UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-13532
EQUIPMENT ASSET RECOVERY FUND, L.P.
Exact name of registrant as specified in its charter
Texas 11-2661586
State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization
Attn: Andre Anderson, 3 World Financial Center,
29th Floor, New York, New York 10285-2900
Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ X ]
No market for the limited partnership interests exists and therefore a
market value for the interests cannot be determined.
Documents Incorporated by Reference:
Portions of the Registrant's Prospectus dated February 2, 1984 filed
pursuant to rule 424(b) are incorporated by reference in PART I of this
report.
Annual Report to Unitholders for the year ended December 31, 1996 is
incorporated by reference in PARTS I, II, III and IV of this report.
PART I
Item 1. Business
a. General Development of Business
Equipment Asset Recovery Fund, L.P. (the "Partnership") (formerly Hutton
Asset Recovery Fund), a Texas limited partnership, was formed to engage in
the business of acquiring various types of distressed assets in the energy
and construction industries, either directly or through partnerships, joint
ventures or other forms of indirect ownership, operating such assets under
management agreements with experienced operators (who may be affiliated
with the General Partners) or leasing such assets to users, and ultimately
selling such assets. The general partners of the Partnership are Equipment
Management, Inc. ("EMI") (formerly Hutton Equipment Management, Inc.), a
Delaware corporation and an affiliate of Lehman Brothers Inc. ("Lehman")
(formerly Shearson Lehman Brothers Inc.) and Mr. Steven A. Webster
(together, the "General Partners") (see Item 10).
On February 2, 1984, the Partnership began the offering of limited
partnership interests in the Partnership (the "Units"). As of July 31,
1984, the termination date of the offering, the Partnership had accepted
subscriptions for 32,722 Units for an aggregate of $16,361,000 (the holders
of such Units are referred to herein as "Limited Partners"). The net
proceeds of the offering after payment of organizational and offering costs
aggregated $14,114,418. The General Partners made an aggregate cash
contribution of $1,000. San Felipe Investors, a Texas general partnership,
(the "Special Limited Partner") made a cash contribution to the Partnership
of $1,000.
b. Financial Information About Industry Segments
The Partnership's sole business was the acquisition, ownership and
operation of such assets described above. All of the Partnership's
revenues, operating profit or loss related solely to such industry segment.
c. Narrative Description of Business
The business of the Partnership was the acquisition of distressed assets,
directly or indirectly, for the purpose of operating them, either directly
or through partnerships or joint ventures in which the Partnership
participates, under management agreements with experienced operators and
ultimately selling such assets. Reference is made to the section captioned
"Investment and Operating Objectives and Policies" contained on pages 18
through 24 of the Prospectus for a description of the Partnership's
objectives and policies regarding the selection, operation, liquidation and
financing of such assets, which pages are incorporated herein by reference
thereto.
Investments
The Partnership used the net proceeds of the public offering to acquire
three types of assets. The Partnership purchased (i) four land drilling
rigs, (ii) an interest in a Texas partnership, GCH Venture, ("GCH") that
purchased five barge drilling rigs, nine crew boats and related property,
and (iii) ten construction cranes and an interest in a joint venture, DSC
Venture ("DSC"), which owned 49 cranes and related equipment and rented
those cranes, the cranes owned by the Partnership, and cranes owned by
third parties. Due primarily to the severe decline in the oil and gas
drilling industry that occurred in 1986, after the purchase of assets in
that industry, all of the Partnership's assets in the oil and gas industry
were either foreclosed on or sold at a loss. During 1991, the Partnership
received the final payments it was owed by Falcon Drilling Inc. ("Falcon")
from the disposition of its interest in GCH.
Investment in Construction Cranes
As of December 31, 1995, the Partnership owned nine cranes outright, a
ninety-nine percent interest in DSC, which owned forty-four cranes and
related equipment, and a controlling interest in SFN Corporation ("SFN"),
which owned four cranes and two pieces of related equipment. During the
first nine months of 1996, DSC and SFN sold a total of 12 cranes and two
pieces of related equipment for a total consideration of approximately
$6,650,000.
Liquidating Sale
On November 27, 1996, the Partnership, DSC and SFN executed a sale (the
"Liquidating Sale") of their crane fleets, related equipment and existing
customer crane rental agreements to Western Crane Supply, Inc. ("Western"),
a Kennewick, Washington-based operator of construction cranes and an
affiliate of Neil F. Lampson, Inc., for a total consideration of $15.9
million cash. Please see "Item 2. Properties", and Note 1 and Note 6 of
the Notes to the Consolidated Financial Statements for a discussion of the
Liquidating Sale. As a result of the Liquidating Sale, the General
Partners are in the process of liquidating the Partnership.
Structure of DSC
Effective October 1, 1984, the Partnership purchased ten Manitowoc crawler
type cranes (the "EARF Cranes") from Dayton-Scott Corporation, a Texas
corporation ("Dayton-Scott"). One EARF crane was subsequently sold. The
Partnership leased the EARF Cranes to DSC, a joint venture formed by the
Partnership and Dayton-Scott, with each having an equal interest. DSC was
formed to operate (i) the EARF Cranes, (ii) forty-nine cranes and seven
pieces of related equipment consisting of Towers and Ringers (the "Venture
Cranes") contributed by Dayton-Scott to DSC, and (iii) the five cranes, one
Tower and one Ringer owned by SFN Corporation (the "SFN Cranes") (the EARF
Cranes, the Venture Cranes and the SFN Cranes, together with all related
Towers, Ringers and equipment are referred to herein as the "Fleet").
Reference is made to Notes 5 and 6 to the Consolidated Financial
Statements, which are incorporated herein by reference thereto for a
discussion of the acquisition of the Fleet. Dayton-Scott no longer holds
an ownership interest in DSC (please see the reference in Note 4 to the
Consolidated Financial Statements).
The cranes and related equipment owned and managed by DSC were in turn
managed and operated by Dayton-Scott Equipment Company ("DSEC") pursuant to
a management agreement between DSC and DSEC dated January 1, 1990, as last
amended on November 27, 1996. DSEC had managed the cranes since their
acquisition by Dayton-Scott Corporation, a Texas corporation
("Dayton-Scott") in early 1982 until disposition of the Fleet on
November 27, 1996. The management agreement provided for the reimbursement
by DSC of all expenses related to the operation of the cranes and related
equipment, including salaries of DSEC's employees. The agreement also
provided for incentive compensation to DSEC and for a sales commission to
be paid to DSEC upon the sale of certain cranes. DSEC earned sales
commissions of $23,875 from the sale of three cranes during 1994, $40,783
from the sale of three cranes during 1995 and $558,772 from the sale of the
remaining assets in the Fleet during 1996. For the years ended
December 31, 1996 and 1995, an incentive management fee of $221,513 and
$55,177, respectively, was earned by DSEC. Additionally, DSEC was paid
severance/termination fees of $1,000,000 for the year ended
December 31, 1996.
DSC's Debt to SFN
Effective April 30, 1992, SFN acquired all of the secured indebtedness of
DSC from Security Pacific (the "Security Pacific Debt") which had an
aggregate outstanding balance of principal and interest as of April 28,
1992 of $11,968,171 (represented by four separate promissory notes). In
connection with the acquisition of the Security Pacific Debt by SFN,
Security Pacific conveyed the following assets to SFN: (i) six cranes, one
Ringer, and one Tower (the "Security Pacific Equipment") previously owned
by Security Pacific and leased to DSC pursuant to an equipment lease (the
"Security Pacific Lease"), and (ii) the rights and obligations of Security
Pacific under a Net Profits Agreement ("Profits Agreement") previously
entered into by and among DSC, Security Pacific, and the Partnership. The
Security Pacific Debt, the Security Pacific Equipment, the Security Pacific
Lease, and the Profits Agreement are collectively referred to as the
"Security Pacific Assets." On August 26, 1993, a SFN-owned crane was sold
pursuant to the terms of SFN's agreement with Security Pacific to acquire
the debt. A second SFN-owned crane was sold on May 15, 1995 pursuant to
the terms of SFN's agreement to acquire the debt. Please refer to Notes 5
and 7 to the Consolidated Financial Statements contained herein at Item 14
for a discussion of DSC's debt refinancing.
Employees
The Partnership has no employees. Certain administrative and managerial
services are provided by the General Partners and certain affiliates.
Item 2. Properties
On November 27, 1996, the Partnership, DSC and SFN executed the Liquidating
Sale. The purchase price was determined by arms-length negotiations.
There is no material relationship between Western and the Partnership or
any of its affiliates, any director or officer of the Partnership, or any
associate of any such director or officer. The Partnership received net
proceeds of $2,772,051 for its crane fleet and received $7,366,940 in
distributions from DSC attributable to its interest in the proceeds from
the sale of the DSC crane fleet.
The Partnership also received $1,938,000 in management fees from SFN during
1996 and $459,000 in January 1997. In addition, the Partnership received
initial liquidating distributions of approximately $552,138 from SFN in
February 1997. The Partnership expects to receive a final liquidating
distribution, in the amount of approximately $190,000, from its interest in
SFN by the end of 1997.
As a result of the Liquidating Sale, as of December 31, 1996, the
Partnership, DSC and SFN owned no assets other than cash and the General
Partners are in the process of liquidating the Partnership.
Item 3. Legal Proceedings
The Registrant is not a party to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders of the Partnership
during the quarter ended December 31, 1996, through the solicitation of
proxies or otherwise.
PART II
Item 5. Market for the Partnership's Limited Partnership Interests and
Related Security Holder Matters.
The Units are not traded on any market, and it is not contemplated that any
public trading for the Units will develop. As of December 31, 1996, the
number of Limited Partners was 1,856.
The Partnership did not make cash distributions to Limited Partners during
1995 and 1996. On March 6, 1997, the Partnership paid a special cash
distribution, in the amount of $300 per Unit, to Unitholders of record as
of November 27, 1996. Such distribution represented a substantial portion
of the net sales proceeds and distributions from DSC received by the
Partnership from the Liquidating Sale. The Partnership's remaining cash
reserve will first be used to provide for the Partnership's remaining
liabilities and obligations through dissolution following which any
remaining cash will be distributed to the partners upon liquidation.
Item 6. Selected Financial Data.
The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related Notes
appearing elsewhere in this Form 10-K.
Financial Highlights
(in thousands except per Unit data)
1996 1995 1994 1993 1992
Rental Revenues $ 4,239 $ 4,562 $ 4,818 $ 4,936 $ 4,698
Gain on Sale of
Equipment 16,218(a) 918 516 246 -
Net Income (Loss) 11,600(a) 354 255 (101) 1,149(b)
Net Income (Loss)
per Unit 324.72(a) - (.46) (9.88) 33.37(b)
Total Assets 15,584(a) 8,422 10,534 11,953 13,445
Loans Payable - 4,453 7,047 9,101 10,759
Cash Distributions
per Unit 300.00(a) - - - 8.88
(a) Reflects 1996 equipment sale activity including the November 1996
Liquidating Sale. Please refer to Note 6 of the Notes to the
Consolidated Financial Statements.
(b) Includes a $1,453,896 gain on refinancing of long-term debt, net of
minority interest allocation share. Without this gain, the
Partnership would have recorded a net loss of $304,424.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At December 31, 1996, the Partnership and its consolidated venture and
subsidiary's cash and cash equivalents balance totaled $15,217,595 compared
to $1,118,831 at December 31, 1995. The increase is primarily due to
proceeds from the Liquidating Sale exceeding cash used for Partnership
operations and principal payments on long-term debt. Please see "Item 2.
Properties," and Note 1 and Note 6 of the Notes to the Consolidated
Financial Statements for a discussion of the Liquidating Sale.
On March 6, 1997, the Partnership paid a special cash distribution, in the
amount of $300 per Unit, to Unitholders of record as of November 27, 1996.
Such distribution represented a substantial portion of the net sales
proceeds and distributions from DSC received by the Partnership from the
Liquidating Sale. The Partnership's remaining cash reserve will first be
used to provide for the Partnership's remaining liabilities and obligations
following which any remaining cash will be distributed to the partners upon
liquidation.
At December 31, 1996, construction cranes at cost totaled $0 as compared to
$16,307,334 at December 31, 1995. The decrease is due to the sale of
twelve DSC Venture cranes and one Ringer attachment and one SFN Ringer
attachment during the nine months ended September 30, 1996 and the
Liquidating Sale. Reference is made to Note 1 and Note 6 of the Notes to
the Consolidated Financial Statements for a discussion of 1996 crane sale
activity. Portions of the proceeds from the above-mentioned sales activity
were used to retire the Partnership's debt. As a result , and in addition
to the Partnership's required monthly debt service payments, loans payable
decreased from $4,452,545 at December 31, 1995 to $0 at December 31, 1996.
Accounts receivable decreased from $272,837 at December 31, 1995 to
$173,415 at December 31, 1996 primarily due to the Liquidating Sale.
Organization and loan closing costs decreased from $321,888 at December 31,
1995 to $0 at December 31, 1996 due to fully amortizing loan closing costs
during 1996.
Accounts payable and accrued expenses increased from $463,130 at December
31, 1995 to $1,745,745 at December 31, 1996 due to accruals for expenses
associated with the Partnership's liquidation.
Management fee payable decreased from $1,889,818 at December 31, 1995 to
$1,445,685 at December 31, 1996 primarily due to the payment of accrued
management fees to the General Partners, offset by an accrual for 1996
management fees due to DSC and the sales disposition fee payable to the
General Partners.
Due to affiliates decreased from $147,000 at December 31, 1995 to $0 at
December 31, 1996. The balance at December 31, 1995 primarily consisted of
an accrual for SFN consulting fees and salary expenses payable to the
minority stockholders.
Results of Operations
1996 vs. 1995
For the year ended December 31, 1996, the Partnership generated net income
of $11,599,902 compared to net income of $354,222 for the year ended
December 31, 1995. The increase in net income is primarily due to a
$16,217,725 gain recognized on the sale of twelve cranes and two pieces of
related equipment during the first nine months of 1996 and Liquidating Sale
in November 1996. The gain was partially offset by an increase in general,
selling and administrative expense. Excluding the gains recognized on the
sales of equipment, the Partnership generated losses from operations,
before provision for income taxes and minority interest, of $3,204,434 and
$522,943 for 1996 and 1995, respectively.
Rental revenues for the year ended December 31, 1996 decreased compared to
1995 primarily due to the absence of December 1996 rental revenue resulting
from the Liquidating Sale in November 1996.
Interest income for the year ended December 31, 1996 increased compared to
1995 primarily due to the Partnership's higher average cash balance as a
result of the Liquidating Sale.
For the year ended December 31, 1996, general, selling and administrative
expenses totaled $4,118,219 compared to $1,915,608 for 1995. The increase
is mainly due to increased salary expense and consulting fees paid by DSC
and SFN related to the Liquidating Sale in November 1996 and the accrual of
expenses associated with the Partnership's liquidation.
Interest expense for the year ended December 31, 1996 decreased compared to
1995 due to interest being calculated on lower outstanding principal
balances on the Partnership's debt resulting from principal repayments made
during 1996 and payment in full of all outstanding debt.
Management fees increased from $233,875 for the year ended
December 31, 1995 to $947,609 for the year ended December 31, 1996 due to
disposition fees and incentive management fees related to the Liquidating
Sale in November 1996.
Gain on extinguishment of debt was $130,144 for the year ended
December 31, 1996. SFN had executed a participation note (the
"Participation Note") with The CIT Group/Equipment Financing, Inc. ("CIT").
