as the basis of calculation, or if a change is made
in the term or number of items contained in the CPI, or
if the CPI is altered, modified, converted or revised
in any other way, then the foregoing computations shall
be made with the use of such conversion factor, formula
or table for converting the CPI as may be published by
the Bureau of Labor Statistics or, if the Bureau shall
not publish the same, then with the use of a conversion
factor which adjusts the modified CPI to the figure
that would have been arrived at had the change in the
manner of computing the CPI in effect on the date of
this lease not been altered. If the Bureau shall cease
publication of the CPI, then any substitute or
successor index published by the Bureau or other
governmental agency of the United States shall be used,
similarly adjusted. If neither the CPI or a successor
or substitute index similarly adjusted is available,
then a reliable governmental or other reputable
publication selected by IHFC(R)and evaluating the
information theretofore used in determining the CPI
shall be used;
<PAGE>
(e) IHFC(R) shall bill the Lessee for the cumulative
increase in the Annual Rental at the same time as its
normal invoices for Annual Rental are sent prior to
each Lease Year, and, upon request by Lessee, shall
furnish Lessee with a statement explaining the method
of computation of the CPI increase; and
(f) IHFC(R) shall not be obliged to make any adjustments or
recomputations, retroactive or otherwise, by reason of
any revision which may later be made in the amount of
the CPI first published for any month.
4.0
USE AND
OCCUPANCY
BY LESSEE Section 4.1. Use. Lessee shall use the Premises for the
display, exhibition, and sale of home furnishings,
furniture, accessories, carpeting and wall coverings, and
for office or clerical purposes to the extent reasonably
required for the conduct of such activities at the Premises,
and for no other purpose.
Section 4.2. Operation During Markets. Lessee shall open the
Premises, exhibit its products and staff the Premises with
employees for the entire period of each regularly scheduled
Market.
Section 4.3. Rules and Regulations. IHFC(R) has established
rules, regulations, guidelines and policies (the
"Guidelines") regarding the operation of the Home
Furnishings Center, and shall be entitled to establish
Guidelines from time to time after the execution of this
Lease. Lessee acknowledges receipt of a copy of the current
Guidelines and agrees to comply, and to cause its employees,
contractors, agents and others occupying the Premises to
comply, with all current and future Guidelines, provided
that (a) IHFC(R) notifies Lessee of any Guidelines
established after the date of this Lease and (b) the
Guidelines established by IHFC(R) do not unreasonably
interfere with Lessee's use of the Premises for the purposes
set forth in Section 4.1.
<PAGE>
Section 4.4. Restriction on Other Operations of Lessee.
Lessee agrees (insofar as and to the extent Lessee may
lawfully do so) that during all regularly scheduled Markets
or other times at which the Home Furnishings Center is
officially open to buyers during the term of this Lease,
Lessee will not, within a five (5) mile radius of the Home
Furnishings Center (a) operate any other showroom under the
same trade name or names under which Lessee does business
from the Premises or (b) exhibit in any other location the
same merchandise which Lessee exhibits in the Premises.
Lessee acknowledges and agrees that it is in the best
interest of Lessee and other tenants in the Home Furnishings
Center as exhibitors, and in the best interest of the
successful operation of the Home Furnishings Center as a
national market for home furnishings, to maximize buyer
traffic in, and the duration of buyer visits to, the Home
Furnishings Center. Lessee agrees that the foregoing
provisions are reasonably necessary to accomplish these
purposes, and that a breach of these provisions by Lessee
will constitute a material breach of the Lease.
Section 4.5. Property of Others. Lessee will not place or
permit to be placed in the Premises property of any other
person or entity, unless it has first secured the written
consent of IHFC(R).
Section 4.6. Market Dates; Admission. IHFC(R) shall have the
sole right to prescribe the dates of regularly scheduled
Markets applicable to Lessee's lines of merchandise, and
qualifications, conditions and times of admission to the
Home Furnishings Center. IHFC(R) may restrict admission to
accredited buyers and condition admission upon the
presentation of credentials prescribed or provided by
IHFC(R). Without limiting the generality of the foregoing,
Lessee agrees not to admit any buyers to the Premises during
the seven-day period prior to each Market.
Section 4.7. Compliance. Lessee agrees not to use or occupy
the Premises, or permit them to be used or occupied, in any
manner which violates applicable laws or regulations
affecting the Premises or the Home Furnishings Center
established by any governmental or public authority having
jurisdiction to promulgate such laws or regulations, or by
any insurance carrier insuring the Premises, property
located therein, or the Home Furnishings Center.
Section 4.8. Inspection of IHFC(R). IHFC(R) and its
representatives shall be entitled to enter the Premises at
any reasonable time for the purpose of inspecting the
Premises, performing any work required or permitted to be
performed by IHFC(R) under this Lease, and exhibiting the
Premises to prospective mortgagees and tenants. IHFC(R)
agrees that to the extent practical, it will not
unreasonably interfere with the operation of Lessee's
business in the exercise of its rights under this Section.
<PAGE>
5.0
ASSIGNMENT
AND
SUBLETTING Section 5.1. Transfers by Lessee. Lessee agrees not to
assign this Lease or sublet all or any part of the Premises
without Lessor's prior written consent in each instance. In
the event of an assignment or sublease, Lessee shall remain
primarily liable for payment and performance of all
obligations under this Lease upon default by the assignee or
subtenant, notwithstanding the acceptance of rent or
performance directly from the assignee or subtenant by
IHFC(R).
Section 5.2. Subleasing Policy. All proposed subleases which
IHFC(R) is requested to approve pursuant to Section 5.1 must
conform to subleasing policies established by IHFC(R) from
time to time, and Lessee acknowledges and agrees that
IHFC's(R) subleasing policies, among other things, may
provide for selection of sublessees from a priority waiting
list, the use of standard forms, direct billing by IHFC(R),
the imposition of subleasing fees by IHFC(R), and the
retention of IHFC(R) of the excess of any amounts payable
under the sublease over the rent and other charges payable
under this Lease. Nothing in this section may be construed
to create any interference that IHFC(R) is obligated to
approve any sublease which complies with the provisions of
this Section.
Section 5.3. Change of Ownership. For purposes of this
Paragraph, an assignment includes: (1) one or more sales or
transfers by operation of law or otherwise by which an
aggregate of more than fifty percent (50%) of Lessee's
shares or ownership shall be vested in a party or parties
who are not shareholders or owners of Lessee as of the date
of this Lease; (2) any transfer by operation of law; (3) any
assignment among co-tenants; and (4) any assignment of a
part interest in this lease.
6.0
REPAIRS
AND
MAINTENANCE Section 6.1. Acceptance. Lessee has examined the Premises
and accepts them in their present conditions, without any
representation on the part of IHFC(R) as to the present or
future condition of the Premises except as otherwise
specifically provided in this Lease.
Section 6.2. IHFC's(R) Repair Obligations. IHFC(R) shall at
IHFC's(R) expense maintain the exterior walls, roof,
structural supports and common areas of the Home Furnishings
Center in good order and repair; provided, however, that (a)
IHFC(R) is not an insurer and its responsibility to do so
shall be confined to making the proper repairs within a
reasonable time after it has received notice of the
necessity, nature and location of the repairs and (b) Lessee
shall repair any damage to the Home Furnishings Center
caused by Lessee or its agents.
<PAGE>
Section 6.3. Lessee's Repair Obligations. Lessee agrees to
maintain the Premises in a neat and clean condition, in good
order and repair, and in full compliance with applicable
laws, ordinances, regulations, and codes.
Section 6.4. Surrender. At the expiration or termination of
this Lease, Lessee agrees to quit and surrender the Premises
to IHFC(R) in as good a condition as when received,
reasonable wear and tear and damage by fire or other
casualty excepted.
7.0 LESSEE'S PROPERTY; ALTERATIONS AND IMPROVEMENTS Section
7.1. Lessee's Property. Subject to the security interest
granted in Section 12.4 of this Lease, all merchandise,
office furniture and equipment, samples, inventory and other
unattached movable property placed in the Premises by Lessee
shall remain the property of Lessee, and Lessee, if it is
not in default under this Lease, shall be entitled to remove
such items from the Premises, provided Lessee repairs any
damage to the Premises or the Home Furnishings Center caused
by such removal.
Section 7.2. Placing Property in or Removing Property from
Premises. Except as otherwise specifically permitted by
IHFC's(R) Guidelines, all property of Lessee shall be moved
to or from the Premises by the employees or designated
contractors of IHFC(R), at the expense and risk of Lessee,
and Lessee agrees to pay IHFC(R) upon receipt of IHFC's(R)
invoice IHFC's(R) standard charges for moving such items to
and from the Premises. IHFC(R) shall not be liable for any
loss or damage to property of Lessee, unless caused by the
negligence of IHFC(R) or its employees.
Section 7.3. Alterations and Improvements. Lessee shall be
entitled to make alterations, additions, and improvements to
the Premises, provided Lessee first obtains IHFC's(R)
written consent, which IHFC(R) will not unreasonably
withhold. Any alteration, addition, improvement or other
property attached to the Premises by Lessee (including,
without limitation electrical wiring, lighting fixtures,
carpeting and track lighting) shall become the property of
IHFC(R) upon the expiration or termination of this Lease,
unless IHFC(R) elects to require Lessee to remove the same,
repair any damages occasioned by such installation or
removal, and restore the Premises to their original
condition.
<PAGE>
Section 7.4. Performance of Work. All work in connection
with alterations, additions, and improvements to the
Premises (a) shall be performed in a first class,
workmanlike manner with all required governmental and
utility permits obtained in advance by Lessee; (b) shall not
weaken or impair the structural integrity of the Home
Furnishings Center; and (c) shall be in accordance with
plans and specifications, and performed by contractors,
approved by IHFC(R). All contractors performing such work
shall carry insurance satisfactory to IHFC(R) and shall
execute lien waivers, and indemnity agreements satisfactory
to IHFC(R). IHFC(R) shall have no duty to Lessee or anyone
else to enforce these requirements in inspect the work of
Lessee's contractors.
8.0
TAXES IHFC(R) agrees to pay all ad valorem taxes and assessments
levied, assessed or charged against the Home Furnishings
Center. Lessee agrees to list and pay all license,
privilege, ad valorem or other taxes levied, assessed or
charged against Lessee or IHFC(R) on account of the
operation of Lessee's business in the Premises or on account
of property owned by Lessee.
9.0
UTILITIES IHFC(R)agrees to furnish heat, electricity, air
conditioning, and elevator service to the Premises for a
period beginning thirty (30) days prior to the commencement
of each regularly scheduled Market, and ending fourteen (14)
days following the close of each such Market; provided,
however, that IHFC(R)shall not be liable for interruptions
in service due to breakdowns or other causes beyond its
control. If Lessee uses the Premises at any other times,
Lessee agrees to pay such additional charges as may be
imposed by IHFC(R)for such excess utility use.
10.0
INSURANCE;
INDEMNITY Section 10.1. Insurance. Lessee agrees to keep its property
located in the Premises, including all alterations,
additions and improvements made by it, insured against loss
or damage by fire or other casualty, under an "all risks"
policy in an amount equal to full replacement cost value
thereof. Lessee agrees to maintain in force comprehensive
general liability insurance coverage on the Premises, with a
minimum combined single limit of $500,000 for each, personal
injury or property damage, naming IHFC(R)as an additional
Insured. This generally liability coverage may be either on
an "occurrence" or a "claims made" basis. If on a "claims
made" basis, Lessee must either:
(a) Agree to provide certificates of insurance evidencing
the above coverages for a period of three years after
expiration of the lease, which certificate shall
evidence a "retroactive date" no later than the
Commencement Date; or
<PAGE>
(b) Purchase the extended reporting period endorsement for
the policy or policies in force during the term of this
lease and evidence the purchase of this extended
reporting period endorsement by means of a certificate
of insurance or a copy of the endorsement itself.
All policies shall provide that unless IHFC(R) is given ten
(10) days written notice of any cancellation, failure to
renew, or material change, the insurance shall remain in
full force and effect, without change. On or before the
Commencement Date, Lessee agrees to provide IHFC(R) with
satisfactory evidence that all required insurance is in
force. Lessee may provide any insurance required under this
Article through its corporate or blanket policies.
Section 10.2. Waiver of Subrogation. To the extent that any
business interruption or loss or damage to property
occurring in the Premises or in the Home Furnishings Center,
or in any manner growing out of or connected with Lessee's
occupation of the Premises or the condition thereof (whether
or not caused by the negligence of IHFC(R) or Lessee or
their respective agents, employees, contractors, tenants,
licensees, or assigns) is covered by insurance (regardless
of whether the insurance is payable to or protects IHFC(R)
or Lessee, or both) neither IHFC(R) nor Lessee, not their
respective officers, directors, employees, agents, invitees,
assignees, tenants, or subtenants, shall be liable to the
other for such business interruption or loss or damage to
property, it being understood and agreed that each party
will look to its insuror for reimbursement. This release
shall be effective only so long as the applicable insurance
policies contain a clause to the effect that it shall not
affect the right of the insured to recover under the
policies. Such clauses shall be obtained by the parties
wherever possible. Nothing in this Section may be construed
to impose any other or greater liability upon either IHFC(R)
or Lessee than would have existed in its absence.
Section 10.3. Assumption of Risks, Release, and Indemnity.
Lessee (1) assumes all risks with respect to, (2) releases
IHFC(R) from liability for, and (3) agrees (except to the
extent IHFC(R) is effectively protected by insurance) to
protect indemnity and save harmless IHFC(R) from and to
defend IHFC(R) (through counsel acceptable to IHFC(R))
against any claim liability, loss, or damage arising out of
or connected with the following, however caused and wherever
originating and regardless of whether the cause or means of
repairing the same is accessible to or under the control of
Lessee:
(a) Damage to property of Lessee, or its agents, employees
or subtenants occurring in or about the Home
Furnishings Center;
(b) Damage to property of anyone occurring in or about the
Premises;
<PAGE>
(c) Any injury to or interruption of business or loss of
profits attributable to or connected with any damage to
property referred to in subparagraphs (a) or (b) above.
(d) Death or personal injury occurring in or about the
Premises (unless resulting from the negligence of
IHFC(R) or its employees); or (e) Any other risks with
respect to which Lessee is required to insure by the
terms of this Lease (whether or not such insurance is
actually in force).
In addition to and without limiting the generality of the
foregoing, Lessee's assumption of risk, release, and
indemnity obligations as set forth above shall apply to any
claim, liability, loss or damage arising out of or in
connection with (1) Lessee's occupancy of or conduct of
business in the Premises (2) the condition of the Premises,
(3) any default of Lessee under this Lease; and (4)
mechanic's or materialmen's liens asserted by persons
claiming to have dealt with Lessee or Lessee's contractors.
11.0
DAMAGE OR
DESTRUCTION Section 11.1 Option to Terminate. If the Premises are
damaged or destroyed by fire or other casualty to such
extent that they are completely untentable, or if the area
of the Home Furnishings Center in which the Premises are
located is so severely damaged that IHFC(R) elects to
demolish, or completely rebuild it, IHFC(R)may terminate
this Lease by notifying Lessee within thirty (30) days
following the damage or destruction, and rent and other
charges payable by Lessee under this lease shall be
apportioned to the date of the damage or destruction.
Section 11.2. Obligation to Repair or Restore. If the
Premises are damaged by fire or other casualty, unless
IHFC(R) has exercised its right to terminate, if any, under
Section 11.1, IHFC(R) shall with reasonable dispatch, and in
any event within one hundred eighty (180) days, repair and
restore the Premises to their condition existing at the date
of the damage or destruction (except for alterations and
improvements installed by Lessee and other property of
Lessee, which Lessee shall repair and restore within that
time) and this Lease shall remain in full force and effect
except that rent shall abate as provided in Section 11.3.
Section 11.3. Rent Abatement. If the Premises are damaged or
destroyed by fire or other casualty and this Lease is not
terminated, rent and other charges under this Lease shall
abate in the same percentage as the rentable area of the
Premises available for use bears to the entire rentable area
of the Premises; provided, however, that if the Premises are
damaged or destroyed to such extent that it is unreasonable
to expect Lessee to continue to operate the Premises as a
showroom, all rent shall abate from the date of the damage
or destruction until the earlier of the date the Premises as
a showroom, all rent shall abate from the date of the damage
or destruction until the earlier of the date the Premises
are repaired and restored, or the date Lessee reopens the
Premises as a showroom. Notwithstanding the foregoing if
IHFC(R) is able to repair and restore the Premises within
such time as to permit Lessee (in the exercise of reasonable
dispatch and considering the time required for Lessee to
complete Lessee's restorations to the Premises and
redecorate them) to use the Premises for a showroom at the
next ensuring Market after the damage or destruction, there
shall be no abatement of rent.
<PAGE>
12.0
DEFAULT Section 12.1. Events of Default. Lessee shall be in default
under this Lease if any one of the following events or
Default occurs:
(a) Lessee fails to pay when due any installment of rent or
other amount due under the terms of this Lease;
(b) Lessee fails to pay when due any other amount owed to
IHFC(R); or
(c) Lessee repudiates or fails to perform any obligation
under Section 1.2 (Relocation), Section 4.0 (Use),
Section 5.0 (Assignment and Subletting), Section 7.3
(Alterations), Section 13.0 (Subordination) or Section
14.0 (Estoppel Certificates).
(d) Lessee vacates or abandons the Premises;
(e) Lessee becomes insolvent, executes an assignment for
the benefit of creditors, is adjudicated a bankrupt,
files for relief under the reorganization provisions of
any Federal bankruptcy law or state insolvency law, or
a permanent receiver of the property of Lessee is
appointed by any court of competent jurisdiction.
(f) Lessee repudiates or, within ten (10) days after notice
of nonperformance by IHFC(R), fails to perform any
other obligation which it is required to perform under
the terms of this Lease or, if performance cannot
reasonably be had within ten (10) days after notice
from IHFC(R), Lessee fails to commence performance
within that period and diligently proceed to completion
of performance.
Section 12.2. Remedies. If an Event of Default occurs,
IHFC(R), at its option and without further notice to Lessee,
may pursue any remedy now or hereafter available to IHFC(R)
under the laws of the State of North Carolina. Without
limiting the generality of the foregoing, IHFC(R) shall be
entitled to reenter the Premises by force, summary
proceedings or otherwise, expelling Lessee and removing all
property from the Premises, all without liability to Lessee
or anyone else and either:
<PAGE>
(a) attempt to relet the Premises for such term and rental
and upon such other terms and conditions as IHFC(R) in
its sole discretion deems advisable. All rentals
received by IHFC(R)from such reletting shall be
applied, first, to payment of any indebtedness other
than rent due from Lessee to IHFC(R); second, to
payment of any expenses of reletting, including,
without limitation, the costs of recovering the
Premises, such alterations or repairs as may be
necessary to relet the Premises, brokerage fees, and
reasonable attorney's fees; third to payment of any
rent unpaid under the terms of this Lease; and the
residue, if any, to the payment of rent as the same
becomes due and payable under this Lease. If the amount
received from such reletting and applied to rent during
any semiannual period is less than the rent reserved
under this Lease, Lessee agrees to pay the deficiency
to IHFC(R). The deficiency shall be calculated and paid
semiannually. No reentry or taking possession of the
Premises by IHFC(R)shall be construed as an election
upon its part to terminate this Lease unless IHFC(R) so
notifies Lessee or this Lease is terminated by order of
a court of competent jurisdiction; or
(b) notwithstanding any reletting without termination, at
any time after an Event of Default occurs, elect to
terminate this Lease, and, in addition to
IHFC's(R)other remedies, recover from Lessee all
damages incurred by reason of Lessee's default,
including, without limitation, the costs of recovering
the Premises, reasonable attorney's fees, and the
worth, at the time of the termination, of the excess,
if any, of the amount of rent reserved under this Lease
over the then reasonable rental value of the Premises
for the remainder of the term of the Lease, all of
which amounts shall be immediately due and payable from
Lessee to IHFC(R).
Section 12.3. Late Charges. If any installment of rent or
any other amount due under this Lease is not received by
IHFC(R) within ten (10) days after the date such payment was
due, the Lessee shall be obligated to pay, in addition to
the amount due, a late charge equal to five percent (5%) of
the overdue amount. Lessee agrees that this late charge
represents fair and reasonable estimate of the additional
processing, accounting and other costs IHFC(R) will incur by
reason of late payment by Lessee, the exact amount of which
would be difficult to ascertain. Notification by IHFC(R) to
Lessee that a late payment charge has been added to the
amount of overdue rent or other charges shall not constitute
a waiver of Lessee's default, nor preclude IHFC(R) from
exercising any other remedy.
Section 12.4. Security Interest. As security for performance
and payment of all present and future rents and other
obligations required to be paid or performed by Lessee under
the terms of this Lease, and for any other amounts owed by
IHFC(R) by Lessee, Lessee hereby grants unto IHFC(R) a
security interest in all installations, samples, goods,
merchandise, furniture, fixtures, and other property of
Lessee, now owned or hereafter acquired, located in the
Premises or the Home Furnishings Center. If an Event of
Default occurs, IHFC(R) at any time thereafter may exercise,
in addition to its other remedies, the rights of a secured
party under Chapter 25 of the North Carolina General
Statutes. The proceeds from any sale of the collateral
pursuant to such remedies shall be applied in the following
order: (a) the expense of taking, removing, holding for
sale, and preparing for sale, specifically including
IHFC's(R) reasonable attorney's fees; (b) the expense of
liquidating any liens, security interests or other
encumbrances superior to this security interest; and (c)
amounts owed by Lessee to IHFC(R) under the terms of this
Lease or otherwise, in the order herein provided for. Lessee
agrees to execute such financing statements and other
documents as may be required to perfect the security
interest granted to IHFC(R) under this Section.
<PAGE>
Section 12.5. Partial Payment. IHFC(R) shall not be
obligated to accept partial payments of rent or other
charges due under this Lease. If IHFC(R) accepts any such
payment, IHFC(R) shall not be deemed to have waived the
default of Lessee by reason of non-payment of such charges
in full, nor to have waived its right to collect late
charges. IHFC(R) will hold any partial payment so received
as a deposit against full payment of such amounts. At any
time prior to full payment by Lessee of such amounts,
IHFC(R) may exercise any one or more of its remedies on
default, and apply the deposit to any amounts or damages
owed by IHFC(R) as of the date IHFC(R) elects to exercise
such remedies, including, without limitation, pro rata rent
and other charges payable under this Lease for the current
lease period up through the date of the exercise by IHFC(R)
of its remedies upon default. The acceptance of such deposit
by IHFC(R) shall be entirely without prejudice to IHFC's(R)
right thereafter, at any time prior to payment in full, to
assert such default, apply the deposit as provided in this
section, and pursue all remedies available to IHFC(R) under
this Lease or applicable law.
Section 12.6. Default Under Prior Lease. If this Lease is to
take effect at the expiration of an earlier lease between
IHFC(R) and Lessee for space in the Home Furnishings Center
(the "Prior Lease"), then this Lease is subject to Lessee's
performing its obligations under the Prior Lease up through
the date of its expiration. If an Event of Default occurs
under the Prior Lease and IHFC(R) pursuant to its rights
under the Prior Lease, either (a) terminates Lessee's right
to possession of the Premises or (b) terminates the Prior
Lease, then this Lease shall be automatically terminated,
whether or not such termination is expressly stated in any
notice from IHFC(R) to Lessee.
13.0
SUBORDINATION At the election of IHFC(R), this Lease shall be subordinate
to a first mortgage or deed of trust held by a lending
institution and secured by the Home Furnishings Center;
provided, however, that IHFC(R) agrees to use reasonable
efforts to secure from the mortgagee a nondisturbance
agreement providing that in the event of foreclosure the
mortgagee will recognize the validity of this Lease, and,
provided Lessee is not in default, will not disturb Lessee's
possession hereunder.
<PAGE>
14.0
ESTOPPEL
CERTIFICATES Upon ten (10) days prior written notice from IHFC(R), Lessee
agrees to execute, acknowledge and deliver to IHFC(R),
Lessee's certificate: (a) stating whether this Lease is in
full force and effect; (b) stating whether this Lease has
been modified, and if so, the nature of such modification;
(c) stating the date through which rent and other charges
are paid in advance; (d) stating whether, to Lessee's
knowledge, there are any uncured defaults of IHFC(R)under
this Lease, specifying the nature of any claimed default;
and (e) providing such other information as IHFC(R)may
reasonably request with respect to the status of the Lease.
Any such certificate may be conclusively relied upon by
IHFC(R)or any prospective purchaser or mortgagee of the Home
Furnishings Center.
15.0
NOTICES All notices required or permitted by the terms of this Lease
shall be deemed given when deposited in the United States
Registered or Certified Mail, Postage Prepaid, or with
verification of delivery by telegram, cable, telex,
commercial courier or any other generally accepted means of
business communication, to either party, at the address set
forth for such party on the first page of this Lease. Either
party may change the address to which notices must be sent
by giving notice to the other party in accordance with this
Section.
16.0
MISCELLANEOUS (a) This Lease shall be governed, construed and enforced
under the laws of North Carolina and the parties submit
to the jurisdiction of the courts of North Carolina and
stipulate that Guilford County, North Carolina, is
proper venue for the purpose of all controversies which
may arise under this Lease;
(b) This Lease contains the entire understanding of the
parties and there are no conditions preceding to its
effectiveness or collateral understandings with respect
to its subject matter;
(c) It may not be modified except by writing signed by both
parties;
(d) It shall not be construed strictly against either
party, but fairly in accordance with their intent as
expressed herein;
<PAGE>
(e) Lessor's remedies are cumulative and not exclusive of
other remedies to which Lessor may be legally entitled;
(f) No waiver of any breach of a provisions of this Lease
may be construed to be a waiver of any succeeding
breach of the same or any other provision, nor shall
any endorsement or statement on any check or letter
accompanying payment be deemed an accord and
satisfaction, and IHFC(R) may accept payment without
prejudice to its rights to pursue any remedy provided
for in this Lease;
(g) Time is of the essence in every particular, especially
where the obligation to pay money is involved;
(h) Amounts not paid IHFC(R) when due will bear interest on
the unpaid balance at the lower of one and one-half
percent (1 1/2%) per month or the maximum lawful rate;
and
(i) This Lease binds the parties, their respective heirs,
personal representatives, successors and assigns.
[Attached to this lease is a schematic of the "Seventh Floor Plan- Wrenn Wing"]
SAN FRANCISCO MART
Basic Lease Terms
<TABLE>
<CAPTION>
<S> <C>
DATE: May 3, 1996
TENANT: The Keller Manufacturing Company, Inc.
LANDLORD: San Francisco Mart
PREMISES: Showroom 778, Mart 1, comprising approximately 1,702 rentable square feet on the 7th
floor of the Building located at 1355 Market Street, San Francisco, CA 94103
COMMENCEMENT DATE: July 1, 1996
EXPIRATION DATE: June 30, 1998
BASE RENT: $2,298.00 per month with yearly escalations based on CPI; provided, however, that in no
event shall the yearly increase in any given year be less than 5%.
SECURITY DEPOSIT: $4,596.00
ELECTRICITY: To be billed as specified in Paragraph 5(a). The monthly administrative fee is $25.00.
MINIMUM HOURS
OF OPERATION: Market weeks
LATE CHARGE: Ten percent (10%) of the overdue amount.
INTERNAL TELE-
COMMUNICATIONS SERVICES: $50.00 per month
NOTICES: All notices are to be sent to:
Mr. Keith Meriwether
The Keller Manufacturing Co., Inc.
701 North Water
Corydon, IN 47112
</TABLE>
Upon execution of this lease, Tenant shall deliver to Landlord the sum of
$2,096.00 representing the additional security deposit as more particularly set
forth in Paragraph 6 of the Lease.
The San Francisco Mart, by this Agreement, leases to the Tenant the
Premises described above for the terms and conditions contained herein and in
the attached Lease which is incorporated by reference in and made a part of this
Lease.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
day and year appearing next to each signature below.
<TABLE>
<CAPTION>
<S> <C>
TENANT: LANDLORD:
THE KELLER MANUFACTURING WESTERN MART CO., a California limited
COMPANY, INC. partnership dba SAN FRANCISCO MART
By:______________________________ By:___________________________________
Its: Marketing Manager Its: Executive Director
Date: May 8, 1996 Date: May 21, 1996
</TABLE>
<PAGE>
SAN FRANCISCO MART
LEASE
This Lease is made with reference to the attached Basic Lease Terms which
are hereby incorporated by reference in this Lease. The parties further agree:
1. Leased Premises. Landlord leases to Tenant the premises as designated in
the Basic Lease Terms and as shown on the floor plan attached hereto as Exhibit
A.
2. Term. The Commencement Date and Expiration Date of the Lease term are
the dates set forth on the Basic Lease Terms. For purposes of this Lease, a
"Lease Year" means the twelve-month period beginning on the first day of the
month in which the term of this Lease commences and each twelve-month period
thereafter until the termination of this Lease. If for any reason Landlord
cannot deliver possession of the Premises to Tenant on the aforesaid
commencement date, this Lease shall not be void or voidable nor shall Landlord
be liable to Tenant for any such delay, but the commencement of the term of this
Lease shall be postponed until such possession can be delivered and the
expiration date of the term shall be similarly extended.
3. Rent. Tenant shall pay to Landlord throughout the Term as rental for the
use and occupancy of the Premises, at the times and in the manner provided in
this Lease, the following sums of money (collectively, "Rent"):
(a) Base Rent. Tenant shall pay to Landlord monthly rent ("Base Rent")
during the first Lease Year of the Term, without offset, deduction or
demand, payable in advance on or before the first day of each and every
calendar month the sum as set forth in the Basic Lease Terms.
On each anniversary of the Lease Commencement Date, Base Rent shall be
increased to an amount equal to the greater of (i) one hundred five percent
(105%) of the Base Rent applicable during the preceding Lease Year; or (ii)
the product obtained by multiplying the Monthly Rent in effect just prior
to the Adjustment Date by a fraction, the numerator of which shall be the
Consumer Price Index for the second month preceding the Adjustment Date
(for example, if the first Adjustment Date is July 1, 1995, then May, 1995)
and the denominator of which shall be the Consumer Price Index for the same
month one year before (for example, if the first Adjustment Date is July 1,
1995, then May, 1994) which fraction is hereinafter referred to as the "CPI
Fraction."
The term "CPI" means the Consumers Price Index, All Urban Consumers,
San Francisco-Oakland-San Jose, All Items (1982-1984 = 100), as published
by the United States Department of Labor, Bureau of Labor Statistics. If
publication of the CPI by any governmental or private agency is
discontinued or if it is so modified that it does not accurately reflect
the changes in consumer prices, then the Landlord and Tenant shall use such
other index as is then generally recognized and accepted for similar
determination of changes in consumer prices. If the CPI is revised, it
shall be converted in accordance with the conversion factor published by
the Bureau of Labor Statistics or any other governmental agency then
publishing same.
<PAGE>
If the Term commences on other than the first day of a calendar month
or ends on other than the last day of a calendar month, the first or last
payment of Base Rent shall be prorated on a daily basis.
(b) Additional Rent. Tenant shall pay, as additional rent ("Additional
Rent"), all sums of money required to be paid to Landlord pursuant to this
Lease, including, without limitation, Paragraphs 3(c), 4,5,7, 8(b),14,
21(c), 24(a), (b) and (e), 25, 28 and 31 below, and all other sums of money
or charges required to be paid by Tenant under this Lease in addition to
Base Rent, whether or not designated as "Additional Rent." If such amounts
or charges are not paid at the time provided in this Lease, they shall
nevertheless be collectible as Additional Rent with the next installment of
Base Rent thereafter falling due, but nothing contained in this Lease shall
be deemed to suspend or delay the payment of any amount of money or charge
at the time the same becomes due and payable under this Lease, or limit any
other remedy of Landlord.
(c) Payment; Late Charge. All Monthly Rent and all Additional Rent
shall be payable without any offset, deduction, prior notice or demand
whatsoever. If any Monthly Rent or Additional Rent due under this Lease is
not received by Landlord on or before the tenth (10th) day after the due
date thereof, Tenant shall pay the Landlord a late charge as specified in
the Basic Lease Terms. Tenant agrees that Tenant's failure to make timely
payments of Base Rent and Additional Rent will result in Landlord's
incurring additional expenses including, but not limited to, sending out
notices of delinquency, computing interest, and segregating delinquent sums
from non-delinquent sums on all accounting, rental and data processing
records, and in loss to Landlord of the use of the money due. Accordingly,
Tenant acknowledges that this late charge represents a fair and reasonable
estimate of the cost that Landlord will incur by reason of Tenant's failure
to meet its financial commitment to Landlord in a timely manner. The
provisions of this Subparagraph 3(c) shall not be construed to grant Tenant
a grace period. Notwithstanding the foregoing, Landlord reserves the right
to increase the aforesaid Late Charge at any time and from time to time by
delivering written notice to Tenant specifying the amount of such increase.
In the event Landlord notifies Tenant as aforesaid, the Late Fee set forth
in the Basic Lease Terms shall be deemed automatically amended without the
necessity of the parties executing a formal Lease amendment or otherwise
modifying the Basic Lease Terms. Without limiting the generality of the
foregoing, Landlord may increase the Late Charge (i) due to Tenant's
repeated failure to pay Rent as and when due; (ii) as a result of overall
increases in interest rates; and (iii) in order to maintain consistency
with prevailing building management practices in San Francisco, California.
4. Operating Expenses. In addition to Monthly Rent as provided in Paragraph
3 above, Tenant shall pay to Landlord, as Additional Rent, and in addition to
any and all other charges payable by Tenant under this Lease Tenant's share of
operating expenses as provided in this Paragraph 4 on the first day of each
month during the term of this Lease beginning on the first such date after the
commencement of this Lease. During the first Lease Year, such monthly Additional
Rent shall be in an amount equal to $ N/A multiplied by the number of square
feet in the Premises. Thereafter, the monthly Additional Rent shall be adjusted
effective as of each Adjustment Date to equal the product of the additional rent
in effect just prior to the Adjustment Date and the applicable CPI Fraction;
provided, however, that in no event shall the adjusted Additional Rent be less
than 105% of the Additional Rent in effect just prior to the Adjustment Date.
Tenant and Landlord both acknowledge and agree that, although the foregoing
Additional Rent is intended to defray Landlord's expenses of owning and
operating the Building, the foregoing provisions may result in Additional Rent
that varies from the actual ownership and operating expenses incurred by
Landlord with respect to the Building, and that such provisions shall in any
event be binding on the parties. Landlord shall have the same remedies for a
default in the payment of Additional Rent pursuant to this Paragraph 4 as for a
default in the payment of Monthly Rent.
<PAGE>
5. Electricity. Tenant shall also pay Landlord for electricity provided to
the Premises and the Building as follows:
(a) If the Premises are separately metered, Tenant shall pay for
electricity as measured by the Individual meter serving the Premises, and
at the current rate specified from time to time by Pacific Gas and Electric
Company. In addition, Tenant shall pay to Landlord monthly, as Additional
Rent, an administrative and billing fee, which rate may be adjusted from
time to time;
(b) If the Premises are not separately metered, Tenant shall pay for
electricity on the first day of each month during the term of this Lease
beginning on the first such date after the commencement of this Lease in
the amount based upon Tenant's electricity use classification at a rate
deemed reasonable by the Landlord.
Landlord reserves the right to change Tenant's use classification in
its sole and absolute discretion upon thirty (30) days written notice to
Tenant. As of each Adjustment Date, Tenant's electricity payment obligation
under this subparagraph (b) shall be increased by the percentage by which
Landlord's per kilowatt cost of electricity has increased due to rate
increases imposed by the utility company.
(c) Notwithstanding anything to the contrary contained in this Lease,
at any time during the term of this Lease Landlord shall have the right, in
Landlord's sole and absolute discretion, either to (i) install an
individual electrical meter in the Premises if the Premises are not
presently metered, or (ii) remove any electrical meter presently serving
the Premises and charge Tenant for its electrical usage pursuant to
Paragraph 5(b) above.
(d) Landlord shall have the same remedies for a default in the payment
for electricity pursuant to this Paragraph 5 as for a default in the
payment of Monthly Rent.
<PAGE>
6. Security Deposit. Upon execution of this Lease, tenant shall pay the
Security Deposit to secure the full performance and observance of each and all
of the provisions of this Lease. If Tenant defaults in any of its obligations
under this lease, Landlord may use, apply or retain the whole or any part of the
security deposit (a) to the extent of any sum due Landlord, or (b) to make any
required payment on Tenant's default, or (c) to compensate Landlord for any
expense or damage caused by Tenant's default. Upon Landlord's demand, Tenant
shall promptly pay to Landlord a sum equivalent to the amount by which the
security deposit was so depleted. It is understood that Landlord is not a
trustee of the deposit and that Landlord may commingle it with other funds. Said
deposit or so much thereof as remains after Tenant's obligations and liabilities
to Landlord hereunder have been satisfied shall be refunded to Tenant, without
interest, upon the termination of this Lease.
7. Keys. Tenant shall not copy or reproduce any keys to the Building or
Premises provided to Tenant by Landlord and shall return all such keys
immediately upon the termination of this Lease. Upon the execution of this
Lease, Tenant shall pay Landlord a key charge as specified in the Basic Lease
Terms.
8. Use of Premises, Etc.
(a) Use. Tenant will use and occupy the Premises for exhibiting and
selling goods, wares and merchandise at wholesale only and related general
office use and for offering services related to the residential home
furnishings or contract furnishings industry.
(b) Hours, Continuous Operation. Tenant agrees to maintain in the
Premises a reasonably comprehensive sample display of its products and to
keep the Premises fully lighted and open for business with adequate
representation in attendance from 9:00 a.m. to 5:00 p.m. on Monday through
Friday of each week (excepting holidays) and every business day of each
seasonal market exhibition period, and on such additional days or for
additional hours as Tenant may desire. Notwithstanding the foregoing,
Tenant shall have the right to close on legal holidays and also to
temporarily close for business on the Premises for a period not to exceed
thirty (30) days for refurbishing the Premises not more than once during
the Term. If Tenant shall breach the foregoing covenant, Landlord may, in
addition to any other remedies which Landlord may have under this Lease or
applicable law, impose a penalty of $50.00 per day, which sum shall be
payable by Tenant to Landlord as Additional Rent hereunder.
(c) Layout. Tenant's layout of the Premises and the manner of
displaying Tenant's goods, merchandise and services shall be subject to
Landlord's reasonable approval from time to time, and Landlord shall have
the right to disapprove any layout or display that detracts from the
appearance of a first-class high quality design showroom or which is
inconsistent in any way with the overall plan or design of the Building or
the area thereof contiguous to the Premises.
