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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended April 2, 1999
Commission File Number 0-23828
Labor Ready, Inc.
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(Exact Name of Registrant as specified in its charter)
Washington 91-1287341
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(State of Incorporation) (Employer Identification No.)
1016 S. 28th Street , Tacoma, Washington 98409
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(Address of Principal Executive Offices) (Zip Code)
(253) 383-9101
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(Registrant's Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
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As of May 5, 1999, the Registrant had 28,328,940 shares of Common Stock
outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE: None.
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LABOR READY, INC.
INDEX
<TABLE>
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets
April 2, 1999 and December 31, 1998................... 2
Consolidated Statements of Income
Thirteen Weeks Ended
April 2, 1999 and April 3, 1998....................... 4
Consolidated Statements of Cash Flows
Thirteen Weeks Ended April 2, 1999
and April 3, 1998..................................... 5
Notes to Consolidated Financial Statements............ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 9
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K...................... 14
SIGNATURES...................................................... 14
</TABLE>
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Page 1
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LABOR READY, INC.
CONSOLIDATED BALANCE SHEETS
IN THOUSANDS
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
April 2, December 31,
1999 1998
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ........................................ $ 24,243 $ 25,940
Accounts receivable, less allowance for doubtful accounts
of $4,826 and $4,218 ............................................ 64,572 65,484
Workers' compensation deposits and credits ....................... 4,868 2,961
Prepaid expenses and other ....................................... 6,882 4,947
Deferred income taxes ............................................ 6,313 6,601
-------- --------
Total current assets ............................................ 106,878 105,933
-------- --------
PROPERTY AND EQUIPMENT:
Buildings and land ............................................... 5,182 4,854
Computers and software ........................................... 15,955 13,443
Cash dispensing machines ......................................... 9,920 7,376
Furniture and equipment .......................................... 626 667
-------- --------
31,683 26,340
Less accumulated depreciation .................................... 6,738 6,069
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Property and equipment, net ..................................... 24,945 20,271
-------- --------
OTHER ASSETS:
Intangible assets and other, less accumulated
amortization of $187 and $6,383 ................................. 953 2,781
Deferred income taxes ............................................ 4,655 1,751
-------- --------
Total other assets .............................................. 5,608 4,532
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Total assets ..................................................... $137,431 $130,736
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
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LABOR READY, INC.
CONSOLIDATED BALANCE SHEETS
IN THOUSANDS (EXCEPT PER SHARE AMOUNTS)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Unaudited)
April 2, December 31,
1999 1998
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<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable ....................................................... $ 5,455 $ 6,889
Accrued wages and benefits ............................................. 7,456 7,544
Reserve for workers' compensation claims ............................... 13,489 15,300
Income taxes payable ................................................... 3,355 4,355
Current maturities of long-term debt ................................... 765 754
-------- --------
Total current liabilities ............................................. 30,520 34,842
-------- --------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities ................................ 7,204 5,073
Reserve for workers' compensation claims ............................... 13,077 10,324
-------- --------
Total long-term liabilities ........................................... 20,281 15,397
-------- --------
Total liabilities ..................................................... 50,801 50,239
-------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $0.197 par value, 20,000 shares authorized;
4,324 shares issued and outstanding .................................... 854 854
Common stock, no par value, 100,000 shares authorized;
28,123 and 27,974 shares issued and outstanding ........................ 57,066 54,131
Retained earnings ...................................................... 28,710 25,512
-------- --------
Total shareholders' equity ............................................ 86,630 80,497
-------- --------
Total liabilities and shareholders' equity ............................ $137,431 $130,736
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
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LABOR READY, INC.
CONSOLIDATED STATEMENTS OF INCOME
IN THOUSANDS (EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 2, April 3,
1999 1998
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<S> <C> <C>
Revenues from services ...................................................... $ 156,933 $ 94,030
Cost of services ......................................................... 105,907 65,695
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Gross profit ................................................................ 51,026 28,335
Selling, general and administrative ...................................... 42,662 26,913
Depreciation and amortization ............................................ 676 1,380
Income from operations ...................................................... 7,688 42
--------- ---------
Interest income, net ........................................................ 18 208
Income before taxes on income and cumulative effect of
change in accounting principle ........................................... 7,706 250
Taxes on income ............................................................. 3,019 105
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Income before cumulative effect of change in accounting principle ........... 4,687 145
Cumulative effect of change in accounting principle,
net of income tax benefit of $897 ....................................... (1,453) --
--------- ---------
Net income .................................................................. $ 3,234 $ 145
--------- ---------
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Basic income per common share:
Income before cumulative effect of change in accounting principle ........ $ 0.17 $ 0.01
Cumulative effect of change in accounting principle, net ................. (0.05) --
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Net income ............................................................... $ 0.12 $ 0.01
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Diluted income per common share:
Income before cumulative effect of change in accounting principle ........ $ 0.16 $ 0.01
Cumulative effect of change in accounting principle, net ................. (0.05) --
Net income ............................................................... $ 0.11 $ 0.01
--------- ---------
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Weighted average shares outstanding:
Basic .................................................................... 28,029 27,689
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--------- ---------
Diluted .................................................................. 28,979 28,502
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</TABLE>
See accompanying notes to consolidated financial statements.
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LABOR READY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
IN THOUSANDS
(UNAUDITED)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 2, 1999 April 3, 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTVITIES:
Net income .......................................................... $ 3,234 $ 145
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization ....................................... 672 1,380
Provision for doubtful accounts ..................................... 2,751 1,144
Deferred income taxes ............................................... (2,615) (114)
Cumulative effect of change in accounting principle ................. 2,350 --
Changes in assets and liabilities
Accounts receivable ................................................. (1,839) (1,900)
Workers' compensation deposits and credits .......................... (1,907) (1,206)
Prepaid expenses and other .......................................... (1,918) (908)
Accounts payable .................................................... (1,406) (228)
Accrued wages and benefits .......................................... (116) (260)
Reserve for workers' compensation claims ............................ 942 727
Income taxes payable ................................................ 357 (588)
-------- --------
Net cash provided by (used in) operating activities .................... 505 (1,808)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................ (3,021) (2,708)
Increase in other assets ............................................ (521) (57)
-------- --------
Net cash used in investing activities .................................. (3,542) (2,765)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from options exercised ..................................... 1,370 343
Proceeds from sale of stock through employee stock purchase plan .... 206 100
Payments on capital lease obligations ............................... (181) (95)
-------- --------
Net cash provided by financing activities .............................. 1,395 348
Effect of exchange rates on cash .................................... (55) (12)
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Net decrease in cash and cash equivalents .............................. (1,697) (4,237)
CASH AND CASH EQUIVALENTS, beginning of period ......................... 25,940 22,117
-------- --------
CASH AND CASH EQUIVALENTS, end of period ............................... $ 24,243 $ 17,880
-------- --------
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</TABLE>
See accompanying notes to consolidated inancial statements.
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ITEM 1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures usually
found in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These financial statements
should be read in conjunction with the consolidated financial statements and
related notes included in the Company's 1998 annual report on Form 10-K. Certain
amounts in the consolidated balance sheet at December 31, 1998 have been
restated to conform to the 1999 presentation. The accompanying consolidated
financial statements reflect all adjustments, including normal recurring
adjustments, which in the opinion of management, are necessary to present fairly
the financial position, results of operations and cash flows for the interim
periods presented. Operating results for the thirteen-week period ended April 2,
1999 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999.
NOTE 2. WORKERS' COMPENSATION
The Company provides workers' compensation insurance to its temporary workers
and regular employees. For workers' compensation claims originating in the
majority of states (the 43 non-monopolistic states), the Company has purchased a
deductible insurance policy. Under terms of the policy, the Company's workers'
compensation exposure is limited to a deductible amount per occurrence and a
maximum aggregate stop-loss limit. Should any single occurrence exceed the
deductible amount per occurrence, all losses and expenses beyond the deductible
amount are paid by independent insurance companies unrelated to the Company.
Similarly, should the total of paid losses related to any one year period exceed
the maximum aggregate stop-loss limit for that year, all losses beyond the
maximum aggregate stop-loss limit are paid by independent insurance companies
unrelated to the Company. In 1997, the per occurrence deductible amount was
$250,000 per claim, to an aggregate maximum of $11.60 per $100 of temporary
worker payroll, or $18.8 million. For claims arising in 1998 and 1999, the per
occurrence deductible amount was increased to $350,000 and the maximum aggregate
stop-loss limit was reduced to $10.41 per $100 of temporary worker payroll, or
$31.7 million for the year ended December 31, 1998 and $8.3 million for the
first quarter of 1999.
For claims arising in years prior to 1997, the Company has insured all losses
beyond amounts reserved in its financial statements with independent insurance
companies unrelated to the Company. The difference between the discounted
maximum aggregate stop-loss limit for claims arising in 1997, 1998 and the first
quarter of 1999 and the total of claims paid and reserved for in the Company's
financial statements for the same periods is $5.5 million. This amount
represents the discounted maximum additional exposure, net of tax, to the
Company before its maximum aggregate stop-loss limits are met for all periods
prior to April 2, 1999.
The Company establishes its reserve for workers' compensation claims using
actuarial estimates of the future cost of claims and related expenses that have
been reported but not settled, and that have been incurred but not reported.
Adjustments to the claims reserve are charged or credited to expense in the
periods in which they occur. Included in the accompanying consolidated balance
sheets as of April 2, 1999 and December 31, 1998, are workers' compensation
claims reserves in the non-monopolistic states of $26.1 million and $24.4
million, respectively. The claims reserves were computed using a discount rate
of 6.0% at April 2, 1999 and December 31, 1998.
Workers' compensation expense totaling $5.6 million, and $4.8 million was
recorded as a component of cost of services in each of the thirteen weeks ended
April 2, 1999 and April 3, 1998, respectively.
For the 1997 and 1998 program years, the Company is required to provide
collateral in the amount of the maximum aggregate stop-loss limits, less claims
paid to date. The Company has provided approximately 50% of the required
collateral in the form of a surety bond, and 50% in letters of credit.
Accordingly, at April 2, 1999, $14.5 million of the collateral was satisfied
with surety bonds and $12.6 million was satisfied with letters of credit for the
1997 and 1998 program years.
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NOTE 2. WORKERS' COMPENSATION, CONTINUED
In December 1998, the Company purchased a deductible insurance policy for the
non-monopolistic states covering the years ended 1999 and 2000. The policy
includes substantially the same terms and limitations as the 1998 policy
described above except that the required collateral was reduced to an amount
equal to 60% of claims reserves. However, the Company was required to provide
approximately half of the estimated collateral for the 1999 program year as of
the beginning of the year. Collateral for the 1999 program year will consist of
50% letters of credit and 50% surety bond. Accordingly, as of April 2, 1999, the
Company has provided the insurance carrier with a letter of credit totaling $4
million and a surety bond for $12.5 million. Subsequent to quarter end, the
Company increased the letter of credit by $4 million. During 1999, the total
amount of the letters of credit and surety bonds for the 1999 program year will
increase to approximately $24.0 million.
For workers' compensation claims originating in Washington, Ohio and West
Virginia (the monopolistic states), Canada and Puerto Rico, the Company pays
workers' compensation insurance premiums as required by state administered
programs. The insurance premiums are established by each jurisdiction, generally
based upon the job classification of the insured workers and the previous claims
experience of the Company.
The Company has established a risk management department at its corporate
headquarters to manage its insurers, third party claims administrators, and
medical service providers. To reduce wage-loss compensation claims, the Company
employs claims coordinators throughout the United States. The claims
coordinators manage the acceptance, processing and final resolution of claims
and administer the Company's return to work program. Workers in the program are
employed on customer assignments that require minimal physical exertion or
within the Company in the local dispatch office. The Company has an on-line
connection with its third party administrators that allow the claims
coordinators to maintain visibility of all claims, manage their progress and
generate required management information.
NOTE 3. CHANGE IN ACCOUNTING PRINCIPLE
In the first quarter of 1999, the Company adopted the provisions of Statement of
Position 98-5, "Reporting on the Costs of Start-up Activities" ("the
Statement"). The Statement establishes new rules for the financial reporting of
start-up costs, and requires the Company to expense the cost of establishing new
dispatch offices as incurred and write off, as a cumulative effect of adopting
the Statement, any capitalized pre-opening costs in the first quarter of the
year adopted. Prior to adopting the Statement, pre-opening costs incurred to
open new dispatch offices, including salaries, recruiting, testing, training,
lease and other related costs, were capitalized and amortized using the
straight-line method over two years. The cumulative effect of adopting the
Statement was to decrease net income by $1.5 million or $0.05 per common share.
NOTE 4. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
(Amounts in Thousands)
Thirteen Weeks Ended
----------------------------
April 2, 1999 April 3, 1998
------------- -------------
<S> <C> <C>
Cash paid during the period for:
Interest ..................................... $ 160 $ 125
Income taxes ................................. $4,334 $ 815
Non-cash investing and financing activities:
Tax effect of disqualifying dispositions
on options exercised ....................... $1,359 $ 287
Assets acquired with capital lease obligations $2,309 $4,208
</TABLE>
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NOTE 5. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income, less preferred
stock dividends, by the weighted average number of common shares outstanding
during the year. Diluted earnings per share is computed by dividing net income,
less preferred stock dividends, by the weighted average number of common shares
and common share equivalents outstanding during the year. Common share
equivalents for the Company include the dilutive effect of outstanding options,
except where their inclusion would be anti-dilutive.
Basic and diluted earnings per share were calculated as follows (amounts in
thousands, except per share data):
<TABLE>
<CAPTION>
---------------------
Thirteen Weeks Ended
---------------------
April 2, April 3,
1999 1998
-------- --------
<S> <C> <C>
Basic:
Net income (loss) ...................................... $ 3,234 $ 145
Less preferred stock dividends ......................... (11) (11)
-------- --------
Income allocable to common shareholders ................ $ 3,223 $ 134
-------- --------
Weighted average shares outstanding .................... 28,029 27,689
-------- --------
Net income per share ................................... $ 0.12 $ 0.01
-------- --------
-------- --------
Diluted:
Income allocable to common shareholders ................ $ 3,223 $ 134
-------- --------
Weighted average shares outstanding .................... 28,029 27,689
Plus options to purchase common stock outstanding at end
of period ............................................ 2,882 2,046
Less shares assumed repurchased ........................ (1,932) (1,233)
-------- --------
Weighted average shares outstanding, including dilutive
effect of options .................................... 28,979 28,502
-------- --------
Net income per share ................................... $ 0.11 $ 0.01
-------- --------
-------- --------
</TABLE>
NOTE 6. COMMITTMENTS
During the first quarter of 1999, the Company entered into an agreement to lease
approximately 200 automated Cash Dispensing Machines ("CDMs") for installation
in the Company's dispatch offices opened in 1999. The fair market value of the
CDMs at inception of the lease is approximately $2.6 million. The lease is
payable over 72 months with an imputed interest rate of 6.5% and a residual
payment equal to 20% of the CDM's original cost. The leases are secured by the
CDMs. During the three months ended April 2, 1999, the Company installed
approximately 166 of the CDMs in its new dispatch offices throughout the United
States. Accordingly, the Company recorded assets under capital lease and capital
lease obligations totaling $2.3 million with future minimum lease payments over
the next 6 years of approximately $0.4 million per year. Included as an exhibit
to this Form 10-Q is an example of a CDM lease, all such leases having
substantially identical terms and conditions.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain matters discussed in this Form 10-Q, including statements about the
Company's revenue growth, the demand for temporary labor and its plans for
opening new offices, are forward-looking statements within the meaning of the
Private Litigation Reform Act of 1995. As such, these forward-looking statements
may involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company to be
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. These factors include, but are not
limited to (1) the Company's ability to manage and continue its rapid growth,
(2) economic conditions in its key market areas, and (3) other risks as set
forth in Item 7 of the Company's Form 10-K for the year ended December 31, 1998.
Although the Company believes the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, it can give no assurance that
its expectations will be attained.
