Page 1
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from
____________ to ______________
Commission File Number 0-15339
THE STROBER ORGANIZATION, INC.
(Exact name of Registrant as specified in its charter)
Delaware 11-2822910
------------------------------- -------------------
(State of Organization (IRS Employer
or other Jurisdiction Identification Number
of Incorporation)
550 Hamilton Avenue
Brooklyn, New York 11232
(Address of principal executive office)
(718) 832-1212
(Registrant's telephone number,
including area code)
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 filing
requirements for the past 90 days.
Yes x No _____
Common Stock $.01 par - shares issued and outstanding at
March 31, 1995 - 5,055,493
(Number of shares outstanding of each class of the
Registrant's Common Stock)
This report contains a total of 29 pages.
Page 2
THE STROBER ORGANIZATION, INC. AND SUBSIDIARIES
INDEX
-----------------------------------------------
Page
----
Face Sheet ............................................ 1
Index ................................................. 2
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1995 and December 31, 1994.... 3
Consolidated Statements of Operations for
the Three Months Ended March 31, 1995
and 1994 ................................ 4
Consolidated Statements of Cash Flows
for the Three Months Ended March 31,
1995 and 1994 ........................... 5
Notes to Consolidated
Financial Statements ................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations .............................. 7-9
Part II Other Information ....................... 10
Part III Exhibits ................................ 11
Signature .............................................. 12
Part 1-Financial Statements Page 3
<TABLE>
The Strober Organization, Inc. and
Subsidiaries Consolidated Balance Sheets
<CAPTION>
(In Thousands)
MAR 31, DEC. 31,
ASSETS 1995 1994
<S> ------ --------
Current assets: <C> <C>
Cash $3,633 $3,890
Accounts receivable, net of
allowance for doubtful accounts of
$2,640 and $2,320 in 1995 and 1994,
respectively 15,225 16,651
Inventory 12,933 10,741
Deferred income taxes 926 926
Other current assets 448 350
------ ------
Total current assets 33,165 32,558
Property and equipment, net 2,659 2,518
Goodwill, net of accumulated
amortization of $1,502 and
$1,450 in 1995 and 1994,
respectively 6,884 6,936
Other assets 630 637
------- -------
Total assets $43,338 $42,649
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term
debt $980 $1,233
Revolving line of credit - -
Accounts payable 6,812 5,056
Accrued expenses and taxes 3,452 4,425
------ ------
Total current liabilities 11,244 10,714
Long-term debt, less current
installments 1,091 1,171
Deferred income taxes 77 77
------ ------
Total liabilities 12,412 11,962
Stockholders' equity:
Preferred stock, $.01 par value,
1,000,000 shares authorized and
unissued - -
Common stock, $.01 par value,
20,000,000 shares authorized;
issued: 5,167 and outstanding:
5,055 shares in 1995 and 1994 52 52
Additional paid-in capital 7,013 7,013
Retained earnings 24,346 24,107
Less: Treasury stock at cost,
112 shares in 1995 and 1994 (485) (485)
-------- -------
Total stockholders' equity 30,926 30,687
-------- -------
Total liabilities and stockholders'
equity $43,338 $42,649
======== =======
</TABLE>
See notes to the accompanying financial statements
<TABLE> Page 4
The Strober Organization, Inc. and Subsidiaries Consolidated
Statements of Operations Three Months
Ended March 31, 1995 and 1994
<CAPTION>
(In thousands, except per share data) 1995 1994
------- --------
<S> <C> <C>
Net sales $28,167 $20,457
Cost of goods sold 20,777 14,777
------- -------
Gross profit 7,390 5,680
Selling, general and administrative
expenses 7,037 6,555
------ ------
Income (loss) from operations 353 (875)
Interest expense (54) (178)
Interest income 105 82
------ ------
Net income (loss) before income taxes 404 (971)
Provision (benefit) for income taxes 165 (340)
------ ------
Net income (loss) $239 ($631)
====== ======
Net income (loss) per share $0.05 ($0.12)
====== ======
Weighted average number of shares
outstanding 5,208 5,163
====== ======
</TABLE>
The computation of fully diluted earnings per share
does not materially differ from that presented above.
See accompanying notes to consolidated financial statements.
Page 5
The Strober Organization, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1995 and 1994
(In thousands)
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $239 ($631)
Adjustments to reconcile net
income (loss) to net cash provided by
(used by) operating activities:
Depreciation and amortization 346 370
Provision for estimated losses
on accounts receivable 239 204
Changes in operating assets and
liabilities:
Accounts receivable 1,187 4,161
Inventory (2,192) (2,992)
Other assets (96) 191
Accounts payable 1,756 (232)
Accrued expenses and taxes (973) (2,213)
------- ------
Net cash provided by (used by) operating
activities 506 (1,142)
------- ------
Cash flows from investing activities:
Additions to property and
equipment, net (159) (37)
------- ------
Cash flows from financing activities:
Repayment of long-term debt (604) (322)
Net increase in revolving line of
credit - 1,056
Proceeds from exercise of stock options - 26
------- ------
Net cash (used by) provided by financing
activities (333) 760
------- ------
Net decrease in cash (257) (419)
Cash at beginning of period 3,890 3,082
------- ------
Cash at end of period $3,633 $2,663
======= ======
</TABLE>
See accompanying notes to consolidated financial statements
Page 6
THE STROBER ORGANIZATION, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------
(1) UNAUDITED STATEMENTS
The accompanying unaudited financial statements and other
related financial information furnished reflect all adjustments
which are in the opinion of management, necessary to a fair
presentation of the financial position as of March 31, 1995 and
the results of operations and cash flows for the three months ended
March 31, 1995 and 1994.
(2) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. Significant
intercompany balances and transactions have been eliminated.
(3) STATEMENTS OF CASH FLOWS-SUPPLEMENTAL DISCLOSURES
Schedule of amounts paid for interest and income taxes:
1995 1994
---- ----
(In thousands)
Interest paid $ 39 $ 113
======= =======
Income taxes paid $ 219 $ 982
======= =======
Capital lease obligations
incurred for purchase of equipment $ 271 $ 0
====== =====
(4) CONDENSED FINANCIAL STATEMENTS
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these consolidated condensed
financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's
December 31, 1994 financial statements. The results of
operations for the period ended March 31, 1995 are not necessarily
indicative of the operating results for the full year.
Item 2. Page 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------------
The following table sets forth certain statement amounts expressed
as a percentage of sales:
Three Months Three Months
Ended Ended
March 31, 1995 March 31, 1994
-------------- --------------
Net sales 100.0% 100.0%
Cost of goods sold 73.8% 72.2%
Gross profit 26.2% 27.8%
SG&A expenses 25.0% 32.1%
Income (loss) from operations 1.2% -4.3%
Net interest income (expense) .2% -.5%
Net income (loss) before income
tax 1.4% -4.8%
Provision (benefit) for income
tax .6% -1.7%
Net income (loss) .8% -3.1%
---- ----
Result of Operations
First Quarter Ended March 31, 1995 Compared to First Quarter
Ended March 31, 1994.
Net sales for the quarter ended March 31,1995 increased by $7.7
million (38%) compared to the same period in 1994. The increase
in sales is primarily due to better weather conditions
experienced in the Northeast this winter as compared to the
extremely severe winter weather conditions endured during the
first quarter of 1994. Traditionally, first quarter sales
(January-March) are the lowest of the year due to winter
constraints on building activity in the Company's marketing
regions. Although management believes that the Company will
achieve overall sales growth in 1995, such growth is not expected
to match the percentage of growth achieved during the first
quarter of 1995.