Pursuant to this note, CIT was entitled to receive the greater of the
accreted value of the note or 25% of the net proceeds from the sale of the
cranes plus 25% of the fair market value of the cranes owned by SFN on
November 30, 2000. At April 30, 1992, the Participation Note was recorded
at 25% of the fair market value of the cranes or $700,000. The
Participation Note was prepaid during 1996 resulting in a gain on the
extinguishment of the debt in the amount of $105,144. SFN also executed a
subordinated promissory note to Security Pacific Business Credit, Inc.
("SPBC") in the amount of $1,000,000. The Note due to SPBC was also
prepaid in 1996 resulting in a gain on the extinguishment of the debt in
the amount of $25,000.
1995 vs. 1994
For the year ended December 31, 1995, the Partnership generated net income
of $354,222 compared to net income of $255,302 for the year ended December
31, 1994. The increase in net income was primarily due to a $918,435 gain
recognized on the sale of two DSC Venture cranes in January and December of
1995 and the sale of one SFN crane in May 1995, and decreases in both
depreciation and amortization and interest expense. These were partially
offset by a decrease in rental revenues and an increase in general, selling
and administrative expense. Excluding the gains recognized on the crane
sales, the Partnership generated losses from operations, before provision
for income taxes and minority interest, of $522,943 and $245,632 for 1995
and 1994, respectively.
Rental revenues for the year ended December 31, 1995 decreased compared to
1994 primarily due to the sale of three cranes during 1995.
For the year ended December 31, 1995, general, selling and administrative
expenses totaled $1,915,608 compared to $1,699,833 for 1994. The increase
was mainly due to the accrual of $300,000 in 1995 for the SFN consulting
fee, 51% of which is eliminated in consolidation, and increased salary and
insurance expense.
Interest expense for the year ended December 31, 1995 decreased compared to
1994 due to interest being calculated on lower outstanding principal
balances on the Partnership's debt resulting from principal repayments made
during 1995.
Item 8. Financial Statements and Supplementary Data.
See Item 14 for a listing of the financial statements filed with this
report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Partnership.
The Partnership does not have any officers, directors or employees. The
General Partners of the Partnership are Equipment Management, Inc.
(formerly known as Hutton Equipment Management, Inc.) and Steven A.
Webster. The Partnership has entered into a Management Agreement with the
General Partners, pursuant to which they will perform certain management
functions for the Partnership as well as provide certain administrative
services.
Steven A. Webster, 45, is Chairman of the Board and Chief Executive Officer
of Falcon Drilling Company, Inc., an offshore drilling contractor. He also
serves as General Partner of two related investment partnerships, Cerrito
Partners, formed in 1984, and Cerrito Investments Limited Partnership,
formed in 1988. Mr. Webster received a B.S. from Purdue University and an
M.B.A. from Harvard Business School. Mr. Webster serves as a Director of
Crown Resource Corporation, a mining concern, and DI Industries Inc., a
land drilling company. Mr. Webster also serves as a Trust Manager for
Camden Property Trust, a real estate investment trust.
Officers and Directors of EMI
Certain officers and directors of EMI are now serving (or in the past have
served) as officers or directors of entities which act as general partners
of a number of limited partnerships which have sought protection under the
provisions of the Federal Bankruptcy Code. These partnerships sought the
protection of the bankruptcy laws to protect the partnerships' assets from
loss through foreclosure.
The directors and executive officers of EMI are as follows:
Name Office
Moshe Braver Director and President
Daniel M. Palmier Vice President and Chief Financial Officer
Moshe Braver, 43, is currently a Managing Director of Lehman Brothers and
has held such position since October 1985. During this time, he has held
positions with the Business Analysis Group, International and Capital
Markets Administration and currently, with the Diversified Asset Group.
Mr. Braver joined Shearson Lehman Brothers in August 1983 as Senior Vice
President. Prior to joining Shearson, Mr. Braver was employed by the
accounting firm of Coopers & Lybrand from January 1975 through August 1983
as an Audit Manager. He received a Bachelor of Business Administration
degree from Bernard Baruch College in January 1975 and is a Certified
Public Accountant.
Daniel M. Palmier, 35, is a Vice President of Lehman Brothers Inc. in its
Diversified Asset Group, and has been employed by Lehman Brothers since
June 1990. He is responsible for the asset management and restructuring of
a diverse portfolio of assets including commercial real estate and
mortgages. From March of 1988, Mr. Palmier worked for LJ Hooker
Corporation, Inc. and held positions of Senior Associate of Mergers and
Acquisitions/Corporate Finance and Vice President in the Real Estate
division. From September 1986, Mr. Palmier was a Real Estate Acquisitions
Officer at John Anthony Associates, Inc. in New York. From June 1983, Mr.
Palmier worked in the public accounting field, most notably for the firm
Price Waterhouse. Mr. Palmier, a New York Certified Public Accountant,
earned a Masters of Science in Real Estate Degree from New York University
in 1995 and graduated from the University of Notre Dame in 1983 with a
B.B.A. in Accounting.
Certain Matters Involving Affiliates of EMI
On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of its
domestic retail brokerage and asset management businesses to Smith Barney,
Harris Upham & Co. Incorporated ("Smith Barney"). Subsequent to the sale,
Shearson Lehman Brothers Inc. changed its name to Lehman Brothers Inc. The
transaction did not affect the ownership of the General Partner. However,
the assets acquired by Smith Barney included the name "Hutton."
Consequently, the Hutton Equipment Management, Inc. general partner changed
its name to Equipment Management, Inc. on January 13, 1994 and the name of
the Partnership was changed to Equipment Asset Recovery Fund L.P. on
October 29, 1993 to delete any reference to "Hutton."
Item 11. Executive Compensation.
The Partnership does not pay the officers or directors of EMI any
remuneration. In addition, EMI does not pay any remuneration to any of its
officers or directors, all of whom receive salaries from an affiliate of
EMI. Reference is made to Note 3 to the Consolidated Financial Statements,
which is incorporated herein by reference thereto for a discussion of the
allocations of Partnership income, losses, distributions and gains from the
disposition of assets.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners.
No person was known by the Partnership to be the beneficial owner of more
than 5% of the Units of the Partnership.
(b) Security Ownership of Management.
The General Partners do not own any Units, and no officer or director of
the EMI owns any Units.
(c) Changes in Control.
None.
Item 13. Certain Relationships and Related Transactions.
The General Partners and their affiliates are entitled to receive annual
Management Fees equal to the greater of $120,000 or 5% of the gross
revenues from the operation of the assets owned directly or indirectly by
the Partnership. During fiscal 1996, the General Partners earned $209,802
in Management Fees. The General Partners are also entitled to a
disposition fee equal to 2% of the gross proceeds from the sale of the
Partnership's assets. During 1996, the General Partners earned a
disposition fee totaling $516,294. During the second quarter of 1985, the
General Partners elected to defer the payment of all Management Fees, other
than the $10,000 per month payable to San Felipe Resources Company, a
partnership owned primarily for the benefit of Mr. Webster, until the cash
flow of the Partnership improved. In June 1986, the amount of fees paid
currently to San Felipe Resources Company was further reduced to $5,000 per
month. (See Note 8 to the Consolidated Financial Statements contained
herein at Item 14 for additional details.)
On November 20, 1996, the Partnership paid EMI deferred management fees of
$1,331,742. Subsequent to December 31, 1996, the Partnership paid San
Felipe Resources (for the benefit of Mr. Webster) $948,197 and EMI $275,974
for deferred management fees and the accrued disposition fee.
Under the terms of the Management Agreement, the General Partners and their
affiliates are entitled to reimbursements by the Partnership for certain
costs and expenses described therein relating to certain administrative and
other services and goods provided. First Data Investor Services Group,
formerly The Shareholder Services Group, provides accounting and investor
relations services for the Partnership. Prior to May 1993, these services
were provided by an affiliate of a general partner. The Partnership's
transfer agent and certain tax reporting services are provided by Service
Data Corporation. Both First Data Investor Services Group and Service Data
Corporation are unaffiliated companies.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form
8-K.
(a) (1) Financial Statements and Notes.
Page
Independent Auditors' Report
Arthur Andersen LLP (1)
Consolidated Balance Sheets -
December 31, 1996 and 1995 (1)
Consolidated Statements of Operations -
For the years ended December 31, 1996,
1995 and 1994 (1)
Consolidated Statements of Partners' Capital
(Deficit) - For the years ended December 31,
1996, 1995 and 1994 (1)
Consolidated Statements of Cash Flows -
For the years ended December 31, 1996,
1995 and 1994 (1)
Notes to the Consolidated Financial Statements (1)
(a) (2) Schedules
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission have been omitted
since (1) the information required is disclosed in the financial statements
and notes there to; (2) the schedules are not required under the related
instructions; or (3) the schedules are inapplicable.
(1) Incorporated by reference to the Partnership's Annual Report
to Unitholders for the year ended December 31, 1996.
(3) Exhibits
The following exhibits are being filed as a part of this report. Documents
other than those designated as being filed herewith are incorporated herein
by reference.
Exhibit
No. Description
3 Amended and Restated Agreement and Certificate of Limited
Partnership of the Partnership (Exhibit 4.1 to the Registrant's
Registration Statement on Form S-1, File No. 2-87488 is
incorporated herein by reference).
10.1 Management Contract by and among the Partnership,
Equipment Management Inc., Steven A. Webster, and Paul B. Loyd, Jr.
(Exhibit 10.1 to the Registrant's Registration Statement on Form
S-1, File No. 2-87488, is incorporated herein by reference).
10.2 Joint Venture Agreement dated October 9, 1984 between the
Partnership, Cerrito Partners and GD Investors, Inc. (Exhibit 4 to
the Registrant's current report on Form 8-K dated October 10, 1984,
File No. 2-87488, is incorporated herein by reference).
10.3 Agreement and Plan of Merger dated December 2, 1987.
(Incorporated by reference to Form 8-K dated December 2, 1987 filed
pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 by the E.F. Hutton Group Inc., commission file number 1-7376).
10.4 Press Release, New York, New York dated December 3, 1987.
(Incorporated by reference to Form 8-K dated December 2, 1987 filed
pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 by the E.F. Hutton Group Inc., commission file number 1-7376).
10.5 DSC Venture Amended and Restated Joint Venture Agreement
dated as of October 1, 1984, executed April 2, 1987. (Exhibit 10.13
to the Registrant's report on Form 10-K for the year ended December
31, 1987, File No. 2-87488, is incorporated herein by reference).
10.6 Net profits agreement dated April 2, 1987 by and among
Security Pacific Business Credit Inc., DSC Venture and the
Registrant. (Exhibit 10.14 to the Registrant's report on Form 10-K
for the year ended December 31, 1987, File No. 2-87488, is
incorporated herein by reference).
10.7 Purchase Agreement dated October 23, 1989 between Falcon
Drilling Inc. and the Registrant. (Exhibit 10.11 to the
Registrant's report on Form 10-K for the year ended December 31,
1989, File No. 2-87488, is incorporated herein by reference).
10.8 Agreement dated October 23, 1989 by and among the
Registrant, CP-1, Ltd. and GD Investors, Inc. (Exhibit 10.12 to
the Registrant's report on Form 10-K for the year ended December
31, 1989, File No. 2-87488, is incorporated herein by reference).
10.9 Management Agreement effective January 1, 1990 between DSC
Venture and Dayton-Scott Equipment Company (Exhibit 10.9 to the
Registrant's Report on Form 10-K for the year ended December 31,
1990, File No. 2-87488, is incorporated herein by reference).
10.10 Loan and Security Agreement by and between SFN Corporation
and the CIT Group/Equipment Financing, Inc. Dated as of April 30,
1992. (Exhibit 10.10 to the Registrant's report on Form 10-K for
the year ended December 31, 1987, File No. 2-87488, is incorporated
herein by reference).
13 Annual Report to Unitholders for the year ended December 31, 1996.
22 Subsidiaries of the Registrant: DSC Venture, a Texas joint venture
and SFN Corporation, a Delaware Corporation. (previously filed)
27 Financial Data Schedule.
28 Portions of prospectus of Registrant dated February 2,
1984 (incorporated by reference).
99 Asset Purchase & Sale Agreement dated November 20, 1996,
and accompanying exhibits, by and among Neil F. Lampson, Inc. as
buyer and DSC, EARF and SFN as Sellers.
(b) Reports on Form 8-K filed in the fourth quarter of fiscal 1996:
On November 27, 1996, the Partnership filed a Form 8-K
reporting that on November 27, 1996, the Partnership, DSC and SFN
executed a bulk sale of their crane fleets, related equipment and
existing customer crane rental agreements to Western Crane Supply,
Inc.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 31, 1997
EQUIPMENT ASSET RECOVERY FUND
BY: Equipment Management, Inc.
General Partner
BY: /s/ Moshe Braver
Name: Moshe Braver
Title: Director and President
BY: /s/ Steven A. Webster
Name: Steven A. Webster
General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
EQUIPMENT MANAGEMENT, INC.
A General Partner
Date: March 31, 1997
BY: /s/ Moshe Braver
Moshe Braver
Director and President
Date: March 31, 1997
BY: /s/ Daniel M. Palmier
Daniel M. Palmier
Vice President and
Chief Financial Officer
EXHIBIT 13
Equipment Asset Recovery Fund, L.P.
1996 ANNUAL REPORT
Message to Investors
We are pleased to provide for your review the 1996 annual report
for Equipment Asset Recovery Fund, L.P. (the "Partnership"). As
discussed in prior correspondence, in November 1996, the
Partnership, in conjunction with DSC Venture ("DSC") and SFN
Corporation ("SFN"), sold (the "Sale") its fleet of heavy-lift
cranes, related equipment and existing customer crane rental
agreements. In this annual report, we have included a review of
the Sale, a financial overview, and the Partnership's audited
financial statements for the year ended December 31, 1996.
Liquidating Sale & Distribution of Proceeds
On November 27, 1996, the Partnership, DSC and SFN completed the
Sale with Western Crane Supply, Inc. ("Western") a Kennewick,
Washington-based operator of construction cranes. The
Partnership received net proceeds of $2,772,051 for its crane
fleet and $7,366,940 in distributions from its interest in DSC.
In addition, the Partnership received initial liquidating
distributions of approximately $552,138 from SFN in February
1997. The Partnership expects to receive a final liquidating
distribution, in the amount of approximately $190,000, from its
interest in SFN by the end of 1997.
As a result of the Sale, on March 6, 1997, the Partnership paid a
special cash distribution, in the amount of $300 per Unit, to
Unitholders of record as of November 27, 1996. Such distribution
represents a substantial portion of the net sales proceeds and
distributions from DSC received by the Partnership. The
remaining net proceeds from the Sale and the Partnership's
remaining cash reserves will then be used to pay a final
liquidating distribution, after the remaining liabilities of the
Partnership have been paid or otherwise provided for.
Summary
We are pleased with the timing and terms of the Sale which
allowed the Partnership to capitalize on significantly improved
market conditions for its equipment. A Schedule K-1, reflecting
the dissolution of the Partnership, will be forwarded to you by
early 1998.
Should you have any remaining questions regarding the
Partnership, you may contact your Financial Consultant or First
Data Investor Services Group. All administrative inquiries,
including change of address, must be submitted in writing to the
Partnership's transfer agent, Service Data Corporation, 2424
South 130th Circle, Omaha, NE 68144-2596. Both First Data
Investor Services Group and Service Data Corporation can be
reached at (800) 223-3464.
Very truly yours,
/s/ Moshe Braver /s/ Steven A. Webster
Moshe Braver Steven A. Webster
President General Partner
Equipment Management Inc.