OVERVIEW
Labor Ready is a leading, national provider of temporary workers for manual
labor jobs. The Company's customers are primarily in the freight handling,
warehousing, landscaping, construction, light manufacturing, and other light
industrial businesses. The Company has grown from eight dispatch offices in 1991
to 652 dispatch offices at April 2, 1999. Substantially all of the growth in
dispatch offices was achieved by opening Company-owned locations rather than
through acquisitions or franchising. The Company's annual revenues have grown
from approximately $6 million in 1991 to $607 million in 1998 and $157 million
for the first quarter of 1999. This revenue growth has been generated both by
opening new dispatch offices in markets throughout the U.S., Canada and Puerto
Rico and by continuing to increase sales at existing dispatch offices.
The Company opened 166 dispatch offices during the first quarter of 1999 and
expects to open 34 additional dispatch offices in the second quarter of the
year. The Company expects the average cost of opening each new dispatch office
in 1999 to be approximately $45,000. The cost of opening a new dispatch office
includes extensive management training, the installation of sophisticated
computer and other office systems and a CDM. Further, once open, the Company
invests significant amounts of additional cash into the operations of new
dispatch offices until they begin to generate sufficient revenue to cover their
operating costs, generally within six months. The Company pays its temporary
workers on a daily basis, and generally bills its customers weekly.
Consequently, the Company may experience significant negative cash flow from
operations and investment activities during periods of high growth and may
require additional sources of working capital in order to continue to grow.
Approximately 20% of the Company's customers are construction and landscaping
businesses, which are significantly affected by the weather. Construction and
landscaping businesses and, to a lesser degree, other customer businesses
typically increase activity in spring, summer and early fall months and decrease
activity in late fall and winter months. Further, inclement weather can slow
construction and landscaping activities in such periods. As a result, the
Company has generally experienced a significant increase in temporary labor
demand in the spring, summer and early fall months, and lower demand in the late
fall and winter months.
Depending upon location, new dispatch offices initially target the construction
industry for potential customers. As dispatch offices mature, the customer base
broadens and the customer mix diversifies. From time to time during peak
periods, the Company experiences shortages of available temporary workers. The
Company has completed the installation of the CDMs in substantially all of its
dispatch offices in the United States. The CDMs provide the Company's temporary
workers with the option of receiving cash payment instead of a payroll check.
The Company believes this additional feature is unique among its direct
competitors and should increase the Company's ability to attract available
temporary workers.
Revenue from services includes revenues earned on services provided by the
Company's temporary workers and fees generated by the CDMs.
Cost of services includes the wages and related payroll taxes of temporary
workers, workers' compensation expense, unemployment compensation insurance and
transportation. Cost of services as a percentage of revenues has historically
been affected by numerous factors, including the use of lower introductory rates
to attract new customers at new dispatch offices, the use of higher pay rates to
attract more skilled workers, changes in the Company's workers' compensation
reserve rates and the changing geographic mix of new and established, more
mature markets. Although the Company has implemented policies and procedures to
prevent unplanned increases in pay rates, and is no longer required to discount
billing rates to attract new customers, significant continuing fluctuations in
cost of services may be experienced as the Company pursues further aggressive
growth.
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Selling, general and administrative expenses include the salaries and wages of
the Company's operations and administrative personnel, dispatch office operating
expenses, corporate office operating expenses and the costs of the CDM program.
Temporary workers assigned to customers remain Labor Ready employees. Labor
Ready is responsible for the employee-related expenses of its temporary workers,
including workers' compensation coverage, unemployment compensation insurance,
and Social Security and Medicare taxes. The Company does not provide health,
dental, disability or life insurance to its temporary workers. Generally, the
Company bills its customers for the hours worked by its temporary workers
assigned to the customer. Because the Company pays its temporary workers only
for the hours actually worked, wages for the Company's temporary workers are a
variable cost that increases or decreases directly in proportion to revenue. The
Company has one franchisee which operates five dispatch offices. The Company
does not intend to grant additional franchises. Royalty revenues from the
franchised dispatch offices are not material during any period presented herein.
RESULTS OF OPERATIONS
The following table compares the operating results of the Company for the
thirteen weeks ended April 2, 1999 and April 3, 1998:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
April 2, April 3,
-------- --------
1999 1998
-------- --------
<S> <C> <C>
Revenues from services ....................... 100.0% 100.0%
Cost of services .............................. (67.5) (69.9)
Selling, general and administrative expenses ... (27.2) (28.6)
Depreciation and amortization ................ (0.4) (1.5)
Interest income, net .......................... 0.01 0.2
Income before income taxes and cumulative
effect of change in accounting principles . 4.9 0.3
Net income ..................................... 2.1 0.2
</TABLE>
THIRTEEN WEEKS ENDED APRIL 2, 1999 COMPARED TO THIRTEEN WEEKS ENDED APRIL 3,
1998
DISPATCH OFFICES
The number of offices grew to 652 at April 2, 1999 from 486 locations at
December 31, 1998, a net increase of 166 dispatch offices, or 34.2%. During
the thirteen weeks ended April 3, 1998, the number of offices grew to 420
from 316 locations at December 31, 1997, a net increase of 104 dispatch
offices, or 32.9%. The Company expects to open 34 additional dispatch
offices in the second quarter of 1999 and 300 dispatch offices in 2000. The
Company estimates that its aggregate costs of opening 166 new dispatch
offices in the first quarter of 1999 were approximately $7.5 million, an
average of approximately $45,000 per dispatch office, compared to aggregate
costs of approximately $5.2 million, an average of approximately $50,000
per dispatch office, to open 104 new stores in the first quarter of 1998.
The decrease in per-store costs in 1999 was primarily the result of a
decline in equipment costs. Approximately $1.1 million of first quarter
1998 costs includes dispatch office pre-opening costs such as salaries,
recruiting, testing, training, lease and other related costs, which were
capitalized and amortized using the straight-line method over two years.
The remaining approximately $4.1 million includes computer systems and
other equipment related costs, CDMs, and leasehold improvements.
REVENUES FROM SERVICES
The Company's revenues from services increased to $156.9 million for the
thirteen weeks ended April 2, 1999, as compared to $94.0 million for the
thirteen weeks ended April 3, 1998, an increase of $62.9 million or 66.9%.
The increase in revenues is due primarily to the increase in the number of
dispatch offices and continued increases in revenues from mature dispatch
offices. Additionally, the Company opened more stores in the first quarter
of 1999 than in the same period in 1998. Finally, the Company continues to
consolidate its position in the marketplace and build brand awareness,
allowing the Company to increase its average bill rates over the same
period a year ago. Included in revenues from services for the thirteen
weeks ended April 2, 1999 and April 3, 1998 are CDM fees of $1.2 million
and $0.2 million, respectively.
COST OF SERVICES
Cost of services increased to $105.9 million for the thirteen weeks ended
April 2, 1999 as compared to $65.7 million for the thirteen weeks ended
April 3, 1998, an increase of $40.2 million or 61.2%. This increase is
directly related to the corresponding increase in revenues during the
period. Cost of services was 67.5% of revenue in the first quarter of 1999
compared to 69.9% of revenue in the first quarter of 1998. Cost of services
as a percentage of revenues decreased 2.4% as compared to the first quarter
of 1998 because the company was able to increase its billing rates over the
same period a year ago while the average wage paid to temporary workers did
not increase. Additionally, the Company experienced a decline in workers
compensation expense due to continuous improvements in workers'
compensation claims experience. Significant continuing fluctuations in cost
of services may be expected as the Company pursues further aggressive
growth.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $42.7 million in the
first quarter of 1999 as compared to $26.9 million in the first quarter of
1998, an increase of $15.8 million or 58.7%. The increase was largely due
to the 66.9% increase in revenue from 1998 to 1999. Selling, general and
administrative expenses were 27.2% of revenues in the first quarter of 1999
as compared to 28.6% of revenues in the first quarter of 1998. The decrease
in selling, general and administrative expenses as a percentage of revenue
in the first quarter of 1999 is due mainly to continued economies of scale
on fixed and semi-fixed dispatch office operating and corporate
administrative costs. Included in selling, general and administrative
expense for the thirteen weeks ended April 2, 1999 and April 3, 1998 are
CDM related expenses of $0.5 million and $0.08 million, respectively.
The Company expects that selling, general and administrative expenses as a
percentage of revenues may fluctuate in future periods as the Company from
time to time adjusts its staffing model at the dispatch offices and
upgrades its operating and administrative capabilities to accommodate
anticipated revenue and dispatch office growth.
DEPRECIATION AND AMORTIZATION EXPENSE.
Depreciation and amortization expense was $0.7 million in the first quarter
of 1999 and $1.4 million in the first quarter of 1998, a decrease of $0.7
million or 50.0%. The decrease in depreciation and amortization expense is
primarily the result of the elimination of amortization expense when the
Company adopted the provisions of SOP 98-5. The Statement required the
Company to expense as incurred, pre-opening costs for new dispatch offices,
and recognize as a cumulative effect of a change in accounting principle, a
one-time charge for the unamortized balance of pre-opening costs. Prior to
the change, the Company had capitalized pre-opening costs and amortized
them over two years. Offsetting this decrease is higher levels of
depreciation resulting from the addition of $12.6 million of property and
equipment since the first quarter of 1998. These additions primarily
include the CDMs and computer equipment, software, and other equipment
needed for the new stores opened during the period and to expand the
Company's data processing capabilities to accommodate the growth in
dispatch offices. Included in depreciation and amortization expense for the
thirteen weeks ended April 2, 1999 and April 3, 1998 are depreciation on
CDMs of $0.3 million and $0.1, respectively.
INTEREST INCOME, NET
The Company recorded net interest income of $18,000 in the first quarter of
1999 as compared to interest income of $0.2 million in the first quarter of
1998, a decrease of $0.2 million or 91.3%. The decrease in net interest
income was the result of increases in interest expense on CDM leases,
higher letter of credit and line of credit fees than in 1998 as a result of
providing additional collateral to the Company's workers' compensation
insurers and increasing the line of credit to $60 million, and a decline in
market interest rates on invested cash balances. Additionally, the Company
had cash balances of approximately $13.3 million held in the CDMs at April
2, 1999 compared to $12.3 million at April 3, 1998.
The Company expects to incur interest expense during the balance of 1999 as
the cash demands of the Company's busiest time of year will require
borrowing on the Company's revolving line of credit. Additionally, cash
balances held in the CDMs for payment of temporary worker payrolls, will
continue to reduce cash available for investing.
TAXES ON INCOME
Taxes on income increased to a provision of $3.0 million in the first
quarter of 1999 from a provision of $0.1 million in the first quarter of
1998, an increase of $2.9 million. The increase in taxes was due to the
increase in income before taxes and cumulative effect of change in
accounting principle to $7.7 million in the first quarter of 1999 from
pretax income of $0.3 million in the first quarter of 1998. The Company's
effective tax rate was 39.2% in the first quarter of 1999 as compared to
42.0% in the first quarter of 1998. The decrease in the effective rate was
primarily due to reductions in the Company's expected state income tax
rates. The principal difference between the statutory federal income tax
rate and the Company's effective income tax rate result from state income
taxes and certain non-deductible expenses.
The Company had a net deferred tax asset of approximately $11.0 million at
April 2, 1999, resulting primarily from workers' compensation claims
reserves. The Company has not established a valuation allowance against
this net deferred tax asset as management believes that it is more likely
than not that the tax benefits will be realized in the future based on the
historical levels of pre-tax income and expected future taxable income.
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NET INCOME
The Company reported net income of $3.2 million for the thirteen weeks
ended April 2, 1999, as compared to net income of $0.1 million, for the
thirteen weeks ended April 3, 1998, an increase of $3.1 million. As a
percentage of revenues from services, net income increased to 2.1% for the
first quarter of 1999, which compares to 0.2%, for the first quarter of
1998, an increase of 1.9%. This increase in net income is primarily the
result of increased revenues and gross margins, economies of scale realized
on selling, general and administrative expenses and decreases in
amortization expense, offset by a one-time charge of $1.5 million related
to the change in accounting principle for dispatch office pre-opening costs
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $0.5 million in the first
quarter of 1999 compared to a use of cash of $1.8 million in the first
quarter of 1998. The increase in cash provided by operations in 1999 is
largely due to net income for the quarter, and non-cash expenses including
depreciation and amortization and the one-time charge for the cumulative
effect of a change in accounting principle offset by an increase in the
Company's net deferred asset during the period. Additionally, increases in
accounts receivable, workers' compensation deposits and credits and prepaid
expenses and a decrease in accounts payable were offset in part by
increases in the reserve for workers' compensation and income taxes
payable.
The Company used net cash in investing activities of $3.5 million in first
quarter of 1999, compared to $2.8 million in the first quarter of 1998. The
increase in cash used in investing activities in 1999 as compared to 1998
is due primarily to an increase in capital expenditures to open 166 new
stores and increase the Company data processing capabilities to accommodate
the growth in dispatch offices. The Company's capital expenditures in 1999
and 1998 include property and equipment acquired other than through capital
lease. Capital expenditures in the first quarter of 1998 includes store
pre-opening costs of $1.1 million and expenditures for property and
equipment of $1.6 million.
Net cash provided by financing activities was $1.4 million in the first
quarter of 1999 and $0.3 million in the first quarter of 1998. The increase
in cash provided by financing activities in 1999 as compared to 1998 is due
mainly to proceeds from the exercise of employee stock options.
In February 1999, the Company entered into a new line of credit agreement
with U.S. Bank. The new agreement allows the company to borrow up to the
lesser of $60 million or 80% of eligible accounts receivable, as defined by
the bank, with interest at the lesser of the bank's prime rate (7.75% at
April 2, 1999) or the London Inter-Bank Offering Rate (LIBOR) plus 1.25%.
The line of credit is secured primarily by the Company's accounts
receivable and is due in full on June 30, 2000. The line of credit
agreement requires that the Company maintain certain minimum net worth and
working capital amounts and ratios. The Company was in compliance with the
requirements at April 2, 1999.
As discussed further in Note 2 to the consolidated financial statements,
the Company is required by the workers' compensation program to
collateralize a portion of its workers' compensation liability with
irrevocable letters of credit. At April 2, 1999, the Company had provided
its insurance carriers with letters of credit totaling $16.6 million. The
letters of credit bear fees of .75% per year and are supported by an equal
amount of available borrowings on the line-of-credit. Accordingly, at April
2, 1999, no borrowings were outstanding on the line-of-credit, $16.6
million was committed by the letters of credit and $43.4 million was
available for borrowing. Subsequent to quarter-end, the Company increased
its outstanding letters of credit by $4.0 million.
During the first quarter of 1999, the Company entered into an agreement to
lease approximately 200 automated Cash Dispensing Machines ("CDMs") for
installation in the Company's dispatch offices opened in 1999. The fair
market value of the CDMs at inception of the lease is approximately $2.7
million. The lease is payable over 72 months with an imputed interest rate
of 6.5% and a residual payment equal to 20% of the CDM's original cost. The
leases are secured by the CDMs. During the three months ended April 2,
1999, the Company installed approximately 166 CDMs in dispatch offices
throughout the United States. Accordingly, the Company recorded assets
under capital lease and capital lease obligations totaling $2.3 million
with future minimum lease payments over the next 6 years of approximately
$0.4 million per year. Included as an exhibit to this Form 10-Q is an
example of a CDM lease, all such leases having substantially identical
terms and conditions.
Included in cash and cash equivalents at April 2, 1999, is approximately
$13.3 million of cash which is located in the CDMs for payment of temporary
worker payrolls. The Company anticipates further increases in cash held in
the CDMs as it enters the busiest time of its year and completes the
installation of CDMs at all of its dispatch offices in the United States.
Historically, the Company has financed its operations through cash
generated by external financing including term loans, credit lines and
stock offerings. The principal use of cash is to finance the growth in
receivables, and fund the cost of opening new dispatch offices. The Company
may experience cash flow deficits from operations and investing activities
while the Company expands its operations, including the acceleration of
opening new dispatch offices. Management expects cash flow deficits to be
financed by profitable operations, the use of the Company's line of credit,
and may consider other equity or debt financings as necessary. The Company
analyzes acquisition opportunities from time to time and may pursue
acquisitions in certain circumstances. Any acquisitions the Company enters
into may require additional equity or debt financing.