Gross profit increased by $1.7 million (30%) in the first quarter
of 1995 as compared to the same period in 1994 due to the higher
sales volume. Gross profit as a percentage of sales decreased
from 27.8% to 26.2% in the first quarter of 1995 compared to the
same period in 1994 due primarily to competitive pricing of
products sold in the Company's marketing regions.
Page 8
Selling, general and administrative expenses increased by
$482,000 (7%) in the first quarter of 1995 compared to the same
period in 1994. This increase is primarily attributable to
increased variable expenses associated with higher sales volume
achieved in the 1995 quarter compared to 1994. The following
table shows the components of the SG&A expenses:
Three Months Ended
------------------
In thousands 3/31/95 3/31/94
------- -------
Delivery $ 2,688 $ 2,426
Selling 1,002 978
Administrative 3,347 3,151
------- -------
$ 7,037 $ 6,555
======= =======
Interest expense decreased by $124,000 in the first quarter of
1995 compared to the same period in 1994. This decrease results
from lower outstanding loan balances on financing debt, as the
Company did not incur any borrowings on its working capital
facility during the 1995 first quarter and continued to reduce
its outstanding subordinated debt obligation.
Income from operations increased $1.2 million in the first
quarter of 1995 to $353,000 compared to a loss of $875,000 in the
same period in 1994. This increase resulted from higher gross
margin dollars resulting from the increased sales activity reduced by
increases in operating expenses. Net income before taxes
increased $1.4 million in the 1995 first quarter to $404,000
compared to a loss of $971,000 in the same period in 1994.
The net income for the first quarter of 1995 reflects an income
tax provision of $165,000 compared to an income tax benefit of
$340,000 for same period in 1994. Net income for the first
quarter ended March 31, 1995, increased $870,000 to $239,000
compared to a loss of $631,000 in the same period in 1994.
Liquidity and Capital Resources
The Company financed its operations in the first quarter of 1995
with cash generated from operations. The Company also maintains a
revolving working capital line of credit in the amount of
$10,000,000 with the Chase Manhattan Bank, N.A. Borrowings under
the credit facility are made as needed, up to a maximum of 75% of
eligible accounts receivable and bear interest at the prime rate
plus 1/2 a percentage point or at the option of the Company at
various fixed LIBOR interest rates.
Page 9
The Company pledged as collateral for the credit facility its
accounts receivable and is required to maintain certain financial
covenants. At March 31, 1995 and December 31, 1994, there were no
balances owed under this credit line.
Capital expenditures, net of dispositions, amounted to $430,000
in the three month period ended March 31, 1995, compared to
$37,000 in the same period in 1994. The Company plans to purchase
during 1995 new delivery equipment costing approximately
$1,250,000, of which $397,000 was purchased as of March 31, 1995.
The Company will utilize capital lease arrangements to finance
the acquisition of the equipment.
Prior to June 1, 1995, the Company will relocate its Farmingdale,
NY facility to a new Farmingdale location. Leasehold improvements
and fixtures will total approximately $300,000.
<PAGE>
Page 10
PART II - Other Information
Item 1. Legal Proceedings.
The Company is not a party to any material legal proceedings. it
is, however, involved in litigation relating to claims arising
out of its operations in the normal course of business. Such
claims against the Company are generally covered by insurance.
It is the opinion of management that any uninsured liability
resulting from such litigation would not have a material adverse
effect on the Company's business, financial position or earnings.
<PAGE>
Page 11
PART III
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10(z) Form of Master Capital Lease Agreement between
The Company and The Chase Equipment Leasing Inc.
dated as of March 24, 1995.
(b) Reports on Form 8-K:
There were no Reports on Form 8-K filed during the quarter.
<PAGE>
Page 12
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE STROBER ORGANIZATION, INC.
By:/s/David J. Polishook
-----------------------------
David J. Polishook
Chief Financial Officer
and Treasurer
<PAGE>
Page 13
EXHIBIT INDEX
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
3(a) Certificate of Incorporation of Company
incorporated by reference to Exhibit
3(a) to the Company's Registration
Statement on Form S-1 (Commission File
No. 33-9348), filed on October 8, 1986.
3(b) By-Laws of Company incorporated by
reference to Exhibit 3(b) to Amendment
No. 1 to the Company's Registration
Statement on Form S-1 (Commission File
No. 33-9348), filed on November 4, 1986,
as amended on November 12, 1991, which
amendment is incorporated by reference
to Quarterly Report on Form 10-Q for the
three months ended September 30, 1991.
4(a) Form of Common Stock Certificate
incorporated by reference to Exhibit
4(a) to Annual Report on Form 10-K for
the year ended December 31, 1986.
4(b) Amendatory Agreement dated December 14,
1990 together with Amended and Restated
Subordinated Note Due January 15, 1994,
incorporated by reference to Exhibit
4(b) to Annual Report for the year ended
December 31, 1990 incorporated by
reference to Exhibit 4(b) to Annual
Report on Form 10-K for the year ended
December 31, 1990.
4(c) Warrant to Purchase 300,000 Common
Shares dated December 14, 1990
incorporated by reference to Schedule
13D filed by Sue Strober on December 22,
1990.
4(d) Reserved
4(e) Form of Warrant Extension Amendment
between Strober and David W. Bernstein
amending the Warrant Agreement between
Strober and David W. Bernstein dated
November 6, 1988, incorporated by
reference to Exhibit 4(e) to Annual
Report on Form 10-K for the year ended
December 31, 1991.
10(a) Non-Qualified Stock Option
Plan incorporated by reference
to Exhibit 10(a) to Amendment
No. 2 to the Company's
Registration Statement on Form
S-1 (Commission File No.
33-9348), filed on November 7,
1986, as amended on August 13,
1991, which amendment is
incorporated by reference to
Quarterly Report on Form 10-Q
for the three months ended
September 30, 1991.
Page 14
10(b) Form of Profit-Sharing Plans
incorporated by reference to
Exhibit 10(b) to the Company's
Registration Statement on Form
S-1 (Commission File No.
33-9348), filed on October 8,
1986 and Exhibit 10(b) to
Amendment No. 2 to the
Company's Registration
Statement on Form S-1
(Commission File No. 33-9348),
filed on November 7, 1986.
10(c) Form of Target Benefit Plan
incorporated by reference to
Exhibit 10(c) to the Company's
Registration Statement on Form
S-1 (Commission File No.
33-9348), filed on October 8,
1986.
10(d) Restricted Stock Plan
incorporated by reference to
Exhibit 10(d) to Amendment No.
2 to the Company's
Registration Statement on Form
S-1 (Commission File No.
33-0348), filed on November 7,
1986.
10(e) Form of Lease between: (i)
JNR Realty Company and Strober
- L.I. Bldg. - Supply Centers,
Inc.; (ii) Strober Realty
Company and Strober Bros. Inc.
Bldg. Supply Centers, Inc.;
(iii) SCONN Realty and Strober
Connecticut Bldg. Supply
Centers, Inc.; and (iv) SY
Realty Corp. and Strober- King
Bldg. Supply Centers, Inc.
incorporated by reference to
Exhibit 10(f) to Amendment No.
1 to the Company's
Registration Statement on Form
S-1 (Commission File No.
33-9348), filed on November 4,
1986 and Exhibit 10(f) to
Amendment No. 2 to the
Company's Registration
Statement on Form S-1
(Commission File No. 33-9348),
filed on November 7, 1986.
10(f) Form of Lease between: (i)
General Realty Associates and
General Building Supply
Company, (ii) P&Z Realty and
General Building Company;
(iii) 3IS Associates and
General Building Supply
Company; and (iv) Peter L.
Churilo and General Building
Supply Company incorporated by
reference to Exhibit 10(f) to
Annual Report on Form 10-K for
the year ended December 31,
1987.