<PAGE>
(d) Name. Tenant shall not, without the prior consent of Landlord, use
the words "San Francisco Mart" or "SFM" for any purpose other than as the
address of the business to be conducted by Tenant in the Premises.
(e) Abandonment. Tenant shall not vacate or abandon the Premises at
any time during the Term of this Lease, and if Tenant shall abandon, vacate
or surrender the Premises, or be dispossessed by process of law or
otherwise, any personal property belonging to Tenant and left on the
Premises shall be deemed to be abandoned, at the option of Landlord.
9. Access.
(a) Premises shall be permitted by Tenant only to Tenant's employees,
retail dealers and to buyers, employees and agents doing business with
Tenant and invitees of Tenant, but not to the general public. Landlord
reserves the right to exclude from the Building and the Premises any person
whom it may consider an improper person or whose presence it considers
detrimental to the Building or to Landlord or to any other tenants.
(b) Notwithstanding anything to the contrary in this Paragraph 9 and
in addition to the rights granted to Landlord pursuant to Paragraph 13(c)
below, Landlord may enter the Premises at reasonable times during the
regular business hours of Tenant to (i) inspect the Premises; (ii) exhibit
the Premises to prospective purchasers, mortgagees or tenants; (iii)
determine whether Tenant is complying with all its obligations under this
Lease; (iv) supply any service to be provided by Landlord to Tenant under
this Lease; (v) post notices of nonresponsibility and (vi) post "for Lease"
signs of reasonable size upon the showroom windows of the Premises during
the last one hundred twenty (120) days of the Term. A designated
representative of Landlord shall at all times have and retain a key to
unlock all of the doors, in, on and about the Premises (excluding Tenant's
vaults, safes and similar areas designated in writing by Tenant in advance)
and Landlord shall have the right to use any and all means which Landlord
may deem proper to open said doors in an emergency in order to obtain entry
to the Premises, and any entry to the Premises obtained by Landlord by any
means, or otherwise, shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into or a detainer of the
Premises or an eviction, actual or constructive of Tenant from the
Premises, or any portion thereof.
10. Rules and Regulations. Tenant shall faithfully observe and comply with
the Rules and Regulations annexed to this Lease and all reasonable modifications
of and additions thereto from time to time put into effect by Landlord. Landlord
shall not be responsible to Tenant for the non-performance by any other tenant
or occupant of the Building of any of these Rules and Regulations.
11. Prohibited Uses. The Premises shall not be used except for the purposes
hereinabove specified. Tenant shall not do or permit anything to be done in or
about the Premises, nor bring nor keep anything therein which will in any way
increase the rate of fire insurance upon the Building or any of its contents, or
cause any cancellation of insurance policies covering the Building or its
contents, or which shall in any way conflict with any law, ordinance, rule or
regulation affecting the occupancy and use of the Premises, which is or may
hereafter be enacted or promulgated by federal, state, county or municipal
authority, or in any way obstruct or interfere with the rights of other tenants
of the Building, or injure or annoy them, nor use, nor allow the Premises to be
used for any other purpose or in a manner which would constitute a breach by
Landlord under any other lease in effect at the Building. No auction, fire,
bankruptcy or going out of business sale shall be conducted on the Premises.
<PAGE>
12. Condition of Premises. Landlord shall deliver the Premises to Tenant in
their current condition, "as is." Landlord makes no representation or warranty
as to the condition of the Premises, including, without limitation, the
compliance of the Premises with applicable building codes or other laws, the
condition of any improvements on the Premises, or the suitability of the
Premises for Tenant's particular use. Tenant represents and warrants that prior
to its signing this Lease it has inspected the Premises and agrees that the
Premises are fit for all of Tenant's desired purposes.
13. Alterations and Repairs.
(a) Tenant shall not make or suffer to be made any alteration,
addition or improvement to or of the Premises, or any part thereof, without
the prior written consent of Landlord, which may be granted or withheld in
Landlord's sole and absolute discretion, any alteration, addition or
improvement to or of the Premises made by Tenant, including without
limitation any partitions (movable or otherwise), carpeting or floor
covering, or lighting fixtures, shall at once become a part of the Building
and belong to Landlord. Movable furniture and equipment and trade fixtures,
however, shall remain the property of Tenant. Landlord specifically
reserves the right to designate the color and type of draperies or other
window coverings on all exterior windows. If Landlord consents to the
making of any alteration, addition or improvement to or of the Premises by
Tenant, the same shall be made by Tenant at its sole cost and expense. At
Landlord's election, any or all of such alterations, additions and
improvements, including, without limitation, flooring. Lighting and wall
treatments, shall remain on the Premises at the end of the term hereof,
without compensation to Tenant. If Landlord elects to permit Tenant to
remove any or all of such alterations, additions, or improvements, Tenant
shall, at Tenant's sole cost, restore the Premises to their condition
immediately prior to installation thereof.
(b) Tenant, at its sole expense, shall at all times during the term
hereof keep the Premises in good and sanitary order, condition and repair,
damage thereto by fire, earthquake, act of God or the elements excepted,
and Tenant hereby waives all rights under and benefits of Subsection 1 of
Section 1932 and Sections 1941 and 1942 of the California Civil Code and
under any similar law, statute or ordinance now or hereafter in effect.
Upon the expiration or sooner termination of the term hereof, Tenant shall
surrender the Premises and (unless designated by Landlord to be removed in
accordance with the preceding Paragraph A), all repairs, alterations,
additions and improvements thereto to Landlord in the same condition as
when received, ordinary wear and tear and damage by fire, earthquake, act
of God or the elements excepted.
<PAGE>
(c) Landlord shall at all times have the right without notice to enter
the Premises to inspect the same and to alter, improve or repair the
Premises and any portion of the Building, without abatement of rent, and
may for that purpose erect, use and maintain scaffolding, pipes, conduits
and other necessary structures in and through the Premises. Tenant hereby
waives any claim for damages for any injury or inconvenience to or
interference with Tenant's business or any loss of occupancy or quiet
enjoyment of the Premises by reason of any such entry and activity on the
Premises, except that the foregoing waiver shall not apply to the
negligence or willful misconduct of Landlord. It is specifically understood
and agreed that Landlord has no obligation and has made no promise to
alter, add to, remodel, improve, repair, decorate or paint the Premises or
any part thereof and that no representations respecting the condition of
the Premises or the building have been made by Landlord to Tenant except as
specifically set forth herein.
(d) In the event Tenant shall make alterations, additions or
improvements to the Premises either of a structural or non-structural
nature in any amount whatsoever, then all labor and materials shall be
performed and supplied only by licensed contractors or mechanics approved
in writing by Landlord in its sole and absolute discretion, under contracts
approved in writing by Landlord, and pursuant to plans and specifications
approved in advance by Landlord. In any event, any and all work (1) shall
be done at Tenant's sole expense and in such manner as not to disrupt
unreasonably existing Building operations or disturb existing tenants and
occupants of the Building; (2) shall comply with all applicable laws,
rules, orders, permits, authorizations, and governmental requirements and
orders, including without limitation the Americans with Disabilities Act
("ADA") and any similar California legislation including without limitation
California Government Code Section 4450 et seq., California Health & Safety
Code Section 18,951 et seq. and Section 19952 et seq., and California Civil
Code Section 51 and 54.1 (all of the foregoing being hereafter referred to
as "Accessibility Legislation"), the rules and regulations of any Board of
Fire Underwriters responsible for the geographic area in which the Premises
are located, and any and all laws governing the removal or encapsulation of
any asbestos-containing material ("ACM"); (3) shall be made promptly and in
good workmanlike manner using prime quality materials and in full
conformance4 with the plans and specifications approved by Landlord; (4)
shall not cause any damage to, or interfere with Landlord's ability to
provide services to, any portion of the Building, and (5) shall be
performed by licensed and bonded contractors reasonably approved by
Landlord. Without limiting the generality of the foregoing, in the event
Tenant undertakes any alterations or repairs pursuant to this Paragraph 13,
whether in connection with the construction of Tenant's encapsulation of
any ACM in or about the Premises, the reinforcement or retrofit of the
Premises to comply with any earthquake hazard reduction program or similar
program now in effect or which may hereafter come into effect, the
installation, repair, upgrade, or replacement of sprinkler systems and
other life safety requirements in the Premises, and compliance with all
applicable provisions of the ADA and other California Accessibility
Legislation, whether or not such compliance involves the making of further
alterations, additions or repairs outside of the Premises.
<PAGE>
(e) Tenant agrees that it will not at any time, either directly or
indirectly, use or permit the use of any contractors or labor or material
in the Premises if such use would create any difficulty with other
contractors or labor engaged by Tenant or Landlord or others in the
construction, maintenance or operation of the Building or any part thereof.
(f) If Tenant fails to comply with any provision of this paragraph,
Landlord in addition to any other remedy herein provided, may require
Tenant to cease all work being performed by or on behalf of Tenant and
Landlord may deny access to the Premises to any person performing work in
or supplying materials to the Premises.
14. Cleaning and Maintenance. Tenant shall be responsible for cleaning the
interior of the Premises, including the interior of all windows therein.
Landlord shall not be responsible for supplying janitorial services to the
Premises, but shall clean, maintain and repair solely the common areas of the
Building, such as the hallways, elevators, entrance and bathrooms, and shall
remove all trash from the Building provided that Tenant places a sealed
receptacle containing its trash in the hallway outside the Premises at the close
of each business day. In addition, Landlord may no more than two times each
year, cause the exterior of the windows in the Building to be cleaned and Tenant
agrees to reimburse Landlord for its cost thereof in an amount proportionate to
the ratio that the number of exterior windows in Tenant's Premises gears to the
total number of exterior windows in the Building.
15. Signage. Tenant shall comply with such regulations as may from time to
time be promulgated by Landlord governing signs, advertising material or
lettering of all tenants in the Building, provided the Tenant shall not be
required to change any sign or lettering that was in compliance with applicable
regulations at the time it was installed or placed in, on or adjacent to the
Premises. Except as provided above, without the prior reasonable consent of
Landlord, Tenant shall not place or permit to be placed (1) any sign,
advertising material or lettering upon the exterior of the Premises or (2) any
sign, advertising material or lettering upon the exterior or interior surface of
any door or window or at any point inside the Premises from which the same may
be visible from outside the Premises. Tenant acknowledges and agrees that it
shall be reasonable for Landlord to withhold its consent to any signage,
advertising or lettering not in conformance with Landlord's reasonable
regulations or not in conformance with the standard style of signage in use at
the Building from time to time. Upon request of Landlord, Tenant shall
immediately remove any sign, advertising material or lettering which Tenant has
place in, on or about the Premises, contrary to the provisions of this Section
15, and if Tenant fails to do so, Landlord may enter upon the Premises and
remove the same at Tenant's expense.
16. Liens. Tenant shall keep the Premises and the property in which the
Premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by Tenant or at the insistence of
Tenant or incurred by or at the insistence of any subtenant of Tenant.
17. Insurance. Tenant, at Tenant's expense, shall keep in force during the
term hereof comprehensive broad form general liability insurance with a combined
single limit of $1,500,000 for each occurrence for injuries to or death of
persons occurring in, on or about the Premises or the Building, and property
damage. The policy or policies for such insurance shall name Landlord as an
additional insured, and shall insure any liability of Landlord, contingent or
otherwise, as respects acts or omissions of Tenant, its agents, employees or
invitees or otherwise, by any conduct or transactions of any of said persons in
or about or concerning the Premises, including any failure of Tenant to observe
or perform any of its obligations hereunder; shall be issued by an insurance
company authorized to transact business in the State of California; and shall
provide that the insurance effected thereby shall not be canceled, except upon
ten (10) days prior written notice to Landlord, Tenant shall deliver to Landlord
a certified copy of all insurance policies required by this Lease and carried by
Tenant.
<PAGE>
Tenant agrees that insurance carried by it against loss or damage by fire
or other casualty shall contain a clause whereby the insurer waives its right to
subrogation against Landlord.
18. Damages By Fire, Etc. In the event the Premises or the Building are
damaged by fire or other casualty, Landlord shall repair the same provided such
repairs can be made within ninety (90) days under the laws and regulations of
the state, federal, county and municipal authorities and this Lease shall remain
in full force and effect except that Tenant shall be entitled to a proportionate
abatement in rent while such repairs are being made, such reduction to be based
prorata to the extent to which the making of such repairs shall interfere with
the use and occupancy of Tenant in the Premises as reasonably determined by
Landlord. If such repairs cannot be made within ninety (90) days, Landlord shall
have the option either (a) to repair or restore such damage, this Lease
continuing in full force and effect, but the rent to be proportionately abated
as provided in this paragraph, or (b) to give notice to Tenant at any time
within thirty (30) days after the occurrence of such damage terminating this
Lease as of a date to be specified in such notice, which date shall be not less
than thirty (30) nor more than sixty (60) days after giving such notice. In the
event of the giving of such notice, this Lease shall expire and all interest of
Tenant in the Premises shall terminate on such date as specified in such notice,
and the rent, reduced by any proportionate reduction based upon the extent, if
any, to which the damage interfered with the use and occupancy of Tenant, shall
be paid to the date of such termination, Landlord agreeing to refund to Tenant
any rent therefore paid in advance for any period of time subsequent to such
date. Landlord shall not be required to repair any injury or damage by fire or
other cause, or to make any repairs or replacements of any paneling,
decorations, partitions, railings, ceilings, floor covering, fixtures or any
other property installed in the Premises by Tenant. The provisions of Section
1932, Subdivision 2, and Section 1933, Subdivision 4 of the Civil Code of
California are hereby waived by Tenant.
19. Condemnation. Should the whole or any part of the Premises be condemned
and taken by any competent authority for any public or quasi-public use or
purpose, all awards payable on account of such condemnation and taking shall be
payable to Landlord, and Tenant hereby waives all interest in or claim to said
awards or any part thereof. If the whole of the Premises is condemned and taken,
this Lease shall thereupon terminate. If a part only of the Premises is
condemned and taken and the remaining portion thereof is not reasonable suitable
for the purposes for which Tenant has leased the Premises, Tenant shall have the
right to terminate this Lease. If a part only of the Premises is condemned and
taken and the remaining part thereof is reasonably suitable for the purposes for
which Tenant has leased the Premises, this Lease shall continue but the rental
shall be reduced in an amount proportionate to the value of the portion taken as
it relates to the total value of the Premises.
<PAGE>
20. Compliance with Law; Etc. Tenant shall not do or permit to be done in,
on or about the Premises, nor bring or keep or permit to be brought or kept
therein, anything which is prohibited by or will in any way conflict with any
law, statute, ordinance or governmental rule or regulation now in force or which
may hereafter be enacted or promulgated, or which is prohibited by Landlord's
fire insurance policy or will in any way increase the existing rate of or affect
any fire or other insurance upon the Building or any of its contents, and shall
promptly comply with all such legal and insurance requirements at its sole
expense insofar as they pertain to the Premises. Tenant shall not do or permit
anything to be done in or about the Premises which will in any way interfere
with the rights of other tenants of the Building, or injure or annoy them, or
use or allow the Premises to be used for any improper, immoral, unlawful or
objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance
in the Premises or commit any waste in the Premises. Tenant shall at its sole
cost and expense promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which may
hereafter be in force, including, without limitation, the ADA and California
Accessibility Legislation; with the requirements of any board of fire
underwriters or other similar body now or hereafter constituted; with any
direction or occupancy certificate issued pursuant to any law by any public
officer or officers; as well as with the provisions of all recorded documents
affecting the Premises, insofar as they relate to or affect the use or occupancy
of the Premises, excluding requirements of structural changes not related to or
affected by improvements made or for Tenant.
21. No Assignment or Subletting.
(a) Tenant shall not transfer, assign, sublet, enter into license or
concession agreements, or hypothecate this Lease or the Tenant's interest
in and to the Premises or permit the use of the Premises or any party other
than the Tenant in whatever part, voluntarily, involuntarily or by
operation of law (collectively "Assignment") without first obtaining
Landlord's consent and otherwise complying with all the terms and
conditions of this Paragraph 21. Such consent shall not be unreasonably
withheld by Landlord. Any Assignment without Landlord's consent shall be
void and shall constitute an Event of Default under this Lease. Tenant
agrees to pay for Landlord's reasonable attorneys' fees and other
administrative costs incurred in conjunction with the processing and
documentation of and response to any request for consent to an Assignment,
the estimated amount of which (as determined by landlord) shall be paid by
Tenant concurrently with the submission of any request for Landlord's
consent to an Assignment.
(b) If Tenant desires at any time to enter into an Assignment of this
Lease, Tenant shall first give written notice to Landlord of its desire to
do so, which notice shall be accompanied by the payment described in the
last sentence of subparagraph (a) above and shall contain (1) the name of
the proposed assignee, subtenant or occupant (collectively "Assignee"); (2)
the nature of the proposed Assignee's business to be carried on in the
Premises; (3) the terms and provisions of the proposed Assignment; and (4)
such financial information regarding both Tenant and the proposed Assignee,
including a current balance sheet and income statement for each, as
Landlord may request; and (5) such operating histories and statements of
prior experience as Landlord may reasonably notice and any additional
information requested by Landlord, Landlord may, by written notice to
Tenant, elect to (a) consent to the Assignment, or 9b) disapprove the
Assignment, or 9c) terminate this Lease upon sixty (60) days written notice
to Tenant with respect to that portion of the Premises covered by the
proposed Assignment. Tenant further acknowledges that the use of the
Premises shall be limited to the uses described in Paragraph 8 above, and
it shall be deemed reasonable for Landlord to withhold its consent to any
other use or to a use which while it shall be deemed reasonable for
landlord to withhold its consent to any other use or to a use which while
complying with Paragraph 8 above is incompatible with existing uses of
other tenants in the building. It shall also be deemed reasonable for
Landlord to withhold its consent to any Assignment to an Assignee whose net
worth does not equal or exceed Tenant's net worth as of the date of this
Lease or the date the request for consent is submitted, whichever is
greater, or to any Assignee that is an existing tenant of the Building. The
foregoing shall not limit in any way Landlord's right to withhold its
consent to an Assignment for any other reason.
<PAGE>
(c) In the event Landlord does consent to any Assignment for which
Tenant receives any compensation or consideration of any kind in excess of
the rents and other charges payable hereunder and any leasing commissions
and tenant improvement costs incurred by Tenant in connection with such
Assignment, then Tenant shall pay over to Landlord ninety percent (90%) of
such excess compensation or consideration as and when received. In the
event of a sublet, Tenant shall pay such sums to Landlord each month as
received, and in the event of an assignment of this Lease as part of a sale
of other assets by Tenant, the total consideration received by Tenant shall
be fairly and reasonably allocated over all assets sold, and Tenant shall
disclose to Landlord all information necessary to enable Landlord to
determine such allocation.
(d) For purposes of this paragraph 21, the term "Assignment" shall
include any sale or other transfer, alone or together with sales or other
transfers previously made, including by consolidation, merger, or
reorganization, of a majority of the voting stock of Tenant or of any
parent corporation that controls Tenant (if Tenant is a corporation) or of
a majority of the general and/or limited partnership interests in Tenant
(if Tenant is a partnership), and shall also include any management
agreement or other contract or arrangement of any kind, however named,
pursuant to which a majority of any profits realized from the conduct of a
business on the Premises shall inure to the benefit of any other person or
pursuant to which effective control or responsibility for the Premises is
transferred or delegated to any person.
(e) Regardless of Landlord's consent, no Assignment shall release
Tenant from Tenant's obligation under this Lease or after the Liability of
Tenant to pay the rent and to perform all other obligations to be performed
by Tenant under this lease. The acceptance of any Rent by Landlord from any
other person shall not be deemed to be a waiver by Landlord of any
provision of this Lease. Consent to one Assignment shall not be deemed
consent to any subsequent Assignment. In the event of default by any
Assignee of Tenant or any successor of Tenant in the performance of any of
the terms of this Lease, Landlord may proceed directly against Tenant
without the necessity of exhausting remedies against such Assignee or
successor.
<PAGE>
(f) Each Assignment to which Landlord has consent shall be by an
instrument in form satisfactory to Landlord and shall be executed by the
Assignor and the Assignee; and each Assignee shall agree in writing for the
benefit of landlord to assume, to be bound by, and to perform the terms,
covenants and conditions of this Lease to be done, kept and performed by
Tenant. No Assignment to which Landlord has consented shall be effective
until an executed copy of such instrument of Assignment has been received
and accepted by Landlord.
22. Indemnification and Release. Landlord, its partners, officers,
directors, shareholders, trustees, agents and invitees shall not be liable to
Tenant and Tenant hereby waives all claims against Landlord and all such persons
for any injury to or death of any persons or damage to or destruction of
property in or about the Premises or the Building by or from any cause
whatsoever, including, without limitation, theft, burglary, mysterious
disappearance, gas, fire, oil, electricity or leakage of any character from the
roof, walls, basement or other portion of the Premises or the Building. Tenant
shall hold Landlord and its partners, officers, directors, shareholders,
trustees, agents and invitees (collectively "Indemnified Parties") harmless from
costs and expenses, including reasonable attorneys' fees, in connection
therewith, arising out of an injury to or death of any person or damage to or
destruction of property occurring in, on or about the Premises, or any part
thereof, from any cause whatsoever; and if occurring in, on or about the
Building (including without limitation, elevators, stairways, parking areas,
passageways or hallways) the use of which Tenant may have in common with other
tenants of the Building, or elsewhere in, on or about the Building or the
Premises, when such injury or damage shall be caused in whole or in part by the
act, neglect, default or omission of any duty by Tenant, its agents,
contractors, employees or invitees or otherwise by any conduct or transactions
of any of said persons in or about or concerning the Premises or the Building,
including without limitation any alterations, additions or repairs performed by
Tenant or any other failure of Tenant to observe or perform any of its
obligations hereunder.
23. Default. Tenant shall deemed to be in default under this Lease upon the
occurrence of any of the following events ("Event of Default"): (a) Tenant shall
fail to pay any Monthly Rent or Additional Rent when and as the sums become due
and payable; (b) Tenant shall fail to pay any other sum when and as the same
becomes due and payable; (c) Tenant shall fail to observe, keep or perform in a
timely manner any of the other terms, covenants, agreements or conditions
contained in this Lease or in the Rules and Regulations described in Paragraph
10 above and on the part of Tenant to be observed or performed; (d) Tenant shall
file a petition for bankruptcy or become insolvent or make a transfer in fraud
of creditors, or make an assignment for the benefit of creditors, or take or
have taken against Tenant any proceedings of any kind under any provision of the
Federal Bankruptcy Act or under any other insolvency, bankruptcy or
reorganization act and, in the event any such proceedings are involuntary,
Tenant is not discharged from the same within sixty (60) days thereafter; (e) a
receiver is appointed for a substantial part of the assets of Tenant and is not
dismissed or discharged within sixty (60) days; (f) Tenant shall vacate or
abandon the Premises; or (g) this Lease or any estate of Tenant hereunder shall
be levied upon by any attachment or execution which is not discharged or bonded
against within thirty (30) days.
<PAGE>
24. Remedies Upon Default. Upon the occurrence of any Event of Default
Landlord may, at its option and without any further notice or demand, in
addition to any other rights and remedies given under this Lease or by law, do
any of the following:
(a) Landlord may terminate this Lease. In the event of any such
termination of this Lease, Landlord may then or at any time thereafter,
re-enter the Premises and remove therefrom all persons and property and
gain, repossess and enjoy the Premises, without prejudice to any other
remedies that landlord may have by reason of an Event of Default or of such
termination and, in addition to any other rights and remedies landlord may
have, Landlord shall have all of the rights and remedies of a Landlord
provided by Section 1951.2 of the California Civil Code. The amount of
damages which Landlord may recover in an event of such termination shall
include, without limitation, (1) the worth at the time of award (computed
by discounting such amount at the discount rate of the Federal Reserve Bank
of San Francisco at the time of award plus one percent) of the amount at
the discount rate of rent for balance of the term after the time of award
exceeds the amount of rental loss that Tenant proves could be reasonably
avoided; (2) all reasonable legal expenses and other related costs incurred
by Landlord following and reasonably avoided; (3) all reasonable legal
expenses and other related costs incurred by Landlord following and Event
of Default; (4) all costs incurred by Landlord in restoring the Premises to
good order and condition, or in limitation, any brokerage, commissions)
incurred by Landlord in reletting the Premises. For the purpose of
determining the unpaid rent in the event of a termination of this Lease,
all unpaid Monthly Rent and Additional Rent set forth in this Lease shall
be included.
(b) If Tenant shall abandon or surrender the Premises or be
dispossessed by process of law or otherwise, any property of Tenant left on
the Premises shall be deemed to be abandoned but Tenant shall remain liable
to Landlord for all cost, loss damage and expenses incurred by Landlord for
the removal of such property from the Premises and for the repair of any
damage to the Premises caused by such removal.
(c) Landlord shall have the right to cause a receiver to be appointed
in any action against Tenant to take possession of the Premises and/or to
collect the rents or profits derived from the Premises. The appointment of
such receiver shall not constitute an election on the part of Landlord to
terminate this Lease unless notice of such intention is given to Tenant.
(d) Landlord may elect to keep this Lease in full force and effect
with Tenant retaining the right to possession of the Premises
(notwithstanding the fact that Tenant may have abandoned the Premises), in
which event Landlord, in addition to all other rights and remedies Landlord
may have at law or in equity, shall have the right to enforce all of
Landlord's rights and remedies under this Lease, including but not limited
to the right to recover the installments of rent as they become due under
this Lease. Notwithstanding any such election to have this Lease remain in
full force and effect, Landlord may at any time thereafter elect to
terminate Tenant's right to possession of the Premises and thereby
terminate this Lease for any previous breach or default hereunder by Tenant
which remains uncured or for any subsequent such breach or default.
<PAGE>
(e) In addition to and not in Limitation of Landlord's remedies as set
forth in this Paragraph 24, if Landlord shall, during the term of this
Lease, serve Tenant with a 3-day notice to quit after the occurrence of an
Event of Default, then any deferred rent and other monetary concessions,
including without limitation, any Tenant improvement allowance, granted by
Landlord to Tenant shall also become immediately due and payable,
regardless of whether Tenant may have cured or may thereafter cure such
Default.
(f) Nothing contained in this Paragraph 24 shall be construed as
limiting Landlord's right to pursue any other lawful remedy now or
hereafter available to Landlord, including without limitation the remedies
set forth in Sections 1951.2, 1951.3 and 1951.4 of the California Civil
Code, as the same may be amended from time to time, or any related or
successor statutes.
25. Landlord's Right to Cure Default. All covenants and agreements to be
performed by Tenant under this Lease shall be at its sole cost and expense and
without any abatement of Monthly Rent or Additional Rent, unless otherwise
specified in this Lease. If Tenant shall fail to pay any sum or money, other
than Monthly Rent or Additional Rent, required to be paid by Tenant pursuant to
this Lease or shall fail to perform any other act on Tenant's part to be
performed under this Lease, Landlord may, but shall not be obligated so to do,
and without waiving or releasing Tenant from any obligations of Tenant, make any
such payment or perform any such other act on Tenant's part to be made or
performed as provided in this Lease. All sums so paid by Landlord and all
incidental costs shall be deemed Additional Rent hereunder and shall be payable
to Landlord on demand.
26. Termination. Upon any termination of this Lease, whether by lapse of
time or otherwise, Tenant shall surrender possession and vacate the Premises
immediately, and deliver possession thereof to Landlord. Any and all property
which Tenant is entitled to remove from the Premises at the expiration or other
termination of this Lease shall become the property of Landlord unless promptly
removed by Tenant.
27. Holding Over. Any holding over after the expiration of the term of this
Lease, with the consent of Landlord shall be deemed a month-to-month tenancy at
twice (300%) of the rental in effect for the last month immediately preceding
such expiration or termination and upon each and every one of the terms,
conditions and covenants of this Lease. In the event of month-to-month tenancy,
Landlord may cancel the same upon seven (7) days with notice left at the
Premises and Tenant shall have the privilege of canceling same upon thirty (30)
days notice to Landlord, all notices to be in writing.
28. Utilities and Services.
(a) Electricity, HVAC and Elevator. Provided that Tenant shall not be
in default hereunder, Landlord agrees to furnish to the Premises
electricity suitable for the intended use of the premises subject to
compliance with any governmental rules or restrictions regarding energy
conservation or other matters and shall, during the ordinary business hours
of 8:00 a.m. to 6:00 p.m., Monday through Friday, furnish heat (and in Mart
2 only, air conditioning) as required in Landlord's judgment for the
comfortable use and occupation of the Premises. Normal elevator service
shall be provided in common to tenants of the Building during the above
hours, and shall be subject to call at all times when normal service is not
provided.
<PAGE>
(b) Internal Telecommunications System. Landlord shall also furnish
building-wide telecommunications service to the Premises through a building
switchboard for incoming calls only. Such service may include, without
limitation, delivery of directory information regarding tenants to
interested parties. Tenant agrees to pay for same at a rate determined by
the landlord, which rate may be adjusted from time to time cover Landlord's
cost and overhead in connection therewith. Tenant acknowledges that the
building-wide telecommunications system is essential for the smooth
operations of the Building, and that it is reasonable for the Landlord to
impose a charge for some.
(c) Water. Landlord shall provide water only to the public facilities.
(d) No Liability. Landlord shall not be liable in any manner for
failure to furnish or delay in furnishing any such services in this
Paragraph 28 when such failure to furnish or delay is occasioned, in whole
or in part, by needed repairs, renewals, or improvements, or by any strike,
lockout or other labor controversy, or by an accident or casualty or by the
act or default of Tenant or other parties, or by any cause beyond the
reasonable control of Landlord; nor shall Landlord be liable for any act or
default of employees not authorized by Landlord; and any such failure shall
not be deemed as an actual or constructive eviction of Tenant, nor shall it
in any way release Tenant from the performance of his covenants.
29. Subordination and Estoppel Statements. This Lease shall automatically
be subordinate to any mortgage or deed of trust hereafter placed upon the
Premises, to any and all advances made or to be made thereunder, to the interest
on the obligations secured thereby and to all renewals, replacements and
extensions thereof; provided, however, that (a) in the event of foreclosure of
any such mortgage or deed of trust or exercise of power of sale thereunder,
Tenant shall attorn to the purchaser of the Premises at such foreclosure sale
and recognize such purchaser as the Landlord under this Lease, and (b)
notwithstanding any such foreclosure or sale this Lese shall remain in full
force if Tenant is not in default hereunder. If any mortgagee or beneficiary
elects to have this Lease superior to this mortgage or deed of trust and gives
notice of its election to Tenant, then this Lease shall thereupon become
superior to the lien of such mortgage or deed of trust, whether this Lease is
dated or recorded before or after the mortgage or deed of trust. Tenant shall
promptly execute, acknowledge and deliver to Landlord any subordination or
nondisturbance agreement or other instrument that Landlord may reasonably
request to carry out the intent of this paragraph. If Tenant shall fail to do so
within fifteen (15) days after receipt of Landlord's request, Landlord may
terminate this Lease by written notice to Tenant. Tenant agrees upon request in
writing from Landlord to execute an deliver within ten (10) days to Landlord a
statement in writing certifying that this Lease is unmodified and in full force
and effect (or if there have been modifications, that the same is in full force
and effect as modified and stating the modifications), and the dates to which
rent has been paid. It is agreed that any such statement may be relied upon by
any prospective purchaser of the Building or the mortgagee, beneficiary or
grantee of any security interest, or any assignee of any thereof covering the
Building. Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant (a) that this Lease is in full force and effect without
modification except as may be represented by Landlord, (b) that there are no
uncured defaults in Landlord's performance, and (c) that no more than two (2)
months rent has been paid in advance as security.
<PAGE>
30. No Waiver. Landlord's failure to exercise any right or remedy it may
have by reason of any Event of Default shall not constitute a waiver thereof
unless expressly so stated in writing by Landlord; the subsequent acceptance of
rent hereunder shall not be deemed a waiver of any preceding Event of Default
hereunder by Tenant other than the failure to pay the particular rental or
accepted; and the waiver by Landlord or any Event of Default shall not
constitute a waiver of any other Event of Default regardless of knowledge
thereof.
31. Attorneys' and/or Collection Agencies' Fees. In the event it becomes
necessary to enforce this Agreement and collect delinquent sums due, Landlord is
entitled to all actually incurred attorney's fees and costs. Recovery of
attorney's fees will be based upon fees actually incurred rather than reasonable
fees pursuant to a Court's Default schedule.
Moreover, any judgment obtained by Landlord against Tenant shall include
the right to post-judgment incurred attorney's fees as part of the judgment.
Specifically, this contract clause shall not be extinguished by merger into the
judgment. Tenant expressly agrees that the judgment creditor shall be entitled
to reasonable and necessary costs of enforcement of judgment including actually
incurred attorney's fees in accordance with Code of Civil Procedure Section
685.040. This contract clause entitling attorney's fees both pre-judgment and
post-judgment shall be expressly set forth in the judgment. Attorney's fees
incurred in enforcing the judgment shall be included as costs collectable
pursuant to Code of Civil Procedure ("CCP") Section 1033.5(a)(10)(A). The
underlying judgment shall include an aware of attorney's fees to the judgment
creditor for enforcement of a judgment pursuant to said Section
1033.5(a)(10)(A). CCP Section 1033.5(a)(10)(A) states that attorney's fees
incurred fees, when authorized by a contract, are allowable as a cost under CCP
Section 1032.
The judgment creditor shall be entitled to a post-judgment attorney's fees
for the enforcement of the judgment pursuant to CCP Section 685.040 and CCP
Section 1033.5(a)(10)(A) by filing a post-judgment cost memoranda in accordance
with procedures set forth by law. The post-judgment attorney's fees incurred in
enforcing the judgment and requested pursuant to post-judgment cost memoranda
shall be recovered and reflected as a cost in the Writ of Execution.
32. Change of Leased Premises.
(a) Tenant acknowledges and agrees that it is essential to the orderly
and efficient operation of the San Francisco Mart buildings that Landlord
have the right from time to time to relocate tenants in order to achieve
optimum utilization of all space in the San Francisco Mart. Therefore, at
any time after the execution of this Lease, Landlord shall have the right
to move Tenant to another location in either Mart 1 (located at 1355 Market
Street, San Francisco) or Mart 2 (located at 875 Stevenson Street, San
Francisco). Landlord shall exercise its right to relocate Tenant in the
following manner: (i) the premises to which Tenant is to be relocated (the
"New Premises") shall be selected by Landlord and shall be reasonably
comparable in size, as determined by Landlord in its sole discretion, to
the Premises; (ii) Landlord shall give Tenant at least thirty (30) days
prior written notice of its intent to relocate Tenant and shall identify
the New Premises in said notice; (iii) within ten (10) days after
Landlord's notice of relocation, Tenant may, at its option, terminate this
Lease by delivering written notice to Landlord; and (iv) if Tenant fails to
terminate this Lease as provided in Section (iii) above, the New Premises
shall be substituted for the original Premises, this Lease shall continue
in full force and effect without any other changes, and Landlord shall,
subject to the conditions set forth below, move Tenant's property to the
New Premises. If the relocation occurs after Tenant has taken occupancy of
the Premises, Landlord shall pay the cost of moving Tenant and replacing
(as practicable and less a reasonable allowance for depreciation as
determined by Landlord) all installations and improvements of Tenant which
cannot be moved to the New Premises.
<PAGE>
(b) Landlord's obligation to pay for Tenant's relocation shall be
further subject to the following: (i) Tenant shall procure and submit to
Landlord three (3) bids from reputable moving companies for the relocation
of Tenant's furniture, fixtures, equipment and other personal property;
(ii) Landlord shall select one of the three (3) bids, or, in the
alternative, select a bid procured independently by Landlord from any other
reputable moving company; (iii) Tenant shall contract directly with the
moving company selected by Landlord to administer Tenant's relocation; and
(iv) Tenant shall submit any and all claims including without limitation
any breakage, denting, marring, chipping, cracking or other damage to any
showroom objects that occurs as a result of such relocation, directly to
the moving company selected by Landlord and Landlord shall have no
liability or responsibility in connection with any such damage or
destruction.
33. Personal Property Lien. As material consideration for Landlord's
entering into this Lease, Tenant hereby grants to Landlord a security interest
for all amounts due from Tenant under this Lease upon all personal property of
Tenant located on or about the Premises. Any such property shall not be removed
(except in the ordinary course of Tenant's business) without the prior written
consent of Landlord, until such time as all amounts due to Landlord under this
Lese shall have been paid in full. Upon the occurrence of any Event of Default
by Tenant hereunder, Landlord shall have the option, in addition to any other
rights or remedies it may have, to enter the Premises and take possession of any
such personal property of Tenant and to sell the same at public or private sale
in accordance with applicable provisions of the California Uniform Commercial
Code, at which sale Landlord or its assigns may purchase such property and apply
the proceeds, less expenses of taking possession and sale, as a credit against
any sums due by Tenant to Landlord hereunder. Any surplus remaining after such
sale shall be paid to Tenant. Simultaneously with the execution of this Lease,
or at such other time as Landlord may request, Tenant shall execute a UCC-1
Financing Statement in form suitable for filing with the California Secretary of
State (or such other filing offices as Landlord may deem appropriate).
<PAGE>
34. "Landlord" Defined. The term "Landlord," as used in this Lease, means
only the owner for the time being of the Premises, so that in the event of any
sale of the Premises, the seller shall be and hereby is entirely freed and
relieved of all covenants and obligations of Landlord hereunder, and it shall be
deemed and construed, without further agreement between the parties or between
the parties and he purchaser of the Premises, that such purchaser has assumed
and agreed to carry out any and all covenants and obligations of Landlord
hereunder.
35. Notices. If at any time after the execution of this Lease, it shall
become necessary or convenient for one of the parties hereto to serve any
notice, demand or communication upon the other party, such notice, demand or
communication shall be in writing, shall be deemed given when personally
delivered or forty-eight (48) hours after being deposited with the United States
Post Office, registered or certified mail, return receipt requested, postage
prepaid and (a) if intended for Landlord shall be addressed to San Francisco
Mart, 1355 Market Street, Suite 460, San Francisco, California 94103, Attention:
President, and (b) if intended for Tenant shall be addressed to Tenant at the
Premises or to the party at the address set forth in the Base Lease Terms.