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INFORMATION PROCESSING SYSTEMS AND THE YEAR 2000
As the Year 2000 approaches, there are uncertainties concerning whether
computer systems and electronic equipment with date functions will properly
recognize date-sensitive information when the year changes to 2000. Systems
that do not properly recognize such information could generate erroneous
data or fail. Due to the Company's reliance on its management information
systems, failure of the management information systems for any reason
(including Year 2000 noncompliance) could result in the loss of
communications with its dispatch offices and could result in unforeseeable
but potentially material losses to the Company. However, management
believes that the Year 2000 does not pose a significant operational problem
for the Company's computer systems.
The Company has developed and is currently implementing a significant
upgrade to its proprietary management information systems to address the
dramatic growth (and expected future growth) in the number of the Company's
dispatch offices and provide certain enhanced features. The software
upgrade is Year 2000 compliant. Through April 2, 1999, the Company has
incurred approximately $1.4 million in development costs which is included
in the accompanying consolidated balance sheets in "Computers and
Software". The Company expects that the upgrade will be installed
Company-wide not later than September 30, 1999.
Management has identified three systems with potential Year 2000 problems:
(1) the existing management information system, which is being replaced as
discussed above, (2) the communication system currently used to exchange
point of sale information between corporate headquarters and the dispatch
offices and, (3) the payroll system for corporate employees (but not for
temporary employees dispatched to customers). The Company expects to
correct the Year 2000 problem related to its system for communicating point
of sale information with an upgrade supplied by the vendor. Alternatively,
the Company believes that it could implement an alternative, Year 2000
compliant system with minimal cost. The Company expects to upgrade the
payroll system by year-end, but will use, if necessary, a third party
capable of providing payroll services. The Company has not negotiated the
cost of such services but believes there are alternative providers to
assure that any costs incurred are at competitive rates.
The Company has tested and will continue to test other computer components
and software including its non-information processing systems such as its
data and phone communications systems for Year 2000 compliance. Based on
such testing, the Company expects to replace its voice mail system for a
total cost of approximately $50,000. Testing to date has indicated no other
year 2000 compliance problems. If other systems fail, the Company will be
required to replace them. Replacement systems are mass produced and
available from a large number of vendors and would constitute an immaterial
expense relative to the operating budget of the Company.
Management believes that as a result of the nature of the Company's
business the Company bears little exposure to risk of Year 2000
non-compliance by third parties. The Company acquires supplies (e.g.,
personal safety equipment, office supplies) that are mass-produced and
readily available from a large number of suppliers. None of the Company's
customers represent more than 2% of the Company's revenues, so that, unless
a significant number of the Company's customers experience complete
disruptions to their business, the Company is unlikely to experience
significant loss of revenue. Nevertheless, the Company is currently
conducting a survey of its largest vendors and customers in order to assess
the readiness of these third parties with which it deals. If the Company
determines that any of its vendors are unable to adequately address Year
2000 issues, the Company believes that alternatives could be found before
the Year 2000.
The Company has a contingency plan for certain Year 2000 issues, however,
the Company believes that its systems will be Year 2000 compliant by year
end, if not before, and that the Year 2000 issue will not materially impact
its operations. The forward looking statements referenced above, including
the preceding sentence, are subject to a number of risks and uncertainties,
including the ability of customers, vendors and other third parties to
solve timely their Year 2000 issues, the accuracy of Year 2000 testing
methods and that remediation of Year 2000 issues will be correctly
implemented.
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<PAGE>
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
THE FOLLOWING EXHIBITS ARE BEING FILED AS A PART OF THIS REPORT:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
10.10 Form of equipment lease and related schedules at
various dates Between the Company as lessor and
Wells Fargo Equipment Finance, Inc. as lessee.
27 Financial Data Schedules as of April 3, 1999 and
April 2, 1998 and for each of the thirteen week
periods then ended.
</TABLE>
(b) REPORTS ON FORM 8-K
None.
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.
REGISTRANT: LABOR READY, INC.
By: /S/ GLENN A. WELSTAD MAY 14, 1999
-------------------------------------- ------------
Glenn A. Welstad Date
Chairman of the Board, Chief Executive
Officer and President
By: /S/ JOSEPH P. SAMBATARO, JR. MAY 14, 1999
-------------------------------------- ------------
Joseph P. Sambataro, Jr. Date
Executive Vice President,
Chief Financial Officer, Treasurer
and Assistant Secretary
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Page 14
<PAGE>
MASTER LEASE
WELLS FARGO EQUIPMENT FINANCE, INC.
INVESTORS BUILDING, SUITE 300
WELLS FARGO 733 MARQUETTE AVENUE
MINNEAPOLIS, MN 55479-2048
MASTER LEASE NUMBER 46866 DATED AS OF APRIL 27, 1999
NAME AND ADDRESS OF LESSEE:
LABOR READY SOUTHWEST, INC.
1016 S. 28TH STREET
TACOMA, WA 98409
MASTER LEASE PROVISIONS
1. LEASE. LESSOR HEREBY AGREES TO LEASE TO LESSEE, AND LESSEE HEREBY AGREES TO
LEASE FROM LESSOR, THE PERSONAL PROPERTY DESCRIBED IN A SUPPLEMENT OR
SUPPLEMENTS TO THIS MASTER LEASE FROM TIME TO TIME SIGNED BY LESSOR AND LESSEE
UPON THE TERMS AND CONDITIONS SET FORTH HEREIN AND IN THE RELATED SUPPLEMENT
(SUCH PROPERTY TOGETHER WITH ALL REPLACEMENTS, REPAIRS, AND ADDITIONS
INCORPORATED THEREIN OR AFFIXED THERETO BEING REFERRED TO HEREIN AS THE
"EQUIPMENT). THE LEASE OF THE ITEMS DESCRIBED IN A PARTICULAR SUPPLEMENT SHALL
BE CONSIDERED A SEPARATE LEASE PURSUANT TO THE TERMS OF THE MASTER LEASE AND THE
SUPPLEMENT THE SAME AS IF A SINGLE LEASE AGREEMENT CONTAINING SUCH TERMS HAD
BEEN EXECUTED COVERING SUCH ITEMS.
2. TERM. THE TERM OF THIS LEASE WITH RESPECT TO EACH ITEM OF EQUIPMENT SHALL
BEGIN ON THE DATE IT IS ACCEPTED BY LESSEE AND SHALL CONTINUE FOR THE NUMBER OF
CONSECUTIVE MONTHS FROM THE RENT COMMENCEMENT DATE SHOWN IN THE RELATED
SUPPLEMENT (THE "INITIAL TERM) UNLESS EARLIER TERMINATED AS PROVIDED HEREIN OR
UNLESS EXTENDED AUTOMATICALLY AS PROVIDED BELOW IN THIS PARAGRAPH. THE RENT
COMMENCEMENT DATE IS THE 15TH DAY OF THE MONTH IN WHICH ALL OF THE ITEMS OF
EQUIPMENT DESCRIBED IN THE RELATED SUPPLEMENT HAVE BEEN DELIVERED AND ACCEPTED
BY LESSEE IF SUCH DELIVERY AND ACCEPTANCE IS COMPLETED ON OR BEFORE THE 15TH OF
SUCH MONTH, AND THE RENT COMMENCEMENT DATE IS THE LAST DAY OF SUCH MONTH IF SUCH
DELIVERY AND ACCEPTANCE IS COMPLETED DURING THE BALANCE OF SUCH MONTH. IN THE
EVENT LESSEE EXECUTES THE RELATED SUPPLEMENT PRIOR TO DELIVERY AND ACCEPTANCE OF
ALL ITEMS OF EQUIPMENT DESCRIBED THEREIN, LESSEE AGREES THAT THE RENT
COMMENCEMENT DATE MAYBE LEFT BLANK WHEN LESSEE EXECUTES THE RELATED SUPPLEMENT
AND HEREBY AUTHORIZES LESSOR TO INSERT THE RENT COMMENCEMENT DATE BASED UPON THE
DATE APPEARING ON THE DELIVERY AND ACCEPTANCE CERTIFICATE SIGNED BY LESSEE WITH
RESPECT TO THE LAST ITEM OF EQUIPMENT TO BE DELIVERED.
AUTOMATIC EXTENSION. LESSEE OR LESSOR MAY TERMINATE THIS LEASE AT THE
EXPIRATION OF THE INITIAL TERM BY GIVING THE OTHER AT LEAST 90 DAYS PRIOR
WRITTEN NOTICE OF TERMINATION. IF NEITHER LESSEE NOR LESSOR GIVES SUCH NOTICE,
THEN THE TERM OF THIS LEASE SHALL BE EXTENDED AUTOMATICALLY ON THE SAME RENTAL
AND OTHER TERMS SET FORTH HEREIN (EXCEPT THAT IN ANY EVENT RENT DURING ANY
EXTENDED TERM SHALL BE PAYABLE IN THE AMOUNTS AND AT THE TIMES PROVIDED IN
PARAGRAPH 3) FOR SUCCESSIVE PERIODS OF ONE MONTH UNTIL TERMINATED BY EITHER
LESSEE OR LESSOR GIVING THE OTHER AT LEAST 90 DAYS PRIOR WRITTEN NOTICE OF
TERMINATION.
3. RENT LESSEE SHALL PAY AS BASIC RENT FOR THE INITIAL TERM OF THIS LEASE THE
AMOUNT SHOWN IN THE RELATED SUPPLEMENT AS TOTAL BASIC RENT. THE TOTAL BASIC RENT
SHALL BE PAYABLE IN INSTALLMENTS EACH IN THE AMOUNT OF THE BASIC RENTAL PAYMENT
SET FORTH IN THE RELATED SUPPLEMENT PLUS SALES AND USE TAX THEREON. LESSEE SHALL
PAY ADVANCE INSTALLMENTS AND ANY SECURITY DEPOSIT, EACH AS SHOWN IN THE RELATED
SUPPLEMENT, ON THE DATE IT IS EXECUTED BY LESSEE. SUBSEQUENT INSTALLMENTS SHALL
BE PAYABLE ON THE FIRST DAY OF EACH RENTAL PAYMENT PERIOD SHOWN IN THE RELATED
SUPPLEMENT BEGINNING AFTER THE FIRST RENTAL PAYMENT PERIOD; PROVIDED, HOWEVER,
THAT LESSOR AND LESSEE MAY AGREE TO ANY OTHER PAYMENT SCHEDULE, INCLUDING
IRREGULAR PAYMENTS OR BALLOON PAYMENTS, IN WHICH EVENT THEY SHALL BE SET FORTH
IN THE SPACE PROVIDED IN THE SUPPLEMENT FOR ADDITIONAL PROVISIONS. IF THE ACTUAL
COST OF THE EQUIPMENT IS MORE OR LESS THAN THE TOTAL COST AS SHOWN IN THE
SUPPLEMENT, THE AMOUNT OF EACH INSTALLMENT OF RENT WILL BE ADJUSTED UP OR DOWN
TO PROVIDE THE SAME YIELD TO LESSOR AS WOULD HAVE BEEN OBTAINED IF THE ACTUAL
COST HAD BEEN THE SAME AS THE TOTAL COST. ADJUSTMENTS OF 10% OR LESS MAY BE MADE
BY WRITTEN NOTICE FROM LESSOR TO LESSEE. ADJUSTMENTS OF MORE THAN 10% SHALL BE
MADE BY EXECUTION OF AN AMENDMENT TO THE SUPPLEMENT REFLECTING THE CHANGE IN
TOTAL COST AND RENT.
DURING ANY EXTENDED TERM OF THIS LEASE, BASIC RENT SHALL BE PAYABLE MONTHLY
IN ADVANCE ON THE FIRST DAY OF EACH MONTH DURING SUCH EXTENDED TERM IN THE
AMOUNT EQUAL TO THE BASIC RENTAL PAYMENT SET FORTH IN THE RELATED SUPPLEMENT IF
RENT IS PAYABLE MONTHLY DURING THE INITIAL TERM OR IN AN AMOUNT EQUAL TO THE
MONTHLY EQUIVALENT OF THE BASIC RENTAL PAYMENT SET FORTH IN THE RELATED
SUPPLEMENT IF RENT IS PAYABLE OTHER THAN MONTHLY DURING THE INITIAL TERM. IN
ADDITION, LESSEE SHALL PAY ANY APPLICABLE SALES AND USE TAX ON RENT PAYABLE
DURING ANY EXTENDED TERM.
IN ADDITION TO BASIC RENT, WHICH IS PAYABLE ONLY FROM THE RENT COMMENCEMENT
DATE AS PROVIDED ABOVE, LESSEE AGREES TO PAY INTERIM RENT WITH RESPECT TO EACH
SEPARATE ITEM OF EQUIPMENT COVERED BY A PARTICULAR SUPPLEMENT FROM THE DATE IT
IS DELIVERED AND ACCEPTED TO THE RENT COMMENCEMENT DATE AT A DAILY RATE EQUAL TO
THE PERCENTAGE OF LESSOR'S COST OF SUCH ITEM SPECIFIED IN SUCH SUPPLEMENT.
INTERIM RENT ACCRUING EACH CALENDAR MONTH SHALL BE PAYABLE BY THE 10TH DAY OF
THE FOLLOWING MONTH AND IN ANY EVENT ON THE RENT COMMENCEMENT DATE. LESSEE
AGREES THAT IF ALL OF THE ITEMS OF EQUIPMENT COVERED BY SUCH SUPPLEMENT HAVE NOT
BEEN DELIVERED AND ACCEPTED THEREUNDER BEFORE THE DATE SPECIFIED AS THE CUTOFF
DATE IN SUCH SUPPLEMENT, LESSEE SHALL PURCHASE FROM LESSOR THE ITEMS OF
EQUIPMENT THEN SUBJECT TO THE LEASE WITHIN FIVE DAYS AFTER LESSOR'S REQUEST TO
DO SO FOR A PRICE EQUAL TO LESSORS COST OF SUCH ITEMS PLUS ALL ACCRUED BUT
UNPAID INTERIM RENT THEREON. LESSEE SHALL ALSO PAY ANY APPLICABLE SALES AND USE
TAX ON SUCH SALE.
4. SECURITY DEPOSIT. LESSOR MAY APPLY ANY SECURITY DEPOSIT TOWARD ANY OBLIGATION
OF LESSEE UNDER THIS LEASE, AND SHALL RETURN ANY UNAPPLIED BALANCE TO LESSEE
WITHOUT INTEREST UPON SATISFACTION OF LESSEE'S OBLIGATIONS HEREUNDER.
5. WARRANTIES. LESSEE AGREES THAT IT HAS SELECTED EACH ITEM OF EQUIPMENT BASED
UPON ITS OWN JUDGMENT AND DISCLAIMS ANY RELIANCE UPON ANY STATEMENTS OR
REPRESENTATIONS MADE BY LESSOR. LESSOR MAKES NO WARRANTY WITH RESPECT TO THE
EQUIPMENT, EXPRESS OR IMPLIED, AND LESSOR SPECIFICALLY DISCLAIMS ANY WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE AND ANY LIABILITY FOR
CONSEQUENTIAL DAMAGES ARISING OUT OF THE USE OF OR THE INABILITY TO USE THE
EQUIPMENT LESSEE AGREES TO MAKE THE RENTAL AND OTHER PAYMENTS REQUIRED HEREUNDER
WITHOUT REGARD TO THE CONDITION OF THE EQUIPMENT AND TO LOOK ONLY TO PERSONS
OTHER THAN LESSOR SUCH AS THE MANUFACTURER, VENDOR OR CARRIER THEREOF SHOULD ANY
ITEM OF EQUIPMENT FOR ANY REASON BE DEFECTIVE. SO LONG AS NO EVENT OF DEFAULT
HAS OCCURRED AND IS CONTINUING, LESSOR AGREES, TO THE EXTENT THEY ARE
ASSIGNABLE, TO ASSIGN TO LESSEE, WITHOUT ANY RECOURSE TO LESSOR, ANY WARRANTY
RECEIVED BY LESSOR.