10(g) Form of Lease between: (i)
SAY Realty Corp. and
Strober-King Bldg. Supply
Centers, Inc.; (ii) P&Z Realty
and General Building Supply
Company; and (iii) SG Realty
Corp. and Strober New Jersey
Building Supply Center, Inc.
incorporated by reference to
Exhibit 10(g) to Annual Report
on Form 10-K for the year
ended December 31, 1988.
Page 15
10(h) Form of Lease between Strober
Bros. Inc. Building Supply
Centers and Elstro Company
incorporated by reference to
Exhibit 10(h) to Annual Report
on Form 10-K for the year
ended December 31, 1989.
10(i) Form of Agreement and Plan of
Reorganization among the
Company and certain of its
affiliates incorporated by
reference to Exhibit 2 to the
Company's Registration
Statement on Form S-1
(Commission File No. 33-9348),
filed on October 8, 1986.
10(j) Amendment to Agreement and
Plan of Reorganization dated
January 25, 1988 incorporated
by reference to Exhibit 4(d)
to Current Report on Form 8-K
filed by the Company to report
an event of January 25, 1988.
10(k) Purchasers' Purchase Agreement
between the Company and
certain of its affiliates
incorporated by reference to
Exhibit 4(e) to Current Report
on Form 8-K filed by the
Company to report an event of
January 25, 1988.
10(l) Amendment to Purchasers'
Purchase Agreement dated
January 25, 1988 incorporated
by reference to Exhibit 4(v)
to Current Report on Form 8-K
filed by the Company to report
an event of January 25, 1988.
10(m) Corporate Purchase Agreement
dated November 7, 1986
incorporated by reference to
Exhibit (g) to Current Report
on Form 8-K filed by the
Company to report an event of
January 25, 1988.
10(n) Metal and Roofing Contract
between Strober-Price Building
Supply Corp. and Local 282
effective January 1, 1991,
incorporated by reference to
Exhibit 10(v) to Annual Report
for the year ended December
31, 1990.
10(o) Lease dated June 14, 1991
between The Chapin Trust and
Strober Building Supply
Center, Inc., incorporated by
reference to Exhibit 10(w) to
Annual Report on Form 10-K for
the year ended December 31,
1991.
Page 16
10(p) Agreements between The General
Building Supply Company and
Grocery, Bakery, Construction
Drivers and Helpers, Teamsters
Local Union 559 for the years
1995 through 1998 incorporated
by reference to Exhibit 10(p)
to Annual Report on Form 10K
for the year ended December
31, 1994.
10(q) Form of Senior Subordinated
Note due September 1, 1996 and
form of Employment Agreement
incorporated by reference to
Exhibit 10(q) to Annual Report
on Form 10-K for the year
ended December 31, 1993.
10(r) Credit Agreement dated as of
December 9, 1994 between and
among the Company, certain of
its subsidiaries and The Chase
Manhattan Bank (National
Association) incorporated by
reference to Exhibit 10(r) to
Annual Report on Form 10K for
the year ended December 31, 1994.
10(s) Form of Agreement between the
Marda Group of Building
Materials Distributors, Inc.
and International Brotherhood
of Teamsters, Chauffeurs,
Warehousemen of Local 807 and
Helpers of America for the
Period Ending December 3,
1995, incorporated by
reference to Exhibit 10(s) to
Annual Report on Form 10-K for
the year ended December 31,
1992.
10(t) Form of The Strober
Organization, Inc. Fiduciary
Reimbursement and
Indemnification Agreement
incorporated by reference to
Exhibit 10(t) to Annual Report
on Form 10-K for the year
ended December 31, 1992.
10(u) Addendum to Lease dated
December 23, 1993 by and
between The Chapin Trust and
Strober Building Supply
Center, Inc. incorporated by
reference to Exhibit 10(u) to
Annual Report on Form 10-K for
the year ended December 31,
1993.
10(v) Memorandum of Agreement by and
between Local 282, IBT and
Strober Price Incorporated,
incorporated by reference to
Exhibit 10(v) to Annual Report
on Form 10-K for the year
ended December 31, 1993.
10(w) 1993 Outside Director Stock
Option Plan incorporated by
reference and Exhibit 4.1 to
the Company's Registration on
Form S-8 (Commission File No.
33-71766), filed November 16,
1993.
10(x) Form of 1994 Non-Qualified
Stock Option Agreement between
the Company and each of its
outside directors incorporated
by reference to Exhibit 10(x)
to Annual Report on Form 10-K
for the year ended December
31, 1993.
10(y) Lease effective as of May 1,
1995 by and among Carman Road
Realty Inc., Broad Properties,
Inc. and Strober Long Island
Building Material Centers,
Inc. incorporated by reference
to Exhibit 10(y) to Annual
Report on Form 10K for the year
ended December 31, 1994.
Page 17
10(z) Form of Master Lease Agreement
dated as of March 24, 1995 Between
the Company and Chase Equipment
Leasing, Inc. 18
22(a) List of Subsidiaries of the
Company incorporated by reference to
Exhibit 22(a) to Annual Report on
Form 10K for the year ended December
31, 1994.
<PAGE>
Page 18
VEHICLE LEASE
CHASE EQUIPMENT LEASING, INC
One Chase Square
Rochester, NY 14643
MASTER LEASE AGREEMENT
This Master Lease Agreement ("Agreement") is made as of March 24,
1995, between CHASE EQUIPMENT LEASING, INC., having its principal
place of business at One Chase Square, Rochester, New York 14643
("Lessor") and THE STROBER ORGANIZATION, INC., a Corporation
having its principal place of business at 550 Hamilton Avenue,
Brooklyn, New York 11232 ("Strober"). Strober wishes to enter
into various leases with Lessor, each of which shall be between
Lessor as lessor and Strober and one of its wholly-owned
Subsidiaries (as defined below) as lessee. As used herein,
"Lessee" shall mean in respect of each Lease (as defined below),
Strober and/or (as the context may require) the wholly-owned
Subsidiary executing the applicable Equipment Schedule evidencing
the Lease. Each such Lease shall be the join and several
obligation of Strober and the applicable wholly-owned Subsidiary.
1. DESCRIPTION OF LEASED VEHICLE: Subject to the terms and
conditions contained herein, Lessor hereby leases to Lessee
and Lessee shall lease from Lessor each and every vehicle
("Vehicle") described in one or more Equipment Schedules to be
executed substantially in the form attached hereto, which
Lessor has purchased at the specific request and direction of
Lessee. Lessee hereby authorizes Lessor to insert the Vehicle
Identification Numbers provided by any vehicle dealer for
Vehicles supplied by that dealer in the Equipment Schedule,
Certificate of Acceptance and any UCC-1 financing statements
covering such Vehicles. Each Equipment Schedule incorporates
the terms and conditions of this Agreement, and shall
constitute a separate, distinct and independent lease and
contractual relationship between Lessor and Lessee. The term
"Lease" shall mean the applicable Equipment Schedule which
incorporates the terms and conditions of this Agreement. The
term "Subsidiary" means any corporation, the majority of the
shares of voting stock of which at any time outstanding is,
owned directly or indirectly or indirectly by Lessee or by one
or more of its other subsidiaries or by Lessee in conjunction
with one or more of its other subsidiaries. Title to and
ownership of the Vehicle, along with all replacements and
additions thereto, shall remain with Lessor.