General Partner
March 31, 1997
Consolidated Balance Sheets At December 31, At December 31,
1996 1995
Assets
Equipment, at cost:
Construction cranes $ _ $ 16,307,334
Vehicles and equipment _ 128,761
- 16,436,095
Less accumulated depreciation _ (9,781,264)
_ 6,654,831
Cash and cash equivalents 15,217,595 1,118,831
Accounts receivable, net of allowance
for doubtful accounts of $10,000 in 1996
and 1995 173,415 272,837
Organization and loan closing costs,
net of accumulated amortization of
$564,260 in 1996 and $242,372 in 1995 _ 321,888
Other assets 193,397 53,124
Total Assets $ 15,584,407 $ 8,421,511
Liabilities and Partners'Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 1,745,745 $ 463,130
Management fee payable 1,445,685 1,889,818
Loans payable _ 4,452,545
Due to affiliates _ 147,000
Distribution payable 10,333,264 _
Income taxes payable 624,065 619,320
Total Liabilities 14,148,759 7,571,813
Minority interest payable 584,313 1,265,001
Partners' Capital (Deficit):
General Partners 34,053 (415,303)
Limited Partners 808,769 _
Special Limited Partner 8,513 _
Total Partners' Capital (Deficit) 851,335 (415,303)
Total Liabilities and Partners'
Capital (Deficit) $ 15,584,407 $ 8,421,511
Consolidated Statements of Partners' Capital (Deficit)
For the years ended December 31, 1996, 1995 and 1994
Special
General Limited Limited
Partners Partners Partner Total
Balance at December 31, 1993 $(1,040,016) $ 15,032 $ 157 $(1,024,827)
Net Income (Loss) 270,491 (15,032) (157) 255,302
Balance at December 31, 1994 (769,525) _ _ (769,525)
Net Income 354,222 _ _ 354,222
Balance at December 31, 1995 (415,303) _ _ (415,303)
Net Income 862,687 10,625,369 111,846 11,599,902
Distributions (413,331) (9,816,600) (103,333) (10,333,264)
Balance at December 31, 1996 $ 34,053 $ 808,769 $ 8,513 $ 851,335
Consolidated Statements of Operations
For the years ended December 31, 1996 1995 1994
Income
Rental income $ 4,239,442 $ 4,562,048 $ 4,818,140
Interest income 123,965 58,881 37,095
Other income 22,558 25,338 38,080
Total Income 4,385,965 4,646,267 4,893,315
Expenses
Rental expenses 1,271,192 1,284,210 1,208,155
General, selling and administrative 4,118,219 1,915,608 1,699,833
Depreciation and amortization 1,207,668 1,235,491 1,331,008
Interest expense 175,855 500,026 651,359
Management fee 947,609 233,875 248,592
Total Expenses 7,720,543 5,169,210 5,138,947
Other Income
Gain on sales of equipment 16,217,725 918,435 516,451
Gain on extinguishment of debt 130,144 _ _
Total Other Income 16,347,869 918,435 516,451
Net Income before Minority Interest
and Provision for Income Taxes 13,013,291 395,492 270,819
Minority Interest (1,034,312) 118,650 129,583
Income before Provision for
Income Taxes 11,978,979 514,142 400,402
Provision for income taxes 379,077 159,920 145,100
Net Income $ 11,599,902 $ 354,222 $ 255,302
Net Income Allocated:
To the General Partners $ 862,687 $ 354,222 $ 270,491
To the Limited Partners 10,625,369 _ (15,032)
To the Special Limited Partner 111,846 _ (157)
$ 11,599,902 $ 354,222 $ 255,302
Per limited partnership unit
(32,722 outstanding) $ 324.72 $ _ $ (.46)
Consolidated Statements of Cash Flows
For the years ended December 31, 1996 1995 1994
Cash Flows From Operating Activities
Net Income $ 11,599,902 $ 354,222 $ 255,302
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities:
Gain on sales of cranes (16,217,725) (918,435) (516,451)
Gain on extinguishment of debt (130,144) _ _
Minority interest (680,688) (118,650) (129,583)
Depreciation 885,780 1,169,389 1,264,906
Amortization 321,888 66,102 66,102
Increase (decrease) in cash arising
from changes in operating assets
and liabilities:
Accounts receivable, net 99,422 (30,169) 204,050
Other assets (140,273) 137,924 (46,859)
Accounts payable and
accrued expenses 1,282,615 (183,832) 124,950
Management fee payable (444,133) 173,875 188,592
Accrued interest _ (50,012) 50,012
Due to affiliates (147,000) 147,000 _
Income taxes payable 4,745 159,920 145,100
Net cash provided by (used for)
operating activities (3,565,611) 907,334 1,606,121
Cash Flows From Investing Activities
Proceeds from sales of cranes,
vehicles and equipment 21,986,776 1,590,552 931,125
Net cash provided by investing
activities 21,986,776 1,590,552 931,125
Cash Flows From Financing Activities
Proceeds from long-term debt 100,000 100,000 275,503
Principal payments on long-term debt (4,422,401) (2,694,790) (2,329,234)
Net cash used for financing activities (4,322,401) (2,594,790) (2,053,731)
Net increase (decrease) in cash and
cash equivalents 14,098,764 (96,904) 483,515
Cash and cash equivalents, beginning
of period 1,118,831 1,215,735 732,220
Cash and cash equivalents, end
of period $15,217,595 $ 1,118,831 $ 1,215,735
Supplemental Disclosure of Cash
Flow Information
Cash paid during the period for interest $175,855 $550,038 $601,347
Notes to the Consolidated Financial Statements
December 31, 1996, 1995 and 1994
1. Organization
Equipment Asset Recovery Fund, L.P. (the "Partnership"), formerly
Hutton Asset Recovery Fund, was organized as a Limited
Partnership under the laws of Texas pursuant to a Certificate and
Agreement of Limited Partnership (the "Partnership Agreement")
dated and filed October 27, 1983. The Partnership was inactive
from its inception through December 1983. The Partnership was
formed for the primary purpose of acquiring, operating, leasing
and selling various types of assets. The Partnership's only
remaining investment was its interest in construction cranes (see
Note 6). The Partnership, through its operating manager, Dayton
Scott Equipment Company ("DSEC"), competed nationwide for heavy
crane rental contracts, and from time to time it competes for
particular international projects. The Partnership derived a
majority of its revenues from the southwest region of the United
States, particularly, Louisiana and Texas.
Equipment Management, Inc. ("EMI"), formerly Hutton Equipment
Management, Inc., an affiliate of Lehman Brothers Inc., and
Steven A. Webster are the General Partners of the Partnership.
On July 31, 1993, certain of Shearson Lehman Brothers Inc.'s
domestic retail brokerage and management businesses were sold to
Smith Barney, Harris Upham & Co. Inc. Included in the purchase
was the name "Hutton." Consequently, the Hutton Equipment
Management, Inc. General Partner's and the Partnership's names
were changed to delete any reference to "Hutton." San Felipe
Investors, a Texas general partnership, is the Special Limited
Partner.
At December 31, 1995, the Partnership's operations consisted of
the operations of a 99%-owned consolidated venture, DSC Venture
("DSC") and a 51% controlling interest in SFN Corporation
("SFN").
On November 27, 1996, the Partnership, DSC and SFN completed a
bulk sale of their remaining equipment assets for $15,900,000.
The Partnership received net proceeds of $2,772,051 for its crane
fleet and $7,366,940 in a distribution from its interests in DSC.
The Partnership also received $1,938,000 in management fees from
SFN during 1996 and $459,000 in January 1997. In addition, the
Partnership received initial liquidating distributions of
approximately $552,138 from SFN in February 1997. The
Partnership expects to receive a final liquidating distribution,
in the amount of approximately $190,000, from its interest in SFN
by the end of 1997. The General Partners declared a special cash
distribution to unitholders of record as of November 27, 1996 in
the amount of $10,333,264 ($300 per limited partnership unit).
The remaining sales proceeds, with the Partnership's cash, will
first be used to provide for all liabilities and obligations of
the Partnership through liquidation, following which any
remaining amounts will be distributed to the partners upon
dissolution of the Partnership, which is expected to occur in
late 1997.
2. Significant Accounting Policies
Basis of Accounting - The accompanying consolidated financial
statements have been prepared on the accrual basis of accounting
in accordance with generally accepted accounting principles.
Revenues were recognized as earned and expenses were recorded as
obligations were incurred.
Reclassifications - Certain prior year amounts have been
reclassified in order to conform to the current year's
presentation.
Construction Cranes - Investments in construction cranes include
the initial purchase price and related acquisition costs.
Depreciation was computed using the straight-line method based on
the estimated useful lives of the assets, which were generally
between 10 to 20 years.
Cash Equivalents - Cash equivalents consist of highly liquid short-
term investments with maturities of three months or less from the
date of issuance. The carrying amount approximates fair value
because of the short maturity of these instruments.
Concentration of Credit Risk - Financial instruments which
potentially subject the Partnership to a concentration of credit
risk principally consist of cash in excess of the financial
institutions' insurance limits. The Partnership invests
available cash with high credit quality financial institutions.
Fair Value of Financial Instruments - Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments" ("FAS 107"), requires that the Partnership
disclose the estimated fair values of its financial instruments.
Fair values generally represent estimates of amounts at which a
financial instrument could be exchanged between willing parties
in a current transaction other than in forced liquidation.
Fair value estimates were subjective and were dependent on a
number of significant assumptions based on management's judgment
regarding future expected loss experience, current economic
conditions, risk characteristics of various financial
instruments, and other factors. In addition, FAS 107 allows a
wide range of valuation techniques, therefore, comparisons
between entities, however similar, may be difficult.
Organization and Loan Closing Costs - Organization costs were
amortized on a straight-line basis over five years. Loan closing
costs were amortized over the life of the related loan.
Rental Revenues - Leases of construction cranes were generally on a
month-to-month basis and were accounted for as operating leases.
Income Taxes - No provision for income taxes has been made in the
consolidated financial statements for the Partnership and DSC
since these taxes are the responsibility of the individual
partners or co-ventures rather than that of the Partnership or
DSC. However, an income tax provision has been included in the
accompanying consolidated financial statements related to the
Partnership's corporate consolidated subsidiary SFN, which is a
separate taxable entity.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those
estimates.
3. Partnership Allocations
Partnership income and losses will be allocated and net cash will
be distributed 4% to the General Partners, 1% to the Special
Limited Partner and 95% to the Limited Partners until each of the
Limited Partners has received cash equal to his or her capital
contribution plus an 8% annual cumulative return thereon.
Thereafter, such items will be distributed 85% to the Limited
Partners, 12.5% to the General Partners and 2.5% to the Special
Limited Partner.
The amount of any net loss of the Partnership, which would be
allocable to a Limited Partner in excess of a positive capital
account, is allocated to the General Partners in proportion to
their relative interests in the Partnership.
The gains on the sales of cranes were first allocated
proportionately to the Partners who had negative capital accounts
to restore these accounts to zero and then in accordance with the
aforementioned percentages.
In 1994, the remaining net loss (after allocation of gain on
sales of cranes) was allocated to the Limited Partners and the
Special Limited Partner in amount that reduced their capital
accounts to zero. The remaining loss was allocated to the
General Partners in proportion to their relative interests in the
Partnership. During 1995, the entire net loss excluding the
gains on sales of cranes was allocated to the General Partners.
4. Joint Venture
In accordance with the October 1984 Joint Venture Agreement
between the Partnership and Dayton-Scott Corporation ("Dayton-
Scott"), the Partnership contributed $2,500,000 in cash for a 50%
interest in DSC. Dayton-Scott contributed forty-nine crawler-
type cranes and seven crane attachments ("DSC cranes"), together
with all of its other assets, in exchange for assumption of its
outstanding nonrecourse Loan and Security Agreement with Security
Pacific Business Credit, Inc. ("SPBC") and a 50% interest in DSC.
Subsequently, the Partnership wrote off its initial $2,500,000
investment in DSC and additional capital contributions of
$100,000 in 1984 and $121,788 in 1986.
In April 1987, Dayton-Scott sold its entire 50% interest in DSC
to the Partnership (49%) and DSEC (1%). DSEC subsequently sold
its 1% interest to DRA Management, Inc., an affiliate of
EMI. The purchase price for the additional
49% interest in DSC consisted of $250,000 in cash, assumption of
$15,200,000 in nonrecourse debt (see Notes 5 and 7) and a
contingent payment of $250,000 based on future events and
conditions as defined in the purchase and sale agreement.
5. SFN Corporation
The Partnership acquired 51% of the shares of issued and
outstanding Common Stock of SFN and all of the issued and
outstanding shares of nonvoting Class B Redeemable Preferred
Stock of SFN. The Partnership acquired such stock in
consideration for its agreement to cooperate with SFN in
connection with SFN's acquisition of certain assets from SPBC.
The Partnership did not contribute any cash to SFN for the shares
of Common Stock and Class B Redeemable Preferred Stock of SFN,
however, the Partnership received a deemed capital account in the
amount of $2,397 for services rendered in connection with this
transaction.
Six individuals, who were affiliated with DSEC, which previously
managed the Equipment (defined below), the cranes owned by DSC,
and the cranes owned by the Partnership, own the remaining 49% of
the shares of Common Stock of SFN. These individuals contributed
cash of approximately $275,000 in the aggregate for 49% of the
issued and outstanding shares of Common Stock and all of the
nonvoting Class A Redeemable Preferred Stock of SFN. This equity
contribution was used, in part, to fund a portion of the purchase
price of the SPBC Assets (defined below) and to pay related
transaction costs.
The holders of the Class A Redeemable Preferred Stock are
entitled to receive a single preferred dividend of $275,000 in
the aggregate, plus a 10% cumulative return until such dividend
is paid, prior to any distributions being made to the other
stockholders of SFN. The Class B Redeemable Preferred Stock
received by the Partnership entitles the Partnership to receive a
single preferred dividend of 104% of the aggregate amount paid to
the holders of the Class A Redeemable Preferred Stock following
the payment of the Class A preferred dividend. Once these
preferred dividends have been paid to the holders of the Class A
and Class B Redeemable Preferred Stock, all further distributions
will be made only to the holders of the Common Stock of SFN in
accordance with the pro rata percentage ownership of the holders
of such Common Stock.
Effective April 30, 1992, SFN acquired all of the secured
indebtedness of DSC from SPBC. In connection with the
acquisition of the SPBC Debt by SFN, SPBC conveyed the following
assets to SFN: (i) six cranes, one ringer, and one tower (the
"Equipment") previously owned by SPBC and leased to DSC pursuant
to an equipment lease ("SPBC Lease"), and (ii) the rights and
obligations of SPBC under a Net Profits Agreement ("Profits
Agreement") previously entered into by and among DSC, SPBC, and
the Partnership (see Note 7). The SPBC Debt, Equipment, Lease
and Net Profits Agreement are collectively referred to as the
"SPBC Assets."
SFN paid SPBC a total consideration of $10,536,813 for the SPBC
Assets, consisting of $9,536,813 paid in cash at closing and a
$1,000,000 subordinated promissory note ("Subordinated Note")
payable to SPBC and secured by a junior lien on all the assets of
SFN.
The purchase price for the SPBC Assets was allocated to the Debt
and Equipment based on the relative fair market value at the date
of acquisition. In addition, SFN paid an investment banking fee
of $321,190 to an affiliate of DSEC, for its role in structuring
the transaction with The CIT Group/Equipment Financing, Inc.
("CIT") and SPBC.
6. Construction Cranes
Concurrent with the formation of DSC, the Partnership purchased
ten construction type cranes (the "Partnership cranes") from
Dayton-Scott for a cash purchase price of $1,500,000 and, in
1986, sold one of these construction cranes. In addition, Dayton-
Scott contributed the DSC cranes.