6. TITLE. TITLE TO THE EQUIPMENT SHALL AT ALL TIMES REMAIN IN LESSOR, AND LESSEE
AT ITS EXPENSE SHALL PROTECT AND DEFEND THE TITLE OF LESSOR AND KEEP IT FREE OF
ALL CLAIMS AND LIENS OTHER THAN THE RIGHTS OF LESSEE HEREUNDER AND CLAIMS AND
LIENS CREATED BY OR ARISING THROUGH LESSOR. THE EQUIPMENT SHALL REMAIN PERSONAL
PROPERTY REGARDLESS OF ITS ATTACHMENT TO REALTY, AND LESSEE AGREES TO TAKE SUCH
ACTION AT ITS EXPENSE AS MAY BE NECESSARY TO PREVENT ANY THIRD PARTY FROM
ACQUIRING ANY INTEREST IN THE EQUIPMENT AS A RESULT OF ITS ATTACHMENT TO REALTY.
7 LAWS AND TAXES. LESSEE SHALL COMPLY WITH ALL LAWS AND REGULATIONS RELATING TO
THE EQUIPMENT AND ITS USE AND SHALL PROMPTLY PAY WHEN DUE ALL SALES, USE,
PROPERTY, EXCISE AND OTHER TAXES AND ALL LICENSE AND REGISTRATION FEES NOW OR
HEREAFTER IMPOSED BY ANY GOVERNMENTAL BODY OR AGENCY UPON THE EQUIPMENT OR ITS
USE OR THE RENTALS HEREUNDER. UPON REQUEST BY LESSOR, LESSEE SHALL PREPARE AND
FILE ALL TAX RETURNS RELATING TO TAXES FOR WHICH LESSEE IS RESPONSIBLE HEREUNDER
WHICH LESSEE IS PERMITTED TO FILE UNDER THE LAWS OF THE APPLICABLE TAXING
JURISDICTION.
8. INDEMNITY. LESSEE HEREBY INDEMNIFIES LESSOR AGAINST AND AGREES TO SAVE LESSOR
HARMLESS FROM ANY AND ALL LIABILITY AND EXPENSE ARISING OUT OF THE ORDERING,
OWNERSHIP, USE, CONDITION, OR OPERATION OF EACH ITEM OF EQUIPMENT DURING THE
TERM OF THIS LEASE, INCLUDING LIABILITY FOR DEATH OR INJURY TO PERSONS, DAMAGE
TO PROPERTY, STRICT LIABILITY UNDER THE LAWS OR JUDICIAL DECISIONS OF ANY STATE
OR THE UNITED STATES, AND LEGAL EXPENSES IN DEFENDING ANY CLAIM BROUGHT TO
ENFORCE ANY SUCH LIABILITY OR EXPENSE.
<PAGE>
9. ASSIGNMENT WITHOUT LESSORS PRIOR WRITTEN CONSENT, LESSEE WILL NOT SELL,
ASSIGN, SUBLET, PLEDGE, OR OTHERWISE ENCUMBER OR PERMIT A LIEN ARISING THROUGH
LESSEE TO EXIST ON OR AGAINST ANY INTEREST IN THIS LEASE OR THE EQUIPMENT, OR
REMOVE THE EQUIPMENT FROM ITS LOCATION REFERRED TO ABOVE. LESSOR MAY ASSIGN ITS
INTEREST IN THIS LEASE AND SELL OR GRANT A SECURITY INTEREST IN ALL OR ANY PART
OF THE EQUIPMENT WITHOUT NOTICE TO OR THE CONSENT OF LESSEE. LESSEE AGREES NOT
TO ASSERT AGAINST ANY ASSIGNEE OF LESSOR ANY CLAIM OR DEFENSE LESSEE MAY HAVE
AGAINST LESSOR.
10. INSPECTION. LESSOR MAY INSPECT THE EQUIPMENT AT ANYTIME AND FROM TIME TO
TIME DURING REGULAR BUSINESS HOURS.
11. REPAIRS. LESSEE WILL USE THE EQUIPMENT WITH DUE CARE AND FOR THE PURPOSE FOR
WHICH IT IS INTENDED. LESSEE WILL MAINTAIN THE EQUIPMENT IN GOOD REPAIR,
CONDITION AND WORKING ORDER AND WILL FURNISH ALL PARTS AND SERVICES REQUIRED
THEREFOR, ALL AT ITS EXPENSE, ORDINARY WEAR AND TEAR EXCEPTED. LESSEE SHALL, AT
ITS EXPENSE, MAKE ALL MODIFICATIONS AND IMPROVEMENTS TO THE EQUIPMENT REQUIRED
BY LAW, AND SHALL NOT MAKE OTHER MODIFICATIONS OR IMPROVEMENTS TO THE EQUIPMENT
WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR. ALL PARTS, MODIFICATIONS AND
IMPROVEMENTS TO THE EQUIPMENT SHALL, WHEN INSTALLED OR MADE, IMMEDIATELY BECOME
THE PROPERTY OF LESSOR AND PART OF THE EQUIPMENT FOR ALL PURPOSES.
12. LOSS OR DAMAGE. IN THE EVENT ANY ITEM of EQUIPMENT SHALL BECOME LOST,
STOLEN, DESTROYED, DAMAGED BEYOND REPAIR OR RENDERED PERMANENTLY UNFIT FOR USE
FOR ANY REASON, OR IN THE EVENT of CONDEMNATION OR SEIZURE of ANY ITEM of
EQUIPMENT, LESSEE SHALL PROMPTLY PAY LESSOR THE SUM of (a) THE AMOUNT of ALL
RENT AND OTHER AMOUNTS PAYABLE BY LESSEE HEREUNDER WITH RESPECT TO SUCH ITEM DUE
BUT UNPAID AT THE DATE of SUCH PAYMENT PLUS (b) THE AMOUNT of ALL UNPAID RENT
WITH RESPECT TO SUCH ITEM FOR THE BALANCE of THE TERM of THIS LEASE NOT YET DUE
AT THE TIME of such PAYMENT DISCOUNTED FROM THE RESPECTIVE DATES INSTALLMENT
PAYMENTS WOULD BE DUE AT THE RATE IMPLICIT IN THE SCHEDULE of RENTAL PAYMENTS
WHEN APPLIED TO THE COST of SUCH ITEM PLUS (c) 10% of THE COST of SUCH ITEM AS
SHOWN IN THE RELATED SUPPLEMENT. UPON PAYMENT of SUCH AMOUNT TO LESSOR, SUCH
ITEM SHALL BECOME THE PROPERTY of LESSEE, LESSOR WILL TRANSFER TO LESSEE,
WITHOUT RECOURSE OR WARRANTY, ALL of LESSOR'S RIGHT, TITLE AND INTEREST THEREIN,
THE RENT WITH RESPECT TO SUCH ITEM SHALL TERMINATE, AND THE BASIC RENTAL
PAYMENTS ON THE REMAINING ITEMS SHALL BE REDUCED ACCORDINGLY. LESSEE SHALL PAY
ANY SALES AND USE TAXES DUE ON SUCH TRANSFER. ANY INSURANCE OR CONDEMNATION
PROCEEDS RECEIVED SHALL BE CREDITED TO LESSEE'S OBLIGATION UNDER THIS PARAGRAPH
AND LESSOR SHALL BE ENTITLED TO ANY SURPLUS.
13. INSURANCE. LESSEE SHALL OBTAIN AND MAINTAIN ON OR WITH RESPECT TO THE
EQUIPMENT AT ITS OWN EXPENSE (a) LIABILITY INSURANCE INSURING AGAINST LIABILITY
FOR BODILY INJURY AND PROPERTY DAMAGE WITH A MINIMUM LIMIT of $500,000 COMBINED
SINGLE LIMIT AND (b) PHYSICAL DAMAGE INSURANCE INSURING AGAINST LOSS OR DAMAGE
TO THE EQUIPMENT IN AN AMOUNT NOT LESS THAN THE FULL REPLACEMENT VALUE of THE
EQUIPMENT. LESSEE SHALL FURNISH LESSOR WITH A CERTIFICATE of INSURANCE
EVIDENCING THE ISSUANCE of A POLICY OR POLICIES TO LESSEE IN AT LEAST THE
MINIMUM AMOUNTS REQUIRED HEREIN NAMING LESSOR AS AN ADDITIONAL INSURED
THEREUNDER FOR THE LIABILITY COVERAGE AND AS LOSS PAYEE FOR THE PROPERTY DAMAGE
COVERAGE. EACH SUCH POLICY SHALL BE IN SUCH FORM AND WITH SUCH INSURERS AS MAY
BE SATISFACTORY TO LESSOR, AND SHALL CONTAIN A CLAUSE REQUIRING THE INSURER TO
GIVE TO LESSOR AT LEAST 10 DAYS PRIOR WRITTEN NOTICE OF ANY ALTERATION IN THE
TERMS OF SUCH POLICY OR THE CANCELLATION THEREOF, AND A CLAUSE SPECIFYING THAT
NO ACTION OR MISREPRESENTATION BY LESSEE SHALL INVALIDATE SUCH POLICY. LESSOR
SHALL BE UNDER NO DUTY TO ASCERTAIN THE EXISTENCE OF OR TO EXAMINE ANY SUCH
POLICY OR TO ADVISE LESSEE IN THE EVENT ANY SUCH POLICY SHALL NOT COMPLY WITH
THE REQUIREMENTS HEREOF
14. RETURN OF THE EQUIPMENT UPON THE EXPIRATION OR EARLIER TERMINATION OF THIS
LEASE, LESSEE WILL IMMEDIATELY DELIVER THE EQUIPMENT TO LESSOR IN THE SAME
CONDITION AS WHEN DELIVERED TO LESSEE, ORDINARY WEAR AND TEAR EXCEPTED AT SUCH
LOCATION WITHIN THE CONTINENTAL UNITED STATES AS LESSOR SHALL DESIGNATE. LESSEE
SHALL PAY ALL TRANSPORTATION AND OTHER EXPENSES RELATING TO SUCH DELIVERY.
15. ADDITIONAL ACTION. LESSEE WILL PROMPTLY EXECUTE AND DELIVER TO LESSOR SUCH
FURTHER DOCUMENTS AND TAKE SUCH FURTHER ACTION AS LESSOR MAY REQUEST IN ORDER TO
CARRY OUT MORE EFFECTIVELY THE INTENT AND PURPOSE OF THIS LEASE, INCLUDING THE
EXECUTION AND DELIVERY OF APPROPRIATE FINANCING STATEMENTS TO PROTECT FULLY
LESSORS INTEREST HEREUNDER IN ACCORDANCE WITH THE UNIFORM COMMERCIAL CODE OR
OTHER APPLICABLE LAW LESSEE WILL FURNISH FROM TIME TO TIME ON REQUEST, A COPY OF
LESSEE'S LATEST ANNUAL BALANCE SHEET AND INCOME STATEMENT.
16. LATE CHARGES. IF ANY INSTALLMENT OF INTERIM RENT OR BASIC RENT IS NOT PAID
WHEN DUE, LESSOR MAY IMPOSE A LATE CHARGE OF UP TO 5% OF THE AMOUNT OF THE
INSTALLMENT BUT IN ANY EVENT NOT MORE THAN PERMITTED BY APPLICABLE LAW. PAYMENTS
THEREAFTER RECEIVED SHALL BE APPLIED FIRST TO DELINQUENT INSTALLMENTS AND THEN
TO CURRENT INSTALLMENTS.
17. DEFAULT EACH OF THE FOLLOWING EVENTS SHALL CONSTITUTE AN "EVENT OF DEFAULT"
HEREUNDER: (a) LESSEE SHALL FAIL TO PAY WHEN DUE ANY INSTALLMENT OF INTERIM RENT
OR BASIC RENT; (b) LESSEE SHALL FAIL TO OBSERVE OR PERFORM ANY OTHER AGREEMENT
TO BE OBSERVED OR PERFORMED BY LESSEE HEREUNDER AND THE CONTINUANCE THEREOF FOR
10 CALENDAR DAYS FOLLOWING WRITTEN NOTICE THEREOF BY LESSOR TO LESSEE; (c)
LESSEE OR ANY GUARANTOR OF THIS LEASE OR ANY PARTNER OF LESSEE if LESSEE IS A
PARTNERSHIP SHALL CEASE DOING BUSINESS AS A GOING CONCERN OR MAKE AN ASSIGNMENT
FOR THE BENEFIT OF CREDITORS; (d) LESSEE OR ANY GUARANTOR OF THIS LEASE OR ANY
PARTNER OF LESSEE IF LESSEE IS A PARTNERSHIP SHALL VOLUNTARILY FILE, OR HAVE
FILED AGAINST IT INVOLUNTARILY, A PETITION FOR LIQUIDATION, REORGANIZATION,
ADJUSTMENT OF DEBT, OR SIMILAR RELIEF UNDER THE FEDERAL BANKRUPTCY CODE OR ANY
OTHER PRESENT OR FUTURE FEDERAL OR STATE BANKRUPTCY OR INSOLVENCY LAW, OR A
TRUSTEE, RECEIVER, OR LIQUIDATOR SHALL BE APPOINTED OF IT OR OF ALL OR A
SUBSTANTIAL PART OF ITS ASSETS; (e) ANY INDIVIDUAL LESSEE, GUARANTOR OF THIS
LEASE, OR PARTNER OF LESSEE IF LESSEE IS A PARTNERSHIP SHALL DIE; (f) ANY
FINANCIAL OR CREDIT INFORMATION SUBMITTED BY OR ON BEHALF OF LESSEE SHALL PROVE
TO HAVE BEEN FALSE OR MATERIALLY MISLEADING WHEN MADE; (g) AN EVENT OF DEFAULT
SHALL OCCUR UNDER ANY OTHER OBLIGATION LESSEE OWES TO LESSOR; (h) ANY
INDEBTEDNESS LESSEE MAY NOW OR HEREAFTER OWE TO ANY AFFILIATE OF LESSOR SHALL BE
ACCELERATED FOLLOWING A DEFAULT THEREUNDER OR, IF ANY SUCH INDEBTEDNESS IS
PAYABLE ON DEMAND, PAYMENT THEREOF SHALL BE DEMANDED; (i) if LESSEE IS A
CORPORATION, MORE THAN 50% OF THE SHARES OF VOTING STOCK OF LESSEE SHALL BECOME
OWNED BY A SHAREHOLDER OR SHAREHOLDERS WHO WERE NOT OWNERS OF VOTING STOCK OF
LESSEE ON THE DATE THIS LEASE BEGINS OR, IF LESSEE IS A PARTNERSHIP, MORE THAN
50% OF THE PARTNERSHIP INTERESTS IN THE LESSEE SHALL BECOME OWNED BY A PARTNER
OR PARTNERS WHO WERE NOT PARTNERS OF LESSEE ON THE DATE THIS LEASE BEGINS; AND
6) LESSEE SHALL CONSOLIDATE WITH OR MERGE INTO, OR SELL OR LEASE ALL OR
SUBSTANTIALLY ALL OF ITS ASSETS TO, ANY INDIVIDUAL, CORPORATION, OR OTHER
ENTITY.
18. REMEDIES. LESSOR AND LESSEE AGREE THAT LESSOR'S DAMAGES SUFFERED BY REASON
OF AN EVENT OF DEFAULT ARE UNCERTAIN AND NOT CAPABLE OF EXACT MEASUREMENT AT THE
TIME THIS LEASE IS EXECUTED BECAUSE THE VALUE OF THE EQUIPMENT AT THE EXPIRATION
OF THIS LEASE IS UNCERTAIN, AND THEREFORE THEY AGREE THAT FOR PURPOSES OF THIS
PARAGRAPH 18 "LESSOR'S LOSS" AS OF ANY DATE SHALL BE THE SUM OF THE FOLLOWING:
(1) THE AMOUNT OF ALL RENT AND OTHER AMOUNTS PAYABLE BY LESSEE HEREUNDER DUE BUT
UNPAID AS OF SUCH DATE PLUS (2) THE AMOUNT OF ALL UNPAID RENT FOR THE BALANCE OF
THE TERM OF THIS LEASE NOT YET DUE AS OF SUCH DATE DISCOUNTED FROM THE
RESPECTIVE DATES INSTALLMENT PAYMENTS WOULD BE DUE AT THE RATE OF 5% PER ANNUM
PLUS (3) 10% OF THE COST OF THE EQUIPMENT SUBJECT TO THIS LEASE AS OF SUCH DATE.