2. TERMS AND RENTAL PAYMENTS: The term of this Agreement shall
commence on the date set forth above and shall continue in
effect thereafter so long a any Lease remains in effect. The
term of each Equipment Schedule as to all or any Vehicle
designated on any Equipment Schedule shall commence on the
date on which the Lessee executes a Certificate of Acceptance
for such Vehicle (the "Acceptance Date") and shall continue
for a period ending that number of months from the date the
first periodic rental payment is due as specified on the
applicable Equipment Schedule. Rent shall be specified and
payable in accordance with the terms as set forth in the
Equipment Schedule. All payments shall be made at the office
of Lessor at One Chase Square, Rochester, New York 14643 or
as otherwise directed by Lessor in writing. If Lessee fails
to pay any periodic rent payment or other sum to be paid to
Lessor after ten days of the due date, then Lessee shall pay a
late charge of five cents per dollar on, and in addition to,
the amount of such payment but not exceeding the maximum
amount, if any, permitted by law ("Late Charge").
3. NET LEASE: This Lease is a net lease. Lessee's obligation to
pay all rent and any other amounts due hereunder shall be
absolute and unconditional and, except as expressly provided,
shall not be subject to any abatement, deferment, reduction,
defense, counterclaim, set-off, or recoupment, including, but
not limited to, for example, (i) any existing or future claims
of whatever kind or nature against Lessor or the
manufacturer(s) or dealer(s) of the Vehicle or (ii)
termination of Lessee's right of possession and/or the taking
of possession of the Vehicle thereof by or through Lessor in
accordance with this Lease. Except as expressly provided
herein, this Lease shall not terminate for any reason,
including, but not limited to, any defect in the Vehicle or
Lessor's title thereto or any destruction or loss of use of
any Vehicle.
4. DELIVERY AND ACCEPTANCE: Lessee shall take immediate
delivery of the Vehicle leased hereunder when made available
by dealer to Lessee, and Lessee shall promptly execute and
deliver to Lessor a Certificate of Acceptance in the form
attached hereto, whereupon such Vehicle shall become subject
to a Lease. Lessor shall not be liable for any failure to
deliver or delay in the delivery of the Vehicle caused by
factors beyond Lessor's control. Lessor shall not be liable
to Lessee for any incidental or consequential damage caused
by any delay, adjustment or loss of service of the Vehicle.
5. PURPOSE: Lessee hereby warrants that the Vehicle shall be
used solely for commercial and business purposes.
6. TITLING; REGISTRATION: Title to the Vehicle shall remain with
the Lessor. Lessee shall at its own expense, title, license
and register the Vehicle in compliance with the laws of any
jurisdictions where the Vehicle may be operated and in such a
manner as shall protect the ownership of Lessor. Lessee shall
notify Lessor of any retitling or reregistration of a Vehicle
in a state other than that where such Vehicle was initially
titled or registered. If required by law or requested by
Lessor, Lessee shall promptly deliver the Vehicle to the
nearest appropriate governmental agency for such inspection as
may be required or requested. In the event this Agreement or
any Equipment Schedule thereto shall be adjudged or determined
not to be a lease, then Lessor's retention of title to the
Vehicle shall be construed to be, and Lessee does hereby grant
to Lessor, a security interest in the Vehicle, insurance
covering the Vehicle and all of the proceeds of the foregoing.
7. ERRORS IN ESTIMATED COST: As used herein, "Total Cost" means
the cost to Lessor of purchasing and delivering the Vehicle to
Lessee, including taxes and transportation and other charges.
The amount of each rental payment set forth on the Equipment
Schedule is based on the Total Cost initially set forth which
is an estimate, and each shall be adjusted proportionally if
the actual cost of the Vehicle differs from said estimate.
Lessee hereby authorizes Lessor to correct the figures set
forth on the Equipment Schedule(s) when the actual cost is
known, and to add to the amount of each rental payment any
sales, use or other tax that may be imposed on or measured by
rental payments. However, if the actual cost of the Vehicle
differs from the estimated cost by more than ten percent (10%)
thereof, either party at its option may terminate the Lease
with respect to the Vehicle as to subsequent obligations by
giving written notice to the other party within fifteen (15)
days after receiving notice of the actual cost or the
corrected rentals and Lessee shall reimburse and indemnify
Lessor for any existing obligation and/or expenses incurred by
Lessor such as but not limited to, open purchase orders and
progress payments made to dealer(s).
8. INSPECTION: Lessee shall, whenever requested, advise Lessor
of the exact location and condition of the Vehicle and shall
give Lessor immediate notice of any attachment or other
judicial processes, liens or encumbrances affecting the
Vehicle and indemnify and save Lessor harmless from any loss
or damage caused thereby. Lessor may for the purpose of
inspection, at all reasonable business hours, enter any
building or place where the Vehicle is located; Lessor shall
Page 19
be entitled to review Lessee's maintenance records relating to
the Vehicle.
9. PRESERVATION OF LESSEE'S EXISTENCE AND BUSINESS:
(a) Lessee will preserve and keep in full force and effect
Lessee's existence, rights, licenses and franchises and those
of any Subsidiaries, necessary and material to Lessee's and
Subsidiaries operations taken as a whole. (b) Lessee will
not make or permit to be made any material change in the
character of Lessee's business or operations.
10. FINANCIAL INFORMATION AND REPORTING:
(a) Lessee shall annually, within ninety (90) days after the
close of Lessee's fiscal year, furnish to Lessor, financial
statements of Lessee (including a balance sheet as of the
close of such year and statements of income, changes in
financial condition and shareholder's equity for such year)
prepared in accordance with generally accepted accounting
principles and certified by Lessee's independent public
accountants. Lessee shall also provide quarterly / monthly
(select one) financial statements of Lessee similarly prepared
for each of the first three quarters of each fiscal year,
which shall be certified (subject to normal year-end
adjustments) by Lessee's chief financial officer and furnished
to Lessor within ninety (90) days following the end of the
quarter. (b) Lessee will furnish Lessor with any and all
information regarding Lessee's business, condition or
operations, financial or otherwise which Lessee furnishes to
any other creditor. This information shall be furnished to
Lessor at the same time it is furnished to that creditor. (c)
Lessee will immediately furnish Lessor with such further
information regarding Lessee's business, condition, property,
assets or operations, financial or otherwise, as Lessor may
from time to time reasonably request, all prepared in form and
detail satisfactory to Lessor. (d) Lessee will at all times
maintain true and complete records and books of account
including, without limiting the generality of the foregoing,
appropriate reserves for possible losses and liabilities, all
in accordance with generally accepted accounting principles
consistently applied. (e) Lessee shall permit, and cause any
Subsidiary to permit, representatives of Lessor (i) to visit
and inspect any of the properties of Lessee or any Subsidiary
(ii) to examine its or their corporate or partnership books
and records, (iii) to make extracts or copies of such books
and records, and (iv) to discuss its or their affairs,
finances and accounts with its or their officers or partners,
as applicable. The foregoing may be done at any time within
regular business hours. (f) Lessee will promptly notify Lessor
in writing of the commencement of any litigation to which
Lessee or any of its affiliates may be a party (except for
litigation in which Lessee's (or the affiliate's) contingent
liability is fully covered by insurance) which, if decided
adversely to Lessee would adversely affect or impair the title
of Lessor to the Vehicle or which, if decided adversely to
Lessee would materially adversely affect the business
operations or financial condition of Lessee. In addition,
Lessee will immediately notify Lessor, in writing, of any
judgment against Lessee if such judgment would have the effect
described in the preceding sentence.