In connection with SFN's acquisition of the DSC promissory notes
from SPBC, SPBC conveyed to SFN the Equipment previously owned by
SPBC. The Equipment had been leased by SPBC to DSC pursuant to
the SPBC Lease since April 1987, and SFN acquired the Equipment
subject to the SPBC Lease, as amended on April 30, 1992.
On November 27, 1996, the Partnership, DSC and SFN completed a
bulk sale of their remaining equipment assets (see Note 1).
The following is a summary of the equipment sold for the years
ended December 31, 1996, 1995 and 1994:
Number Net Net Gain
of Cranes Selling Price Book Value On Sale
1996
EARF 9 $ 3,090,478 $ 223,359 $ 2,867,119
DSC 51 17,391,292 4,879,473 12,511,819
SFN 6 1,486,314 650,132 836,182
DSC Vehicles - 18,692 16,087 2,605
Total for 1996 66 $21,986,776 $5,769,051 $16,217,725
1995
DSC 2 $ 931,125 $ 347,035 $ 584,090
SFN 1 659,427 325,082 334,345
Total for 1995 3 $ 1,590,552 $ 672,117 $ 918,435
1994
DSC 3 $ 931,125 $ 414,674 $ 516,451
Total for 1994 3 $ 931,125 $ 414,674 $ 516,451
The sales proceeds were used to reduce and eventually extinguish
the Partnership's debt (see Note 1).
DSEC managed and operated the DSC cranes, SFN cranes and the
Partnership cranes (collectively, the "Fleet") pursuant to a
management agreement that reimbursed all expenses related to the
operation of the Fleet, including the salaries of DSEC's
employees. The agreement also provided for incentive
compensation if certain revenue goals were attained and
commission payments if cranes were sold. The following is a
summary of the sales commissions, incentive management fee and
severance/termination fee paid to DSEC for the years ended
December 31, 1996, 1995, and 1994:
Unpaid Paid Paid Paid
December 31, During During During
1996 1996 1995 1994
Incentive Management Fees $ 221,513 $ _ $ 55,177 $ 116,453
Sales Commissions _ 558,772 40,783 23,875
Severance/Termination Fees _ 1,000,000 _ _
$ 221,513 $1,558,772 $ 95,960 $ 140,328
7. Loans Payable
Inter Company Debt
In April 1987, concurrent with the Partnership's acquisition of
an additional 49% interest in DSC (see Note 4), the Partnership
assumed three notes in the amount of $12,000,000, $3,000,000 and
$200,000, all of which were purchased by SFN in 1992. The notes
were nonrecourse to DSC and the Partnership and were
collateralized by a first lien on DSC assets. This note was paid
in full in July 1996 due to prepayments made according to the
terms of the note.
The $12,000,000 note accrued interest at BankAmerica's prime
lending rate plus 1/2%, subject to a floor of 8% and a cap tied
to the revenues of DSC. This note was paid in full in June 1996
due to prepayments made according to the terms of the note.
The $3,000,000 note accrued interest at a fixed rate of 7.5% per
annum, compounded annually, and payments on such note were
deferred until the $12 million note was paid in full. This note
was paid in full on October 4, 1996 due to prepayments made
according to the terms of the note.
The $200,000 note was noninterest-bearing, and was due in full 30
days after the last payment was made on the $3,000,000 note.
Additionally, in consideration for the restructuring of its debt
in 1988, DSC was required to pay additional interest under a Net
Profits Agreement, in the amount of 25% of future net operating
profits (as defined) and 25% of all net proceeds upon the sale or
constructive sale of the DSC cranes. For the years ended
December 31, 1996, 1995, and 1994, SFN earned $2,779,189, $34,984
and $44,430, respectively, under this agreement.
Third Party Debt
In order to fund the cash portion of the purchase price for the
SPBC Assets and related transaction costs, the Partnership,
through its consolidated subsidiary, SFN, obtained loans
(collectively, the "CIT Loans") from CIT in an aggregate amount
of $9,761,813, consisting of a $8,761,813 term loan (the "Term
Loan") and a $1,000,000 revolving loan (the "Revolving Loan").
The Loans were secured by a first priority security interest in
all the assets of SFN, including the collateral securing the
Notes Receivable from DSC and all the rights under the Net
Profits Agreement.
The Term Loan originally matured on July 31, 2000 and accrued
interest at the Prime Rate plus 1.625% per annum; monthly
principal and interest payments commenced May 31, 1992. Pursuant
to the terms of the agreement, net proceeds from the sales of any
DSC cranes or SFN cranes were applied to the Term Loan and/or
Revolving Loan. This note was paid in full in August 1996 due to
prepayments made according to the terms of the note.
The $1,000,000 Revolving Loan was due and payable on March 31,
2001. Interest accrued at the Prime Rate plus 1.625% per annum
and was payable in monthly installments that commenced May 31,
1992. Additional advances for federal, state and local taxes and
operating expenses, up to a maximum of $40,000 per annum, shall
constitute a part of the principal and shall bear interest from
the date of the advance. The balance outstanding on the Revolving
Loan was paid in full in September 1995.
SFN also executed a participation note (the "Participation Note")
in the amount of $252,200, with interest to accrue until November
30, 2000, at the rate of 8% per annum in favor of CIT, at which
time the total principal and interest were to be $500,000.
Pursuant to this note, CIT was entitled to receive the greater of
the accreted value of the note or 25% of the net proceeds from
the sale of the cranes plus 25% of the FMV of the cranes owned by
SFN on November 30, 2000. At April 30, 1992, the Participation
Loan was recorded at 25% of the fair market value of the cranes
or $700,000. On July 25, 1996 SFN paid $594,856 to CIT in full
satisfaction of this note and recorded a gain on extinguishment
of debt of $105,144.
SFN also executed a subordinated promissory note to SPBC in the
amount of $1,000,000. Interest accrued at the rate of 7.5% per
annum and was payable on a monthly basis beginning June 5, 1992.
Principal installments were due annually beginning May 5, 1993
and ending on May 5, 1999. On August 30, 1996 SFN paid $276,962
to SPBC in full satisfaction of this note and recorded a gain on
extinguishment of debt of $25,000.
8. Transactions with General Partners and Affiliates
The following is a summary of transactions with General Partners
and their affiliates during the years ended December 31, 1996,
1995 and 1994:
Unpaid Paid Paid Paid
December 31, During During During
1996 1996 1995 1994
Administrative salaries
and expenses $ 58,192 $ 57,537 $ 103,583 $ 100,966
Management fees 1,224,172 1,391,742 60,000 60,000
$1,282,364 $1,449,279 $ 163,583 $ 160,966
As of June 1986, the General Partners agreed to defer payment of
monthly management fees in excess of $5,000 until cash flow of
the Partnership improved. On November 20, 1996, the Partnership
paid deferred management fees totaling $1,331,742 to EMI.
Subsequent to December 31, 1996, the Partnership paid to San
Felipe Resources (for the benefit of Mr. Webster) $948,197 and
EMI $275,974.
At December 31, 1995, cash in the amount of $834,258, was on
deposit with an affiliate of EMI. As of December 31, 1996, no
cash and cash equivalents were on deposit with an affiliate of
the General Partner or the Partnership.
9. Significant Customers
During 1996, 1995 and 1994, net rental revenues from one customer
amounted to approximately $1,002,818 (24%), $1,104,000 (24%), and
$1,202,000 (25%) of rental revenues, respectively.
10. Reconciliation of Net Income to Taxable Income
The net income reported in the financial statements for the year
ended December 31, 1996, 1995 and 1994 was less than the net
income reported for federal income tax purposes by approximately
$1,961,000, $1,706,000 and $1,779,000, respectively. The
differences for each year were primarily the result of
differences between methods of depreciation for book and tax
purposes, timing differences in the recognition of revenues and
expenses between book and tax methods of accounting, differences
in the recognition of the Partnership's share of DSC's income and
the treatment of SFN as a separate taxable entity.
11. Current Income Taxes (SFN Corporation)
The provision for income taxes results from the Partnership's
corporate consolidated subsidiary, SFN Corporation, which is a
separate taxable entity, and, therefore, has no effect on the
limited partners, taxable income or loss reportable for the year
ended December 31, 1996 (see Note 5) .
SFN Corporation's total provision for income taxes differs from
that which would have been calculated using the statutory federal
income tax rate due primarily to the net effect of the provision
for state income taxes. Current income taxes result from
temporary differences in the recognition of revenues and expenses
for tax and financial reporting purposes primarily related to
differences in the methods of amortization of the discount on
notes receivable and methods of depreciation for book and tax
purposes.
The provision for income taxes and current tax liability at
December 31, 1996 and 1995 consists of the following:
Provision for Income Taxes 1996 1995
Federal income taxes $345,347 $ 140,318
State taxes 33,730 19,602
Provision for income taxes $379,077 $ 159,920
Current Tax Liability
Estimated current tax asset $ _ $ 888,345
Estimated current tax liability (624,065) (1,507,665)
Net current tax liability $(624,065) $ (619,320)
Report of Independent Accountants
To the Partners of
Equipment Asset Recovery Fund, L.P. and
Consolidated Venture and Subsidiary:
We have audited the accompanying consolidated balance sheets of
Equipment Asset Recovery Fund, L.P. (a Texas limited partnership)
and Consolidated Venture and Subsidiary as of December 31, 1996
and 1995, and the related consolidated statements of operations,
partners' capital (deficit) and cash flows for each of the three
years in the period ended December 31, 1996. These financial
statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
accounting standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the
Partnership sold all of its equipment assets on
November 27, 1996. The Partnership anticipates settling and
liquidating its remaining assets and liabilities and dissolving
the Partnership in 1997. The balance sheet presented herein
represents the general partners' estimated net realizable value
of all assets and liabilities as of December 31, 1996 and the
statements of operations and cash flows represent the operations
of the Partnership for the year ended December 31, 1996,
including the operations related to the equipment assets through
November 26, 1996.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Equipment Asset Recovery Fund, L.P. and Consolidated
Venture and Subsidiary as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 18, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<CASH> 15,217,595
<SECURITIES> 000
<RECEIVABLES> 183,415
<ALLOWANCES> (10,000)
<INVENTORY> 000
<CURRENT-ASSETS> 15,584,407
<PP&E> 000
<DEPRECIATION> 000
<TOTAL-ASSETS> 15,584,407
<CURRENT-LIABILITIES> 14,148,759
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 851,335
<TOTAL-LIABILITY-AND-EQUITY> 15,584,407
<SALES> 4,239,442
<TOTAL-REVENUES> 4,385,965
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 7,544,688
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 175,855
<INCOME-PRETAX> 11,978,979
<INCOME-TAX> 379,077
<INCOME-CONTINUING> 11,599,902
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 11,599,902
<EPS-PRIMARY> 324.72
<EPS-DILUTED> 324.72
</TABLE>
EXHIBIT 99
Asset Purchase & Sale Agreement dated November 20, 1996,
and accompanying exhibits, by and among Neil F. Lampson, Inc.
as buyer and DSC, EARF and SFN as Sellers.
ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement (this "Agreement") is
entered into effective the 20th day of November, 1996, by and
among NEIL F. LAMPSON, INC., a Washington corporation ("Buyer"),
and DSC VENTURE, a Texas joint venture ("DSC Venture"), EQUIPMENT
ASSET RECOVERY FUND, a Texas general partnership ("EARF"), and
SFN CORPORATION, a Texas corporation ("SFN"). DSC Venture, EARF
and SFN are sometimes hereinafter referred to individually as a
"Seller" and collectively as the "Sellers".
R E C I T A L S
1. Sellers desire to sell and transfer to Buyer, and Buyer
desires to purchase and acquire from Sellers, the Manitowoc
construction cranes and related spare parts owned by Sellers, on
the terms and conditions set forth herein.
2. Sellers and Buyer have entered into a letter of intent
dated November 12, 1996 relating to the purchase and sale of
Sellers' construction cranes and related spare parts, which
letter of intent requires that the parties enter into a
definitive agreement with respect to such transaction at the
earliest reasonably practicable date. This Agreement is the
definitive agreement required by such letter of intent.
3. In addition to the terms and conditions of such
purchase and sale of Sellers' construction cranes and related
spare parts, Sellers and Buyer desire to set forth in this
Agreement certain representations, warranties and covenants made
by them as an inducement to the consummation of the transactions
contemplated by this Agreement, all as more fully set forth
below.
A G R E E M E N T
IN CONSIDERATION of the respective covenants and agreements
contained herein, the parties hereto agree as follows:
1. DUE DILIGENCE REVIEW OF ASSETS.
Buyer and Sellers agree that Buyer may commence its due
diligence investigation of the Assets (as hereinafter defined)
and the Asset Records (as hereinafter defined) upon the execution
and delivery of this Agreement. Sellers shall afford Buyer
access to the Asset Records, cranes and related spare parts to
the extent that such access to cranes can be granted without
interfering with the current use of each of the cranes. Buyer
shall complete its due diligence investigation of the Assets
available for inspection and Asset Records before 5:00 p.m.
central time on Wednesday, November 27, 1996 (the "Due Diligence
Deadline"), unless certain Assets are unavailable for inspection
prior to the Due Diligence Deadline (the " Uninspected Assets")
in which event, upon the written notice by Buyer to DSEC
requesting an extension of the Due Diligence Deadline, the Due
Diligence Deadline shall be extended for a period of five days
from Buyer's receipt of written notice from DSEC that the
Uninspected Assets are then available for Buyer to complete its
due diligence inspection. Buyer shall have the right to accept
or reject the Assets in its sole discretion and shall notify
Dayton-Scott Equipment Company ("DSEC"), as agent for all Sellers
in writing of its acceptance or rejection of the condition of the
Assets before the Due Diligence Deadline. Failure to notify DSEC
of acceptance or rejection of the condition of the Assets by the
Due Diligence Deadline, as it may be properly extended, shall
constitute acceptance of the condition of the Assets. Upon
rejection of the condition of all or any portion of the Assets,
this Agreement shall be terminated without any liability of any
party to the others (other than for breaches of covenants herein
prior to such termination), and the Earnest Money (as hereinafter
defined) shall be returned to Buyer in accordance with the terms
of the Escrow Agreement (as hereinafter defined).
2. SALE AND PURCHASE OF ASSETS; LIABILITIES.
2.1 Sale and Purchase of Assets.
(a) Subject to the terms and conditions of this Agreement,
at the Closing (as hereinafter defined) (i) DSC Venture shall
sell, assign, transfer and convey to Buyer, and Buyer shall
purchase and acquire from DSC Venture, all right, title and
interest in and to the 38 construction cranes and related
equipment ("Units") of DSC Venture listed on the attached Exhibit
"A" (the "DSC Units"), (ii) EARF shall sell, assign, transfer and
convey to Buyer, and Buyer shall purchase and acquire from EARF,
all right, title and interest in and to the 9 Units of EARF
listed on the attached Exhibit "A" (the "EARF Units"), and (iii)
SFN shall sell, assign, transfer and convey to Buyer, and Buyer
shall purchase and acquire from SFN, all right, title and
interest in and to the 5 Units of SFN listed on the attached
Exhibit "A" (the "SFN Units").
(b) Subject to the terms and conditions of this Agreement,
at the Closing the Sellers shall sell, assign, transfer and
convey to Buyer, and Buyer shall purchase and acquire from the
Sellers, all right, title and interest in and to and the spare
parts related to the Units located on Sellers' Pearland, Texas
equipment yard (the "Spares"), which Spares have been commonly
maintained and are not segregated by Seller or by Unit, as listed
on the attached Exhibit "B".