36. Choice of Law and Forum. This Lease shall be construed in accordance
with and governed by the laws of the State of California, and any action or
proceeding brought by either party in connection with this Lease shall be
brought in, and the parties hereby submit to the jurisdiction of, the United
States District Court of the Municipal or Superior Court for the City and County
of San Francisco.
37. Time. Time is of the essence of this Lease.
38. Corporate Authority. If Lessee is a corporation, trust, general or
limited partnership, or limited liability company, each individual executing
this Lease on behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on behalf of said entity. If
Lessee is a corporation, trust, partnership or limited liability company, Lessee
shall, within thirty (30) days after execution of this Lease, deliver to Lessor
evidence of such authority satisfactory to Lessor.
39. Brokers. Except as may be expressly set forth herein, each party
represents to the other that no person, firm, corporation or other entity is
entitled to any brokerage commission or finder's fee on account of the execution
and consummation of this Lease. Tenant hereby agrees to indemnify Landlord and
to hold harmless Landlord from any and all claims, losses, damages, costs and
expenses of whatsoever nature, including attorneys' fees and costs of litigation
arising from or relating to any brokerage commissions or finder's fees incurred
by Tenant in connection with this Lease.
40. Modification of Lease. Except as otherwise provided herein, this Lease
may be amended or modified only by a written instrument executed by both
landlord and Tenant.
<PAGE>
41. Confidentiality. Tenant hereby agrees, on behalf of its self and its
partners, employees, agents and representatives, that except as required by law,
Tenant shall keep the terms of this Lease confidential and shall not disclose or
reveal any of such terms in any manner, whether orally in writing, to any person
or entity. Tenant may only disclose the economic terms of this Lease to its
accountants and lenders if Tenant obtains an agreement by such persons to treat
such information as confidential.
42. Limitation of Recovery Against Landlord. Tenant acknowledges and agrees
that the liability of Landlord (which for purposes of this Section shall include
all partners, both general and limited, of any partnership, the officers,
directors and shareholders of any corporation, the members of any limited
liability company, and any and all co-tenants or joint-venturers comprising
Landlord) under this Lease shall be limited to its interest in the Building, and
any judgments rendered against Landlord shall be satisfied solely out of the
proceeds of sale of its interest in the Building. No officer, director, partner,
shareholder or member of Landlord shall be named as a party in any suit or
action (except as may be necessary to secure jurisdiction over Landlord) and no
personal judgment shall lie against Landlord. Tenant agrees that the foregoing
covenants and Limitations shall be applicable to any obligation or liability of
Landlord, whether expressly contained in this Lease or imposed by statute or at
common law. The foregoing provisions are not intended to relieve Landlord from
the performance of any of Landlord's obligation under this Lease, but only to
limit the personal liability of Landlord in case of recovery of a judgment
against Landlord.
43. No Partnership. It is expressly understood that Landlord does not, in
any way or for any purpose, become a partner of Tenant in the conduct of its
business, or otherwise, or joint venturer or a member of a joint enterprise with
Tenant.
44. Complete Agreement. There are no oral agreements between Landlord and
Tenant affecting this Lease, and this Lease supersedes and cancels any and all
previous negotiations, arrangements, brochures, agreements and understandings,
if any, between the Landlord and Tenant or displayed by Landlord to Tenant with
respect to the subject matter of this Lease. There are no representations
between Landlord and Tenant other than those contained in this Lease and all
reliance with respect to any representations in solely upon the representations
contained in this Lease.
45. Effectiveness of Lease. This Lease shall not become effective, and
shall not create any rights or obligations of the parties hereto, until one or
more original counterparts hereof have been fully executed and delivered by the
parties and, if required by Landlord, a Guaranty of Lease has been duly executed
and delivered to Landlord.
46. Captions. The captions in this Lease are for convenience only and are
not a part of this Lease and do not in any way limit or amplify the terms and
provisions of the Lease.
47. Miscellaneous. The words "Landlord" and "Tenant" as used herein shall
include the plural as well as the singular. If there be more than one Tenant,
the obligations under this Lease imposed upon Tenant shall be joint and several.
Submission of this instrument for examination or signature by Tenant does not
constitute a reservation of or option for lease, and it is not effective as a
lease of otherwise until execution and delivery by both landlord and Tenant. The
terms, covenants, agreements and conditions herein contained, shall, subject to
the provisions as to assignment apply to and bind the heirs, successors,
executors, administrators and assigns of the parties hereto. If any provision of
the Lease shall be determined to be illegal or unenforceable, such determination
shall not affect any other provision of this Lease and all such other provisions
shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
day and year appearing next to each signature below.
<TABLE>
<CAPTION>
<S> <C>
TENANT: LANDLORD:
THE KELLER MANUFACTURING COMPANY, INC. WESTERN MART CO., a California limited
partnership dba SAN FRANCISCO MART
By:________________________________
Its: Marketing Manager By:___________________________________
Its: Executive Director
Date: May 8, 1996 Date: May 21, 1996
</TABLE>
<PAGE>
SAN FRANCISCO MART BUILDING RULES AND REGULATIONS
1. Landlord reserves the right to issue passes to all persons, including
tenants and their employees, and to require anyone seeking entry into the
Building to produce a pass.
2. Tenants, their employees and sales personnel shall at all times refrain
from unethical methods of selling their products or services to visitors of the
Building, including soliciting in corridors, loitering in doorways, accosting
buyers in fellow tenants' premises, escorting buyers to other tenants'
showrooms, and participating in sales in other tenants' premises.
3. Sidewalks, halls, passages, exits, entrances, elevators and stairways
shall not be obstructed by Tenants or used by them for any purpose other than
for ingress and egress from their respective premises.
4. The bulletin board or directory of the Building will be provided
exclusively for the display of the name and location of Tenants only and
Landlord reserves the right to exclude any other names therefrom.
5. No Tenant shall obtain for use upon its premises ice, drinking water,
food, beverage, towel or other similar services, or accept barbering or
shoe-shining services in its premises, except from persons authorized by
Landlord, and at hours and under regulations fixed by Landlord.
6. Each Tenant shall see that the doors of its premises are closed and
securely locked and shall observe strict care and caution that all utilities are
entirely shut off before the tenant or its employees leave the premises so as to
prevent waste or damage, and for any default or carelessness the tenant shall
make good all injuries sustained by other tenants or occupants of the Building
or Landlord.
7. No tenant shall alter any lock or install a new or additional lock or
any bolt on any door of its premises without the prior written consent of the
Landlord. If Landlord shall give its consent, the Tenant shall in each case
furnish Landlord with a key for any such lock.
8. Each Tenant, upon the termination of the tenancy, shall deliver to
Landlord all the keys of or to the Building, offices, rooms which shall have
been furnished the Tenant or which the Tenant shall have had made. In the event
of the loss of any keys so furnished by Landlord, Tenant shall pay Landlord
therefor.
9. Upon assignment or sublease of all or a portion of any premises, the
assignee or sublessee shall pay to Landlord an annual service fee in such amount
as Landlord may prescribe from time to time.
10. The toilet room, toilets, urinals, wash bowls and other apparatus shall
not be used for any purpose other than that for which they were constructed and
no foreign substance of any kind whatsoever shall be thrown therein, and the
expense of any breakage, stoppage or damage resulting from the violation of this
rule shall be borne by the Tenant who, or whose employees or invitees, shall
have caused it.
<PAGE>
11. No Tenant shall use or keep in its premises or the Building any
kerosene, gasoline or inflammable or combustible fluid or material or use any
method of heating or air conditioning other than supplied by Landlord.
12. No Tenant shall use, keep or permit to be used or kept in its premises
any foul or noxious gas or substance or permit or suffer such premises to be
occupied or used in a manner offensive or objectionable to Landlord or other
occupants of the Building by reason of noise, odors and/or vibrations or
interfere in any way with other Tenants or those having business therein, nor
shall any animals or birds be brought or kept in or about any premises of the
Building.
13. No cooking shall be done or permitted by any Tenant on its premises,
except that the preparation of coffee, tea, hot chocolate and similar items for
Tenants and their employees shall be permitted, nor shall such premises be used
for lodging.
14. Landlord will direct electricians as to where and how telephone,
telegraph and electrical wires are to be introduced or installed. No boring or
cutting for wires will be allowed without the prior written consent of Landlord.
The location of telephones, call boxes and other office equipment affixed to all
premises shall be subject to the written approval of Landlord.
15. No Tenant shall install any radio or television antenna, loudspeaker or
any other device on the exterior walls of the Building.
16. No Tenant shall lay linoleum, tile, carpet or any other floor covering
so that the same shall be affixed to the floor of its premises in any manner
except as approved in writing by Landlord. The expense of repairing any damage
resulting from a violation of this rule or the removal of any floor covering
shall be borne by the Tenant by whom, or by whose contractors, employees or
invitees, the damage shall have been caused.
17. No furniture, freight, equipment, packages or merchandise will be
received in the Building or carried up or down the elevators, except between
such hours and in such elevators as shall be designated by Landlord. No
furniture, merchandise or other bulky objects shall be brought into or removed
from the Building during any major market exhibition without the prior written
consent of Landlord. Landlord shall have the right to prescribe the weight, size
and position of all safes and other heavy equipment brought into the Building.
Safes or other heavy objects shall, if considered necessary by Landlord, stand
on wood strips of such thickness as is necessary to properly distribute the
weight thereof. Landlord will not be responsible for loss of or damage to any
such safe or property from any cause, and all damage done to the Building by
moving or maintaining any such safe or other property shall be repaired at the
expense of the Tenant.
<PAGE>
18. No Tenant shall overload the floor of its premises or mark, or drive
nails, screw or drill into, the partitions, woodwork or plaster or in any way
deface such premises or any part thereof.
19. There shall not be used in any space, or in the public areas of the
Building, either by any Tenant or others, any hand trucks except those equipped
with rubber tires and side guards. No other vehicles of any kind shall be
brought by any Tenant into or kept in or about any premises.
20. Each Tenant shall store all its trash and garbage within the interior
of its premises. No material shall be placed in the trash boxes or receptacles
if such material is of such nature that it may not be disposed of in the
ordinary and customary manner or removing and disposing of trash and garbage in
the City of San Francisco without violation of any law or ordinance governing
such disposal.
21. Landlord shall have the right, exercisable without notice and without
liability to any Tenant, to change the names and address of the Building.
22. Landlord may waive any one or more of these Rules and Regulations for
the benefit of any particular Tenant or Tenants, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of any
other Tenant or Tenants, nor prevent Landlord from thereafter enforcing any such
Rules and Regulations against any or all Tenants of the Building.
23. Tenant, employees, agents and guests shall not be passengers on the
freight elevators except when using the elevators to move samples and equipment
between the shipping/receiving area and the leased premises.
24. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify, alter or amend, in whole or in part, the terms,
covenants and conditions of the Lease.
<PAGE>
SAN FRANCISCO MART
LEASE EXTENSION
This Lease Extension ("Agreement") is made this 6th day of May, 1998 by and
between 1355 MARKET STREET ASSOCIATES, L.P. dba SAN FRANCISCO MART ("Landlord")
and KELLER MANUFACTURING COMPANY, INC. ("Tenant").
Landlord and Tenant entered into a Written Lease Agreement on May 21, 1996
(the "Lease") for the certain premises consisting of approximately 1,702
rentable square feet (the "Premises") known as Showroom 778 located at 1355
Market Street, San Francisco, CA 94103.
Landlord and Tenant hereby acknowledge and mutually agree to the following:
1. Defined Terms. Capitalized terms used but not defined in this Agreement
shall have the meanings given to them in the Lease.
2. Extension of Lease Term. The term of the lease is extended from the
Expiration Date of June 30, 1998 until June 30, 1999 (the "Extended Term").
3. Rent. As of the first month of the Extended Term, the Monthly Rent as
set forth in paragraph 3(a) of the Lease shall be $2,534.00.
4. Security Deposit. The Security Deposit will be increased to $5,068.00
5. Electricity. Tenant shall pay for electricity on the first day of each
month during the term of this lease beginning on the first such date after the
commencement of this Lease at the monthly rate of $0.05 times the square feet in
the Premises. Landlord reserves the right to change Tenant's use rate in its
sole and absolute discretion upon thirty(30) days written notice to Tenant.
6. No Representations. Landlord has made no representations other than
those contained in this Agreement.
7. Modification of Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the subject matters hereof and may not
be modified except by a written instrument executed by both parties.
8. Incorporation of Lease Terms; Lease in Full Force and Effect. All of the
terms and provisions of the Lease are hereby incorporated in this Agreement
except to the extent directly amended by the terms hereof. Except as expressly
so amended, the Lease shall remain in full force and effect in accordance with
its terms during the Extended Term.
Upon execution of this Extension, Tenant shall deliver to Landlord the sum
of $472.00 representing the additional security deposit.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year appearing next to each signature below.
<TABLE>
<CAPTION>
<S> <C>
TENANT: LANDLORD:
KELLER MANUFACTURING COMPANY, INC. 1355 MARKET STREET ASSOCIATES, L.P. dba SAN
FRANCISCO MART
By: Western Mart Corp., General Partner
By: By:
Its: Assist. V.P. of Marketing Its: Vice President
Date: 3/20/98 Date: 4/13/98
</TABLE>
Certified Correct
As to Area, Rate
And Extension
EFFECTIVE MANAGEMENT SYSTEMS, INC.
SOFTWARE LICENSE, PROFESSIONAL SERVICES, AND SUPPORT
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is made and entered into as of
the 6th day of July, 1998, by and between EFFECTIVE MANAGEMENT SYSTEMS, INC.
("EMS"), a Wisconsin corporation with offices at 12000 West Park Place,
Milwaukee, Wisconsin 53224 and KELLER MANUFACTURING COMPANY ("Buyer") an Indiana
corporation with offices at 701 North Water Street, Corydon, IN 47112-0008.
R E C I T A L S
0.1 EMS has certain rights to license computer software and sell computer
hardware, and offers certain services in connection with those activities.
0.2 Buyer desires to purchase and EMS is willing to license, sell, or
provide certain of such goods and services subject to the terms and conditions
that follow:
1. DEFINITIONS
The following terms, when used in this Agreement shall have the following
meanings:
1.1 "Products" means, except where the context requires otherwise, any of
the following:
1.1.1 The Application Software, Third Party Software, and other
items as listed on Exhibit A, which is incorporated herein by
this reference,
1.1.2 The Professional Services projects, sometimes "Services", as
set forth on or authorized pursuant to Exhibit B, which is
incorporated herein by this reference, and
1.1.3 The Support services, and other items as listed on Exhibit C,
as amended from time to time, for the Term set forth on
Exhibit C, which is incorporated herein by this reference.
1.2 "Application Software" means the totality of EMS' TCM(TM) application
software standard modules, programs, processes, and routines made available
under this license from EMS and used in the processing of information. It
includes machine readable code, generally referred to as object code, and
related ancillary materials such as user instructions, design, specifications,
and any other reference documentation made available for general distribution.
It also includes vocabularies and other items generally referred to as source
code, except with respect to those portions referred to as DNC and Foundation
Routines.
1.3 "Third Party Software" or "TPS" means software other than Application
Software or Operating System software.
1.4 "Price" means, with respect to this Agreement, the sum of the prices
set forth on Exhibits A, B, and C for the Products and, with respect to each
Exhibit, the sum of the prices for the Products set forth on the Exhibit.
1.5 "Computer System" means the Hardware with the Operating System set
forth on Exhibit A on which the Application Software is authorized for use in
order to perform various data processing functions.
<PAGE>
1.6 "Hardware" means the combination of the machine types and other
hardware products which, together with the Operating System, can perform one or
more data processing functions when utilizing the Application Software.
1.7 "Operating System" means the software necessary to operate the
Hardware.
1.8 "Location" means the location set forth on Exhibit A.
1.9 "User" means any Computer System session, i.e., user log-in, running
the Operating System and Application Software, either attached or detached.
1.10 "Customizations" means any and all changes, modifications, or
enhancements to the Application Software, as well as derivative works, developed
by Buyer, for Buyer by third parties, or by EMS under separate Project
Authorization, regardless by whom paid.
1.11 "Professional Services" means services provided by EMS to Buyer on a
time and materials or fixed price basis, whether they occur at Buyer's site, at
EMS, or over the telephone and whether authorized in this Agreement or by
separate Project Authorization as described in Exhibit B. The most common
Professional Services are training, consulting, installation, data conversions,
and Customizations.
1.12 "Support" means the Upgrade, and Telephone Support services purchased
by the Buyer under Exhibit C of this Agreement for the standard, unmodified,
Application Software.
1.13 "Upgrade" means the Application Software Upgrade Plan service provided
by EMS to Buyer on a periodic basis under which EMS makes available the latest
versions of Application Software previously licensed to Buyer.
1.14 "Telephone Support" means a service provided by EMS to Buyer on a
periodic Telephone Support Plan basis under which EMS makes available various
levels of telephone support.
2. LICENSE AND PURCHASE
2.1 Grant. Subject to all the terms and conditions of this License, and
upon payment of the Price as applicable, EMS grants to Buyer the nonexclusive,
nontransferable, forty (40) year right and license to use, but not own, the
Application Software and to use, but not own, Customizations, on the Computer
System, at the Location, in Buyer's own business, and solely for Buyer's own
internal operations at the User level. The Buyer's right to use TPS Products is
subject to the terms of their respective agreements which Buyer shall execute if
required. Customizations, as well as TPS Products not covered by standard EMS
Support under Exhibit C, may be supported on a time and materials basis under
Project Authorizations separately entered into pursuant to Exhibit B.
2.2 Security. Buyer agrees to use and not to attempt to defeat the present
and any future security system of the Products.
2.3 Application Development Language License. By execution of this
Agreement, Buyer acknowledges having read and understood, agrees to comply with
and be bound by the application development language license attached hereto as
Exhibit AA, and is hereby granted the right to use the application development
language as therein set forth. EMS is hereby authorized by Buyer, if required by
the application development language owner, to execute same on behalf of Buyer
as attached.
<PAGE>
2.4 DNC and Foundation Routines Source Code. EMS agrees, upon request and
at Buyer's expense, to escrow the DNC and Foundation Routines excluded from the
Application Software under terms that will permit Buyer to access such source
code, for use under the terms and conditions of this Agreement, upon
presentation to the escrow agent of a court order finding that EMS has ceased
business operations through dissolution or the like. EMS will, upon request,
provide Buyer with the name and location of the escrow agent.
2.5 Purchase. Subject to all the terms and conditions of this Agreement,
Buyer agrees to purchase the Professional Services Products as set forth in
Exhibit B and the Support and any other Products as set forth in Exhibit C at
the Prices also set forth in those Exhibits, except that Buyer is not committing
to purchase any items set forth as "Estimated" amounts on Exhibit B unless and
until a Project Authorization is completed as specified in Exhibit B for any
such item.
3. PAYMENT
3.1 Timing. Buyer shall pay EMS for the Products as follows:
3.1.1 A down payment of 50 percent of the Application Software
and TPS Price upon execution of this Agreement and shall
pay the balance of the Price upon Acceptance as defined
below in Paragraph 4.3. Buyer shall pay for other items as
set forth on Exhibit A.
3.1.2 Buyer shall pay EMS for Professional Services as incurred.
3.1.3 Buyer shall pay EMS for Support and any other Products set
forth in Exhibit C the Price set forth in Exhibit C in
advance of the Term as defined in Exhibit C.
3.2 Currency. All prices are expressed in United States currency unless
otherwise noted and all purchases are F.O.B. point of shipment unless otherwise
noted.
3.3 Related Costs. In addition to the Price, Buyer shall pay EMS, or
certify that payment has been made, for any sales, use, or other tax or related
payment applicable to the sale or licensing of the Products, and actual shipping
and related insurance charges.
4. DELIVERY, INSTALLATION, AND ACCEPTANCE
4.1 Estimated Dates. Any stated delivery, installation, or other
performance date shall be regarded as an estimated date only, which EMS shall
make reasonable efforts to meet. EMS' acceptance of this Agreement is
conditioned on review and approval by EMS' Credit Department.
4.2 Changes. Buyer may not make any changes to delivery, installation, or
other performance of services schedules once agreed except with EMS's prior
written consent, which shall not be unreasonably withheld.
<PAGE>
4.3 Acceptance.
4.3.1 EMS shall deliver the Exhibit A software Products to Buyer
or, if separately agreed to, install such Products on
the Computer System at the Location and demonstrate to
Buyer that the Application Software Products perform on the
Computer System. All the Exhibit A Products shall be deemed
accepted by Buyer and Acceptance shall be deemed to have
occurred upon delivery or, if installed by EMS, upon the
earlier of the completion of the Application Software
demonstration or 30 days after delivery.
4.3.2 EMS shall perform or deliver the Exhibit B Services or
Products as set forth on Exhibit B. Such Services or
Products shall be deemed Accepted by Buyer upon performance
or delivery as called for.
4.3.3 Buyer may not cancel or reschedule any Application
Software, or Special Products and Services or portion
thereof after pickup, delivery or installation.
4.3.4 Buyer may not cancel Software Customization, Professional
Services, Software Maintenance Plan(s), or Data Conversion
after the respective services are provided to Buyer.
5. BUYER'S AND EMS' REMEDIES
5.1 Arbitration. Any controversy or claim arising out of or relating to
this Agreement or its breach, shall only be settled in accordance with the
Commercial Rules of the American Arbitration Association in Milwaukee, WI and
judgment upon any award rendered by the arbitrator may be entered in any court
having jurisdiction thereof.
5.2 Termination. In addition to any other termination provisions herein,
this Agreement may be terminated by either party in the event the other party
should fail to perform any of its obligations hereunder and should fail to
remedy such nonperformance within thirty (30) calendar days after written
demand, provided, however, that upon a second breach of the same obligation by
such party, the other party hereto may forthwith terminate this Agreement upon
written notice to the breaching party and failure to cure within five (5)
calendar days.
5.3 After Termination. Upon the termination of this Agreement for any
reason, both parties shall return to the others as appropriate all Product and
Confidential Information, as defined in Paragraph 7.2, in the other's possession
or, with the other's approval, destroy such information with certification by an
officer. The parties' obligations relating to Confidential Information shall
survive the termination of this Agreement.
6. WARRANTY AND LIMITATION OF LIABILITY
6.1 Warranty.
6.1.1 EMS warrants that the Application Software does not
infringe a third party's property rights. EMS further
warrants that it has the right to sell or license the
Application Software and Third Party Software to Buyer
pursuant to the terms of this Agreement and, to the extent
authorized, passes on to Buyer all available TPS
warranties. EMS further warrants that for as long as Buyer
subscribes to the EMS Telephone Support Plan, the
Application Software will perform in essential compliance
with its official products manual specifications. EMS
makes no other warranty with respect to Third Party
Software, which is covered by whatever warranty, if any,
each such Third Party may separately provide directly to
the Buyer. EMS also represents that Third Party Software
will work in concert with the Application Software if such
Third Party Software is covered under Software Support
Services in Exhibit C herein, and such representation is
specifically set forth in Exhibit C.
<PAGE>
6.1.2 EMS warrants that it has the right to sell or license the
Professional Services Products to buyer pursuant to the
terms of this Agreement and that its Customization
Products will perform in essential compliance with their
Project Authorization design requirements for a period of
three (3) months from acceptance.
6.1.3 EMS warrants that it has the right to sell or license the
Exhibit C Products to Buyer pursuant to the terms of this
Agreement and that the Support will be performed in
essential compliance with the Support plans set forth in
Exhibit C.
6.2 No Other Warranty. THE WARRANTIES SET FORTH IN THIS AGREEMENT ARE IN
LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
6.3 Limitation of Liability.
6.3.1 In the event the Products sold or licensed by EMS do not
conform to their above respective warranty, EMS' entire liability and
Buyer's sole remedy will be, in EMS' sole discretion, either a) the
correction of the problem by replacement or rework of the Product, or
b) a refund of any fees actually paid relating thereto and proportional
to the remaining Term of the underlying license if Application Software
or Professional Services are involved, or in proportion to the Term of
Support remaining if Support services are involved. Where EMS chooses
to correct or rework the Application Software, it will perform the
following: 1) for Application Software which is licensed as part of the
initial purchase, EMS will investigate, develop and make available
programming corrections as appropriate, in machine readable form, at no
charge to Buyer except for EMS's direct out of pocket expenses, (meals,
lodging, and transportation for on-site work, and phone charges for
remote work) except that subsequent to the first twelve (12) months
after Acceptance, Buyer is responsible for detailed investigation of a
suspected non-compliance; 2) for Application Software which is
subsequently licensed or upgraded to a newer version, EMS will
investigate, develop and make available programming corrections as
appropriate, in machine readable form, at no charge to the Buyer except
for EMS's direct out of pocket expenses, except that subsequent to the
first three (3) months after Acceptance, Buyer is responsible for
detailed investigation of a suspected non-compliance. In both 1) and 2)
Buyer is responsible for applying the corrections to its copy of the
Application Software.
6.3.2 In the event of a breach by EMS of the non-infringement
warranty in 6.1.1, but subject to the same limitations on liability in
6.3.1b, EMS shall be responsible for Buyer's reasonable attorney fees
and any damages finally awarded so long as Buyer has promptly given EMS
notice of such claim, offered to turn over defense of the claim to EMS,
and fully informed and cooperated with EMS in the defense of the claim.
<PAGE>
6.3.3 In the event of a non-warranty breach of this Agreement
by EMS, Buyer's sole recovery shall be for its actual damages, not to
exceed any fees it actually paid to EMS pursuant to this Agreement.
6.3.4 IN NO EVENT SHALL EMS BE LIABLE UNDER THIS AGREEMENT FOR
ANY CONSEQUENTIAL, GENERAL, OR SPECIAL DAMAGES EVEN THOUGH THE PARTIES
MAY BE AWARE OF THE POSSIBILITY OF SUCH DAMAGES.
6.4 Access. EMS or its designated agent shall have reasonable access to the
Computer System to perform any warranty and maintenance services when and as
required and to determine if the Products provided to Buyer are being used in
conformance to this Agreement.
7. CONFIDENTIALITY
7.1 Third Party Proprietary Property. Some of the Products provided
pursuant to this Agreement may constitute the trade secrets and proprietary
properties of EMS or other licensing suppliers pursuant to agreements with those
suppliers. Buyer agrees to include on any permitted copies made of the Products,
the same proprietary notices or legends that appear on the materials it
receives. Buyer also agrees to use reasonable efforts to procedurally protect
those materials and the information they contain from transfer, disclosure, or
use by any employee, entity, or other person, other than as expressly permitted.
Buyer agrees to notify EMS or the third party owner, as appropriate,
immediately of any violation of this provision it becomes aware of or suspects.
7.2 Confidential Information. Buyer and EMS acknowledged that, in
connection with the Products purchased or licensed pursuant to this Agreement,
EMS has provided or may provide Buyer with discs, tapes, or other software
media; documents; or information through discussions relating to its or its
licensors' products, processes, programs, plans, customers, or the like and that
EMS will receive non-public information concerning the business of Buyer. All
such information, whether of a Trade Secret or non-Trade Secret nature, shall be
deemed Confidential Information and shall be kept in the strictest confidence
and trust and may not be disclosed to other than Buyer's or EMS's own employees
having a need to know the information in furtherance of this Agreement, without
the express written consent of EMS or Buyer as applicable, which consent shall
not be unreasonably withheld.
8. MISCELLANEOUS
8.1 Entire Agreement. This Agreement, which includes the Exhibits attached
hereto, constitutes the entire Agreement between the parties with regard to the
Products, superseding any prior proposals or agreements. Any provisions of this
Agreement prohibited by law shall, without invalidating the remaining provisions
hereof, be ineffective to the extent of the prohibition. Any changes to this
Agreement must be in writing and signed by both parties.
8.2 Governing Law. This Agreement and the rights and obligations of the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Wisconsin.
8.3 Further Actions. The parties agree to take any and all further actions,
including the execution of documents, required to fully effect the provisions
and intent of this Agreement.
<PAGE>
9. AMENDMENT
The attached Amendment dated this same date is incorporated into this
Agreement by this reference. The terms and conditions set forth in that
Amendment take procedure over any conflicting terms set forth above.
IN WITNESS WHEREOF, each party represents that it has full power and
authority to enter into and perform this Agreement, that the person signing this
Agreement on behalf of each party, subject to EMS credit approval condition
above, has been properly authorized and empowered to do so, and that each has
carefully reviewed it and consulted with such experts as each deemed necessary.
BUYER:
KELLER MANUFACTURING COMPANY
By: /s/ Marvin C. Miller
------------------------------------
Name: Marvin C. Miller
----------------------------------
Title: VP/S
---------------------------------
ACCEPTED at Milwaukee, Wisconsin
By: EFFECTIVE MANAGEMENT
SYSTEMS, INC.
By: /s/ Tony Kalupa
------------------------------------
Name: Anthony J. Kalupa
----------------------------------
Title: President - Central Region
---------------------------------
<PAGE>
INVESTMENT SUMMARY
To
EMS Purchase Agreement
KELLER MANUFACTURING COMPANY
Your Computer System Investment is priced as follows:
<TABLE>
<CAPTION>
<S> <C>
EMS Software Investment $0
Non-EMS Software Investment $0
- -------------------------------------------------------------------------------
Total Hardware and Software Investment $0
Recommended Professional Services Budget is priced as follows:
Account Services and Project Management to be provided
by George S. Olive & Company, Inc. $0
Installation Services $2,520
Data Conversion Services $3,360
Seminar Training Services to be provided by
George S. Olive & Company, Inc. $0
Budget for EMS Software Update Installations 2 per year $1,000
Estimated Budget for Software Customization Services $6,800
- -------------------------------------------------------------------------------
Total Professional Services Budget $13,680
Software Maintenance Plan is priced as follows:
Annual EMS Software Maintenance Plan $0
Annual Non-EMS Software Maintenance & Support $0
- -------------------------------------------------------------------------------
Total Software Maintenance Plans $0
</TABLE>
<PAGE>
EXHIBIT A
To
EMS Purchase Agreement
(Software License Purchases)
between EMS and KELLER MANUFACTURING COMPANY as Buyer
The following are the Application Software and Third Party Software
Products to be licensed or purchased under this Agreement with their Price for
use only on the Computer System and at the User level and Location also set
forth. EMS offers standard Support for the Products listed under subsections 1
and 2 below under Exhibit C to this Agreement. While standard Support is not
available for Products listed under subsection 3 below, support may be provided
by EMS for some of them on a time and materials, product by product, basis under
separate Project Authorizations under Exhibit B-4 to this Agreement.
Computer System:
Hardware: DEC Prioris XI Operating System: Windows NT
-------------- ----------
Location: 71 North Water Street, Cordon, IN 47112-0008
--------------------------------------------
Number of Application Software Users on the Computer System: 50 Version: 60
----- ----
1. Application Software Products for which standard Support is available for
purchase:
<TABLE>
<CAPTION>
Number of V6.0 TCM Users 50 concurrent users
Number of Existing TCM Users 50 concurrent users
<S> <C> <C> <C> <C>
Existing Upgrade List Price
License License V6.0 V6.0 Software
Application (Y/N) (Y/N) User Count Investment
- ----------------------------------------------------------------------------------------------------
TCM Base Functions and Foundation
Routines including Document Library
(Mandatory) $12,300 $12,300
Inventory Management with Material
History and Bin/Lot Tracking Y Y $11,700 $11,700
Bills of Material Y Y $7,000 $7,000
Standard Product Routings Y Y $4,300 $4,300
Standard Product Costing Y Y $4,300 $4,300
Job Costing Y Y $7,000 $7,000
Estimating Y Y $11,700 $11,700
Customer Order Processing with Sales
History Y Y $11,700 $11,700
Bookings History Y Y $4,300 $4,300
Features & Options N N $4,300 $0
Product Configurator N N $7,000 $0
Rules Based Calculator N N $7,000 $0
Purchase Order with Purchasing History Y Y $11,700 $11,700
Requistions Y Y $4,300 $4,300
Shop Floor Control with Manufacturing
History Y Y $11,700 $11,700
<PAGE>
"As Built" Configuration History N N $4,300 $0
Material Requirements Planning Y Y $11,700 $11,700
Master Production Scheduling Y Y $11,700 $11,700
Plant and Equipment Maintenance Y Y $7,000 $7,000
Accounts Payable Y Y $7,000 $7,000
Accounts Receivable Y Y $7,000 $7,000
Payroll (This module is in maintenance
Mode) Y Y $7,000 $7,000
General Ledger Y Y $7,000 $7,000
Factory Data Collection Y Y $11,700 $11,700
Liability & Warranty Tracking N N $4,300 $0
Mailing Systems N N $4,300 $0
Electronic Data Interchange (EDI) N N $11,700 $0
Abra Interface (Licensed by number of
Employees) 0 N $0 $0
Subtotal EMS Application Software $172,100
EMS Application Software Transfer Fee $0
Credit for Software Upgrade or
Maintenance Plan Y -$172,000
- ----------------------------------------------------------------------------------------------------
Total EMS Software Investment $0
</TABLE>
<PAGE>
EXHIBIT A
To
EMS Purchase Agreement
(Software License Purchases Continued)
2. Third Party Software Products for which standard Support is available for
purchase:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Product Name Each Qty Extended
- ------------------------------------------------------------------------------------
Synergy SE Licenses $260 50 $13,000
Synergy SE, Credit for Existing Synergy 0 -$13,000
- ------------------------------------------------------------------------------------
Total Synergy SE Software $0
Annual Synergy Support and Right-to-Updates (15%) -
Current Plan Remains Intact
- ------------------------------------------------------------------------------------
ABRA Human Resources $0
ABRA Payroll $0
ABRA Networked Seats (1 Included) $0
ABRA Link and Toolkit Required for Data Collection
Integration $1,890 0 $0
- ------------------------------------------------------------------------------------
Total ABRA Software $0
- ------------------------------------------------------------------------------------
ABRA Human Resources Support and Right-to-Updates $0
ABRA Payroll Support and Right-to-Updates $0
ABRA Toolkit and Link Support and Right-to-Updates $0
- ------------------------------------------------------------------------------------
Total ABRA Support and Right-to-Updates $0
</TABLE>
3. Third Party Software Products for which standard Support is not available:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Myriad Viewer Single Seat $395 0 $0
Myriad Viewer Concurrent Version 5-User Increments $2,565 0 $0
Loftware Label Printing (Professional Edition) $995 0 $0
Forest & Trees (Price for over 10 users is $195 each) $295 0 $0
- ------------------------------------------------------------------------------------
Total Non-EMS Client PC Software $0
Windows NT Server V4.0 +5 Client Access Licenses $810 0 $0
Windows NT V4.0 Additional Client Access Licenses $40 0 $0
Exchange Server V5.5 + 5 Client Access Licenses $1,000 0 $0
Exchange Server V5.5 Additional Client Access Licenses $57 0 $0
Seagate Backup Exec Single Server Edition $695 0 $0
Windows NT Server Resource Kit $99 0 $0
Powerchute UPS Shutdown Software $99 0 $0
Diskeeper NT Server $399 0 $0
Diskeeper NT Workstation (one license per workstation) $75 0 $0
- ------------------------------------------------------------------------------------
Total Non-EMS Windows NT Server Software $0
</TABLE>
<PAGE>
EXHIBIT AA - To EMS Purchase Agreement
Between EMS and KELLER MANUFACTURING COMPANY as Buyer
SYNERGEX
2330 Gold Meadow Way, Gold River, CA 95670
Phone 800 366 3472 or 916/635-7300 or Fax 916/635-6549
Synergy License Agreement
(Please type or print all information clearly)
Supplier Name Effective Management Systems, Inc.
----------------------------------
(Synergex or VAR)
Hardware DEC Prioris XL
-------------- ---------------
(Brand/Model) (Serial Number)
Operating System Windows NT System Code
---------- ---------------
Registration String (Not Applicable for VMS)
--------------
Licensee Keller Manufacturing Co., Corydon, IN
-------------------------------------
Number of Licensed Concurrent Users 50
------
<TABLE>
<CAPTION>
Licensed Product Information - Licensed Software
- ------------------------------------------------
<S> <C>
Synergy Development Environment Synergy Report Writer
Visual Synergy Synergy Runtime
Synergy Report Writer Runtime Synergy Client/Server Package
db Drivers Synergy SQL Connection Runtime
Synergy RDB Translator Runtime Synergy SQL OpenNet
Synergy ODBC Driver
</TABLE>
Synergex should return configuration keys or license PAKSS to:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FAX Number 414-359-9011 Attention Sue Gundermann, Customer Service
------------ ---------------------------------
Customer Name Effective Management Systems, Inc. Address 12000 West Park Place, Milwaukee, WI
---------------------------------- ------------------------------------
</TABLE>
Licensee agrees to be bound by Synergex's Product Licensee Agreement terms as
set forth on the following page. Licensee acknowledges that 1) on the VMS
operating systems, the Licensed Software will not operate unless this License
Agreement is signed and returned to the Supplier names above; 2) on other
operating systems, the Licensed Software will operate for a period of only
fourteen (14) days unless this License Agreement is signed and returned to the
Supplier named above within fourteen (14) days after Software installation.
Licensee: Keller Manufacturing Co., Corydon, IN
-------------------------------------
By: Date:
------------------------------ -------------------
<PAGE>
TERMS AND CONDITIONS
Licensee agrees to the following terms and conditions for a nonexclusive right
to use the computer software indicated on the face page of this License
Agreement (the "Licensed Software").
1. Licensee shall use the Licensed Software solely for the Licensee's own
internal business purposes at the address identified on the face page.
2. The Licensed Software may only be used by the number of users set forth
on the face page. In addition, the Licensed Software may only be used
on the CPU designated on the face page.
3. Licensee's use of the Licensed Software is conditioned upon (1) payment
in full of the applicable software license fee for the software, and
(2) compliance with all terms and conditions of this Agreement.
4. Licensee shall not decompile, reverse engineer or apply any other
procedures or technology to the Licensed Software so as to determine
the source listings for the Licensed Software.
5. Licensee agrees it will not use or grant any right to use the Licensed
Software or any portion thereof except as authorized herein, and that
it will not make or have made, or permit to be made, any copies which
are not necessary to the use by Licensee for which rights are granted
hereunder. Licensee agrees each such necessary copy shall contain the
same proprietary notice or legends which are applicable to such
portions thereof.
6. Licensee agrees it has no rights with respect to the Licensed Software
other than those rights granted by this Agreement. Neither the Licensed
Software nor this Agreement may be assigned or otherwise transferred by
Licensee except that Licensee may, with the written consent of
Synergex, remove the Licensed Software from a designated CPU and
designate a replacement CPU.