11. PAYMENT OF TAXES, DEBTS AND OBLIGATIONS:
(a) Lessee shall pay all taxes (including any interstate over-
the-road taxes), assessments, fees, charges, penalties and
fines imposed upon each Vehicle and/or arising out of the
lease, use, possession or operation thereof and whether levied
or assessed against Lessee or against Lessor. All taxes, fees
and similar charges imposed on the ownership, possession or
use of the Vehicle during the term of this Lease shall be paid
by Lessee. In case of failure of Lessee to pay said taxes,
fees and similar charges, Lessor may pay the same, and the
amount thereof shall be payable by Lessee as additional rent
with the next periodic rental payment. (b) Lessee will cause
to be paid and discharged all its obligations when due and all
lawful taxes, assessments and governmental charges or levies
imposed upon Lessee or any Subsidiary, or upon any Vehicle
belonging to Lessee or any Subsidiaries, or upon any part
thereof, before the same shall become in default, as well as
all lawful claims for labor, materials and supplies which, if
unpaid, might become a lien or charge upon the Vehicle or any
part of it. Notwithstanding the previous sentence, neither
Lessee nor any Subsidiary shall be required to cause to be
paid and discharged any obligation, tax, assessment, charge,
levy or claim so long as its validity is contested in the
normal course of business and in good faith by appropriate and
timely proceedings and Lessee or any Subsidiary, as the case
may be, sets aside on its books adequate reserves with respect
to each tax, assessment, charge, levy or claim so contested,
nor shall Lessee nor any Subsidiary be required to pay or
discharge any trade Indebtedness which is not past its stated
due date by more than thirty (30) days.
12. USE; MAINTENANCE; FACTORY RECALL: Lessee shall use the
Vehicle only as follows: for lawful purposes; within the
United States; when in a safe and sound condition; when
covered by the insurance required by this Lease, and in
compliance with any restrictions contained therein; in
compliance with any and all appropriate laws, ordinances or
regulations; following the manufacturer's recommendations;
for commercial or business purposes; but in no event for the
transportation of passengers. Lessee shall maintain the
Vehicle, in good order, working condition and repair, and
shall pay any and all costs and expenses incurred in its
operation, including, but not limited to, traffic fines,
maintenance and repair. Lessor shall not be obligated to,
nor be called upon by Lessee to make or pay for any repairs
and replacements. Any necessary or advisable service or
repair work shall be performed promptly, and, if claimed
under a manufacturer's warranty agreement, only at a factory
authorized dealership. All repairs, parts, mechanisms and
devices furnished or affixed to the Vehicle shall thereupon
belong to and become the property of the Lessor. In the
event a manufacturer announces a recall campaign for the
repair of defective parts, of which Lessee has knowledge,
Lessee shall promptly have all appropriate Vehicles repaired
by a factory authorized dealer. Lessee shall be responsible
for notification to all Vehicle manufacturers that Lessee is
in possession of each Vehicle, is responsible for
maintenance and that any and all notices from the
manufacturer concerning Vehicle maintenance, repair or
defects shall be sent directly to Lessee. Lessee hereby
indemnifies and holds Lessor, its officers, employees,
agents, successors and assigns, harmless with respect to any
third-party from any liability, claim, loss, damage or
expense (including litigation expense and reasonable
attorney's fees) which may arise as a result of such defects
or need for such repairs or maintenance, regardless of
whether Lessee receives such notice from the manufacturer or
not.
13. INSURANCE; NOTICE OF ACCIDENT:
(a) At its sole expense, Lessee shall secure and maintain in
full force and effect throughout the term of all Equipment
Schedules and any extensions of renewals thereof, insurance
against all risks including, but not limited to, theft,
damage, or destruction of the Vehicle in an amount equal to
the aggregate Total Cost of all Equipment Schedules written in
the broadest form available on usual commercial terms and with
carriers acceptable to Lessor. Lessee shall also maintain
public liability insurance satisfactory to Lessor and with at
least the minimum limits as set forth in the Equipment
Schedule. (b) Upon execution of the Certificate of
Acceptance, Lessee shall deliver the policy or policies or
duplicates or certificates thereof, to Lessor. Lessee shall
maintain a loss payable endorsement on all such policies in
favor of Lessor and its successors and assigns and shall
afford to Lessor and its successors and assigns such
additional protection as Lessor and its successors and assigns
shall reasonably require. All such insurance policies shall
name Lessor, its successors and assigns, as additional
insureds and expressly provide that any obligations imposed
upon the insureds (including, without limitation, the
obligation to pay premiums) shall be the obligation solely of
Lessee and not the obligations of Lessor, its successors and
assigns. Each policy shall expressly provide that (1) the
insurance as to Lessor and its successors and assigns shall
not be invalidated by any act, omission or neglect of Lessee,
(2) the same may not be cancelled, modified or allowed to
lapse (for failure to renew or otherwise) without at least
thirty (30) days prior written notice to Lessor or its
successors and assigns, and (3) the insurance shall be
Page 20
primary, without right or contribution of any other insurance
carried by or on behalf of Lessor with respect to its
interests. In the event that any policies insuring against
liability risks described above shall now or hereafter provide
coverage on a "claims made" basis, Lessee shall continue to
maintain such policies in effect for a period of not less than
three years after the expiration of the Lease term of any
Equipment Schedule. (c) Lessor and its successors and assigns
may apply the proceeds of insurance to replace or repair the
Vehicle and/or to satisfy Lessee's obligations hereunder, as
determined in Lessor's sole discretion. If Lessee fails to
pay when due any insurance premium for any policy written
hereunder, then Lessor may make such premium payment and add
the amount thereof to the next rent payment, and such premium
amounts shall become rent. Lessee appoints Lessor as Lessee's
attorney-in-fact to make any claim for, to receive payment for
and to execute and endorse any documents, checks or other
instruments in payment for loss, theft or damage under any
such insurance policy. Lessor shall be under no duty to
ascertain the existence of any insurance coverage or to
examine any certificate of insurance or other evidence of
insurance coverage or to advise Lessee in the event the
insurance coverage does not comply with the requirements of
this Agreement. Lessee will promptly notify the appropriate
insurer, Lessor and any assignee, of any accident or
occurrence which may become the basis of a claim against the
insured. In connection with any claim against Lessor and/or
Lessee arising out of the ownership, operation, maintenance
and use of a Vehicle, Lessee agrees to cooperate with Lessor
in defending against such claims, including making Lessee's
employees available to Lessor without charge. (d) Lessee will
maintain, and cause any Subsidiaries to maintain, insurance
from duly licensed and responsible insurers on all property of
Lessee and any Subsidiaries to its full insurable value,
except to the extent limited by applicable insurance law.
This insurance shall be against risks of fire and all other
risks as fall within "extended coverage" as that term is
generally understood in the insurance industry. Lessee shall
also maintain, and cause any Subsidiaries to maintain,
additional insurance in such amounts and against such risks,
including, without limitation, product liability, personal
injury, property damage, and workers' compensation, as is
usually carried by owners of similar businesses of similar
size and profits or as Lessor may reasonably require.
14. INDEMNIFICATION: To the fullest extent permitted by law,
Lessor, its officers, employees, agents, successors and
assigns, shall not be liable to Lessee for, and Lessee shall
indemnify and hold Lessor, its officers, employees, agents,
successors and assigns, harmless with respect to any third-
party from any liability (including liability for Lessee
negligence), claim, loss, damage or expense (including
litigation expense) of any kind or nature arising out of
this Lease, or the transactions contemplated in this Lease,
including, but not limited to: (a) the inadequacy of any
Vehicle for any purpose; (b) any deficiency or defect in any
Vehicle; (c) the use or performance or maintenance of any
Vehicle; (d) any interruption or loss of service, use or
performance of any Vehicle; or (e) any loss of business or
other consequential damage whether or not resulting from any
of the foregoing. IN PARTICULAR, LESSOR AND ITS SUCCESSORS
AND ASSIGNS SHALL NOT BE LIABLE FOR INJURIES TO PERSONS OR
DAMAGE TO ANY VEHICLE OR OTHER PROPERTY UNDER ANY THEORY OF
STRICT LIABILITY, AND LESSEE SHALL INDEMNIFY AND SAVE LESSOR
AND ITS SUCCESSORS AND ASSIGNS HARMLESS FROM ANY SUCH
LIABILITY AND ALL COSTS AND EXPENSES IN DEFENDING THE SAME.