(c) At the Closing, each Seller shall execute and deliver
to Buyer a Bill of Sale in the form of the attached Exhibit "C"
(a "Crane Bill of Sale") for the Units to be conveyed hereunder
by such Seller. Also at the Closing, the Sellers shall jointly
execute and deliver to Buyer a Bill of Sale in the form of the
attached Exhibit "C" (the "Spares Bill of Sale") for all of the
Spares to be conveyed hereunder by Sellers.
2.2 Assumption of Certain Contracts and Liabilities.
(a) Subject to the terms and conditions of this Agreement,
at the Closing (i) DSC Venture shall assign and transfer to Buyer
all of DSC Venture's right, title and interest in and to all
rental agreements and lessee purchase orders for the Units and
insurance certificates (only to the extent such insurance
certificates are assignable) from lessees (collectively,
"Assigned Contracts") of DSC Venture relating to the DSC Units,
including, without limitation, the agreements and other
instruments of DSC Venture listed on the attached Exhibit "D"
(the "DSC Contracts"), (ii) EARF shall assign and transfer to
Buyer all of EARF's right, title and interest in and to all
Assigned Contracts of EARF relating to the EARF Units, including,
without limitation, the agreements and other instruments of EARF
listed on the attached Exhibit "D" (the "EARF Contracts"), and
(iii) SFN shall assign and transfer to Buyer all of SFN's right,
title and interest in and to all Assigned Contracts of SFN
relating to the SFN Units, including, without limitation, the
agreements and other instruments of SFN listed on the attached
Exhibit "D" (the "SFN Contracts"). As a general matter, the
rental agreements and lessee purchase orders are entered into
with customers by DSEC on behalf of each of the Sellers and
Sellers, to the extent necessary or appropriate, shall cause DSEC
to assign such agreements and purchase orders to Buyer at
Closing. The DSC Units, the EARF Units, the SFN Units, the
Spares, the DSC Contracts, the EARF Contracts, and the SFN
Contracts are sometimes hereinafter collectively referred to as
the "Assets."
(b) At the Closing, Buyer and each Seller shall execute and
deliver an Assignment and Assumption Agreement in the form of the
attached Exhibit "E" (an "Assignment"), pursuant to which Buyer
shall assume and agree to pay, perform and discharge when due the
liabilities and obligations of such Seller under its Assigned
Contracts, and shall own and receive the benefits of such
Assigned Contracts, arising from and after the Closing Date (as
hereinafter defined). Buyer hereby assumes and agrees to pay,
perform and discharge when due all liabilities and obligations of
each Seller regarding or relating to the Assets arising from and
after the Closing Date. Sellers hereby assume and agree to pay,
perform and discharge when due all liabilities and obligations of
each Seller regarding or relating to the Assets arising prior to
the Closing Date.
2.3 Accounts Receivable. All accounts receivable relating
to the Assets accruing before 12:01 a.m. on January 1, 1997 (the
"Effective Date") shall remain the property of Sellers. Sellers
shall retain responsibility for all invoicing regarding such
accounts receivable. If Buyer receives at any time any such
amounts attributable to any period prior to the Effective Date,
Buyer shall promptly remit such amounts to DSEC as agent for
Sellers. All accounts receivable relating to the Assets accruing
after the Effective Date shall be the property of, and invoiced
by, Buyer. If Seller receives at any time any such amounts
attributable to any period after the Effective Date, Seller shall
promptly remit such amounts to Buyer. In the event either Seller
or Buyer elect to bring suit to enforce payment of a delinquent
account receivable on an account or accounts in which each has an
interest, such suit shall be brought jointly or by the one
holding the largest account receivable with assignment from the
other. All litigation expense and any recovery by settlement or
judgment shall be paid/distributed among Buyer and Sellers pro
rata to their respective interests in the unpaid account
receivable.
2.4 Excluded Assets. The Assets to be transferred and
assigned to Buyer shall not include, Sellers shall not transfer
or assign to Buyer, and Buyer shall not acquire from Sellers, any
assets, properties or rights other than the Assets (the "Excluded
Assets"), which Excluded Assets shall include, without
limitation, the following assets, properties and rights:
(a) All cash on hand in bank accounts, securities,
certificates of deposit, savings accounts and other cash
equivalents, and all bank, checking, money market and other
similar accounts;
(b) Any accounts, notes receivable, promissory notes or
other similar documents evidencing amounts owed to any of
Sellers;
(c) Any income, franchise or other tax refunds to which any
Seller is or may become entitled;
(d) Any insurance policies owned or maintained by any
Seller, any cash surrender values, unearned premiums and rights
to collect the same or obtain refunds thereof, and any rights of
recovery thereunder;
(e) Any real or personal property leases pursuant to which
any Seller is a lessee, any real property of any Seller, any
personal property of any Seller except as specifically listed on
Exhibit "A" or Exhibit "B", including, without limitation,
vehicles, office equipment and office fixtures;
(f) All accounts receivable of any Seller accruing prior to
the Effective Date relating to the Assets and all accounts
receivable of any Seller not relating to the Assets;
(g) All records of Sellers, including, without limitation,
accounting records, corporate records, tax records and any other
records which a Seller is required by law to keep, except for the
"Asset Records" (as hereinafter defined); and
(h) The goodwill of Sellers and the ownership of or
right to use the names "Dayton-Scott Equipment Company" or
"Dayton-Scott," the names of any of Sellers or any variation of
any of the foregoing and Buyer shall not represent to any person
from and after the date hereof that Buyer has acquired the assets
or business of "Dayton-Scott" or "Dayton-Scott Equipment
Company."
2.5 Liabilities Not Assumed. Except for the liabilities
assumed by Buyer pursuant to this Agreement, including, without
limitation, liabilities arising under the DSC Contracts, the EARF
Contracts and the SFN Contracts, Buyer shall not assume any
liabilities or obligations of Sellers.
2.6 Consideration for Sale of the Assets. Subject to the
terms and conditions of this Agreement, Buyer shall pay and
deliver to DSEC as agent for Sellers a purchase price (the
"Purchase Price") in the amount of Fifteen Million Nine Hundred
Thousand Dollars ($15,900,000) in cash at Closing by cashier's
check or wire transfer of immediately available funds. Buyer
shall pay the Purchase Price to DSEC as agent for Sellers.
2.7 The Closing.
(a) The closing of the transactions contemplated by this
Agreement (the "Closing") shall be held at the offices of Gardere
Wynne Sewell & Riggs, L.L.P., 333 Clay Avenue, Suite 800,
Houston, Texas 77002 at 10:00 a.m., Houston time, on January 6,
1997 (the "Closing Date"), unless another time, date and place
for the Closing is agreed to in writing by the parties hereto.
Title to, ownership of, control over, and risk of loss of the
Assets shall pass to Buyer at the Closing. Failure to consummate
the transactions provided for in this Agreement on the date and
time and at the place selected pursuant to this Section shall not
result in the termination of this Agreement and shall not relieve
any party to this Agreement of any obligation hereunder.
(b) At or before the Closing, each party shall cause to be
prepared, and at the Closing the parties shall execute and
deliver, each document, agreement and instrument required or
contemplated by this Agreement to be so executed and delivered in
connection with the transactions contemplated by this Agreement,
including, without limitation, the Bills of Sale and the
Assignments.
2.8 Conduct of Operations Pending Closing. From the date
hereof until the Closing Date, except as otherwise permitted or
contemplated by this Agreement, each Seller will:
(a) conduct the operations of its respective Assets only in
the usual, regular and ordinary manner and use its reasonable
best efforts to maintain and preserve the present relationships
of such Seller with the other parties to its Assigned Agreements;
(b) not create, assume or permit to exist any Lien upon any
of its respective Assets other than Permitted Liens and Liens
currently in existence and to be released prior to Closing;
(c) not sell, assign, lease, or otherwise transfer or
dispose of any of the Assets, except in the ordinary course of
business consistent with past business practices, and in no event
sell or otherwise transfer ownership of any Unit;
(d) not enter into any other contract or commitment or
engage in any other transaction relating to the Assets not in the
usual and ordinary course of its business consistent with past
business practices; and
(e) maintain or cause to be maintained in full force and
effect insurance coverage relating to the Assets substantially
equivalent to the coverage maintained by Sellers or by DSEC on
behalf of any Seller on the date hereof.
2.9 Transfer Taxes; Recording and Filing Fees. The parties
have taken the position that the sale of the Assets by Sellers to
Buyer as contemplated by this Agreement is exempt from applicable
state sales taxes. Notwithstanding the foregoing, Buyer shall be
responsible for and shall pay any and all sales, use, transfer
and similar taxes that may become due or payable by reason of the
sale and transfer to Buyer of the Assets and the other
transactions contemplated by this Agreement (collectively, the
"Transfer Taxes"). Buyer also shall pay any and all recording,
filing or other fees relating to the conveyance or transfer of
the Assets from Sellers to Buyer. Buyer shall defend, indemnify
and hold harmless Sellers from, against and in respect of any and
all claims, demands, lawsuits, proceedings, fines, penalties,
obligations, costs, expenses, liabilities and damages, including,
without limitation, interest, penalties and attorneys' fees,
which arise or result from or relate to any Transfer Taxes.
2.10 Risk of Loss and Removal of Assets.
(a) Prior to the Closing Date, Sellers shall retain all
risk of loss and damage to their respective Assets. In the event
of a total loss or constructive total loss of any Unit prior to
the Closing date, the Purchase Price payable hereunder shall be
reduced in the following amounts based on the type of Unit lost,
and such Unit and its related Assigned Contracts shall not be
transferred to Buyer as part of the Assets:
Type of Unit Amount
4100W S2 or 4100W $ 550,000
4000W $ 325,000
3900 $ 175,000
Ringer $ 150,000
Tower Attachment $ 75,000
In the event of a loss which is not a total or constructive total
loss of a Unit, Buyer shall purchase such damaged Asset along
with the other Assets for the full Purchase Price, and Sellers
shall take such actions as may be reasonably necessary to insure
that Buyer will receive any and all insurance proceeds payable in
connection with such loss, free and clear of any claim by any
Seller to the extent, and only to the extent, that such insurance
proceeds are necessary to return such damaged Asset to its
condition at the Due Diligence Deadline subject to reasonable
wear and tear thereafter to the date of the loss to such damaged
Asset.
(b) From and after the Closing Date, Buyer assumes all risk
of loss and damage to the Assets, and any injury or death to any
person in connection with Buyer's removal of the Assets from the
location of the Assets. After the Closing Date, a Seller shall
only be responsible for loss of or damage to the Assets if caused
by such Seller's gross negligence or willful misconduct while
such Assets are in its possession. Buyer, at Buyer's cost, shall
load and remove all of the Spares from Sellers' Pearland, Texas
equipment yard within thirty (30) days following the Closing. In
removing the Assets, Buyer shall exercise the utmost care and
precautions not to damage or injure any property or personnel,
including, without limitation, property or personnel of Sellers
or their agents or representatives, and shall clean up the debris
at such locations following such removal. If Buyer fails to
remove all Assets from Sellers' Pearland, Texas equipment yard
within sixty (60) days of Closing, Buyer shall promptly pay to
DSEC the full amount of the monthly rental due on the Pearland,
Texas equipment yard from Closing until all such Assets are
removed. If Buyer complies with its obligation to remove the
Spares from Sellers' Pearland, Texas equipment yard within sixty
(60) days of Closing, Buyer shall not be obligated to pay DSEC
any monthly rental due on the Pearland, Texas equipment yard.
2.11 Notification of Customers by Sellers. Promptly after
the Closing, DSEC as agent for Sellers shall undertake to notify
lessees of the Units that the Units have been sold to Buyer.
Such notification shall state that (i) the applicable leases have
been assigned to Buyer, (ii) payments for periods beginning on
and after the Effective Date under such leases should be made to
Buyer, (iii) payments for periods prior to the Effective Date
under such Leases should be made to Sellers, and (iv) all
insurance certificates provided by such customers should be
amended to designate Buyer as an additional assured and loss
payee from and after the Closing Date, pursuant to the terms of
such lease agreement. Prior to Closing, the parties shall agree
on the exact form of such notices.
2.12 Records. The Assets conveyed by Sellers to Buyer
hereunder shall include all machine files and current rental
files directly relating to the Assets and manufacturer's
maintenance and operator's manuals for the Units (the "Asset
Records") which are in Sellers' possession. Buyer shall maintain
the Asset Records, and Sellers and their representatives and
agents shall have the right to access and copy the Asset Records,
for a period of five years from the Closing Date.
2.13 Units Under Repair. Buyer acknowledges that Units No.
40546 and 391240 are currently being refurbished by Sellers.
During the period prior to the Closing, Sellers shall continue
such refurbishment. On the Closing Date, Buyer shall purchase
such Units with the other Assets on an "AS IS, WHERE IS" basis.
3. EARNEST MONEY.
Concurrently with the execution of this Agreement, Buyer
shall deliver the sum of $1,500,000 as earnest money (the
"Earnest Money") to Gardere Wynne Sewell & Riggs, L.L.P. (the
"Escrow Agent") pursuant to the terms of the Escrow Agreement
(the "Escrow Agreement") attached hereto as Exhibit "F". Such
Earnest Money and all interest earned thereon shall be held by
the Escrow Agent pursuant to the terms of the Escrow Agreement
and shall be applied to the payment of the Purchase Price at the
Closing, released to Sellers, released to Buyers, or tendered to
the registry of any court of competent jurisdiction, all upon the
terms and conditions set forth in the Escrow Agreement.
4. REPRESENTATIONS AND WARRANTIES OF SELLERS.
4.1 DSC Venture's Representations and Warranties. DSC
Venture represents and warrants to Buyer as of the date hereof
the following:
(a) DSC Venture is a joint venture validly existing under
the laws of the State of Texas. The execution and delivery by
DSC Venture of this Agreement and the documents contemplated by
this Agreement and the performance of its obligations under such
agreements are within the venture powers of DSC Venture, have
been duly authorized by all necessary venture action and will not
contravene any provision of its Joint Venture Agreement;
(b) The execution, delivery and performance of this
Agreement by DSC Venture will not result in a breach of or
constitute a default (which breach or default has not been
properly waived or consented to by the appropriate party prior to
Closing) under any agreement, contract, license, debenture or
other instrument to which DSC Venture is a party or by which it
or any of its property is bound, except to the extent that the
effect thereof is not material to the DSC Units or the
transactions contemplated by this Agreement;
(c) The execution, delivery, and performance of this
Agreement will not violate (i) to DSC Venture's knowledge, any
statute or regulation, or (ii) any order, ruling or decree of any
court or governmental authority or agency by which it or any of
its property is bound;
(d) This Agreement constitutes a legal, valid and binding
obligation of DSC Venture, enforceable in accordance with its
terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws and equitable
principles relating to or limiting creditors' rights generally;
(e) DSC Venture has not incurred any broker or finder's
fees relating to the sale of the Assets to Buyer for which Buyer
will be responsible;
(f) There are no actions, suits or proceedings pending or,
to the knowledge of DSC Venture, threatened against DSC Venture
which, if adversely determined against DSC Venture, would have a
material adverse effect on DSC Venture's ability to perform its
obligations under this Agreement;
(g) DSC Venture has no knowledge of any material default
and has not received any notice of material default under any DSC
Contract;
(h) DSC Venture is not obligated to obtain any consent in
order to permit DSC Venture to complete the transactions contemplated
by this Agreement;
(i) There are no claims, proceedings, actions, lawsuits, or
governmental investigations in existence or threatened, or
contemplated so far as DSC Venture is aware, with respect to the
DSC Units, the DSC Contracts, or its interest therein or in the
Spares; and
(j) DSC Venture has, and the Crane Bill of Sale for the DSC
Units when executed and delivered to Buyer will convey to Buyer,
good and marketable title to the DSC Units, free and clear of all
liens, pledges, claims, charges, security interests, encumbrances
and liabilities of any kind, other than (i) liens, pledges,
claims, charges, security interests or encumbrances of any nature
whatsoever ("Liens") securing the payment of taxes, assessments
or other governmental charges or levies which are not yet
delinquent, including, without limitation, inchoate ad valorem
taxes not yet due and payable and (ii) materialmen's, mechanics',
carriers', workmen's, repairmen's or similar Liens incurred in
the ordinary course of business securing sums not yet due
(collectively, "Permitted Liens"); provided, however DSC Venture
shall promptly pay and discharge all Permitted Liens arising
prior to the Effective Date.