UPON THE OCCURRENCE OF AN EVENT OF DEFAULT AND AT ANY TIME THEREAFTER,
LESSOR MAY EXERCISE ANY ONE OR MORE OF THE REMEDIES LISTED BELOW AS LESSOR IN
ITS SOLE DISCRETION MAY LAWFULLY ELECT; PROVIDED, HOWEVER, THAT UPON THE
OCCURRENCE OF AN EVENT OF DEFAULT SPECIFIED IN PARAGRAPH 17(d), AN AMOUNT EQUAL
TO LESSOR'S LOSS AS OF THE DATE OF SUCH OCCURRENCE SHALL AUTOMATICALLY BECOME
AND BE IMMEDIATELY DUE AND PAYABLE WITHOUT NOTICE OR DEMAND OF ANY KIND.
a) LESSOR MAY, BY WRITTEN NOTICE TO LESSEE, TERMINATE THIS LEASE AND DECLARE AN
AMOUNT EQUAL TO LESSOR'S LOSS AS OF THE DATE OF SUCH NOTICE TO BE IMMEDIATELY
DUE AND PAYABLE, AND THE SAME SHALL THEREUPON BE AND BECOME IMMEDIATELY DUE AND
PAYABLE WITHOUT FURTHER NOTICE OR DEMAND AND ALL RIGHTS OF LESSEE TO USE THE
EQUIPMENT SHALL TERMINATE BUT LESSEE SHALL BE AND REMAIN LIABLE AS PROVIDED IN
THIS PARAGRAPH 18. LESSEE SHALL AT ITS EXPENSE PROMPTLY DELIVER THE EQUIPMENT TO
LESSOR AT A LOCATION OR LOCATIONS WITHIN THE CONTINENTAL UNITED STATES
DESIGNATED BY LESSOR. LESSOR MAY ALSO ENTER UPON THE PREMISES WHERE THE
EQUIPMENT IS LOCATED AND TAKE IMMEDIATE POSSESSION OF AND REMOVE THE SAME WITH
OR WITHOUT INSTITUTING LEGAL PROCEEDINGS.
b) LESSOR MAY PROCEED BY APPROPRIATE COURT ACTION TO ENFORCE PERFORMANCE BY
LESSEE OF THE APPLICABLE COVENANTS OF THIS LEASE OR TO RECOVER, FOR BREACH OF
THIS LEASE, LESSOR'S LOSS AS OF THE DATE LESSOR'S LOSS IS DECLARED DUE AND
PAYABLE HEREUNDER; PROVIDED, HOWEVER, THAT UPON RECOVERY OF LESSORS LOSS FROM
LESSEE IN ANY SUCH ACTION WITHOUT HAVING TO REPOSSESS AND DISPOSE OF THE
EQUIPMENT, LESSOR SHALL TRANSFER THE EQUIPMENT TO LESSEE AT ITS THEN LOCATION
UPON PAYMENT OF ANY ADDITIONAL AMOUNT DUE UNDER CLAUSES (d) AND (e) BELOW.
<PAGE>
c) IN THE EVENT LESSOR REPOSSESSES THE EQUIPMENT, LESSOR SHALL EITHER RETAIN THE
EQUIPMENT IN FULL SATISFACTION OF LESSEE'S OBLIGATION HEREUNDER OR SELL OR LEASE
EACH ITEM OF EQUIPMENT IN SUCH MANNER AND UPON SUCH TERMS AS LESSOR MAY IN ITS
SOLE DISCRETION DETERMINE. THE PROCEEDS OF SUCH SALE OR LEASE SHALL BE APPLIED
TO REIMBURSE LESSOR FOR LESSOR'S LOSS AND ANY ADDITIONAL AMOUNT DUE UNDER
CLAUSES (d) AND (e) BELOW. LESSOR SHALL BE ENTITLED TO ANY SURPLUS AND LESSEE
SHALL REMAIN LIABLE FOR ANY DEFICIENCY. FOR PURPOSES OF THIS SUBPARAGRAPH, THE
PROCEEDS OF ANY LEASE OF ALL OR ANY PART OF THE EQUIPMENT BY LESSOR SHALL BE THE
AMOUNT REASONABLY ASSIGNED BY LESSOR AS THE COST OF SUCH EQUIPMENT IN
DETERMINING THE RENT UNDER SUCH LEASE.
d) LESSOR MAY RECOVER INTEREST ON THE UNPAID BALANCE OF LESSOR'S LOSS FROM THE
DATE IT BECOMES PAYABLE UNTIL FULLY PAID AT THE RATE OF THE LESSER OF 8% PER
ANNUM OR THE HIGHEST RATE PERMITTED BY LAW.
e) LESSOR MAY EXERCISE ANY OTHER RIGHT OR REMEDY AVAILABLE TO IT BYLAW OR BY
AGREEMENT, AND MAY IN ANY EVENT RECOVER LEGAL FEES AND OTHER EXPENSES INCURRED
BY REASON OF AN EVENT OF DEFAULT OR THE EXERCISE OF ANY REMEDY HEREUNDER,
INCLUDING EXPENSES OF REPOSSESSION, REPAIR, STORAGE, TRANSPORTATION, AND
DISPOSITION OF THE EQUIPMENT.
IF ANY SUPPLEMENT IS DEEMED AT ANY TIME TO BE A LEASE INTENDED AS SECURITY,
LESSEE GRANTS LESSOR A SECURITY INTEREST IN THE EQUIPMENT TO SECURE ITS
OBLIGATIONS UNDER THIS LEASE AND ALL OTHER INDEBTEDNESS AT ANY TIME OWING BY
LESSEE TO LESSOR AND AGREES THAT UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, IN
ADDITION TO ALL OF THE OTHER RIGHTS AND REMEDIES AVAILABLE TO LESSOR HEREUNDER,
LESSOR SHALL HAVE ALL OF THE RIGHTS AND REMEDIES OF A SECURED PARTY UNDER THE
UNIFORM COMMERCIAL CODE..
NO REMEDY GIVEN IN THIS PARAGRAPH IS INTENDED TO BE EXCLUSIVE, AND EACH
SHALL BE CUMULATIVE BUT ONLY TO THE EXTENT NECESSARY TO PERMIT LESSOR TO RECOVER
AMOUNTS FOR WHICH LESSEE IS LIABLE HEREUNDER NO EXPRESS OR IMPLIED WAIVER BY
LESSOR OF ANY BREACH OF LESSEE'S OBLIGATIONS HEREUNDER SHALL CONSTITUTE A WAIVER
OF ANY OTHER BREACH OF LESSEE'S OBLIGATIONS HEREUNDER.
19. NOTICES. ANY WRITTEN NOTICE HEREUNDER TO LESSEE OR LESSOR SHALL BE DEEMED TO
HAVE BEEN GIVEN WHEN DELIVERED PERSONALLY OR DEPOSITED IN THE UNITED STATES
MAILS, POSTAGE PREPAID, ADDRESSED TO RECIPIENT AT ITS ADDRESS SET FORTH ABOVE OR
AT SUCH OTHER ADDRESS AS MAY BE LAST KNOWN TO THE SENDER.
20. NET LEASE AND UNCONDITIONAL OBLIGATION. THIS LEASE IS A COMPLETELY NET LEASE
AND LESSEES OBLIGATION TO PAY RENT AND AMOUNTS PAYABLE BY LESSEE UNDER
PARAGRAPHS 12 AND 18 IS UNCONDITIONAL AND NOT SUBJECT TO ANY ABATEMENT,
REDUCTION, SETOFF OR DEFENSE OF ANY KIND.
21. NON-CANCELABLE LEASE. THIS LEASE CANNOT BE CANCELED OR TERMINATED EXCEPT AS
EXPRESSLY PROVIDED HEREIN.
22. SURVIVAL OF INDEMNITIES. LESSEE'S OBLIGATIONS UNDER PARAGRAPHS 7, 8, AND 18
SHALL SURVIVE TERMINATION OR EXPIRATION OF THIS LEASE.
23. COUNTERPARTS. THERE SHALL BE BUT ONE COUNTERPART OF THE MASTER LEASE AND OF
EACH SUPPLEMENT AND SUCH COUNTERPART WILL BE MARKED "ORIGINAL." TO THE EXTENT
THAT ANY SUPPLEMENT CONSTITUTES CHATTEL PAPER (AS THAT TERM IS DEFINED BY THE
UNIFORM COMMERCIAL CODE), A SECURITY INTEREST MAY ONLY BE CREATED IN THE
SUPPLEMENT MARKED "ORIGINAL."
24. MISCELLANEOUS. THIS MASTER LEASE AND RELATED SUPPLEMENT(S) CONSTITUTE THE
ENTIRE AGREEMENT BETWEEN LESSOR AND LESSEE AND MAY BE MODIFIED ONLY BY A WRITTEN
INSTRUMENT SIGNED BY LESSOR AND LESSEE. ANY PROVISION OF THIS LEASE WHICH IS
UNENFORCEABLE IN ANY JURISDICTION SHALL, AS TO SUCH JURISDICTION, BE INEFFECTIVE
TO THE EXTENT OF SUCH UNENFORCEABILITY WITHOUT INVALIDATING THE REMAINING
PROVISIONS OF THIS LEASE, AND ANY SUCH UNENFORCEABILITY IN ANY JURISDICTION
SHALL NOT RENDER UNENFORCEABLE SUCH PROVISION IN ANY OTHER JURISDICTION. IF THIS
LEASE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE SUBSTANTIVE LAWS OF THE STATE OF MINNESOTA. IN THE EVENT THERE IS MORE THAN
ONE LESSEE NAMED HEREIN OR IN ANY SUPPLEMENT, THE OBLIGATIONS OF EACH SHALL BE
JOINT AND SEVERAL.
LESSOR: WELLS FARGO EQUIPMENT FINANCE, INC. LABOR READY SOUTHWEST, INC., LESSEE
BY BY
--------------------------------- --------------------------------
TITLE TITLE
--------------------------------- --------------------------------
MASTLEAS: SKS:04271999:1616:2117:46866-100:52036
<PAGE>
AMENDMENT TO
TO MASTER LEASE #46866 DATED APRIL 27, 1999 (THE "LEASE")
BETWEEN
LABOR READY SOUTHWEST, INC. ("LESSEE")
AND
WELLS FARGO EQUIPMENT FINANCE, INC. ("LESSOR")
Lessor and Lessee hereby mutually agree to amend the Lease as follows:
Paragraph 12 is amended by inserting in the second line after the phrase "shall
promptly" the phrase "either (i) replace the Equipment with identical equipment
and thereupon the replacement equipment shall be come the Equipment or (ii)".
Paragraph 12 is further amended by adding the following before the last sentence
thereof: "If Lessee elects to replace the equipment, Lessee shall transfer to
Lessor title to such replacement equipment, free and clear of any and all liens,
claims and encumbrances."
Except as modified herein, the terms and conditions of the Lease remain the
same.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Amendment this day of
______________________1999.
Wells Fargo Equipment Finance, Inc. Labor Ready Southwest, Inc.
By: ________________________________ By:_____________________________
Its:________________________________ Its:____________________________
<PAGE>
SUPPLEMENT TO MASTER LEASE
OPTION TO PURCHASE
WELLS FARGO EQUIPMENT FINANCE, INC.
INVESTORS BUILDING, SUITE 300
WELLS FARGO 733 MARQUETTE AVENUE
MINNEAPOLIS, MN 55479-2048
SUPPLEMENT NUMBER 46866-100 DATED AS OF APRIL 27, 1999 TO
MASTER LEASE NUMBER 46866 DATED AS OF APRIL 27, 1999
NAME AND ADDRESS OF LESSEE:
LABOR READY SOUTHWEST, INC.
1016 S. 28TH STREET
TACOMA, WA 98409
THIS IS A SUPPLEMENT TO THE MASTER LEASE IDENTIFIED ABOVE BETWEEN LESSOR AND
LESSEE (THE "MASTER LEASE'). UPON THE EXECUTION AND DELIVERY BY LESSOR AND
LESSEE OF THIS SUPPLEMENT, LESSOR HEREBY AGREES TO LEASE TO LESSEE, AND LESSEE
HEREBY AGREES TO LEASE FROM LESSOR, THE EQUIPMENT DESCRIBED BELOW UPON THE
TERMS AND CONDITIONS OF THIS SUPPLEMENT AND THE MASTER LEASE. ALL TERMS AND
CONDITIONS OF THE MASTER LEASE SHALL REMAIN IN FULL FORCE AND EFFECT EXCEPT TO
THE EXTENT MODIFIED BY THIS SUPPLEMENT. THIS SUPPLEMENT AND THE MASTER LEASE AS
IT RELATES TO THIS SUPPLEMENT ARE HEREINAFTER REFERRED TO AS THE "LEASE".
EQUIPMENT DESCRIPTION:
(37) DIEBOLD 1064 IX FRONT LOAD CASH DISPENSERS
LOCATED AS MORE FULLY DESCRIBED ON EXHIBIT B
EQUIPMENT LOCATION: , ,
<TABLE>
<CAPTION>
SUMMARY OF PAYMENT TERMS
<S> <C>
INITIAL TERM IN MONTHS: 72 TOTAL COST: $512,501.80
PAYMENT FREQUENCY: MONTHLY TOTAL BASIC RENT.- $532,757.52
BASIC RENTAL PAYMENT: $7,399.41 PLUS INTERIM RENT DAILY RATE: .048
APPLICABLE SALES AND USE TAX
NUMBER OF INSTALLMENTS: 72 INTERIM RENT CUTOFF DATE: MAY 31, 1999
ADVANCE PAYMENTS: FIRST DUE ON SIGNING THIS LEASE SECURITY DEPOSIT. N/A
</TABLE>
END OF TERM OPTIONS:
1. UPON EXPIRATION OF THE INITIAL TERM OF THE LEASE AND, PROVIDED THAT THE
LEASE HAS NOT BEEN TERMINATED EARLY AND LESSEE IS IN COMPLIANCE WITH THE
LEASE IN ALL RESPECTS, THEN LESSEE MAY EXERCISE ONE OF THE FOLLOWING
OPTIONS:
(i) PURCHASE ALL BUT NOT LESS THAN ALL OF THE EQUIPMENT AT THE EXPIRATION
OF THE INITIAL TERM OF THE LEASE FOR A PURCHASE PRICE OF 20.00% OF THE
ORIGINAL COST OF THE EQUIPMENT OR THE THEN FAIR MARKET VALUE OF THE
EQUIPMENT, WHICHEVER IS GREATER, UPON SATISFACTION OF THE FOLLOWING
CONDITIONS: (a) LESSEE GIVES LESSOR WRITTEN NOTICE AT LEAST 60 DAYS BUT NOT
MORE THAN 120 DAYS BEFORE THE EXPIRATION OF THE INITIAL TERM OF THE LEASE
OF LESSEE'S ELECTION TO PURCHASE THE EQUIPMENT HEREUNDER AND (b) LESSEE
DELIVERS A CERTIFIED OR CASHIERS CHECK FOR THE PURCHASE PRICE ON OR BEFORE
THE EXPIRATION OF THE INITIAL TERM OF THE LEASE. IF THERE IS A DEFAULT IN
THE LEASE EXISTING WHEN THE PURCHASE PRICE IS RECEIVED, LESSOR MAY APPLY
THE FUNDS RECEIVED TO CURE THE DEFAULT. "FAIR MARKET VALUE" OF THE
EQUIPMENT FOR PURPOSES OF THIS PARAGRAPH SHALL BEAN AMOUNT DETERMINED
ACCORDING TO THIS PARAGRAPH. UPON RECEIPT OF LESSEE'S NOTICE OF ELECTION TO
PURCHASE THE EQUIPMENT, LESSEE AND LESSOR WILL ATTEMPT TO AGREE ON AN
AMOUNT DURING THE NEXT 30 DAYS, AND THE AMOUNT SO AGREED UPON SHALL BE THE
FAIR MARKET VALUE. IN THE EVENT LESSOR AND LESSEE CANNOT AGREE ON AN AMOUNT
DURING SUCH 30-DAY PERIOD, THEN EACH PARTY SHALL CHOOSE AN INDEPENDENT
APPRAISER, AND THE TWO APPRAISERS SHALL EACH DETERMINE THE FAIR MARKET
VALUE OF THE EQUIPMENT ON THE BASIS OF AN ARM'S-LENGTH SALE BETWEEN AN
INFORMED AND WILLING BUYER (OTHER THAN A BUYER CURRENTLY IN POSSESSION) AND
AN INFORMED AND WILLING SELLER UNDER NO COMPULSION TO SELL. THE AVERAGE OF
THE AMOUNTS DETERMINED BY THE TWO APPRAISERS SHALL BE THE FAIR MARKET
VALUE. EACH PARTY SHALL PAY THE EXPENSES OF THE APPRAISER IT CHOOSES; OR
(ii) IF THE LESSEE FOR ANY REASON DOES NOT PURCHASE THE EQUIPMENT PURSUANT
TO AND IN ACCORDANCE WITH THE OPTION GRANTED IN PARAGRAPH 1(I) (THE
"OPTION'), THEN LESSEE SHALL ON THE EXPIRATION DATE OF THE INITIAL TERM OF
THE LEASE BE REQUIRED TO PAY LESSOR A RENTAL OF $8,757.78 PER MONTH PAYABLE
MONTHLY IN ADVANCE AS RENEWAL RENT FOR A RENEWAL PERIOD OF 12 MONTHS
BEGINNING AT THE EXPIRATION DATE OF THE INITIAL TERM OF THE LEASE, AND THE
LEASE SHALL BE RENEWED AND EXTENDED FOR SUCH PERIOD ON THE SAME TERMS AND
CONDITIONS (OTHER THAN THE RENT AND THE TERM). UPON EXPIRATION OF SUCH
RENEWAL PERIOD, LESSEE SHALL RETURN THE EQUIPMENT IN ACCORDANCE WITH THE
LEASE.