This obligation to indemnify shall apply from the date of
the execution of the Equipment Schedule out of which the
claim arises, notwithstanding that the Lease term may not
have commenced. All of Lessor's and its successors' and
assigns' rights under this section shall survive the
termination of this Lease. However, Lessee shall not be
required to indemnify Lessor or its successors or assigns
for claims arising from events which occur after Vehicle has
been redelivered to Lessor, its successors or assigns.
15. RISK OF LOSS:
(a) Lessee hereby assumes and shall bear the entire risk of
loss, theft, damage and destruction of Vehicle, whether
partial or complete, from any cause whatsoever. No loss,
theft, damage or destruction of Vehicle shall relieve Lessee
of the obligation to pay rent or any other obligation of this
Lease, and, except as provided below, this Lease shall remain
in full force and effect. Lessee shall promptly notify Lessor
in writing of any such loss, theft, damage or destruction of
the Vehicle. Lessor shall not be liable to Lessee for any
loss, damage or expense of any kind or nature, caused directly
or indirectly by any Vehicle or by the use, maintenance,
repair, failure, destruction or damage of any Vehicle. (b) In
the event of damage of any kind whatsoever to a Vehicle
(unless the same is damaged beyond repair), Lessee, at the
option of Lessor, shall at Lessee's expense (i) place the same
in good repair, condition and working order, or (ii) replace
the same with like Vehicle of the same or a later model, and
in good repair, condition and working order and provide Lessor
good and valid title thereto. (c) In the event that the
Vehicle is lost, stolen, destroyed or damaged beyond repair
(any such event is referred to as an "Event of Loss"), Lessee,
at the option of Lessor, shall (i) at Lessee's expense replace
the same with like Vehicle of the same or a later model, in
good repair, condition and working order and provide Lessor
good and valid title thereto or (ii) pay to Lessor an amount
equal to the unpaid balance of the rent and any other sums
then due or past due, plus the Stipulated Loss Value
attributable to the Vehicle (as set forth on Attachment 1 to
the Equipment Schedule) calculated on the rental payment date
immediately preceding the date of the loss. (This option (ii)
shall only be applicable if a Stipulated Loss Value table is
referenced in the Equipment Schedule) or (iii) pay to Lessor
an amount equal to the unpaid balance of the rent and any
other sums then due, plus the balance of any remaining rents
(discounted at the rate of six (6) percent per annum)
attributable to the Vehicle during the term and extension
thereof, if any, of this Lease. Upon such payment Lessee's
obligation to pay further rent for such Vehicle shall cease,
and Lessee thereupon shall become entitled to the Vehicle paid
for "as-is-where-is", without recourse or warranty, express or
implied, with respect to any matter whatsoever. (d) To the
extent of Lessee's expense actually incurred to repair or
replace the Vehicle or of Lessee's payment to Lessor for the
loss, theft, damage or destruction of the Vehicle or items
therefor, Lessee shall then be entitled to receive from Lessor
any insurance or recovery received by Lessor in connection
with such loss, theft, damage or destruction, and any amount
of insurance or recovery received by Lessor in excess of
Lessee's expenses actually incurred or paid to Lessor shall
belong to Lessor.
16. OWNERSHIP; ASSIGNMENT; LIENS: The Vehicle is and shall
remain the sole and exclusive property of Lessor, and Lessee
shall have no right, title or interest therein except as to
the use thereof provided in the Lease. Lessee shall attach
to each Vehicle such sign, legend or other notice as may be
required by law to protect or disclose the interest of
Lessor, or disclose the fact that said Vehicle is leased.
All additions, improvements and replacements made to a
Vehicle shall immediately become and remain accessions to
such Vehicle and shall be returned to Lessor with such
Vehicle. Lessee shall not assign, (except as permitted by
section 17 below), transfer, pledge or hypothecate this
Lease, any Vehicle or any interest therein and shall not
sublet or lend any Vehicle, and Lessee's interest herein may
not be assigned or transferred by operation of law. Lessee
shall keep each Vehicle free and clear of all levies, liens
and encumbrances, except any lien arising solely through
acts of Lessor.
17. ASSIGNMENT: Neither this Lease nor Lessee's rights
hereunder shall be assignable in whole or in part by Lessee
except with Lessor's prior written consent, and the
provisions hereof shall bind any permitted successors and
assigns of Lessee. Lessor shall have the right to assign
this Lease or any part thereof. If Lessor assigns the
rentals reserved herein or all or any of Lessor's other
rights hereunder, or amounts equal thereto, the right of the
Assignee to receive the rentals as well as any other right
of the Assignee shall not be subject to any defense, setoff,
counterclaim, or recoupment which may arise out of any
breach or obligation of Lessor in connection herewith or by
reason of any other indebtedness or liability at any time
Page 21
owing by Lessor to Lessee. All rentals due hereunder shall
be payable to the Assignee by Lessee whether or not this
Lease is terminated by operation of law or otherwise,
including without limitation, termination arising out of
bankruptcy, reorganization or similar proceedings involving
Lessor. On receipt of notification of such assignment,
Lessee, subject to its rights hereunder, shall become the
pledgeholder of the Vehicle for and on behalf of the
Assignee and will relinquish possession thereof only to the
Assignee or pursuant to its written order. Lessee, on
receiving notice of any such assignment, shall abide thereby
and make payment as may therein be directed. Following any
such assignment the term "Lessor" shall be deemed to include
or refer to Lessor's Assignee, provided that no such
Assignee shall be deemed to assume any obligation or duty
imposed upon Lessor hereunder, and Lessee shall look only to
Lessor for performance thereof. Lessee is further directed
that after assignment of a Lease only Assignee shall have
the right or power to compromise, settle, extend or
otherwise negotiate the terms of payment under that Lease.
18. SECURITY INTEREST: Where appropriate, Lessor shall file all
necessary documents, including UCC financing statements, in
connection with this Lease so as to perfect Lessor's
security interest under the Lease. Lessee shall execute and
deliver to Lessor such documents (including UCC financing
statements) as Lessor shall deem necessary or desirable for
purposes of evidencing, protecting or recording the rights
and interest of Lessor in the Vehicle or this Lease and in
furtherance of the performance of the terms and conditions
of this Lease. All reasonable expenses (including UCC search
and filing fees) related thereto shall be paid by Lessee.
Lessee hereby irrevocably appoints Lessor as its lawful
attorney and agent to execute UCC financing statements on
Lessee's behalf and hereby authorizes Lessor to file, at
Lessee's expense, such UCC financing statements in any
appropriate public office.
19. DISPOSITION: At the expiration or termination of this Lease
by lapse of time, or otherwise, Lessee shall return the
Vehicle to Lessor or its designee at a location designated
by Lessor within the State of New York, with transportation
charges (including in-transit insurance), prepaid by Lessee,
in the same condition as when received by Lessee, ordinary
wear and tear alone excepted, and free of any lien created
or suffered by Lessee. All tires must have at least 33% of
tire tread remaining upon return. To the extent the Lease
does not terminate at the end of the Lease term thereof, and
the Vehicle is not returned to Lessor or its designee, and
other rental amounts are not specified therein or mutually
agreed to in writing, then the same amount of rent shall
continue to be due and payable by Lessee until the Equipment
is returned to Lessor or its designee. Lessee shall remain
responsible to maintain in full force an effect insurance in
accordance with paragraph 13 of this Agreement.