7. Licensee recognizes that Synergex and its suppliers make no warranty of
any kind with respect to the Licensed Software. The sole obligation of
Synergex or its supplier with respect to the Licensed Software shall
be: (1) to make available to Licensee all published modifications and
updates made by Synergex to the Licensed Software for a period of sixty
(60) days; (2) to make available to Licensee all such modifications or
updates after that sixty (60) days only in the event Licensee has
contracted for software support on the terms and conditions of
Synergex's separate support agreement; and (3) to reply to written
notification of defects in the Licensed Software. In the event Synergex
is not the supplier as listed herein, the supplier and not Synergex
shall have the foregoing obligations.
THE FOREGOING IS IN LIEU OF ALL WARRANTIES, EXPRESS OR IMPLIED, CONCERNING THE
LICENSED SOFTWARE OR ANY MEDIA OR HARDWARE USED TO DELIVER OR TRANSMIT THE
SOFTWARE, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. LICENSEE FURTHER AGREES
SYNERGEX AND ITS SUPPLIERS SHALL NOT BE LIABLE FOR ANY LOST PROFITS, OR FOR ANY
CLAIM OR DEMAND AGAINST LICENSEE BY ANY OTHER PARTY. IN NO EVENT SHALL SYNERGEX
OR ITS SUPPLIERS BE LIABLE FOR CONSEQUENTIAL DAMAGES, EVEN IF SYNERGEX HAS BEEN
ADVISED OF THE POSSIBILITIES OF SUCH DAMAGES.
8. Licensee agrees Synergex may immediately terminate this Product License
in the event Licensee fails to observe the terms and conditions set
forth herein and fails to remedy the breach within seven (7) days after
written notice from Synergex or its authorized representative. Since
such unauthorized use or transfer of the Licensed Software will
substantially diminish the value of the Licensed Software to Synergex,
Synergex will be entitled to equitable relief as well as money damages.
9. In the event this Product License is terminated, Licensee agrees to
return to Synergex the Licensed Software and to provide Synergex with a
signed and dated written certification the Licensee has destroyed all
of its copies of the Licensed Software. Such return and notice must be
received by Synergex within fifteen (15) calendar days following notice
of termination.
10. This Agreement shall remain in effect for a period of not more than
twenty (20) years hence, or until otherwise terminated as provided
herein.
11. If Synergex is required to engage in any proceedings, legal or
otherwise, including arbitration, to enforce its rights under this
Agreement, Synergex shall be entitled to recover from Licensee, in
addition to any other sums due, the reasonable attorney's fees, costs,
and necessary disbursements involved in said proceedings. In addition,
Licensee shall pay Synergex its reasonable attorneys' fees and costs
incurred in enforcing any judgment, order or decree issued by a court,
arbitrator or other authority in such proceedings, or in collecting any
monetary award made to Synergex in such proceedings.
12. Synergex shall be deemed not to have assented to any variations in the
terms of this Agreement or to different terms unless such assent is
express, includes an express waiver of the applicable terms of this
Agreement, and is in writing and signed. Moreover, any waiver is only
for the particular matter specified therein, and shall not constitute a
waiver of any further breach of this Agreement.
13. This Agreement shall be governed by the laws of the State of
California.
<PAGE>
EXHIBIT B
To
EMS Purchase Agreement
(Time Critical(TM) Implementation Time and Materials Services Purchases)
between EMS and KELLER MANUFACTURING COMPANY as Buyer
1. PROFESSIONAL SERVICES PRICE LIST
Time and Materials Service Hourly Rates
<TABLE>
<CAPTION>
<S> <C>
Application Programming $95/hr
Application Design and Senior Programming $125/hr
Account and Project Management $125/hr
Senior Account and Senior Project Management $155/hr
Senior Application and Technical Consulting $155/hr
Strategic Business Consulting $175/hr
</TABLE>
Professional Services rates are based on current EMS labor rates which may be
revised upon 90 days' written notice. In addition to these rates, Buyer will pay
reasonable out-of-pocket expenses for work done at Buyer's location such as
meals, lodging, transportation, and allowance for auto mileage, long-distance
telephone charges for work done at EMS on Buyer's computer system and travel
time. All Professional Services travel time is billable at 1/2 the regular rate
for the selected service.
There will be 1/2 hour minimum Professional Services charge for all work
performed at EMS, including telephone calls. There will be a 2-hour minimum
Professional Services charge for on-site work performed for EMS customers within
60 miles of the EMS office, for EMS customers outside 60 miles there will be a
4-hour minimum Professional Services charge for work performed on-site. A 50%
premium is added for all work performed on weekends and holidays for the
selected service.
EMS will receive Buyer approval before beginning any Professional Services work.
All Professional Services time is billable to the Buyer (with the sole exception
of correcting warranteed programming errors) whether it occurs at the Buyer's
site, at EMS, or over the phone. Actual Professional Services expenses vary
greatly from customer to customer, depending primarily on customer commitment of
resources, speed of learning, previous experience, internal coordination and
management, etc. Professional Services will be provided as needed and requested
by Buyer. The estimated investments on the following pages are Professional
Services the Buyer might request from EMS.
<PAGE>
EXHIBIT B (continued)
To EMS Purchase Agreement
2. PROFESSIONAL SERVICES BUDGET ESTIMATES
Actual Professional Services expenses vary greatly from customer to customer,
depending primarily on customer commitment of resources, number of individuals
who need training, speed of learning, previous experience, internal coordination
and management, and other factors. Professional Services will be provided based
on the requests of Buyer. The budgeted estimated amounts of Professional
Services shown below are what Buyer might request from EMS.
The Price to Buyer for each Professional Services Product is based on the actual
effort expended by EMS in completing each project as approved in this Exhibit by
a Fixed price or unit Fixed Price entry or by separate Project Authorization.
Based on discussions to date, the recommended budget estimates for the following
Professional Services projects are as follows:
Account Services and Project Management to be provided by George S. Olive &
Company, Inc.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Licensed Plan to Currently Standard
EMS Application Description (Y/N) Use Use (Y/N) 21-50 Users
(Y/N)
- --------------------------------------------- ------------ ----------- ----------- ------------
EMS Base System Setup Y N N
using Doc Lib Organization Y N N
Using VMK Buttons (NT) Y N N
Inventory Management Y N N
Using Bin Tracking Y N N
Bill of Material Y N N
Using ECN Y N N
Standard Product Routing Y N N
Standard Product Cost Y N N
Job Costing Y N N
Estimating Y N N
Cust Order Proc & Sales History Y N N
Using Shipping/BOL Function Y N N
Using Shipping Containers Y N N
Using Loftware Lbl Integration Y N N
Features & Options N N N
Product Configurator N N N
Rules Based Configurator N N N
Purchase Orders with History Y N N
Requisitions Y N N
Shop Floor with History Y N N
Using Scheduling Y N N
using Shop Order Auto-Create Y N N
using Outside Processing Y N N
using Factory Workstation Y N N
using As-built-Config history N N N
Plant & Equip Maintenance Y N N
Material Requirements Planning Y N N
Master Production Scheduling Y N N
Accounts Payable Y N N
Account Receivable Y N N
Payroll (TCM) Y N N
General Ledger Y N N
Factory Data Collection Y N N
Liability & Warranty Tracking N N N
Mailing Systems N N N
EDI (Custom Quote) N N N
Multi-Currency -- N N
Value Added Tax (VAT) -- N N
Whole System Quote (Basic) -- N N
- ---------------------------------------------------------------------------------- ------------
Total EMS Implementation (Days) 0-0
</TABLE>
<PAGE>
EXHIBIT B (continued)
To EMS Purchase Agreement
PROFESSIONAL SERVICES BUDGET ESTIMATES (continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Approved Non-EMS Software
- ------------------------------------------------- ---------- ---------- --------- -------------------------
Synery ICS Y N N
EIS (Forest & Trees) N N N
ODBC Y N N
Abra Human Resources N N N
with DC/ABRA HR Integration N N N
Abra Payroll N N N
with GL/Abra PR Integration N N N
- ------------------------------------------------- ---------- ---------- --------- -------------------------
Total Non-EMS Implementation (Days) 0.0
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Total EMS & Non-EMS (Days) 0.0
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Project Planning & Coordination
Project Planning & Coordination N 0.0
Senior Consulting Services
Senior Consulting N 0.0
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Standard
Implementation Services Budget 21-50 Users
Total Implementation Days 0.0
Hourly Rate and Estimated Budget $125 $0
Senior Application Consulting
Total Senior Consulting Days 0.0
Hourly Rate and Estimated Budget $155 $0
Total Implementation Estimated Budget $0
Total Implementation Estimated Days 0.0
</TABLE>
<PAGE>
EXHIBIT B (continued)
To EMS Purchase Agreement
INSTALLATION SERVICES BUDGET ESTIMATES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Installation Services Qty List Price Extended Price
- ------------------------------------------------------------------------------------------- --------- ----------- ---------------
Windows NT Server Operating System Installation 0 $750 $0
- - Install NT 4.0 Server from CD + Establish Admin and EMS passwords - Install
Service Pack 3 on NT Server
- - Configure RAID sets (up to 7 devices) - Configure 1 Network Card and TCP/IP
Address - Configure one modem using RAS on server
- - Install/Configure Remotely Possible for dial-in operation
- ------------------------------------------------------------------------------------------- --------- ----------- ---------------
Additional Recommended NT Server Application Installation 0 $750 $0
- - Install/Configure Seagate Backup Exec
- - Install/Configure APC Powerchute
- - Install/Configure MS Exchange with defaults and EMS & EMSMAIL
- ------------------------------------------------------------------------------------------- --------- ----------- ---------------
NT Server TCP/IP Network Software Installation 0 $500 $0
- - Install/Configure the MS Internet Information Server
- - Install/Configure DHCP Server on the NT Server
- - Install/Configure DNS Server on the NT Server
- - Install/Configure WINS Server on the NT Server
- ------------------------------------------------------------------------------------------- --------- ----------- ---------------
Standard TCM Software Installation (includes 1 client) 1 $2,100 $2,100
- - Install TCM from CD Distribution + Establish Standard Passwords
- - Install Dual ems root (V5.3/V6.0)
- - Configure 3 supported printers for TCM at time of initial installation
- - Load Test Company + Install TCM on one client to ensure operation
- ------------------------------------------------------------------------------------------- --------- ----------- ---------------
Additional TCM Client Installations 0 $140 $0
- - Install TCM Client on the PC already running Wwin95 or NT
- - Install MS Exchange on the PC already logged into the NT Domain
- - Install Remotely Possible on the PC
- ------------------------------------------------------------------------------------------- --------- ----------- ---------------
Document Library & Myriad Initial Installation (includes 1 client) 0 $420 $0
- - Configure Document Library in TCM
- - Install/Configure EMSIMAGE module on one client
- - Install/Configure Myriad on the server (if purchased)
- - Provide training on EMSIMAGE/Myriad installation
- ------------------------------------------------------------------------------------------- --------- ----------- ---------------
Additional Document Library/Myriad Client Installation 0 $100 $0
- - Install/Configure EMSIMAGE module + Myriad (if purchased)
- ------------------------------------------------------------------------------------------- --------- ----------- ---------------
Document Library Print/Merge Initial Setup 0 $420 $0
- ------------------------------------------------------------------------------------------- --------- ----------- ---------------
ODBC Database Access Setup 1 $420 $420
- - Install Synergy/DE SQL OpenNet on server
- - Configuration of ODBC Security
- - Installation of the Synergy xfODBC Client Driver on one client PC
- - Test ODBC access from the client to the server
- ------------------------------------------------------------------------------------------- --------- ----------- ---------------
Forest & Trees with EIS Template installation with one client 0 $280 $0
- ------------------------------------------------------------------------------------------- --------- ----------- ---------------
Additional Forest & Trees Client Installation 0 $100 $0
- ------------------------------------------------------------------------------------------- --------- ----------- ---------------
Factory Workstation Setup with one client 0 $200 $0
- ------------------------------------------------------------------------------------------- --------- ----------- ---------------
Total Installation Services $2,520
</TABLE>
<PAGE>
EXHIBIT B (continued)
To EMS Purchase Agreement
TRAINING BUDGET ESTIMATES
Training Services to be provided by George S. Olive & Company, Inc.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Classroom Onsite
Length Seminar Seminar
Scheduled Classroom Seminars Licensed Select Days Students Students Total Cost
- -------------------------------------------------- ------------- ---------- ----------- ---------------- ------------- ------------
Inventory Management Y N 2.0 1 0 $0
Bill of Material Y N 0.5 1 0 $0
Standard Routings Y N 1.0 1 0 $0
Job Costing Y N 1.5 1 0 $0
Shop Floor Control Y N 2.0 1 0 $0
Shop Floor Scheduling Y N 1.0 1 0 $0
Engineering Change Control -- N 0.5 0 0 $0
Outside Processing -- N 1.0 0 0 $0
Product Configurator N N 1.0 0 0 $0
Features & Options N N 1.0 0 0 $0
Rules Based Configurator N N 1.0 0 0 $0
Data Collection Labor & Matl Reporting Y N 1.5 1 0 $0
Plant & Equipment Maintenance Y N 0.5 1 0 $0
Standard Product Costing Y N 0.5 1 0 $0
Estimating Y N 1.5 1 0 $0
Customer Order Processing Y N 2.0 1 0 $0
Purchase Orders Y N 1.5 1 0 $0
Requisitions Y N 0.5 1 0 $0
Material Requirements Planning Y N 2.0 1 0 $0
Master Production Scheduling Y N 2.0 1 0 $0
Accounts Payable Y N 1.5 1 0 $0
Accounts Receivable Y N 1.0 1 0 $0
Payroll Y N 2.0 1 0 $0
General Ledger Planning Y N 1.0 0 0 $0
General Ledger Operations Y N 1.0 0 0 $0
Liability & Warranty Tracking N N 1.0 0 0 $0
Synergy Report Writer -- N 2.0 0 0 $0
Synergy Toolkit Programming -- N 4.0 0 0 $0
Introduction to EMS Programming -- N 2.0 0 0 $0
EMS Applications on Windows NT Y N 1.0 1 0 $0
ODBC Systems Administration Y N 1.0 1 0 $0
Electronic Data Interchange (EDI) N N Custom 0 0 $0
- -------------------------------------------------- ------------- ---------- ----------- ---------------- ------------- ------------
Total Classroom Seminar Budget $0
- -------------------------------------------------- ------------- ---------- ----------- ---------------- ------------- ------------
Daily Student Rate $325
Daily Onsite Seminar Rate, 1-9 Students $1,400
Daily Onsite Seminar Rate, 10-15 Students $2,000
Daily Onsite Seminar Rate, 16-20 Students $2,300
</TABLE>
<PAGE>
EXHIBIT B (continued)
To EMS Purchase Agreement
DATA CONVERSION BUDGET ESTIMATES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Estimated Estimated Fixed
Data File Conversions # of Days Price* Price
- --------------------- --------- --------- ------
Convert: IM, BM, SR, JC, PO, SF, DC, Tables (CM) $3,360
Recommended Data File Conversions Budget: $3,360
----- ------
<FN>
*These estimates are based on Buyer supplying to EMS files to be converted on a
suitable media with suitable "record layouts".
</FN>
</TABLE>
<PAGE>
EXHIBIT B (continued)
EMS Purchase Agreement
3. SOFTWARE CUSTOMIZATION
- --------------------------------------------------------------------------------
EMS provides Application Software Customization services using a formal design
and approval procedure to ensure each software Customization project will meet
Buyer's requirements. Programming is not started on a Customization project
until its specifications are mutually agreed upon and a written Project
Authorization with design requirements is approved by Buyer. Any subsequent
changes in specifications normally involve additional expense to Buyer.
Consulting, design discussions, programming, testing, and other activities
related to Customization projects performed by EMS are all billable to Buyer
based on the above Price List as revised from time to time. Additional projects
may be requested and approved by Buyer at any time using the Project
Authorization procedure. Overall expense for Customization varies considerably
depending on Buyer's willingness to adapt to standard software features.
The Customization projects below and their budgeted estimated costs are only
those identified as of the date of this Agreement and are based on information
EMS has received from Buyer. Each requires completion of a Project Authorization
under this Exhibit subsection 4 must be separately agreed upon.
<TABLE>
<CAPTION>
<S> <C>
Description Estimated Price
----------- ---------------
Retrofit current modifications from V5.3 to V6.0.3 $ 8,500
Less: Special Customer Discount -8,500
----------
Software Customization Subtotal $ 0
Estimated: Update modifications from V6.0.3 to V6.0.5
- This may vary based on the actual released content of V6.05 3,800
Install modifications (3.0 days) $ 3,000
----------
Totals Exhibit B-3: $ 6,800
----------
</TABLE>
- --------------------------------------------------------------------------------
4. SPECIAL SERVICES
- --------------------------------------------------------------------------------
Special Services are Professional Services which EMS may agree to provide on a
time and materials, project by project, basis in response to Buyer requests.
Special Services will be initiated by the Project Authorization procedure. All
requests to provide support, (other than standard software Support available
under Exhibit C) such as for all Customizations, certain Third Party Software,
and all Computer System Products, to the extent available through EMS, is
available only as Special Services under this provision.
The Special Services projects listed below and their Prices are only those
identified as of the date of this Agreement and, if estimated, are based on
information EMS has received from Buyer and require completion of individual
Project Authorizations before work will begin. Those listed as Fixed are
considered approved.
<TABLE>
<CAPTION>
<S> <C> <C>
Estimated Fixed
Special Services Price Price
- ---------------- --------- -----
Not applicable
Totals Exhibit B-4: N/A
-----------------------
</TABLE>
<PAGE>
EXHIBIT C
to
EMS Purchase Agreement
(Software Support Services Purchases)
between EMS and KELLER MANUFACTURING COMPANY as Buyer
- --------------------------------------------------------------------------------
The following are the software Support services Projects to be purchased under
this Agreement with their Price for use only on the Computer System and at the
User level and Location also set forth. EMS reserves the right to revise the
terms of these Plans (other than price, which may not be revised during a Term)
at anytime upon 30 days notice. Each `period' referenced is a Term. The initial
Term commences upon delivery of the Application Software and/or Third Party
Software. Non-standard software support (for all Customizations of the
Application Software and for TPS not listed below) is only available from EMS on
a time and materials, product by product, basis under a separate Exhibit B-4
Project Authorization.
Computer System:
Hardware: DEC Prioris XL
Operating System: Windows NT
Location: 701 North Water Street, Corydon, IN 47112-0008
Number of Application Software Users on the Computer System: 50
Version: 6.0
1. SOFTWARE UPGRADE AND TELEPHONE SUPPORT PLAN PERTAINING TO THE FOLLOWING
EMS APPLICATION SOFTWARE PRODUCTS PURCHASED FROM EMS PURSUANT TO EXHIBIT
A-1:
At the annual price set forth below EMS agrees to make available to Buyer the
latest versions of all previously licensed Application Software packages listed
below for the Computer System shown above, and EMS also agrees to provide to
Buyer toll-free telephone support weekdays except holidays between 7:00 AM and
6:00 PM Central Time for the Application Software packages listed below.
Customer is responsible for actual installation of the upgrade versions, or may
choose to contract with EMS to provide installation services of such upgrades
under a separate Professional Services Purchase Agreement. The annual price will
remain in effect for two years. The Plan price will be adjusted during the year
as additional Application Software or users are purchased. Buyer agrees to
remain on the Plan for a minimum of two years from the date of commencement of
the Plan. After the initial two year period, the Plan automatically renews for
annual periods thereafter except if canceled in writing by either EMS or Buyer
at least 30 days prior to the end of a Term. This plan does not include any
Professional Services, seminars, additional manuals, software preparation,
Operating System Licenses, reapplying customizations, or other expenses
associated with the delivery or conversion to the new version of the Application
Software. This plan does not include the long distance telephone charges for
warranty work performed at EMS on Buyer's Computer System
<PAGE>
EXHIBIT C (continued)
To EMS Purchase Agreement
(Software Support Services Purchases Continued)
Current Plan Remains Intact - 100 EMS Users billed to Corydon, Indiana, location
include 25 EMS Users each at Culpeper and New Salisbury locations.
<TABLE>
<CAPTION>
Number of V6.0 TCM Users 100
<S> <C> <C>
Application Software Module Covered Licensed License Price
- --------------------------------------------------------------------------------------------------------------------------
TCM Base Function/Foundation Routines includes Document Library (Mandatory) Y $20,300
Inventory Management with Material History and Bin/Lot Tracking Y $20,700
Bills of Material Y $12,000
Standard Product Routings Y $7,300
Standard Product Costing Y $7,300
Job Costing Y $12,000
Estimating Y $20,700
Customer Order Processing with Sales History Y $20,700
Bookings History Y $7,300
Features & Options N $0
Product Configurator N $0
Rules Based Calculator N $0
Purchase Order with Purchasing History Y $20,700
Requisitions Y $7,300
Shop Floor Control with Manufacturing History Y $20,700
"As Built" Configuration History N $0
Material Requirements Planning Y $20,700
Master Production Scheduling Y $20,700
Plant and Equipment Maintenance Y $12,000
Accounts Payable Y $12,000
Accounts Receivable Y $12,000
Payroll (This module is in maintenance mode) Y $12,000
General Ledger Y $12,000
Factory Data Collection Y $20,700
Liability & Warranty Tracking N $0
Mailing Systems N $0
Electronic Data Interchange (EDI) N $0
Abra Interface (Licensed by number of employees) N $0
- ------------------------------------------------------------------------------------------------------------------------------------
Total EMS Software Investment $299,100
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Check
Appropriate
Payment Pre-Paid Annual EMS Software Maintenance Prepay Annual
Option* Plan Term Discount Amount Total Savings
--------------------------------------------------------------------------------------------------
One (1) Year 0% $50,847 $0
Two (2) Years 9% $46,271 $4,576
Three (3) Years 14% $43,728 $7,119
Four (4) Years 19% $41,186 $9,661
Five (5) Years 24% $38,644 $12,203
<FN>
*The default payment option is for a one year period
</FN>
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT C
to
EMS Purchase Agreement
(Software Support Services Purchases)
(cont'd)
- --------------------------------------------------------------------------------
2. SOFTWARE UPGRADE AND TELEPHONE SUPPORT PLAN PERTAINING TO THE FOLLOWING
TPS PRODUCTS PURCHASED FROM EMS PURSUANT TO EXHIBIT A-2:
TPS Upgrade and Telephone Support Plan terms and conditions are the same as
above for the EMS Application Software unless otherwise set forth, except that
for the Annual Upgrade and Telephone Support Plan Price indicated, the services
provided for any particular TPS will only include those indicated by the code as
shown in the "Services Provided" column. The codes are "A": includes EMS
software Upgrades and Telephone Support, "B": includes only EMS Telephone
Support, or "C": includes only software Upgrades. EMS represents that the TPS
supported under codes A and B will work in concert with Application Software.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Product Name Each Qty Extended
New Synergy SE Licenses $260 50 $13,000
Total Synergy SE Software $13,000
<FN>
Annual Synergy Support and Right-to-Updates (15%) - Current Plan Remains Intact. N/A
</FN>
</TABLE>
ABRA Number of Networked PC Seats Required 0
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Product Name Each Qty Extended
- ------------------------------------------------------------------------------------------------
ABRA Human Resources $0
ABRA Payroll $0
ABRA Networked Seats (1 included) $0
ABRA Link and Toolkit Required for Data Collection Integration $1,890 0 $0
- ------------------------------------------------------------------------------------------------
Total ABRA Software $0
- ------------------------------------------------------------------------------------------------
ABRA Human Resources Support and Right-to-Updates $0
ABRA Payroll Support and Right-to-Updates $0
ABRA Toolkit and Link Support and Right-to-Updates $0
- ------------------------------------------------------------------------------------------------
Total ABRA Support and Right-to-Updates $0
Current Plan Remains Intact
</TABLE>
<PAGE>
ADDENDUM TO EXHIBIT A
to
EMS Purchase Agreement
dated July 6, 1998 between EMS and KELLER MANUFACTURING COMPANY as Buyer
- --------------------------------------------------------------------------------
The following are the additional software Products to be licensed or purchased
under the above Agreement with their Price for use only on the Computer System
and at the User level and Location also set forth. This Addendum is effective as
of November 10, 1998.
Computer System:
Hardware: DEC Prioris XL
Operating System: Windows NT
Location: 701 North Water Street, Corydon, IN 47112
Number of Application Software Users on the Computer System: 50
Version: 6.0
Please Reference Keller Manufacturing Company's Purchase Order #37279.
1. Application Software Products for which standard Support is available for
purchase:
<TABLE>
<CAPTION>
<S> <C> <C>
Product Code Description License Price
- ------------ ----------- -------------
Five (5) Additional EMS User Licenses @ $1,755 ea. $8,775
------
Total Concurrent EMS Users = 55
Application Software sub-total: $8,775
------
</TABLE>
2. Third Party Software Products for which standard Support is available for
purchase:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Product Code Description Number of Users License Price
- ------------ ----------- --------------- -------------
Five (5) Additional Synergy SE User Licenses @ $260 ea. 5 $1,300
------
Total Concurrent Synergy Users = 55
TPS standard Supportable sub-total: $1,300
------
</TABLE>
3. Third Party Software Products for which standard Support is not available:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Product Code Description Number of Users License Price
- ------------ ----------- --------------- -------------
Not Applicable
TPS non-standards Supportable sub-total: N/A
Totals Addendum to Exhibit A: $10,075
</TABLE>
<PAGE>
ADDENDUM TO EXHIBIT C
to
EMS Purchase Agreement
(Standard Software Support Services Purchases)
dated July 6, 1998 between EMS and KELLER MANUFACTURING COMPANY as Buyer
- --------------------------------------------------------------------------------
The following are the additional software Support services Products to be
purchased under the above Agreement with their Price for use only on the
Computer System and at the User level also set forth (see Exhibit). This
Addendum is effective as of November 10, 1998.
Computer System:
Hardware: DEC Prioris XL
Operating System: Windows NT
Location: 701 North Water Street, Corydon, IN 47112
Number of Application Software Users on the Computer System: 50
Version: 6.0
1. SOFTWARE UPGRADE AND TELEPHONE SUPPORT PLAN PERTAINING TO THE FOLLOWING
EMS APPLICATION SOFTWARE PRODUCTS PURCHASED FROM EMS PURSUANT TO
EXHIBIT A-1.
<TABLE>
<CAPTION>
<S> <C>
Current
Additional EMS application Software Modules Covered License Price
- --------------------------------------------------- -------------
Five (5) Additional EMS User Licenses $8,775
Additional sub-total $1,243
NOTE: Effective dates are December 1, 1998 through September 30, 1999.
Price has been adjusted to coincide with existing plan.
Current
EMS Application Software Modules Already Covered License Price
- ------------------------------------------------ -------------
Current Plan Remaining Intact
Prior sub-total N/A
-------------
Received Annual Exhibit C-1 EMS Application Software Combined Plan Price $1,243
-------------
</TABLE>
<PAGE>
ADDENDUM TO EXHIBIT C
to
EMS Purchase Agreement
(Standard Software Support Services Purchases)
(Cont'd)
- --------------------------------------------------------------------------------
2. SOFTWARE UPGRADE AND TELEPHONE SUPPORT PLAN PERTAINING TO THE FOLLOWING
PRODUCTS PURCHASED FROM EMS PURSUANT TO EXHIBIT A-2:
TPS Upgrade and Telephone Support Plan terms and conditions are the
same as above for the EMS Application Software unless otherwise set
forth, except that for the Annual Upgrade and Telephone Support Plan
Price indicated, the services provided for any particular TPS will only
include those indicated by the code as shown in the "Services Provided"
column. The codes are "A": includes EMS software Upgrades and Telephone
Support; "B": includes only EMS Telephone Support, or "C": includes
only software Upgrades. EMS represents that the TPS supported under
codes A and B will work in concert with Application Software.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Current Annual
Additional TPS Covered License Price Services Provided Plan Price
- ---------------------- ------------- ----------------- ----------
Five (5) Additional Synergy SE User Licenses $1,300 A $163
----
Additional sub-total $163
----
NOTE: Effective dates are December 1, 1998 through September 30, 1999.
Price has been adjusted to coincide with existing plan.
TPS Already Covered
- -------------------
Current Plan Remaining Intact
Prior sub-total N/A
----
Revised Annual Exhibit C-2 TPS Combined Plan Price: $163
----
</TABLE>
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ACCEPTED at Milwaukee, Wisconsin
BUYER: KELLER MANUFACTURING COMPANY By: EFFECTIVE MANAGEMENT SYSTEMS, INC.
By: /s/ Marvin C. Miller By: ___________________________________________
Name: Marvin C. Miller Name: Anthony J. Kalupa
Title: VP/S Title: President - Central Region
</TABLE>
<PAGE>
ADDENDUM TO EXHIBIT A
to
EMS Purchase Agreement
dated July 6, 1998 between EMS and KELLER MANUFACTURING COMPANY as Buyer
- --------------------------------------------------------------------------------
The following are the additional software Products to be licensed or purchased
under the above Agreement with their Price for use only on the Computer System
and at the User level and Location also set forth. This Addendum is effective as
of November 10, 1998.
Computer System:
Hardware: DEC Prioris HX 6200 Pentium Process
Operating System: Windows NT
Location: Route 3 East, Culpupper, VA 22701
Number of Application Software Users on the Computer System: 25
Version: 6.0
Please Reference Keller Manufacturing Company's Purchase Order #37279.
1. Application Software Products for which standard Support is available for
purchase:
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Product Code Description License Price
- ------------ ----------- -------------
Five (5) Additional EMS User Licenses @ $1,755 ea. $8,775
------
Total Concurrent EMS Users = 30
Application Software sub-total: $8,775
------
</TABLE>
2. Third Party Software Products for which standard Support is available for
purchase:
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Product Code Description Number of Users License Price
- ------------ ----------- --------------- -------------
Five (5) Additional Synergy SE User Licenses @ $260 ea. 5 $1,300
------
Total Concurrent Synergy Users = 30
TPS standard Supportable sub-total: $1,300
</TABLE>
3. Third Party Software Products for which standard Support is not available:
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Product Code Description Number of Users License Price
- ------------ ----------- --------------- -------------
Not Applicable
TPS non-standards Supportable sub-total: N/A
-------
Totals Addendum to Exhibit A: $10,075
-------
</TABLE>
<PAGE>
ADDENDUM TO EXHIBIT C
to
EMS Purchase Agreement
(Standard Software Support Services Purchases)
dated July 6, 1998 between EMS and KELLER MANUFACTURING COMPANY as Buyer
- --------------------------------------------------------------------------------
The following are the additional software Support services Products to be
purchased under the above Agreement with their Price for use only on the
Computer System and at the User level also set forth (see Exhibit). This
Addendum is effective as of November 10, 1998.
Computer System:
Hardware: DEC Prioris HX 6200 Pentium Process
Operating System: Windows NT
Location: Route 3 East, Culpupper, VA 22701
Number of Application Software Users on the Computer System: 25
Version: 6.0
1. SOFTWARE UPGRADE AND TELEPHONE SUPPORT PLAN PERTAINING TO THE FOLLOWING
EMS APPLICATION SOFTWARE PRODUCTS PURCHASED FROM EMS PURSUANT TO
EXHIBIT A-1.
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Current
Additional EMS application Software Modules Covered License Price
- --------------------------------------------------- -------------
Five (5) Additional EMS User Licenses $8,775
------
Additional sub-total $1,243
------
NOTE: Effective dates are December 1, 1998 through September 30, 1999.
Price has been adjusted to coincide with existing plan.
Current
EMS Application Software Modules Already Covered License Price
- --------------------------------------------------- -------------
Current Plan Remaining Intact
Prior sub-total N/A
------------
Received Annual Exhibit C-1 EMS Application Software Combined Plan Price $1,243
------------
</TABLE>
<PAGE>
ADDENDUM TO EXHIBIT C
to
EMS Purchase Agreement
(Standard Software Support Services Purchases)
(Cont'd)
- --------------------------------------------------------------------------------
2. SOFTWARE UPGRADE AND TELEPHONE SUPPORT PLAN PERTAINING TO THE FOLLOWING
PRODUCTS PURCHASED FROM EMS PURSUANT TO EXHIBIT A-2:
TPS Upgrade and Telephone Support Plan terms and conditions are the
same as above for the EMS Application Software unless otherwise set
forth, except that for the Annual Upgrade and Telephone Support Plan
Price indicated, the services provided for any particular TPS will only
include those indicated by the code as shown in the "Services Provided"
column. The codes are "A": includes EMS software Upgrades and Telephone
Support; "B": includes only EMS Telephone Support, or "C": includes
only software Upgrades. EMS represents that the TPS supported under
codes A and B will work in concert with Application Software.
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Current Annual
Additional TPS Covered License Price Services Provided Plan Price
- ---------------------- ------------- ----------------- ----------
Five (5) Additional Synergy SE User Licenses $1,300 A $163
----
Additional sub-total $163
----
NOTE: Effective dates are December 1, 1998 through September 30, 1999.
Price has been adjusted to coincide with existing plan.
TPS Already Covered
Current Plan Remaining Intact
Prior sub-total N/A
----
Revised Annual Exhibit C-2 TPS Combined Plan Price: $163
----
</TABLE>
<TABLE>
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ACCEPTED at Milwaukee, Wisconsin
BUYER: KELLER MANUFACTURING COMPANY By: EFFECTIVE MANAGEMENT SYSTEMS, INC.
By: /s/ Marvin C. Miller By: ___________________________________
Name: Marvin C. Miller Name: Anthony J. Kalupa
Title: VP/S Title: President - Central Region
</TABLE>
EMS CUSTOMER SUPPORT
12000 West Park Place
Milwaukee, WI 53224-53026
EXTENDED HOUR SUPPORT AGREEMENT
Att: Marvin Miller
Keller Manufacturing
701 North Water Street
Corydon, IN 47112
Fax (812) 738-7382
Extended Hour Support Plan
Plan coverage is from 5:00 am to 7:00 am CST Monday - Friday. This excludes EMS
Holidays. This agreement is for Support services outside of the Standard
Customer Telephone Support Plan hours of business (7 AM to 6 PM Central Standard
Time Monday through Friday).
Coverage is limited to issues normally covered under the Standard Customer
Support Plan.
Annual fee of $1500.00 plus each call will be billed at a time and a half,
Support rate of $225.00. There is 1 hour minimum charge per call, per issue,
with additional time being charged on the quarter hour.
Please sign below to approve Extended Hour Support Agreement.
X___________________________________ Customer PO# __________________
After receipt of signed authorization you will receive a call from EMS Customer
Support to confirm after hour support and the pager phone number enabling you to
reach a Support Analyst to handle your extended hour requests.
LEASE AGREEMENT
THIS LEASE AGREEMENT entered into this 2nd day of November, 1995, by
and between TRAILER LEASING COMPANY, DIVISION OF KELLERS SYSTEMS, INC.,
(hereinafter called "Lessor,") with its principal office at 3115 North Wilke
Road, Arlington Heights, Illinois 60004, and KELLER MANUFACTURING COMPANY
(hereinafter called "Lessee"), at P.O. Box 8, Corydon, Indiana 47112.
IN CONSIDERATION of the mutual promise and undertakings as hereinafter
contained,
THE PARTIES AGREE AS FOLLOWS:
1. Lease of Equipment: Lessee does hereby lease the trailers and
equipment as set out on the Schedule attached hereto and marked Exhibit "A" (the
"Equipment") from Lessor for an initial term of ______ months commencing on the
delivery date as set forth on Exhibit "A". Lessee agrees to pay Lessor for the
lease of the Equipment, rentals at the rate of ______________ Dollars per month
per trailer unit.
2. Rental Payments: Rentals shall be paid by Lessee to Lessor on the
recurring billing date of each month during the term hereof, payable one (1)
month in advance. Rentals shall be paid to the Lessor at 3115 North Wilke Road,
Arlington Heights, Illinois 60004, unless otherwise directed in writing by the
Lessor.
3. Return of Trailers: At the termination of this Lease for any reason,
or upon demand from Lessor if Lessee is in default, or at any time Lessee
returns one or more trailers to Lessor, the trailer(s) must be returned to the
following location: 3433 South 7th Street Road, Louisville, Kentucky 40216.
Return locations may be changed by notice from Lessor.
4. Receipt in Good Condition: Lessee acknowledges that he has inspected
each unit of Equipment at the Lease commencement and has received it in good
condition and free from defects.
5. Rights in the Equipment: Lessor shall at all times have the primary
right, title, and interest in or to the Equipment, and except as contained
herein, acquires only the right to possess and use said Equipment in accordance
with the terms hereof and provided Lessee shall not be in default hereunder. If
Lessee defaults in any of the terms or conditions of this Lease, Lessee's right
to possess and use said Equipment shall cease and Lessee shall be required to
return all of the Equipment to Lessor immediately. Lessee shall in no event be
deemed an agent of Lessor if the registered owner of the Equipment as indicated
by the Equipment registration card is other than the Lessor, then the Lessee
under this agreement shall become sub-lessee of Lessor and be subject and
subordinate to the provisions of any written agreement covering this Equipment
between owner and Lessor, including the owner's rights of repossession. If
applicable, the Lessee has been advised of the existence of such a written
agreement, and such agreement has been made available and is available to the
Lessee as sub-lessee upon request. Lessor reserves to itself, the right to place
upon each unit of Equipment leased hereunder, the name of the Lessor and
registered owner, and Lessee agrees not to remove said words or permit or suffer
any other person to do so.
6. Licenses and Certificates: Each trailer leased hereunder carries a
license for either the State of Maine or the State of Michigan. Lessee assumes
all responsibility to obtain and pay for any and all other licenses, titles,
permits and other certificates as may be required by law or otherwise for
Lessee's lawful operation of said Equipment, Lessee agrees that all certificates
of title or registration applicable to the Equipment leased hereunder shall
reflect Lessor's ownership.
7. Prohibited Uses: The Lessee agrees not to transport any persons in
or on any leased trailer, agrees not to propel or tow any other vehicle with or
through the agency of any trailer, and agrees not to knowingly use any trailer
for any immoral, illegal or prohibited purpose. Lessee agrees not to store or
transport any toxic substance in any leased trailer.
8. Taxes: Lessee shall promptly pay all taxes, assessments and other
governmental charges, including but not limited to sales, use or ad valorem
taxes in any state levied or assessed during the term of this lease upon the
Equipment or the interest of the Lessee in the Equipment or upon the use or
operation of the Equipment or the earnings of Lessee arising out of his lease or
use of the Equipment. If any levy or assessment is made against Lessor on
account of any of the foregoing matters or on account of its ownership of the
Equipment, exclusive, however, of any taxes on income of Lessor from this lease
of the Equipment, Lessee will promptly pay or reimburse Lessor for same. Lessee
shall indicate Lessor's ownership of the Equipment on any personal property tax
reports which Lessor is required to file. Lessee shall be responsible for the
payment of any personal property taxes.