2. IF ON ACCOUNT OF CASUALTY OR OTHERWISE LESS THAN ALL OF THE EQUIPMENT IS
SUBJECT TO THE LEASE AT THE EXPIRATION OF THE INITIAL TERM OF THE LEASE,
THEN THE OPTION PRICE UNDER PARAGRAPH I (I) SHALL BE COMPUTED WITH
REFERENCE ONLY TO THE ITEMS OF EQUIPMENT THEN SUBJECT TO THE LEASE, AND THE
DOLLAR FIGURE FOR FIXED RENT IN PARAGRAPH 1(II) SHALL BE REDUCED
PROPORTIONATELY BASED ON THE PROPORTION THAT THE ORIGINAL COST OF THE
REMAINING EQUIPMENT BEARS TO THE ORIGINAL COST OF ALL EQUIPMENT.
3. IF LESSEE SHOULD GIVE TIMELY NOTICE OF ELECTION TO PURCHASE THE EQUIPMENT
AS PROVIDED IN PARAGRAPH 1 AND FAIL TO MAKE TIMELY PAYMENT OF THE PURCHASE
PRICE, THEN LESSOR MAY IN ITS SOLE DISCRETION, BY WRITTEN NOTICE TO LESSEE,
(a) TREAT THE EQUIPMENT AS PURCHASED AND ENFORCE PAYMENT OF THE PURCHASE
PRICE, OR (b) DECLARE A FAILURE TO MEET THE CONDITIONS OF PURCHASE
WHEREUPON THE INTEREST OF LESSEE IN THE LEASE AND THE EQUIPMENT SHALL
TERMINATE AUTOMATICALLY.
<PAGE>
4. FOLLOWING LESSOR'S RECEIPT OF THE PURCHASE PRICE FOR THE EQUIPMENT AND UPON
REQUEST BY LESSEE, LESSOR WILL DELIVER A BILL OF SALE TRANSFERRING THE
EQUIPMENT TO LESSEE. LESSOR HEREBY WARRANTS THAT AT THE TIME OF TRANSFER
THE EQUIPMENT WILL BE FREE OF ALL SECURITY INTERESTS AND OTHER LIENS
CREATED BY OR ARISING THROUGH LESSOR. LESSOR MAKES NO OTHER WARRANTY WITH
RESPECT TO THE EQUIPMENT, EXPRESS OR IMPLIED, AND SPECIFICALLY DISCLAIMS
ANY WARRANTY OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE AND
ANY LIABILITY FOR CONSEQUENTIAL DAMAGES ARISING OUT OF THE USE OF OR THE
INABILITY TO USE THE EQUIPMENT.
5. LESSEE AGREES TO PAY ALL SALES AND USE TAXES ARISING ON ACCOUNT OF ANY SALE
OF THE EQUIPMENT UPON EXERCISE OF THE OPTION.
6. LESSOR AND LESSEE AGREE THAT THE MASTER LEASE IS HEREBY AMENDED BY DELETING
THE SECOND PARAGRAPH OF PARAGRAPH 2 (RELATING TO AUTOMATIC EXTENSION) AND
THE SECOND PARAGRAPH OF PARAGRAPH 3 (RELATING TO EXTENDED TERMS).
IN ADDITION, PARAGRAPHS 12 AND 18 (RELATING TO CASUALTY AND DEFAULT) ARE
AMENDED BY CHANGING "10%" WHERE IT APPEARS THEREIN TO "20.00%"
7. LESSOR MAKES NO REPRESENTATIONS WITH RESPECT TO THE INCOME TAX CONSEQUENCES
OF THIS AGREEMENT.
LESSOR. WELLS FARGO EQUIPMENT FINANCE, INC.
BY
------------------------------------
TITLE
------------------------------------
------------------------------------
RENT COMMENCEMENT DATE
LABOR READY SOUTHWEST, INC., LESSEE
BY
----------------------------
TITLE
----------------------------
SUP1STAM: SKS:04271999:1616:2117:46866-100:52036
<PAGE>
EXHIBIT B
EQUIPMENT LOCATION
<TABLE>
<S> <C> <C> <C>
2901 W. Thomas, Suite 2 Phoenix AZ 85017
7137 E. 22nd Street Tucson AZ 85710
1638 University Ave. Berkeley CA 94703
750 St. Clair Costa Mesa CA 92626
11434 Old River School Rd. Downey CA 90241
2315 W. Colorado Blvd. Eagle Rock CA 90065
22404 Norwalk Blvd. Hawaiian Gardens CA 90716
677 W. Tennyson Hayward CA 94544
6379 Hollywood Blvd. Hollywood CA 90028
18582 Beach Blvd. Suite 2 Huntington Beach CA 92647
1570-1580 La Habra Blvd. La Habra CA 90631
5873 Atlantic Ave. Long Beach CA 90805
2211 N. Broadway Los Angeles CA 90031
2498-2500 S. Figueroa Los Angeles CA 90007
8660 Foothills Blvd. Los Angeles CA 91040
1210 W. 16th Street Merced CA 95340
3330 McHenry Ave. Modesto CA 95350
1742-1744 E. Chapman Ave. Orange CA 92667
1638 W. Mission Blvd. Pomona CA 91766
18 Colton Ave. Redlands CA 92373
8810 E. Garvey Ave. Rosemead CA 91770
4740 Clairemont Mesa Blvd. San Diego CA 92117
3379 26th Street San Francisco CA 94110
4802 Mission St. San Francisco CA 94112
1423 Branham Lane San Jose CA 95118
450 S. Norfolk Street San Mateo CA 94401
2215 F S. Pacific Ave. San Pedro CA 90731
414 Martin Ave. Santa Clara CA 95050
917 N. Broadway Santa Maria CA 93458
2701 Firestone Blvd. Suite E South Gate CA 90280
5918 Pacific Ave. Stockton CA 95207
2089 Solano Ave. Vallejo CA 94590
324 E. Vista Way Vista CA 92084
2791-B Del Monte St. West Sacramento CA 95691
5020 E. Tropicana Ave. B9 Las Vegas NV 89122
5243 W. Charlston, Suite 5 Las Vegas NV 89102
4090 W. 5415 S. Suite 116 Kearns UT 84118
</TABLE>
Labor Ready Southwest, Inc.
By
------------------------------------
Title
------------------------------------
<PAGE>
ADDENDUM TO EQUIPMENT LEASE
EARLY BUYOUT OPTION
WELLS FARGO EQUIPMENT FINANCE, INC.
INVESTORS BUILDING, SUITE 300
WELLS FARGO 733 MARQUETTE AVENUE
MINNEAPOLIS, MN 55479-2048
EQUIPMENT LEASE NUMBER 46866-100 DATED AS OF APRIL 27, 1999
NAME AND ADDRESS OF LESSEE:
LABOR READY SOUTHWEST, INC.
1016 S. 28TH STREET
TACOMA, WA 98409
THIS ADDENDUM IS AN ADDITION TO THE EQUIPMENT LEASE IDENTIFIED ABOVE BETWEEN
LESSEE AND LESSOR (THE "LEASE'). ALL TERMS AND CONDITIONS OF THE LEASE SHALL
REMAIN IN FULL FORCE AND EFFECT EXCEPT TO THE EXTENT MODIFIED BY THIS ADDENDUM.
1. DEFINITIONS. THE FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS:
OPTION: THE EARLY BUYOUT OPTION GRANTED IN PARAGRAPH 2
EBO DATE:___________ (AFTER PAYMENT NUMBER 60) EBO PRICE: 36.56% OF THE
ORIGINAL COST TO LESSOR OF THE EQUIPMENT TO BE PURCHASED UPON EXERCISE OF
THE OPTION.
2. THE OPTION. PROVIDED THAT THE LEASE HAS NOT BEEN TERMINATED BEFORE THE EBO
DATE AND NO EVENT OF DEFAULT UNDER THE LEASE HAS OCCURRED AND IS CONTINUING
ON THE EBO DATE, THEN LESSEE MAY, UPON AT LEAST 30 DAYS BUT NOT MORE THAN
90 DAYS PRIOR WRITTEN NOTICE TO LESSOR, PURCHASE ON THE EBO DATE ALL BUT
NOT LESS THAN ALL OF THE EQUIPMENT SUBJECT TO THE LEASE ON THE EBO DATE FOR
A PURCHASE PRICE EQUAL TO THE EBO PRICE.
3. SALES TAX. LESSEE SHALL PAY ANY SALES TAX PAYABLE ON THE SALE OF THE
EQUIPMENT PURSUANT TO THE OPTION.
4. TRANSFER OF EQUIPMENT. IF LESSEE EXERCISES THE OPTION, AND IF ON THE EBO
DATE THE CONDITIONS SET FORTH IN PARAGRAPH 2 ARE SATISFIED AND LESSEE PAYS
THE EBO PRICE PLUS THE SALES TAX REFERRED TO IN PARAGRAPH 3 PLUS ALL
ACCRUED BUT UNPAID RENT AND ANY OTHER AMOUNTS OWING UNDER THE LEASE, THEN
ON THE EBO DATE THE EQUIPMENT SHALL BE DEEMED TRANSFERRED TO LESSEE AT ITS
THEN LOCATION. UPON REQUEST BY LESSEE, LESSOR WILL DELIVER A BILL OF SALE
TRANSFERRING THE EQUIPMENT TO LESSEE. LESSOR HEREBY WARRANTS THAT AT THE
TIME OF TRANSFER THE EQUIPMENT WILL BE FREE OF ALL SECURITY INTERESTS AND
OTHER LIENS CREATED BY OR ARISING THROUGH LESSOR.
5. TAX INDEMNITY. LESSOR'S LOSS OF, OR LOSS OF THE RIGHT TO CLAIM, OR
RECAPTURE OF, ALL OR ANY PART OF THE FEDERAL OR STATE INCOME TAX BENEFITS
LESSOR ANTICIPATED AS A RESULT OF ENTERING INTO THE LEASE AND OWNING THE
EQUIPMENT IS REFERRED TO HEREIN AS A "LOSS." IF FOR ANY REASON (INCLUDING
THE EXISTENCE OF THE OPTION) THE LEASE AS IN EFFECT BEFORE THE OPTION IS
EXERCISED IS NOT A TRUE LEASE FOR FEDERAL OR STATE INCOME TAX PURPOSES, OR
IF FOR ANY REASON (EVEN THOUGH THE LEASE MAY BE A TRUE LEASE) LESSOR IS NOT
ENTITLED TO DEPRECIATE THE EQUIPMENT FOR FEDERAL OR STATE INCOME TAX
PURPOSES FOR THE PERIOD BEFORE THE OPTION IS EXERCISED IN THE MANNER THAT
LESSOR ANTICIPATED WHEN ENTERING INTO THE LEASE, AND AS A RESULT LESSOR
SUFFERS A LOSS, THEN LESSEE AGREES TO PAY LESSOR A LUMP-SUM AMOUNT WHICH,
AFTER THE PAYMENT OF ALL FEDERAL, STATE, AND LOCAL INCOME TAXES ON THE
RECEIPT OF SUCH AMOUNT, AND USING THE SAME ASSUMPTIONS AS TO TAX BENEFITS
AND OTHER MATTERS LESSOR USED IN ORIGINALLY EVALUATING AND PRICING THE
LEASE, WILL IN THE REASONABLE OPINION OF LESSOR MAINTAIN LESSOR'S NET
AFTER-TAX RATE OF RETURN WITH RESPECT TO THE LEASE AT THE SAME LEVEL IT
WOULD HAVE BEEN IF SUCH LOSS HAD NOT OCCURRED. THE LESSOR MAKES NO
REPRESENTATION WITH RESPECT TO THE INCOME TAX CONSEQUENCES OF THE LEASE,
THE OPTION, OR THE EQUIPMENT LESSOR WILL NOTIFY LESSEE OF ANY CLAIM THAT
MAY GIVE RISE TO INDEMNITY HEREUNDER. LESSOR SHALL MAKE A REASONABLE EFFORT
TO CONTEST ANY SUCH CLAIM BUT SHALL HAVE NO OBLIGATION TO CONTEST SUCH
CLAIM BEYOND THE ADMINISTRATIVE LEVEL OF THE INTERNAL REVENUE SERVICE OR
OTHER TAXING AUTHORITY. IN ANY EVENT, LESSOR SHALL CONTROL ALL ASPECTS OF
ANY SETTLEMENT AND CONTEST. LESSEE AGREES TO PAY THE LEGAL FEES AND OTHER
OUT-OF-POCKET EXPENSES INCURRED BY LESSOR IN DEFENDING ANY SUCH CLAIM EVEN
IF LESSOR'S DEFENSE IS SUCCESSFUL.
NOTWITHSTANDING THE FOREGOING, LESSEE SHALL HAVE NO OBLIGATION TO INDEMNIFY
LESSOR FOR ANY LOSS CAUSED SOLELY BY (a) A CASUALTY TO THE EQUIPMENT IF LESSEE
PAYS THE AMOUNT LESSEE IS REQUIRED TO PAY AS A RESULT OF SUCH CASUALTY, (b)
LESSOR'S SALE OF THE EQUIPMENT OTHER THAN ON ACCOUNT OF AN EVENT OF DEFAULT
HEREUNDER, (c) FAILURE OF LESSOR TO HAVE SUFFICIENT INCOME TO UTILIZE ITS
ANTICIPATED TAX BENEFITS OR TO TIMELY CLAIM SUCH TAX BENEFITS, AND (d) A CHANGE
IN TAX LAW (INCLUDING TAX RATES) EFFECTIVE AFTER THE LEASE BEGINS.
FOR PURPOSES OF THIS PARAGRAPH 5, THE TERM "LESSOR" SHALL INCLUDE ANY MEMBER OF
AN AFFILIATED GROUP OF WHICH LESSOR IS (OR MAY BECOME) A MEMBER IF CONSOLIDATED
TAX RETURNS ARE FILED FOR SUCH AFFILIATED GROUP FOR FEDERAL INCOME TAX PURPOSES.
LESSEE'S INDEMNITY OBLIGATIONS UNDER THIS PARAGRAPH 5 SHALL SURVIVE TERMINATION
OF THE LEASE AND (IF THE OPTION IS EXERCISED) PAYMENT OF ALL AMOUNTS OWING UNDER
THE LEASE FOLLOWING EXERCISE OF THE OPTION. FAILURE TO PAY INDEMNITY AS REQUIRED
BY THIS PARAGRAPH MAY BECOME AN EVENT OF DEFAULT UNDER PARAGRAPH 17(b) OF THE
LEASE.
LESSOR: WELLS FARGO EQUIPMENT FINANCE, INC.