20. EVENTS OF DEFAULT AND LESSOR'S REMEDIES:
(a) Each of the following events shall constitute an event of
default ("Event of Default") hereunder: (i) Lessee fails to
pay any rent or other amount due hereunder within ten (10)
days after the same is due and payable; or (ii) Lessee fails
to perform any other obligation or observe any condition of
this Lease required to be performed or observed by Lessee; or
(iii) any representation, warranty or statement made in
writing to Lessor by Lessee (or guarantor of Lessee's
obligations under this Agreement) in connection with the
transactions contemplated under this Lease shall have been
false in any material respect when made; or (iv) Lessee
attempts to sell, transfer, encumber, part with possession of,
assign or sublet (except as expressly permitted by the
provisions hereof) any Vehicle; or (v) Lessee fails to insure
(pursuant to section 13 hereof) any Vehicle; or (vi) Lessee
fails to deliver to Lessor any documents required by Lessor
under the Lease; or (vii) Lessee (or any guarantor of Lessee's
obligations under this Agreement) is in default under any
other agreement with Lessor or any of its affiliates; or
(viii) Lessee ceases doing business as a going concern; or
(ix) Lessee (or any guarantor of Lessee's obligations under
this Agreement) shall consolidate with or merge into any other
entity, or convey, transfer or lease substantially all of its
assets to any other entity; or (x) the corporate existence of
Lessee (or any guarantor of Lessee's obligations under this
Agreement) shall terminate; or (xi) any of Lessee's issued and
outstanding shares of capital stock are sold, assigned,
pledged, transferred, exchanged in a corporate reorganization
or otherwise disposed of or new shares of such stock are
issued and such sale, assignment, pledge, transfer, exchange,
issuance or other disposition results in vesting the "control"
of such corporation in a person (or persons) not presently
having control and not approved by Lessor in writing prior to
such vesting (except for involuntary transfers of such stock
by operation of law). "Control" shall be deemed vested in the
person or persons owning more than fifty percent (50%) of the
number of issued and outstanding shares of such stock, however
designated, or holding more than fifty percent (50%) of the
voting power for the election of members of the Board of
directors of the Lessee; or (xii) Lessee (a) incurs any
accumulated funding deficiency within the meaning of the
Employee Retirement Income Security Act of 1974, as amended
from time to time and the regulations thereunder, equal to 5%
of Consolidated Tangible Net Worth of Lessee or (b) incurs any
liability of comparable size to the Pension Benefit Guaranty
Corporation; or (xiii) Lessee or any subsidiary fails to
comply with the provisions of the Fair Labor Standards Act of
1938, as amended; or (xiv) Lessee is, or permits any
subsidiary to be, in violation of any law or regulation,
order, writ, injunction or decree of any court or governmental
instrumentality or in breach of any agreement or instrument to
which Lessee or any Subsidiary is subject or in default
thereunder: or (xv) Lessee (or guarantor of Lessee's
obligations under this Agreement) applies for or consents to
the appointment of a receiver, trustee, assignee, custodian or
liquidator of its business or any substantial part of its
property; or (xvi) Lessee (or guarantor of Lessee's
obligations under this Agreement) fails to pay its debts
generally as they become due; or (xvii) Lessee (or guarantor
of Lessee's obligations under this Agreement) makes a general
assignment for the benefit of creditors; or (xviii) Lessee (or
guarantor of Lessee's obligations under this Agreement) fails
within sixty (60) days to lift any execution, garnishment or
attachment of such consequences as will impair its ability to
carry on its operations under this Lease; or (xix) Lessee (or
guarantor of Lessee's obligations under this Agreement)
commences (as the debtor) a case in bankruptcy (including a
petition for reorganization or arrangement) under the United
States Bankruptcy Code or a proceeding under any state or
federal insolvency law; or (xx) a case in bankruptcy or any
other proceeding (including a petition for reorganization or
arrangement) under the United States Bankruptcy Code or any
case or proceeding under any other insolvency law shall be
commenced against Lessee (or guarantor of Lessee's obligations
under this Agreement) (as the debtor) involuntarily or a
decree or order for relief against Lessee (or guarantor of
Lessee's obligations under this Agreement) (as the debtor)
shall be entered in any court of competent jurisdiction, and
such case, proceeding or decree or order is not dismissed
within forty (40) days after such commencement or entry, or
Lessee (or guarantor of Lessee's obligations under this
Agreement) shall consent to or admit the material allegations
against it in any such case or proceeding; or (xxi) a trustee,
assignee, receiver, custodian or agent (however named) is
appointed or authorized to take charge of any substantial part
of Lessee's (or guarantor of Lessee's obligations under this
Agreement) property.
(b) Upon the occurrence of any Event of Default, Lessor may
declare the Lessee in default. At its option, Lessor may
declare a default in all Leases and any other agreement
between Lessor, or any affiliate of Lessor, and Lessee except
as specifically exempted therefrom by Lessor in such
declaration. In the case of an Event of Default, Lessor or
its agents shall have the right, at their option, to exercise
any or all of the rights and remedies available to a secured
party under the Uniform Commercial Code and, in addition, to
do any or all of the following: (i) to declare immediately due
and payable without notice or demand to Lessee an amount equal
to the balance of unpaid rent and any other sums then due plus
the balance of the rent and any other sums to become due
(discounted at the rate of four (4) percent per annum) during
the term and extension thereof, if any, of this Lease; and/or
(ii) to sue for and recover from Lessee an amount equal to the
unpaid balance of rent and any other sums then due plus the
Page 22
balance of rents and any other sums to become due (discounted
at the rate of four (4) percent per annum) during the term and
extension thereof, if any, of this Lease (hereinafter "Unpaid
Rent"); and/or (iii) to take possession of any or all Vehicles
without demand or notice wherever the same may be located
without any court order or other process of law. Upon taking
possession of any or all Vehicles, Lessor at its option may
(i) lease the repossessed Vehicle to any third party on such
terms and conditions as Lessor may determine, or (ii) sell the
Vehicle or any part thereof at public auction or at private
sale. In the event Lessor re-lets the repossessed Vehicle,
then Lessor shall credit against the Unpaid Rent the present
value of the aggregate of the rent to be received from the re-
lease during the remaining term of the applicable Equipment
Schedules (discounted at a rate equal to the sum of the prime
interest rate in effect at The Chase Manhattan Bank, N.A., on
the date such re-lease is entered into plus 2%). In the event
Lessor sells the repossessed Vehicle, then Lessor shall credit
all amounts received from the sale, less expenses incurred in
connection therewith, to the Unpaid Rent due. Lessee hereby
agrees to peaceably deliver the Vehicle to Lessor upon demand
after an Event of Default is declared by Lessor; Lessee waives
any and all damages occasioned by such taking possession. Any
such taking of possession shall not constitute a termination
of this Lease and shall not relieve Lessee of its original
obligation hereunder unless Lessor expressly so notifies
Lessee in writing.
(c) Should any proceeding be instituted by Lessor to recover
any monies due and/or to become due hereunder and/or for the
possession of the Vehicle, Lessee shall pay a reasonable sum
as attorney's fees and collection agency fees, court costs and
repossession expenses. The exercise, or the beginning of
exercise by the Lessor of any one or more of such remedies
described above shall not constitute the exclusive election of
such remedies and shall not preclude the simultaneous or later
exercise by Lessor of any or all of such other remedies.