4.2 EARF's Representations and Warranties. EARF represents
and warrants to Buyer as of the date hereof the following:
(a) EARF is a general partnership validly existing under
the laws of the State of Texas. The execution and delivery by
EARF of this Agreement and the documents contemplated by this
Agreement and the performance of its obligations under such
agreements are within the partnership powers of EARF, have been
duly authorized by all necessary partnership action and will not
contravene any provision of its Partnership Agreement;
(b) The execution, delivery and performance of this
Agreement by EARF will not result in a breach of or constitute a
default (which breach or default has not been properly waived or
consented to by the appropriate party prior to Closing) under any
agreement, contract, license, debenture or other instrument to
which EARF is a party or by which it or any of its property is
bound, except to the extent that the effect thereof is not
material to the EARF Units or the transactions contemplated by
this Agreement;
(c) The execution, delivery, and performance of this
Agreement will not violate (i) to EARF's knowledge, any statute
or regulation, or (ii) any order, ruling or decree of any court
or governmental authority or agency by which it or any of its
property is bound;
(d) This Agreement constitutes a legal, valid and binding
obligation of EARF, enforceable in accordance with its terms,
except as may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws and equitable
principles relating to or limiting creditors' rights generally;
(e) EARF has not incurred any broker or finder's fees
relating to the sale of the Assets to Buyer for which Buyer will
be responsible;
(f) There are no actions, suits or proceedings pending or,
to the knowledge of EARF, threatened against EARF which, if
adversely determined against EARF, would have a material adverse
effect on EARF's ability to perform its obligations under this
Agreement;
(g) EARF has no knowledge of any material default and has
not received any notice of material default under any EARF
Contract;
(h) EARF is not obligated to obtain any consent in order to
permit EARF to complete the transactions contemplated by this
Agreement;
(i) There are no claims, proceedings, actions, lawsuits, or
governmental investigations in existence or threatened, or
contemplated so far as EARF is aware, with respect to the EARF
Units, the EARF Contracts, or its interest therein or in the
Spares; and
(j) EARF has, and the Crane Bill of Sale for the EARF Units
when executed and delivered to Buyer will convey to Buyer, good
and marketable title to the EARF Units, free and clear of all
liens, pledges, charges, claims, security interests, encumbrances
and liabilities of any kind other than Permitted Liens; provided,
however EARF shall promptly pay and discharge all Permitted Liens
arising prior to the Effective Date.
4.3 SFN's Representations and Warranties. SFN represents
and warrants to Buyer as of the date hereof the following:
(a) SFN is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas. The
execution and delivery by SFN of this Agreement and the documents
contemplated by this Agreement and the performance of its
obligations under such agreements are within the corporate powers
of SFN, have been duly authorized by all necessary corporate
action and will not contravene any provision of its Articles of
Incorporation or Bylaws;
(b) The execution, delivery and performance of this
Agreement by SFN will not result in a breach of or constitute a
default (which breach or default has not been properly waived or
consented to by the appropriate party prior to Closing) under any
agreement, contract, license, debenture or other instrument to
which SFN is a party or by which it or any of its property is
bound, except to the extent that the effect thereof is not
material to the SFN Units or the transactions contemplated by
this Agreement;
(c) The execution, delivery, and performance of this
Agreement will not violate (i) to SFN's knowledge, any statute or
regulation, or (ii) any order, ruling or decree of any court or
governmental authority or agency by which it or any of its
property is bound;
(d) This Agreement constitutes a legal, valid and binding
obligation of SFN, enforceable in accordance with its terms,
except as may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws and equitable
principles relating to or limiting creditors' rights generally;
(e) SFN has not incurred any broker or finder's fees
relating to the sale of the Assets to Buyer for which Buyer will
be responsible;
(f) There are no actions, suits or proceedings pending or,
to the knowledge of SFN, threatened against SFN which, if
adversely determined against SFN, would have a material adverse
effect on SFN's ability to perform its obligations under this
Agreement;
(g) SFN has no knowledge of any material default and has
not received any notice of material default under any SFN
Contract;
(h) SFN is not obligated to obtain any consent in order to
permit SFN to complete the transactions contemplated by this
Agreement;
(i) There are no claims, proceedings, actions, lawsuits, or
governmental investigations in existence or threatened, or
contemplated so far as SFN is aware, with respect to the SFN
Units, the SFN Contracts, or its interest therein or in the
Spares; and
(j) SFN has, and the Crane Bill of Sale for the SFN Units
when executed and delivered to Buyer will convey to Buyer, good
and marketable title to the SFN Units, free and clear of all
liens, pledges, charges, claims, security interests, encumbrances
and liabilities of any kind other than Permitted Liens; provided,
however SFN shall promptly pay and discharge all Permitted Liens
arising prior to the Effective Date.
4.4 Sellers' Representations and Warranties. Sellers,
jointly and severally, represent and warrant to Buyer as of the
Closing Date that they have, and the Spares Bill of Sale when
executed and delivered to Buyer will convey to Buyer, good and
marketable title to the Spares, free and clear of all liens,
pledges, charges, claims, security interests, encumbrances and
liabilities of any kind other than Permitted Liens.
4.5 Buyer's Representations and Warranties. Buyer
represents and warrants to each Seller as of the Closing Date the
following:
(a) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Washington.
The execution and delivery by Buyer of this Agreement and the
documents contemplated by this Agreement and the performance of
its obligations under such agreements are within the corporate
powers of Buyer, have been duly authorized by all necessary
corporate action and will not contravene any provision of its
Articles of Incorporation or By-Laws;
(b) The execution, delivery and performance of this
Agreement by Buyer will not result in a breach of or constitute a
default (which breach or default has not been properly waived or
consented to by the appropriate party prior to Closing) under any
agreement, contract, license, debenture or other instrument to
which Buyer is a party or by which it or any of its property is
bound, except to the extent that the effect thereof is not
material to the transactions contemplated by this Agreement;
(c) The execution, delivery, and performance of this
Agreement will not violate (i) to Buyer's knowledge, any statute
or regulation, or (ii) any order, ruling or decree of any court
or governmental authority or agency by which it or any of its
property is bound;
(d) This Agreement constitutes a legal, valid and binding
obligation of Buyer enforceable in accordance with its terms,
except as may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws and equitable
principles relating to or limiting creditors' rights generally;
(e) Buyer has not incurred any broker or finder's fees
relating to the sale of the Assets to Buyer for which any Seller
will be responsible;
(f) There are no actions, suits or proceedings pending or,
to the knowledge of Buyer, threatened against Buyer which, if
adversely determined against Buyer, would have a material adverse
effect on Buyer's ability to perform its obligations under this
Agreement;
(g) Buyer is not obligated to obtain any other consent in
order to permit Buyer to complete the transactions contemplated
by this Agreement; and
(h) Buyer has total assets and annual net sales of less
than $100,000,000.
5. DISCLAIMER OF WARRANTIES.
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES PROVIDED BY
EACH SELLER IN SECTION 4 HEREOF, SELLERS MAKE NO, AND HEREBY
EXPRESSLY DISCLAIM ALL, REPRESENTATIONS AND WARRANTIES, EXPRESS
OR IMPLIED, OF EVERY KIND AND NATURE INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE AND REPRESENTATIONS AND WARRANTIES
REGARDING QUALITY, CONDITION, VALUE, SUITABILITY, UTILITY,
SALABILITY AND PROFITABILITY. BUYER HEREBY ACCEPTS ALL OF THE
ASSETS IN "AS IS, WHERE IS" CONDITION.
6. INDEMNITY.
6.1 Indemnity by DSC Venture. DSC Venture shall indemnify,
defend, save and hold harmless Buyer from and against any
liability, loss, costs, expenses, claims or damages (including
without limitation, attorneys' fees and court costs) (col
lectively, "Losses") arising out of (i) any breach of a
representation or warranty of DSC Venture, and (ii) any
liabilities or obligations regarding the DSC Units or the DSC
Contracts arising prior to the Closing Date.
6.2 Indemnity by EARF. EARF shall indemnify, defend, save
and hold harmless Buyer from and against any losses arising out
of (i) any breach of a representation or warranty of EARF, and
(ii) any liabilities or obligations regarding the EARF Units or
the EARF Contracts arising prior to the Closing Date.
6.3 Indemnity by SFN. SFN shall indemnify, defend, save
and hold harmless Buyer from and against any losses arising out
of (i) any breach of a representation or warranty of SFN, and
(ii) any liabilities or obligations regarding the SFN Units or
the SFN Contracts arising prior to the Closing Date.
6.4 Indemnity by Sellers. Sellers shall, jointly and
severally indemnify, defend, save and hold harmless Buyers from
and against any liabilities or obligations regarding the Spares
arising prior to the Closing Date.
6.5 Indemnity by Buyer. Buyer shall indemnify, defend,
save and hold harmless Sellers from and against any losses
arising out of (i) any breach of a representation or warranty of
Buyer, and (ii) any liabilities or obligations regarding the
Assets arising after the Closing Date, including, without
limitation, obligations and liabilities for payment of sums or
performance of obligations after the Closing Date under the
Assigned Contracts.
6.6 Indemnification Coverage. For purposes of this
Agreement, the right to indemnification shall extend to the
parties hereto and their partners, venturers and affiliates, and
each of their owners, directors, officers, employees, representa
tives, contractors and agents. All indemnity obligations and
liabilities assumed by the parties under the terms of this
Agreement, including, without limitation, this Section 6, shall
be without monetary limit, and without regard to the cause or
causes thereof (including pre-existing conditions or defects),
the negligence of any party or parties (whether the negligence be
sole, joint or concurrent, active or passive), and the fault or
responsibility of any party or parties under any other contract
or any statute, rule or theory of law (including, but not limited
to, strict liability).
6.7 Indemnity Procedure. Upon receipt by a party entitled
to indemnification pursuant to this Section 6 (the "Indemnified
Party") of actual notice of any Losses (as defined in Section 6.1
hereof) with respect to which indemnity may be sought under this
Agreement, the Indemnified Party shall promptly notify the party
obligated to provide indemnification pursuant to this Section 6
(the "Indemnifying Party") in writing of such Losses. Failure by
the Indemnified Party to provide such notification to the
Indemnifying Party shall not relieve the Indemnifying Party from
any obligation or liability which the Indemnifying Party may have
on account of this Agreement or otherwise, except to the extent
the Indemnifying Party shall have been materially prejudiced by
such failure. The Indemnifying Party shall have the right to
assume the defense of any such action related to the Losses,
including the employment of counsel reasonably satisfactory to
the Indemnified Party. The Indemnified Party shall have the
right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the Indemnified Party
unless: (i) the Indemnifying Party has failed promptly to assume
the defense and employ counsel or (ii) the named parties to any
such action related to the Losses (including any impleaded
parties) include the Indemnified Party and the Indemnifying Party
and the Indemnifying Party has not employed counsel to defend the
Indemnified Party for those claims to which the Indemnified Party
is entitled to indemnification. The Indemnifying Party shall
not, without the prior written consent of the Indemnified Party
(which consent shall not be unreasonably withheld) settle,
compromise or consent to the entry of any judgment and/or
otherwise seek to terminate any pending or threatened action with
respect of which indemnification or contribution may be sought
hereunder (whether or not the Indemnified Party is a party
thereto) unless such settlement, compromise, consent or
termination includes an unconditional release of the Indemnified
Party from all potential Losses arising out of such action. The
Indemnifying Party shall reimburse the Indemnified Party for all
Losses as they are incurred in connection with the Indemnified
Party's rights under this Agreement.
6.8 Definition. The word "arising" as used in Section
2.2(b) and Sections 6.1 through 6.5 also refers to the date of
the event, occurrence or cause of action giving rise to the
liability or obligations and not to the date when such claim or
demand is made or the suit is brought.
7. SURVIVAL.
Notwithstanding anything to the contrary herein, express or
implied, the representations and warranties contained in Section
4 hereof, and the indemnity obligation contained in Section 6
hereof, are relied upon by Buyer and Sellers as being true and
shall survive the date hereof for the benefit of the parties for
a period of four years.
8. TAXES.
Ad valorem and/or personal property taxes for the Assets for
calendar year 1996 shall be the liability of and shall be paid by
each respective Seller thereof. Such taxes accruing from and
after the Effective Date shall be the liability of and shall be
paid by Buyer.
9. CONFIDENTIALITY.
Except to the extent required in connection with any
governmental, federal securities laws or stock exchange
disclosure or obtaining any governmental or lender approvals or
as otherwise required by law, the parties hereto agree not to
disclose any of the terms of this Agreement and the terms of the
documents contemplated by this Agreement to any person without
the prior written consent of the other parties hereto. Buyer
agrees to maintain the confidentiality of all information it
obtains pursuant to its due diligence review hereunder, and Buyer
will not use such information for any purpose other than
evaluating the purchase and sale transaction contemplated hereby.
Specifically, except as and to the extent required by law, Buyer
shall not disclose or use, and it shall cause it representatives
not to disclose or use, any Confidential Information (as defined
below) with respect to the Sellers or the Assets furnished, or to
be furnished, by the Sellers or their respective representatives
to Buyer or its representatives, or otherwise obtained by Buyer
or its representatives from Sellers or their representatives, in
connection with Buyer's due diligence inspection of the Assets at
any time or in any manner other than in connection with its
evaluation of the transaction described herein. "Confidential
Information" means any information about the Assets or the
Sellers obtained by Buyer; provided that it does not include
information that Buyer can demonstrate (i) is generally available
to or known by the public other than as a result of improper
disclosure by Buyer or its representatives or (ii) is obtained by
Buyer from a source other than the Sellers, provided that such
source was not bound by a duty of confidentiality with respect to
such information. If this Agreement is terminated as a result of
Buyer's rejection of the condition of the Assets as set forth in
Section 1 hereof, Buyer shall promptly return to the Sellers any
Confidential Information in its possession.
10. MISCELLANEOUS CLAUSES.
10.1 Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto with respect to the
transactions contemplated hereby. It shall not be amended or
modified except by written instrument duly executed by all of the
parties hereto. Any and all previous agreements and understand
ings between or among any or all of the parties regarding the
subject matter hereof, whether written or oral, are superseded by
this Agreement including, without limitation, that certain letter
of intent dated November 12, 1996 by and among the parties
hereto.
10.2 Assignment. This Agreement may only be assigned by a
party with the prior written consent of the other party hereto;
provided, however the Buyer may direct the Sellers to deliver the
Bills of Sale to any one or more affiliates of Buyer. Subject to
the foregoing, all of the terms and provisions of this Agreement
shall be binding upon, inure to the benefit of, and be
enforceable by the successors and assigns of Sellers and Buyer.
10.3 Waiver. A benefit, right or duty provided by this
Agreement shall be deemed waived only by a writing expressly
referring to this Agreement that is signed by the party entitled
to the benefit thereof. The waiver in one instance of any act,
omission, condition or requirement shall not constitute a
continuing waiver unless specifically so stated in the aforesaid
written waiver.