BY
-----------------------------------------------
TITLE
-----------------------------------------------
LABOR READY SOUTHWEST, INC., LESSEE
BY
-----------------------------------------------
TITLE
-----------------------------------------------
EQAEBO: SKS:04271999:1617:2117:46866-100.52036
<PAGE>
April 27, 1999
Mr. Bob Sovern
Labor Ready Southwest, Inc.
1016 S. 28th Street
Tacoma, WA 98409
RE: Sales Tax/Property Tax for Master Lease #46866 dated April 27, 1999 and all
Supplements thereto.
Dear Mr. Sovern:
By notice of this letter, Labor Ready Northwest, Inc. ("Labor Ready") hereby
informs Wells Fargo Equipment Finance, Inc. ("WFEFI") that Labor Ready shall be
completely and solely responsible for the collection and remittance, and all
other processes, with regards to the sales/use tax and property tax, whether now
or hereafter applicable, due and payable, with respect to the above referenced
Lease Supplements.
Labor Ready hereby indemnifies and holds harmless WFEFI with respect to any and
all taxes as referenced in Paragraph seven (7) of the Master Lease.
Sincerely,
Labor Ready Southwest, Inc.
By:
-----------------------------------------------
Its:
-----------------------------------------------
<PAGE>
PAY PROCEEDS LETTER
WELLS FARGO EQUIPMENT FINANCE, INC.
633 17TH STREET, THIRD FLOOR
WELLS FARGO DENVER, CO 80202
In reference to Contract Number 46866-100 dated as of April 27, 1999, Wells
Fargo Equipment Finance, Inc. is irrevocably instructed to disburse payment as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
PAYEE INVOICE NUMBER AMOUNT
- ----- -------------- ------
Diebold Various $512,501.80
TOTAL FINANCED $512,501.80
</TABLE>
Dated:
------------------------------------------
Labor Ready Southwest, Inc.
By:
-----------------------------------------------
Its:
---------------------------------------------
<PAGE>
CERTIFIED CORPORATE RESOLUTION
WELLS FARGO EQUIPMENT FINANCE, INC.
INVESTORS BUILDING, SUITE 300
WELLS FARGO 733 MARQUETTE AVENUE
MINNEAPOLIS, MN 55479-2048
I HEREBY CERTIFY THAT I AM THE DULY ELECTED ______________________________OF
LABOR READY SOUTHWEST, INC., (THE "CORPORATION"), AND THAT THE FOLLOWING
RESOLUTION IS A TRUE AND CORRECT COPY OF A RESOLUTION DULY ADOPTED BY THE BOARD
OF DIRECTORS OF THE CORPORATION IN THE FOLLOWING MANNER (CHECK AND COMPLETE
ONE).
/_/ in a writing dated _____________________________ signed by all the
directors.
/_/ at a valid meeting of the directors held on
____________________________________.
"RESOLVED THAT THE PRESIDENT, ANY VICE PRESIDENT, THE TREASURER, THE SECRETARY,
OR ANY OTHER OFFICER OF THIS CORPORATION BE AND S/HE HEREBY IS AUTHORIZED TO
EXECUTE FROM TIME TO TIME, ON BEHALF OF THIS CORPORATION, LEASES, INSTALLMENT
SALE CONTRACTS, PROMISSORY NOTES, AND SECURITY AGREEMENTS, TOGETHER WITH ANY AND
ALL RELATED DOCUMENTS, IN CONNECTION WITH EQUIPMENT FINANCING, ANY SUCH
DOCUMENTS IN CONNECTION WITH SUCH FINANCING TO BE IN SUCH FORM AND TO CONTAIN
SUCH TERMS AS THE OFFICER SIGNING THE SAME SHALL APPROVE, HIS/HER APPROVAL TO BE
CONCLUSIVELY EVIDENCED BY HIS/HER SIGNATURE THERETO."
DATED
--------------------------------------------
SIGNATURE
---------------------------------------
TITLE
--------------------------------------------
CORPRES: SKS:04271999:1616:2117:46866-100:52036
<PAGE>
CERTIFIED CORPORATE RESOLUTION
CORPORATE GUARANTOR
WELLS FARGO EQUIPMENT FINANCE, INC.
INVESTORS BUILDING, SUITE 300
WELLS FARGO 733 MARQUETTE AVENUE
MINNEAPOLIS, MN 55479-2048
I hereby certify that I am the duly elected________________ of LABOR READY,
INC., (the "Corporation"), and that the following resolution is a true and
correct copy of a resolution duly adopted by the board of directors of the
Corporation in the following manner (check and complete one).
/_/ in a writing dated ______________________________ signed by all the
directors.
/_/ at a valid meeting of the directors held on___________________.
"RESOLVED that the President, any Vice President, the Treasurer, the Secretary,
or any other officer of this corporation be and s/he hereby is authorized to
execute from time to time, on behalf of this corporation, guarantees of leases,
installment sale contracts, and promissory notes executed by LABOR READY
SOUTHWEST, INC. (the "Customer") in connection with equipment financing obtained
by Customer from time to time from Wells Fargo Equipment Finance, Inc., any such
guaranty to be in such form and to contain such terms as the officer signing the
same shall approve, his/her approval to be conclusively evidenced by his/her
signature thereto."
Dated
--------------------------------------------
Signature
---------------------------------------
Title
--------------------------------------------
CORPRESG: SKS:04271999:1616:2117:46866-100:52036
<PAGE>
GUARANTY
WELLS FARGO EQUIPMENT FINANCE, INC.
INVESTORS BUILDING, SUITE 300
WELLS FARGO 733 MARQUETTE AVENUE
MINNEAPOLIS, MN 55479-2048
TO INDUCE WELLS FARGO EQUIPMENT FINANCE, INC. ("CREDITOR,) FROM TIME TO TIME TO
EXTEND CREDIT TO OR FOR THE ACCOUNT OF LABOR READY SOUTHWEST, INC., ("DEBTOR')
BY WAY OF LEASE, LOAN, INSTALLMENT SALE CONTRACT OR ANY OTHER MEANS, THE
UNDERSIGNED HEREBY AGREES AS FOLLOWS:
1. THE UNDERSIGNED HEREBY ABSOLUTELY AND UNCONDITIONALLY GUARANTEES TO
CREDITOR THE FULL AND PROMPT PAYMENT AND PERFORMANCE WHEN DUE OF EACH AND
EVERY DEBT, LIABILITY AND OBLIGATION OF EVERY TYPE AND DESCRIPTION THAT
DEBTOR MAY NOW OR IN THE FUTURE OWE TO CREDITOR WHETHER ABSOLUTE OR
CONTINGENT OR PRIMARY OR SECONDARY (THE "OBLIGATIONS" AND EACH AN
"OBLIGATION').
2. THE UNDERSIGNED HEREBY WAIVES (i) NOTICE OF THE ACCEPTANCE HEREOF BY
CREDITOR AND OF THE CREATION AND EXISTENCE OF THE OBLIGATIONS AND (II) ANY
AND ALL DEFENSES OTHERWISE AVAILABLE TO GUARANTOR OR ACCOMMODATION PARTY.
3. THIS GUARANTY IS ABSOLUTE AND UNCONDITIONAL, AND THE LIABILITY OF THE
UNDERSIGNED HEREUNDER SHALL NOT BE AFFECTED OR IMPAIRED IN ANY WAY BY ANY
OF THE FOLLOWING, EACH OF WHICH CREDITOR MAY AGREE TO WITHOUT NOTICE TO OR
THE CONSENT OF THE UNDERSIGNED-(a) ANY EXTENSION OR RENEWAL OF ANY
OBLIGATION WHETHER OR NOT FOR LONGER THAN THE ORIGINAL PERIOD, (b) ANY
CHANGE IN THE TERMS OF PAYMENT OR OTHER TERMS OF ANY OBLIGATION OR ANY
COLLATERAL THEREFOR, OR ANY EXCHANGE, RELEASE OF, OR FAILURE TO OBTAIN ANY
COLLATERAL THEREFOR, (c) ANY WAIVER OR FORBEARANCE GRANTED TO DEBTOR OR ANY
OTHER PERSON LIABLE WITH RESPECT TO ANY OBLIGATION OR ANY RELEASE OF,
COMPROMISE WITH, OR FAILURE TO ASSERT RIGHTS AGAINST DEBTOR OR ANY SUCH
OTHER PERSON, (d) THE APPLICATION OR FAILURE TO APPLY IN ANY PARTICULAR
MANNER ANY PAYMENTS OR CREDITS ON THE OBLIGATIONS, AND (e) THE CREATION OF
OBLIGATIONS FROM TIME TO TIME.
4. THIS GUARANTY SHALL CONTINUE IN FORCE AND BE BINDING UPON THE UNDERSIGNED
WHETHER OR NOT ALL THE OBLIGATIONS ARE PAID IN FULL UNTIL THIS GUARANTY IS
REVOKED PROSPECTIVELY AS TO FUTURE TRANSACTIONS BY WRITTEN NOTICE FROM THE
UNDERSIGNED ACTUALLY RECEIVED BY CREDITOR. SUCH REVOCATION SHALL NOT BE
EFFECTIVE AS TO OBLIGATIONS EXISTING OR COMMITTED FOR AT THE TIME OF ACTUAL
RECEIPT OF SUCH NOTICE OR AS TO ANY RENEWALS, EXTENSIONS AND REFINANCINGS
THEREOF.
5. CREDITOR SHALL NOT BE REQUIRED BEFORE EXERCISING AND ENFORCING ITS RIGHTS
UNDER THIS GUARANTY FIRST TO RESORT FOR PAYMENT OF ANY OBLIGATION TO DEBTOR
OR TO ANY OTHER PERSON OR TO ANY COLLATERAL. THE UNDERSIGNED AGREES NOT TO
OBTAIN REIMBURSEMENT OR PAYMENT FROM DEBTOR OR ANY OTHER PERSON OBLIGATED
WITH RESPECT TO ANY OBLIGATION OR FROM ANY COLLATERAL FOR ANY OBLIGATION
UNTIL ALL OBLIGATIONS HAVE BEEN PAID IN FULL.
6. THE UNDERSIGNED SHALL BE AND REMAIN LIABLE FOR ANY DEFICIENCY FOLLOWING
FORECLOSURE OF ANY MORTGAGE OR SECURITY INTEREST SECURING ANY OBLIGATION
WHETHER OR NOT THE LIABILITY OF DEBTOR UNDER SUCH OBLIGATION IS DISCHARGED
BY SUCH FORECLOSURE.
7. IF ANY PAYMENT APPLIED TO ANY OBLIGATION IS THEREAFTER SET ASIDE,
RECOVERED, RESCINDED OR REQUIRED TO BE RETURNED FOR ANY REASON (INCLUDING
ON ACCOUNT OF A PREFERENCE IN THE BANKRUPTCY OF DEBTOR), THE OBLIGATION TO
WHICH SUCH PAYMENT WAS APPLIED SHALL FOR THE PURPOSES OF THIS GUARANTY BE
DEEMED TO HAVE CONTINUED IN EXISTENCE NOTWITHSTANDING SUCH APPLICATION, AND
THIS GUARANTY SHALL BE ENFORCEABLE AS TO SUCH OBLIGATION AS FULLY AS IF
SUCH APPLICATION HAD NEVER BEEN MADE.
8. THE UNDERSIGNED AGREES TO PAY ALL COSTS, EXPENSES AND LEGAL FEES PAID OR
INCURRED BY CREDITOR IN CONNECTION WITH ENFORCING ANY OBLIGATION AND THIS
GUARANTY.
9. THIS GUARANTY SHALL BE BINDING UPON THE ESTATE, HEIRS, SUCCESSORS AND
ASSIGNS OF THE UNDERSIGNED, AND SHALL INURE TO THE BENEFIT OF THE
SUCCESSORS AND ASSIGNS OF CREDITOR.
DATED AS OF: APRIL 27, 1999
LABOR READY, INC.
BY
--------------------------------------------
NAME (PLEASE PRINT OR TYPE)
TITLE
--------------------------------------------
PRINCIPLE PLACE OF BUSINESS:
- -------------------------------------------------
- -------------------------------------------------
PHONE:
--------------------------------------------
GTYCORP: SKS:04271999:1616:2117:46866-100:52036
<PAGE>
DELIVERY AND ACCEPTANCE CERTIFICATION
WELLS FARGO EQUIPMENT FINANCE, INC.
INVESTORS BUILDING, SUITE 300
WELLS FARGO 733 MARQUETTE AVENUE
MINNEAPOLIS, MN 55479-2048
SUPPLEMENT NUMBER 46866-100 DATED AS OF APRIL 27, 1999 TO
MASTER LEASE NUMBER 46866 DATED AS OF APRIL 27, 1999
NAME AND ADDRESS OF LESSEE:
LABOR READY SOUTHWEST, INC.
1016 S. 28TH STREET
TACOMA, WA 98409
EQUIPMENT DESCRIPTION:
(37) DIEBOLD 1064 IX FRONT LOAD CASH DISPENSERS
LOCATED AS MORE FULLY DESCRIBED ON EXHIBIT B
EQUIPMENT LOCATION: , ,
DELIVERY AND ACCEPTANCE CERTIFICATION:
ALL of THE EQUIPMENT DESCRIBED ABOVE (THE "EQUIPMENT') HAS BEEN DELIVERED TO US
PURSUANT TO THE MASTER LEASE REFERRED TO ABOVE (THE "MASTER LEASE') AND WE
HEREBY ACCEPT THE EQUIPMENT AS of THE DATE SET FORTH BELOW AND AGREE THAT THE
EQUIPMENT IS NOW SUBJECT TO THE MASTER LEASE.
DATED:
--------------------------------------------
LABOR READY SOUTHWEST, INC.
- -------------------------------------------------
LESSEE
BY
--------------------------------------------
TITLE
--------------------------------------------
D-N-A: SKS:04271999:1616:2117:46866-100:52036
<PAGE>
AUTHORIZATION FOR
AUTOMATIC PAYMENT PLAN
WELLS FARGO EQUIPMENT FINANCE, INC.
INVESTORS BUILDING, SUITE 300
WELLS FARGO 733 MARQUETTE AVENUE
MINNEAPOLIS, MN 55479-2048
HERE'S HOW IT WORKS:
YOU AUTHORIZE REGULARLY SCHEDULED PAYMENTS TO BE MADE FROM YOUR CHECKING OR
SAVINGS ACCOUNT. YOUR PAYMENTS WILL BE MADE AUTOMATICALLY ON THE CONTRACT DUE
DATE AS INDICATED ON YOUR MONTHLY INVOICE. PROOF OF PAYMENT WILL APPEAR WITH
YOUR BANK STATEMENT.
THE AUTHORITY YOU GIVE TO CHARGE YOUR ACCOUNT WILL BE EFFECTIVE FOR ALL CURRENT
AND FUTURE CONTRACTS WITH WELLS FARGO EQUIPMENT FINANCE, INC. ("CREDITOR') AND
WILL REMAIN IN EFFECT UNTIL YOU NOTIFY US OR YOUR BANK in writing TO TERMINATE
THE AUTHORIZATION.
PLEASE MAKE YOUR REGULAR PAYMENT UNTIL YOUR MONTHLY INVOICE INDICATES THAT THE
AUTOMATIC PAYMENT PLAN IS IN EFFECT.
I AUTHORIZE CREDITOR AND THE BANK NAMED BELOW TO INITIATE VARIABLE ENTRIES TO MY
CHECKING/SAVINGS ACCOUNT. THIS AUTHORITY WILL REMAIN IN EFFECT UNTIL I NOTIFY
CREDITOR OR THE BANK IN WRITING TO CANCEL IT IN SUCH TIME AS TO AFFORD THE BANK
A REASONABLE OPPORTUNITY TO ACT ON IT. I CAN STOP PAYMENT OF ANY ENTRY BY
NOTIFYING CREDITOR OR MY BANK THREE DAYS BEFORE MY ACCOUNT IS CHARGED. I CAN
HAVE THE AMOUNT OF AN ERRONEOUS CHARGE IMMEDIATELY CREDITED TO MY ACCOUNT UP TO
15 DAYS FOLLOWING ISSUANCE OF MY BANK STATEMENT OR 46 DAYS AFTER POSTING,
WHICHEVER OCCURS FIRST.