21. LESSEE'S AND LESSOR'S WARRANTIES: (a) Lessee hereby
warrants and represents to Lessor, its successors and
assigns that: (i) Lessee's execution and performance of this
Lease has been duly authorized by all necessary corporate
action and is not now and will not be in conflict with
Lessee's charter or by-laws, or with any indenture, contract
or agreement by which it is bound, or with any statute,
judgment, decree, rule or regulation binding upon it; (ii)
no consent or approval of any trustee or holder of any
indebtedness or obligation of Lessee, and no consent or
approval of any governmental authority, is necessary for
Lessee's execution or performance of this Lease; (iii) there
is no litigation or other proceeding pending, or to the best
of the Lessee's knowledge, threatened against or affecting
Lessee which, if decided adversely to Lessee would adversely
affect or impair the title of Lessor to the Vehicle or
which, if decided adversely to Lessee would materially
adversely affect the business operations or financial
condition of Lessee; (v) all balance sheets, statements of
profit and loss and other financial data that have been
delivered to Lessor with respect to Lessee are complete and
correct in all material respects, accurately present the
financial condition of the Lessee on the dates for which,
and the results of its operations for the periods for which,
the same have been furnished and have been prepared in
accordance with generally accepted accounting principles
consistently applied; (vi) there has been no material
adverse change in the condition of Lessee, financial or
otherwise, since the date of the most recent financial
statements delivered to Lessor; (vii) this Lease is valid
and binding and enforceable against Lessee in accordance
with its terms, subject to enforcement limitations imposed
by rules of equity or by bankruptcy or similar laws. Upon
Lessor's request, Lessee shall submit to Lessor an opinion
of Lessee's counsel that the above warranties and
representations are true. (b) Lessor hereby warrants and
represents to Lessee, its successors and assigns that: (i)
Lessor's execution and performance of this Lease has been
duly authorized by all necessary corporate action and is not
now and will not be in conflict with Lessor's charter and
by-laws, or with any indenture, contract or agreement by
which it is bound, or with any statute, judgment, decree,
rule or regulation binding upon it; (ii) no consent or
approval of any trustee or holder of any indebtedness or
obligation of Lessor, and no consent or approval of any
governmental authority, is necessary for Lessor's execution
or performance of this Lease; and (iii) this Lease is valid
and binding and enforceable against Lessor in accordance
with its terms, subject to enforcement limitations imposed
by rules of equity or by bankruptcy or similar laws.
22. JOINT AND SEVERAL LIABILITY; AUTHORITY TO SIGN;
SUBSIDIARIES; PURCHASE OF VEHICLES: If more than one party
executes this Lease as Lessee, each such party shall be
jointly and severally bound by the terms and provisions of
this Lease. Any person who signs as an officer or agent for
a corporation, partnership or other entity warrants that he
has authority from such corporation, partnership or other
entity to enter into this Lease on its behalf. Each Vehicle
delivered pursuant to this Lease by Lessor to a subsidiary
of Lessee or to any entity or person designated by Lessee,
whether at the request of Lessee or such subsidiary, entity
or person shall be a Vehicle for all purposes of this Lease,
and Lessee shall be and remain primarily liable for its
obligations under this Lease with respect to such Vehicle.
Lessor shall not be obligated to purchase and deliver any
Vehicle unless Lessor has executed an Equipment Schedule
covering the Vehicle.
23. MODIFICATION: No change, modification, or alteration of,
and no additions to, the terms of this Lease shall be
effective or binding on Lessor unless the same is in writing
and signed by Lessor (except if the Lease term is
automatically extended per section 19 hereof). In the event
of conflict between the terms of this Lease and the
Equipment Schedule, the Equipment Schedule shall govern.
24. NOTICES: (a) Lessee will immediately notify Lessor in
writing with full details if (i) any event occurs or any
condition exists which constitutes, or which but for a
requirement of lapse of time or notice or both would
constitute, an Event of Default under section 20, or which
might materially and adversely affect the financial
condition or operations of Lessee or of any Subsidiary or
(ii) any representation or warranty made in the Master Lease
Agreement or in any writing related to it may for any reason
cease in any material respect to be true and complete. (b)
All notices relating to this Lease, shall be in writing and
shall be deemed given when delivered or when deposited in
the U.S. mail, certified, postage prepaid and addressed with
the full name and address of the appropriate party set forth
above, or to such other address as may have been furnished
by written notice from the party to whom notice is sent.
25. TIME OF ESSENCE; ENTIRE AGREEMENT; WAIVER; SURVIVAL OF
TERMS: Time is of the essence of this Lease. This Lease
constitutes the entire agreement between the parties and
shall be binding upon the parties and their respective
successors or assigns, and shall only be amended by a
written instrument signed by Lessor and Lessee. Any waiver
of the performance of any of the terms, conditions or
covenants hereof by either party shall not be construed as
thereafter waiving any such terms, conditions or covenants,
but the same shall remain in full force and effect, as if no
such waiver has occurred. Lessee's obligations and
liabilities under this Lease shall not be affected by the
expiration or earlier termination of this Lease.
26. APPLICABLE LAW: This Lease shall be governed by and in
accordance with the laws of the State of New York. At
Lessor's option, any action or proceeding relating directly
or indirectly to this Lease shall be tried in a court of
competent jurisdiction located in the State of New York.
Lessee hereby consents to jurisdiction of any court of
competent jurisdiction chosen by Lessor. This Lease shall
be deemed to have been made in the State of New York,
regardless of the order in which it was executed.
Page 23
27. HEADINGS: The headings of each numbered paragraph are for
reference only and constitute no part of this Lease.
28. ACKNOWLEDGEMENTS AND WARRANTIES: Lessee acknowledges that
it has selected both (a) the Vehicle(s) and (b) the
manufacturer and/or dealer from whom Lessor is to purchase
it. LESSOR MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO ANY
MATTER WHATSOEVER, INCLUDING THE CONDITION OF THE
VEHICLE(S), ITS MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE, AND, AS TO LESSEE, LESSOR LEASES THE
VEHICLE(S) AS IS. NO DEFECT OR UNFITNESS OF THE VEHICLE(S)
SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR OF ANY
OTHER OBLIGATION UNDER THIS LEASE. LESSOR WARRANTS TO
LESSEE THAT, SO LONG AS NO EVENT OF DEFAULT HAS OCCURRED AND
IS CONTINUING, LESSOR WILL NOT INTERFERE WITH THE LESSEE'S
USE AND POSSESSION OF THE VEHICLE(S).
If a Vehicle is unsatisfactory for any reason, Lessee shall
make any claim on account thereof solely against the
manufacturer or dealer. Lessor hereby agrees to assign to
Lessee, solely for the purpose of making and prosecuting any
such claim, all of the rights which Lessor has against such
manufacturer or dealer for breach of warranty or other
representation respecting the Vehicle to the extent the same
are assignable.
29. LESSOR'S RIGHT TO CURE: Upon Lessee's failure to perform
any of its duties under a Lease, Lessor may, but shall not
be obligated to, perform any or all such duties, and Lessee
shall pay an amount equal to the expenses thereof to Lessor
forthwith upon demand by Lessor. No such performance of any
or all such duties by Lessor shall be deemed to cure any
Event of Default of Lessee.
30. ADDITIONAL ASSURANCES: If Lessor shall request, Lessee
shall execute and deliver to Lessor such documents as Lessor
shall reasonably deem necessary or desirable.
<PAGE>
Page 24
31. MODIFICATIONS/ADDITIONAL PROVISIONS: See attached Addendum,
if there are any modifications or additions hereto.
Covenants, representations and warranties made by The Strober
Organization, Inc. and Subsidiaries under Credit Agreement
dated as of December 9, 1994 between said party and The Chase
Manhattan Bank, N.A. are hereby made a part of this Master
Lease as if written herein and shall survive the cancellation
or termination (due to maturity or otherwise) of the Credit
Agreement as long as this Master Lease Agreement remains in
effect.
IN WITNESS WHEREOF, THE PARTIES HAVE CAUSED THIS AGREEMENT TO BE
DULY EXECUTED AS OF THE DATE FIRST ABOVE WRITTEN.
CHASE EQUIPMENT LEASING, INC. LESSEE: THE STROBER ORGANIZATION, INC.
By: By:
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Title: Title:
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