9. Compliance with Laws and Regulations: Lessee agrees to comply with
all laws, ordinances, and regulations of all state, federal or local governments
or agencies which affect the use, operation or maintenance of the Equipment, and
to indemnify and hold harmless Lessor, its officers, directors, employees,
agents, successors and assigns from any and all fines, forfeitures, seizures,
penalties and liabilities including the cost of compliance that may result from
the use, possession, operation, or condition of any of the Equipment.
10. Indemnification:
A. Lessee agrees to indemnify and hold harmless Lessor, its
officers, employees, agents, successors and assigns from any and all
claims, lawsuits, demands, liens or any liability whatsoever arising
out of the use, possession, or lease of the Equipment or from work
performed or materials supplied in connection with the use, operation
or maintenance of any of the Equipment and from loss or damage thereto
and from and against all loss, penalties and expenses, including
attorney's fees, howsoever arising because of, but not limited to, the
storage, maintenance, use, repair, loading, unloading or operation or
alleged use or operation, of any of the Equipment therein or thereon.
B. Lessee hereby indemnifies Lessor, its officers, directors,
employees, agents, successors and assigns and agrees to hold them
harmless from and against any and all loss, expenses, and damages any
of them may sustain or suffer because of:
i. The loss of or damage to said Equipment for any
reason; or
ii. Injury to any person, or damage to the property
of any person as a result of, in whole or in part, the use or
operation of said Equipment while in the custody, possession,
or control of the Lessee, its employees, agents, and
personnel, or at any time during the term of this lease; or
iii. Loss, injury or damage sustained because of the
failure of Lessee to maintain said Equipment as agreed and
provided herein; or
iv. Lessor's being a party to this agreement.
11. Assignment: Lessee shall not have the right to assign this Lease or
to sublet, rent, or otherwise hire out or part with possession of any of said
Equipment to any person, firm, partnership, association or corporation other
than Lessee, without the prior written consent of Lessor which shall not be
unreasonably withheld. Lessor shall have the right to assign this Lease and/or
the rentals or other sums to be received. In the event of an assignment of this
Lease by Lessor, the assignee shall acquire thereby whatever rights and/or
remedies are assigned and the Lessee shall agree to render its performance to
the assignee.
12. Operation: Lessee agrees that the Equipment leased hereunder will
not be operated by any person other than Lessee or agents or employees of
Lessee, each of whom Lessee warrants to be a careful, dependable operator having
a currently valid license to operate said Equipment and the power equipment used
therewith as required by law.
13. Additional Rent: Lessee agrees to pay to Lessor with ten (10) days
of invoicing as additional rent, the following amounts:
A. The amount to repair or replace a trailer, or any part
thereof, (without allowance for depreciation) including tires, (except
as provided hereafter for tire wear), tools and accessories, which has
become damaged, lost or stolen while this lease is in effect. If any
such loss or damage is covered by insurance, Lessor agrees upon receipt
of the proceeds of said insurance, to rebate so much of Lessee's
payment as was covered by the insurance proceeds.
B. Any other charges which may become due hereunder.
14. No Proration: There shall be no proration of charges for partial
terms. Invoices not paid within thirty (30) days from the invoice date shall
carry interest at the rate of 1 1/2% per month from the date due until paid.
15. Insurance: Lessee at Lessee's cost and expense shall procure and
deliver to Lessor, simultaneously with or prior to delivery to Lessee of the
Equipment to be leased hereunder, a policy or policies of insurance with terms,
amounts and insurance companies satisfactory to Lessor, in Lessor's sole
discretion with premiums prepaid thereon for the current policy period, insuring
and protecting Lessor in Lessor's name as an insured party and loss payee,
against any and all loss and damages it may sustain or suffer resulting from the
use, operation and possession of each unit of Equipment by Lessee, or otherwise,
with limits of not less than One Million Dollars ($1,000,000) per occurrence for
damages arising out of bodily injury and property damage liability, or where
permitted, minimum ICC limits of Seven Hundred Fifty Thousand Dollars ($750,000)
combined single limit bodily injury and/or property damage. Lessee also agrees
to provide physical damage coverage, i.e. collision and comprehensive coverage
to the amount of the fair market value of the leased Equipment. Said insurance
shall be kept in force and effect during the entire lease term hereof and shall
contain a provision that the policy may not be cancelled without prior
notification to Lessor. Lessee shall also provide comprehensive general
liability coverage and contractual coverage for all hold harmless agreements
contained herein in amounts satisfactory to Lessor, and certificates of
insurance required to be furnished hereunder should so state.
<PAGE>
16. Lease Term: The lease period shall commence on the date provided in
Exhibit "A", which in any event shall be no later than the date Lessee takes
possession (or if any trailer is delivered to the Lessee, on the date it is
moved from its previous location). Lessee's lease obligations shall not
terminate prior to the date of return, as specified in Exhibit "A", plus the
period of repair after return. Lessee agrees that upon request of Lessor at any
time it will provide the physical location of each trailer unit hereunder.
17. No Warranties: It is understood between the parties that Lessor
extends no warranties and expressly disclaims all express warranties and claims
of merchantability and fitness for a particular purpose or condition and of
patent and/or latent defects in material, workmanship, or capacity or that any
trailer will meet the requirements of any laws, rules, specifications or
contracts which provide for specific apparatus or special equipment. Lessee has
examined the trailers thoroughly and is satisfied with the condition.
18. Maintenance: Lessee shall maintain each trailer in good condition
and in no less than the same condition as when received, and shall pay for all
damages to each trailer, and all costs necessary to repair, reidentify, or
restore the appearance of each trailer. Tires shall be returned to Lessor in the
same condition as at the commencement (per outgoing inspection delivery report).
If brakes are not returned in same condition, Lessee will pay all costs to
repair or replace. If tires are not returned in the same condition, Lessee
agrees to pay to Lessor ____________ Dollars per 32nd of tread wear on each ply
bias tire and _______________ Dollars per 32nd of tread wear on each radial
tire.
19. Acceptance of Condition: The receipt and acceptance by the Lessee
of a trailer shall constitute conclusive acknowledgment by Lessee that the
trailer has been accepted and found by Lessee to be in good, safe and
serviceable condition, and fit for use. Unless the Lessee makes a claim to the
contrary to Lessor by registered mail, return receipt requested, within three
(3) days after receipt of said trailer, Lessee shall be forever barred from
asserting a claim regarding the condition of a trailer. Such registered letter
shall set forth in detail the complete nature and condition of the trailer
received.
In the event of notice to Lessor by the Lessee that a trailer is not in
good condition and fit for use at the commencement of the term, Lessor shall
have the right but not the obligation to put said trailer in a good, safe and
serviceable condition, and fit for use within a reasonable time and if Lessor
elects not to do so, the sole right and remedy of the Lessee shall be to return
the trailer immediately to Lessor and terminate the lease with regard to that
trailer only, or to waive any such right to return and continue leasing the
Equipment as it is without any rental abatement.
20. Repairs:
A. In the event of repairable damage to any trailer, Lessee
shall remain liable for all trailer rental charges even though the
trailer is unusable. Lessee may have the same repaired by any competent
person, firm or corporation at its own expense, or, upon notice and
redeliver to Lessor, Lessor may repair said trailer for Lessee, using
reasonable diligence to make said repairs or replacement in the
shortest possible time. Lessee agrees to pay the amount charged by
Lessor (which may include administrative overhead) for any material or
labor to make said repairs.
B. Lessee agrees to promptly and timely pay any and all
charges for repairs or maintenance to the leased Equipment and to
suffer no lien for labor, materials, or storage to be filed or attached
to said Equipment. Lessor may, at its option, refuse to do any repair
work on any trailer in time of strike, or if in the opinion of Lessor
such repairs are not advisable.
C. Lessee shall not make, suffer or permit any unlawful use or
handling of said leased Equipment. Lessee shall not, without Lessor's
prior written consent thereto, make or suffer any changes, alterations
or improvements in or to said leased Equipment or remove therefrom any
parts, accessories, attachments or other equipment.
21. Removal of Equipment: Lessor reserves the right without notice to
enter upon Lessee's premises or elsewhere and repossess or remove a trailer from
the Lessee at any time when Lessee is in default, or has become insolvent, filed
bankruptcy, or when in Lessor's opinion the trailer(s) is in danger because of
strike or any other reason. Lessee agrees to pay all costs and expenses incurred
in the repossession of any trailer(s).
<PAGE>
22. Default: If Lessee shall fail to promptly pay any rental or other
sum due hereunder or fail to timely perform any performance required hereunder,
Lessee shall be in default. Lessor may, at Lessor's option, terminate Lessee's
right to use and possess the Equipment. Failure to terminate shall not be deemed
a waiver. In the event Lessor elects to terminate, all of the Equipment shall be
immediately returned to Lessor upon demand therefor, but Lessee shall not be
relieved of its obligation to pay rent. Lessor or its agents may, without
notice, enter the premises occupied by Lessee or any other premises where the
Equipment may be located without being a trespasser thereon and take possession
of and remove any one or more of its trailers with or without process of law. In
the event any action as hereinbefore set forth becomes necessary, the Lessee
agrees to pay in addition to other charges herein specified, all costs of
removal or return of a trailer and all other charges (including attorney's fees
and court costs) incurred by such default. In the event that Lessor takes
possession of a trailer following a default, Lessee shall not be relieved of its
obligation to pay the rental or any other charges due hereunder, including
repairs. Lessor shall be under no obligation to relet the trailer.
23. Miscellaneous:
A. No amendment or modification of this lease shall be
effective unless it shall be in writing and duly signed by both
parties.
B. Lessee shall pay and discharge or promptly reimburse Lessor
for all costs, expenses and attorney's fees, which shall be incurred
and expended by Lessor in enforcing the covenants and agreements of
this Lease Agreement whether by the institution of litigation or by the
taking of advice of counsel or otherwise.
C. This shall inure to the benefit of Lessor, its successors
and assigns. This lease shall be binding upon Lessee, its heirs,
representatives, successors and permitted assigns. Any notice given
hereunder shall be sent by delivery or certified mail, postage prepaid,
return receipt requested, and addressed to the party at the address
listed above.
D. This lease shall not be effective until approved and
accepted by an authorized officer of TRAILER LEASING COMPANY, DIVISION
OF KELLERS SYSTEMS, INC. at its corporate offices at 3115 North Wilke
Road, Arlington Heights, Illinois 60004.
E. This lease agreement is made in the Village of Arlington
Heights, County of Cook, State of Illinois. The parties consent to
jurisdiction in the Circuit Court of Cook County, Illinois. Any legal
action brought or instituted concerning this lease shall be brought in
the Circuit Court of Cook County, Illinois, or the United States
District Court for the Northern District of Illinois, Eastern Division.
All terms, provisions, and performances contemplated by this Lease
shall be governed by the internal laws of the State of Illinois.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
as of the day and date first written above.
<TABLE>
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LESSOR: LESSEE:
TRAILER LEASING COMPANY, KELLER MANUFACTURING COMPANY, INC.
DIVISION OF KELLERS SYSTEMS, INC.
By: _________________________________ By: _____________________________________
Title: Larry D. Bailes, Branch Manager Title: Walter West, Traffic Manager
</TABLE>
RYDER TRUCK RENTAL, INC.
TRUCK LEASE AND SERVICE AGREEMENT
THIS AGREEMENT is made as of the ____ day of ____________, 19___, between
RYDER TRUCK RENTAL, INC. 530 South 13th Street, Louisville, KY 40203 (hereafter
Ryder) and KELLER MANUFACTURING COMPANY, INC., whose address is P.O. Box 8,
Water & Cedar Streets, Corydon, IN 47112 (hereafter Customer).
1. EQUIPMENT COVERED AND TERM:
A. Ryder agrees to lease to Customer and Customer agrees to lease from
Ryder the Vehicles on Schedules A hereafter made a part of this Agreement
(hereafter Vehicle(s)). Execution of a Schedule A constitutes Customer's
authorization to Ryder to acquire the Vehicles selected by Customer. The
Agreement will become effective with respect to each Vehicle on the date the
Vehicle is tendered by Ryder and continue form the term specified on Schedule A
unless terminated earlier as provided in this Agreement.
B. Acceptance of Vehicles in service constitutes Customer's acknowledgment
of compliance with Customer's specifications. Customer agrees to pay for any
structural alterations (not to be made without Ryder's prior written consent),
special equipment, or material alteration in painting, lettering or art work
thereafter required by Customer. In the event that, subsequent to the date of
execution of this Agreement by Ryder, any federal, state or local law,
ordinance, or regulation requires the installation of any additional equipment.
Customer will be responsible for all costs including installation expenses.
Ryder agrees to either install or arrange for such installation and Customer
agrees to pay Ryder the full cost.
C. Where a Vehicle is operated by Customer with a trailer or other
equipment not included on a Schedule A, or not maintained by Ryder under a
separate agreement, Customer agrees that such trailer and/or equipment will be
in good operating condition. Notwithstanding any other provision of this
Agreement, Customer will indemnify and hold Ryder harmless from any claim or
loss or damage caused by such trailer and/or equipment.
2. OPERATION OF VEHICLES:
A. The Vehicles will be used and operated by Customer only in the normal
and ordinary course of Customer's business, not in violation of any laws or
regulations (including legal weight and size limits) and Customer will indemnify
and hold Ryder harmless from any claim or loss or damage arising out of any such
violation.
B. Each Vehicle will be promptly returned by Customer to Ryder's facility
specified on Schedule A at the end of its lease term unless Customer purchases
the Vehicle as provided for hereinafter.
<PAGE>
3. MAINTENANCE AND REPAIRS TO VEHICLES:
A. Ryder agrees to provide at its sole cost: (1) Lubricants, tires, tubes
and all other operating supplies necessary for the Vehicles; (2) Maintenance and
repairs including all labor and parts required to keep the Vehicles in good
operating condition; (3) Painting and lettering at the time the Vehicles are
placed into service; (4) Exterior washings; and (5) Road service for mechanical
or tire failure.
B. Customer agrees that only Ryder or parties authorized by Ryder will make
any repairs or adjustments to Vehicles. When repairs are necessary, Customer
will notify Ryder immediately. Ryder will not be responsible for the cost of
repairs or services not expressly authorized by Ryder. Customer must submit
acceptable vouchers for such repairs or services.
C. Customer agrees to return each Vehicle to Ryder for service and
maintenance at the facility stated on Schedule A for a minimum of 8 hours each
week at such scheduled times as agreed to by the parties.
4. FUEL:
The party designated on Schedules A agrees to provide fuel for the
Vehicles.
A. When Ryder is designated:
(1) Fuel will be provided from Ryder's facilities or facilities
designated by Ryder. Charges for fuel will be based on the Rated Fuel Cost
including all fuel taxes and will be adjusted as provided on the applicable
Schedule A.
(2) If Customer purchases fuel from sources other than Ryder's
facilities or other designated facilities, Ryder will reimburse Customer
for such fuel cost upon receipt of an itemized paid invoice. Such
reimbursement will not exceed the Rated Fuel Cost.
(3) Ryder will, where permitted by law, apply for fuel tax permits,
prepare and file fuel tax returns, and pay the taxes imposed upon the
purchase and consumption of fuel by Customer provided: (a) Customer
provides Ryder weekly with all documentation necessary to prepare the fuel
tax returns and will reimburse Ryder for all charges incurred or credits
disallowed as a result of untimely or improper furnishing of such
documents, and (b) Customer will reimburse Ryder all such fuel taxes paid
on Customer's behalf in excess of those which would have been payable had
the fuel consumed been purchased in the state of consumption.
B. When Customer is designated:
Customer will hold Ryder harmless from any claims or loss resulting from
Customer's failure to pay fuel taxes.
5. LICENSES:
A. Ryder agrees to pay for the state motor vehicle license for the licensed
weight shown on Schedule A, personal property taxes and Vehicle inspection fees
for each Vehicle in the state of domicile, and federal highway use tax, all at
the rates and method of assessment in effect on the date of execution of each
Schedule A. Customer will be responsible for any increases or changes in
assessment of these items thereafter.
B. Where legal, Ryder will apply for vehicle licenses and prorate or state
reciprocity plates at Customer's request and cost.
<PAGE>
C. Customer agrees to pay for any special license or pay any taxes
resulting from the operation and use of the Vehicles by Customer including
mileage taxes, ton mileage taxes, highway or bridge tolls. Ryder shall have the
right to settle and claim or lien involving any Vehicle as a result of
Customer's failure to pay any such taxes and Customer will reimburse Ryder
immediately.
6. SUBSTITUTION:
Ryder agrees to furnish a substitute vehicle at no extra charge for any
Vehicle, other than those excepted below, which may be temporarily inoperable
because of mechanical failure, the substitute to be as nearly as practicable the
same size as the Vehicle. The substitute will be furnished to Customer where the
Vehicle was disabled and will be returned by Customer to the Ryder facility that
provided it. Ryder will not furnish a substitute for any Vehicle that is out of
service for ordinary maintenance and service time; or is out of service for
repair of any form of physical damage resulting from causes including fire,
collision, or upset; or is lost or stolen; or is out of service for repair of
damage resulting from Customer's violation of any provisions of this Agreement;
or is out of service for repair or maintenance of special equipment for which
Ryder is not responsible. Ryder's failure to furnish a substitute vehicle within
a reasonable time when required will cause the charges for the inoperable
Vehicle to abate until the Vehicle is returned to Customer's service or a
substitute is available. Ryder's liability in the event of such a failure will
be limited to abatement of charges for the inoperable Vehicle. A substitute
vehicle, while in Customer's service, will be subject to all the terms and
conditions of this Agreement. While a Vehicle is out of service because of
damage resulting from any form of physical damage, Ryder will rent Customer a
replacement vehicle, if available, at a rate equal to the charge for the
inoperable Vehicle. Irrespective of whether or not Customer rents a vehicle from
Ryder while a Vehicle is out of service for repair of physical damage, the
charges applicable to it will not abate.
7. DRIVERS:
A. Customer agrees that each Vehicle will only be operated by a properly
licensed driver, at least 18, who is the employee or agent of Customer, subject
to Customer's exclusive direction and control, and that Vehicles will not be
operated by a driver in possession of or under the influence of alcohol or any
drug which may impair the driver's ability. Customer agrees to reimburse Ryder
in full for loss or damage to Vehicles, including related expenses, if Vehicles
are operated by drivers under 18. Upon receipt of a written complaint from Ryder
specifying any reckless, careless or abusive handling of a Vehicle or any other
incompetence by or of any driver, and requesting the driver's removal as an
operator of Vehicles, Customer will immediately remove such individual as a
driver of Vehicles. In the event that Customer fails to do so, or is prevented
from so doing by any agreement with anyone on the driver's behalf: (1) Customer
will, notwithstanding any other provisions of this Agreement, reimburse Ryder in
full for any loss and expense sustained by Ryder for damage to any Vehicle when
being operated by such individual and Customer will indemnify and hold Ryder
completely harmless from any claims or causes of action for death or injury to
persons or loss or damage to property arising out of the use or operation of any
Vehicle by such individual notwithstanding that Ryder may be designated on
applicable Schedules A as responsible for furnishing and maintaining Liability
Insurance; and (2) Ryder may at its election and at any time thereafter upon 30
days notice to Customer, terminate any Liability Insurance coverage extended by
Ryder, and may, at its election, with respect to each Vehicle, increase the
amount of Customer's physical damage responsibility to an amount equal to the
agreed value calculated in accordance with Paragraph 11D as of the time of
damage or loss.
<PAGE>
B. Ryder agrees, at Customer's request, to assist Customer in developing a
driver education and safety program.
C. Customer agrees that the Vehicles will not be operated in a reckless or
abusive manner, or off an improved road, or on a flat tire, or improperly
loaded, or loaded beyond the manufacturer's recommended maximum gross weight, or
to transport any property or material deemed extra hazardous by reason of being
poisonous, inflammable, explosive, or fissionable. Notwithstanding any other
provision of this Agreement, and irrespective of which party is responsible for
physical damage to Vehicles pursuant to Paragraph 10B, Customer agrees to
reimburse Ryder in full for damage to any Vehicle, including expenses, resulting
from a violation of this provision. Customer will be responsible for all
expenses of towing any mired Vehicle when not in Ryder's possession or on
Ryder's premises.
8. CHARGES:
A. Customer agrees to pay Ryder the fixed monthly charge for each Vehicle
upon receipt of Ryder's invoice and to pay all other charges within 10 days of
the date of Ryder's invoice without deduction or setoff.
B. Mileage will be determined from odometer readings. If the odometer fails
to function, Customer will immediately report it to Ryder. The mileage for the
period in which the failure existed may then be determined at Ryder's option
from (1) Customer's trip records; or (2) the amount of fuel consumed and the
miles per gallon record of Ryder averaged for the previous 30 days.
C. Customer agrees to promptly provide Ryder with current financial
statements and other financial information as requested.
9. ADJUSTMENT:
A. The charges in this Agreement are based on Ryder's current cost of
labor, parts, and supplies. These costs may fluctuate after the date of
execution of this Agreement. Customer agrees that for each rise or fall of 1% in
the Revised Consumer Price Index for Urban Wage Earners and Clerical Workers
(1967 base period, published by U.S. Bureau of Labor Statistics), above or below
the base index figure on Schedule A, charges for each Vehicle will be adjusted
upward or downward as follows:
1% of 50% of the Fixed Rental Charge and 10% of 100% of the
Mileage Rate excluding all Rated Fuel Cost
1% of 60% of the Mileage Rate excluding all Rated Fuel Cost (but
including Mileage Guaranty) for Mileage only Rated Vehicles
1% of 100% of the hourly charge (only for refrigeration equipment)
B. Adjustments will be based on the original charges stated on Schedule A
and be effective on the first day of January and July based on the latest index
published prior to such effective date. In the event the Revised Consumer Price
Index for Urban Wage Earners and Clerical Workers is discontinued, another
mutually acceptable cost adjustment index will be chosen.
<PAGE>
C. Customer agrees to pay for (1) any sales, use, gross receipts or similar
tax now or hereafter imposed upon the use of the Vehicle or on the rental or
other charges accruing hereunder; (2) any increase in license or registration
fees, federal highway use taxes, vehicle inspection fees, fuel tax permits, and
personal property tax; or (3) any new or additional tax of governmental fees,
adopted after the date of the execution of the applicable Schedule A.
10. INSURANCE:
A. Liability Insurance Responsibility.
(1) A standard policy of automobile liability insurance (hereafter
liability insurance) with limits specified on each Schedule A will be
furnished and maintained by the party designated on Schedule A at its sole
cost, written by a company satisfactory to Ryder, covering both Ryder and
Customer as insureds for the ownership, maintenance, use or operation of
the Vehicles and any substitute vehicle. Such policy will provide that the
coverage is primary and not additional or excess coverage over insurance
otherwise available to either party and that it cannot be canceled or
materially altered without 30 days prior written notice to both parties.
The party designated will furnish to the other certificates to evidence
compliance with the provision.
(2) Upon not less than 30 days prior written notice to Customer, Ryder
may terminate Liability Insurance coverage maintained by Ryder and Customer
will be obligated to procure and maintain Liability Insurance in the limits
set forth on Schedule A as of the effective date of termination and the
charges will be adjusted accordingly.
(3) If Customer is obligated to procure and maintain Liability
Insurance and fails to do so, or fails to promptly furnish Ryder the
required evidence of insurance, Customer agrees to indemnify and hold Ryder
harmless from and against any claims or causes of action for death or
injury to persons or loss or damage to property arising out of or caused by
the ownership, maintenance, use, or operation of any Vehicle, and Ryder is
authorized but not obligated to procure such Liability Insurance without
prejudice to any other remedy Ryder may have, and Customer will pay Ryder,
as additional rental, the amount of the premium paid by Ryder.
(4) Customer agrees to release, indemnify and hold Ryder harmless from
and against any claims or causes of action for death or injury to persons
or loss or damage to property in excess of the limits of Liability
Insurance, whether provided by Ryder or Customer, arising out of or caused
by the ownership, maintenance, use or operation of any Vehicle or
substitute vehicle, and any such claims or causes of action which Ryder may
be required to pay as a result of any statutory requirements of insurance
or as a result of the insolvency of Customers's insurance company and for
which Ryder would not otherwise pursuant to the terms hereof be required to
pay.
(5) Ryder will, where required and legal, at Customer's request, file
evidence of automobile liability insurance required by federal or state
governmental authorities when Ryder is designated as responsible for
Liability Insurance.
(6) Customer further agrees to release and hold Ryder harmless for
death or injury to Customer, Customer's employees, drivers, passengers or
agents, arising out of the ownership, maintenance, use or operation of any
Vehicle or substitute vehicle.
<PAGE>
B. Physical Damage Responsibility
The party designated on Schedule A will pay for loss or damage to any
Vehicle subject to the following:
(1) When Ryder is designated:
a. Ryder will assume and pay for loss (including theft) or damage
to each Vehicle in excess of the deductible amount specified on
Schedule A EXCEPT (1) any willful damage to the Vehicle, specifically
including but not limited to damage arising out of or in connection
with any labor dispute to which Customer is a party; (2) conversion of
any Vehicle by an agent or employee of Customer; and (3) the loss of
tools, tarpaulins, accessories, spare tires and other such
appurtenances. Customer agrees to pay up to the amount specified on
Schedule A for loss (including theft) or damage to each Vehicle,
including related expenses, from each occurrence and will pay for all
loss (including theft) or damage to any Vehicle resulting from any
perils specifically excepted in this Paragraph.
b. Upon not less than 30 days prior written notice to Customer,
Ryder may designate Customer as responsible for all physical damage to
Vehicles. In such event, Customer will be obligated to procure and
maintain complete physical damage insurance coverage reasonably
acceptable to Ryder. Ryder's charges to Customer will be decreased to
reflect the change in designation of the responsibility for physical
damage. Whenever Customer is obligated to procure and maintain
physical damage insurance coverage and fails to do so, or fails to
promptly furnish Ryder with complete certificates evidencing such
coverage, Customer agrees to pay Ryder for all loss (including theft)
or damage to any Vehicle or substitute vehicle from all causes
whatsoever.
(2) When Customer is designated:
a. Customer will be responsible and pay for all loss (including
theft) or damage to any Vehicle or substitute vehicle, including
related expenses arising from any cause and regardless of how,
including Ryder's negligence, or where, including Ryder's premises,
the loss or damage occurred. Customer's liability for any Vehicle will
not exceed the purchase price for the Vehicle computed according to
Paragraph 11D at the time of such loss or damage.
b. Customer agrees to furnish Ryder with evidence of physical
damage insurance coverage reasonably acceptable to Ryder with Ryder
listed as a named insured or endorsed as a loss payee and having a
deductible amount not to exceed the amount specified on Schedule A.
C. Notice of Accident
Customer agrees to immediately notify Ryder of any accident, collision,
loss (including theft), or damage involving a Vehicle or substitute vehicle; to
cause the driver to make a detailed report in person at Ryder's office as soon
as practicable; and to render all other assistance reasonably requested by Ryder
and the insurer in the investigation, defense, or prosecution of any claims or
suits.
D. Cargo Insurance Responsibility
Ryder will have no liability for loss of or damage to any goods or other
property in or carried on any Vehicle or substitute vehicle whether such loss or
damage occurs in a Ryder facility or elsewhere, occurs due to any negligence or
Ryder's part, or occurs as a result of any other failure on Ryder's part.
Customer hereby assumes all such risk of loss or damage, waives any claim it may
have against Ryder, and agrees to release, indemnify, defend, and hold Ryder
harmless from all liability for such loss or damage to cargo. Customer agrees to
reimburse Ryder for loss of any tools, tarpaulins, spare tires, or other similar
equipment furnished by Ryder.
<PAGE>
E. Vehicle Theft or Destruction
If a Vehicle is lost or stolen and remains so for 30 days after Ryder has
been notified, the lease as to such Vehicle will then terminate provided all
charges for the Vehicle have been paid to that date and provided any amounts due
Ryder pursuant to Paragraph 10B have been paid. Ryder will not be obligated to
provide a substitute vehicle during this 30 day period. If a Vehicle is, in
Ryder's opinion, damaged beyond repair, Ryder will notify Customer within 30
days after Ryder has been advised of the loss. Upon receipt of Ryder's notice
that the Vehicle has been damaged beyond repair, provided all charged for the
Vehicle have been paid to that date and provided any amounts due Ryder pursuant
to Paragraph 10B hereto have been paid, the lease as to such Vehicle will then
terminate.
11. TERMINATION
A. Either party may terminate the lease of any Vehicle prior to expiration
of its term on any anniversary date of its Date of Delivery indicated on the
Schedule A by giving to the other party at least 60 days prior written notice.
If termination is effected by Ryder, Customer will have the right, but not the
obligation, to purchase in accordance with Paragraph 11D all Vehicles with
respect to which termination notice has been given on the termination date(s).
If termination is effected by Customer, Customer will at Ryder's option purchase
in accordance with Paragraph 11D all Vehicles with respect to which termination
notice has been given on the termination date(s).
B. In the event Customer becomes insolvent, files a voluntary petition in
bankruptcy, makes an assignment for the benefit of creditors, is adjudicated a
bankrupt, permits a receiver to be appointed for its business, or permits or
suffers a material disposition of its assets, the lease of Vehicles will
terminate at the election of Ryder. Upon written notice thereof sent to
Customer, Ryder may at its option demand that Customer purchase the Vehicles
within 10 days of termination in accordance with Paragraph 11D.
C. Breach or Default
(1) If Customer breaches or is in default of any provision of
this Agreement and that breach or default is not cured within 7 days
after written notice has been mailed to Customer, Ryder may
immediately, without further notice or demand, take possession of the
Vehicles. Ryder will be entitled to enter upon any premises where the
Vehicles may be and remove them and refuse to redeliver them to the
Customer until such breach or default is cured without any of such
actions being deemed an act of termination and without prejudice to
the other remedies Ryder may have under this Agreement and at law.
Customer will continue to be liable for all charges accruing during
the period the Vehicles are retained by Ryder.
(2) In the event Ryder takes possession of any Vehicle and there
is any property in or upon the Vehicle which belongs to or is in the
custody or control of Customer, Ryder may take possession of such
items and either hold them for Customer until Customer claims them or
place them in public storage for Customer at Customer's expense.
(3) If Customer's breach or default continues for 7 days after
written notice has been mailed to Customer, Ryder may terminate the
Agreement. Upon termination, Ryder may demand that Customer purchase
within 10 days of termination any or all Vehicles in accordance with
Paragraph 11D without prejudice to other remedies Ryder may have under
this Agreement and at law.
<PAGE>
(4) Customer agrees to pay Ryder all Ryder's costs and expenses,
including reasonable attorney's fees, incurred in collecting amounts
due from Customer or in enforcing any rights of Ryder hereunder.
D. In the event Customer (pursuant to Paragraph 11A) shall be required to
purchase any Vehicle, or should Ryder (pursuant to Paragraph 11B or 11C) demand
of Customer that it purchase any Vehicle, Customer agrees to purchase each such
Vehicle for cash within the time provided for in this Agreement for its Original
Value as shown on Schedule A, less the total depreciation which has accrued for
such Vehicle in accordance with Schedule A. Additionally, Customer agrees to pay
Ryder for the amount of any unexpired licenses, applicable taxes, including
personal property taxes and federal highway use taxes, and other prepaid
expenses previously paid by Ryder for the Vehicles prorated to the date of sale
and will be responsible for any sales or use tax arising from the purchase.
Customer will have no obligation or right to purchase any Vehicle as to which
the term on Schedule A has expired.
12. ASSIGNMENT OF LEASE:
This Agreement will be binding on the parties hereto, their successors,
legal representatives and assigns. Customer agrees to promptly notify Ryder in
writing prior to all substantial changes in ownership or any material
disposition of the assets of Customer's business. Customer does not have the
right to sublease any of the Vehicles, nor to assign this Agreement or any
interest therein without Ryder's prior written consent, which consent will not
be unreasonably withheld and any attempt to do so will be void.
13. FORCE MAJEURE:
Ryder will incur no liability to Customer for failure to supply any
Vehicle, provide a substitute vehicle, repair any disabled Vehicle, or provide
fuel for Vehicles, if prevented by a national emergency, wars, riots, fires,
labor disputes, federal, state or local laws, rules, regulations, shortages
(local or national), or fuel allocation programs, or any other cause beyond
Ryder's control whether existing now or hereafter. Notwithstanding Ryder's
inability to perform under these conditions Customer's obligations hereunder
will continue.
14. NOTICES:
Notices provided for herein will be in writing and mailed to the parties at
their respective addresses set forth above.
15. GENERAL:
This Agreement will not be binding on Ryder until executed by a person duly
authorized and will then constitute the entire agreement and understanding
between the parties concerning the Vehicles, notwithstanding any previous
writings or oral undertakings, and its terms will not be altered by any oral
agreement or informal writing, nor by failure to insist upon performance, or
failure to exercise any rights or privileges, but alterations, additions, or
changes in this Agreement will only be accomplished by written endorsements,
amendments, or additional Schedules A to this Agreement executed by both
parties.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
RYDER TRUCK RENTAL, INC. KELLER MANUFACTURING COMPANY, INC.
(RYDER) CUSTOMER
By: By:
-------------------------------- ------------------------------
Name/Title: Name/Title:
------------------------ ----------------------
Date: Date:
------------------------------ ----------------------------
Witness: Witness:
--------------------------- -------------------------
</TABLE>
KELLER DEDICATED TRAN CO.
FLEET LIST
10/20/98
<TABLE>
<CAPTION>
TRACTORS LEASED FROM RYDER
<S> <C> <C> <C> <C> <C> <C> <C>
Mo/cost Unit Serial Value Year Make LeaseTo Lease
From
- -------------------------------------------------------------------------------------------------------------------
$466.00 516963 1FUYDSYB7SH659389 $84,006 95 FRTL 08/01/94 01/08/00
$474.16 583320 1FUYDDYB6WL935642 $78,034 98 FRTL 05/01/97 11/01/02
$474.16 583321 1FUYDDYB8WL935643 $78,034 98 FRTL 05/01/97 11/01/02
$474.16 583322 1FUYDDYBXWL935644 $78,034 98 FRTL 05/01/97 11/01/02
$474.16 583323 1FUYDDYB1WL935645 $78,034 98 FRTL 11/01/97 11/01/02
$474.16 583324 1FUYDDYB3WL935646 $78,034 98 FRTL 05/01/97 11/01/02
$477.07 316846 1FUYDDYB8XLA57684 $86,002 98 FRTL 07/07/98 12/07/03
$477.07 316847 1FUYDDYBXXLA57685 $86,002 98 FRTL 07/07/98 12/07/03
$477.07 316848 1FUYDDYB1XLA57686 $86,002 98 FRTL 07/07/98 12/07/03
$477.07 316849 1FUYDDYB3XLA57687 $86,002 98 FRTL 07/07/98 12/07/03
$477.07 316850 1FUYDDYB5XLA57688 $86,002 98 FRTL 07/07/98 12/07/03
$477.07 316851 1FUYDDYB7XLA57689 $86,002 98 FRTL 07/07/98 12/07/03
$477.07 316852 1FUYDDYB3XLA57690 $86,002 98 FRTL 07/07/98 12/07/03
$477.07 316853 1FUYDDYB5XLA57691 $86,002 98 FRTL 07/07/98 12/07/03
$477.07 316854 1FUYDDYB7XLA57692 $86,002 98 FRTL 07/07/98 12/07/03
$477.07 316855 1FUYDDYB9XLA57693 $86,002 98 FRTL 07/07/98 12/07/03
$477.07 316856 1FUYDDYB0XLA57694 $86,002 98 FRTL 07/07/98 12/07/03
$477.07 316857 1FUYDDYB2XL157695 $86,002 98 FRTL 07/07/98 12/07/03
$477.07 316858 1FUYDDYB4XLA57696 $86,002 98 FRTL 07/07/98 12/07/03
TRACTOR LEASED FROM UHL
354288 SCO15917 95
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KELLER DEDICATED TRANSPORTATION
TRAILERS LEASED
10/21/98
<S> <C> <C> <C> <C> <C> <C>
5 yr. Lease: 03/05/93 to 03/05/98 480340 1JJV482U2NL164033 WABASH 1992 $269/MO
03/05/93 to 03/05/98 480341 1JJV482U4NL164034 WABASH 1992 $269/MO
03/05/93 to 03/05/98 480342 1JJV482U6NL164035 WABASH 1992 $269/MO
03/05/93 to 03/05/98 480343 1JJV482U8NL164036 WABASH 1992 $269/MO
03/05/93 to 03/05/98 480344 1JJV482UXNL164037 WABASH 1992 $269/MO
03/05/93 to 03/05/98 480345 1JJV482UXNL164183 WABASH 1992 $269/MO
03/05/93 to 03/05/98 480346 1JJV482UINL164184 WABASH 1992 $269/MO
03/05/93 to 03/05.98 480347 1JJV482U3NL164185 WABASH 1992 $269/MO
03/05/93 to 03/05/98 480348 1JJV482U5NL164186 WABASH 1992 $269/MO
03/05/93 to 03/05/98 480349 1JJV482U6NL164187 WABASH 1992 $269/MO
03/05/93 to 03/05/98 53696 1JJV532U6NL167484 WABASH 1992 $295/MO
03/05/93 to 03/05/98 53697 1JJV532U8NL167485 WABASH 1992 $295/MO
03/05/93 to 03/05/98 53698 1JJV532UXNL167486 WABASH 1992 $295/MO
03/05/93 to 03/05/98 53699 1JJV532U1NL167487 WABASH 1992 $295/MO
03/18/93 to 03/18/98 481400 1JJV482UXRL200072 WABASH 1994 $273/MO
03/18/93 to 03/18/98 481401 1JJV482U1RL200073 WABASH 1994 $273/MO
03/18/93 to 03/18/98 481402 1JJV482U3LF200074 WABASH 1994 $273/MO
03/18/93 to 03/18/98 481403 1JJV482U5RL200075 WABASH 1994 $273/MO
03/18/93 to 03/18/98 481404 1JJV482U6RL200076 WABASH 1994 $273/MO
RYDER:
10 Year 06/27/95 to 06/27/05 251837 1UYVS2484SC472801 UTILITY 1994 $83/WK
Lease 06/27/95 to 06/27/05 251838 1UYVS2486SC472802 UTILITY 1994 $83/WK
06/27/95 to 06/27/05 251839 1UYVS2488SC472803 UTILITY 1994 $83/WK
06/27/95 to 06/27/05 251840 1UYVS248XSC472804 UTILITY 1994 $83/WK
06/27/95 to 06/27/05 251841 1UYVS2488SC472805 UTILITY 1994 $83/WK
06/27/95 to 06/27/05 251842 1UYVS2483SC472806 UTILITY 1994 $83/WK
06/27/95 to 06/27/05 251843 1UYVS2485SC472807 UTILITY 1994 $83/WK
06/27/95 to 06/27/05 251844 1UYVS2487SC472808 UTILITY 1994 $83/WK
06/27/95 to 06/27/05 251845 1UYVS2489SC472809 UTILITY 1994 $83/WK
06/27/95 to 06/27/05 251846 1UYVS24855C472810 UTILITY 1994 $83/WK
TLC
8 Year 06/26/95 to 06/26/03 485000 1JJV482U05L325086 WABASH 1996 $279/MO
Lease 06/26/95 to 06/26/03 485001 1JJV482U2TL325087 WABASH 1996 $279/MO
06/26/95 to 06/26/03 485002 1JJV482U4TL325088 WABASH 1996 $279/MO
06/26/95 to 06/26/03 485003 1JJV482U6TL320589 WABASH 1996 $279/MO
06/26/95 to 06/26/03 485004 1JJV482U2TL325090 WABASH 1996 $279/MO
07/06/95 to 07/06/03 485005 1JJV482U4TL325091 WABASH 1996 $279/MO
07/06/95 to 07/06/03 485006 1JJV483U6TL325092 WABASH 1996 $279/MO
07/07/95 to 07/07/03 485007 1JJV482U4TL325093 WABASH 1996 $279/MO
07/10/95 to 07/10/03 485008 1JJV482UXTL325091 WABASH 1996 $279/MO
07/11/95 to 07/11/03 485009 1JJV482U1TL325095 WABASH 1996 $279/MO
07/11/95 to 07/11/03 485010 1JJV482U3TL325096 WABASH 1996 $279/MO
11/02/96 to 11/02/03 485011 1JJV482U5TL325097 WABASH 1996 $279/MO
11/02/96 to 11/03/03 485012 1JJV482U7TL325098 WABASH 1996 $279/MO
04/29/96 to 04/29/05 485023 1JJV482U8TL325091 WABASH 1996 $279/MO
04/29/96 to 04/29/05 485027 1JJV482UXTL325113 WABASH 1996 $279/MO
EXTRA: 11/07/90 to 11/07/98 296038 MB024101 FRUEHAUF 1990 $285/MO
11/07/90 to 11/07/98 296039 MB024102 FRUEHAUF 1990 $285/MO
11/07/95 to 11/07/98 296040 MB024103 FRUEHAUF 1990 $285/MO
11/07/90 to 11/07/98 296042 MBO24105 FRUEHAUL 1990 $285/MO
RYDER
10 Year 05/01/97 to 05/01/07 276719 1UYVS2481VP264601 UTILITY 1997 $304/MO
Lease 05/01/97 to 05/01/07 276720 1UYVS2483VP264602 UTILITY 1997 $304/MO
05/01/97 to 05/01/07 276721 1UYVS2485VP264603 UTILITY 1997 $304/MO
05/01/97 to 05/01/07 276722 1UYVS2487VP264604 UTILITY 1997 $304/MO
05/01/97 to 05/01/07 276723 1UYVS2489VP264605 UTILITY 1997 $304/MO
TLC
8 Year 02/20/97 to 02/20/05 484989 1JJV482U6TL325075 WABASH 1996 $229/MO
Lease: 02/20/97 to 02/20/05 484996 1JJV482U3TL325082 WABASH 1996 $229/MO
02/20/97 to 02/20/05 485022 1JJV482U6TL325108 WABASH 1996 $229/MO
02/20/97 to 02/20/05 485028 1JJV482U1TL325114 WABASH 1996 $229/MO
02/20/97 to 02/20/05 485029 1JJV482U3TL325115 WABASH 1996 $229/MO
Ryder
10 Yr 06/08/98 to 06/08/08 309059 1UYVS2536WP599101 UTILITY 1998 $179.58/mo
Lease: 06/08/98 to 06/08/08 309060 1UYVS2538WP599102 UTILITY 1998 $179.58/mo
06/08/98 to 06/08/08 309061 1UYVS253XWP500103 UTILITY 1998 $179.58/mo
06/08/98 to 06/08/08 309062 1UYVS2531WP500104 UTILITY 1998 $179.58/mo
</TABLE>
<PAGE>
Schedule No.