<TABLE>
<S> <C>
LABOR READY SOUTHWEST, INC.
----------------------------------------------
COMPANY NAME
1016 S. 28TH STREET TACOMA, WA 98409
----------------------------------------------
COMPANY ADDRESS
AUTHORIZED SIGNATURE AND TITLE DATE
---------------- --------------------------------
BANK NAME CITY STATE
------------------------------------ -------------------- -----
CHECKING ACCOUNT NUMBER SAVINGS ACCOUNT NUMBER
----------------------- ---------------
BANK ROUTING NUMBER (LOCATED BETWEEN THE SYMBOLS :000000000: ON THE BOTTOM OF YOUR CHECK)
PLEASE ATTACH A VOIDED CHECK OR DEPOSIT SLIP
FOR OFFICE USE ONLY
CCAN NUMBER 10046866 PAYMENT DUE DATE(S)
---------------------- -------------------- ---------------------
</TABLE>
ACH: SKS:04271999:1617:2117:46866-100:52036
<PAGE>
INSURANCE
WELLS FARGO EQUIPMENT FINANCE, INC.
INVESTORS BUILDING, SUITE 300
WELLS FARGO 733 MARQUETTE AVENUE
MINNEAPOLIS, MN 55479-2048
PH. 800-322-6220
* * * VERIFICATION OF INSURANCE COVERAGE MUST BE OBTAINED PRIOR TO FUNDING * * *
NAME AND ADDRESS OF LESSEE:
LABOR READY SOUTHWEST, INC.
1016 S. 28TH STREET
TACOMA, WA 98409
EQUIPMENT DESCRIPTION:
(37) DIEBOLD 1064 IX FRONT LOAD CASH DISPENSERS
LOCATED AS MORE FULLY DESCRIBED ON EXHIBIT B
EQUIPMENT LOCATION: , ,
PLEASE COMPLETE, SIGN AND RETURN THIS FORM ALONG WITH YOUR LEASE DOCUMENTS AND
ALSO CONTACT YOUR AGENT TO HAVE A CERTIFICATE OF INSURANCE FAXED TO THE
ATTENTION OF SHANNON K. SULLIVAN AT 303-293-5555. IF A CERTIFICATE HAS NOT BEEN
RECEIVED BY THE TIME ALL OTHER REQUIREMENTS FOR FUNDING HAVE BEEN MET, WELLS
FARGO EQUIPMENT FINANCE, INC. WILL CONTACT YOUR AGENT DIRECTLY TO REQUEST A
CERTIFICATE OF INSURANCE AS AUTHORIZED BELOW. IN ACCORDANCE WITH THE PROVISIONS
OF YOUR LEASE, INSURANCE COVERAGE IS REQUIRED AS FOLLOWS:
1. PROPERTY INSURANCE IS REQUIRED AGAINST THE LOSS, THEFT OF OR DAMAGE TO THE
EQUIPMENT. O THE MINIMUM AMOUNT OF COVERAGE REQUIRED IS $512,501.80 O WELLS
FARGO EQUIPMENT FINANCE, INC., ITS SUCCESSORS AND ASSIGNS ("LESSOR), MUST
BE NAMED AS LOSS PAYEE.
2. COMMERCIAL GENERAL LIABILITY INSURANCE IS REQUIRED FOR BODILY INJURY AND
PROPERTY DAMAGE. O THE MINIMUM AMOUNT OF COVERAGE REQUIRED IS $500,000.00
FOR EACH OCCURRENCE AND $500,000.00 AGGREGATE. O WELLS FARGO EQUIPMENT
FINANCE, INC., ITS SUCCESSORS AND ASSIGNS ("LESSOR), MUST BE NAMED AS AN
ADDITIONAL INSURED.
3. THE PROPERTY AND GENERAL LIABILITY POLICIES (THE "POLICY"), AS TO THE
INTEREST OF LESSOR, SHALL NOT BE INVALIDATED BY ANY ACT OF OMISSION OR
COMMISSION OR NEGLECT OR MISCONDUCT OF LESSEE AT ANY TIME, NOR BY ANY
FORECLOSURE OR OTHER PROCEEDING OR NOTICE OF SALE RELATING TO THE INSURED
PROPERTY, NOR BY ANY CHANGE IN THE TITLE OR OWNERSHIP THEREOF OR THE
OCCUPATION OF THE PREMISES FOR PURPOSES MORE HAZARDOUS THAN ARE PERMITTED
BY THE POLICY, PROVIDED, THAT IN CASE LESSEE SHALL FAIL TO PAY ANY PREMIUM
DUE UNDER THE POLICY, LESSOR MAY, AT ITS OPTION, PAY SUCH PREMIUM.
4. THE POLICY MAY BE CANCELED AT ANY TIME BY EITHER INSURER OR LESSEE
ACCORDING TO ITS PROVISIONS, BUT IN ANY SUCH CASE THE POLICY SHALL CONTINUE
IN FULL FORCE AND EFFECT FOR THE EXCLUSIVE BENEFIT OF LESSOR FOR TEN DAYS
AFTER WRITTEN NOTICE TO LESSOR OF SUCH CANCELLATION AND SHALL THEN CEASE.
BY SIGNING BELOW LESSEE HEREBY AUTHORIZES ITS AGENT TO ADJUST ITS INSURANCE
COVERAGE TO COMPLY WITH THE ABOVE REQUIREMENTS AND TO FORWARD A CERTIFICATE OF
INSURANCE EVIDENCING SUCH COVERAGE TO LESSOR.
ACKNOWLEDGED AND AGREED:
AUTHORIZED SIGNATURE: DATED.
----------------------- ----------------------
LESSEE TO COMPLETE THE FOLLOWING:
PROPERTY INSURANCE
<TABLE>
<S> <C> <C>
INSURANCE COMPANY POLICY NUMBER
-------------------- -----------------
EFFECTIVE DATE EXPIRATION DATE LIMIT $
----------------------- --------------------- -------------------------
AGENCY NAME AGENT NAME
-------------------------- ----------------------
AGENCY ADDRESS
-----------------------
PHONE NUMBER FAX NUMBER
------------------------- ---------------------
LIABILITY INSURANCE (IF DIFFERENT THAN PROPERTY INSURANCE)
INSURANCE COMPANY POLICY NUMBER
-------------------- -----------------
EFFECTIVE DATE EXPIRATION DATE LIMIT $
----------------------- ----------------------- -------------------------
AGENCY NAME AGENT NAME
-------------------------- ----------------------
AGENCY ADDRESS
PHONE NUMBER FAX NUMBER
------------------------- ----------------------
</TABLE>
INSEQLS: SKS:04271999:1616:2117:46866-100:52036
<PAGE>
ADDITIONAL INFORMATION
TAX STATUS, BILLING ADDRESS
AND EQUIPMENT LOCATION
WELLS FARGO EQUIPMENT FINANCE, INC.
INVESTORS BUILDING, SUITE 300
WELLS FARGO 733 MARQUETTE AVENUE
MINNEAPOLIS, MN 55479-2048
CONTRACT NUMBER 46866-100 DATED AS OF APRIL 27, 1999
NAME AND ADDRESS OF LESSEE:
LABOR READY SOUTHWEST, INC.
1016 S. 28TH STREET
TACOMA, WA 98409
EQUIPMENT DESCRIPTION:
(37) DIEBOLD 1064 IX FRONT LOAD CASH DISPENSERS
LOCATED AS MORE FULLY DESCRIBED ON EXHIBIT B
EQUIPMENT LOCATION: , ,
BILLING ADDRESS: LABOR READY SOUTHWEST, INC., ATTN: ACCOUNTS PAYABLE,
1016 S. 28TH STREET, TACOMA, WA 98409
CUSTOMER IS REQUIRED TO COMPLETE ALL SHADED AREAS.
TAX STATUS:
1. SALES/USE TAX: (CHECK ONE)
/_/ Subject to sales and use tax. (Tax will be charged based on the state
in which the equipment is located.)
/_/ Exempt from sales and use tax, for the following reason:
/_/ Exemption Certificate attached
/_/ Valid Certificate already on file with Wells Fargo Equipment Finance,
Inc.
2. PERSONAL PROPERTY TAX: IF THE EQUIPMENT IS LOCATED IN A STATE OR LOCALITY
THAT REQUIRES REPORTING OF THE EQUIPMENT ON A PERSONAL PROPERTY TAX RETURN,
WELLS FARGO EQUIPMENT FINANCE, INC. WILL REPORT THE EQUIPMENT
BILLING ADDRESS:
/_/ The billing address stated above is correct.
/_/ Change the billing address as stated below:
EQUIPMENT LOCATION:
/_/ The equipment will be located at the Equipment Location stated above
or on the Schedule A.
/_/ The equipment will be located at:
(IF MULTIPLE LOCATIONS, ATTACH A LIST INDICATING BY PIECE OF EQUIPMENT
IN WHICH CITY, STATE, AND COUNTY EACH PIECE OF EQUIPMENT IS LOCATED.)
ACKNOWLEDGED.
(AUTHORIZED SIGNATURE)
--------------------------
AIEQLS: SKS:04271999:1617:2117:46866-100:52036
<PAGE>
STATE OF WASHINGTON -UCC-1
THIS UCC-1 FINANCING STATEMENT IS PRESENTED FOR FILING PURSUANT TO THE
WASHINGTON UNIFORM COMMERCIAL CODE, CHAPTER 62A.9 RCW, TO PERFECT A SECURITY
INTEREST IN THE BELOW NAMED COLLATERAL.
PLEASE TYPE FORM FILING FEE: $12.00.
- --------------------------------------------------------------------------------
1. DEBTOR(S) (SEE INSTRUCTION #2
/_/ PERSONAL (last, first, middle name and address)
/_/ BUSINESS (legal business name and address)
LABOR READY SOUTHWEST, INC.
1016 S. 28TH STREET
TACOMA, WA 98409
TRADE NAME, DBA, AKA:
- --------------------------------------------------------------------------------
2. FOR OFFICE USE ONLY
- --------------------------------------------------------------------------------
3. SECURED PARTY(IES) (NAME AND ADDRESS
WELLS FARGO EQUIPMENT FINANCE, INC.
733 MARQUETTE AVE., THIRD FLOOR
MINNEAPOLIS, MN 55402
- --------------------------------------------------------------------------------
4. ASSIGNEE(S) of SECURED PARTY(IES) if applicable (NAME AND ADDRESS)
- --------------------------------------------------------------------------------
5. SECURED PARTY CONTACT PERSON: Phone:
- --------------------------------------------------------------------------------
6. CHECK ONLY IF APPLICABLE: (FOR DEFINITIONS OF TRANSMITTING UTILITY AND
PRODUCTS OF COLLATERAL, SEE INSTRUCTION SHEET.)
/_/ Debtor is a Transmitting Utility
/_/ Products of Collateral are also covered
- --------------------------------------------------------------------------------
7. THIS FINANCING STATEMENT covers the following collateral: (ATTACH
ADDITIONAL 8-1/2" X 11" SHEET(S) IF NEEDED.)
(37) Diebold 1064 IX Front Load Cash Dispensers located as more fully
described on Exhibit B.
THIS TRANSACTION IS INTENDED TO BE A TRUE LEASE AND NOT A
SECURITY TRANSACTION AND THE FILING OF THIS FINANCING STATEMENTS IS
NOT AN ADMISSION THAT THIS TRANSACTION IS OTHER THAN A TRUE LEASE.
- --------------------------------------------------------------------------------
8. RETURN ACKNOWLEDGMENT COPY TO: (NAME AND ADDRESS)
Wells Fargo Equipment Finance, Inc.
733 Marquette Ave., Third Floor
Minneapolis, MN 55402
- --------------------------------------------------------------------------------
9. FILE WITH:
UNIFORM COMMERCIAL CODE
DEPARTMENT OF LICENSING
P.O. BOX 9660
OLYMPIA, WA 98507-9660
(206) 753-2523
MAKE CHECKS PAYABLE TO THE DEPARTMENT OF LICENSING
- --------------------------------------------------------------------------------
10. FOR OFFICE USE ONLY IMAGES TO BE FILMED
- --------------------------------------------------------------------------------
11. If collateral is described below, this statement may be signed by the
Secured Party instead of the Debtor. Please check the appropriate box,
complete the adjacent lines and box 13, if collateral is:
a./_/ already subject to a security interest in another jurisdiction
when it was brought into this state or when the debtor's location
was changed to this state. (COMPLETE ADJACENT LINES I AND 2)
b./_/ proceeds of the original collateral described above in which a
security interest was perfected. (COMPLETE ADJACENT LINES I AND
2)
c./_/ listed on a filing which has lapsed. (complete ADJACENT LINES I
AND 2)
a./_/ acquired after a change of name, identity, or corporate structure
of the debtor(s). (COMPLETE ADJACENT LINES 1, 2 AND 3)
ORIGINAL FILING NUMBER
FILING OFFICE WHERE FILED
FORMER NAME OR DEBTOR(S)
- --------------------------------------------------------------------------------
12. DEBTOR NAME(S) AND SIGNATURE(S):
LABOR READY SOUTHWEST, INC.
TYPE NAME(S) OF DEBTOR(S) AS IT APPEARS IN BOX 1.
By:
SIGNATURE(S) OF DEBTOR(S)
SIGNATURE(S) OF DEBTORS)
- --------------------------------------------------------------------------------
13. SECURED PARTY NAME(S) AND SIGNATURE(S) ARE REQUIRED IF BOX 11 HAS BEEN
COMPLETED.
WELLS FARGO EQUIPMENT FINANCE, INC.
TYPE NAME(S) OF SECURED PARTY(IES) AS IT APPEARS IN BOX 3 OR 4.
By:
SIGNATURE(S) OF SECURED PARTY(IES)
SIGNATURE(S) OF SECURED PARTY(IES)
FORM APPROVED FOR USE IN THE STATE OF WASHINGTON (R/7/93)
WASHINGTON UCC-1
COPY 1 - FILING OFFICER - INDEX
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE APRIL
2, 1999 CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> APR-02-1999
<CASH> 24,243
<SECURITIES> 0
<RECEIVABLES> 69,398
<ALLOWANCES> 4,826
<INVENTORY> 0
<CURRENT-ASSETS> 106,878
<PP&E> 31,683
<DEPRECIATION> 6,738
<TOTAL-ASSETS> 137,431
<CURRENT-LIABILITIES> 30,520
<BONDS> 0
0
854
<COMMON> 57,066
<OTHER-SE> 28,712
<TOTAL-LIABILITY-AND-EQUITY> 137,431
<SALES> 0
<TOTAL-REVENUES> 156,933
<CGS> 0
<TOTAL-COSTS> 105,907
<OTHER-EXPENSES> 40,587
<LOSS-PROVISION> 2,751
<INTEREST-EXPENSE> (18)
<INCOME-PRETAX> 7,706
<INCOME-TAX> 3,019
<INCOME-CONTINUING> 4,687
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1,453)
<NET-INCOME> 3,234
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.11
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE APRIL 3,
1998 CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S FORM 10-Q AND
IS QUALIFIED IN IS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> APR-03-1998
<CASH> 17,880
<SECURITIES> 0
<RECEIVABLES> 40,113
<ALLOWANCES> 2,963
<INVENTORY> 0
<CURRENT-ASSETS> 63,031
<PP&E> 19,066
<DEPRECIATION> 3,395
<TOTAL-ASSETS> 84,485
<CURRENT-LIABILITIES> 14,535
<BONDS> 86
0
854
<COMMON> 50,539
<OTHER-SE> 7,396
<TOTAL-LIABILITY-AND-EQUITY> 84,485
<SALES> 0
<TOTAL-REVENUES> 94,030
<CGS> 0
<TOTAL-COSTS> 65,695
<OTHER-EXPENSES> 27,149
<LOSS-PROVISION> 1,144
<INTEREST-EXPENSE> (208)
<INCOME-PRETAX> 250
<INCOME-TAX> 105
<INCOME-CONTINUING> 145
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 145
<EPS-PRIMARY> 0.01<F1>
<EPS-DILUTED> 0.01<F1>
<FN>
<F1>ADJUSTED FOR THE COMPANY'S 3 FOR 2 STOCK SPLIT EFFECTIVE 5/11/98
</FN>
</TABLE>