10.4 Notices. All communications under this Agreement shall
be made in writing to the respective addresses set forth below,
or such other addresses as may be designated in writing by notice
given hereunder. Such communications shall be deemed to have
been duly given if either delivered personally or by air courier
service, sent by facsimile, or mailed by postage prepaid
registered or certified U.S. mail, return receipt requested. All
communications under this Agreement shall be effective upon
personal delivery or facsimile transmission, or deposit in the
U.S. mail or with an air courier service. Until changed pursuant
to the terms hereof, the respective addresses for the parties are
as follows:
Neil F. Lampson, Inc.
607 East Columbia Drive
Kennewick, Washington 99336
Attention: William N. Lampson, President
Facsimile: (509) 586-0825
Dayton-Scott Equipment Company
4546 Southwest Freeway, Suite 181
Houston, Texas 77027
Attention: Robert S. Dayton, President
Facsimile: (713) 621-2443
Equipment Asset Recovery Fund
1900 W. Loop S., Suite 1800
Houston, Texas 77027
Attention: Steven A. Webster, General Partner
Facsimile: (713) 623-8103
SFN Corporation
4546 Southwest Freeway, Suite 181
Houston, Texas 77027
Attention: Robert S. Dayton, President
Facsimile: (713) 621-2443
DSC Venture
c/o Equipment Management, Inc.
Three World Financial Center, 29th Floor
New York, New York 10285
Attention: Daniel M. Palmier
Facsimile: (212) 528-9696
10.5 Governing Law and Venue. This Agreement shall be
governed by and interpreted and enforced in accordance with the
laws of the State of Texas, without giving effect to any conflict
of law rules or provisions. Except as may be required by
applicable law, each party hereto agrees that any suit, action or
other proceeding arising out of this Agreement shall be brought
and litigated only in the State or Federal courts located in
Harris County, Texas, and each party hereto hereby irrevocably
consents to personal jurisdiction and venue in any such court and
hereby waives any claim it may have that such court is an
inconvenient forum for the purposes of any such suit, action or
other proceeding. Each party hereto hereby irrevocably consents
to the service of process of any of the aforementioned courts in
any such suit, action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to such
party at the address of such party first above written, or such
other address designated to the preceding Section 10.4.
10.6 Exhibits and Schedules. All Exhibits and Schedules
referred to herein are intended to be and hereby are specifically
made a part of this Agreement.
10.7 Further Assurances. Subject to the terms and
conditions herein provided, each of the parties hereto shall use
its best efforts (i) to take or cause to be taken such action,
(ii) to execute and deliver or cause to be executed and delivered
such additional documents and instruments, and (iii) to do or
cause to be done all things necessary, proper or advisable under
the provisions of this Agreement and under applicable law to
consummate and make effective the transactions contemplated by
this Agreement.
10.8 Severability. If any one or more of the provisions of
this Agreement shall for any reason be held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability
shall not affect the remaining provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal, or
unenforceable provision had never been a part hereof.
10.9 Attorneys' Fees. If any litigation is commenced
between the parties concerning this Agreement, the party
prevailing in such litigation shall be entitled to the reasonable
attorneys' fees and expenses of counsel and court costs incurred
by reason of such litigation.
10.10 Counterparts. This Agreement may be executed in
any number of counterparts, each of which when executed and
delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
BUYER: NEIL F. LAMPSON, INC.,
a Washington corporation
By: /s/ William N. Lampson
William N. Lampson, President
SELLERS: DSC VENTURE,
a Texas joint venture
BY: EQUIPMENT ASSET RECOVERY FUND,
Venture Manager
By: EQUIPMENT MANAGEMENT, INC.,
General Partner
By: /s/ Moshe Braver
Moshe Braver
EQUIPMENT ASSET RECOVERY FUND,
a Texas limited partnership
By: /s/ Steven A. Webster
Steven A. Webster,
General Partner
SFN CORPORATION,
a Texas corporation
By: /s/ Robert S. Dayton
Robert S. Dayton, President
EXHIBIT "A"
MANITOWOC CONSTRUCTION CRANE FLEET
Model and Serial Location
Capacity No.
DSC Units 4100W S-2, 230 Ton 41311 Baytown, TX
41357 Grand Prairie, TX
41417 Erath, LA
41443 Westlake, LA
41505 Mountainburg, AR
41629 Westlake, LA
4100W, 200 Ton 41423 Westlake, LA
41452 Houma, LA
Ringer, 300 Ton 10175 Three Rivers, TX
10224 Altamira, Mexico
10261 Westlake, LA
4100W Tower 13111 Duluth, MN
4000W, 150 Ton 40507 San Diego, CA
40546 Pearland, TX
40586 Channelview, TX
40597 Sugar Creek, MO
40605 Houma, LA
40616 Houma, LA
40625 Tulsa, OK
40641 Houma, LA
40643 Westlake, LA
40650 Houma, LA
40672 Lolita, TX
40692 Houma, LA
40694 Houma, LA
40696 San Diego, CA
40707 Hamilton, MS
4000W Tower 13009 Pearland, TX
13055 Jackson, MS
3900, 100 Ton 391131 Fourchon, LA
391156 Westlake, LA
391159 Venice, LA
391168 Pelican Island,
TX
391177 Atlanta, GA
391186 Intracoastal
City, LA
391208 San Diego, CA
391240 Houma, LA
391243 Amelia, LA
EARF Units 4100W S-2, 230 Ton 41547 Westlake, LA
41556 Three Rivers, TX
41594 Mountainburg, AR
4000W, 150 Ton 40646 Houma, LA
40688 Enterprise, MS
40708 Hamilton, MS
3900, 100 Ton 391206 Norman, OK
391219 San Antonio, TX
391238 Baytown, TX
SFN Units 4000W, 150 Ton 40697 Phoenix, AZ
40714 Westlake, LA
4000W Tower 13220 Pearland, TX
3900 391221 Venice, LA
391228 San Antonio, TX
Exhibit "B"
SPARE PARTS INVENTORY
YARD - PEARLAND, TX
YARD INVENTORY - AREA 1
1 - Gantry crossover sheaves
1 - Equalizer link
1 - Used boom hoist cable 4000W
4 - 40' pendants
1 - Gantry crossover sheaves
2 - Equalizer links
1 - Used boom hoist cable
1 - 30' #22 Boom Butt
4 - 10' pendants
1 - Used boom hoist cable
1 - 10' #22 boom insert w/ pendants
3 - Equalizer adapters for #27 boom
2 - Mast straps for 4000W tower
1 - 30' #122 Jib top
1 - 4100W Tower ferris wheel w/ masts stops legs and pendants
2 - 4000W Tower latches
1 - 4100W Tower hold back
1 - Box of misc. parts for 3900 auxiliary drum
1 - Sheave assembly for ringer boom carrier
1 - 4100W Tower hold back
1 - #22 boom top cable guide (no sheaves)
1 - Home made upper cable guide for #22 boom
12 - rolls of misc. cables
2 - Block sheaves for S2 load block
3 - 3 Sheave adapters for #27 boom top
2 - 3 Sheave adapters for 300 ton load block
1 - Single sheave adapter for #22 OT boom top
2 - 3"x 4'x 8' Steel plates
1 - Used roller for ringer boom carrier
1 - Universal anchor joint
1 - 40' #27 Boom Insert
1 - 10' #122A Boom Insert
3 - Spools of used cable for ringer BH, LL, SEC
5 - Spools of cable from Ringer S/N 10224
2 - Becket and wedges (1-1 1/8"- 1 1/4" Johnson, 1-part #15865C)
1 - #27 40' Boom insert with pins
1 - #122 10' Jib insert
1 - Bent back stay leg
Miscellaneous pendants
2 - 10' #123 Jib Inserts
YARD INVENTORY - AREA 2
1 - 10' #8 boom insert no pendants
6 - 30' #8 boom inserts, no pendants
3 - 30' #8 boom inserts w/pendants no pins
(No boom bolts for above boom)
YARD INVENTORY - AREA 3
1 - Stack of misc. carbody steps
1 - Used load drum for 4100W
1 - Roll Cable - Used
1 - Stack steel plates
2 - 4000W boom hoist drums (used)
1 - Stand for 3900 auxiliary drum
4 - Adapters for ringer to carbody screw jack beams
5 - Sets 4100W whip line drum lagging
1 - Tumbler axle
1 - Hydraulic 3rd drum
1 - 300 Ton hook block (hook missing)
4 - #22 Boom point sheave dividers
1 - Pallet of 4000W boom hoist drum lagging
4 - 4 1/2 offset links for 4600 boom
1 - 4100W Equalizer frame
1 - Power down tank for 3900
1 - Stack boom cable roller
3 - S2 block, 5 or 6 sheave adapters
1 - Set 300 ton block adapter
1 - 3900 spreader bar
2 - #22 boom spreader bars - 2 more missing parts
1 - Misc. cab and car body steps/ 4100W
1 - Cable guard for #22 boom top
2 - Cheet weights for single sheave load block
1 - 100 Ton load block
1 - 200 Ton load block
SHOP
1 - Box Hydraulic 3rd drum parts
1 - Pallet jib pins
2 - Crane seats
1 - Boom point sheave shaft
1 - Deck gear (Used)
1 - Hydraulic 3rd drum unit (Poor)
4 - Air cylinder for boom stop #27 boom
1 - Pallet miscellaneous clutch and brake linings
6 - Gantry sheaves
4 - #22 Boom stop air cylinder
1 - 4000W Rear cab door
1 - 4000W Deck cover
7 - Miscellaneous mainshaft spiders
2 - Swing shaft spider 3900
6 - Boom hoist spiders
1 - Set mainshaft clutches old - 4
1 - Set mainshaft clutches new - 2
6 - Engine fans
3 - Exhaust flex pipes
1 - Muffler pipe (roof)
1 - Set equalizer pennant links 4100W
1 - Lot miscellaneous wedge and sockets
8 - Miscellaneous pendants top links for boom top
1 - Miscellaneous air cylinder
1 - Pallet miscellaneous clutch linings (18)
1 - Pallet miscellaneous off links, Jib 5 + 10 degrees
4 - Main shaft slingers (sides)
1 - Pallet misc. becket + wedges - pins and bolts etc.
1 - Pallet misc. chain links - new and used
1 - Lot miscellaneous sheaves - 30
4 - Hook rollers - 3900
CONEX
1 - Set transmission case chains
1 - 4100W Boom hoist drive chain
1 - Boom hoist drive pinion
1 - Swing shaft air cylinder (new)
2 - 3900 Hook roller
1 - 4100W Hook roller
3 - Miscellaneous load ball swivels
1 - Slide pinion
1 - New boom hoist pinion
2 - Used converter positioner air cylinder
1 - Transmission jack (new)
2 - New cable load indicator
1 - Miscellaneous lot flex air valves
1 - Grease hose reel and hose
1 - Battery charger
2 - Boom angle indicator
1 - Transmission case chain
3 - 76605 Bushings brass
7 - Miscellaneous chain case seals
1 - 4100W (deck) air swivel
1 - No pack cylinder - 3900
2 - Cables for drum rotation indicators
1 - Box misc. main shaft parts
1 - Boom hoist controller
1 - Compensator valve
1 - Hydraulic 3rd drum pump
WEST YARD
2 - 4100W Upper boom point cable guide (no sheaves)
3 - 10' #123 Jib Inserts
1 - Lot miscellaneous pendants
3 - 30' #8 boom inserts - 1 with J.L.
1 - #122 Jib pendent strut
1 - 30' #122 Jib butt
1 - 20' #8 insert no pendants
1 - 30' #8 insert with pendants no pins
1 - 40' #27 Boom insert
1 - 30'#8 insert with pendants
1 - 4000W Gantry frame (bent)
1 - 40' #22 insert no pendants with jib lugs no pins
1 - 40' #22 insert with tower rails and pendants
5 - 30' #8 insert no pendants
1 - 10' #8 insert no pendants
1 - 20' #22 Insert no pendants
1 - Upper cable guide 3900
1 - Set drum lagging 4100 whip line
1 - 20' #22 insert no pendants
1 - 10' #123 Jib insert and pendants
2 - #123 Jib struts (Bad)
1 - #123 Jib butt no pendants
1 - #123 Jib point no pendants
4 - #123 Jib points damaged (Bad)
1 - 40' #27 insert
1 - 10' #8 insert no pendants
1 - 30' #8 insert no pendants
1 - 40' #123 Jib Complete
1 - 30' #8 insert with pendent (with jib lugs)
1 - 20' #8 insert with pendent (with jib lugs)
1 - 30' #8 insert with pendants
1 - 3900 Spreader bar
2 - 4000W Tower attachments Complete
1 - 300 Ton Ringer load block with sister hook
1 - #27 boom point sheave adapter
1 - #27 mast top (no parts)
4 - 40' #22 boom pendants
1 - Roll Ringer boom cable (7/8") (Used)
1 - Roll Ringer load cable (1-1/8") (Used)
2 - 4100W gantry top rollers
2 - 4100W equalizer pendant pins
NOTE: 1 - 40' #27 boom insert at Coastal Equipment, Birmingham,
AL
EXHIBIT "C"
BILL OF SALE
__________________, a ________________ ___________ (the
"Seller"), for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, has and does hereby
bargain, sell, convey, assign and transfer to NEIL F. LAMPSON,
INC., a Washington corporation (the "Buyer"), pursuant to that
certain Asset Purchase and Sale Agreement dated November ____,
1996, between the Seller and the Buyer (the "Purchase Agreement")
all of the Seller's right, title and interest in and to the
equipment described on the attached Schedule (the "Assets"). All
capitalized terms not otherwise defined in this Bill of Sale
shall have the meanings assigned to those terms in the Purchase
Agreement.
The Seller represents and warrants that it has, and this
Bill of Sale when delivered to the Buyer will convey to the
Buyer, good title to the Assets, free and clear of all liens,
pledges, claims, charges, encumbrances, and liabilities of any
kind other than Permitted Liens.
TO HAVE AND TO HOLD, all and singular, the Assets to the
Buyer, its successors and assigns, forever.
IN WITNESS WHEREOF, this Bill of Sale is executed effective
the ____ day of January, 1997.
SELLER:
BY:
NAME:
TITLE:
Exhibit "D"
RENTAL AND LEASE AGREEMENTS,
ACCOMPANYING LESSEE INSURANCE CERTIFICATES,
PURCHASE ORDERS AND RELATED DOCUMENTS
Model Serial Number Lessee R-File Number
4100W S2 41311 KCI Constructors, Inc. 2742
41357 Austin Commercial 2690
41417 WHC, Inc. 2735
41443 ABB Lummus Global, Inc. 2716
41505 American Tank and Vessel 2753
41547 ABB Lummus Global, Inc. 2733
41556 American Tank and Vessel 2739
41594 Union Carbide 2756
41629 ABB Lummus Global, Inc. 2718
4100W 41423 ABB Lummus Global, Inc. 2714
41452 Gulf Island Fabrication 2659
Ringers 10175 American Tank and Vessel 2739
10224 Shell (Pecten) 2722
10261 ABB Lummus Global, Inc. 2715
4000W 40507 Western Summit
Constructors, Inc. 2748
40546
40586 Solar Turbines 2703
40597 Newberg/Perini 2639
40605 Gulf Island Fabrication 2413
40616 Gulf Island Fabrication 2164
4000W 40625 Centric-Jones Co. 2759
40641 Gulf Island Fabrication 1734
40643 ABB Lummus Global, Inc. 2712
40646 Gulf Island Fabrication 1586
40650 Gulf Island Fabrication 1833
40672
40688 Ranger Plant 2743
40692 Gulf Island Fabrication 2065
40694 Gulf Island Fabrication 1815
40696 Western Summit Constructors Co. 2749
40697 Kiewit Western 2702
40707 Brown & Root, Inc. 2741
40708 Brown & Root, Inc. 2740
40714 ABB Lummus Global, Inc. 2737
4100W
Tower 13111 Chellino Crane Service, Inc. 2754
4000W
Towers 13009
13055
13220
3900 391131 Ambar Fluids, Inc. 2440
391156 ABB Lummus Global, Inc. 2711
391159 Ambar Fluids, Inc. 2439
3900 391168 Ambar Fluids, Inc. 2687
391177 Elion Concrete, Inc. 2658
391186 Ambar Fluids, Inc. 2466
391206 Flintco, Inc. 2692
391208 Western Summitt Constructors Co. 2752
391219 J. T. Vaughn Constructors 2751
391221 Baker Hughes Inteq 2694
391228 T.M. Davis Construction, Inc. 2757
391238 KCI Constructors, Inc. 2746
391240
391243 McDermott Shipbuilding, Inc. 2724
EXHIBIT "E"
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement")
is entered into this ____ day of January, 1997, by and between
________________, a _________ __________ ("Seller"), and NEIL F.
LAMPSON, INC., a Washington corporation ("Buyer").