To TLSA dated: April 10, 1986
Page: 1
SCHEDULE A Dated January 22, 1998 to Truck Lease and Service Agreement (the
"Master Lease Agreement")
Between Ryder Truck Rental, Inc. d/b/a Ryder Transportation Services ("Ryder")
and KELLER DEDICATED TRANSPORTATION, INC. ("You" or "Customer"),
Location Name Jeffersonville, IN
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Max
Date of GCW
Delivery Make GVW
Vehicle Beginning Term Model And/or
Lease of In Vehicle And Serial Licensed
No Lease Term Months Year Type Number Weight
(1) (2) (3) (4) (5) (6) (7)
316856 07/10/98 56 1998 [VPA 97] FRTL FLO 1fuyddyboxla57694 80,000
120645T T/A SLPR TR
316857 07/07/98 65 1998 [VPA 97]FRTL FLO 1FUYDDYB2XLA57695 60,000
120645T T/A SLPR TR
316858 07/06/98 56 1998 [VPA 97] FRTL 1FUYDDYB4XLA57696 80,000
FLO120645T T/ASLPR TR
<C> <C> <C> <C> <C> <C>
Estimated Refrig
Annual Fixed Maint.
Monthly Mileage Charge Rate
Original Depreciation Or Per MileageRate Per
Value Amount Hours Week Per Mile Hour
(8) (9) (10) (11) (12) (13)
$86,002 $825.91 120,000 $477.07 $0.0650 n/a
$86,002 $825.92 120,000 $477.07 $0.0650 n/a
$86,002 $825.92 120,000 $477.07 $0.0650 n/a
<FN>
*The lease of each Vehicle listed on this Schedule A shall constitute a separate
and independent lease agreement (each a "Vehicle Lease") subject to the terms
and conditions contained in: (i) the Master Lease Agreement; (ii) any amendments
to the Master Lease Agreement; (iii) this Schedule A; and (iv) any other written
agreement between Ryder and you regarding that Vehicle. Any reference to the
"Agreement" contained in any of the foregoing documents shall be deemed to refer
to each and every Vehicle Lease. If there is a conflict between the terms of
this Schedule A and any other terms of the Agreement, then the terms of this
Schedule A will apply. Payments relating to an invoice for multiple Vehicles
will be allocated on a pro-rata basis among the covered Vehicles.
1. Original Value: The Original Value, Monthly Depreciation and Fixed Charges
Per Week listed in columns 8, 9 and 11 are based, in part, upon the
manufacturer's quoted prices as of the date you execute this Schedule A. If
a manufacturer's quoted price increases prior to the Date of Delivery of a
vehicle, then you agree that for each $50 increase in price (or fraction
thereof), the following shall be increased accordingly on the date of
delivery:
Original Value: $50.00
Monthly Depreciation: $.65
Fixed Charge per week: $0.30
2. Washing To Be Provided by: Ryder - - For the following number of ties per
year: 26
3. Initial Painting and Lettering Allowance: $300.00. If the actual cost of
the initial painting and lettering exceeds the Initial Painting and
Lettering Allowances by $50.00 or more, the Original Value, Monthly
Depreciation and Fixed Charge Per Week will be adjusted as indicated in (1)
above.
<PAGE>
2. Liability Insurance Responsibility:
Provided by: Customer
Bodily Injury: $0 per person.
Bodily Injury: $0 per occurrence.
Property Damage: $0 per occurrence.
3. Physical Damage Responsibility by:
Customer.
4. Fuel Provided by:
Ryder
5. Domicile of the Vehicle(s) by City:
JEFFERSONVILLE, IN
6. Service and Maintenance Location of Vehicles Listed on this Schedule
JEFFERSONVILLE, IN
7. Adjustment of Charges:
The base index of *(TBD will be used to compute the adjustment of charges
described in paragraph 9 of the Truck Lease and Service Agreement (TLSA).
*The base index will be determined at the time of inservice.
Timing of adjustments:
Notwithstanding anything in the Truck Lease and Service Agreement to the
contrary, the charges on the Vehicle(s) listed on this Schedule A (the
"Scheduled Vehicle(s)") shall be adjusted on each January first and July first.
8. Allowances per Year:
License Fee $1,325
Federal Heavy Vehicle Use Tax $550
Personal Property Taxes: $549
<PAGE>
Fuel/Road Mile permit charges total $120 for each Vehicle listed on the
Schedule. The vehicles listed on this Schedule will operate in the states of:
IN.
If Ryder's total cost for the above allowances in these states in any year is
more or less than the amount included in Customer's Fixed Rental Charge,
Customer shall pay the additional amount or receive a credit from Ryder
accordingly; provided, however, that no credit shall be given for personal
property taxes. Charges incurred by Ryder in states not listed shall be billed
to Customer in addition as incurred.
9. Original Identification Cost:
$300.00. If this amount varies by $50.00 or more in price over the original
estimated cost, the Original Value, Monthly Depreciation and Fixed Charge per
Week will be adjusted as indicated in (1) above.
10. Washing Provided By:
RYDER for the following number of times per year: 26.
11. Estimated Annual Mileage:
If the Estimated Annual Mileage (Column 10), of this Schedule A in any year
beginning on the Date of Delivery of the Vehicle(s) is (i) under 125,000 miles
and is exceeded by 20% or (ii) 125,000 miles or over and is exceeded by 10%, the
parties will negotiated in good faith a one time charge to the Fixed Charge per
Week (Column 1). Depreciation Month Amount (Column 9) and the Term (Column 3)
for each Vehicle affected.
12. Comments
Replacement for the following units 500113-500114-500115 and 500116
plus 516963-516965-516966 and 516968
The terms and conditions set forth on this Schedule A will apply only to the
Vehicles listed and described on this Schedule A. THIS SCHEDULE A is a part of
the Truck Lease and Service Agreement between the parties hereto.
</FN>
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
RYDER TRUCK RENTAL, INC., KELLER DEDICATED TRANS
d.b.a. Ryder Transportation Services ("RYDER") ("Customer")
By: By:
------------------------------------------------ ------------------------------------------------
Name: Name:
------------------------------------------------ ------------------------------------------------
Title: Title:
------------------------------------------------ ------------------------------------------------
Date: Date:
------------------------------------------------ ------------------------------------------------
Witness: Witness:
------------------------------------------------ ------------------------------------------------
</TABLE>
THE KELLER MANUFACTURING COMPANY, INC.
CRAFTSMAN STOCK OPTION PLAN
1. DEFINITIONS. The following terms, when capitalized herein, shall have
the meanings specified in this Section:
(a) "Board of Directors" or "Board" means the Board of Directors of
Keller Mfg. Co., Inc.
(b) "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time.
(c) "Committee" means the committee appointed by the Board of
Directors, pursuant to Section 3(a), to administer this Plan.
(d) "Common Shares" means the Common Shares of the Company.
(e) "Company" means The Keller Manufacturing Company, Inc., an Indiana
corporation.
(f) "Director" means a member of the Board of Directors of the
Company.
(g) "Eligible Employee" means an Employee who has been employed with
the Company or any Subsidiary for at least two (2) years prior to the date
of grant of the Option.
(h) "Employee" means an individual employed by the Company or any
Subsidiary. A Director of the Company shall not be deemed to be employed by
the Company solely as a result of his or her position as a Director.
(i) "Employer" means, collectively, or where the context is
appropriate, individually, the Company and/or any of its Subsidiaries.
(j) "Expiration Date" means January 1, 2004.
(k) "Fair Market Value" means the closing price of the Common Shares
on the Over-the-Counter market, or as reported by the Nasdaq Stock Market
or any national securities exchange on which Common Shares may be traded;
provided, however, if the Common Shares are not so traded, "Fair Market
Value" shall be determined by the Committee, or pursuant to rules
established by the Committee, on a basis consistent with regulations under
the Code.
(l) "Option" means a right to purchase Common Shares granted pursuant
to this Plan. All Options granted hereunder shall be non-statutory options
which are not intended to meet the requirements of Section 422 of the Code.
(m) "Optionee" means a Person to whom an Option is granted under this
Plan.
<PAGE>
(n) "Option Agreement" or "Agreement" means a written instrument
between the Company and a Participant evidencing an Option and prescribing
the terms, conditions, and restrictions applicable to the Option.
(o) "Plan" means this Keller Manufacturing Company, Inc. Craftsman
Stock Option Plan.
(p) "Retirement" means, with respect to an Employee, retirement from
the Employer pursuant to the early or normal retirement provisions of any
applicable retirement plan.
(q) "Rule 16b-3" means Rule 16b-3 of the Securities and Exchange
Commission or any successor rule.
(r) "Separation from Service" or "Separates from Service" means with
respect to:
(i) an Employee, any voluntary or involuntary termination of the
Employee's employment with the Employer for any reason, including, but
not limited to, death, disability or Retirement; provided, however,
the term shall not include the transfer of an Employee's employment
from the Company to any Subsidiary, from a Subsidiary to the Company
or between Subsidiaries;
(ii) Director, termination of service as a Director.
(s) "Subsidiary" means a company (whether or not incorporated) 80% or
more of the total combined voting power and 80% or more of the total value
of which is owned directly or indirectly by the Company.
(t) "1934 Act" means the Securities Exchange Act of 1934, as amended.
2. PURPOSE. The purpose of the Plan is to promote the success of the
Company and its Subsidiaries by providing to all Employees of the Company and
its Subsidiaries and to all Directors incentives that will link their personal
interests to the long-term financial success of the Company and its Subsidiaries
and to growth in stockholder value. The Plan is designed to provide flexibility
to the Company and its Subsidiaries in their ability to motivate, attract, and
retain the services of all Employees and Directors upon whose judgment,
interest, and special effort the successful conduct of their operations is
largely dependent.
3. ADMINISTRATION.
(a) COMMITTEE. This Plan shall be administered by a Committee
appointed by the Board of Directors, consisting of one Director and one
manager of the Company.
<PAGE>
(b) POWER AND AUTHORITY The Committee shall have the full power and
authority to take all actions and make all determinations required or
provided for under this Plan; to interpret and construe the provisions of
this Plan or any Option Agreement, which interpretation or construction
shall be final, conclusive and binding on the Company, the Employer and the
Optionee; and to take any and all other actions and make any and all other
determinations not inconsistent with the specific terms and provisions of
this Plan which the Committee deems necessary or appropriate in the
administration of this Plan. The Committee may from time to time prescribe,
amend and rescind rules and regulations applicable to this Plan.
(b) ACTIONS AND DETERMINATIONS. All actions and determinations of the
Committee shall be made by a unanimous affirmative vote, or by unanimous
written consent. Each member of the Committee shall be entitled to vote on
any matters affecting the administration of this Plan or the grant of any
Options pursuant to this Plan; however, no member shall act upon the
granting of an Option to himself or herself except pursuant to action taken
by unanimous written consent.
4. ELIGIBILITY. The Directors and Eligible Employees who shall be eligible
to receive grants of Options pursuant to this Plan, and the bases on which
Options may be granted each calendar year, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Shares/Year
-----------
Hourly Associates 50
Office Associates 50
Sales Associates 100
Salary Associates 100
Corporate Associates 150
Corporate Vice President Associates 250
Plant Managers Associates 250
Board of Directors Associates 250
Corporate President 500
Chief Executive Officer 500
Chairman of the Board 500
</TABLE>
An individual who is both a Director and an Employee shall be granted an option
each calendar year based on his or her status as both a Director and as an
Employee.
5. SHARES. Options may be granted for the purchase of authorized but
unissued, or reacquired, Common Shares. The total number of Common Shares with
respect to which Options may be granted under this Plan shall not exceed in the
aggregate 200,000 Common Shares, except as adjusted in accordance with the
provisions set forth in Section 6(g). In the event any outstanding Option
expires or is terminated in whole or in part for any reason prior to the
Expiration Date, any Common Shares as to which the Option was not exercised may
again be subject to an Option granted under this Plan. During the period that
any Options granted under this Plan are outstanding, the Company shall reserve
and keep available that number of Common Shares sufficient to satisfy all
outstanding, unexercised Options.
<PAGE>
6. TERMS AND CONDITIONS OF OPTIONS. Subject to the terms and conditions set
forth in this Plan, the Committee may grant Options to eligible individuals upon
such terms and conditions as the Committee shall determine. The date on which
the Committee approves the grant of an Option shall be considered the date on
which the Option is granted. Options granted pursuant to this Plan shall be
evidenced by an Option Agreement in such form, consistent with this Plan, as the
Committee shall prescribe from time to time. The grant and exercise of Options
also shall comply with and be subject to the following terms and conditions:
(a) MEDIUM AND TIME OF PAYMENT.
(i) In General. An Option may be exercised by delivery of payment
for the Common Shares subject to the Option accompanied by a properly
executed written notice of exercise in a form prescribed by the
Committee. The notice of exercise shall specify the number of Common
Shares with respect to which the Option is being exercised. The
Committee may prescribe in the Option Agreement a minimum number of
Common Shares with respect to which an Option may be exercised.
Payment in full of the purchase price of the Common Shares for which
an Option is exercised shall be made either (A) in cash or in cash
equivalents; (B) if the Optionee can do so without violating Rule
16b-3 or Section 16(b) of the 1934 Act, through the tender to the
Company of Common Shares or the withholding of Common Shares subject
to the Option, which Common Shares shall be valued, for purposes of
determining the extent to which the purchase price has been paid, at
their Fair Market Value on the date of exercise; or (C) by a
combination of the methods prescribed in (A) and (B); provided,
however, that the Committee may in its discretion impose and set forth
in the Option Agreement such limitations or prohibitions on the use of
Common Shares to exercise Options as it deems appropriate. Any attempt
to exercise an Option other than as set forth in this Section 6(a)
shall be invalid and of no force or effect.
(ii) Issuance of Certificates. Subject to Section 6(j), promptly
after the exercise of an Option and the payment in full of the
purchase price for the Common Shares, the individual exercising the
Option shall be entitled to the issuance of a certificate or
certificates evidencing ownership of the Common Shares purchased.
(b) NUMBER OF SHARES. The Option Agreement shall state the total
number of Common Shares which may be purchased pursuant to the grant of the
Option.
(c) OPTION PRICE. The purchase price of each Common Share subject to
an Option shall be fixed by the Committee at an amount not less than the
Fair Market Value of a Common Share as of the close of business on the date
of grant of the Option. The Option Agreement shall state the purchase price
of the Common Shares subject to the Option.
(d) TERM OF OPTIONS. Each Option granted under this Plan shall expire
on the fourth anniversary of the date on which the Option was granted. The
Option Agreement shall state the date of the grant of the Option.
<PAGE>
(e) TIME OF EXERCISE. The Committee may, in its discretion, provide in
a Option Agreement that an Option granted under this Plan may not be
exercised in whole or in part until the expiration of such period or
periods of time, or the attainment of such objectives, as may be specified
by the Committee; provided, however, that any limitation on the exercise of
an Option may be rescinded, modified or waived by the Committee, in its
sole discretion, at any time and from time to time after the date of grant
of such Option so as to accelerate the time in which the Option may be
exercised to the extent permitted under Code Section 424(h). In no event,
however shall an Option granted to an individual to whom Section 16(b)
applies be exercised prior to the date which is six (6) months following
the date of grant. Except as specifically restricted by the provisions of
this Section 6(e) or by the Committee, any Option may be exercised in whole
or in part at any time and from time to time during the period commencing
with the date of grant and ending upon the expiration or termination of the
Option.
(f) SEPARATION FROM SERVICE.
(i) In General. Except as otherwise provided herein, in the event
an Optionee Separates from Service, all Options outstanding in the
hands of the Optionee shall terminate immediately as to any
unexercised portion thereof; provided however, that the Committee, in
its discretion, subject to the provisions of Section 6(d), may permit
an Optionee who has Separated from Service to exercise any unexercised
Options at any time within three (3) months after the effective date
of the Optionee's Separation from Service with respect to the Common
Shares for which such Options could have been exercised (i) on the
effective date of the Separation from Service, or (ii) during the
three (3) month period following that effective date. If an Optionee
Separates from Service due to Retirement or permanent and total
disability (as defined in Code Section 22(e)(3)), the Optionee shall
have the right, subject to the provisions of Section 6(d), to exercise
the Option with respect to the Common Shares for which it could have
been exercised on the effective date of the Separation from Service at
any time within three months after a Separation from Service due to
Retirement or at any time within twelve (12) months after a Separation
from Service due to permanent and total disability.
(ii) Death. In the event of the death of an Optionee while the
Option remains exercisable under this Section 6(f) or other provisions
of this Plan, the Optionee's personal representative shall have the
right, subject to the provisions of Section 6(d), to exercise the
Option with respect to the Common Shares for which it could have been
exercised on the date of death, at any time within twelve (12) months
after the date of death.
(iii) Determinations. For purposes of this Plan, whether a
termination of employment or service due to permanent and total
disability, and whether an authorized leave of absence or absence on
military or government service, shall be deemed to constitute
Separation from Service shall be determined by the Committee, which
determination shall be final, conclusive and binding.
<PAGE>
(g) RECAPITALIZATION. The aggregate number of Common Shares as to
which Options may be granted under this Plan, the number of Common Shares
covered by each outstanding Option, and the price per Common Share with
respect to each outstanding Option, all shall be proportionately adjusted
for any increase or decrease in the number of issued Common Shares
resulting from a subdivision or consolidation of shares or any other
capital adjustment, the payment of a share dividend or other increase or
decrease in the Common Shares effected without receipt of consideration by
the Company. In the event that there shall be a capital reorganization or
reclassification of the shares of the Company resulting in a substitution
of other shares for the Common Shares, each outstanding Option shall be
deemed to represent the right to acquire the number of substitute shares
that would have been issued in exchange for the Common Shares then
remaining under the Option if those Common Shares had been then issued and
outstanding.
(h) CHANGE OF CONTROL, DISSOLUTION AND LIQUIDATION.
(i) Change of Control. For purposes of this Plan, "change of
control event" shall be deemed to have occurred if:
(A) The Committee determines in its sole discretion that, by
reason of an agreement of merger, consolidation or other
reorganization to which the Company has become a party, the
Company will not be in control of the surviving or resulting
corporation;
(B) The Company shall become a party to an agreement
providing for the sale by the Company of all or substantially all
of the Company's assets to any Person;
(C) The Committee determines in its sole discretion that any
Person has become or is anticipated to become the beneficial
owner, directly or indirectly, of securities of the Company
representing 50% or more of the total combined voting power of
the Company's then outstanding securities, the effect of which
(as determined by the Committee in its sole discretion) is the
acquisition of control of the Company; or
(D) During any period of two consecutive years, individuals
who, at the beginning of such period, constituted the Board of
Directors cease, for any reason, to constitute at least a
majority thereof, unless the election or nomination of election
for each new Director was approved by the vote of at least
two-thirds of the Directors in office at the beginning of the
period.
(ii) Effect of a Change of Control Event. Upon the occurrence of
a change of control event, the Company shall provide written notice
thereof (the "Change of Control Notice") to the Optionees. The Company
shall have the right, but not the obligation, to terminate all
outstanding Options as of the date described in the Change in Control
Notice by including a statement to such effect in the Change of
Control Notice. Upon delivery of the Change of Control Notice, and
subject to Section 6(f), and regardless of whether the Company elects
to terminate the outstanding Options, the Optionees shall have the
right to immediately exercise all outstanding Options in full
notwithstanding the terms and conditions set forth in this Plan or in
any Notice of Option.
<PAGE>
(iii) Dissolution and Liquidation. In the event the Company
adopts all necessary resolutions approving a plan to dissolve or
liquidate the Company, the Company shall provide written notice
thereof (the "Dissolution Notice") to the Optionees. Upon delivery of
the Dissolution Notice, and subject to Section 6(d), the Optionees
shall have the right to immediately exercise all outstanding Options
notwithstanding the terms and conditions set forth in this Plan or in
any Notice of Option. All unexercised Options outstanding immediately
following the time specified for exercise in the Dissolution Notice
shall terminate.
(i) ASSIGNABILITY. No Option shall be assignable or transferable,
except to the extent provided in Section 6(f) in the event of the death of
an Optionee. During the lifetime of an Optionee, the Option shall be
exercisable only by the individual to whom the Option was granted (or, in
the event of the legal incapacity or incompetency of the Optionee, the
Optionee's legal guardian or legal representative on behalf of the
Optionee).
(j) ISSUANCE OF SHARES AND COMPLIANCE WITH SECURITIES LAWS.
(i) Registration of Shares. Options shall not be exercisable
unless the issuance of the Common Shares subject to the Options is the
subject of an effective registration statement under the Securities
Act of 1933, as amended, or unless, in the opinion of counsel to the
Company, the issuance would be exempt from the registration
requirements of the Securities Act of 1933, as amended.
(ii) Compliance with Rule 16b-3. This Plan is intended to qualify
for the exemption from the short-swing profits liability imposed by
Section 16(b) under the 1934 Act provided by Rule 16b-3. To the extent
any provision of this Plan or action by the Committee does not comply
with the requirements of Rule 16b-3, that provision or action shall be
deemed inoperative to the extent permitted by law and deemed advisable
by the Committee.
(k) RIGHTS AS A SHAREHOLDER. An Optionee shall have no rights as a
shareholder with respect to Common Shares subject to an Option until the
date of issuance of a certificate or certificates to the Optionee and only
after the Common Shares are fully paid. No adjustment will be made for
dividends or other rights for which the record date is prior to the date a
certificate is issued.
(l) OTHER PROVISIONS. A Option Agreement issued pursuant to this Plan
may contain such other provisions as the Committee shall deem advisable,
provided that those provisions are not inconsistent with the terms of this
Plan.
<PAGE>
7. TERM OF PLAN. This Plan shall become effective March _____, 1999. The
Plan was approved by the Board of Directors on October 30, 1998. Unless
terminated earlier by the Board of Directors pursuant to Section 8, this Plan
shall terminate on the Expiration Date. No Option may be granted under this Plan
after the Expiration Date; however, any option granted prior to the Expiration
Date shall remain in effect until it is exercised or terminated by its own
terms.
8. AMENDMENT OF THE PLAN. The Board of Directors may from time to time,
alter, amend, suspend or terminate this Plan with respect to any Common Shares
as to which Options have not been granted; provided, however, that the Board of
Directors may not, without further approval by the holders of a majority of the
Common Shares represented at a duly convened shareholders' meeting, increase the
maximum number of Common Shares as to which Options may be granted under this
Plan or change the class of shares for which Options may be granted under this
Plan.
9. APPLICATION OF FUNDS. The proceeds received by the Company from the sale
of Common Shares pursuant to Options granted under this Plan will be used for
general corporate purposes.
10. NO OBLIGATION TO EXERCISE OPTION. The granting of an Option under this
Plan shall impose no obligation upon the Optionee to exercise any such Option.
11. NO OBLIGATION TO CONTINUE EMPLOYMENT OR SERVICE. Neither the adoption
of this Plan nor the granting of an Option under this Plan shall impose any
obligation on the Company to provide any specified amount of compensation to, or
to continue the employment of or independent contractor relationship with, any
Person.
12. APPLICABILITY OF AMENDMENTS. Without the express written consent of the
Company and the Optionee, no amendment, suspension or termination of this Plan
shall alter, impair or otherwise affect any rights or obligations of the Company
or an Optionee with respect to any Option previously granted to the Optionee.
13. WITHHOLDINGS. The Committee shall have the right to require an Optionee
to remit to the Company amounts sufficient to satisfy any federal, state or
local income, employment or other tax withholding requirements at such times as
the Company deems necessary or appropriate for compliance with law. The
Committee may provide in an Option Agreement that tax withholding requirements
may be satisfied by an election of the Optionee to (i) tender to the Company of
Common Shares, (ii) authorize the withholding of Common Shares subject to the
Option if the Optionee can do so without violating Rule 16b-3 or Section 16(b)
of the Securities Exchange Act of 1934, as amended, or (iii) any other
arrangement satisfactory to the Committee with regard to such taxes; provided,
however, that the Committee may in its discretion impose and set forth in the
Option Agreement pertaining to an Option such limitations or prohibitions on the
use of Common Shares to exercise Options as it deems appropriate.
THE KELLER MFG. CO., INC.
BOARD OF DIRECTORS'
STOCK BONUS AWARD PROGRAM
7/31 87 7/25/97
Revised 7/31/88
7/27/90
<TABLE>
<CAPTION>
<S> <C>
PURPOSE
(1) TO REWARD MANAGER, OR MANAGERS, AND BOARD MEMBERS FOR
OUTSTANDING MEASURABLE PERFORMANCE ACCOMPLISHED.
(2) TO REWARD IMAGINATIVE AND EFFECTIVE MANAGERS AND BOARD MEMBERS, AND
ENCOURAGE OTHERS TO SIMILAR PERFORMANCE.
AWARD: THE AWARD IS TO BE SEPARATE FROM BONUS PLAN. THE AWARD IS TO BE PAID IN KELLER
UNISSUED COMMON STOCK. THE NUMBER OF SHARES TO BE ISSUED WILL BE DETERMINED BY
DIVIDING THE DOLLAR AWARD BY THE MARKET VALUE OF THE STOCK AT THE TIME 1ST
QUARTERLY MEETING OF THE YEAR.
AMOUNT: THE MAXIMUM NUMBER OF SHARES TO BE ISSUED IS 16,000, PLUS 10% OF 16,000. THE
ACTUAL SHARES ISSUED CAN VARY EACH YEAR, AND SOME YEARS NO SHARES AWARDED.
PERSONS ELIGIBLE: DIVISION HEADS, PLUS PLANT MANAGERS AND BOARD MEMBERS ARE ELIGIBLE. AWARD MAY
BE SPLIT AMONG SUBORDINATE IF DIVISION HEAD CHOOSES.
SAVINGS OR CONTRIBUTION THE SAVINGS OR CONTRIBUTION MUST BE IN EXCESS OF $500,000. THE PROFIT
REQUIRED: CONTRIBUTABLE MUST BE MEASURABLE IN DOLLARS. CAN BE AN IMPROVEMENT OVER A
PERIOD OF 4 YEARS. (EXAMPLES ATTACHED.)
APPROVAL: REQUIRES BOARD APPROVAL - NOMINEES FOR AWARD TO BE PRESENTED 1ST QUARTERLY
MEETING, AND VOTED ON AT THE 2ND QUARTERLY MEETING OF EACH YEAR.
</TABLE>
THE KELLER MFG. CO., INC.
INCENTIVE PROGRAM
FOR EXECUTIVE PERSONNEL
Revised: December 29, 1981
December 31, 1992
I. OBJECTIVES:
A. To Provide additional compensation to those Executives whose
efforts are, in the opinion of the Board of Directors, a
determining factor in the profits made, each year, by the
Company. Participation shall be, in the future, restricted to
those Executives, who have the authority and responsibility
for the major functions of the organization, and whose
decisions will make major contributions to, or losses for, the
Company.
B. To provide a means whereby such efforts can be recognized by
conferring upon such key Executives ownership interest in the
Company, through receiving a part of such additional
compensation in the form of common stock in the Company.
C. To provide a greater incentive on the part of such key
Executives to exert more effort toward increasing the profits
of the Company.
D. The plan is, and shall continue to be a group program, where
all of the participants share as a percentage of base salary.
Each Executive is affected by the performance of every member.
It is intended that the plan will provide additional incentive
for all to help the performance of those who perform below
standard.
II. SELECTION AND PARTICIPATION:
A. The following key Executive positions shall be included in the
plan:
Chairman of the Board
C.E.O.
President
Vice President - Manufacturing
Vice President - Engineering
Vice President - Marketing
Vice President - Finance and Treasurer
Plant Manager - Corydon
Plant Manager - Culpeper
Plant Manager - New Salisbury
<PAGE>
B. The foregoing list of key Executive positions may be altered
by the Board of Directors from time to time.
C. To be eligible to participate in the plan, an Employee must
have worked for the Company for a continuous period of twelve
(12) months or longer; and must have worked in one of the
qualifying Executive positions for a continuous period of six
(6) months.
D. After completion of the time period outlined in "C" above, an
Employee may be selected to participate for a portion of a
year on a prorata basis.
E. Should an Executive in the plan cease participation during a
year because of retirement, disability or death, he shall
share in the plan as provided in IV. A.
F. If participation ceases by reason of death, the incentive
earned during that portion of the year of participation shall
be paid in his behalf.
III. AMOUNT FOR DISTRIBUTION:
A. The amount to be made available for distribution, under this
plan shall be an amount determined by the Board of Directors
not greater than 9.75% of the annual pre-incentive, pre-tax
profits (Profits before incentive and State and Federal income
tax deductions) of the Company. The combined total of the
Middle Management and Executive Plans shall not exceed 12%.
B. In determining the amount of profits of the company, the
amount shall be computed in conformity with generally accepted
accounting principles.
C. The certificate of the Company's independent certified public
accountants shall be binding in the event of any difference of
opinion or dispute regarding the computation of the amount of
profits so distributable under the plan.
IV. INCENTIVE IN PROPORTION TO BASE SALARY:
A. The amount of such additional compensation that may be payable
under the plan shall be distributed to each qualifying
Executive on a prorata basis. The amount so distributable to
each Executive shall bear the same ratio to the total amount
available for distribution under the plan, as such executive's
base salary (before payroll deductions) earned during the year
bears to the sum of such earned salaries of all the qualifying
Executives included under the plan.
B. This shall apply to all Executives in the plan except new
Executives coming into the plan for the first time and who
have participated for less than the full year. In this case,
the Total Base Annual Salary shall be reduced to the
fractional number of months of participation.
<PAGE>
V. PAYMENT AND METHOD OF PAYMENT:
A. Upon the determination of the amount due and payable to each
qualifying Executive under the plan, the individual Executive
shall receive seventy-five percent (75%) of such amount in
cash and twenty-five (25%) of such amount in shares of the
common stock of the Company ("Company Stock"); provided,
however, that the percentage of Company Stock shall be
adjusted upward to the extent necessary to prevent the
issuance of fractional shares.
B. The value of the Company Stock, for the purpose of payment
shall be the fair market value as agreed upon by the Board of
Directors of the Company and the participating Executives, at
the time of distribution.
C. The payment of incentives earned shall be made no later than
the fifteenth day of April in the year immediately following
the year for which the incentives were earned.
LICENSE AGREEMENT
(PGA TOUR - HOME FURNISHINGS PROGRAM)
This is an Agreement between Keller Manufacturing Company, Inc., a
corporation organized under the laws of the state of Indiana, having its
principal place of business at 701 North Water Street, Corydon, Indiana 47112
("Licensee"), and PGA TOUR Licensing, a Georgia partnership, having a principal
place of business at 320 Interstate North, Suite 102, Atlanta, Georgia 30339
("PGA TOUR Licensing").
WHEREAS PGA TOUR Licensing represents licensing interests of the PGA
TOUR, Inc. ("PGA TOUR") and has exclusive domestic rights, as representative, to
license for commercial purposes the use of certain indicia.
WHEREAS Licensee desires to be licensed to utilize certain indicia in
connection with the manufacture, distribution and sale of certain products, and
PGA TOUR Licensing is willing, subject to certain conditions, to grant such a
license.
NOW, THEREFORE, in consideration of the parties' mutual covenants and
undertakings, and other good and valuable consideration the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
1. DEFINITIONS
(a) The "Licensed Indicia" means the names, trademarks, service marks,
abbreviations, slogans, designs, logos and other symbols associated with or
referring to PGA TOUR, including any registrations that may exist therefor.
Licensed Indicia includes those in Appendix B.
(b) "Licensed Articles" means the products listed in Appendix C and
bearing Licensed Indicia.
(c) "Territory" extends to the United States of America, its
territories and possessions, and the Commonwealth of Puerto Rico. Licensee
shall not distribute or sell Licensed Articles outside the Territory, or to
any person or entity that Licensee knows or has reason to know intends or
is likely to resell Licensed Articles outside the Territory, without prior
approval of PGA TOUR.
(d) "Premium" means any product bearing Licensed Indicia sold or given
away for the purposes of increasing the sale, promoting, or publicizing any
other product, service or establishment, including incentives for sales
force, trade or consumer promotions.
(e) "Retail Sales" means the sale of Licensed Articles directly to or
for approved retail outlets, mail order, or catalogs, where the Licensed
Articles are ultimately sold to consumers. Retail Sales does not include
the sale or distribution of Licensed Articles as Premiums, which requires
separate agreements executed by PGA TOUR Licensing with both the
manufacturer and user of the Premium.
<PAGE>
(f) "Net Sales" means the total gross invoice amounts of the Licensed
Articles billed customers or payments received, whichever is greater,
including the royalty amount, less lawful quantity discounts actually
allowed and taken as such by customers and shown on the invoice, less any
credits for returns actually made as supported by credit memoranda issued
to customers, and less sales taxes and prepaid transportation charges on
Licensed Articles if shipped by Licensee. No deduction shall be made for
direct or indirect costs incurred in the manufacturing, selling,
advertising (including cooperative and promotional allowances) or
distributing the Licensed Articles, nor shall any deduction be made for
uncollectible accounts, cash discounts, similar allowances or any other
amounts.
2. GRANT OF LICENSE
(a) Grant: PGA TOUR Licensing grants to Licensee the nontransferable
license to use the Licensed indicia on the Licensed Articles for Retail
Sales in the Territory during the Term. The rights granted herein shall be
exclusive regarding Case Goods, including bedroom, dining room and casual
dining; and nonexclusive regarding Occasional Furniture (e.g., cocktail
tables, end tables, entertainment centers, etc.). This license applies only
to:
(1) The Licensed Indicia in Appendix B.
(2) The Licensed Articles described in Appendix C.
(b) Term: This Agreement shall be in effect on the last date of
signature below and shall expire on December 31, 2001, unless terminated
sooner or extended in the manner provided in this Agreement.
(c) Renewal: Upon expiration, Licensee shall have the option to renew
this Agreement for an additional three (3) year term, subject to Licensee's
satisfactory performance of all obligations under this Agreement and mutual
agreement of the parties.
(d) Limitation on License: This license is subject to the following
additional limitations.
(1) Licensee shall not use the Licensed Indicia for any purpose
other than upon or in connection with the approved Licensed Articles
listed in Appendix C. Any additions to the Licensed Articles and/or
new deigns shall be submitted in writing to PGA TOUR Licensing and
samples shall be submitted to PGA TOUR Licensing for prior written
approval. Licensee shall, upon request by PGA TOUR Licensing,
immediately recall any unauthorized products or designs from the
marketplace, and destroy or submit to PGA TOUR Licensing at Licensee's
expense said products or designs, at PGA TOUR Licensing's option.
<PAGE>
(2) Licensee shall not provide any method of application of
Licensed Indicia to any party unless PGA TOUR Licensing authorizes
Licensee to provide said application under the terms of an authorized
manufacturer's agreement.
(3) Licensee shall not contract with any party for the production
of Licensed Articles or application of Licensed Indicia by that party
("Manufacturer") without PGA TOUR Licensing's written authorization.
In the event that Licensee desires to have a Manufacturer produce one
or more Licensed Article, or any component thereof which bears the
Licensed Indicia, Licensee shall provide PGA TOUR Licensing with the
name, address, telephone number and name of the principal contact of
the proposed Manufacturer. PGA TOUR Licensing must approve any
Manufacturer, in writing, and the Manufacturer must execute an
authorized manufacturer's or supplier's agreement provided by PGA TOUR
Licensing prior to use of the Licensed Indicia. In addition, Licensee
shall take the steps necessary to ensure the following: Manufacturer
produces the Licensed Articles only as and when directed by Licensee,
which remains fully responsible for ensuring that the Licensed
Articles are manufactured in accordance with the terms herein
including approval; Manufacturer does not distribute, sell or supply
the Licensed Articles to any person or entity other than Licensee;
Manufacturer does not delegate in any manner whatsoever its
obligations with respect to the Licensed Articles. Licensee's failure
to comply with this Paragraph may result in termination of this
Agreement and/or confiscation and seizure of Licensed Articles by PGA
TOUR Licensing in its sole discretion. PGA TOUR Licensing hereby
reserves the right to terminate in its sole discretion the engagement
of any Manufacturer at any time.
(4) Licensee shall not engage in the direct shipment of off-shore
manufactured Licensed Articles to distributors, wholesalers,
retailers, etc. Licensee must take receipt of Licensed Articles at the
applicable U.S. port of entry.
(5) Licensee shall not manufacture, sell, or distribute articles
bearing Licensed Indicia as Premiums, for publicity purposes, for fund
raising, as giveaways, in combination sales, or for disposal under
similar methods of merchandising. Licensee shall not use any of the
Licensed Indicia in connection with any sweepstake, lottery, game of
chance or any similar promotional or sales program. In the event
Licensee desires to use Licensed Articles for acceptable promotional
purposes, Licensee shall obtain written approval from PGA TOUR
Licensing.
(6) Licensee shall not use the Licensed Indicia in connection
with names, marks or likenesses of PGA TOUR or Senior PGA TOUR
players, or any other person or entity unless Licensee has obtained
written authorization to use the same in connection with the Licensed
Indicia, and such use has been approved in writing by PGA TOUR
Licensing.
<PAGE>
(7) PGA Tour Licensing will have the right to approve Licensee's
opening wholesale price points, which approval will not be
unreasonably withheld.
3. EXCLUSIVITY
Except with regard to the Licensed Articles as specified in Paragraph 2(a)
and Appendix C, nothing in this Agreement shall be construed to prevent PGA TOUR
Licensing from granting any other licenses for use of the Licensed Indicia.
4. PERFORMANCE / DISTRIBUTION
Licensee agrees to use its best efforts to provide for the broadest
possible distribution of Licensed Articles throughout the Territory, consistent
with its marketing and distribution plans. Licensee agrees to maintain adequate
inventories of Licensed Articles as an essential part of its distribution
program. Licensee shall obtain prior approval of its marketing plan and
anticipated distribution channels and outlets through PGA TOUR Licensing.
5. PAYMENTS
(a) Rate: Licensee shall pay to PGA TOUR Licensing the applicable
royalty rate set forth in Appendix A. The royalties paid ("Royalty
Payments") shall be based upon Net Sales, as defined in Paragraph 1(f), of
all items containing the Licensed Indicia sold during the Term and any
renewal, and during the period allowed pursuant to Paragraph 17.
(b) For purposes of determining the Royalty Payments, sales shall be
deemed to have been made at the time of invoicing or billing for Licensed
Articles or at the time of delivery thereof, whichever comes first.
(c) Royalty Payments shall be (i) paid by Licensee to PGA TOUR
Licensing on all Licensed Articles (including without limitation any
seconds, irregulars, etc. distributed by Licensee pursuant to the
provisions of Paragraph 11(c) of this Agreement) distributed by Licensee or
any of its affiliated, associated or subsidiary companies even if not
billed or billed at less than the usual Net Sales price for such Licensed
Articles, and (ii) based upon the Net Sales price for such Licensed
Articles generally charged the trade by Licensee.
(d) In the event Licensee sells or distributes Licensed Articles at a
special price directly or indirectly to itself, including without
limitation, any subsidiary of Licensee, or to any other person, firm or
corporation related in any manner to licensee or its officers, directors or
major stockholders, or to an exclusive distributor, Licensee shall pay
Royalty Payments with respect to such sales or distribution based upon the
Net Sales price generally charged the trade by Licensee.
<PAGE>
(e) Advance and Minimum Payments: Licensee shall pay to PGA TOUR
Licensing an Advance and a Minimum Guarantee. The Advance is the
nonrefundable amount which Licensee shall pay to PGA TOUR Licensing upon
execution of this Agreement, which will be credited against the Minimum
Guarantee. The Minimum Guarantee is the minimum amount of royalties
Licensee shall pay to PGA TOUR Licensing during the Term. The Advance and
Minimum Guarantee schedules are listed in Appendix A.
6. MULTIPLE ROYALTIES
PGA TOUR Licensing recognizes that Licensee may be subject to other license
agreements which, together with this Agreement, would subject certain Licensed
Articles to one or more additional royalty payments. Royalty Payments required
to be paid to PGA TOUR Licensing for Licensed Articles may be reduced by
mutually agreed upon amounts set forth in writing.
7. STATEMENT, PAYMENTS AND PENALTIES
(a) On or before the twentieth (20th) day of each month, Licensee
shall submit to PGA TOUR Licensing, in a format agreed upon by PGA TOUR
Licensing, full and accurate statements showing the quantity, description,
and Net Sales of the Licensed Articles distributed and/or sold during the
preceding month, and including any additional information kept in the
normal course of business by the Licensee which is appropriate to enable an
independent determination of the amount due hereunder. All Royalty Payments
then due PGA TOUR Licensing shall be made simultaneously with the
submission of the statements. Such statements shall be submitted whether or
not they reflect any sales.
(b) Failure to submit timely or accurate statements and/or Royalty
Payments shall result in an additional charge of 1 1/2% per month on any
balance unpaid as of the applicable reporting period.
(c) The receipt and/or acceptance by PGA TOUR Licensing of the
statements furnished or Royalty Payments, or the cashing of any royalty
checks paid hereunder, shall not preclude PGA TOUR Licensing from
questioning the correctness thereof at any time. In the event that any
inconsistencies or mistakes are discovered in such statements or payments,
they shall immediately be rectified by the Licensee and the appropriate
payment shall be made by the Licensee.
<PAGE>
(d) Licensee shall, unless otherwise directed in writing by PGA TOUR
Licensing, send all Royalty Payments and accounting reports to:
Bill Battle
PGA TOUR Licensing
320 Interstate North, Suite 102
Atlanta, GA 30339
8. OWNERSHIP OF LICENSED INDICIA AND PROTECTION OF RIGHTS
(a) Licensee acknowledges and agrees that PGA TOUR owns or has the
right to use the Licensed Indicia in Appendix B and any registrations
therefor, as well as any indicia adopted and used or approved for use by
PGA TOUR, and that each of the Licensed Indicia is valid, and that PGA TOUR
has the exclusive right to use each of its Licensed Indicia subject only to
the revocable license to use the Licensed Indicia. Licensee acknowledges
the validity of the state and federal registrations PGA TOUR owns, obtains
or acquires for its Licensed Indicia. Licensee shall not, at any time, file
any trademark application with the United States Patent and Trademark
Office, or with any other governmental entity, anywhere in the world, for
the Licensed Indicia, whether or not such Licensed Indicia are identified
in Appendix B. Licensee shall not use any of the Licensed Indicia, in whole
or in part, or any similar mark as, or as part of, a trademark, service
mark, trade name, fictitious name, company or corporate name anywhere in
the world. Any trademark or service mark registration obtained or applied
for that contains the Licensed Indicia or any similar mark shall be
transferred to PGA TOUR without compensation, and at the expense of
Licensee.
(b) Licensee shall not oppose or seek to cancel or challenge, in any
forum, including, but not limited to, the United States Patent and
Trademark Office, any mark, application or registration of PGA TOUR.
Licensee shall not object to, or file any action or lawsuit because of, any
use by PGA TOUR of any Licensed Indicia for any goods or services, whether
such use is by PGA TOUR directly or through different licensees or
authorized users.
(c) Licensee recognizes the great value of the good will associated
with the Licensed Indicia and acknowledges that such good will belongs to
PGA TOUR, and that such Licensed Indicia have inherent and/or acquired
distinctiveness. Licensee shall not, during the term of this Agreement or
thereafter, attack the property rights of PGA TOUR, attack the validity of
this Agreement, or use the Licensed Indicia or any similar mark in any
manner other than as licensed hereunder.
(d) Licensee agrees to assist PGA TOUR Licensing in the protection of
the Licensed Indicia and shall provide, at reasonable cost to be borne by
PGA TOUR Licensing or PGA TOUR, any evidence, documents, and testimony
concerning the use by Licensee of any one or more of the Licensed Indicia,
which PGA TOUR Licensing may request for use in obtaining, defending, or
enforcing rights in any Licensed Indicia or related application or
registration. Licensee shall notify PGA TOUR Licensing in writing of any
infringements or imitations by others of the Licensed Indicia of which it
is aware. As between Licensee and PGA TOUR Licensing, PGA TOUR Licensing
shall have the sole right to determine whether or not any action shall be
taken on account of any such infringements or imitations. Licensee shall
not institute any suit or take any action on account of any such
infringements or imitations without first obtaining the written consent of
PGA TOUR Licensing to do so. Licensee agrees that it is not entitled to
share in any proceeds received by PGA TOUR Licensing or PGA TOUR (by
settlement or otherwise) in connection with any formal or informal action
brought by PGA TOUR Licensing, PGA TOUR or other entity.
<PAGE>
(e) Nothing in this Agreement gives Licensee any right, title, or
interest in any Licensed Indicia except the right to use in accordance with
the terms of this Agreement. Licensee's use of any Licensed Indicia inures
to the benefit of PGA TOUR.
(f) Licensee acknowledges that any original designs, artwork or other
compilations or derivatives ("Works") created by it pursuant to this
Agreement that contain the Licensed Indicia are compilations or derivatives
as those terms axe used in Section 103 of the Copyright Act. Therefore, any
rights, including copyrights, that Licensee might have in those original
Works do not extend to any portion or aspect of the Licensed Indicia or any
derivatives thereof, and do not in any way dilute or affect the interests
of PGA TOUR in the Licensed Indicia or any derivatives thereof.
Accordingly, Licensee shall not copy, use, assign or otherwise transfer any
rights in any Works with any portion or aspect of the Licensed Indicia or
any derivatives thereof included, except in accordance with this Agreement.
Licensee shall not affix a copyright notice to any product bearing Licensed
Indicia, or otherwise attempt to obtain or assert copyright rights in any
artwork or design which contains Licensed Indicia, without the express
written authorization of PGA TOUR Licensing.
(g) Licensee acknowledges that its breach or threatened breach of this
Agreement win result in immediate and irremediable damage to PGA TOUR
Licensing and/or PGA TOUR and that money damages alone would be inadequate
to compensate PGA TOUR Licensing and/or PGA TOUR. Therefore, in the event
of a breach or threatened breach of this Agreement by Licensee, PGA TOUR
Licensing and/or PGA TOUR may, in addition to other remedies, immediately
obtain and enforce injunctive relief prohibiting the breach or threatened
breach or compelling specific performance. In the event of any breach or
threatened breach of this Agreement by Licensee or infringement of any
rights of PGA TOUR, if PGA TOUR Licensing and/or PGA TOUR employ attorneys
or incur other expenses, Licensee shall reimburse PGA TOUR Licensing and/or
PGA TOUR for their reasonable attorney's fees and other expenses.
9. DISPLAY AND APPROVAL OF LICENSED INDICIA
(a) Licensee shall use the Licensed Indicia properly on all Licensed
Articles, as well as labels, containers, packages, tags, and displays
(collectively "Packaging"), and in all print advertisements and promotional
literature, television and radio commercials, and press releases
(collectively "Advertising"). On all visible Packaging and Advertising, the
Licensed Indicia shall be emphasized in relation to surrounding material by
using a distinctive type face, color, underlining, or other technique
approved by PGA TOUR Licensing. Wherever appropriate, the Licensed Indicia
shall be used as a proper adjective, and the common noun for the product
shall be used in conjunction with the Licensed Indicia. The proper symbol
to identify the Licensed Indicia as a trademark (i.e., the circled "R"
symbol if the Licensed Indicia is registered in the United States Patent
and Trademark Office or the "TM" symbol if not so registered) shall be
placed adjacent to each Licensed Indicia.
<PAGE>
(b) PGA TOUR Licensing will provide to Licensee guidance on the proper
use of the Licensed Indicia, including the guidelines set forth in Appendix
D. A true representation or example of any proposed use by Licensee of any
of the Licensed Indicia listed, in any visible or audible medium, and all
proposed products, Packaging and Advertising containing or referring to any
Licensed Indicia, shall be submitted at Licensee's expense to PGA TOUR
Licensing for approval prior to such use. Licensee shall not use any
Licensed Indicia in any form or in any material disapproved or not approved
by PGA TOUR Licensing.
(c) Licensee shall display on each Licensed Article or its Packaging
and Advertising the trademark and license notices required by PGA TOUR
Licensing's written instructions in effect as of the date of manufacture.
10. DISPLAY OF OFFICIAL TAG
(a) Licensee shall, prior to distribution or sale of any Licensed
Article, affix to each Licensed Article, its Packaging and Advertising an
"Officially Licensed Products" tag in the form prescribed by PGA TOUR
Licensing ("Official Tag"). In addition, Licensee shall affix its name to
each Licensed Article, its Packaging and Advertising. Licensee shall obtain
Official Tags from one or more suppliers authorized by PGA TOUR Licensing
to produce those tags.
(b) Licensee is responsible for affixing the Official Tag to each
Licensed Article, its Packaging and Advertising. Licensee shall not provide
Official Tags to any third party for any purpose whatsoever, without prior
written approval by PGA TOUR Licensing.
(c) Licensee agrees to defend, indemnify and hold harmless PGA TOUR
Licensing, PGA TOUR, and those Indemnified Parties set forth in Paragraph
14 from a liability claims, costs or damages, including but not limited to
any liability for the conversion or wrongful seizure of any of the Licensed
Articles not containing the Official Tag and Licensee's name as required by
this Paragraph. This provision is in addition to and in no way limits
Paragraph 14.
11. PROCEDURE FOR PRODUCT SUBMISSION AND APPROVAL
(a) Licensee understands and agrees that it is an essential condition
of this Agreement to protect the high reputation enjoyed by PGA TOUR, and
that the products and designs sold, promoted, or advertised in association
with any of the Licensed Indicia shall be of high and consistent quality,
subject to the approval and continuing supervision and control of PGA TOUR
Licensing. All products, Packaging and/or designs containing the Licensed
Indicia must receive written quality control approval by PGA TOUR Licensing
as provided herein.
<PAGE>
(b) The description of each Licensed Article to be sold under each of
the Licensed Indicia are set out in Appendix C, or in an attachment to
Appendix C; and guidelines regarding the Licensed Indicia are set out in
Appendix D. Licensee agrees to adhere strictly to the descriptions and
guidelines for each Licensed Article sold under each of the Licensed
Indicia.
(c) Prior to the manufacture, distribution or sale of any product,
Packaging, or design containing the Licensed Indicia, Licensee shall submit
to PGA TOUR Licensing, at Licensee's expense, pictures, illustrations or
other renderings, and product specifications, of each product, Packaging
and/or design, and shall submit or make available for inspection a mutually
agreed-upon number of actual products as they would be produced for sale.
If PGA TOUR Licensing approves in writing the product, Packaging and/or
design, the same shall be accepted to serve as an example of quality for
that product, Packaging and/or design, and production quantities may be
manufactured by Licensee in strict conformity with the approved sample.
Licensee shall not depart from the approved quality standards in any
material respect without the prior written approval of PGA TOUR Licensing.
Products not meeting those standards, including seconds, irregulars, etc.,
shall not be sold or distributed under any circumstances without PGA TOUR
Licensing's prior written consent.
(d) Licensee may only use the Licensed Indicia as depicted in Appendix
B and approved in the manner set forth herein. Licensee may not modify the
Licensed Indicia without the express written approval of PGA TOUR
Licensing. The use of the Licensed Indicia in conjunction with original
artwork supplied by the Licensee requires the express written approval of
PGA TOUR Licensing. Licensee may submit sketches of proposed artwork for
preliminary approval before submitting finished samples; provided, however,
that such preliminary approval shall not relieve Licensee from its product
and design approval obligations as stated in this Agreement.
(e) Upon request by PGA TOUR Licensing at any other time, in addition
to any other requirement, Licensee shall submit or make available for
inspection such mutually agreed-upon number of each product, Packaging
and/or design sold under the Licensed Indicia as may be necessary for PGA
TOUR Licensing to examine and test to assure compliance with the quality
and standards for products, Packaging and/or designs approved herein.
(f) If PGA TOUR Licensing notifies Licensee of any defect in any
product or Packaging, or of any deviation from the approved use of any of
the Licensed Indicia, Licensee shall have fifteen (15) days from the date
of notification from PGA TOUR Licensing to correct every noted defect or
deviation. Defective products, Packaging and/or designs in Licensee's
inventory shall not be sold or distributed and shall, upon request by PGA
TOUR Licensing, be immediately recalled from the marketplace and destroyed
or submitted to PGA TOUR Licensing, at PGA TOUR Licensing's option and at
Licensee's expense. However, if it is possible to correct all defects in
the products, Packaging and/or designs in Licensee's inventory, such
products, Packaging or designs may be sold after all defects are corrected.
PGA TOUR Licensing and/or its authorized representatives shall have the
right at reasonable times without notice to inspect Licensee's plants,
warehouses, storage facilities and operations related to the production of
Licensed Articles.
<PAGE>
(g) Upon request by PGA TOUR Licensing and by mutual consent, Licensee
shall provide a mutually agreed-upon number of Licensed Articles to be used
by PGA TOUR Licensing and PGA TOUR staff for promotional purposes.
(h) PGA TOUR Licensing and/or PGA TOUR shall have the right to
purchase Licensed Articles at most favored customer wholesale pricing
levels, at any time during the Term or any renewals.
12. NO JOINT VENTURE OR ENDORSEMENT OF LICENSEE
Nothing herein contained shall be construed to place the parties in the
relationship of partners, joint venturers, or agents, and Licensee shall have no
power to obligate or bind PGA TOUR Licensing or PGA TOUR in any manner
whatsoever. Although PGA TOUR Licensing retains the right to approve the use of
the Licensed Indicia and the quality of the Licensed Articles, neither PGA TOUR
Licensing nor PGA TOUR is in any way a guarantor of the quality of any product
produced by Licensee. Licensee shall neither state nor imply, directly or
indirectly, that the Licensee or its activities, other than under this license,
are supported, endorsed or sponsored by PGA TOUR Licensing or by PGA TOUR and,
upon direction of PGA TOUR Licensing or PGA TOUR, shall issue express
disclaimers to that effect.
13. INFRINGEMENT
Licensee represents and warrants to PGA TOUR Licensing that all designs and
products submitted for approval are not subject to any valid patent, copyright,
trademark or any other proprietary rights of any non-consenting third party.
Neither PGA TOUR Licensing nor PGA TOUR shall be liable as the result of
activities by Licensee under this Agreement for infringement of any patent,
copyright, trademark or other right belonging to any third party, or for damages
or costs involved in any proceeding based upon any such infringement, or for any
royalty or obligation incurred by Licensee because of any patent, copyright, or
trademark held by a third party.
14. INDEMNIFICATION AND INSURANCE
(a) Licensee is solely responsible for, and will defend, indemnify and
hold harmless PGA TOUR Licensing, PGA TOUR, each of their affiliated
entities, and their respective officers, agents, and employees
(collectively "Indemnified Parties") from any claims, demands, causes of
action or damages, including reasonable attorney's fees, arising out of (i)
any unauthorized use of or infringement of any patent, copyright, trademark
or other proprietary right by Licensee in connection with the designs and
Licensed Articles covered by this Agreement, (ii) alleged defects or
deficiencies in said Licensed Articles or the use thereof, or false
advertising, fraud, misrepresentation or other claims related to the
Licensed Articles not involving a claim of right to the Licensed Indicia,
(iii) the unauthorized use of the Licensed Indicia or any breach by
Licensee of this Agreement, (iv) libel or slander against, or invasion of
the right of privacy, publicity or property of, or violation or
misappropriation of any other right of any third party, and/or (v)
agreements or alleged agreements made or entered into by Licensee to
effectuate the terms of this Agreement. The indemnifications hereunder
shall survive the expiration or termination of this Agreement.
<PAGE>
(b) Prior to the first sale of any Licensed Article, Licensee shall
obtain, and thereafter maintain, Commercial General Liability insurance,
including product and contractual liability insurance, providing adequate
protection for the Indemnified Parties as additional insured parties on
License's policy against any claims, demands, or causes of action and
damages, including reasonable attorney's fees, arising out of any of the
circumstances described in Paragraph 14(a) above. Such insurance policy
shall not be canceled or materially changed in form without at least thirty
(30) days written notice to PGA TOUR Licensing. PGA TOUR Licensing shall be
furnished with a certificate of such insurance and endorsements in the form
prescribed by PGA TOUR Licensing. Licensee agrees that such insurance
policy or policies shall provide coverage of one million dollars
($1,000,000) for personal and advertising injury, bodily injury and
property damage arising out of each occurrence, or Licensees standard
insurance policy limits, whichever is greater. However, recognizing that
the aforesaid amounts may be inappropriate with regard to specific classes
of goods, it is contemplated that PGA TOUR Licensing may make reasonable
adjustment to the foregoing amounts. Any adjustment must be confirmed in
writing by PGA TOUR Licensing.
(c) PGA TOUR Licensing and PGA TOUR are responsible for, and will
defend, indemnify and hold harmless Licensee and its respective officers,
agents, and employees from any claims, demands, causes of action or
damages, including reasonable attorney's fees, arising out of a claim by
any third party disputing PGA TOUR Licensing's rights to use or license the
Licensed Indicia, or alleging infringement of Licensed Indicia by Licensee
in connection with its production and distribution of Licensed Articles
authorized by this Agreement; provided, however, that Licensee notifies PGA
TOUR Licensing promptly in writing of the claim and permits PGA TOUR
Licensing and PGA TOUR to defend, compromise or settle the claim. The
indemnifications hereunder shall survive the expiration or termination of
this Agreement.
15. RECORDS AND RIGHT TO AUDIT
(a) Licensee shall, keep, maintain and preserve in its principal place
of business during the Term, any renewal periods and at least three (3)
years following termination or expiration, complete and accurate books,
accounts, records and other materials covering all transactions related to
this Agreement in a manner such that the information contained in the
statements referred to in Paragraph 7 can be readily determined including,
without limitation, customer records, invoices, correspondence and banking,
financial and other records in Licensee's possession or under its control.
PGA TOUR Licensing and/or its duly authorized representatives shall have
the right to inspect and audit all materials related to this Agreement,
which right to inspect and audit shall include the conduct of normal audit
tests of additional Licensee records including those covering
"non-licensed" sales to verify that they are not sales covered by this
Agreement. In addition to the materials required by normal accounting
practices, Licensee must retain detail of PGA TOUR licensed sales to the
invoice number level for audit purposes, and invoices must indicate the PGA
TOUR name beside each Licensed Article.
<PAGE>
(b) Such materials shall be available for inspection and audit
(including photocopying) at any time during the Term, any renewal periods
and at least three (3) years following termination or expiration during
reasonable business hours and upon at least five (5) days notice by PGA
TOUR Licensing and/or its representatives. Licensee will cooperate and will
not cause or permit any interference with PGA TOUR Licensing and/or its
representatives in the performance of their duties of inspection and audit.
PGA TOUR Licensing and/or its representatives shall have free and full
access to said materials for inspection and audit purposes.
(c) Following the conduct of the audit, Licensee shall take immediate
steps to timely resolve all issues raised therein, including payment of any
monies owing and due. Should an audit indicate an underpayment of 10% or
more or an underpayment of $20,000 or more of the royalties due PGA TOUR
Licensing, the cost of the audit shall be paid by Licensee. Payment of the
audit cost is in addition to the full amount of any underpayment including
interest as provided in Paragraph 7(b), to be paid by Licensee. Licensee
must cure any contract breaches discovered during the audit, provide
amended reports if required, and submit the amount of any underpayment
including interest and, if applicable, the cost of the audit within thirty
(30) days from the date of the conduct of the audit.
16. TERMINATION
(a) PGA TOUR Licensing shall have the right to terminate this
Agreement without prejudice to any other rights it may have, whether under
the provisions of this Agreement, in law, in equity or otherwise, upon
written notice to Licensee at any time should any of the following defaults
occur:
(1) Licensee does not begin the bona fide manufacture,
distribution, and sale of Licensed Articles within one (1) year of the
date of this Agreement.
(2) Licensee fails to continue the bona fide manufacture,
distribution, and sale of Licensed Articles during the Term. If during
any calendar quarter of the Term, Licensee fails to sell any of the
Licensed Articles, PGA TOUR Licensing may terminate this Agreement
with respect to said Licensed Article by giving written notice.
<PAGE>
(3) Licensee fails to make any payment due or fails to deliver
any required statement, and fails to cure this default within fifteen
(15) days from receipt of notice from PGA TOUR Licensing.
(4) The amounts stated in the periodic statements furnished
pursuant to Paragraph 7 are significantly or consistently understated.
(5) Licensee fails to resolve any issue raised in connection with
any audit.
(6) Licensee fails to pay its liabilities when due, or makes any
assignment for the benefit of creditors, or files any petition under
any federal or state bankruptcy statute, or is adjudicated bankrupt or
insolvent, or if any receiver is appointed for its business or
property, or if any trustee in bankruptcy shall be appointed under the
laws of the United States government or the several states.
(7) Licensee attempts to grant or grants a sublicense or attempts
to assign or assigns any right or duty under this Agreement to any
person or entity without the prior written consent of PGA TOUR
Licensing.
(8) Licensee or any related entity manufactures, distributes or
sells any product infringing or diluting the trademark, property or
any other right of any third party.
(9) Licensee fails to deliver to PGA TOUR Licensing or maintain
in full force and effect the insurance referred to in Paragraph 14(b).
(10) Any governmental agency or court of competent jurisdiction
finds that the Licensed Articles are defective in any way, manner or
form.
(11) Licensee discontinues its business as it is now conducted.
(12) Licensee manufactures, distributes or sells Licensed
Articles of quality lower than the samples approved, or manufactures,
distributes, sells or uses Licensed Articles or Licensed Indicia in a
manner not approved or disapproved by PGA TOUR Licensing, and fails to
cure this default within fifteen (15) days from receipt of notice from
PGA TOUR Licensing.
(13) Licensee breaches any provision in this Agreement, and fails
to cure this default within fifteen (15) days from receipt of notice
from PGA TOUR Licensing.
(14) Licensee fails to affix to each Licensed Article, its
Packaging and Advertising an Official Tag and Licensee name in the
manner provided in Paragraph 10, and fails to cure this default within
fifteen (15) days from receipt of notice from PGA TOUR Licensing.
<PAGE>
(b) PGA TOUR Licensing shall have the right to modify Appendices B or
D of this Agreement upon written notice to Licensee. Any such modification
of Appendices will be subject to Licensee's right to dispose affected
inventory under Paragraph 17.
(c) The entire unpaid balance of all payments owing and due under this
Agreement shall immediately become due and payable upon termination.
17. EFFECT OF EXPIRATION OR TERMINATION / DISPOSAL OF INVENTORY
(a) Effect of Expiration or Termination: After expiration or
termination of this Agreement for any reason, Licensee shall refrain from
further use of any of the Licensed Indicia or any similar mark, including
any geographic reference or depiction, directly or indirectly, or any
derivation of the Licensed Indicia or a similar mark, except as provided in
Paragraph 17(b), or unless expressly authorized by PGA TOUR Licensing.
Until payment to PGA TOUR Licensing of any monies due it, PGA TOUR
Licensing shall have a lien on any units of Licensed Articles not then
disposed of by Licensee and on any monies due Licensee from any jobber,
wholesaler, distributor, or other third parties with respect to sales of
Licensed Articles.
(b) Disposal of Inventory: After expiration or termination of this
Agreement, Licensee shall have no further right to manufacture Licensed
Articles or other products utilizing the Licensed Indicia, but may continue
to distribute its remaining inventory of Licensed Articles in existence at
the time of expiration or termination for a period of ninety (90) days,
provided all statements (including Final Statement) and payments then due
have been delivered and that during the disposal period Licensee delivers
all statements and payments due in accordance with Paragraph 7 and complies
with all other terms and conditions of this Agreement. Licensee may request
an additional period of ninety (90) days to dispose of inventory if
necessary. Said request will not be unreasonably denied. Notwithstanding
the foregoing, Licensee shall not manufacture, sell or distribute any
Licensed Articles after the expiration or termination of this Agreement
because of (a) departure of Licensee from the quality and style approved by
PGA TOUR Licensing under this Agreement; (b) failure of Licensee to obtain
product or design approval; or (c) a default under Paragraph 16.
18. FINAL STATEMENT
Thirty (30) days before the expiration of this Agreement, Licensee shall
furnish to PGA TOUR Licensing a statement showing the number and description of
Licensed Articles on hand or in process. If this license is terminated for any
reason, such statement shall be furnished within fifteen (15) days after notice
of termination. PGA TOUR Licensing reserves the right to conduct physical
inventories to ascertain or verify the amount of remaining inventory.
<PAGE>
19. SURVIVAL OF RIGHTS
(a) The terms and conditions of this Agreement necessary to protect
the rights and interests of PGA TOUR in its Licensed Indicia including, but
not limited to, Licensee's obligations under Paragraph 14, shall survive
the termination or expiration of this Agreement.
(b) The terms and conditions of this Agreement requiring Licensee to
furnish PGA TOUR Licensing with reports, statements, or accounts and
payment of monies due to PGA TOUR Licensing, and providing PGA TOUR
Licensing with the right to examine and make copies of Licensee's books and
records to determine or verify the correctness and accuracy of Licensee's
reports, statements, accounts or payments shall survive the termination or
expiration of this Agreement.
(c) The term and conditions of this Agreement providing for any
activity following the effective date of termination or expiration of this
Agreement shall survive until such time as those terms and conditions have
been fulfilled or satisfied.
20. NOTICES
All notices and statements to be given and all payments to be made, shall
be given or made to the parties at their respective addresses set forth herein,
unless notification of a change of address is given in writing. Any notice shall
be sent by first class mail, or by mailgram, telex, TWX, telegram, any
nationally recognized overnight delivery service or by telecopy, and shall be
deemed to have been given at the time it is mailed or sent.
21. CONFORMITY TO LAW
(a) Licensee shall comply with such guidelines, policies, and/or
requirements as PGA TOUR Licensing may announce from time to time,
including without limitation guidelines, policies and/or requirements
contained in periodic PGA TOUR Licensing bulletins. Licensee shall comply
with all laws, regulations and standards relating or pertaining to the
manufacture, sale, advertising or use of the Licensed Articles and shall
maintain the highest quality and standards. Licensee shall comply with the
requirements of any regulatory agencies (including without limitation the
United States Consumer Product Safety Commission) which shall have
jurisdiction over the Licensed Articles.
(b) Licensee undertakes and agrees to obtain and maintain all required
permits and licenses at Licensee's expense.
(c) Licensee shall pay all federal, state and local taxes due on or by
reason of the manufacture, distribution or sale of any Licensed Articles.
<PAGE>
22. SEVERABILITY
The determination that any provision of this Agreement is invalid or
unenforceable shall not invalidate this Agreement, and the remainder of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
23. NON-ASSIGNABILITY
This Agreement is personal to Licensee, and Licensee shall not sublicense
or franchise any of its rights. Neither this Agreement nor any of Licensee's
rights shall be sold, transferred or assigned by Licensee without PGA TOUR
Licensing's prior written approval, and no rights shall devolve by operation of
law or otherwise upon any assignee, receiver, liquidator, trustee or other
party. Subject to the foregoing, this Agreement shall be binding upon any
approved assignee or successor of Licensee and shall inure to the benefit of PGA
TOUR Licensing its successors and assigns.
24. NO WAIVER, MODIFICATION, ETC.
This Agreement, including appendices, constitutes the entire agreement and
understanding between the parties and cancels, terminates, and supersedes any
prior agreement or understanding relating to the subject matter hereof between
Licensee, PGA TOUR Licensing and PGA TOUR. There are no representations,
promises, agreements, warranties, covenants or understandings other than those
contained herein. None of the provisions of this Agreement may be waived or
modified, except expressly in writing signed by both parties. However, failure
of either party to require the performance of any term in this Agreement or the
waiver by either party of any breach shall not prevent subsequent enforcement of
such term nor be deemed a waiver of any subsequent breach.
25. THIRD PARTY BENEFICIARY
PGA TOUR shall be deemed to have rights as a third party beneficiary of
this Agreement.
26. MISCELLANEOUS
When necessary for appropriate meaning, a plural shall be deemed to be the
singular and singular shall be deemed to be the plural. The attached appendices
are an integral part of this Agreement. Paragraph headings are for convenience
only and shall not add to or detract from any of the term or provisions of this
Agreement. This Agreement shall be construed in accordance with the laws of the
state of Georgia, which shall be the sole jurisdiction for any disputes. This
Agreement shall not be binding on PGA TOUR Licensing until signed by an officer
of PGA TOUR Licensing.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement.
LICENSEE: KELLER MANUFACTURING COMPANY, INC.
By: Steven W. Robertson [Seal]
(Signature of officer, partner, or individual
duly authorized to sign)
Title: Sr. V.P.
Date: 3/25/98
PGA TOUR LICENSING
By:___________________________________
(Signature of President or officer duly
authorized to sign)
Title:__________________________________
Date: 3/24/98
<PAGE>
<TABLE>
<CAPTION>
APPENDIX A
ROYALTY FEE SCHEDULE
<S> <C> <C> <C> <C>
LICENSED MINIMUM
PROPERTY ARTICLES ROYALTY GUARANTEE ADVANCE
See App. C 5% N/A N/A
PGA TOUR
SENIOR
PGA TOUR
</TABLE>
<PAGE>
APPENDIX B
LICENSED INDICIA
PGA TOUR owns or has the right to license the use of the following Licensed
Indicia.
VERBIAGE
- --------
PGA TOUR
SENIOR PGA TOUR
<TABLE>
<CAPTION>
GRAPHICS
- --------
<S> <C>
GRAPHIC I GRAPHIC II
[Insignia of the PGA Tour. [Insignia of the Senior PGA Tour.
Rectangular box with the term "Tour" Rectangular box with "PGA" and "TOUR"
written vertically along the left side and the written in the same manner as Graphic I.
term "PGA" written horizontally along the The term "SENIOR" is written horizontally
top. A silhouette image of a male golfer at about the term "PGA". A silhouette image
the top of his swing is beside the vertically of a male golfer at the top of his swing is
written "Tour"] beside the vertically written "TOUR" just as
in Graphic I, however, this image is in
knickers and wearing a hat whereas, the
image in Graphic I is in long pants and
hatless.]
<FN>
Any additions to or derivations of the Licensed Indicia shown above must be
approved by PGA TOUR Licensing and added to the Agreement by addendum. Composite
logos (e.g., featuring sponsors such as Michelob, O'Douls, etc.) are not
included in the Agreement.
</FN>
</TABLE>
<PAGE>
APPENDIX C
LICENSED
ARTICLES
- --------
Exclusive
- ---------
Case Goods, including bedroom, dining room and casual dining
Nonexclusive
- ------------
Occasional Furniture (e.g., cocktail tables, end tables, entertainment centers,
etc.).
<PAGE>
APPENDIX D
LICENSED INDICIA GUIDELINES
PGA TOUR
- --------
1. Logo samples and PMS requirements are set forth in Appendix B. Uses of the
Licensed Indicia shall conform to the samples.
2. Prominent uses of the PGA TOUR Licensed Indicia include a "(R)" symbol,
denoting the same as a registered trademark.
3. Uses of the PGA TOUR name shall in all cases be styled in all capital
letters.
4. The PGA letters are not to be punctuated with periods (i.e., not P.G.A.
Tour).
5. All promotional and advertisement materials, using or incorporating the
Licensed Indicia shall be tasteful and professional, and shall not include
any claims which are inaccurate or deceptive in any way.
6. Any questions regarding proper usages of the Licensed Indicia should be
discussed in advance with the PGA TOUR Licensing staff.
SENIOR PGA TOUR
- ---------------
1. Logo samples and PMS requirements are set forth in Appendix B. Uses of the
Licensed Indicia shall conform to the samples.
2. Prominent uses of the SENIOR PGA TOUR Licensed Indicia shall include a
"(TM)" symbol, denoting the same as a trademark.
3. Uses of the SENIOR PGA TOUR name shall in all cases be styled in all
capital letters.
4. The PGA letters are not to be punctuated with periods (i.e., not P.G.A.
TOUR).
5. All promotional and advertisement materials using or incorporating the
Licensed Indicia shall be tasteful and professional, and shall not include
any claims which are inaccurate or deceptive in any way.
6. Any questions regarding the proper usages of the Licensed Indicia should be
discussed in advance with the PGA TOUR Licensing staff.
DESIGNATION AND SPONSORSHIP AGREEMENT
This Agreement is made as of the 25th day of March, 1996 by and between PGA
TOUR, INC., a Maryland corporation with its principal offices located at 112 TPC
Boulevard, Ponte Vedra, Florida 32082 ("TOUR") and KELLER MANUFACTURING COMPANY,
an Indiana corporation ("Keller") with its principal offices located at P.O. Box
8 Corydon, IN 47112 in the following circumstances:
WITNESSETH
WHEREAS, TOUR is the organization of certain professional tournament
golfers that, among other things, sanctions, cosponsors and promotes certain
professional golf tournaments ("PGA TOUR Events"); and
WHEREAS, TOUR is the proprietor of the PGA TOUR trademarks and logos set
forth on Attachment I hereto (the "Marks") and has the right to authorize the
use of the Marks as more fully provided herein; and
WHEREAS, Keller is a nationally recognized manufacturer of fine furniture;
NOW THEREFORE, in consideration of the mutual covenants and promises herein
contained the parties do hereby agree as follows:
1.0 TERM. The term of this Agreement shall commence as of the date of this
Agreement and shall terminate on February 28, 1998 ("Term").
2.0 GRANT OF OFFICIAL DESIGNATION LICENSE. TOUR hereby grants to Keller,
subject to the provisions and conditions hereof to designate itself as the
"Official Sponsor of the PGA TOUR Storm Alert Program" (the "Designation"). This
license shall include the right to use the Marks on premium items (i.e., items
used for promotional purposes and not for sale) which also incorporate the
Keller trademark and/or logo; provided, however, that Keller will purchase such
premium products from TOUR's licensee for such products or, if TOUR has no
licensee for such product, Keller Will coordinate the purchase of such items
through TOUR's licensing agent. Keller understands and agrees that the license
rights granted herein shall not affect TOUR's rights to license the use of the
Marks. In consideration of the license rights granted above, Keller shall pay to
TOUR royalties in the amount of $150,000 per year. All annual amounts will be
due and payable monthly beginning April 1, 1996.
<PAGE>
3.0 ON-SITE EXPOSURE. Whenever possible, Tour, in its sole discretion, will
arrange for on-site exposure of the Designation at PGA TOUR, SENIOR PGA TOUR and
NIKE TOUR Events where the Storm Alert Program is in operation.
4.0 USE OF MARKS: QUALITY CONTROL.
4.1 Prior Approval. All uses of the Marks made by Keller pursuant
hereto shall be subject to TOUR's prior approval. Keller shall submit
materials pertaining to all proposed uses of the Marks to TOUR for its
review. TOUR shall have ten (10) days from the date of receipt of such
materials to either approve or disapprove of the proposed use. Should TOUR
fail to notify Keller of TOUR's approval or disapproval of any proposed use
of the Marks, such proposed use shall be deemed approved.
4.2 Guidelines. Keller agrees to follow the instructions set forth in
Attachment II hereto with regard to proper usage of the Marks, including
the display of trademark and service mark registration symbols and notices.
5.0 TITLE TO MARKS: BENEFIT OF USE.
Keller acknowledges that TOUR is the proprietor of the Marks and that all
rights arising from Keller's use of the Marks under this Agreement shall inure
to the benefit of TOUR. Keller further acknowledges that it is not acquiring any
interest or rights in the marks apart from the rights set forth in this
Agreement. Keller will not contest or deny the validity of the Marks or the
proprietary interest of TOUR therein. Upon termination of this Agreement for any
reason, Keller shall immediately discontinue entirely all uses of the Marks, and
all rights granted in and to the Marks shall revert to TOUR. Keller agrees that
it will not knowingly use any other word, trademark, service mark, brand name,
trade name, symbol, design or the like that infringes TOUR's trademark rights.
Keller will not intentionally take any action that might harm or prejudice the
Marks or TOUR's rights therein in any way.
6.0 REPRESENTATIONS AND WARRANTIES.
6.1 TOUR represents and warrants that it has the exclusive right to
license for commercial purposes the use of the Marks in the United States
during the Term.
6.2 TOUR warrants that it has the exclusive power and authority to
convey the rights granted herein to Keller.
6.3 TOUR represents that United States trademark registrations for the
Marks, during the Term, will remain current, valid and subsisting, that
TOUR has the right to license the use of the Marks, that no third party has
any prior or superior rights in the Marks in the United States and that use
of the Marks in the United States by Keller shall not violate the rights of
any third party.
<PAGE>
7.0 PROTECTION OF THE MARKS.
Keller will promptly notify TOUR of any infringement or imitation of the
Marks, or of any use by third persons of a trademark, service mark, trade name,
symbol, design or the like similar to the Marks or of any acts of unfair
competition involving the Marks of which it becomes aware. TOUR may take such
action as it deems advisable for the protection of its rights in and to the
Marks and Keller shall, if requested by TOUR, cooperate in all respects, therein
at TOUR's expense. In no event, however, shall TOUR be required to take any
action if it deems it inadvisable to do so, and Keller shall have no right to
take any action with respect to the Marks without the prior written approval of
TOUR.
8.0 INDEMNIFICATION.
8.1 By Keller. Keller covenants and agrees to indemnify and hold TOUR,
its affiliated entities and each of their respective officers, directors,
employees and agents (collectively, the "Tour Indemnitees") harmless from
and against any and all losses, claims, damages, expenses, judgments,
awards, petitions, demands or liabilities (including reasonable attorneys'
fees, whether incurred in preparation for trial, at trial, on appeal or in
bankruptcy proceedings), joint or several to which the TOUR Indemnitees may
become subject on account of any default by Keller in the performance of
Keller's obligations hereunder and/or on account of the sale,
advertisement, promotion or use of the Licensed Product or premiums
permitted pursuant to Section 2 hereof. TOUR will notify Keller promptly
upon receipt of notice of any such claim. Upon such notice to Keller,
Keller shall assume responsibility for the defense of the interests of the
TOUR Indemnitees.
8.2 By TOUR. TOUR covenants and agrees to indemnify and hold Keller,
its affiliated entities and each of their respective officers, directors,
employees and agents (collectively, the "Keller Indemnitees") harmless from
and against any and all losses, claims, damages, expenses judgments,
awards, petitions, demands or liabilities (including reasonable attorneys'
fees, whether incurred in preparation for trial, at trial, on appeal or in
bankruptcy proceedings), joint or several, to which the Keller Indemnitees
may become subject on account of the use of the Marks in accordance with
the terms hereof and/or on account of any default by TOUR in the
performance of its obligations hereunder or for any breach of the
representations and warranties contained herein. Keller will notify TOUR
promptly upon receipt of notice of any such claim. Upon such notice to
TOUR, TOUR shall assume responsibility for the defense of the interest of
the Keller Indemnitees.
<PAGE>
8.3 Survival. The obligations of the parties set forth in subsections
8.1 and 8.2 hereof shall survive any -------- termination of this
Agreement.
9.0 ASSIGNMENT.
This Agreement and any rights herein granted are personal to the parties
hereto and shall not be assigned, sublicensed, encumbered or otherwise
transferred by either party without the prior written consent of the other
party, and any attempt at violative assignment, sublicense, encumbrance or other
transfer, whether voluntary or by operation of law, shall be void and of no
force or effect.
10.0 EARLY TERMINATION.
10.1 Default. In the event either party defaults in its obligations
provided herein, the other party shall give the defaulting party written
notice of such default. If the defaulting party does not cure such default
within thirty (30) days after receipt of such notice, this Agreement shall
be immediately terminable by the non-defaulting party. TOUR and Keller
acknowledge and agree that, in the event of a termination, for any reason,
of the Services Agreement, then this License Agreement shall be terminable
by the non-defaulting party upon the giving of written notice of such
termination.
10.2 Insolvency. Either party may terminate this Agreement effective
upon written notice to the other in the event of the other's insolvency,
adjudication of bankruptcy or the filing of a petition for voluntary or
involuntary bankruptcy of the other, or the other's making of an
arrangement with or an assignment for the benefit of creditors or the
appointment of a receiver or trustee for the assets of the other.
10.3 Effect of Termination. Subject to the provision of Section 10.1,
termination of this Agreement pursuant to this Section 10.0 shall not
prohibit a party from seeking payment of amounts owed to it hereunder and
all other damages to which it may be entitled.
11.0 MISCELLANEOUS.
11.1 No Waiver. Failure of either party to complain of any act or
omission on the part of the other party shall not be deemed to be a waiver
by either party of its rights under this Agreement
11.2 Notices. Notice by either party hereunder shall be deemed given
when mailed, postage prepaid, certified or registered, return receipt
requested, sent by guaranteed twenty-four hour delivery service or
facsimile transmission, addressed to the other party at the address
appearing below:
<PAGE>
TOUR: PGA TOUR, Inc.
112 TPC Boulevard
Ponte Vedra Beach, FL 32082
Attention: Vice President - Marketing
Keller: Keller Manufacturing Company
P.O. Box 8
Corydon, IN 47112
Attn: Mr. Steve Robertson
Either party may, by written notice to the other, change the address to which
any such communications shall be sent, and after notice of such change has been
received, any communications shall be sent directly to such party at such
changed address.
11.3 No Agency. This Agreement shall not constitute or be considered a
partnership, employer-employee relationship, joint venture or agency
between the parties hereto. Neither party hereto nor any of its employees
or agents shall have the power or authority to bind or obligate the other
party.
11.4 Binding Effect. Subject to the provisions of this Agreement
governing assignment, this Agreement shall be binding upon and shall inure
to the benefit of the successors of the parties hereto.
11.5 Severability. If any term, covenant, condition or provision of
this Agreement or the application thereof to any person or circumstance
shall, to any extent be invalid or unenforceable, the remainder of this
Agreement or application of such term or provision to any person or
circumstance, other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term, covenant,
condition or provision of this Agreement shall be valid and shall be
enforced to the fullest extent provided by law.
11.6 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
cannot be amended, added to or modified in any way except by a subsequent
writing signed by both parties.
11.7 Attachments. All attachments hereto are incorporated within and
made a part of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
<TABLE>
<CAPTION>
<S> <C>
PGA TOUR, INC. KELLER MANUFACTURING
COMPANY
By: By: /s/ Steven W. Robertson
-----------------------------
Title: EVP & CFO Title: V.P. of Sales & Marketing
</TABLE>
<PAGE>
TRADEMARK LICENSE AGREEMENT
THIS TRADEMARK LICENSE AGREEMENT (this "Agreement") made this 25th day of
March, 1996 between PGA TOUR, INC., a Maryland corporation ("TOUR") and KELLER
MANUFACTURING COMPANY, an Indiana corporation ("Licensee").
BACKGROUND:
A. TOUR is the internationally recognized organization of certain
professional tournament golfers that, among other things, sanctions, cosponsors
and promotes certain professional golf tournaments.
B. TOUR owns the exclusive rights to use the valuable registered trademarks
and service marks described in Exhibit A (collectively, the "Marks"), such Marks
being well known and recognized by the general public and associated in the
public mind with TOUR.
C. Licensee is a nationally known manufacturer of fine furniture products.
D. Licensee intends to develop a new line of furniture designed and
marketed around the PGA TOUR.
E. Licensee desires to use the Marks in connection with the Licensed
Products.
F. TOUR and Licensee have entered into that certain Designation and
Sponsorship Agreement of even date herewith (the "D&S Agreement").
NOW, THEREFORE, in consideration of the mutual promises contained in this
Agreement, the parties, intending to be legally bound, hereby agree as follows:
1. GRANT OF LICENSE.
(a) Articles. Subject to the terms and conditions set forth in this
Agreement, TOUR hereby grants to Licensee, and Licensee hereby accepts from
TOUR, a non-exclusive, limited license to use the Marks solely upon and in
connection with the manufacture, sale and distribution of the articles described
in Exhibit B (collectively, the "Articles") solely in the "Territory" (as
defined below).
(b) Territory. The license granted in Section 1(a) above (the "License")
extends only in the United States (the "Territory"). Licensee agrees that it
will not: (i) make or authorize any direct or indirect use of the Marks outside
the Territory; or (ii) knowingly sell the Articles to persons who intend or are
likely to resell such Articles outside the Territory.
(c) Goodwill. Licensee recognizes the great value of the goodwill
associated with each of the Marks, and acknowledges that the TOUR owns the
exclusive right to use the Marks and all rights therein and goodwill pertaining
thereto. Licensee agrees that its use of the Marks shall inure solely to the
benefit of TOUR and that Licensee shall not at any time acquire any rights in
any of the Marks by virtue of its use thereof pursuant to this Agreement or
otherwise. Notwithstanding the foregoing, Licensee hereby transfers to TOUR any
rights, equities, goodwill, or other rights in and to the Marks which it may
obtain or which may vest in Licensee as the result of any of the activities
authorized by this Agreement or any other activities of Licensee, and agrees to
execute any instruments requested by TOUR to accomplish or confirm the foregoing
transfer.
<PAGE>
(d) Further Documentation and Actions.
(1) Licensee agrees to execute and deliver to TOUR any further
documents and instruments, and do any and all further acts, deemed
necessary by TOUR to give full force and effect to the License, this
Agreement and the intentions of the parties with respect thereto.
(2) Licensee covenants that it will not, during the term of this
Agreement or after its termination, adopt or use any trademark, trade name,
service mark or logo which, in TOUR's opinion, is similar to or likely to
conflict or cause confusion with any of the Marks.
(3) Licensee and TOUR each agree to comply with all applicable laws
and regulations and to take all actions necessary to ensure such
compliance, maintain the validity of the License and effect the intentions
of the parties.
2. ROYALTY.
(a) Rate. Licensee agrees to pay to TOUR a royalty a sum equal to five
percent (5%) of all gross sales by Licensee or any of its affiliated, associated
or subsidiary companies, or any of their agents, of any or all of the Articles
(collectively, the "Royalties").
(b) Periodic Statements. During the term of this Agreement, promptly on the
fifteenth (15th) day of each calendar month, Licensee shall furnish to TOUR a
complete and accurate statement (the "Statement") certified to be accurate by
Licensee and in a form acceptable to TOUR showing the number, description and
gross sales price, of each Article distributed and/or sold by Licensee during
the preceding calendar mouth, together with any returns made during the
preceding calendar month. Each Statement shall be furnished to TOUR whether or
not any Articles have been sold during the preceding calendar month.
(c) Royalty Payments. Royalties shall be due on the fifteenth (15th) day of
the month following the calendar month in which earned, and payment shall
accompany each Statement. The receipt or acceptance by TOUR of any Statement or
of any Royalties paid hereunder shall not preclude TOUR from questioning the
accuracy thereof at any time, and in the event that any inconsistencies or
mistakes are discovered in any such Statement or payments, they shall
immediately be rectified and the appropriate payment made by Licensee. Payment
of all Royalties shall be made in readily available U.S. currency. All taxes
shall be payable by Licensee.
<PAGE>
3. TERM. The term of this Agreement (the "Initial Term") shall be effective on
the date of this Agreement and shall be coterminous with the Designation and
Sponsorship Agreement.
4. TOUR'S TITLE AND PROTECTION OF THE MARKS.
(a) Licensee acknowledges that TOUR is the owner of the exclusive rights to
use the Marks. licensee agrees that it will not during the term of this
Agreement, or thereafter, attack the title or any rights of TOUR in and to the
Marks or attack the validity of the License. Licensee further agrees that it
shall not foster, aid or encourage, either directly or indirectly, any conduct
by any third party to (i) infringe the Marks; (ii) make any use of the Marks not
authorized in this Agreement; or (iii) attack the validity of the Marks.
(b) If during the term of this Agreement Licensee becomes aware that one or
more third parties are infringing the Marks, Licensee shall immediately notify
TOUR of such infringement. Such notice shall include all details in Licensee's
possession concerning the nature of the infringement, the date and location of
each infringement of which Licensee is aware and any other such pertinent
information Licensee may possess. Within thirty (30) days of the date of such
notification, TOUR shall determine whether it desires to commence an action in
its own name or in Licensee's name with respect to such infringements. If TOUR
elects to commence such action, Licensee shall give TOUR such assistance in
prosecuting such action as TOUR may reasonably request. Licensee may not under
any circumstances commence an action against such third party, without TOUR's
prior written consent.
5. INDEMNIFICATION BY LICENSEE AND PRODUCT LIABILITY INSURANCE. Licensee hereby
indemnifies TOUR and undertakes to defend and hold TOUR harmless from any and
all claims, suits, loss or damage arising out of any allegedly unauthorized use
of any trademark, copyright, patent process, idea, method or device by Licensee
in connection with any of the Articles or any other alleged action by Licensee
and also from any claims, suits, loss or damage arising out of alleged defects
in any of the Articles. Licensee agrees that it will obtain, at its own expense,
product liability insurance from a recognized insurance company acceptable to
TOUR, providing adequate protection (at least in the amount of $ 1,000,000) for
TOUR (as well for Licensee) against any claims, suits, loss or damage arising
out of any alleged defects in the Articles. Evidence of such insurance coverage
satisfactory to TOUR shall be provided to TOUR upon the execution of this
Agreement. As used in the first two sentences of this Section 6, "TOUR" shall
also include the officers, directors, agents, and employees of the TOUR, or any
of its subsidiaries or affiliates.
<PAGE>
6. QUALITY CONTROL. Licensee agrees that all of the Articles shall: (i) be of a
high quality and of such style, appearance and quality as to be adequate and
suited to their exploitation to the best advantage and to the protection and
enhancement of the Marks and the goodwill pertaining thereto; (ii) be
manufactured, sold and distributed in accordance with all applicable Federal,
state and local laws of the United States and all laws of each country in the
Territory; (iii) shall not reflect adversely upon the good name of TOUR or any
of the Marks. To this end, TOUR shall have the right to approve all Articles
prior to their sale and Licensee shall, before selling or distributing any of
the Articles, furnish to TOUR free of cost, for its written approval, a
reasonable number of samples of each Article and the cartons, containers and
packing and wrapping material to be used with each such Article. The quality and
style of such samples, as well as of any carton, container or packing or
wrapping material shall be subject to the approval of TOUR. Any item submitted
to TOUR shall not be deemed approved unless and until the same shall be approved
by TOUR in writing. After samples have been approved pursuant to this Section 7,
Licensee shall not depart therefrom in any material respect without TOUR's prior
written consent, and TOUR shall not withdraw its approval of the approved
samples except on sixty (60) days' prior written notice to Licensee. From time
to time after Licensee has commenced selling the Articles and upon TOUR's
written request, Licensee shall furnish without cost to TOUR additional random
samples of each Article being manufactured and sold by Licensee hereunder,
together with any cartons, containers and packing and wrapping material used in
connection therewith.
7. LABELING. Licensee agrees that it will cause to appear on or within each
Article sold by it under this Agreement and on or within all advertising,
promotional or display material bearing any of the Marks, the appropriate
statutory notice of registration or application for registration thereof, as
determined by TOUR in its sole discretion, and any other notice desired by TOUR.
In the event that any Article is marketed in a carton container and/or packing
or wrapping material bearing the Marks, such notice shall also appear upon each
such item. Each and every tag, label, imprint or other device containing any
such notice and all advertising, promotional or display material bearing the
Marks shall be submitted to TOUR for its written approval prior to use by
Licensee. Approval by TOUR shall not constitute waiver of TOUR's rights or
Licensee's duties under any provision of this Agreement.
8. DISTRIBUTION.
(a) licensee agrees that during the term of this License it will diligently
and continuously manufacture, distribute and sell the Articles and that it will
make and maintain adequate arrangement for the distribution and sale of the
Articles.
<PAGE>
(b) Licensee shall not, without prior written consent of TOUR, sell or
distribute any of the Articles to jobbers, wholesalers, distributors, retail
stores or merchants whose sales or distribution are or will be made for
publicity or promotional tie-in purposes, combination sales, premiums,
giveaways, or similar methods of merchandising, or whose business methods are
questionable.
9. RECORDS. Licensee agrees to keep accurate books of account and records
covering all transactions relating to this Agreement, and TOUR and its duly
authorized representatives shall have the right at all reasonable hours of the
day to an examination of such books of account and records and of all other
documents and materials in the possession or under the control of Licensee with
respect to the subject matter and terms of this Agreement, and shall have free
and full access thereto for such purposes and for the purpose of making copies
thereof. Upon demand of TOUR, Licensee shall, at its own expense, furnish to
TOUR a detailed statement by an independent certified public accountant showing
the number, description, gross sales price of the Articles distributed and/or
sold by Licensee to the date of TOUR's demand. All books of account and records
shall be kept available for at least two (2) years after the termination of this
Agreement.
10. REMEDIES FOR BREACH.
(a) If Licensee shall not have commenced in good faith to distribute and
sell the Articles in substantial quantities within three (3) months after the
date of this Agreement or if at any time thereafter in any calendar month
Licensee fails to sell any of the Articles (or any class or category of the
Articles), TOUR in addition to all other remedies available to it hereunder may
terminate this Agreement with respect to any such Articles (or class or category
thereof) which have not been distributed and sold during such mouth, by giving
written notice of termination to Licensee. Such notice shall be effective when
mailed by TOUR. Licensee further acknowledges that such failure shall result in
immediate and irreparable damages to TOUR.
(b) if licensee files a petition in bankruptcy or is adjudicated a bankrupt
or if a petition in bankruptcy is filed against Licensee or if it becomes
insolvent, or makes an assignment for the benefit of its creditors or an
arrangement pursuant to any bankruptcy law, or if Licensee discontinues its
business or if a receiver is appointed for it or its business, this Agreement
shall automatically terminate without any notice. In the event this Agreement is
so terminated, Licensee, its receivers, representatives, trustees, agents,
administrator, successors and/or assigns shall have no right to use any of the
Marks or sell, exploit or in any way deal with or in any of the Articles or any
carton, container, packing or wrapping material, advertising, promotional or
display material pertaining thereto, except with and under the special consent
and instructions of TOUR in writing, which they shall be, obligated to follow.
<PAGE>
(c) If Licensee shall breach any of its other obligations under the terms
of this Agreement or the D&S Agreement, TOUR shall have the right to terminate
this Agreement upon ten (10) days' notice in writing, and such notice of
termination shall become effective unless Licensee shall completely remedy the
breach within the ten (10)-day period and satisfy TOUR that such breach has been
remedied.
(d) Termination of this Agreement pursuant to this Section 10 shall be
without prejudice to any rights which TOUR may otherwise have against Licensee.
Upon the termination of this Agreement, notwithstanding anything to the contrary
herein, all Royalties on sales made prior to such termination shall become
immediately due and payable.
11. FINAL STATEMENT UPON TERMINATION OR EXPIRATION. Sixty (60) days before the
expiration or termination of this Agreement, and, in the event of its
termination, ten (10) days after receipt of notice of termination or the
happening of the event which terminates this Agreement where no notice is
required, a statement showing the number and description of Articles covered by
this Agreement on hand or in process shall be furnished by Licensee to TOUR.
TOUR shall have the right to take a physical inventory to ascertain or verify
such inventory and statement, and refusal by Licensee to submit to such physical
inventory by TOUR shall forfeit Licensee's right to dispose of such inventory.
12. DISPOSAL OF INVENTORY UPON TERMINATION OR EXPIRATION. After termination or
expiration of this Agreement, Licensee, except as otherwise provided in this
Agreement, may dispose of Articles which are on hand or in process at the time
notice of termination is received for a period of sixty (60) days after notice
of termination, provided Royalties with respect to that period are paid and
Statements are furnished for that period in accordance with Section 2.
Notwithstanding anything to the contrary herein, Licensee shall not manufacture,
sell or dispose of any Articles after the expiration or termination of this
Agreement based on the failure of Licensee to affix notice of copyright,
trademark or service mark registration or rights or any other notice to the
Articles, cartons, containers, or packing or wrapping material or advertising,
promotional or display material, or because of the departure by Licensee from
the quality and style approved by TOUR pursuant to Section 7.
<PAGE>
13. EFFECT OF TERMINATION OR EXPIRATION.
(a) Upon and after the expiration or termination of this Agreement, the
License shall be terminated and all other rights granted to Licensee hereunder
shall be terminated and shall revert to TOUR, who shall be free to license
others to use the Marks in connection with the manufacture, sale and
distribution of any of the Articles in the Territory. Licensee will refrain from
further use of any of the Marks or any direct or indirect further reference to
any of them, or anything deemed by TOUR to be similar to any of the Marks in
connection with the manufacture, sale or distribution of Licensee's products,
except as is necessary to dispose of remaining inventory in accordance with
Section 13 of this Agreement.
(b) Licensee acknowledges that its failure (except as otherwise provided
herein) to cease the manufacture, sale or distribution of any of the Articles at
the termination or expiration of this Agreement will result in immediate and
irreparable damage to TOUR and to the rights of any subsequent licensee.
Licensee acknowledges and admits that there is no adequate remedy at law for
such failure and agrees that in the event of such failure TOUR shall be entitled
to equitable relief by way of temporary and permanent injunctions and such other
further relief as any court with jurisdiction may deem just and proper.
14. NOTICES. All notices and statements to be given, and all payments to be made
hereunder, shall be given or made at the respective addresses of the parties as
set forth below, unless notification of a change of address is given in writing,
and the date of mailing shall be deemed the date the notice or statement is
sent:
If to TOUR:
PGA TOUR, INC.
112 TPC Boulevard
Ponte Vedra, Florida 32082
Attn: Vice President - Marketing
If to Licensee:
Keller Manufacturing Company
P.O. Box 47112
Corydon, IN 47112
Attn: Mr. Steve Robertson
15. NO JOINT VENTURE. Nothing herein contained shall be construed to place the
parties in the relationship of partners or joint venturers, and Licensee shall
have no power to obligate or bind TOUR in any manner whatsoever.
<PAGE>
16. GENERAL. Licensee and TOUR each warrant that they have full authority to
enter into this Agreement and to consummate the transactions contemplated
herein, and that such action is not in violation of any agreement to which they
are a party. This Agreement is not transferable or assignable by Licensee, in
whole or in part, without TOUR's prior written consent and any attempted
transfer or assignment without TOUR's prior written consent shall be null and
void. This Agreement is governed by Florida law and constitutes the entire
agreement of the parties with respect to its subject matter and supersedes all
agreements, quotations or negotiations between the parties, whether oral or
written. Licensee shall reimburse TOUR for all attorneys' fees and collection
and court costs incurred as a result of any breach of or default by Licensee in
the performance of any of its obligations under this Agreement. Each provision
of this Agreement is severable and the invalidity of any part or paragraph shall
not affect the enforceability of the remainder. No waiver or amendment to this
Agreement shall be binding unless in writing and signed by both parties hereto.
All Exhibits to this Agreement are incorporated into and form on integral part
of this Agreement.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed as of the day and year first above written.
LICENSEE:
KELLER MANUFACTURING COMPANY
By: /s/ Steven W. Robertson
Title: V.P. of Sales and Marketing
PGA TOUR, INC.
By: ___________________________________
Title: EVP & CFO
<PAGE>
EXHIBIT A
MARKS
GRAPHIC I [Insignia of the PGA Tour.
Rectangular box with the term "Tour" written vertically along the left side and
the term "PGA" written horizontally along the top. A silhouette image of a male
golfer at the top of his swing is beside the vertically written "Tour"]
GRAPHIC II
[Same as GRAPHIC I Except approximately half its size]
GRAPHIC III [Same as GRAPHIC II Except approximately half its size]
<PAGE>
SERVICES AGREEMENT
This Agreement is made as of the 25th day of March, 1996 by and between
PGA TOUR, INC., a Maryland corporation with its principal offices located at 112
TPC Boulevard, Ponte Vedra, Florida 32082 ("TOUR") and KELLER MANUFACTURING
COMPANY, an Indiana corporation with its principal offices located at P.O. Box
8, Corydon, IN 47112 ("Keller") in the following circumstances:
WITNESSETH
WHEREAS, TOUR is the organization of certain professional tournament
golfers that, among other things, sanctions, cosponsors and promotes certain
professional golf tournaments ("PGA TOUR Events"); and
WHEREAS, Keller is a nationally recognized manufacturer of fine furniture;
and
WHEREAS, TOUR and Keller desire to form a sponsorship relationship for
their mutual benefit;
NOW THEREFORE, in consideration of the mutual covenants and promises herein
contained the parties do hereby agree as follows:
1.0 TERM. The term of this Agreement shall commence as of the date of this
Agreement and shall terminate on February 28, 1998 ("Term").
2.0 RIGHTS OF AND OBLIGATIONS TO Keller. Keller shall have the following
rights and obligations during the Term of this Agreement:
2.1 Television Exposure. Each year during the term of this Agreement,
TOUR's television production unit PGA TOUR PRODUCTIONS ("PRODUCTIONS"),
will provide periodic mentions of Keller and its sponsorship of the Storm
Alert Program on at least one of its three shows INSIDE THE PGA TOUR,
INSIDE THE SENIOR PGA TOUR and THIS IS THE PGA TOUR. Additionally, each
year during the term of this Agreement, PRODUCTIONS will produce one
feature on the Storm Alert Program which will feature Keller's sponsorship
to air on one of the above-mentioned shows.
2.2 Print Exposure. During the term of this Agreement, Keller will be
featured in any editorial features which feature the Storm Alert Program in
any of the following print vehicles: ON TOUR magazine, TOUR's monthly
magazine, Business of the PGA TOUR, SENIOR TOUR JOURNAL, special
supplements appearing in Business Week Magazine, TOUR, a special supplement
appearing in Golf Magazine, TOUR News, TOUR's weekly newsletter, and all
TOUR media Guides.
<PAGE>
2.3 Consumer Promotions. At Keller's request, TOUR will work with
Keller to develop appropriate and impactful consumer promotions designed to
reach Keller's target consumer.
2.4 Hospitality Packages. Each year during the term of this Agreement,
Keller agrees to purchase hospitality packages at PGA TOUR and SENIOR PGA
TOUR Events, of at least $35,000. This amount will be due and payable each
February 28 during the term of this Agreement; provided that the first such
annual payment shall be due and payable on April 1, 1996. TOUR and Keller
will work together to develop a comprehensive plan for Keller hospitality
purchase. All hospitality purchases will be coordinated through TOUR.
3.0 ADDITIONAL BENEFITS TO Keller. TOUR shall provide the following to
Keller during the Term of this Agreement:
3.1 Pro-Am Spots: Tournament Tickets. During the term of this
Agreement, TOUR provides Keller 12 pro am spots each year as follows: four
(4) spots at PGA TOUR events, four (4) spots at SENIOR PGA TOUR events, and
four (4) spots at NIKE TOUR events. In addition, TOUR will provide Keller
with a maximum of Fifty (50) tournament tickets to PGA TOUR, SENIOR PGA
TOUR and NIKE TOUR events. Keller understands and agrees that no more ten
(10) tournament tickets will be provided for any one event and no more than
thirty (30) of the total number of tickets will be for PGA TOUR events.
3.2 Club Memberships. During the term of this Agreement, TOUR shall
provide Keller with a corporate membership at the Tournament Players Club
of ___________ with one (1) individual designee. Keller will not be
required to pay any initiation fees or dues for such membership. All other
terms and conditions of Keller memberships shall be the same as those which
are applicable to other corporate members at the club. Such membership will
expire immediately upon expiration or termination of this Agreement.
3.3 Money Clips. Keller will receive two (2) PGA TOUR corporate
sponsor money clips for use during the Term. The privilege of using such
corporate sponsor money clips for access to TOUR-sponsored or co-sponsored
events shall terminate upon the expiration or termination of this
Agreement.
<PAGE>
4.0 CONSIDERATION TO TOUR.
4.1 Financial Consideration. In consideration of the rights granted
Keller in this Agreement, each year during the term of this Agreement
Keller shall pay to TOUR, $60,000. All annual amounts will be due and
payable monthly beginning April 1, 1996.
4.2 Preferential Pricing. Keller will provide to all TOUR players and
staff preferential pricing and ordering for Keller's entire furniture line.
TOUR will work with Keller to properly present its fine to TOUR players.
5.0 INDEMNIFICATION.
5.1 By Keller. Keller covenants and agrees to indemnify and hold TOUR,
its affiliated entities and each of their respective officers, directors,
employees and agents (collectively, the 'TOUR Indemnities") harmless from
and against any and all losses, claims, damages, expenses, judgments,
awards, petitions, demands or liabilities (including reasonable attorneys,
fees, whether incurred in preparation for trial, at trial, on appeal or in
bankruptcy proceedings), joint or several, to which the TOUR Indemnities
may become subject on account of any default by Keller in the performance
of Keller's obligations hereunder. TOUR will notify Keller Promptly upon
receipt of notice of any such claim. Upon such notice to Keller, Keller
shall assume responsibility for the defense of the interests of the TOUR
Indemnities.
5.2 By TOUR. TOUR covenants and agrees to indemnify and bold Keller,
its affiliated entities and each of their respective officers, directors,
employees and agents (collectively, the "Keller Indemnities") harmless from
and against any and all losses, claims, damages, expenses, judgments,
awards, petitions, demands or liabilities (including reasonable attorneys'
fees, whether incurred in preparation for trial, at trial, on appeal or in
bankruptcy proceedings), joint or several, to which the Keller Indemnities
may become subject on account of any default by TOUR in the performance of
its obligations hereunder or any injury to person or property which may
result from the maintenance or operation of the Scoreboards. Keller will
notify TOUR promptly upon receipt of notice of any such claim. Upon such
notice to TOUR, TOUR shall assume responsibility for the defense of the
interest of the Keller Indemnities.
5.3 Survival. The obligations of the parties set forth in subsections
5.1 and 5.2 hereof shall survive any termination of this Agreement.
Agreement.
6.0 ASSIGNMENT.
This Agreement and any rights herein granted are personal to the parties
hereto and shall not be assigned, sublicensed, encumbered or otherwise
transferred by either party without the prior written consent of the other
party, and any attempt at violative assignment sublicense, encumbrance or other
transfer, whether voluntary or by operation of law, shall be void and of no
force or effect.
<PAGE>
7.0 EARLY TERMINATION.
7.1 Default. In the event either party defaults in its obligations
provided herein, the other party shall give the defaulting party written
notice of such default. If the defaulting party does not cure such default
within thirty (30) days after receipt of such notice, this Agreement shall
be immediately terminable by the non-defaulting party. TOUR and Keller
acknowledge and agree that, in the event of a termination, for any reason,
of the License Agreement, then this Agreement shall be deemed in default
and terminable by the non-defaulting party upon the giving Of written
notice of such termination.
7.2 Insolvency. Either party may terminate this Agreement effective
upon written notice to the other in the event of the other's insolvency,
adjudication of bankruptcy or the filing of a Petition for voluntary Or
involuntary bankruptcy of the other, or the other's making of an
arrangement with or an assignment for the benefit of creditors or the
appointment of a receiver or trustee for the assets of the other.
7.3 Effect of Termination. Subject to the provisions of Section 6.1,
termination of this Agreement pursuant to this Section 6.0 shall not
prohibit a party from seeking payment of amounts owed to it hereunder and
all other damages to which it may be entitled.
8.0 MISCELLANEOUS.
8.1 No Waiver. Failure of either party to complain of any act or
omission on the part of the other party shall not be deemed to be a waiver
by either party of its rights under this Agreement.
8.2 Notices. Notice by either party hereunder shall be deemed given
when mailed, postage prepaid. certified or registered, return receipt
requested, sent by guaranteed twenty-four hour delivery service or
facsimile transmission, addressed to the other party at the address
appearing below:
TOUR: PGA TOUR, Inc.
112 TPC Boulevard
Ponte Vedra Beach, Florida 32082
Attention: Vice President - Marketing
Keller: Keller Manufacturing Company
P.O. BOX 8
Corydon, IN 47112
Attn: Mr. Steve Robertson
<PAGE>
Either party may, by written notice to the other, change the address to which
any such communications shall be sent, and after notice of such change has been
received, any communications shall be sent directly to such party at such
changed address.
8.3 No Agency. This Agreement shall not constitute or be considered a
partnership, employer-employee relationship, joint venture or agency
between the parties hereto. Neither party hereto nor any of its employees
or agents shall have the power or authority to bind or obligate the other
party.
8.4 Binding Effect. Subject to the provisions of this Agreement
governing assignment, this Agreement shall be binding upon and shall inure
to the benefit of the successors of the, parties hereto.
8.5 Severability. If any term, covenant, condition or provision of
this Agreement or the application thereof to any person or circumstance
shall, to any extent, be invalid or unenforceable, the remainder of this
Agreement or application of such term or provision to any person or
circumstance, other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term, covenant,
condition or provision of this Agreement shall be valid and shall be
enforced to the fullest extent provided by law.
8.6 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
cannot be amended, added to or modified in any way except by a subsequent
writing signed by both parties.
8.7 Attachments. All attachments hereto are incorporated within and
made a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
<TABLE>
<CAPTION>
<S> <C>
PGA TOUR, INC. KELLER MANUFACTURING COMPANY
By: ______________________________ By: /s/ Steven W. Robertson
Title: EVP & CFO Title: V.P. of Sales & Marketing
</TABLE>
EXHIBIT 21.01
THE KELLER MANUFACTURING COMPANY, INC.
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
<S> <C> <C>
Name Under Which Subsidiary Does
Name State of Incorporation Business
---- ---------------------- --------------------------------
Keller Dedicated Transportation Co. Indiana Keller Dedicated Transportation
Co.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE KELLER MANUFACTURING COMPANY, INC.
FINANCIAL DATA SCHEDULE
This schedule contains summary financial information extracted from the
consolidated financial statements of The Keller Manufacturing Company, Inc. and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 3,985,786 3,902,289
<SECURITIES> 0 0
<RECEIVABLES> 6,284,517 5,815,324
<ALLOWANCES> 291,000 337,000
<INVENTORY> 16,066,490 15,178,611
<CURRENT-ASSETS> 27,412,112 25,253,284
<PP&E> 19,555,956 16,925,929
<DEPRECIATION> 9,757,782 8,218,074
<TOTAL-ASSETS> 39,471,045 35,545,608
<CURRENT-LIABILITIES> 5,253,602 6,084,870
<BONDS> 0 0
0 0
0 0
<COMMON> 696,825 608,937
<OTHER-SE> 32,435,564 27,833,114
<TOTAL-LIABILITY-AND-EQUITY> 39,471,045 35,545,608
<SALES> 60,144,243 58,736,617
<TOTAL-REVENUES> 60,144,243 58,736,617
<CGS> 43,076,105 40,955,515
<TOTAL-COSTS> 50,964,429 49,782,916
<OTHER-EXPENSES> 9,059 7,395
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 9,170,755 8,946,306
<INCOME-TAX> 3,514,750 3,448,011
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,656,005 5,498,295
<EPS-PRIMARY> 0.97 0.94
<EPS-DILUTED> 0.97 0.94
</TABLE>