IN CONSIDERATION of the mutual covenants and agreements set
forth below, Seller and Buyer agree as follows:
(a) Introduction. Seller and Buyer have entered into that
certain Asset Purchase and Sale Agreement dated November ____,
1996 (the "Purchase Agreement"). This Agreement effectuates the
assignment by Seller to Buyer of certain agreements, and the
assumption by Buyer from Seller of all liabilities and
obligations of Seller under such agreements, as contemplated by
the Purchase Agreement. All capitalized terms not otherwise
defined in this Agreement shall have the meanings assigned to
those terms in the Purchase Agreement.
(b) Assignment and Assumption. Subject to the Purchase
Agreement, Seller hereby assigns, transfers and conveys to Buyer
all of Seller's rights, title and interest in and to the Assigned
Contracts of Seller, including, without limitation, the
agreements and other instruments of Seller listed on the attached
Schedule, and Buyer hereby assumes and agrees with Seller to
fulfill and carry out, as of the Effective Date, all liabilities,
obligations, duties, terms and conditions of and applicable to
Seller under the Assigned Contracts to the extent they arise or
are to be first performed from and after the Effective Date.
(c) Miscellaneous.
(i) Binding Effect. This Agreement shall be binding upon
and inure to the benefit of Buyer and Seller and their respective
successors and assigns.
(ii) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State
of Texas, without giving effect to any conflict of law rules or
provisions.
(iii) Effective Date. This Agreement shall be effective
as of the Effective Date.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Assumption Agreement to be executed by their
respective duly authorized representatives on the day and year
first written above.
SELLER:
By:
Name:
Title:
BUYER: NEIL F. LAMPSON, INC.
By:
Name:
Title:
Exhibit "F"
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is entered into this
20th day of November, 1996, by and among Neil F. Lampson, Inc., a
Washington corporation ("Lampson," sometimes hereafter referred
to as "Buyer"), DSC Venture, a Texas joint venture ("DSC
Venture"), Equipment Asset Recovery Fund, a Texas limited
partnership ("EARF") and SFN Corporation, a Texas corporation
("SFN") (DSC Venture, EARF and SFN are referred to hereafter
collectively as the "Seller"), and Gardere Wynne Sewell & Riggs,
L.L.P., a Texas limited liability partnership ("GWS&R").
Recitals
(1) Buyer and Seller have entered into that certain Asset
Purchase and Sale Agreement (the "Purchase Agreement") of even
date herewith, pursuant to which Lampson, subject to certain
terms and conditions, has agreed to purchase and DSC Venture,
EARF and SFN have agreed to sell certain Manitowoc construction
cranes, towers, ringers and related spare parts.
(2) Pursuant to the provisions of Section 3 of the Purchase
Agreement, Buyer is obligated to deliver the sum of $1,500,000 as
earnest money (the "Earnest Money") to GWS&R, as escrow agent, on
the date of the Purchase Agreement.
(3) This Agreement is being entered into by and among
Buyer, Seller, and GWS&R in order to set forth the rights,
duties, liabilities and obligations of GWS&R with respect to the
Earnest Money.
Agreement
NOW, THEREFORE, for and in consideration of the mutual
covenants, conditions and agreements contained herein, the
parties hereto agree as follows:
(1) Appointment and Acceptance by Escrow Agent. Buyer and
Seller hereby jointly select and designate GWS&R to act as the
escrow agent pursuant to Section 3 of the Purchase Agreement.
GWS&R hereby accepts such appointment on and subject to the
specific terms, conditions and provisions contained in this
Agreement.
(2) Relationship of Parties. It is hereby acknowledged and
agreed by all of the parties hereto that GWS&R is representing,
and will continue to represent, Seller in connection with all of
the transactions contemplated by the Purchase Agreement. Nothing
contained herein shall imply, or be construed to imply, that
GWS&R is providing any legal services for or on behalf of Buyer.
It is specifically understood and acknowledged that GWS&R's sole
obligations to Buyer shall be those which are specifically set
forth herein. The parties hereto acknowledge that GWS&R is
acting, at the special instance and request of Seller, in its
capacity as the legal representative of Seller, subject to the
specific contractual limitations contained herein with respect to
delivery of the Earnest Money. GWS&R is not being compensated in
the form of any escrow fee in connection with the fulfillment of
its obligations hereunder.
(3) Deposit of Earnest Money, Notice of Acceptance of
Earnest Money. Pursuant to the provisions of Section 3 of the
Purchase Agreement, on the date hereof, Buyer shall deliver the
sum of $1,500,000 to GWS&R in its capacity as escrow agent.
Immediately upon its receipt of such $1,500,000, GWS&R shall give
written notice of such receipt to Buyer by facsimile.
(4) Investment of Earnest Money. During the term of this
Agreement, the Earnest Money shall be held in the GWS&R Trust
Account, shall be invested only in securities, instruments,
certificates of deposit or accounts with Bank One, Texas, N.A.
Houston or NationsBank of Texas, N.A. All interest earned on the
Earnest Money shall be deemed to be a part of the Earnest Money,
except as otherwise provided herein.
(5) Delivery of Earnest Money. The ultimate rights of
Seller and Buyer to receive the Earnest Money shall in all
respects be governed by and determined in accordance with the
following:
(a) Upon Closing of the transactions contemplated in the
Purchase Agreement, GWS&R shall pay the Earnest Money over to
Buyer or, upon the written instruction of Buyer, to Sellers to be
applied against the Purchase Price under the Purchase Agreement.
(b) If the Purchase Agreement is terminated pursuant to
Section 1 of the Purchase Agreement, then GWS&R shall immediately
upon demand by Buyer pay over to Buyer the Earnest Money.
(c) Notwithstanding anything herein to the contrary,
in the event of any dispute between Buyer and Seller relating to
entitlement to the Earnest Money, GWS&R shall have no obligation
whatsoever to deliver the Earnest Money to either Buyer or to
Seller unless and until:
(i) GWS&R has received, in form and substance reasonably
satisfactory to GWS&R, a written instrument signed by Buyer and
Seller jointly directing and authorizing GWS&R to deliver the
Earnest Money in accordance with the terms thereof; or
(ii) a court of competent jurisdiction has ruled in the
form of a final judgment directing and authorizing GWS&R to deliver
the Earnest Money in accordance with the terms thereof.
Notwithstanding the foregoing, it is specifically understood
and agreed that, should any dispute or other disagreement
arise between Buyer and Seller with respect to who is
entitled to receive the Earnest Money, at any time
hereafter, GWS&R shall have the right to petition any court
of competent jurisdiction requesting such dispute to be
resolved by such court of competent jurisdiction and GWS&R
shall specifically have the right, in connection therewith,
to interplead or otherwise deliver the Earnest Money into
the registry of such court. In the event of a dispute over
entitlement of the Earnest Money, the prevailing party shall
be entitled to recover its reasonable attorneys' fees and
costs of court, as well as any costs, expenses or liability
paid in connection with indemnification of the escrow agent
hereunder.
(6) Successor Escrow Agents. GWS&R may at any time resign
by giving notice in writing to Buyer and Seller, and shall be
discharged from its duties under this Agreement on the first to
occur of the appointment of a successor escrow agent or the
expiration of thirty (30) calendar days after such written notice
is given. In the event of any resignation, a successor escrow
agent, which shall be an insured state or national bank with
trust powers and whose principal office is in Houston, Texas,
must be appointed within thirty (30) days by Buyer, subject to
the reasonable approval of Seller. The successor escrow agent
shall deliver to Seller, Buyer and GWS&R a written instrument
accepting appointment under this Agreement and thereupon it shall
succeed to all of the rights and duties of GWS&R under this
Agreement and shall be entitled to receive the Earnest Money then
held by GWS&R under this Agreement. If a successor escrow agent
has not been selected by Buyer and approved by Seller within
thirty (30) calendar days after notice of the resignation of
GWS&R hereunder, then Seller shall have the right, for an
additional thirty (30) calendar days, to appoint a successor
escrow agent, which shall be an insured state or national bank
with trust powers and whose principal office is in Houston,
Texas, subject to the reasonable approval of Buyer. If a
successor escrow agent has not been appointed by Seller and
approved by Buyer within such additional thirty (30) calendar day
period, then, at any time thereafter, GWS&R shall have the
express right to interplead or otherwise deliver the Earnest
Money into the registry of any court of competent jurisdiction
requesting such court to determine who should be entitled to
receive the Earnest Money in accordance with the terms of this
Agreement. The indemnity provisions contained herein in favor of
GWS&R shall survive resignation of GWS&R as escrow agent
hereunder.
(7) Rights, Privileges, Immunities and Liabilities of
Escrow Agent. The following provisions shall govern the rights,
privileges, immunities and liabilities of GWS&R, in its capacity
as recipient of the Earnest Money:
(a) Except for this Agreement, GWS&R is not a party to, and is
not bound by, any agreements between Seller and Buyer, including,
without limitation, the Purchase Agreement or any Definitive Agreement.
(b) In the event GWS&R becomes involved in litigation or
threatened litigation in connection with this Agreement or the
Earnest Money, including, without limitation, litigation arising
as a result of the release of the Earnest Money by GWS&R to any
party hereto, Seller and Buyer agree, jointly and severally, to
indemnify and save GWS&R harmless from and reimburse GWS&R for
all losses, costs, damages, expenses and attorneys' fees suffered
or incurred by GWS&R as a result thereof and such losses, costs,
damages, expenses and attorneys' fees shall be reimbursed to
GWS&R as incurred by GWS&R. The indemnity contained herein shall
include all legal fees and other costs incurred by GWS&R in
connection with any interpleader or other action instituted by
GWS&R which may be necessary to obtain a judicial determination
of the rightful recipient of the Earnest Money.
(c) GWS&R shall be protected in acting on any written
notice, request, waiver, consent, certificate, receipt,
authorization, power of attorney or other paper or document, including,
without limitation, any written notice from Buyer or Seller, which GWS&R
in good faith believes to be genuine and what it purports to be.
(d) GWS&R shall not be liable for anything which it may do or
refrain from doing in connection herewith provided that it acts in good
faith.
(e) GWS&R may consult with legal counsel in the event of
any dispute or question as to the construction of any provision
of this Agreement or its duties hereunder, and it shall incur no
liability and shall be fully protected in acting in accordance
with the opinion and instructions of its counsel.
(f) In the event of any disagreement resulting in adverse
claims or demands being made in connection with the Earnest
Money, or in the event that GWS&R, in good faith, shall be in
doubt as to what action it should take hereunder, GWS&R may, at
its option, refuse to comply with any claims or demands on it or
refuse to take any other action hereunder, so long as such
disagreement continues or such doubt exists, and in such event,
GWS&R shall not be or become liable in any way or to any person
for its failure or refusal to act, and GWS&R shall be entitled to
continue to so refrain from acting until (i) the rights of all
interested parties shall have been fully and finally adjudicated
by a court of competent jurisdiction or (ii) all differences
shall have been adjusted and all doubt resolved by agreement
among all of the interested parties and GWS&R shall have been so
notified in a written instrument signed by all such parties. The
rights of GWS&R under this paragraph are cumulative to all other
rights it may have at law or otherwise.
(g) GWS&R, on delivery of the Earnest Money either to
a successor escrow agent or to Buyer and/or Seller pursuant to
the terms of this Agreement, shall be discharged from any further
obligations hereunder.
(8) Notices. Any notice permitted or required to be given
under the terms of this Agreement shall be in writing, may be
given by facsimile or mail (unless otherwise specified herein),
and shall be deemed given when received by the party to whom it
is directed or, if sooner, 5 business days after deposited in the
United States Mail, certified or registered, return receipt
requested, with postage prepaid, and addressed to the party to be
notified at the appropriate address specified below. The
addresses of the parties are as follows:
Seller: DSC Venture, Equipment Asset Recovery Fund, and SFN
Corporation
4645 Southwest Freeway, Suite 181
Houston, Texas 77027
Attention: Mr. Robert S. Dayton
Facsimile No. 713/621-2443
Telephone No. 713/627-7710
with a copy to: Gardere Wynne Sewell & Riggs, L.L.P.
333 Clay, Suite 800
Houston, Texas 77002
Attention: Mr. N.L. Stevens III
Facsimile No. 713/308-5807
Telephone No. 713/308-5774
Buyer: Neil F. Lampson, Inc.
607 East Columbia Drive
Kennewick, Washington 99336
Attention: William N. Lampson, President
Facsimile No. 509/586-0825
Telephone No. 509/586-0411
GWS&R: Gardere Wynne Sewell & Riggs, L.L.P.
333 Clay, Suite 800
Houston, Texas 77002
Attention: Mr. N.L. Stevens III
Facsimile No. 713/308-5807
Telephone No. 713/308-5774
The above addresses may be changed by any party by notice given
in the manner provided in this Paragraph 8.
(9) Effect of Agreement. This Agreement shall be binding on,
inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns. Any term used
herein but not defined herein shall have the meaning ascribed to
it in the Acquisition Agreement.
(10) Applicable Law and Jurisdiction. The validity of this
Agreement, its construction, interpretation and enforcement, and
the rights of the parties hereunder, shall be determined under,
governed by and construed in accordance with the laws of the
State of Texas without giving effect to the principles of
conflicts of laws thereof. Each party hereto agrees that any
suit, action or other proceeding arising out of this Agreement
shall be brought and litigated only in the state or federal
courts located in the County of Harris, State of Texas and each
party hereto hereby irrevocably consents to personal jurisdiction
and venue in any such court and hereby waives any claim it may
have that such court is an inconvenient forum for the purposes of
any such suit, action or other proceeding. Each party hereto
hereby irrevocably consents to the service of process of any of
the aforementioned courts in any such suit, action or proceeding
by the mailing of copies thereof by registered or certified mail,
postage prepaid, to such party at the address of such party
specified herein.
(11) Counterparts. This Agreement may be executed in multiple
counterparts each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
Witness the execution hereof as of the day and year first
above written.
NEIL F. LAMPSON, INC.
BY:
NAME:
TITLE:
DSC VENTURE
BY:
NAME:
TITLE:
EQUIPMENT ASSET RECOVERY FUND
BY:
NAME:
TITLE:
SFN CORPORATION
BY:
NAME:
TITLE:
GARDERE WYNNE SEWELL & RIGGS,
L.L.P.
BY:
NAME:
TITLE:
